Angel Oak Mortgage, a company that buys home loans to non-traditional borrowers, launched a scaled-down IPO on Thursday; and as of press Thursday afternoon, stocks were trading evenly at levels between $ 18 and $ 19 per share.
The Real Estate Investment Trust, which also buys small commercial mortgages, has set its offering of 7.2 million shares at a starting price of $ 19 each. Underwriters have the option to purchase an additional 1.08 million shares in the company within 30 days. The company originally planned to sell 8.05 million shares at a price of $ 20-21 each, giving underwriters the option to purchase about an additional 1.21 million shares. Upon completion of the offering, Angel Oak will sell more than 2.1 million of its common shares to CPPIB Credit Investments Inc. in a concurrent private placement at a price of $ 19.00 per share.
The relatively steady public demand for the company's shares suggests that investors are receptive to the notion that lending to certain self-employed borrowers and others who do not have W-2 income could be a growth engine for lenders, since other sources of mortgage volume weaken. The loans Angel Oak buys are those that fall outside of the evolving qualifying mortgage definition, which serves as a guide that loans meet the parameters of the Dodd-Frank Act's Eligibility Rule. The rule was created to hold lenders accountable for ensuring borrowers have the financial means to make loan payments after a wave of improperly taken over loans led to a property crash in the mid-2000s.
The pandemic outbreak temporarily disrupted the non-QM lending market last year, but it has made a comeback as traditional lending, fueled by record-low interest rates last year, slowed.
Recent examples include the announcement by privately held Sprout Mortgage on Tuesday that it is expanding its retail channel by leveraging its traditional expertise in the non-QM space. A&D Mortgage and Imperial Fund also announced Tuesday that they recently completed a $ 214 million non-QM securitization issue.
Other publicly traded non-banks with expertise in non-QM are Finance of America and Impac Mortgage Holdings. While Finance of America isn't solely focused on non-QM loans, its president, Bill Dallas, is a mortgage industry veteran who has worked with them extensively.