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Ellington launches new large-loan RMBS in $226M deal

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Ellington Financial is sponsoring its first non-qualifying residential mortgage securitization in a year, through a newly launched $226.9 million transaction secured by large-loan properties.

Ellington Financial Mortgage Trust 2019-1 is pooling 497 loans, which include first-lien fixed- and adjustable-rate mortgages for single-family homes and multifamily properties. All of the loans were transferred from LendSure Mortgage Corp., which is 45% owned by Ellington Financial Inc.

Since 2015, LendSure has been acquiring and originating mortgage loans exempt from qualified mortgage/ability to repay rules. It managed 1,615 non-QM loans and investor-property loans totaling $742 million as of March 31, according to a presale report form S&P Global Ratings.

The loans, which are mostly adjustable-rate (63.3%) have an average balance of $456,566, but were largely made to self-employed borrowers (65% of the pool) under alternative documentation standards (60.2%). The borrowers have substantial equity in the homes, with an average current loan-to-value ratio of 67.9%.

According to S&P, most of the mortgage loans are for primary owner-occupied residences making up approximately 72.62% of the pool by balance, with 50.4% backed by single-family residences, 33.9% by planned-unit developments, 7.1% are by condominiums and 8.6% backed by two- to four-family homes.

Nearly 50% of the homes are concentrated in California.

The pool includes foreign-borrower loans that accounted for 8.84% of the pool balance. The weighted average borrower FICO is 712.

The pool of loans has an average seasoning of five months.

The trust will market seven classes of senior, mezzanine and subordinate notes, as well as note classes that will earn income on excess servicing proceeds and monthly excess cash flow.

The capital stack has a $158.4 million Class A senior-note tranche with a preliminary AAA rating from S&P. The tranche benefits from 30.2% credit enhancement.

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