A&D Mortgage Announces New $390.6 Million Non-QM Securitization

 A&D Mortgage, a Non-QM lender, has issued its latest securitization, A&D Mortgage Trust 2024-NQM5 (ADMT 2024-NQM5). The transaction, valued at $390.6 million, is backed by a pool of 1,171 mostly newly originated non-prime residential mortgages, and closed on October 31, 2024.

This marks A&D Mortgage’s latest in a series of successful securitizations, highlighting the company’s commitment to providing flexible mortgage solutions for borrowers utilizing alternative income documentation, such as bank statements, profit and loss statements, and debt service coverage ratios (DSCRs).

Key Highlights of ADMT 2024-NQM5:

• Transaction Volume: $390.6 million
• Loan Count: 1,171 mortgages
• Loan Origination: All loans originated by A&D Mortgage or its qualified correspondents
• Average Borrower Credit Score: 735
• Weighted Average Loan-to-Value (LTV): 67.4%
• Percentage of Non-QM Loans: 35.2%
• Percentage of Investment Property Loans: 47.4%
• Credit Enhancements: The transaction features excess spread and subordination, providing additional protection to senior certificates against potential losses.
• Servicer: A&D Mortgage, with Nationstar Mortgage LLC (d/b/a Mr. Cooper) acting as the Master Servicer.

A significant portion of the pool—90.35%—has been underwritten using alternative documentation methods, catering to self-employed borrowers and investors. The inclusion of bank statement loans (38.6%) and DSCR loans (34.0%) reflects A&D Mortgage’s focus on delivering innovative solutions for non-traditional borrowers. Approximately 47.4% of the pool is secured by investment properties, providing investors with a diverse and dynamic collateral mix.

In late September, Atlas Merchant Capital, A&D Mortgage, and Imperial Fund Asset Management announced a strategic joint venture aimed at expanding the non-QM mortgage securitization market. The partnership’s first securitization under this agreement, ADMT 2024-NQM4, was launched in August 2024, quickly establishing the venture’s commitment to high-quality, non-QM asset-backed securities. This initial securitization showcased strong market demand, attracting a diverse group of investors and setting a solid foundation for subsequent transactions, including the newly announced ADMT 2024-NQM5.

“Securitization remains a crucial engine for broadening access to capital, especially within the Non-QM mortgage space. With ADMT 2024-NQM5, our second securitization in the joint venture with A&D Mortgage and Imperial Fund Asset Management, we continue to support borrowers with diverse financial profiles while providing investors with high-quality opportunities,” said Bob Diamond, Founding Partner and CEO of Atlas Merchant Capital. This transaction represents a sound investment for capital markets due to its robust credit enhancements, diversified collateral, and resilience against economic shifts. We’re proud to strengthen our collaboration with A&D Mortgage, exemplifying our commitment to delivering financial solutions that align with today’s evolving market needs.”

The ADMT 2024-NQM5 securitization has undergone thorough reviews by both S&P Global Ratings and Kroll Bond Rating Agency (KBRA), receiving favorable preliminary ratings. These independent evaluations highlight the strength of the underlying collateral and the robust credit enhancements in place to mitigate risks. The transaction’s senior classes received AAA ratings from KBRA, underscoring the securitization’s solid creditworthiness and adherence to industry standards. Both agencies recognized the quality of A&D Mortgage’s underwriting processes and the performance history of its previous Non-QM securitizations.

This securitization employs a hybrid pro-rata/sequential payment structure, ensuring timely interest payments and mitigating risks in periods of stress. The certificates benefit from excess servicing income, further enhancing their credit profile.