Angel Oak got an easier AAA on its next nonprime RMBS

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Angel Oak was able to secure triple-A credit ratings for its next offering of nonprime residential mortgage bonds, despite offering considerably less credit enhancement.

Both DBRS and S&P Global Ratings expect to assign triple-A ratings to the senior tranche of AOMT 2017-2, which benefits from 37.75% credit enhancement. That’s significantly less than the 46.65% on the senior trance of a deal completed in March, which was also rated by DBRS.

Both deals are backed by a portfolio of fixed-rate and adjustable-rate mortgages, primarily to borrowers with “near-prime” credit, meaning they are unable to obtain financing through conventional channels because their credit scores aren’t quite high enough, they declared bankruptcy too recently, or because they are self-employed and need to verify their income using bank statements.

Most of the credit characteristics listed in DBRS’ presale report are similar to those of Angel Oak’s previous deal. The rating agency does note that, compared with other recent securitizations, the pool has a high concentration of loans located in Florida (34.7%. However, Metropolitan Statistical Area, Miami-Miami Beach-Kendall, represents only 7.3% of the entire transaction, and DBRS does not believe the AOMT 2017-2 pool is particularly sensitive to any deterioration in economic conditions or to the occurrence of a natural disaster in any specific region.

The DBRS-calculated weighted-average (WA) original combined LTV (CLTV) of 74.5% suggests borrowers have considerable
equity in their homes. The pool contains 0.2% first-lien loans with piggybacks, with WA original CLTV of 90.0%.

Select Portfolio Servicing is the servicer; Clayton Services is the rep and warranty reviewer.

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