As noted in a recent J.P. Morgan research publication, Angel Oak Mortgage Trust (AOMT) has demonstrated strong credit performance, with low delinquency rates in both 2023 and 2024. In response to today’s more challenging housing environment and increasing financial pressure on consumers, we have proactively managed credit by reducing exposure to higher-risk loan categories. Specifically, we have limited the inclusion of loans with lower FICO scores and higher loan-to-value (LTV) ratios, as well as CPA/profit and loss (P&L)-only and no-ratio debt service coverage ratio (DSCR) investor loans.
No-ratio DSCR loans are typically underwritten based solely on LTV ratios due to insufficient rental income. Along with CPA/P&L-only loans, they have shown higher delinquency rates according to J.P. Morgan research. While these delinquencies have not yet resulted in realized losses, they may pose a risk for insurance companies and investors in the junior tranches of securitizations if macroeconomic conditions, such as employment or home prices, begin to deteriorate.
Non-QM Shelf Performance Divergence
Source: J.P. Morgan, CoreLogic as of June 2025.
Collateral Breakdown Across Non-QM Shelves
Source: J.P. Morgan, CoreLogic as of June 2025.
There is no guarantee that such performance will be achieved, and actual results may vary substantially. Based upon viewpoints which may change over time, inherently involve uncertainty, and employ the use of material assumptions which may not prove accurate. Assumptions regarding yield and other potential portfolio characteristics are provided for discussion purposes only. Any actual portfolio may include material differences from this presentation. Past performance is no guarantee of future results.
The views expressed represent the opinion of Angel Oak Capital Advisors which are subject to change and are not intended as a forecast or guarantee of future results. Stated information is derived from proprietary and non-proprietary sources which have not been independently verified for accuracy or completeness. While Angel Oak Capital Advisors believes the information to be accurate and reliable, we do not claim or have responsibility for its completeness, accuracy, or reliability. Statements of future expectations, estimate, projections, and other forward-looking statements are based on available information and management’s view as of the time of these statements. Accordingly, such statements are inherently speculative as they are based on assumptions which may involve known and unknown risks and uncertainties. Actual results, performance, or events may differ materially from those expressed or implied in such statements.
All investing involves risk, including the loss of principal. There is no guarantee that investment objectives will be attained. Results may vary. There is no guarantee that risk can be managed successfully.
This document does not constitute advice or a recommendation or offer to sell or a solicitation to deal in any security or financial product. It is provided for informational purposes only and on the understanding that the recipient has sufficient knowledge and experience to be able to understand and make their own evaluation of the proposals and services described herein, any risks associated therewith and any related legal, tax, accounting or other material considerations. To the extent that the reader has any questions regarding the applicability of any specific issue discussed above to their specific portfolio or situation, prospective investors are encouraged to contact Angel Oak Capital Advisors or consult with the professional advisor of their choosing.
Except where otherwise indicated, the information contained in this presentation is based on matters as they exist as of the date of preparation of such material and not as of the date of distribution or any future date. Recipients should not rely solely on this material in making any future investment decision.
This presentation is confidential, is intended only for the person to whom it has been directly provided and under no circumstances may a copy be shown, copied, transmitted or otherwise be given to any person other than the authorized recipient without the prior written consent of Angel Oak Capital Advisors.
Specific investments described herein do not represent all investment decisions made by Angel Oak Capital Advisors. The reader should not assume that investment decisions identified and discussed were or will be profitable. Specific investment advice references provided herein are for illustrative purposes only and are not necessarily representative of investments that will be made in the future.
Past performance is no guarantee of future returns. No guarantee of investment performance is being provided and no inference to the contrary should be made.
Angel Oak Capital Advisors is a registered investment advisor. However, registration as an investment adviser with the SEC does not imply approval by the SEC or that the Adviser or its employees possess a certain level of skill or training.