Angel Oak Companies, which originated more than $1 billion in loans outside the ability-to-repay rule's safe harbor last year, plan to produce at least twice that volume in 2018.

Demand for loans that are made outside the Consumer Financial Protection Bureau's definition for qualified mortgages is growing rapidly in the larger market, according to Tom Hutchens, senior vice-president of sales and marketing for Angel Oak Mortgage Solutions, one of the three affiliated lending units operated by Angel Oak Companies.

"Today, non-QM originations total roughly $20 billion per year, but we believe that the non-QM market will grow to over $100 billion in the coming years," he said in a press release. "We are seeing a lot of demand in the nonagency market, especially as more national lenders enter to the space."

Tom Hutchens
"We are seeing a lot of demand in the nonagency market," said Angel Oak SVP Tom Hutchens.

Angel Oak Mortgage Solutions is looking to add to its partnerships with lenders seeking a nonagency correspondent relationship on either the regional or national level, Hutchens said.

The loans underlying securities from Angel Oak's securitizations have had near-prime credit, recent bankruptcies, or been taken out by self-employed borrowers that verify their income with bank information.

Angel Oak's securitizations have been assigned higher credit enhancement levels in the past year, suggesting collateral credit quality has been weakening. However, the correspondent unit has pledged not to bend underwriting standards so far that they jeopardize loan performance the way they did during the subprime era.

"Not everybody needs our programs and they are designed to perform," Sean Marr, Angel Oak Mortgage's director of correspondent lending, said in an interview last year. "We're not out there offering yesteryear's subprime and we hope nobody goes too far and takes a dangerous approach again."

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Corrected May 15, 2018 at 11:17AM: This story has been corrected to clarify that Angel Oak Mortgage Solutions is a division of Angel Oak Companies.