Sector's growth has continued even despite a turbulent year
As a reflection of how the overall economy has continued to roll along despite volatility in 2025, the non-QM space has grown almost regardless of what’s been happening in the broader economy.
Even in a higher-rate environment in the first half of 2025, the non-agency side of lending continued to expand. As rates slid through the second half of the year, non-QM continued rolling along.
Ben Fertig (pictured top), president of Constructive Capital, said that while some sectors may be worried about what the Fed will do next and its impact on mortgage rates, non-QM keeps plowing ahead.
“These markets have grown despite rising interest rates,” Fertig told Mortgage Professional America. “I think everybody's looking at, ‘Hey, what is the Fed going to do?’ But every time the Fed seems to lower, the middle and the long end of the curve go the other way, which is what's affecting rates, if anything.
“But I think that the credit markets, in terms of non-QM in general, and these products are super healthy. We have seen more so than some of the macro factors. Because, whether it's the tariffs, inflation, you know, potential for a slowdown or a recession, that's all interrelated.”
Rates and spreads
Fertig said no matter what’s going on in either the economy or in the geopolitical sphere, it comes down to two major factors in the non-QM space.
“The geopolitical tension, deficits, government shutdown, whatever you want to talk about,” he said. “Ultimately, I have to distill it down into what's relevant, and that's interest rates and spreads for us.”
In the consumer mortgage loan space, there has been talk of borrowers being more hesitant to enter the market, potentially waiting for rates to fall. It’s a little more complicated in the investment space, which has allowed deals to continue to flow with less hesitation.
“Is a borrower going to be hesitant to jump into a loan or jump into a project?” Fertig said. “We've seen all of those dynamics in a good place, so I think there are some nuances around risk management that we're starting to see at the secondary marketing level. So I would say it's more… micro is probably not the best way to put it, but just a more market-specific type of concern. Are your valuation review processes in line?
“There's been a couple of concentrated defaults that have really changed some of that narrative. But that said, it is happening within very attractive spreads. The broader outlook is there's a lot of capital, and the demand for these products is outstanding right now.”
Liquidity, not rates
One reason the non-QM market remains strong is the considerable investment in the space. Fertig said market liquidity drives the action more than interest rate fluctuations.
“In my opinion, liquidity is the driver,” he said. “Conventional markets, it's interest rates, at least on the refi side. I think the non-QM markets, the ampleness of liquidity is a big factor. It’s there, so these markets are going to do well. I think there's a lot of capital to be put to work.”
Even though there are just over six weeks left in 2025, Fertig believes there will be a race to use that capital before the end of the year, and then it will start over again in 2026.
“I think it's great because people are going to race to put it to work by the end of the year,” Fertig said. “Then they're going to replenish at the beginning of the year. Last year, the President got elected, and spreads started to come in. Then they got really tight in December, January, and February. Then, we've seen them kind of retighten right at the beginning of October. So it'll be interesting to see what happens.”
With liquidity strong, there is optimism that, as strong as 2025 was in non-QM, 2026 is shaping up to be an even stronger year. Fertig believes that brokers should keep an eye out for a resurgence in residential transition loans (RTL), or fix-and-flip loans, if inventory levels pick up.
“I think that we feel pretty good about where we are and where the market is going into 2026,” he said. “If you start to see some inventory come on the market, then the RTL side could pick up. I think it's been suppressed because of the supply constraints. But I think DSCR is going to keep going.”
Matt Seguin, senior principal, fraud solutions at Cotality, said the areas of biggest concern continue to be on the commercial side.https://t.co/hCdNcNbxeK
— Mortgage Professional America Magazine (@MPAMagazineUS) November 18, 2025
Because rates have been elevated over the last couple of years, Fertig believes there could be opportunities for DSCR refinances, even if rates don’t drop dramatically, given the liquidity in place.
“You’ll see some more organic opportunity in DSCR if rates do come down now,” he said. “We’ve had three years of a lot of paper being printed, between 7% and 8.5%. You could potentially see an organic rate-term refi market, paying off existing DSCR loans.
“But it's not going to need lower interest rates to grow. It could certainly help it, but I think that the market, in terms of the liquidity landscape, in terms of borrower demand, in terms of where the originators are at, is going to be in a good place.”
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