Non-QM Impairments Continue to Grow, Breaking Historical Recovery Patterns

Quick Insights

• Overview: Non-QM impairments have diverged from the broader mortgage market since mid-2022, continuing to rise despite a brief improvement in early 2024. June saw the largest impairment spike in years, breaking the historical trend of Sunday month-end recoveries, and for the first time since the GFC, impairments have not decreased within two months, instead continuing to rise through July and August.

• FICO: 660-700 FICO borrowers experienced the largest spike in Impairment among all attributes and have seen the most significant growth in impairment—both in absolute and relative terms—since 2023.

• Deal Age: The ongoing underperformance is primarily driven mainly by Cash Out loans, which exhibit nearly 3X higher Impairment rates on an age-adjusted basis than 2021/2022 comps.