Sunday Month-End Effect Drives Non-QM Performance in June 2024

While the Sunday month-end effect drove negative credit behavior in June, prepayments fell for the second consecutive month (0.6 CPR), largely in response to April and May’s mortgage rate increases, and s-curves were largely unchanged MoM.

Quick Insights

• FICO: Below 660 FICO, and more recently 660-700 ranges, have seen the largest Prepayment increases in 2024, with the gap relative to other ranges widening over the past five months.

• DTI & LTV: The largest Prepayment declines are among Below 25 and Below 10 DTI loans. Meanwhile, Above 80 LTV is one of the few attributes where Prepayment rates continue to increase.

• Geographic Region: The Other region has seen prepayments increase at a modestly faster pace in the past few months, likely a result of increasing housing turnover in Texas.

• Prepayment Forecasting: The dv01 Non-QM Prepayment Model forecasts speeds for August to be materially slower than July.