Mortgage News March 28, 2023
Angel Oak Mortgage Trust (AOMT) is gearing up to launch its second non-qualified mortgage (non-QM) residential mortgage-backed securities (RMBS) transaction of the year, worth $495.5M. The securitization is backed by a pool of 877 loans, 72.2% of which are non-QM mortgages, while 27.9% are investor loans.
According to Fitch, the loans have seasoned for an average of 15.5 months. While Fitch views the home price values of the pool as 8.5% above a long-term sustainable level, this is lower than the national level, which sits at 10.5%. Due to low inventory, favorable mortgage rates, and new buyers entering the market, Fitch explains that the fundamentals are not keeping pace with the price increase.
The borrowers in the pool have a strong credit profile, with an average FICO score of 741 and a 39.8% debt-to-income (DTI) ratio. The largest loan in the pool amounts to $3.4M, and 127 loans in the pool are over $1M. According to Fitch, most of the loans are current.
The non-QM market has been growing steadily over the years, and Angel Oak is one of the players leading the way in the sector. These loans typically fall outside the remit of the Qualified Mortgage (QM) guidelines and are often extended to self-employed borrowers or those with non-traditional income sources. AOMT has continued to expand its non-QM mortgage business, driven by the demand for alternative lending options in the market.
Angel Oak’s latest non-QM RMBS transaction highlights the growing demand for alternative lending options in the mortgage market, as well as the strength of borrowers in the non-QM space. With the non-QM market continuing to grow, it will be interesting to see how Angel Oak and other players in the sector adapt and expand their offerings to meet changing market demands.
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