“In late 2024, all the forecasts that I saw, we were thinking non-QM originations were going to hit maybe $70 billion to $75 billion, maybe $45 billion in securitizations,” Davis told Mortgage Professional America. “Fast forward to the end of the year, and we should finish about $120 billion in originations. Securitizations will hit like north of $70 billion.”
A tighter credit box
The non-QM space has exploded for many reasons. One reason they’ve become more popular with investors is that the loan quality on the non-agency side has improved significantly.
“It’s still a high-growth area,” Davis said. “What’s interesting is that the delinquency in 2025, when you compare it to 2024 and 2023, has actually improved, because the box has tightened in non-QM. Two years ago, 15% to 20% of this production was in the 80% to 90% LTV bucket, and LTVs were in the low 70s. Today, non-QM is around the mid-60s. So LTVs have come down, but the FICO and the DTI have really remained the same. Borrowers have more embedded equity.”
While the non-QM space, especially investor loans, generally rolls along regardless of major rate declines, Davis said that if rates are significantly lower next year, non-QM originations may be knocking on the door of $200 billion.
“We think non-QM is going to be $150 billion in the current rate environment,” he said. “But if rates tick down 50 basis points, we could see it as high as $180 billion. The MBA is forecasting $2.2 trillion next year for all originations. If rates come down 50 to 100 basis points, that potentially you could see like a $2.6 to $2.8 trillion market because of all the refis.”
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