Ellington Financial announced an agreement to acquire Statebridge Co., a diversified loan servicer whose expertise primarily covers late-stage distress, residential-transition and other non-qualified mortgages. The purchase price was not disclosed in the sources.
The real estate investment trust announced its purchase this week, according to Asset Securitization Report. The company hinted at the likely merger over the summer in its second-quarter earnings.
Ellington Co-Chief Investment Officer Mark Tecotzky said on the company's earnings call that the decision to acquire a servicer came about in part from industry contraction, which made it challenging for Ellington to find a partner that could effectively work with the types of delinquent and non-QM loans it owns. "We didn't see great options where we could really get what we think are best-in-class protocols, and have a dialog and be able to use our data analysis and our kind of native experience and expertise in the product to effectuate outcomes," he said.
CEO Larry Penn said: "We're going to build this into the premier special servicer. Even with what we see as the delinquency pipeline now, once we've built this, I think there'll be plenty of business for Statebridge to grow and thrive on." Leaders advised that financial benefits might not appear on the balance sheet immediately, with the upside coming in the longer term.
As of September 30, Statebridge serviced approximately 14,700 loans representing an approximate unpaid principal balance of $1.9 billion, nearly all for third-party clients. The portfolio includes 3,500 non-QM and RTL loans with balances totaling $1.1 billion, as well as a smaller subset of agency and commercial mortgages.
Tecotzky said delinquencies were trivially small when non-QM first started, and noted the effect of Covid-era home-price appreciation on the housing market. "We don't see that HPA tailwind right now obviously, so we think long-term delinquencies will tick up to levels that are more consistent with reasonable expectations." He added that as Ellington builds the business out and demonstrates the quality of resolutions it believes Statebridge can get, others may want to use its services.