Not since the go-go days of the mid 2000s has a national subprime REIT pulled off an IPO. If Angel Oak’s offering goes well, might the floodgates open? Wall Street can only hope.
As much as $20 billion of GSE-eligible mortgages could go into non-agency MBS annually due to new restrictions on GSE acquisitions of mortgages for investment properties and second homes.
It marks the first residential MBS rated by Kroll that aligns with a social bond framework. Fitch Ratings also rated the deal, though the firm appeared to be somewhat less impressed.
Months of improvements in the performance of non-agency MBS stalled earlier this year, though delinquencies resumed a downward trend at the end of March.
Non-agency outlets are seeing a surge in the supply of non-owner-occupied loans due to caps recently placed on GSE business. Non-agency MBS issuance is expected to increase, though pricing for jumbos is also declining.
In April, issuers offered $4.95 billion of prime non-agency MBS across nine deals. Meanwhile, only two expanded-credit MBS hit the market, totaling $735.58 million.
After complaints from MBS investors regarding the reporting of performance of loans in non-agency deals, the Structured Finance Association released voluntary standards that could address the issue.
Securitization of non-agency prime and Alt A mortgages ramped up significantly in the first quarter, although subprime MBS issuance dropped to its lowest level since 2017. RPL/NPL transactions remained the biggest component in the non-agency MBS market. (Includes three data charts.)