Angel Oak Mortgage REIT purchased $204 million in newly originated Non-QM mortgages and home equity lines of credit during the second quarter, up approximately 39% from a year earlier but down 17% from the first quarter.
The results, combined with two securitizations completed after quarter-end, provide another measure of investor appetite for non-agency mortgages despite difficult origination conditions. Angel Oak executives described the Non-QM securitization market as healthy, citing active buyers and continued capital formation.
Angel Oak did not disclose how the latest purchases were divided between Non-QM mortgages and HELOCs. The loans had a weighted average coupon of 7.34%, a weighted average combined loan-to-value ratio of 70.5%, and an average credit score of 759.
“The market obviously is difficult from the origination side” because housing affordability remains strained, CEO and President Sreeni Prabhu told analysts during Tuesday’s earnings call.
“That being said, the Non-QM market, amazingly enough, over the last few years continues to grow,” Prabhu said.
Beyond the quarterly earnings figures, Angel Oak’s available financing capacity and post-quarter securitizations show how much room the REIT has to continue purchasing loans.
Securitizations Replenish Buying Capacity
In July, Angel Oak was the sole contributor to AOMT 2026-3, a $279.6 million securitization backed by residential mortgages. The company used the proceeds to repay approximately $247.4 million in outstanding debt, releasing $22.3 million for new loan purchases and operating expenses.
Angel Oak subsequently contributed $71.2 million in HELOCs to AOMT 2026-HB1, a $221.4 million securitization completed in August.
Together, the transactions reduced Angel Oak’s recourse debt-to-equity ratio from 2.3 times at the end of June to approximately 1.0 times.
As of June 30, Angel Oak also had four loan financing facilities allowing aggregate borrowings of as much as $1.3 billion. Approximately $365 million had been drawn, leaving about $900 million in capacity for new loan purchases.
Executives told analysts that the proceeds from the two securitizations provide fresh capital that can be used to purchase loans before the company gradually adds warehouse debt as its portfolio grows.
Angel Oak expects to maintain an average pace of approximately four Non-QM securitizations annually. Management also said another HELOC securitization is likely this year and that its pipeline could support another Non-QM transaction during the third quarter, although the timing could slip into October.
“The securitization market’s healthy in the Non-QM space — lots of buyers, lots of activity,” Chief Financial Officer Brandon Filson said. “So, that is moving in the correct direction, even in the face of the volatility of rates.”
HELOC Growth Remains Selective
Angel Oak expects HELOCs to remain a relatively small but growing part of its portfolio.
“We think of it as a 10% to 15% allocation of our overall allocation,” Prabhu said. “So, we’ll still be predominantly Non-QM. And then selectively, we’ll look into HELOCs based on our credit boxes.”
That strategy continues Angel Oak’s expansion into home-equity lending. In May 2025, Angel Oak completed its first HELOC securitization, a roughly $191 million transaction that included loans sourced through Angel Oak Mortgage Solutions and third-party channels.
Second-lien products have gained attention among Loan Originators because they allow homeowners to tap their equity without replacing a low-rate first mortgage.
The latest HELOC securitization contained loans with a weighted average coupon of 9.79%, an average credit score of 744, and a weighted average CLTV of 64.8%, according to management.
Angel Oak’s Non-QM holdings are also concentrated in two of the sector’s principal borrower groups. Executives said investor cash-flow loans account for approximately half of its Non-QM collateral, with bank-statement products for small-business owners comprising another important part of the portfolio.
The concentration reflects a broader industry shift examined in NMP’s recent analysis of the DSCR lending boom, as securitization demand and institutional capital draw more lenders into investor-focused products.
Credit Discipline Draws Attention
Angel Oak is remaining cautious about credit even as more capital enters the Non-QM market.
Prabhu said increased competition has brought additional insurance-company capital into the sector, requiring investors and lenders to remain disciplined about the loans they are willing to originate or acquire.
“There are weak points that are starting to show up in certain programs that we generally don’t do, but some of our competitors are doing,” Prabhu said.
He did not identify the programs or companies. Prabhu added that underwriting across the broader Non-QM market generally remains prudent.
Angel Oak is also approaching HELOC underwriting cautiously. Prabhu said the company does not intend to scale the product simply for the sake of increasing volume, particularly given broader concerns about consumer credit and elevated home prices.
Earnings Improve, Book Value Slips
Angel Oak reported second-quarter GAAP net income of $3.4 million, or 14 cents per diluted share, up from $767,000, or 3 cents per share, a year earlier.
Net interest income increased 8% year over year to $10.7 million. For the first half of 2026, net interest income rose 14.1% to $22.9 million.
Distributable earnings, a non-GAAP measure the company uses to evaluate operating performance after excluding certain unrealized gains, losses, and nonrecurring items, totaled $9 million, or 37 cents per diluted share.
The results were partly offset by market-value changes. Angel Oak recorded $5.2 million in net unrealized losses during the quarter. GAAP book value declined 1.7% from the first quarter to $10.13 per share, while economic book value edged down 0.3% to $12.24.
The company held approximately $438.8 million in residential whole loans awaiting securitization at the end of June, up from $294.1 million at the end of 2025. Total assets increased to approximately $3 billion from $2.75 billion over the same period.
What It Means For Loan Originators
The results suggest Loan Originators continue to have a well-funded secondary-market outlet for Non-QM, DSCR, bank-statement, and home-equity production. Angel Oak’s available financing capacity and plans for additional securitizations indicate that it has room to keep purchasing loans even while the broader origination market remains constrained.
The credit profile of its purchases also shows where that appetite is concentrated. With an average credit score of 759 and a 70.5% combined loan-to-value ratio, Angel Oak is deploying capital selectively rather than signaling a broad relaxation of underwriting standards. The opportunity remains strongest in well-structured Non-QM and second-lien loans that fit established investor credit parameters.
Angel Oak declared a quarterly dividend of 32 cents per common share, payable Aug. 28 to shareholders of record as of Aug. 21.
