Angel Oak Mortgage Trust is starting its 2022 vintage by issuing $537.5 million in residential mortgage-backed securities (RMBS), from a collateral pool of 1,138 mortgages. Most of the mortgages are considered non-prime – but not necessarily subprime.

The deal, AOMT 2022-1, is slated to close on February 10, and is collateralized by mortgages that were mostly originated using alternative documentation. Such documentation included asset qualification, investor cash flow/debt service coverage ratio (DSCR) and business or personal bank statements, and account for about 69.9% of the loans in the collateral pool, by percentage of pool balance.

Barclays Capital, Deutsche Bank Securities, Goldman Sachs, and Morgan Stanley are all initial note purchasers, KBRA said. Wells Fargo Bank is serving as master servicer.

KBRA expects to assign ratings that include ‘AAA’ on the $447.7 million A-1 notes; ‘BBB+’ on the $18.2 million M-1 class; and ‘BB-’ on the $6.9 million, B-2 class of notes.

The notes will be issued from a sequential pay structure, but not in the same way as recent non-prime RMBS that provide for pro-rata principal distribution among the class A certificates before any principal is allocated to the class M-1 or class B certificates. AOMT 2022-1’s waterfall payment structure allows for sequential principal distribution to all of the certificates at all times, including A-1 through A-3.

The notes benefit from credit enhancement in the form of a 180-day stop advance, and an excess spread mechanism.

Excess spread will come from the difference between the collateral’s net weighted average cashflow (WAC) of 4.09% on and the certificates’ 2.92% WAC. Remaining cashflow available up to the amount of current period and cumulative realized losses can be used to pay down the most senior classes of certificates outstanding and on a sequential basis, KBRA said.

On average, the loans have an outstanding balance of $472,381. On a weighted average basis, the collateral also has:

• Original loan-to-value (LTV) ratios of 70.6%

• Original FICO scores of 744

• Debt-to-income ratio of 32.7%

• Loan age of 5.8 months

The collateral is comprised of first-lien loans, entirely, KBRA said. A majority of the mortgages are fixed-rate, fully amortizing loans for which 63.0% of borrowers are self-employed.

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