Brookfield Asset Management has forged a pact with Angel Oak Companies that adds to the most recent wave of merger and acquisition activity in the mortgage business.
The larger Brookfield, which has more than $1 trillion in assets under management, is buying a controlling interest in Angel Oak and its $18 billion AUM for undisclosed terms.
Brookfield said the purchase was attractive due to the access it affords the company to Angel Oak’s residential mortgage credit strategies. Those now become available to a larger investor base and help Angel Oak access more size-related efficiencies in a consolidating housing-finance industry.
“With Brookfield as our partner, we see significant opportunities to scale our integrated asset management and mortgage operations,” said Sreeni Prabhu and Mike Fierman, co-CEOs at Angel Oak Companies, in a press release.
Angel Oak will become part of the $317 billion Brookfield Credit business line.
“We are pleased to announce our partnership with Angel Oak. Their origination and investment capabilities will be a strong complement to Brookfield’s overall credit offerings as we grow our platform,” said Craig Noble, CEO of Brookfield Credit, in the press release.
Although Angel Oak will be part of Brookfield Credit, the agreement between the two companies calls for it to keep operating independently under its existing co-CEOs.
KingsRock Securities LLC served as Angel Oak’s exclusive financial advisor. UBS Investment Bank advised Angel Oak’s management team, and Paul Hastings LLP acted as that company’s legal counsel.
Law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP served as Brookfield’s legal counsel.
Since Angel Oak’s founding in 2008, it has originated over $30 billion in mortgages and issued over 60 securitizations.
Angel Oak has specialized in non-qualified mortgages, which are private loans that lie outside standard definitions of ability to repay. Its vertically integrated platform includes a lender active in correspondent and wholesale channels called Angel Oak Mortgage. The parent company pairs this with an asset management operation called Angel Oak Capital Advisors. An affiliate of the asset management division externally manages a real estate investment trust that went public in 2021.
The Trump administration’s consideration of a plan to free Fannie Mae and Freddie Mac, two influential, quasi-public mortgage investment entities, from government conservatorship could create opportunities for non QM, Angel Oak Mortgage REIT executives said during a recent earnings call.
Other mortgage-related strategic partners Brookfield has had include Oaktree Capital Management. Last year, Oaktree purchased an increased stake in a joint-venture vehicle for investments in mortgage servicing rights it formed as a joint venture with Onity. Onity had formed the JV with Oaktree in 2020. Before a rebranding last year, Onity operated under the name Ocwen.
Brookfield’s planned purchase of a majority stake in Angel Oak follows closely on the heels of mortgage origination giant Rocket Cos.’ announcement of an agreement to merge with Mr. Cooper, a large player in servicing.
The Trump administration could be more lenient when it comes to allowing large-scale merger and acquisition activity under antitrust regulation than President Biden was.
The Biden administration initially tried to block a large-scale mortgage technology acquisition before a divestiture, thereafter allowing it to go through.
