Angel Oak Real Estate Investment Trust I is sponsoring a $263.1 million sale of mortgage-backed securities, and the non-prime portfolio is secured by a much smaller pool of loans than the program has typically seen in recent years, this time with modest leverage.
Class A, M and B notes will be issued through nine tranches of notes from the Angel Oak Mortgage Trust 2025-2, according to analysts at Kroll Bond Rating Agency and Fitch Ratings. Fitch says that the notes have the same final maturity date of February 2070.
The AOMT 2025-2 pool is composed of 497 loans, down from 631 home loans in the previous transaction. On a weighted average (WA) basis, the pool has a loan-to-value ratio of 70.8%, and a FICO score of 749, also on a WA basis. Borrowers have $368,345 in liquid reserves.
The transaction will repay investors through a senior-subordinate, combination of pro-rata and sequential pay structure, according to KBRA. The rating agency also noted that loan modifications and expenses have reduced available interest and net weighted average coupon (WAC) rates in the deal, KBRA said.
Goldman Sachs is the deal's lead underwriter, says Fitch, while it joins BofA Merrill Lynch, Deutsche Bank Securities, and J.P. Morgan Securities on the deal as manager.
Two performance triggers—one for cumulative loss and another for delinquency—are also support credit to the notes. If both performance triggers are set off, the trust will pay principal to the class A certificates as unpaid interest and then as principal. If neither trigger is satisfied, the deal will allocate principal sequentially throughout the structure, first as unpaid interest to the certificates and then as principal, according to KBRA.
Primary residences account for half of the pool, while investor properties make up another 43.0% of the underlying collateral, Fitch said. The underwriting is predominantly alternative, breaking down to bank statement documentation accounting for 51.7% of the pool. Another 33.9% was underwritten through investor cash flow documentation, including debt service ratio (DSCR), Fitch said.
The A1 notes benefit from credit enhancement equaling 26.8% of the pool balance, while the A2 and A3 notes have enhancement levels of 23.2% and 14.9%, respectively.
KBRA assigns AAA to the A1 notes; AA+ to the A2 tranche; and A+ to the A3 notes; BBB+ and BBB- to the M1A and M1B notes, respectively; and BB and B to the B1 and B2 tranches, respectively.
Fitch assigns AAA to the A1 notes; AA to the A2 notes; and A and BBB- to the A3 and M1A notes.
