Looser underwriting standards for loans in expanded-credit MBS issued in 2023 are leading to higher delinquency rates.

Delinquencies on non-qualified mortgages spiked in November, adding to a “worrying” trend, according to dv01.

The performance of expanded-credit MBS was attractive to investors until interest rates increased throughout 2022. Higher rates cut into excess interest and slowed build-up of credit enhancement levels on outstanding deals.

The impairment rate on securitized non-QMs posted its largest one-month jump in November since the early days of the pandemic. Hurricane Ian was a factor.

Demand for non-QMs in the secondary market remains weak. Investors are concerned about the prepayment profile of the loans, among other issues.

Distressed borrowers with subprime mortgages in states with a judicial foreclosure process achieve non-foreclosure outcomes at a higher rate than similar borrowers in states that don’t have a such a process, according to findings from a new paper.

Improvements to practices in the non-agency MBS market will help to protect investors from lenders that don’t make it through the current market contraction, according to Kroll Bond Rating Agency.

Kroll Bond Rating Agency published a report focusing on mortgages originated by CDFIs and their inclusion in non-agency MBS. The Change Company defended its practices while Quontic Bank stopped offering “no ratio” loans.

After more than a year of steady declines in delinquencies on securitized non-QMs, delinquency rates have fluctuated in recent months.

A look at the performance of investment-property loans reveals some differences between GSE-eligible loans and non-agency mortgages. Performance also differed from owner-occupied prime jumbos and non-QMs.