Rate says it had best year ever for non-QM

Rate had its best year ever for non-qualified mortgage originations in 2024, with a new product leading the way, contributing just shy of half of the volume.

Non-QM securitizations industry-wide rose 25% year-over-year during 2024, according to BTIG. For this year, volume is likely to be similar or even higher, Morningstar DBRS said.

Of the $2.8 billion of these loans Rate originated, $1.3 billion came from the Edge Non-QM product suite launched in January. The company rebranded from Guaranteed Rate in July.

On a broader basis, the non-QM segment has been on the upswing, especially as the U.S. economy exited the pandemic, as it caters to consumers with non-traditional income and diverse financial situations.

"Non-QM lending has seen significant growth, a trend that started before the pandemic and has only gained momentum as the economy adjusts to new financial realities," Kate Armor, executive vice president and head of enterprise products for Rate, said in a press release.

The securitized volume of non-QM deals in 2024 was $40 billion according to statistics in separate reports from Morningstar DBRS and BTIG; the latter noted last year had 173 issuances. That was an increase from $29.8 billion in 2023, the BTIG report said.

In the first two weeks of 2025, three non-QM issuances of $1.5 billion have taken place; the loans were likely aggregated during 2024.

Non-QM issuance in 2025 may be stable to slightly higher versus last year, Morningstar DBRS analysts Corina Gonzalez and Mark Branton wrote.

"Tighter non-QM spreads on top of a lower front half of the Treasury curve helped issuer execution costs last year, and 2025 may see more of the same," Morningstar DBRS said. "Slow but steady housing market conditions may help provide some upside growth potential for purchase money, while credit curing provides ongoing opportunities for refinance activity next year."

Prepayment speeds have increased during 2024 not just for non-QM but for other private-label securitizations as well. They are likely to persist at current levels given where mortgage rates are, the Morningstar DBRS analysts said.

For older vintages of non-QM, 2025 could be a mixed bag when it comes to delinquencies.

"Performance of outstanding transactions backed by non-qualified mortgage loans will likely remain much weaker than before the pandemic, and much weaker than prime and GSE loans, after lenders widened their credit boxes," a Moody's 2025 credit outlook said.

The Morningstar DBRS analysts were slightly more positive, saying they "expect pool performance trends to stay within projected ranges, despite segment [delinquencies] moving higher relative to other RMBS segments."