Select Portfolio Servicing gained ground during the third quarter but Shellpoint Mortgage Servicing remained the top servicer of non-agency MBS. (Includes data chart.)

The share of non-QMs that are delinquent or in a loan modification declined again in September. The impairment rate in the sector remains high, though loan holders are optimistic.

Some 19.2% of non-QMs in MBS were modified or delinquent as of the end of August, down 70 basis points from July. Loan performance improved even as enhanced unemployment benefits expired.

While lenders like the CFPB’s proposal to provide QM status to certain non-QMs if the loans perform well for the first three years after origination, con-sumer advocates warned of reduced protections for borrowers.

While some issuers will remove loans with exposure to hurricanes from MBS pools, others face higher loss expectations.

Velocity, which focuses on loans for investment properties, is working on obtaining warehouse financing without mark-to-market provisions.

A lack of standardized reporting is causing problems for non-agency MBS investors. In one non-QM MBS, research firm dv01 found 233 loans that had been modified while the trustee reported only 41 mods.

After increasing in March, April and May, the delinquency rate on securitized non-QMs declined in June. Now servicers are grappling with forbearance plans that are expiring.

MFA and Western Asset Management took losses on non-QMs in 2Q. Anworth is in a holding pattern and Starwood is buying non-QMs at a discount.