Non-QM originations on pace for new post-crisis record in 2026

Nonqualified mortgage (non-QM) originations are on track to set another post-crisis record in 2026, as debt-service-coverage ratio (DSCR) and investor loans fuel growth in a still high-rate environment, according to a new Bank of America Securities report.

In terms of non-QM securitizations, insurance demand for bonds remains strong and investors are looking for high-quality, jumbo-like loans flowing through the channel — referred to in the report as “fumbos.”

Non-QM production is expected to reach $175 billion in 2026, compared to $108 billion in 2025. DSCR and investor products now account for about half of all non-QM collateral.

Meanwhile, non-QM securitization issuance will rise from $80 billion in 2025 to roughly $100 billion in 2026. About 70% of non-QM loans are securitized, with the remaining loans primarily purchased by insurance companies.

“Year to date, securitization volumes are running at $57 billion, and we think higher mortgage rates should result in a modest slowdown in the second half of 2026,” BofA analysts wrote on Monday.

High-quality asset pools

Part of the increase in non-QM securitization volumes stems from high-quality, jumbo-like loans flowing through the channel. These large-balance loans are sometimes referred to in the market as “fumbo” loans, they said.

For 2026 originations, loans with balances above $1 million account for about 28% of new non-QM production, and loans above $1.5 million make up 15%, the report said. That is up from 20% and 10%, respectively, in 2018.

This shift means that more prime-quality, high-balance mortgages are being financed via non-agency shelves rather than held on bank balance sheets or placed in traditional jumbo programs, changing both the credit and prepayment profiles of non-QM pools.

In general, non-QM resecuritizations have increased following a pickup in deal calls since 2025. Year to date in 2026, about $4 billion of non-QM paper has been resecuritized, versus $5.5 billion of so-called collateral, the strategy team said.

Weakening performance?

Prepayment behavior in non-QM has shifted over time. S-curves have become steeper, a trend Bank of America attributes to the changing mix of high-FICO, high-balance and full-documentation loans in non-QM shelves, as well as differing concentrations of these loans across issuers. An increase in larger loans in recent deals has amplified that effect.

Delinquencies have continued to creep up in the 2022-2024 vintages across documentation types, the report said. The strategists point to cash-out refinances, weaker performance on bank statement underwriting, and multiple loans extended to single borrowers as primary drivers. By contrast, the 2025 vintage has performed better as lenders tightened credit boxes.

“Overall, cumulative losses in non-QM remain low at 3.6 basis points across vintages for the roughly $281 billion of cumulative originations and securitized since 2018,” the report explains. “A total of about 1,000 out of 580,000 loans have incurred cumulative loss greater than $10,000.”

This article was written by Flávia Furlan Nunes and generated with the assistance of HousingWire Automation, then reviewed by a HousingWire editor before publication.