Overall delinquencies across the non-qualified mortgage (non-QM) sector remained flat year over year through the end of August. But while recent loan vintages have stabilized, performance from 2023 and 2024 production continues to exhibit deterioration.

That’s according to Fitch Ratings’ residential mortgage-backed securities performance report for the third quarter, which includes data through August remittances.

The delinquency rate for loans 30 days or more past due had eased to 5.02% as of the end of August, while seriously delinquent loans 90 days or more past due also fell from the previous quarter to 2.33%. Fitch’s rated non-QM portfolio spans almost 445,000 loans representing an outstanding balance of about $114.3 billion.

Advertisement

On a sector-wide basis, the 30-day delinquency rate is materially better than levels observed a year ago at around at 6.54%, but underlying pressures persist.

“Despite this modest sector-wide improvement,” said Fitch, “the 2023 and 2024 vintages remain the primary drag on performance.” Significant performance gaps opened as the sector transitioned to higher mortgage rates in the years immediately following the COVID-19 pandemic.

Compared to sector-wide averages, 30-day delinquency rates on non-QM loans from 2023 stood at 10.53% as of the end of August and 6.14% for 2024 vintages. Serious delinquencies were 5.85% for 2023 loans and 2.93% for 2024.

Loans originated in early 2025 are following a “similar trajectory” as 2024 originations, Fitch reported, with 12-month seasoned loans bearing a 30-day delinquency rate of 3.28% compared to 3.72% for loans from 2024 of equivalent seasoning.

“Prepayment activity for non-QM has moderated to 14.96%, showing continued fluctuation throughout 2026,” added Fitch, noting that “tranche deleveraging, relative credit enhancement growth and excess spread continue to protect against expected losses, mitigating the risks posed by rising delinquencies.”

Across document types on 2023 and 2024 vintages, bank statement loans show measurably higher delinquency rates than debt-service coverage ratio (DSCR) investor loans and fully documented products.

Performance leveled out across those non-QM products in 2025, with bank statement loans actually performing better than DSCR loans so far on 2026 production.

Portfolio-wide impairment rates hovered above 7.5% for 12-month and 24-month bank statement loans, compared to about 5% impairment rates for DSCR loans, according to non-QM performance data published in July by dv01, a data analytics platform owned by Fitch Solutions.