Performance Report: Non-QM and Second Lien Mortgages, March 2025

The latest dv01 research is now available for download. March marked the first monthly impairment decline in Non-QM since June—and introduces performance data on Closed-End Seconds:

Quick Insights

Non-QM

• Impairments finally fall: Overall impairments dropped 25 bps—the largest monthly improvement since summer 2022—with no clear seasonal or one-off drivers.

• Borrowers stabilize: Cure and Made Payment rates rose sharply, both rebounding from February’s dip and hitting multi-month highs.

• Prepayments accelerate: CPR jumped 2.8 MoM, led by Above 740 FICO borrowers and markets like California and the NY Tri-State.

• Cash-outs remain challenged: 2023 vintage cash-outs are still underperforming, with 60+ DQ 3x higher than 2021/2022 levels.

• 2024 vintages shows early promise: Newer Purchase loans are tracking better than 2023—and closer to 2022—hinting at a possible rebound.

Closed-End Seconds

• New Fitch-dv01 Benchmark launched: dv01 now tracks Closed-End Seconds—a resurging second-lien market post-2021.

• Impairments rise with seasoning:

  Overall impairments increasing steadily, partly due to limited vintage diversity and recent hurricanes.

• FICO is key differentiator: Borrowers <720 FICO account for 55% of impairments despite being just 30% of balances.

• Prepayments trend higher: Speeds exceed Non-QM, especially for loans with low CLTV or extreme FICO ranges.