March 2026 Update: Seasonal Rebound in Non-QM, Stability in Second Liens

March delivered a seasonal boost to mortgage performance, but the broader trajectory remains uncertain.

dv01’s latest analysis of Non-QM, Closed-End Seconds, and HELOC markets shows that while performance improved across key metrics, much of the strength appears driven by seasonality—not a fundamental shift.

Quick Insights

What the Data Says

• Non-QM Performance rebounded, but largely on cue: Impairments declined and cure and May Payment rates rose in March, reversing early-2026 weakness. However, March is historically the strongest month, and this improvement aligns closely with seasonal patterns rather than a clear structural shift.
• Vintage divergence is becoming more pronounced: The 2025-H1 vintage is outperforming prior cohorts early on, while 2024-H2 has rapidly converged back toward weaker 2023/2024 trends—raising questions about whether recent gains can persist.
• Second liens remain resilient for now: Closed-End Seconds and HELOCs continue to show high cure rates and borrower willingness to pay, even exceeding Non-QM in some cases—despite ongoing seasonality-driven impairments.

What We're Watching

• Will Non-QM’s seasonally adjusted improvement carry into the next few months or prove a one-off surprise in otherwise continued weakness?
• How will impairment rates for second liens evolve as they season, and more critically, at what levels will Cure and Made Payment rates find their footing?
• Will the 2025-H1 vintage maintain its early credit performance promise, or is it destined to align with the trends observed in 2023 and 2024 over the next few months?