Non-prime mortgages power Angel Oak’s $250 million offering

The Angel Oak Mortgage Trust pool of 381 mortgages, classified as either non-qualified or exempt from Ability-to-Repay rules, will support $250 million in residential mortgage-backed securities (RMBS).

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Securitized bonds from the trust will be sold through 11 tranches of notes, classes A, M and B, according to analysts at Kroll Bond Rating Agency. The A1 senior notes include a first cash flow and a last cash flow tranche, which are fixed-rate and pro rata, but are not among the exchangeable notes, KBRA said.

Deutsche Bank Securities leads a group of initial purchasers that includes J.P. Morgan Securities and Goldman Sachs. Slated to close on October 29, the notes have a final maturity of November 2071, the rating agency said.

Among the A1 classes, credit enhancement levels, relative to the note balances, includes 30.80% on the A1A notes and 20.80% on the A-1B, A-1FCF, A-1LCF and A-1, KBRA analysts said.

The other senior notes, A2 and A3, benefit from credit enhancement levels of 15.30% and 11.05%, respectively. Among the mezzanine and subordinate notes, classes M, B1, B2 and B3 benefit from credit enhancement levels of 5.00%, 2.75%, 1.35% and 0.00%, respectively.

While the A1 senior notes are dynamic, KBRA assigned AAA ratings to all of them and found they are expected to pay coupons of 6.49%, the rating agency said.

Known as AOMT, series 2026-6, the transaction will repay investors through a sequential-pay structure, KBRA said.

To further bolster credit to the notes, the transaction includes two stop-advance provisions that prevent forwarding parties from advancing interest and principal on loans, the rating agency said. For first-lien loans, the stop advance applies to loans that are delinquent by 180 days or more, while the stop advance requirement applies to second-lien loans that are delinquent by 60 days or more.

AOMT 2026-6’s underlying loans have an average balance of $657,737, a weighted average (WA) coupon of 7.24%, and just 18.8% have an interest-only period.

In other collateral characteristics, borrowers have a FICO score of 754 on a WA basis. They also have modest leverage, with a WA, original loan-to-average (LTV) ratio of 71.4%.

Borrowers, most of whom are self-employed (63.9%) have a non-zero WA average income of $1.4 million, and liquid reserves of $532,541, KBRA said.

KBRA assigned AA and A to classes A2 and A3, respectively; and BBB-, BB- and B- to classes M1, B1 and B2, the rating agency said.