The number of non-qualifying mortgages (non-QM) that were 30-days past due at the end of November was 1.3% higher than a year ago, according to an analysis released Monday by ratings agency Fitch Ratings.
Thirty-day delinquencies averaged 5.9% across the non-QM residential mortgage-backed securities (RMBS) sector, which Fitch described as “low relative to credit enhancement” and below projections for what the ratings agency would consider “stressed scenarios,” per the report.
“Although delinquency rates have been increasing in the nonprime space, most deals are not close to failing their delinquency triggers,” Fitch reports.
Ninety-day (serious) delinquencies averaged 2.9% at the end of November, up 0.38% from a year ago.
The report presents a snapshot of overall stable non-QM performance as the sector moves into 2026 following a year of expanding issuance in 2025.
Fitch noted that vintage performance remains a driver of overall sector health, however, with 2024 and 2025 originations “showing significantly stronger performance” from an early-delinquency perspective.
“The 2021 vintage stands out for its stable performance due to stronger originations during a period of rate cuts and low mortgage rates,” the report also indicated.
Thirty-day delinquencies among the 2022 and 2023 non-QM loans continued to show stress, up 2.2% and 3.9% annually at the end of November to reach 9.1% and 9.6% respectively. Fitch attributes the deterioration to “less stringent origination standards” by lenders during those years.
Serious delinquencies among 2023-vintage non-QM loans are around 6%, compared to around 4% or lower for originations from 2018 or younger.
Fitch noted that conditional prepayment rates were stable through the first half of 2025 before rising sharply on the heels of falling mortgages rates, concentrated among non-QM loans from 2023 and younger that were originated at higher coupons.
Conditional prepayment rates were 18.6% at the end of November, up 3.7% year over year.
However, prepayment speeds varied between different non-QM documentation programs, Fitch noted. Full-documentation and bank-statement loan prepayment rate were 24.1% and 16.1%, respectively, while debt-service-coverage-ratio (DSCR) loans were just 11.9%.
DSCR loans usually include three-year prepayment penalties, disincentivizing borrowers from paying off or refinancing those loans prematurely.
