Angel Oak Capital Advisors (Angel Oak), an investment management firm specialising in value-driven structured credit products, has completed AOMT 2021-2, the first non-agency, mortgage-backed securitisation issued in the US that qualifies as a social bond.
The USD231 million securitisation is composed primarily of non-qualified mortgages (non-QM) originated entirely by affiliated mortgage lenders. The securitisation, made up of 466 loans, has an average credit score of 740 and a loan-to-value ratio of 73 per cent. The transaction was rated by Fitch Ratings and Kroll Bond Rating Agency, and the senior tranche received a AAA rating.
Angel Oak undertook a high level of diligence in qualifying loans for AOMT 2021-2 and adhered to the standards put in place by the International Capital Market Association (ICMA) Social Bond Principles, the industry’s leading framework for social- and green-bond issuances. Angel Oak also secured a second-party opinion from ISS ESG, which confirmed AOMT 2021-2 alignment with the standards set forth by the ICMA Social Bond Principles.
In addition, Angel Oak developed a comprehensive framework and used extensive data analytics to categorise and quantify the bonds’ social impact at the loan level. The securitisation pooled loans that generally offer mortgage financing solutions for underserved US homebuyers who are not able to borrow through traditional lending channels. These borrowers largely include self-employed individuals, a sector of the population that has disproportionately felt the economic strain caused by the Covid-19 pandemic.
“The issuance of this securitisation comes as a natural next step as part of our company-wide, socially conscious integration program,” says Rob McDonough, director of ESG and regulatory initiatives at Angel Oak. “This focus has allowed us to not only pioneer a social bond, but also institute the due diligence necessary to ensure an impactful product. We have dedicated significant time, energy and resources to achieve this, and we are proud of our ability to execute on this first-to-market securitisation.”
One of the key aspects that sets Angel Oak apart is the company’s vertically integrated model, which allows it to oversee and control all aspects of every loan from origination to underwriting and securitisation. Angel Oak has developed a comprehensive database that tracks loan performance and key metrics, giving the firm a competitive advantage. It also allows Angel Oak to develop new programs that will align with future opportunities.
“At its core, this securitisation remains in line with the high standards set forth by Angel Oak while also bringing additional value through the lens of an impactful social bond,” says Namit Sinha, chief investment officer of private strategies. “We’re continuously advancing our technologies and growing our practices to deliver new, progressive products for our demanding investors. These capabilities leverage Angel Oak’s adaptability and ultimately aid our continuing ability to deliver higher-yielding opportunities in a challenging market environment.”
The completion of AOMT 2021-2 marks the firm’s second securitisation this year, totalling approximately USD500 million in issuance in 2021 alone. Since Angel Oak’s first securitisation in 2015, the firm has been a true leader in non-agency RMBS issuance, completing 23 securitisations totalling more than USD7.9 billion