President Trump's proposal to privatize the government-sponsored enterprises will present promising opportunities for non-QM growth if it materializes, leaders in the space say.
Following his election to a non-consecutive second term, President Trump and his advisors regularly floated the possibility of looser regulations on Fannie Mae and Freddie Mac,
"If we look at what Trump was trying to do in his first term and think about what he might try to do in the second, I think it could be positive for non-QM in terms of shaking loose some loans that used to be sitting with the GSEs and moving them out into non-QM or creating a little bit more of a market," said Brandon Filson, the real estate investment trust's chief financial officer, in its latest earnings call.
But similar suggestions during Trump's first term never came to fruition, making it premature to count eggs before they are hatched.
"The way this one's going so far — maybe tomorrow, everything could change. But I think in general I would be willing to bet that non-QM would be expanded if anything is done this term," Filson said.
His remarks came during an earnings call in which the company reported falling into the red in the fourth quarter as interest rate volatility pulled down loan portfolio valuations. The Atlanta-based REIT posted a $15.1 million net loss attributable to shareholders in the final three months of 2024. The number came down from
"The valuation decrease was almost exclusively driven by unrealized losses in our securitized loan portfolio," Filson said. "I'll point out that the loans in our securitized loan portfolio continue to perform well, and that these unrealized losses will be recouped as the loans pay off and/or rates and spreads decline."
On a more positive note, the REIT recorded profits of $28.8 million over last year, but the number was down 14.7% from 2023.
Net interest income at Angel Oak also saw a pickup on both a quarterly and annual basis, rising to $9.9 million in the fourth quarter. The number rose 9.3% from $9 million the previous quarter and 19.7% from $8.2 million on year earlier
Angel Oak leaders suggested rate volatility would lead to further disruption throughout 2025, but also said the company was poised to handle the fluctuations due to effective risk management efforts it had undertaken.
"We may continue to experience these ups and downs from a valuation perspective as long as the rate paths remain uncertain," said CEO Sreeni Prabhu.
"We view the current environment as active and deep, offering up ample opportunities to recycle capital," Prabhu added.
The company touted the five securitizations it brought to market, surpassing its goal to average one per quarter. The transactions contributed to a total of $855 million in unpaid principal balance.
The REIT observed stable delinquency levels across its portfolio, with no indications of potential performance concerns.
"If you look at our trend lines we're trending back toward a more normalized level of 2%-to-3% 90-day delinquencies in our loan books," Filson said.
"We haven't seen any kind of overheating of delinquencies trickling in. I think we're right in the sweet spot, where I think it's a healthy level," he added.
