Morningstar DBRS Changes Trend on Acra Lending to Stable From Positive, Confirms Residential Mortgage Originator Ranking

DBRS, Inc. (Morningstar DBRS) confirmed the MOR RO2 residential mortgage originator ranking for Acra Lending (Acra or the Company) and changed the trend on the ranking to Stable from Positive.

Acra is a specialty finance company focused on non-Qualified Mortgage (Non-QM) lending. Acra is a registered doing business as (dba) Citadel Servicing Corporation (CSC), which has been originating loans since 2013. CSC was acquired by funds managed by HPS Investment Partners (HPS) in February 2020 and rebranded its origination arm as Acra Lending in 2021 to differentiate that business from the servicing arm.

On December 3, 2024, BlackRock and HPS entered into a definitive agreement for BlackRock to acquire HPS for approximately $12 billion, with 100% consideration paid in BlackRock equity. The transaction is expected to close on June 1, 2025, subject to regulatory approvals and customary closing conditions. Acra management indicated that it does not expect any change to the Acra platform because of the transaction other than its being owned by funds managed by BlackRock.

Acra is licensed in the Nationwide Multistate Licensing System and authorized in 47 states and the District of Columbia to originate and service mortgage loans. Acra offers Non-QM, Fix and Flip, short-term, bridge, business-purpose, and jumbo prime products through loan programs that include Full Documentation, Limited Documentation, Bank Statement, Ability-to-Repay, Investor Cash Flow, Foreign National, Interest Only, Individual Tax Payer Identification Number, and Jumbo Non-QM, as well as a new Platinum program for better-credit borrowers with higher FICO scores and lower loan-to-value ratios than in existing programs. Acra has a fully developed platform and has originated more than $16.7 billion in loans since 2013. In 2024, Acra originated or acquired more than 7,000 mortgage loans with an unpaid principal balance (UPB) of more than $3.5 billion, representing an increase in volume of $1.2 billion over 2023 originations. Approximately 83% of Acra's originations are acquired through the wholesale channel. The correspondent and retail channels account for approximately 14% and 3% of originations, respectively.

Acra is headquartered in Irvine, California, and is led by an experienced executive and senior management team averaging approximately 15 years of non-prime mortgage origination and underwriting experience. All areas of the Company have well-defined reporting lines with clearly delineated responsibilities. Senior management changes in 2024 included a new chief financial officer (CFO) and managing director (MD) of IT. Additionally, Keith Lind, Chief Executive Officer (CEO) and Chairman of the Board for Acra since February 2020, has resigned his position as CEO. Mr. Lind was an MD at HPS prior to joining Acra at the time of the acquisition and has returned to HPS in a senior leadership role. Mr. Lind is currently the non-executive Chairman of the Board and is expected to remain involved with Acra until a new CEO has been identified. Acra created an office of the president with the Company's top five executives (the president; CFO; MD, business development; MD, IT; and the general counsel) who meet weekly to ensure effective communications across the executive team.

Acra has approximately 410 employees, including approximately 53 underwriters who average nearly 20 years of industry experience. In 2024, the overall Company turnover rate increased to 36%, including a 43% turnover rate in origination staff that was primarily attributed to approximately 20 wholesale account executives leaving the firm.

Acra remains focused on optimizing its origination processes. The Company continues to closely monitor and align staffing levels with origination volumes, operational efficiencies, and profitability, and continues to invest in technology enhancements to further automate the loan origination process, all of which efforts have resulted in significantly reduced origination turn times.

Acra continues to maintain targeted origination channels with comprehensive approval and monitoring practices for third-party originators and detailed underwriting processes that are well defined with a significant focus on borrowers' equity and ability to repay.

The MOR RO2 residential mortgage originator ranking reflects Acra's strong management team and underwriting staff, focused risk and compliance culture, solid underwriting processes, and highly integrated technology infrastructure. The change in trend to Stable from Positive reflects Acra's senior management changes and sales staff turnover as well as the open CEO position. While the acquisition of HPS, Acra's parent, by Blackrock is viewed as positive, the transaction is not yet closed and will need to season over time.

All rankings are subject to surveillance, which could result in rankings being raised, lowered, placed under review, confirmed, or discontinued by Morningstar DBRS.

Morningstar DBRS North American mortgage originator rankings are not credit ratings. Instead, they are designed to evaluate the quality of the parties that originate mortgage loans. Although the originator's financial condition contributes to the applicable ranking, its relative importance is such that an originator's ranking should never be considered as a proxy of its creditworthiness.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is U.S. Residential Mortgage Originator Rankings (June 28, 2024), https://dbrs.morningstar.com/research/435288.

For more information on this ranking or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277