Operator: Thank you for your continued patience. Your meeting will begin shortly. If you need assistance at any time, please press 0, and a member of our team will be happy to help you. Please stand by. Your program is about to begin. Good morning, ladies and gentlemen, and thank you for standing by. Welcome to the Ellington Financial Inc. First Quarter 2026 Earnings Conference Call. Today's call is being recorded. At this time, participants have been placed in listen-only mode. The floor will be open for your questions following the presentation. If you would like to ask a question during that time, please press star then the number 1 on your keypad. If at any time your question has been answered, you may remove yourself from the queue by pressing 2. Lastly, if you should require operator assistance, please press star 0. It is now my pleasure to turn the call over to Alaael-Deen Shilleh. You may begin.
Alaael-Deen Shilleh: Thank you. Before we begin, I would like to remind everyone that this conference call may include forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not historical in nature and involve risks and uncertainties detailed in our annual and quarterly reports filed with the SEC. Actual results may differ materially from these statements, so they should not be considered predictions of future events. The company undertakes no obligation to update these forward-looking statements. Joining me today are Larry Penn, Chief Executive Officer of Ellington Financial Inc., Mark Tecotzky, Co-Chief Investment Officer, and JR Herlihy, Chief Financial Officer. Our first quarter earnings conference call presentation is available on our website, ellingtonfinancial.com. Today's call will track that presentation, and all statements and references to figures are qualified by the important notice and endnotes in the back of the presentation. With that, I will hand it over to Larry.
Larry Penn: Good morning, everyone, and thank you for joining us today. I will begin on slide three of the presentation. Ellington Financial Inc. delivered an exceptionally strong first quarter in terms of both GAAP net income and adjusted distributable earnings. Even in the face of rising market volatility and widening credit spreads throughout the month of March, performance was strong across our diversified portfolio, which drove GAAP net income of 78¢ per share and annualized economic return of 26% and book value per share appreciation of 3% even after dividends. Our ADE continues to consistently outpace the quarterly dividend run rate of 39¢ per share, and this quarter, with our ADE reaching 55¢ per share, it exceeded our dividend by a very wide margin. Our strong ADE for the quarter reflected the high yields and steady credit performance from our loan portfolios, complemented by an absolutely standout quarter from Longbridge, which contributed a disproportionate share of both ADE and net income. Despite what is typically a seasonally slow quarter, Longbridge had a near-record quarter for proprietary reverse mortgage loan origination volumes, continued gains in market share for HECM originations, and healthy gain-on-sale margins across products. Our Longbridge segment's results also benefited from the successful PropReverse securitization we completed during the quarter, where we achieved our lowest-ever cost of funds and tightest-ever overall debt spreads for this type of securitization. Servicing was also a key contributor for Longbridge, driven by strong tail securitization execution, a net gain on our HMBS MSRs, and steady base servicing income. Finally, results at the Longbridge segment included gains on interest rate hedges, along with the receipt of a one-time litigation settlement payment that added to an already strong quarter. Overall, again, in what is typically a seasonally slow quarter, net income at our Longbridge segment not only set a quarterly record, but it actually surpassed its 2025 full-year net income by a wide margin. We also saw great contributions from our other origination platforms, with LendSure continuing its impressive run of performance in the first quarter. High origination volumes and strong gain-on-sale margins drove another excellent quarter at LendSure, with profitability contributing meaningfully to Ellington Financial Inc.'s bottom line, both through our ownership stake and through the steady flow of high-quality loans into our portfolio. Turning back to our portfolio, our non-QM, closed-end second lien, and agency-eligible strategies delivered continued robust results, supported by strong securitization executions. Our securitization platform remained highly active during the quarter. We participated in seven transactions totaling more than 2.8 billion from our EFMT shelf, compared to just 1.1 billion across four transactions in 2025. These higher volumes are facilitating larger deal sizes, with our average non-QM securitization size reaching 508 million in Q1 2026, nearly double the 205 million average in Q1 2025. Our first quarter results were further reinforced by continued strong credit performance across both our residential and commercial loan portfolios. Our delinquency rates actually declined for a second consecutive quarter, and realized credit losses remain minimal. In non-QM, we saw mortgage rates briefly dip below 6% in the quarter, triggering a brief prepayment spike in that sector. We have always focused on prepayment risk in our asset selection, and the recent prepayment spike highlighted the benefit of that focus. According to JPMorgan Research, our EFMT shelf has both the lowest prepayment speeds in the cohort and almost the lowest 30-plus day delinquency rates, each of which directly enhances the overall value of our high-yielding retained tranches. Importantly, consistency and durability of our loan performance help keep our securitization platform attractive to securitization investors. Turning now to the balance sheet, our portfolio grew by approximately 4% during the quarter, even net of securitization activity, driven primarily by growth in our loan portfolios. Our leverage ratios were essentially unchanged for the quarter, as equity growth kept pace with asset growth. We also continued to advance the acquisition of a residential mortgage servicer, which remains subject to regulatory approval. Once completed, this acquisition is expected to deepen our vertical integration by bringing additional servicing capabilities in-house and enhancing our ability to manage delinquent assets more directly and efficiently. One note on book value per share: because we carry our unsecured debt at fair value on the liability side of the balance sheet, higher interest rates and wider credit spreads had a positive impact on our book value per share. Over time, and all other things being equal, the prices of our assets should be loosely correlated with the prices of our long-term liabilities, but there will definitely be some month-to-month noise during periods of high credit spread volatility, as we are seeing so far this year. Looking at April, we saw continued solid performance across the investment portfolio and at Longbridge as well. However, with credit spreads in April retracing much of the March widening, we estimate that remarking liabilities will have a roughly 13¢ effect on book value per share in the other direction, which will offset some of April's solid portfolio performance. Turning to our equity activity, we raised 117 million of common equity in January through a block trade, using the proceeds specifically to redeem our Series A preferred stock, which was our highest-cost tranche. The issuance was accretive to book value per share net of all costs, and was precisely sized to fund the preferred stock redemption. Since our Series A preferred had carried a coupon of over 9%, redeeming that preferred stock has reduced our overall cost of capital, with the benefit flowing directly to common shareholders. Our common equity transaction was well received, with the offering more than two and a half times oversubscribed by institutional investors, and our timing was excellent, as we were able to execute ahead of the subsequent spike in market volatility. We will continue to monitor the markets with an eye toward issuing additional preferred equity when pricing becomes more attractive. With that, please turn to slide five, and I will turn the call over to JR to walk through our financial results in more detail. JR?
JR Herlihy: Thanks, Larry. Good morning, everyone. For the first quarter, we reported GAAP net income of 78¢ per common share on a fully mark-to-market basis and ADE of 55¢ per share. On slide five, you can see the portfolio income breakdown by strategy: 61¢ per share from credit, 2¢ from agency, and a remarkable 47¢ from Longbridge. And on slide six, you can see the ADE contribution by segment: 58¢ per share from the investment portfolio segment and a sizable 21¢ from the Longbridge segment. ADE for the quarter exceeded expectations mainly due to the outsized contribution from Longbridge. Moving forward, we are now increasing our quarterly guidance on ADE per share to the 45¢ per share area, which is still well above our dividend run rate of 39¢. Starting with the credit portfolio, net interest income again increased sequentially, and we also generated net realized and unrealized gains across our non-QM and closed-end second lien loan portfolios, including retained tranches, as well as agency-eligible loans and commercial REO. These results were partially offset by losses in certain other credit strategies and on residential REO. We continue to benefit from strong overall earnings contributions from our loan originator affiliates, particularly LendSure, alongside solid credit performance across our loan businesses. For a second consecutive quarter, 90-day delinquency rates declined in both our residential and commercial loan portfolios, and life-to-date realized credit losses remain very low, as shown on slide 13. Moving to the agency strategy, results were driven by net interest income and net gains on interest rate hedges, partially offset by net losses on our agency RMBS, with spreads on many agency securities wider during the quarter. As Larry noted earlier, Longbridge had an excellent quarter across both originations and servicing. Origination results were driven by strong volumes and gain-on-sale margins, and also by the proprietary reverse mortgage loan securitization that we completed during the quarter, with net gains on that transaction further boosting earnings. In Longbridge's servicing business, steady base servicing net income, strong tail securitization executions, and a net gain on HMBS MSRs all contributed positively. Results at Longbridge also benefited from net gains on interest rate hedges and the receipt of a 17 million litigation settlement payment. Turning now to portfolio changes during the quarter, slide seven shows a 4% sequential increase in our adjusted long credit portfolio to 4.27 billion, net of securitizations, driven by growth in our loan portfolios and retained RMBS tranches. Our short-duration loan portfolios continue to generate significant paydowns, with RTL, commercial mortgage bridge, and consumer loan portfolios returning 224 million of principal during the quarter, representing 15% of their beginning fair value. On slide eight, our total long agency RMBS portfolio declined by 3% to 197 million, and on slide nine, the Longbridge portfolio increased by 13% to 695 million, with proprietary reverse mortgage loan origination volumes exceeding the impact of the prop loan securitization completed during the quarter. Longbridge originated 515 million of new loans during the quarter, which is a 52% increase from 2025. Please turn next to slide 10 for a summary of our borrowings. At March 31, the total weighted average borrowing rate on recourse borrowings was 5.49%, down 18 basis points from year-end, driven by tighter repo spreads. Quarter over quarter, net interest margin on the credit portfolio was relatively stable, while agency NIM declined as the benefit from swap carry moderated. At quarter-end, 30% of our recourse borrowings were long-term and non-mark-to-market, and 18% were unsecured. The weighted average remaining term of repo borrowings was nine months. Finally, during the quarter, we improved the terms on several of our credit facilities, with those enhancements taking effect in the second quarter. At March 31, our recourse debt-to-equity ratio was 1.9 to 1, and our overall debt-to-equity ratio was 9 to 1, both unchanged from year-end as equity growth kept pace with increased borrowings supporting our larger portfolio. Unencumbered assets increased by 8% to 1.9 billion. Slide 17 shows our credit hedging portfolio at quarter-end. Corporate credit hedges declined, while our net short TBA position increased. Our short TBA positions serve multiple purposes: hedging interest rates, volatility, and mortgage basis risk, while also historically performing well during periods of credit spread widening. As a result, they can provide protection in both interest rate stress scenarios and credit stress scenarios. Slide 16 shows our broader interest rate hedging portfolio, where the net short TBA position complements interest rate swaps and short Treasury positions across the yield curve. As has been our longstanding practice, we carry our unsecured notes at fair value through the income statement. Consistent with this treatment, quarter-over-quarter increases in interest rates and widening credit spreads—with the latter widening sharply at quarter-end—resulted in a positive mark-to-market on those liabilities, contributing to both GAAP net income and book value per share. Results also reflect an accrued incentive fee. At March 31, book value per share was $13.56, up 3% from $13.16 at year-end, and economic return for the first quarter was 26% annualized. With that, I will pass it over to Mark.
Mark Tecotzky: Thanks, JR. This was a quarter where Ellington Financial Inc. showed resilience and stability amid substantial market stress. It was a quarter of very strong net income and very strong ADE. There were some tailwinds specific to the quarter, but even without those, we delivered strong performance from our more diversified, vertically integrated platform. Securitization volumes were 2.8 billion, our largest quarter ever, and well diversified across several loan types. We started securitizing non-QM loans back in 2017, and we now securitize five different loan types. Greater securitization volume does not just increase profits; it also tends to improve margins. It is important that these businesses operate at scale. At scale, some of the profits can be reinvested back into the business to improve technology. That is what we have been doing to grow market share and process more volume without adding meaningfully to operational headcount. At scale, our mortgage shelf benefits from improved liquidity, which is one of the most important factors for investment-grade buyers. Scale also enables us to provide consistent liquidity and stable pricing to our loan origination partners. All this deal activity creates a future potential tailwind for us, as the call rights from these deals can become exercisable and valuable if interest rates drop. Once that happens, we will generally look to resecuritize the underlying loans. By replacing short-term repo financing with match-funded, non-mark-to-market debt issued through our securitizations, we have gone a long way toward better insulating our portfolios from market shocks. As you know, we navigated COVID very well, but we still had to deal with margin calls from our repo lenders. Today, mark-to-market repo represents a much smaller percentage of our overall borrowings, so our margin call risk is even lower now than it was back then. To be clear, significant market-wide spread widening would hit our book value per share; however, the lasting damage to many REITs during COVID was not caused by the sudden dramatic spread widening itself, but by the inability to meet margin calls, which caused forced selling that crystallized losses. During the quarter, even after closing multiple securitizations and selling all the senior debt tranches, we still achieved a healthy 4% portfolio growth, bringing total portfolio assets to more than 5 billion. At one point late in the quarter, when credit spreads neared their widest levels of the year, we took advantage of a strong insurance company bid by selling a non-QM pool in the form of a whole loan sale. Insurance companies tend to be less sensitive to short-term fluctuations in market credit spreads, so we were able to monetize strong gains on our credit hedges at the same time that we sold the pool. Moving now to our originator affiliates, they had positive performance broadly, but Longbridge in particular had really amazing results. It has emerged as a market leader in private-label reverse mortgages. Demographic trends and the increasing preference of baby boomers to age in place represent powerful tailwinds that we expect will support continued strong growth. We also had strong returns in our non-QM and second lien strategies, and a relatively new agency-eligible loan strategy which is benefiting from the pullback of the GSEs. We see agency-eligible loans as a key growth area moving forward. Nonagency mortgage volumes continue to grow, with an increasing share of GSE-eligible loans migrating to private-label execution where pricing is frequently more attractive than what the GSEs offer. As we have spoken about before, the size of the nonagency market is growing while the Fannie and Freddie footprint continues to shrink. Importantly, this growth in the nonagency market is concentrated in sectors where Ellington Financial Inc. is actively involved. We see these trends—with the nonagency market growing and the Fannie and Freddie market shrinking—as a logical response to guarantee fees and LLPA pricing from the GSEs that are disconnected from historical or expected losses. Absent significant repricing from the GSEs, we think this dynamic will continue. It almost feels strange not to mention the war in the Middle East, but aside from the short-lived interest rate and spread volatility we saw in March, it was not materially impactful to our strategies. Looking ahead, if higher energy prices persist, many consumers will have less disposable income, and those at the lower end of the income spectrum may find it harder to meet their debt obligations. Given our large presence in the agency, the SCR, and multifamily lending, we also have exposure to renters who typically have lower incomes than homeowners. We are watching this very closely. HPA is no longer the powerful tailwind to credit performance it was in years past. 2025 was the weakest year of HPA growth in a decade, which means that borrowers facing income disruption may find it more difficult to pay off their mortgages simply through home sales. That said, housing is definitely more affordable than it was coming into 2025, which should be supportive of long-term loan performance. At Ellington, we continue to add resources to our research effort both to inform our investment decisions and to share insights with our origination partners, helping them make better credit decisions. Our aim is to continue to capture the large and, in many cases, growing opportunity in both residential and commercial lending. Now back to Larry.
Larry Penn: Thanks, Mark. 2026 is off to a great start. In the first quarter, we delivered outsized GAAP net income, ADE that widely exceeded dividends, and strong growth in book value per share, despite elevated volatility and widening credit spreads late in the quarter. I attribute these excellent results to the strength of our diversified, vertically integrated platform and the excellent credit performance from our loan portfolios. But I also want to emphasize the significance of three other important factors in our success: the ongoing growth and stability of Longbridge, the increased scale and effectiveness of our securitization program, and our continued progress strengthening and optimizing our balance sheet. I will close by highlighting these three important factors. First, Longbridge. I do not think one can overstate just how much Longbridge now means for Ellington Financial Inc., and I am not just referring to the strength of this one quarter. Even in this prolonged higher interest rate environment, where many mortgage companies are still struggling, the Longbridge platform has achieved a level of consistency that has effectively given us a head start on our earnings targets each quarter. Furthermore, its target demographic, namely seniors, is obviously growing significantly, and meanwhile, the barriers to entry in the reverse mortgage business remain large. Longbridge's proprietary reverse mortgage business is now well established, with a seasoned securitization program and a deep and repeat investor base that continues to support strong execution. Many of Longbridge's costs are fixed or quasi-fixed, so its origination cost ratios have declined as volumes have grown. Its servicing cost ratios have also come down with the growth in its MSR portfolio, not only because of internal economies of scale, but also because its subservicing costs have declined as a result of increased competition among subservicers. As a result, Longbridge's MSR assets are generating very high yields for us, and those yields should continue to increase. Meanwhile, Longbridge's investments in technology are only adding to its operating efficiencies, and all of this has been achieved without the benefit of a meaningful decline in interest rates which, if that ever materializes, should be a significant tailwind for Longbridge's origination volumes and profitability. In summary, Longbridge is in a fundamentally stronger and more stable position than it was even a year or two ago, and we believe that Longbridge is well positioned to be an even more consistent and meaningful contributor to Ellington Financial Inc.'s earnings going forward, providing a strong and increasingly predictable foundation for our quarterly results. Second factor, our securitization platform. As I mentioned earlier, we priced seven transactions from our EFMT shelf during the quarter, totaling more than 2.8 billion. Our increased scale, achieved without compromising speed to market, reflects the continued expansion of our origination platform and has enhanced execution economics for us. Larger transactions enable us to spread fixed costs over a broader base, attract a wider institutional investor audience, and secure long-term non-mark-to-market financing on more favorable terms. And more frequent transactions mean that our loans spend less time in the warehouse period, when net interest margins and returns on equity are lower, and instead they transform more quickly into high-yielding retained tranches, which remain important contributors to our earnings. Third factor, all the important steps we have taken to strengthen our balance sheet. Our accretive common equity raise in January enabled us to retire our highest-cost preferred equity tranche. And following our inaugural Moody’s- and Fitch-rated unsecured debt issuance this past September, we have ready access to the long-term institutional debt markets. Issuing more unsecured notes remains a key priority, but we plan to be opportunistic—not just when it comes to overall market interest rates, but when it comes to the debt spreads over Treasuries that we can achieve. One balance sheet metric worth highlighting is the continued expansion of our unencumbered asset base, which has increased meaningfully since our unsecured notes offering in the third quarter of last year. At March 31, unencumbered assets stood at nearly 2 billion, up considerably over the past nine months. This reflects a deliberate migration where the proportion of our liabilities represented by long-term unsecured debt will continue to increase, and the proportion represented by short-term repo financing will continue to decrease. And as I just mentioned, we intend to continue this migration by issuing additional unsecured notes as market conditions permit. Our goal is to create a virtuous cycle where issuing long-term unsecured debt and using some of the proceeds to replace short-term debt improves our credit ratings and thereby makes additional unsecured debt issuances even more attractive and lowers our overall funding costs. In conclusion, I think we are firing on all cylinders now, and we are really excited not only about this great first quarter that we just reported, but about our prospects for the rest of the year and thereafter. We will now open the call for questions. Operator, please go ahead.
Operator: Thank you. If you would like to ask a question, please press star then 1 on your keypad. To leave the queue at any time, you may press star then 2. Once again, it is star then 1 to ask a question. We will take our first question from Frank Gilabetti on behalf of Bose George with KBW. Your line is open.
Frank Gilabetti: Hey, good morning, guys. I wanted to start with just your current run-rate ADE. It has consistently been above the dividend, and you noted earlier that you raised your ADE guidance. Where does the board see current dividend policy going forward, and what is the trade-off of retaining earnings to build book versus reinvesting some of those earnings in your operating companies?
Larry Penn: Thanks, Frankie. Yes. Let me just start off by saying we are certainly not thinking of lowering the dividend, so let us just start with that. The dividend is at a good place. I think it does achieve good balance. We were able to, and have been able now recently to, build some book value per share. Our yield—at an 11 handle—I think that is a good yield. So I would say, again, certainly no thoughts of lowering the dividend. Could the next move at some point be a raise? Sure. But at this point, we just like where it is.
Frank Gilabetti: Thank you. And then on the commercial REO outperformance, you showed some unrealized gains there, and roughly 60% of your commercial book is multifamily. Are those gains coming from successful workouts in the sector, or are you seeing some more positive trends there?
JR Herlihy: It is more of the latter. The way that we mark those assets is we run a DCF that projects expenses and CapEx expenditures we expect, and then we discount those back to a net present value today, typically at a pretty high return in the double digits. The idea is if we deliver on those expectations, there is a higher terminal value at the end; the fair value should accrete up to that terminal value over time because of the high discount rate. That dynamic is what was driving the P&L in Q1 on the commercial REO book, as opposed to some large resolution. We thought it was worth flagging given its contribution to P&L.
Frank Gilabetti: Great. And then just one last question if I can. On your agency allocation, it has come down over time. Where do you guys see that trending? Do you see it roughly in this 1% range going forward?
Mark Tecotzky: Sure. I would say given the substantial recovery you saw in agency MBS spreads in 2025, and continuing on this year—albeit at a slower pace—I do not see that allocation going up. It will probably drop a little over time. We mentioned it dropped by 3% on a face amount to investment amount basis. We have expertise there, and should we get to a point in relative value of agency MBS versus all the other things we are doing that we thought it was compelling, we could certainly bring it up. The other area where you see activity on agency MBS—and JR mentioned it, I believe—is hedging activities. Especially as some of the securitizations, like agency-eligible investor loans and eligible second homes, a lot of those AAA bonds are explicitly priced at a dollar-price spread relative to the agency market. It functions as a very effective hedge.
JR Herlihy: Just to add to that, as opposed to being a significant core strategy for us, agencies are going to be more opportunistic. If spreads widen, that could be more of a trade to put more agency on. And as Mark said, we actively manage the TBA short hedge, especially against our non-QM loans.
Operator: We will move to Timothy DeAgostino with B. Riley Securities. Your line is open.
Timothy DeAgostino: Yes, hi. Good morning. Thanks for taking the question, and congrats on another great quarter. Looking at the origination volumes at some other peers to Longbridge, I noted that March was a stronger month in the reverse space for origination volume. I was wondering if you all witnessed the same thing at Longbridge—if March volume was stronger than January and February—and if that theme has persisted through April and May. And then as well, if you could just provide some color on what you thought the driver of outperformance there was.
JR Herlihy: Thanks, Tim. I would say that while Q1 is typically seasonally slow, Longbridge's sequential decline—from Q4 to Q1—was very modest. In other words, they originated almost as much in Q1 as they did in Q4, and then it was about 50% higher year over year versus Q1 2025. April is looking good, so we are seeing that momentum continue so far into Q2. Looking at month-by-month origination volumes, they did trend up from January to February to March, with March being the highest of the three by a decent margin. So we did see that same dynamic. In terms of drivers, prop has proven more resilient in the face of higher interest rates than HECM has. HECM volumes have certainly declined.
Larry Penn: I would just add that this is still a very small market in the context of the entire mortgage market. Even though this is a seasonally slow quarter, I think that this product is gradually getting more traction overall, especially the prop product. Coming out of the seasonally slow months, I would expect to see some good seasonal effects. We talked about the demographics, and in terms of the marketing efforts that Longbridge has undertaken, those are helping as well. Pull-through rates are improving. There are a lot of things that we are doing to ultimately originate more loans that do not necessarily have to do with seasonality. I am looking for continued strong performance there.
Timothy DeAgostino: Okay, great. Thank you. And then a second one: you guided to, at the bottom line, 45¢ per share on a run rate. As we think about net interest income, it took a pretty big material step up from 4Q to 1Q. Are there some one-off items driving that growth? And is there any guidance or color you want to provide on how we should think about net interest income going forward, looking at the larger portfolio?
JR Herlihy: We were at 55¢ overall ADE. We mentioned the 45¢ area as a run rate moving forward, which is in line with Q4—Q4 was 47¢. The contribution from the investment portfolio segment—where most of the net interest income comes from—is running at a steady state. Most of the exceedance this quarter was from Longbridge, which is driven more by their origination activity and their securitization activity. The NII we are seeing has been trending up nicely in line with the growth of the portfolio, and we improved cost of funds this quarter as we discussed. I do not think there is huge volatility in NII quarter to quarter. The guidance is more signaling that we should not expect 21¢ from Longbridge every quarter. The NII contribution from the investment portfolio has been, as designed, pretty stable quarter to quarter. Our retained tranches are very high yielding and continue to grow, and we are continuing to grow the equity base as well, so hopefully everything is keeping pace with that.
Operator: We will move to Trevor Cranston with Citizens JMP. Your line is open.
Trevor Cranston: Hey, thanks. Good morning. There has been a decent move up in mortgage rates since the initial announcement of the GSE portfolio buying. I am curious for your current thoughts on the likelihood of more targeted government policies aimed at lowering mortgage rates as we go through the balance of the year, and particularly whether you think there is any chance that the GSEs do something like reducing LLPAs or G-fees in an attempt to get mortgage rates to a lower level.
Mark Tecotzky: Hey, Trevor. When that announcement first came out, it seemed like if the focus is affordability, there were two other logical levers—not the GSEs, but FHA—could pull. One is LLPAs, because LLPAs clearly, for many types of GSE loans, are far in excess of historical or expected losses. They are also losing market share to the nonagency market because of high LLPAs, so that was one easy lever. The other lever was either an ongoing or upfront cost cut to MIPs on the FHA side. When you did not see those get done, our takeaway is it is probably not top of mind right now. You are seeing other tweaks to affordability—changes in title insurance and now acceptance of VantageScore. Vantage pulls are materially cheaper than a traditional FICO pull. While we think LLPA and G-fee ongoing or upfront cuts are possible, we would characterize them as not likely. I know some people spoke about the possibility that Fannie and Freddie would increase their purchases above and beyond their current caps and above and beyond the 200 billion. Again, we think it is possible, but not likely. What you have seen this year is relatively strong performance in CMBS. You are starting to see some pickup in bank buying, coming from some clarity around Basel III and proposals from Governor Bowman about changing capital requirements as a function of LLPA. That is broadly supportive of bank participation in the market. Bank buying was very weak last year, so we think banks will be a bigger part of the market—that is a tailwind. You have certainly seen REITs issuing shares and buying more agency MBS, which is a positive tailwind, and you have seen better foreign, non-U.S. participation. So there are pools of capital more aggressively buying agency MBS than at the start of 2025, and we think that is where the support comes from. If these other things that help add affordability happen, we think it is possible, but they are at the margin and definitely second-order effects. What is helping affordability is HPA growth that is less than income growth, and the decline in mortgage rates you saw since 2025; those have been supportive as well.
Larry Penn: If I could just add, when you think about overall mortgage rates, these effects are important on spreads, but overall interest rates—Treasury rates, for example—are going to drive mortgage rates a lot more. Where is inflation, where is the deficit and the debt, what is Fed policy—those things are going to dwarf the impacts that some of these moves could have on mortgage rates.
Operator: Next, we go to Analyst with JonesTrading. Your line is open.
Analyst: Hey, good morning, guys. Thanks for taking the question, and congrats on a strong quarter. You mentioned that you sold a whole loan pool to an insurance company during the quarter. Could you talk a little bit about how this came about, and where you are seeing sales execute there versus where they would execute in the securitization market right now?
Mark Tecotzky: Thanks for the question. We did a lot of whole loan sales back in 2023 when securitization spreads were wide; in many instances, that looked like materially better execution than securitizations. At the margin, our preference is securitizations—we mentioned all the benefits of operating at scale and improved liquidity for the shelf—so our preference is for securitizations. The transaction we talked about was a bit of a one-off. There were moments in the quarter with real volatility in equity prices, credit spreads, and rates. We are disciplined on the hedging of mortgage loans—not only interest rate hedging, including parcels along the curve, but also thinking about our exposure to changes in implied and realized vol, and the correlation between mortgage spreads and broader corporate credit spreads, either IG or high yield. There was a moment where spreads, both high yield and IG, widened substantially, but the spreads on the mortgage loans relative to Treasuries had not really moved. It was opportunistic for us to take advantage of that by making a loan sale, and then buying back the pro rata share of credit hedges we had allocated to those loans. That was unique to the volatility in that quarter. We look at loan sales all the time. Where we are in the cycle now, I think they are not going to be a big part of what we do going forward. We really like the yields, profiles, and call options we retain from doing securitizations. We like the momentum our shelf has and the better liquidity and bigger scale, and how that delivers more assets and better liquidity to the investors that support our shelf. Right now, that is where our focus is.
Analyst: Thanks. And then a second one for me. With Longbridge, you mentioned you are leveraging technology there. Is there anything you are doing from an AI standpoint across there and the other originators where you are going to see more efficiencies or cost savings as you continue to scale?
Larry Penn: Absolutely. Longbridge has rolled out an important AI product whereby its employees—even those that are customer-facing—can get quick access through AI to, for example, underwriting guidelines, to get better and quicker responses to customers' questions. That is just one example. Across many of our businesses, we are using AI in a big way to be more efficient.
Operator: And that was our final question for today. We thank you for participating in the Ellington Financial Inc. First Quarter 2026 Earnings Conference Call. You may disconnect your line at this time, and have a wonderful day.