Impairment rate on non-QMs slumps in November

by Candyd Mendoza11 Jan 2021

The impairment rate on delinquent securitized non-qualified mortgages and modified loans declined in November.

Non-QMs posted a 20 basis-point month-over-month decline in impairment rate, down to 11.3% at the end of November, Inside Mortgage Finance reported, citing data from analytics firm dv01. The company tracks non-QMs with a total unpaid principal balance of more than $7 billion.

However, dv01 warned that “problematic pockets of loans remain, particularly among self-employed borrowers.” Though impairment rates have largely dropped across most non-QM loan types since June, the impairment rate on bank statements – which are often used by self-employed borrowers – rose while rates on other types of non-QMs fell.

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Meanwhile, the share of non-QM borrowers paying off their loans was 27% in November. But that was nowhere near the 45% prepayment rate on mortgages in the government-sponsored enterprises’ risk-sharing transactions, according to the report.