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.
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.
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.
The SEC’s Investor Advisory Committee wants increased regulatory disclosures in the sector. However, an SEC commissioner questioned the utility of the proposal.
Prepayments helped pay down senior bonds, making the remaining subordinated tranches the larger share of an expanded-credit deal’s balance. Result: A larger cushion against potential losses, DBRS said.
Industry-wide REIT MBS holdings expanded just 0.6% during the fourth quarter, a sharp slowdown from the growth rates in the prior two quarters. (Includes data chart.)