U.S. RMBS: Q4 2024 Non-QM Recap--DQs Up, Prepayments Peak, Structures Stable, While New Issuance Characteristics on Trend

Over Q4 2024, the U.S. non-Qualified Mortgage (non-QM) residential mortgage-backed securities sector saw delinquencies rise again quarter over quarter, while prepayments reached, then retreated incrementally from, near-term highs as mortgage rates climbed back up from September's lows. Meanwhile, structural performance over the vast majority of non-QM deals remained on trend as credit enhancements improved methodically. In Q4 2024, transaction closing volumes were well above 2024's average quarterly pace, coming in at just above $11.1 billion in collateral securitized, versus about $9.8 billion in the third quarter, making the fourth quarter the highest volume quarter of 2024 as deal collateral attributes remained largely in context within respective issuance
platforms.

The core influences for the latest quarter's non-QM credit performance included a persistently supportive macroeconomic environment. The unemployment rate across Q3 and Q4 2024 stayed between 4.1% and 4.2%, a few tenths of a percentage point above the beginning of 2024, but still historically low. Concurrently, nonfarm payrolls progressively added a moderate number of jobs over the fourth quarter. The latest Q4 2024 GDP numbers showed economic activity growing at 2.2%, a little slower pace relative to the prior three quarters, but still sufficiently positive as inflation ticked back up slightly to 2.9% in December, according to headline CPI, remaining above the Federal Reserve's target 2.0% level.