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Through the frist six months of 2025, real estate investors accounted for 29% to 32% of U.S. home sales – approximately 3 in every 10 purchases. This sustained market presence exceeds pandemic-era peaks of 27.2% (February 2022) and post-pandemic peaks of 27.1% (January 2024), despite ongoing affordability challenges.
Prior to pandemic-era stimulus, investor purchase share fluctuated between 15.7% and 20% from January 2018 to January 2020. In September,investors maintained a 30% purchase share,according to Cotality. This elevated investor activity is a direct result of affordability issues,contributing to a decline in first-time homebuyers,who now represent just 1 in 5 home sales in 2025.
The residential investor lending segment is largely distributed, with over 85% of investors owning fewer than five properties. Historically low home sales and mortgage production since 2023 have spurred growth in non-qualifying mortgage (non-QM) originations, including business-purpose investor loans. Simultaneously, nonconforming mortgage originations have risen alongside declining conforming volumes, a trend Mortgage capital trading attributes to the expansion of private lending.
‘Writing is on the wall’
Stacy Speas, senior vice president of loan servicing operations for Cornerstone Servicing, believes growth in the non-QM segment is unavoidable. “Borrowers are really dictating the kinds of loans that they need in the market,” she explains, overseeing a non-QM book of subservicing business that is 55% investor and 45% non-investor loans.
Debt-service coverage ratio (DSCR) loans are increasingly popular for financing rental properties, while residential transition loans (RTLs) support renovation and resale projects (fix-and-flips). Investor mortgage loans comprised roughly 28.5% of nonconforming originations in August (according to Optimal Blue), with owner-occupied non-QM originations making up the remaining 71.5%.This shift highlights originators’ success in finding production opportunities outside agency programs.
Speas notes that loss of income is the primary driver of distress for owner-occupied non-QM borrowers, while loss of rental payments impacts business-purpose borrowers. However, she emphasizes that performance is comparable across both non-QM segments and against the broader loan book.
Non-QM mortgage bond issuance reached a record $20 billion in the third quarter, with September alone seeing $7.5 billion, according to DBRS Morningstar.
‘Crowding out first-time buyers’
Cotality’s chief economist, Selma Hepp, points to the secondary market’s “willingness to absorb risk for yield” as evidenced by strong issuance. However, she cautions about “affordability pressures coming from investor presence in the lower price tiers, and how that’s crowding out first-time buyers.”
Non-QM Mortgage Volumes Rise as Borrowing Becomes Easier, Despite Delinquency Concerns
Non-Qualified Mortgage (non-QM) volumes are increasing, driven by a narrowing gap in underwriting requirements between prime and non-QM loans, and a growing appetite from secondary investors. This trend is occurring even as unemployment shows a slight increase and delinquencies in non-QM loans are beginning to rise.
According to a government jobs report released last week (delayed due to a shutdown), the unemployment rate ticked up to 4.4% in September,even though hiring gains also increased. https://www.bls.gov/news.release/empsit.nr0.htm
Susan Hosterman, a senior director at Fitch Ratings specializing in non-QM collateral within Residential mortgage-Backed Securities (RMBS), notes that issuers are maintaining consistent credit criteria despite the increased volume. Average loan-to-value (LTV) ratios remain around 70%, and average credit scores are in the mid-700s. Issuers are also increasing the frequency of issuance, moving from roughly once a month historically to more than once a month currently, indicating strong investor demand.
“We’re not seeing a drop in credit on the new issues,” Hosterman told Scotsman Guide. “Even though there’s a rise in volume, so the originators are still keeping their guidelines tight and they’re being prudent in underwriting.”
Hosterman suggests the increasing popularity of non-QM loans is partly due to the reduced documentation burden for borrowers. “It’s not as much of a heavy lift to go for a non-QM bank statement product,” she explained. “Your still showing 24 months or 12 months of income, but you’re not getting out all your W2s, all your pay stubs and your bank statements as you would with the prime, full-documentation deal. It’s a little bit less of a lift for borrowers, I feel.”
However, concerns remain regarding potential performance issues.Cotality’s Hepp reports that serious delinquencies (90 days or more past due) have risen from 0.5% in mid-2022 to approximately 2% as of early 2025. This trend warrants close monitoring, especially for 2023 and 2024 non-QM loan pools as they mature.
Hepp cautioned,”Rising unemployment or home price stagnation could pressure non-QM performance,especially for [choice documentation] and investor-heavy pools.” Despite these concerns,Hepp anticipates continued investor activity in the non-QM sector long-term.
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