Performance Report: Non-QM and Second Lien Mortgages, June 2026

dv01’s latest analysis of Non-QM, Closed-End Seconds, and HELOC markets finds trends moved in different directions across the sectors. Non-QM remains under pressure, while second-lien performance is more stable.


What the Data Says

• HELOC charge-offs should gradually decline in the second half of the year: The three-month average has risen near its 2025 level to 0.6 CDR as loans reach the 180-day charge-off threshold, but lower 2026 delinquencies should reduce defaults over time.
• Non-QM impairments increase for the fifth time in six months: Impairments rose 16 bps, with weaker credit borrowers, especially below 700 FICO, accounting for the majority of the increase.
• Aggregate performance masks strength in newer Non-QM vintages: Split by loan purpose, both Purchase and Cash-Out loans in the 2024-H2 and 2025-H1 vintages outperform relative to 2023/2024-H1. This is not reflected on an aggregate basis because newer pools lean more heavily on higher-delinquency Cash-Outs.

What We're Watching

• How high will delinquencies get in the Non-QM sector, and at what point will elevated delinquencies affect the callability of 2023 vintage deals?
• With second-lien performance remaining well anchored even as Non-QM and FHA loans deteriorate, will strong performance lead to more originations and greater investor focus on the sector?
• Can the outperformance of Purchase and Cash-Out loans in 2024-H2 and 2025-H1 eventually translate into improved aggregate performance, or will concentration differences mute the impact?