Angel Oak adds $559M deal to non-QM RMBS pipeline

Angel Oak Mortgage’s brisk pace of non-qualified residential mortgage-backed securitizations carries on with the private lender’s fourth asset-backed offering in 2019.

The Atlanta firm is launching the $558.5 million Angel Oak Mortgage Trust 2019-4 involving 1,551 loans, according to ratings agency presale reports. Nearly 84% of the loans have borrowers who do not meet the Consumer Financial Protection Bureau’s qualified mortgage standard due to the non-prime credit standing, self-employment or plans to purchase investor properties.

Such non-QM loans typically do not meet ability-to-repay standards and truth-in-lending (TILA) disclosure requirements under the CFPB’s rules. Owner-occupied loans are usually underwritten with alternative-income and bank-statement documentation.

Investor-property loans making up 6.9% of the pool balance that are underwritten to property values and expected rental cash flow, instead of the buyer’s take-home income, according to presale reports.

All of the loans were originated by Angel Oak, which in the past has included third-party loans in its non-QM pools. The loans were mostly issued (87.4% of the pool balance) through the Angel Oak Mortgage Solutions affiliate that offers non-QM financing to borrowers; another 11.9% were through Angel Oak Home Loans that focus on Federal Housing Administration, Veterans Affairs, jumbo loans or other nonprime products.

The average loan balance is $360,075, with a weighted average borrower FICO of 704, according to Morningstar. (S&P estimated a WA FICO of 699.) The loans had a WA current rate of 7.1%, with about 64% with adjustable-rate terms.

The capital stack in the securitization has nine tranches of senior, mezzanine and subordinate notes, including two that will only pay investors proceeds from excess cash flow and on servicing mortgage loans released from the pool.

The senior notes consist of a Class A-1 tranche totaling $334 million and a Class A-2 tranche totaling $33.5 million, each with preliminary AAA ratings from Morningstar Credit Ratings, and $74 million in Class A-3 notes with an AA+.

S&P Global Ratings issued its AAA rating for the Class A senior notes, but just AA for the A-2 bonds and an A rating for the A-3 notes.

The loans were issued in 41 states and the District of Columbia, but nearly 47% of the loans were originated in California and Florida, and are all current.

The loan-to-value ratio estimated by Morningstar is 76.9%, “relatively higher” than non-QM deals rated by the credit ratings agency.

Angel Oak has more than $11.1 billion in assets under management.