DBRS, Inc. (DBRS) has issued its preliminary ratings for the following Series 2019-1 Mortgage-Backed Certificates (the Certificates) issued by Angel Oak Mortgage Trust I, LLC 2019-1 (AOMT 2019-1 or the Trust) . concluded:
-- $390.1 million Class A-1 at AAA (sf)
-- $54.3 million Class A-2 in AA (sf)
-- $49.1 million Class A-3 at A (sf)
-- $40.8 million Class M-1 at BBB (sf)
-- $20.7 million class B-1 at BB (high) (sf)
-- $22.9 million Class B-2 at B (tall) (sq. ft.)
The AAA (sf) rating of the Class A-1 Certificates reflects the 36.00% credit enhancement provided by the subordinate Certificates in the group. The AA(sf), A(sf), BBB(sf), BB(high)(sf), and B(high)(sf) ratings reflect 27.10%, 19.05%, 12.35%, 8.95%, and 5.20% of the improvement of the credit rating was reflected, respectively,
Other than the classes specified above, DBRS does not evaluate any other classes in this transaction.
This transaction is a securitization of a portfolio of fixed and variable rate, subprime and senior prime residential mortgages. The Certificates are secured by 1,752 loans with a total principal amount of $609,601,531 as of the Effective Date (January 1, 2019).
Angel Oak Home Loans LLC (AOHL), Angel Oak Mortgage Solutions LLC (AOMS) and Angel Oak Prime Bridge LLC (collectively Angel Oak) contributed 95.5% of the portfolio (1,539 loans). Angel Oak Senior Mortgages have been made under the following nine programs:
(1) Portfolio Select (36.7%): For near-prime credit borrowers who cannot obtain financing through traditional or government channels because (a) they do not meet credit requirements, (b) they are self-employed and need it an Alternative Income Calculation using 12- or 24-month bank statements to qualify, (c) may have a lower credit score than required by government-sponsored underwriting guidelines, or (d) may have been subject to bankruptcy or foreclosure 24 or more months prior to creation.
(2) Platinum (34.5%) – For borrowers with excellent or near-excellent credit who are unable to obtain financing through traditional or government channels because (a) they do not meet credit requirements, (b) they are self-employed own and require alternative income calculations using 12 or 24 month bank statements; or (c) may have been subject to bankruptcy or foreclosure 48 or more months prior to its creation.
(3) Prime Jumbo (9.4%): For borrowers with preferred credit and a cleaner housing history, with no bankruptcy or foreclosure in the 60 months prior to the loan. The loan amounts also allow for high borrowing limits on the balance sheet. The interest-only function is allowed. Income documentation requirements follow Appendix Q.
(4) Non-Prime General (7.1%) – For borrowers who have not experienced a housing event in the past 24 months, but whose credit reports show multiple delinquencies of more than 30 and/or more than 60 days on reported debt . last 12 months.
(5) Investor Cash Flow (4.1%) – Created for real estate investors with experience buying, leasing, and managing investment properties with a proven credit history of five years and at least 24 months of credit history. living clean but cannot obtain financing through conventional or government channels because (a) they do not meet the requirements of such programs or (b) they may exceed the maximum number of properties allowed. Loans made under the Investor Cash Flow program are considered a business purpose and are not subject to Ability to Repay Rules (ATR) or the TRID Rule.
(6) Asset Qualifier (1.4%) – For borrowers with excellent credit scores and significant assets who can purchase the property with their assets but choose to use a financing instrument for cash flow purposes. Assets must cover home purchase plus 60 months of debt service and six months of reserves. No income documentation is obtained, but borrower qualifies based on certain credit requirements (minimum score 700) and significant equity requirements. These loans are available in the Platinum and Portfolio Select programs.
(7) Non-Preferred Foreign Citizen (1.2%): For investment property borrowers who are foreign citizens and do not reside or work in the United States. Borrowers may use alternate income and credit documents. Income is usually documented by the employer or accountant, and credit is confirmed through letters from foreign borrowers.
(8) New Non-Prime Home (1.1%) - Awarded to borrowers who have terminated their properties or have been the subject of a short sale, replacement deed, notice of default, or foreclosure. Borrowers who filed for bankruptcy or severely delinquent 12 or more months prior to the loan extension may also be considered for this program.
(9) Non-Prime Investment Property (0.1%) – Made for real estate investors who may have financed up to four mortgage-backed properties with originators (or 20 mortgage-backed properties with all lenders).
In addition, the group includes 0.1% secondary mortgage loans originated under Federal National Mortgage Association (Fannie Mae) guidelines and covered by Angel Oak.
The remaining 213 mortgage loans (4.5% of the total pool balance) were originated by two third-party assignors. Of the third-party loans, 29 loans (3.0% of total portfolio balance) were originated by HomeBridge Financial Services (HomeBridge).
Select Portfolio Servicing Inc. (SPS) is the servicing provider for all non-HomeBridge loans. Homebridge will be the servicing provider for loans originated by HomeBridge. AOHL and HomeBridge will act as Service Administrators and Wells Fargo Bank, N.A. (Wells Fargo; rated AA with stable trend by DBRS) will serve as lead manager. The US National Association of Banks acts as trustee and custodian.
While the mortgage loans were made in accordance with CFPB ATR rules, they were made to borrowers who, for the various reasons described above, generally do not qualify for jumbo products. prime, government or private label. an agency. Under CFPB's Qualified Mortgage (QM) rules, 9.1% of loans are designated as QM Safe Harbor, 1.1% as QM Rebuttable Presumption, and 79.2% as Non-QM. About 10.7% of loans are for investment properties and therefore not subject to MoQ rules.
Collection agents will generally finance advances on the principal and interest arrears on any mortgage until such loan is 180 days past due and will be required to advance taxes, insurance premiums, and reasonable expenses incurred in servicing and disposing of properties.
Beginning on the January 2022 Distribution Date, the depositor has the option to purchase all outstanding Certificates at a price equal to the outstanding Class Balance plus accrued and unpaid interest, including amounts transferred. Following this purchase, the depositor has the option to sell any remaining mortgage loan to (1) an unaffiliated third party or (2) at an auction in which the trustee has received at least two unaffiliated third-party bids in a single auction. transaction or multiple concurrent transactions.
The transaction uses a sequential disbursement cash flow structure with a proportional allocation of capital to the senior tranches. Principal proceeds may be used to cover interest shortfalls on the Certificates once the outstanding Senior Certificates are paid in full. In addition, the excess margin can be used to cover the first realized losses before being allocated to the deferred amounts pending payment up to Class B-1.
The ratings reflect the strengths of the transaction, including:
(1) Strong underwriting standards: Whether for prime or non-prime mortgages, underwriting standards have improved significantly compared to the pre-crisis period. All mortgage loans (with the exception of Investor Cash Flow, Investment Property and Foreign) have been underwritten in accordance with the eight underwriting factors of the ATR Rules, although they may not necessarily comply with Schedule Q of the Z regulation
(2) Robust credit attributes and group composition:
-- Mortgage loans in this portfolio generally have strong credit attributes, as reflected in combined loan-to-value (LTV) ratios, borrowers' household income, and cash holdings, including non-senior program loans that show a weaker creditworthiness of the borrower.
-- LTV ratios gradually decline as programs move up the credit spectrum, suggesting consideration of balancing factors for higher risk groups.
-- The group consists of 63.2% hybrid adjustable-rate mortgages with an initial term of five to 10 years, allowing borrowers plenty of time to repair credit before interest rates reset. The remaining 36.8% of the portfolio is made up of fixed-rate mortgages, which present the lowest risk of non-payment due to the stability of the monthly installments.
(3) Satisfactory Third Party Due Diligence: Third party due diligence firms performed property appraisals and credit reviews on 100% of the loans in the pool. For 95.9% of the loans (ie the entire group except 162 investor cash flow loans), external due diligence firms conducted regulatory compliance reviews. Data integrity checks were also performed on the pool.
(4) Strong servicer: SPS, a strong residential mortgage servicer and a wholly owned subsidiary of Credit Suisse AG, services the majority of the group's loans (97.0%). In this transaction, AOHL and HomeBridge as Service Administrators or SPS as Primary Service Providers are responsible for funding upfront payments to the extent necessary. Additionally, the transaction employs Wells Fargo as its primary service. If Service Administrators or Collection Agents fail to meet their obligations to pay principal and interest in advance, Wells Fargo is obligated to finance such service advances.
(5) Current Loans and Faster Prepayments: Angel Oak began originating out-of-branch loans in the fourth quarter of 2013. Since the issuance of the first transaction in December 2015, voluntary prepayment rates have been relatively high, as that these borrowers tend to take credit and refinance into lower-cost mortgages. In addition, the AOMT 2019-1 portfolio loans are 100% current. Although 3.1% of the portfolio was previously in default, all of these loans have been repaid.
The transaction also includes the following challenges and mitigating factors:
(1) Representations and Warranties (R&W) Framework and Supplier: While slightly stronger than other comparable DBRS-rated non-QM transactions, the R&W framework for AOMT 2019-1 is weaker compared to the high-quality jumbo securitization frameworks after the crisis. Instead of an automatic review when a loan becomes severely delinquent, this transaction uses a mandatory review on less immediate triggers. In addition, R&W providers, guarantors, or support providers are unrated entities that have a limited track record of performing in non-QM securitizations and may be subject to financial stress that may result in default of repurchase obligations. DBRS notes the following mitigating factors:
-- 100% of pooled loans had satisfactory third-party due diligence for credit quality, property valuation, and data integrity. With the exception of 162 investor cash flow loans, a regulatory compliance review was conducted. Comprehensive due diligence mitigates the risk of future R&W breaches.
-- An independent R&W auditor, Covius Real Estate Services, LLC, will be designated in the transaction to review the loans for alleged R&W violations.
-- DBRS conducted a local originator review of AOHL and AOMS and found the mortgage companies to be acceptable.
-- The sponsor or co-sponsor, both Angel Oak affiliates, will maintain an eligible vertical interest in at least 5% of the certifications in each class, balancing the sponsor and investor participation in the capital structure.
-- However, DBRS adjusted the originator's scores downward to account for a potential inability to meet repurchase obligations, a lack of track record and a weaker R&W structure. A lower originator score leads to higher default and loss assumptions and provides additional protections for rated securities.
(2) Non-prime loans, QM with reusable presumption or no QM: Compared to post-crisis prime jumbo transactions, this portfolio includes mortgages made to borrowers with weaker credit ratings or adverse credit events in the past, as well as QM - Rebuttable presumption or non-QM loan. In addition, some loans were identified through 24-month income statements (30.5%), 12-month income statements (20.6%), assets instead of income statements (1.4%), or as cash flow Investor cash loans (4.1%) subscribed . . DBRS notes the following mitigating factors:
-- All loans subject to ATR rules were originated to meet the eight required underwriting factors.
-- Underwriting standards have improved significantly since before the crisis.
-- Income statements and business loans are treated as incomplete documentation in the RMBS Insight Model, increasing expected losses on these loans.
-- The RMBS Insight Model includes the severity of loss penalties for non-QM loans and the rebuttable presumption of QM, as detailed in the "Key Factors Determining Loss Severity" section of the associated report.
-- For loans in this portfolio originated through the Non-Prime General and Non-Prime Recent Housing Event programs, borrower credit events generally occurred an average of 36 months and 20 months prior to the record date, respectively. In its analysis, DBRS applies additional penalties to borrowers with recent credit events in the past two years.
(3) Geographic concentration: Compared to other recent securitizations, the AOMT 2019-1 group has a high concentration of loans in Florida (24.2% of the group). Mitigating factors include:
-- Although the group is concentrated in Florida, the loans are well distributed in the Metropolitan Statistical Areas (MSAs). Florida's largest MSA, Miami-Miami Beach-Kendall, accounts for just 5.1% of the total transaction. DBRS does not believe that the AOMT 2019-1 group is particularly sensitive to deteriorating economic conditions or the occurrence of a natural disaster in a particular region.
-- DBRS's RMBS Insight model generates a higher asset correlation for this pool, driven by loan size and geographic concentration, compared to similarly collateralized pools, resulting in higher expected losses across all rating categories.
(4) Advances from the Collection Agent on Past Due Principal and Interest: The Affiliated Collection Agent will advance, on a scheduled basis, the principal and interest of past-due mortgages until said loans are 180 days past due or until such advances are considered bad debts This is likely to result in fewer losses on the transaction, since prepaid principal and interest will not have to be repaid from the fund at mortgage payoff, but will increase the likelihood of periodic interest losses for certificate holders . Mitigating factors include the fact that (a) basic income can be used to pay interest losses on the Certificates if outstanding Senior Certificates are paid in full and (b) subordination levels are higher than the expected losses, leading to O Certificates may result in interest payments. DBRS ran cash flow scenarios that included up to 180 days of advances on principal and interest on delinquent loans; Cash flow scenarios are discussed in more detail in the Cash Flow Analysis section of the related report.
DBRS's AAA(sf) and AA(sf) ratings refer to timely payment of interest and full repayment of principal before the final legal maturity date in accordance with the terms of the applicable certificates. The DBRS A(sf), BBB(sf), BB(high)(sf) and B(high)(sf) ratings address the final payment of interest and full repayment of principal on the final legal maturity date in accordance with the terms and conditions of the associated certificates.
Full description of strengths, challenges, and mitigating factors are listed in the related report. More information on the sensitivity of the assumptions used in the rating process can be found in the respective annex.
All amounts are in US dollars, unless otherwise stated.
The main methodology is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, found atdbrs.comin Methods and Criteria.
The rated company or its affiliated companies participated in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its affiliates in connection with this rating action.
The full report with additional analytical details is available by clicking the link below under Related Research or by contacting us via firstname.lastname@example.org.
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- Angel Oak Mortgage Trust I, LLC Valuation Report 2019-1
- Angel Oak Mortgage Trust I, LLC 2019-1 - DBRS Disclosure Report 17g-7
- Angel Oak Mortgage Trust I, LLC 2019-1 - Appendix: Sensitivity Analysis
- Angel Oak Mortgage Trust I, LLC 2019-1 - ABS Due Diligence Form - 15E (AMC)
- Angel Oak Mortgage Trust I, LLC 2019-1 - ABS Due Diligence Form - 15E (AMC)
- Angel Oak Mortgage Trust I, LLC 2019-1 - ABS Due Diligence Form - 15E (Clayton)
- Angel Oak Mortgage Trust I, LLC 2019-1 – Formular ABS Due Diligence – 15E (Clayton – Erzählung)