Spring of Hope: March Non-QM Performance Sparks Optimism

In a positive turn for the sector, Total Impairments rose by just 3 bps MoM, signaling a trend toward stabilization. The climb in Impairments began seven months ago, and today’s figures are up 110+ bps since then and sit 230 bps above their post-COVID lows in Summer 2022. This increase is driven by higher New Impairments and significantly lower Cure rates.

Furthermore, both Overall and First-Time New Impairments saw declines of 14 and 7 bps, respectively, placing them at the low end of post-COVID averages and indicating promising signs for future performance. Despite the increased home prices relative to incomes, LTVs for new originations have remained consistent, showcasing the strength of current underwriting practices and the tendency of borrowers to increase their down payments, avoiding excessive leverage.

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