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Fitch rates the residential mortgage-backed certificates to be issued by Angel Oak Mortgage Trust 2021-8, Mortgage-Backed Certificates, Series 2021-8 (AOMT 2021-8). The certificates include 841 loans with a balance of $418.16 million.
According to Fitch, the certificates are secured by mortgage loans originated by Angel Oak Home Loans LLC and Angel Oak Mortgage Solutions LLC, as well as third-party originators each contributing less than 10% to the pool. A reported 78% of loans in the pool are designated as non-QM and 21.7% are investment properties that are not subject to the Ability to Repay rule. A single loan of the pool was designated as safe harbor QM.
The company provided a negative designation to updated sustainable home prices, which the company reports is at 10.2% above a long-term sustainable level.
“Underlying fundamentals are not keeping pace with the growth in prices, which is a result of a supply/demand imbalance driven by low inventory, low mortgage rates, and new buyers entering the market,” according to Fitch. “These trends have led to significant home price increases over the past year, with home prices rising 18.6% yoy nationally as of June 2021.”
Fitch also reported that the non-QM credit quality was mixed.
“The borrowers have a strong credit profile (739 FICO and 36% debt to income ratio [DTI], as determined by Fitch) and relatively moderate leverage with an original combined loan to value ratio (CLTV) of 72.9% as determined by Fitch that translates to a Fitch-calculated sustainable LTV (sLTV) of 78.6%,” according to the report.
“Of the pool, 71.8% represent loans where the borrower maintains a primary residence, while 28.3% comprises an investor property or second home based on Fitch's analysis; 13.3% of the loans were originated through a retail channel.”