With a small sliver of Libor-indexed collateral, the Angel Oak Mortgage Trust, 2021-6 is preparing to issue about $590 million in mortgage-backed securities to investors.
Angel Oak originators, comprised of Angel Oak Home Loans LLC and Angel Oak Mortgage Solutions, provided the home loans, along with third-party originators with originated less than 10% of the loans in the pool, according to Fitch Ratings and Kroll Bond Rating Agencies.
About 73.9% of the underlying home loans are designated as non-qualified mortgages, and 26.1% are investment properties, according to Fitch Ratings. As for the pool’s Libor exposure, three loans have adjustable-rate mortgages referencing the one-year Libor. Yet the certificates being offered to investors are fixed-rate and capped at the net weighted average coupon.
About 87% of the loans in the pool were underwritten to borrowers with less than full documentation, according to Fitch. Out of that group, Fitch estimates that 63.9% were underwritten to a 12- to 24-month bank statement to verify income, which Fitch says is not consistent with appendix Q standards and its own view of what constitutes a full-documentation program.
About 1,176 loans are in the collateral pool, and seasoned for about six months. KBRA noted that, in a potential credit negative, originators relied on alternative or non-traditional income documentation. KBRA also noted that the pool’s moderate ratio of loans originated on investment properties as a potential credit weakness.
KBRA made several notes about the debt-service-coverage-ratio (DSCR) loans in the collateral. They account for 18.6% of the pool and are the largest subset of investor loans in the pool, are typically qualified using a ratio of the borrower’s actual income to certain debt service payments and are generally not subject to the Ability-to-Repay rule. The DSCR demonstrate strong borrower equity with a weighted average (WA), original combined loan-to-value (OCLTV) ratio of 67.4%, which combines mortgage loans with credit card debt. They also have a NZWA original score of 747.
The entire investor population within the subject pool has a comparable risk profile with a NZWA original score of 748 and WA OLTV/OCLTV of 67%.
California accounted for the state with the largest concentration of loans in the pool, 40.3%. Los Angeles, with 19.6% of the pool, represents the largest MSA in the pool.
