Transaction reflects growing investor demand for non-QM loans
A&D Mortgage has issued a $458.93 million non-QM residential mortgage-backed securities (RMBS) transaction.
The securitization, A&D Mortgage Trust 2025-NQM1 (ADMT 2025-NQM1), is backed by 1,290 loans and reflects the increasing investor demand for non-QM RMBS, a sector that has been gaining momentum in recent years.
The loan pool consists of both prime and nonprime mortgages, including bank statement loans, debt service coverage ratio (DSCR) loans, and other alternative income documentation products. The loans have a weighted average credit score of 745 and a combined loan-to-value (CLTV) ratio of 68.91%. A significant portion of the loans (45%) are investment property mortgages.
The nonprime RMBS market has seen significant growth in recent years, bouncing back from near dormancy following the 2008 financial crisis. In 2024, non-QM RMBS issuance reached approximately $21 billion, surpassing issuance in prime RMBS ($17 billion), seasoned and reperforming loans ($16 billion), and second liens/home equity lines of credit ($9 billion).
The sector continues to attract investors. Santander is preparing a $400 million non-QM RMBS issuance, with plans to become a regular issuer in the US market through multiple deals each year.
Investor confidence in non-QM RMBS remains strong. A&D’s latest securitization features multiple classes of rated certificates, with the senior tranche receiving an AAA rating, reflecting the strength of the underlying loan pool and credit enhancement measures.
Initial purchasers for the transaction include Nomura Securities International, ATLAS SP Securities (a division of Apollo Global Securities), Barclays Capital, BMO Capital Markets, BNP Paribas, Guggenheim Securities, Jefferies, Mizuho Securities USA, Academy Securities, AmeriVet Securities, and Piper Sandler & Co.
To improve operational efficiency and investor reporting, A&D Mortgage and Imperial Fund Asset Management have partnered with Clearwater Analytics to refine compliance processes and enhance risk assessment and transparency for institutional investors.
The transaction was sponsored by Atlas A&D Opportunity Fund III LLC, with A&D Mortgage acting as the loan originator, servicer, and representations and warranties provider. The deal is expected to close on March 13, 2025.
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The outlook for the non-QM RMBS market remains positive. KBRA projects that total RMBS issuance will reach approximately $107 billion in 2025, representing a 12% year-over-year increase. Within this, non-prime RMBS, including non-QM loans, is expected to total $44 billion, marking an 8% increase from the previous year.
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