Low credit scores in non-QM verge on 10% default rate

Nonqualified mortgage performance over the past decade has varied broadly by segment while generating relatively few credit losses on average, a new Kroll Bond Rating Agency study shows

Weighted averages show losses from a 3.8% cumulative default rate have been just 0.03%, but the CDR is far higher for a market segment like borrowers with credit scores below 660. The CDR for these borrowers verges on 10%, KBRA’s study of its own data and Cotality‘s finds.

The study quantifies what default rates for various types of loans in the securitized non-QM mortgage market have been like after a period in which it has been able to establish a track record and experience some strain.

“NQM delinquency and defaults have been trending higher. Although it may be premature to call this an inflection…