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Angel Oak adds more fixed-rate collateral to latest RMBS pool

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Angel Oak Capital Advisors is shifting toward more fixed-rate loans in its latest pool of near-prime/prime, non-conventional mortgages.

According to presale reports, the fixed-rate loan collateral in Angel Oak Mortgage Trust 2019-5 makes up 77.8% of the new collateral, compared to just 35.5% in Angel Oak’s previous deal that priced in July.

Angel Oak’s new pool consists of 969 loans with a collateral balance of $352.7 million – issued mostly to borrowers who could not qualify for conventional or government-sponsored loans due to credit problems, self-employment status or recent housing events such as a foreclosure or delinquency.

The new transaction will offer six classes of senior notes, including three senior-note tranches. The Class A-1 tranche totaling $218.4 million is supported by 38.1% credit enhancement, lower than Angel Oak’s 40.2% CE from its deal in July that had most of its pool tied to adjustable-rate mortgages.

The Class A-1 notes carry preliminary AAA ratings from S&P Global Ratings and DBRS.

The loans were all originated by three Angel Oak affiliates: Angel Oak Mortgage Solutions, Angel Oak Home Loans and Angel Oak Prime Bridge.

All the loans were originated under eight lending programs for various borrowers unable to obtain conventional or government-backed financing for purchase or investor homes. A majority of the loans, 637 totaling $283.1 million, were either “platinum” or “portfolio select” loans for borrowers with spotty credit or who are self-employed, requiring alternate income calculation.

While the platinum borrowers had a weighted average FICO of 731, most were unable to obtain conventional mortgages because of self-employment status or credit issues, such as a prior bankruptcy or foreclosure.

Another 113 loans were “non-prime general” loans for borrowers who have not had a foreclosure, notice of default or short-sale/deed-in-lieu event, but who have multiple 30/60/90 day delinquencies on debt reported in the past 12 months.

According to DBRS, Angel Oak is shifting its criteria by offering more bank statement loans with only 12 months of statements (62.7% of the pool) compared to two-year bank statement loans (2.8%). Also, Angel Oak is including more investor cash-flow loans into its pools, now making up 10.9% of the pool by balance.

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RMBS Subprime lending