Less-capitalized non-QM lenders struggled amid weak demand for the loans in the secondary market. Some firms are looking to take advantage of that weakness.

Non-QM lenders are regaining their footing as volatility in the secondary market recedes. And many potential non-QM borrowers are comfortable paying relatively high interest rates, helping to boost originations.

Impairments, which reflect delinquencies and modifications, increased on securitized non-QMs for a second consecutive month. In July, the performance of severely distressed borrowers also worsened.

The non-agency market hasn’t lived up to the hype, according to Mat Ishbia of United Wholesale Mortgage, which saw a drop in non-agency lending. The overall sector, meanwhile, saw higher production and gained market share in the second quarter.

Non-agency business-purpose lending is paying off for Velocity Financial. The firm turned a profit in the second quarter despite a decline in originations.

Angel Oak Mortgage suffered widening losses in the second quarter amid weak demand in the secondary market for non-QMs. Still, officials at the REIT suggest that things are looking up.

Altisource Asset Management is acquiring bridge loans and plans to add non-agency debt service coverage ratio mortgages to its mix as it transitions from asset management to an originator of non-agency loans.

For the first time since May, a non-agency MBS with GSE-eligible mortgages for investment properties hit the market. And Change Lending switched products with its latest offering, focusing on mortgages with income verification. Overall, issuance remains slow.

The traditional leaders of contributions to expanded-credit MBS slowed their activity in the second quarter, with smaller entities filling some of the void. The types of loans going into MBS also shifted somewhat. (Includes three data charts.)

Annaly is seeing strong returns from its aggregation and sales of non-agency mortgages even with weak demand in the secondary market. The REIT boosted its non-agency MBS issuance with plans for further growth.