Pressures on non-qualified mortgage (non-QM) loan performance appeared to ease slightly in March after impairments rose at a rapid monthly clip in February, signaling “rapidly deteriorating” sector performance.

Initial projections released this week by dv01, a data analytics platform owned by Fitch Solutions, show sector-wide impairment rates fell to around 6.92% from around 7.4% over the prior month, “largely driven by seasonality.”

Impairment rates reflect the portion of non-QM loans that are delinquent or otherwise under modification within a securitized loan pool. Non-QM loans are underwritten outside the conventional parameters of Fannie Mae, Freddie Mac or government-backed loans.

Following February analysis that the non-QM sector “may be poised for further decline” in 2026, the early snapshot of March performance indicated that the pace of new impairment formation declined 36 basis points to 1.13%, while the first-time delinquency and impairment rate slipped 18 basis points to 0.42%.

The 90-plus-day impairment rate increased, however, by around 10 basis points to 3.93%, showing signs of continued stress on loans in later stages of distress. The non-QM serious delinquency rate had increased from 2.9% in November to 3.61% through the end of February.

Total delinquencies fell 60 basis points in March from around 7.5% the month before to 6.9%. The easing delinquencies were supported by a 6.3% monthly recovery in delinquency cure rates, which increased to 26.3%, and payment-made rates, which bumped up 530 basis points to 46.7% last month.

Cure rates measure the share of delinquent loans that return to current status within a defined period, while payment‑made rates measure the percentage of delinquent borrowers who make any payment at all.

Roll rates, which capture the pace at which loans progress into later stages of delinquency, eased across all stages in March.

The 60-to-89-day roll rate declined 290 basis points from February to 41.1%, dvo1’s early projections show. The 30-to-59-day roll rate, which hovered between 15% and 23% from 2020 through 2023 but has been “substantially higher ever since,” fell 850 basis points to 19.9% in March.

A separate report published by dv01 in early April examining more than 75,000 active Fitch-rated non-QM loans — seasoned since 2018 and representing a total unpaid balance exceeding $27 billion — reported that low-documentation loan performance continues to decline, having “widened materially over the past 18 months.”

Certified public accountant endorsed, profit-and-loss loans (CPA/P&L loans) are an accelerating pocket of weakness, with impairment rates around 11%. Weakness has also been seen in 12-month and 24-month bank statement loans.

Full documentation, verification of employment and debt-service coverage ratio investor loans have impairments rates of about 6% or lower.