Non-QM Shows Positive Developments - May 2024 Performance

• Non-QM Market Overview: The sector has improved the past few months, with May 2024 showing relatively strong performance, with positive observations across multiple credit metrics. While Total Impairments rose 2 bps MoM, it follows April's massive decline of 25 bps; furthermore, New Impairment rates continue to improve with First-Time New Impairments being on par with their summer 2022 lows.

• Non-QM Deal Age Analysis: The 2023 vintage continues to underperform compared to previous vintages, largely driven by an overwhelming concentration of Purchase loans.
  The underperformance is much less severe when looking only at Purchase loans, and the 2023 vintage actually outperformed 2021.

• Non-QM Prepayment Forecasting: Actual and Model-predicted Prepayments narrowed in May due to our model’s effective recalibration to recent S-curve steepening. 24-Month Bank Statements, and to a lesser extent DSCR loans, were responsible for the majority of the narrowing differences.