Angel Oak Mortgage Trust is bringing a $228.2 million residential mortgage-backed securities deal to market, secured by a pool of mortgages in which non-qualified mortgages account for 59% of the collateral. The transaction, known as AOMT 2026-5, matters because it offers a current window into how rating agencies and investors are pricing credit risk in the non-QM segment, where borrowers often have stronger financial profiles than traditional QM borrowers but fall outside standard underwriting boxes. The deal's structure and disclosed collateral metrics provide a concrete, single-source snapshot of underwriting standards, credit enhancement levels, and expected investor yields in this corner of the private-label RMBS market.
The $228.2 million will be issued through 10 class A, M and B notes, all with a final scheduled maturity of July 2071. Most of the A1 tranches, including a first-cash flow and a last-cash flow tranche, are expected to pay a coupon of 5.83%, except for the A-1 last-cash flow tranche, which is expected to pay 5.93%, according to KBRA. The A2, A3 and M1 tranches are expected to pay coupons of 6.03%, 6.42% and 6.25%, respectively. Credit enhancement levels include 25.80% on all the A1 tranches, except 35.80% on the A1A notes, while classes A2 through B2 benefit from credit enhancement levels ranging from 19.30% down to 0.90%. The deal uses a modified sequential structure, under which class A certificates receive principal on a pro-rata basis before any principal is paid to more subordinate classes.
The underlying collateral consists of 458 performing, fixed- and adjustable-rate first-lien mortgages. Angel Oak Mortgage originated 71.2% of the pool, with other originators contributing the remainder, though none accounted for less than 10%, according to Fitch and KBRA. On average, the loans have a balance of $524,549 and a weighted average coupon of 7.00%. Only 10.6% of the collateral loans have an interest-only period. On a weighted average basis, borrowers have an original credit score of 753 and an original loan-to-value ratio of 70.8%. On a non-zero weighted average basis, underlying borrowers have annual income of $998,784, liquid reserves of $332,353, and a debt service coverage ratio of 1.25%, according to KBRA. All underlying mortgages were subjected to third-party due diligence, the rating agencies said.
The ratings split across the capital stack illustrates how credit enhancement and subordination are being allocated in this non-QM-heavy pool. KBRA assigns AAA to the A1 notes, AA and A to classes A2 and A3, and BBB, BB- and B- to classes M1, B1 and B2, respectively. Fitch assigns AAA to the A1 notes, AA and A to classes A2 and A3, respectively, and BBB- to the M1 notes. The servicer and master servicer, Select Portfolio Servicing and Computershare Trust, respectively, are prohibited from forwarding interest and principal on loans that are delinquent by 180 days or more, a structural protection that limits the extent to which severely delinquent collateral can continue to divert cash flows within the transaction.
The evidence base for this analysis is limited to a single secondary source, National Mortgage News, which summarizes disclosures from KBRA and Fitch. The dossier does not include the full rating agency presale reports, loan-level data, or details on geographic concentration, documentation type, or historical performance of Angel Oak's prior securitizations. As a result, the analysis cannot assess how this deal's pricing or credit metrics compare with earlier AOMT transactions or with broader non-QM issuance trends. What to watch is whether the 59% non-QM share, the 7.00% weighted average coupon, and the relatively high borrower income and reserves translate into performance that supports the assigned ratings, particularly for the more subordinate B1 and B2 classes where credit enhancement falls to 0.90%.