Atlas A&D Opportunity Fund III's latest sponsored securitization of a non-prime mortgage securitization has the largest closing pool balance in almost six months, while maintaining only modest leverage.
The transaction will issue notes through eleven tranches of class A, M and class B notes. It will repay the notes through a pro rata structure on the class A notes, while the mezzanine and subordinate tranches will be repaid sequentially, according to Kroll Bond Rating Agency.
A&D Mortgage Trust 2026-NQM2, or ADMT 2026-NQM2, will issue $602.7 million in non-prime residential mortgage-backed securities (RMBS). The collateral pool contains 1,793 mortgages with four months of seasoning, financing primarily single-family homes and planned unit developments (68.4%) and condominiums (20.5%), KBRA said.
Almost half of borrowers in the collateral pool are self-employed (48.1%), an increasing trend in non-prime RMBS transactions, KBRA said. Underwriting relied heavily on alternative documentation, led by debt-service coverage ratios (35.7%) and bank statements ranging from 12-23 months (28.2%) and longer than 24 months (4.6%), while full documentation accounted for just 7.5% of the loans included in the pool.
None of that seemed to indicate the borrowers themselves were of poor quality, however, KBRA said. On a non-zero weighted average (WA) basis, borrowers had annual income of $656,931, with liquid reserves of $170,061, the rating agency said. Borrowers also had a FICO score of 748 on a WA basis.
J.P. Morgan Securities is the structuring lead, and a large group of institutions joins the institution as managers, including ATLAS SP Securities, Barclays Capital, Mizuho Securities and Morgan Stanley, according to KBRA.
A&D Mortgage Trust 2026-NQM2's structure includes excess spread, excess servicing income to compensate for losses, KBRA said.
Similar to every other transaction going back to the ADMT 2025-NQM3, from August 2025, Florida accounted for the largest portion of loans in the pool geographically, around 40% each time. In the 2026-NQM2 series, California and New York followed with 14.9% and 13.9%, respectively.
KBRA assigns AAA to the class A1 notes; AA+ to the A2 notes; A to the A3 notes; and BBB+, BB+ and B- to classes M1, B1 and B2, respectively.
