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Mortgage shop securitizes loanDepot loans

(Refiling to reach broader audience)

By Joy Wiltermuth

NEW YORK, Aug 19 (IFR) - Ellington Financial, a specialty finance company best known for placing big bets on dicey mortgage-backed securities, has begun to dip its toes in securitizing debt created by online lenders.

The Connecticut company bought loanDepot's online consumer loans that were packaged into a new US$105.65m securitization trade that priced on Friday, according to deal documents viewed by IFR.

Credit Suisse was hired to sell the unrated bond. A 1.16-year US$87m class of bonds cleared as expected at a 4% yield, an investor said. A 3.11-year US$18.65m class was retained.

The new deal, called CILO 2016-LD1, is backed by a pool of nearly 9,000 loans with 14% average interest rates to borrowers with 715 FICO scores, according to the deal documents.

Ellington CEO Larry Penn said in June that the firm had been cutting its exposure to the shrinking business of pre-crash mortgage bonds to make room for high-yielding consumer loans "hot off the presses," while speaking at a conference.

Consumer loans grew to 27% of Ellington's long credit portfolio in the second quarter - or nearly the same size as its non-agency RMBS exposure, according to an earnings presentation.

But Penn said his firm has preferred partners with mortgage operations.

"They're used to dealing with a lot of rules, about the do's and don'ts of originating. And that's obviously critical for us," Penn said.

California-headquartered loanDepot is best known for its mortgages, including loans that conform to the standards set by government agencies Fannie Mae, Freddie Mac and Ginnie Mae, according to the company's website.

But last year it added consumer loans to its offerings and can give out loans with sizes of up to US$35,000.

Slightly more than 73% of the borrowers in the new securitization had an outstanding mortgage, according to deal documents.

Jefferies, a popular partner for online lenders, securitized the first US$150m pool of loanDepot consumer loans in December 2015. A spokesperson for Ellington declined to comment.

(Reporting by Joy Wiltermuth; editing by Shankar Ramakrishnan)