As non-prime mortgage assets continue to make up a significant portion of mortgage-backed securities (MBS) deals, Angel Oak Mortgage Fund is preparing to issue $350.2 million in MBS secured by a portfolio dominated by mortgage loans considered non-qualified or exempt from ability to repay rules.
Non-qualified mortgages account for most of the loans, at 55.2%, while ATR/qualified mortgage assets represent the smaller portion, 44.8%, according to Kroll Bond Rating Agency, the only agency to rate the deal, which is slated to close on June 17, according to Asset Securitization Report's deal database.
The deal, Angel Oak Mortgage Trust 2025-7 will repay notes through a pro-rata, sequential hybrid structure, with a final maturity of June 2070, according to KBRA. The rating agency found that excess spread, representing 1.1% of the pool balance, will provide additional credit enhancement.
Every month excess cashflow available up to the amount of the current period and cumulative realized losses will pay down the most senior classes of outstanding certificates on a sequential basis, KBRA said. Aside from preventing write downs, KBRA says, using excess spread this way will preserve and replenish subordination.
Managers include
The database also finds that the A1 tranche, AAA-rated notes offer a coupon of 5.75%. Further down the deal structure the A2, AA+ rated notes carry a coupon of 5.95%, the A3 tranche, A-rated notes have a coupon of 6.10% and the BBB-rated notes offer 6.48%.
As for the portfolio, KBRA found that bank statements going back 12-23 months accounted for the largest portion of underwriting in the pool, at 45.3%. Following that, debt service coverage ratio underwriting accounted for 30.8%, the rating agency said. The loans had an average balance of $484,987, and borrowers had an original FICO score of 753 on a weighted average basis.
On a non-zero WA basis, borrowers had a median annual income of $271,653, with liquid reserves of $377,853, also on a non-zero WA basis.
KBRA assigned ratings of BB- and B- to the B1 and B2 tranches, respectively.
