By the Numbers
Weaker owner-occupied loans drive delinquencies in 2023 non-QM MBS
This material is a Marketing Communication and does not constitute Independent Investment Research.
Credit performance across most vintages of non-QM MBS remains strong, marked by relatively flat levels of serious delinquencies. The 2023 vintage remains an outlier, as delinquencies continue to steadily increase. An overall loosening of underwriting in the wake of tight Covid-era credit availability looks to be the primary driver of relative underperformance. More specifically, an outsized population of riskier owner-occupied loans looks to be the more acute reason why the vintage remains a relatively weak credit.
At the cohort level, serious delinquency rates on non-QM loans remain benign. The percentage of loans greater than 60 days past due peaked in March of last year at just above 4.0% and subsequently fell to a low reading of roughly 3.4% in late 2025. Delinquency rates have subsequently increased slightly, in line with seasonal expectations as borrower performance tends to be weakest in the window between the holiday season and when homeowners receive income tax refunds (Exhibit 1).
Exhibit 1: Tracking serious delinquencies across non-QM loans
Source: Santander US Capital Markets, Core Logic LoanPerformance
However, when cutting the cohort by vintage, loans originated and securitized in 2023 stand out as showing both weaker absolute performance and a much steeper trajectory at which serious delinquencies are piling up. Higher delinquency rates on 2023 vintage deals merit particular attention when contextualized versus both earlier and later vintage deals. 2020 and 2021 vintage deals have somewhat elevated delinquency rates given the fact that they initially de-levered very quickly against COVID-era lows in interest rates, effectively decreasing the size of the outstanding UPB denominator relative to the balance of seriously delinquent loans. And when stacking up the 2023 vintage on a WALA adjusted basis, serious delinquency rates have ramped faster in the 2023 deals relative to later vintage securtizations (Exhibit 2 & 3).
Exhibits 2 & 3: Stacking up credit performance of 2023 vintage loans versus other cohorts
Source: Santander US Capital Markets, Core Logic LoanPerformance
The ‘whys’ behind weaker credit performance
A look at underwriting in the 2023 vintage relative to both previous and subsequent cohorts show areas of relative weakness. Average FICO scores are lower and the ‘tail’ of lower FICO loans higher relative to other vintages. Fully documented loans, which exhibit stronger credit performance, are noticeably sparse in 2023 securitizations, and the overall risk premia on loans securitized in 2023, as measured by SATO is elevated relative to other cohorts (Exhibits 4 & 5).
Exhibits 4 & 5: 2023 vintage non-QM exhibits weaker underwriting than other years
Source: Santander US Capital Markets, Core Logic LoanPerformance
Digging into cohort level collateral performance on the 2023 vintage shows that occupancy is one of the primary areas where collateral performance de-couples, as owner-occupied loans are performing substantially worse than both investor loans and second homes within the vintage. Owner-occupied loans have exhibited weaker performance than investor loans across the broader cohort of non-QM collateral, so this is not a phenomenon unique to the 2023 vintage. However, the relative underperformance is amplified, as serious delinquency rates have surpassed 9.0% for owner-occupied loans and are 300 bp higher than those of investor loans (Exhibit 6).
Exhibit 6: Owner-occupied loans driving weaker performance in 2023 vintage non-QM
Source: Santander US Capital Markets, Core Logic LoanPerformance
Another attribute contributing to the relative underperformance in the 2023 vintage is the relatively large population of large loans. Serious delinquency rate on loans with original balances in excess of $1 million have jumped to upwards of 13% in the 2023 vintage. As of the February remittance cycle, those loans accounted for roughly one quarter of the collateral supporting 2023 vintage trusts (Exhibit 7).
Exhibit 7: Serious delinquencies elevated in large loans
Source: Santander US Capital Markets, Core Logic LoanPerformance
Digging further into the profile of owner-occupied loans within the cohort shows a fairly stark difference in performance when cutting loans by the risk premia, or SATO, priced into the loan at origination. 2023 vintage owner-occupied loans with just 50 bp of risk-based pricing are exhibiting relatively low 60+ day delinquency rates, totaling just 225 bp. In contrast, serious delinquency rates on loans with two points of risk premia are nearly five times greater, in excess of 10%.
When stacking up the 2023 vintage versus owner-occupied loans in other cohorts, it shows that 2023 has substantially greater concentrations of riskier loans than more recent vintages. Owne- occupied loans with 200 bp of SATO make up 17.5% of all owner-occupied loans backing the 2023 vintage. In the 2024 vintage they make up a little more than 10% of the broader cohort and only 6.7% of owner-occupied loans securitized in 2025 carry two points of risk-based pricing. This phenomenon is observable across other swaths of higher risk-based pricing as well (Exhibit 8).
Exhibit 8: The 2023 vintage carries larger concentrations of riskier owner-occupied loans
Source: Santander US Capital Markets, Core Logic LoanPerformance
This material is intended only for institutional investors and does not carry all of the independence and disclosure standards of retail debt research reports. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This message, including any attachments or links contained herein, is subject to important disclaimers, conditions, and disclosures regarding Electronic Communications, which you can find at https://portfolio-strategy.apsec.com/sancap-disclaimers-and-disclosures.
Important Disclaimers
Copyright © 2026 Santander US Capital Markets LLC and its affiliates (“SCM”). All rights reserved. SCM is a member of FINRA and SIPC. This material is intended for limited distribution to institutions only and is not publicly available. Any unauthorized use or disclosure is prohibited.
In making this material available, SCM (i) is not providing any advice to the recipient, including, without limitation, any advice as to investment, legal, accounting, tax and financial matters, (ii) is not acting as an advisor or fiduciary in respect of the recipient, (iii) is not making any predictions or projections and (iv) intends that any recipient to which SCM has provided this material is an “institutional investor” (as defined under applicable law and regulation, including FINRA Rule 4512 and that this material will not be disseminated, in whole or part, to any third party by the recipient.
The author of this material is an economist, desk strategist or trader. In the preparation of this material, the author may have consulted or otherwise discussed the matters referenced herein with one or more of SCM’s trading desks, any of which may have accumulated or otherwise taken a position, long or short, in any of the financial instruments discussed in or related to this material. Further, SCM or any of its affiliates may act as a market maker or principal dealer and may have proprietary interests that differ or conflict with the recipient hereof, in connection with any financial instrument discussed in or related to this material.
This material (i) has been prepared for information purposes only and does not constitute a solicitation or an offer to buy or sell any securities, related investments or other financial instruments, (ii) is neither research, a “research report” as commonly understood under the securities laws and regulations promulgated thereunder nor the product of a research department, (iii) or parts thereof may have been obtained from various sources, the reliability of which has not been verified and cannot be guaranteed by SCM, (iv) should not be reproduced or disclosed to any other person, without SCM’s prior consent and (v) is not intended for distribution in any jurisdiction in which its distribution would be prohibited.
In connection with this material, SCM (i) makes no representation or warranties as to the appropriateness or reliance for use in any transaction or as to the permissibility or legality of any financial instrument in any jurisdiction, (ii) believes the information in this material to be reliable, has not independently verified such information and makes no representation, express or implied, with regard to the accuracy or completeness of such information, (iii) accepts no responsibility or liability as to any reliance placed, or investment decision made, on the basis of such information by the recipient and (iv) does not undertake, and disclaims any duty to undertake, to update or to revise the information contained in this material.
Unless otherwise stated, the views, opinions, forecasts, valuations, or estimates contained in this material are those solely of the author, as of the date of publication of this material, and are subject to change without notice. The recipient of this material should make an independent evaluation of this information and make such other investigations as the recipient considers necessary (including obtaining independent financial advice), before transacting in any financial market or instrument discussed in or related to this material.
Important disclaimers for clients in the EU and UK
This publication has been prepared by Trading Desk Strategists within the Sales and Trading functions of Santander US Capital Markets LLC (“SanCap”), the US registered broker-dealer of Santander Corporate & Investment Banking. This communication is distributed in the EEA by Banco Santander S.A., a credit institution registered in Spain and authorised and regulated by the Bank of Spain and the CNMV. Any EEA recipient of this communication that would like to affect any transaction in any security or issuer discussed herein should do so with Banco Santander S.A. or any of its affiliates (together “Santander”). This communication has been distributed in the UK by Banco Santander, S.A.’s London branch, authorised by the Bank of Spain and subject to regulatory oversight on certain matters by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA).
The publication is intended for exclusive use for Professional Clients and Eligible Counterparties as defined by MiFID II and is not intended for use by retail customers or for any persons or entities in any jurisdictions or country where such distribution or use would be contrary to local law or regulation.
This material is not a product of Santander´s Research Team and does not constitute independent investment research. This is a marketing communication and may contain ¨investment recommendations¨ as defined by the Market Abuse Regulation 596/2014 ("MAR"). This publication has not been prepared in accordance with legal requirements designed to promote the independence of research and is not subject to any prohibition on dealing ahead of the dissemination of investment research. The author, date and time of the production of this publication are as indicated herein.
This publication does not constitute investment advice and may not be relied upon to form an investment decision, nor should it be construed as any offer to sell or issue or invitation to purchase, acquire or subscribe for any instruments referred herein. The publication has been prepared in good faith and based on information Santander considers reliable as of the date of publication, but Santander does not guarantee or represent, express or implied, that such information is accurate or complete. All estimates, forecasts and opinions are current as at the date of this publication and are subject to change without notice. Unless otherwise indicated, Santander does not intend to update this publication. The views and commentary in this publication may not be objective or independent of the interests of the Trading and Sales functions of Santander, who may be active participants in the markets, investments or strategies referred to herein and/or may receive compensation from investment banking and non-investment banking services from entities mentioned herein. Santander may trade as principal, make a market or hold positions in instruments (or related derivatives) and/or hold financial interest in entities discussed herein. Santander may provide market commentary or trading strategies to other clients or engage in transactions which may differ from views expressed herein. Santander may have acted upon the contents of this publication prior to you having received it.
This publication is intended for the exclusive use of the recipient and must not be reproduced, redistributed or transmitted, in whole or in part, without Santander’s consent. The recipient agrees to keep confidential at all times information contained herein.
