Non-QM securitizations hit $78B as lenders ease guidelines to capture unserved borrower demand, even as total impairments rise for the 10th time in 13 months to 6.27%, according to dv01.
The non-QM segment is growing in terms of programs being offered and by securitization volume.
Carrington Mortgage Services recently announced guideline changes which includes accepting FICO scores of 550 for certain alternative documentation non-QM borrowers.
This change by Carrington reflects something mortgage originators are seeing, which is a growing pool of borrowers with a need for a lender to underwrite their full financial picture, said Eric Bernstein, president and co-founder of LendFriend Mortgage.
"Bank statement loans and asset depletion products have moved from niche to necessary for a meaningful slice of today's purchase market," said Bernstein. "Lenders that expand here aren't chasing risk; they're catching up to demand that conventional guidelines have long left unserved."
The question of how Carrington's and any other lenders expansion of underwriting affects performance remains to be seen.
But the trends from dv01 show on a month-to-month basis, most of the movement when it comes to distressed mortgages has been higher. But some exceptions exist.
Last July, total impairments fell 21 basis points, while in September they were 4 basis points lower. A 28 basis point month-to-month decline in March was "largely driven by seasonality," dv01 said in that month's Early Non-QM Performance Snapshot.
Impairments involving loans 90 days or more behind rose 21 basis points to 3.6%. Newly impaired loans rose 6 basis points from the prior month to 1.19%, while first time delinquent new impairments were up 4 basis points to 0.56%, according to dv01, which is owned by Fitch Ratings..
But total delinquencies fell by 2 basis points to 5.39% as a 9 basis point drop in the 30-to-59-day bucket to 1.9% was largely offset by a 7 basis point rise in seriously delinquent non-QM loans to 2.71%.
New delinquencies made up 99 basis points of the 30-day-plus late loans, while borrowers going late for the first time was 40 basis points of the total.
Data previously released by ICE Mortgage Technology in its July First Look report, which covers all segments of the industry, found the 30 day or later delinquency rate for the month was 3.36%, 4.59% lower than June.
Meanwhile, the cure rate rose by 1.29 percentage points to 24.22%, while borrowers who are 30-days late but still made a payment had a 47.02% share of this category in July, dv01 reported.
It pointed out that the 30-59-day delinquent roll rates have hovered between 15% and 23% from 2020 through 2023, as well as during 2026. In July, this category was unchanged at 22.26%.
The 60-to-89-day delinquent roll rate fell 159 basis points from June to 37.32%, while the 90 day or longer was 161 basis points lower at 80.62%.
The conditional prepayment rate for July was 14.5, with the three-month CPR falling to 14.8 and the six-month to 16.4, dv01 said.
So far this year, of the $182 billion of non-agency residential mortgage-backed securities issued, $78 billion is non-QM.
"Non-agency RMBS continues to grow as a whole, led by significant increases in sectors such as non-QM, jumbo, and home equity line of credit/closed end seconds," Bank of America Securities latest weekly report on the topic noted. "We expect capital in smaller sectors to move over to the more 'mainstream' of products, further increasing demand for the rest of the year and moving forwards."
