Non-QM Market Gains Momentum - April 2024 Performance

• Housing Market Overview: Despite historically low existing home sales, total mortgage counts increased by 900,000 in 2023—the largest annual growth since 2007. This indicates underlying strength in the housing market, driven mainly by new home sales and first-time buyers.

• Non-QM Market Overview: Total Impairments declined 9 bps MoM, marking the first significant improvement since October 2023. Furthermore, First-Time New Impairments fell below pre-COVID levels, indicating better loan quality and borrower behavior. DSCR loans continue to outperform all other Doc Types in credit performance over the past few quarters.

• Non-QM Deal Age Analysis: The 2023 vintage continues to underperform compared to previous vintages, especially among purchase loans. Meanwhile, the 2022 vintage—particularly cash-out refinance loans—showed significant improvement.

• Non-QM Prepayment Forecasting:Actual and model-predicted prepayments increased at the same rate in April; however, the gap that emerged in March still persists. This discrepancy is primarily due to a significant S-curve steepening, which continues to be a notable factor to monitor.