What brokers need to know about the surge in non-agency loans
Non-agency mortgage loans were one of the most talked-about loan sectors in 2025. Non-QM outperformed projections during the year, and did so in what was a challenging rate environment for the first half of the year.
If the sector keeps its momentum, 2026 may be an even bigger year for non-QM loans, according to one industry executive.
Tom Davis (pictured top), chief sales officer at Deephaven Mortgage, was asked by the Mortgage Bankers Association (MBA) to co-chair a non-agency forum committee this year. He said that the sector far surpassed expert projections for 2025.
“In late 2024, all the forecasts that I saw, we were thinking non-QM originations were going to hit maybe $70 billion to $75 billion, maybe $45 billion in securitizations,” Davis told Mortgage Professional America. “Fast forward to the end of the year, and we should finish about $120 billion in originations. Securitizations will hit like north of $70 billion.”
A tighter credit box
The non-QM space has exploded for many reasons. One reason they’ve become more popular with investors is that the loan quality on the non-agency side has improved significantly.
“It's still a high-growth area,” Davis said. “What's interesting is that the delinquency in 2025, when you compare it to 2024 and 2023, has actually improved, because the box has tightened in non-QM. Two years ago, 15% to 20% of this production was in the 80% to 90% LTV bucket, and LTVs were in the low 70s. Today, non-QM is around the mid-60s. So LTVs have come down, but the FICO and the DTI have really remained the same. Borrowers have more embedded equity.”
While the non-QM space, especially investor loans, generally rolls along regardless of major rate declines, Davis said that if rates are significantly lower next year, non-QM originations may be knocking on the door of $200 billion.
“We think non-QM is going to be $150 billion in the current rate environment,” he said. “But if rates tick down 50 basis points, we could see it as high as $180 billion. The MBA is forecasting $2.2 trillion next year for all originations. If rates come down 50 to 100 basis points, that potentially you could see like a $2.6 to $2.8 trillion market because of all the refis.”
While non-QM makes up the majority of non-agency loans, the space also includes second liens, fix-and-flip loans, private loans, and some jumbo loans. All of those sectors will combine to make up a sizeable chunk of mortgage originations in 2026.
“You're looking at a space that's going to be like $400 to $500 billion in originations,” Davis said. “One out of every five loans, or one out of every four loans, is going to be in the non-agency space next year. We’re seeing originators continue to adopt and embrace these products. A third of the purchase transactions year to date are investor transactions. It's important for investors to have all these investor solutions, including DSCR, five-to-nine, fix-and-flip bridge, and ground-up construction.”
Chance for brokers to stack deals
The reason Davis is so bullish on second-lien products like home equity lines of credit (HELOCs) is that many people still hold low-rate pandemic-era mortgages, and they simply aren’t going to give them up unless rates fall further. This is true of both consumer and investor loans.
“There are 19 million self-employed people who account for over 30 million businesses,” he said. “There are 19 million investment properties that account for over 49 million doors. Those investors who have really low note rates on those investment properties and their cash is flowing, they're not going to refi out of that first lien.
“What they're going to do is they're going to take an equity loan, a second position, they're going to take $100,000, and they're going to use that cash to go buy more investment properties. It doesn't make sense to tap into the first and refi out of that if the rates are really low, because it'll worsen the cash flow.”
Benn Jackson of Constructive Capital highlights why technology integration is the top priority for non-QM lenders in 2026, aiming to boost efficiency, speed, and broker adoption as demand grows.https://t.co/nZhUF7qWSx
— Mortgage Professional America Magazine (@MPAMagazineUS) December 15, 2025
Davis encourages brokers to use these non-agency products to pursue more investor loans in 2026. He said it’s the perfect chance to get multiple deals out of one relationship, instead of doing a mortgage for someone you may not see again for years.
“For a loan officer to be a part of the solution and expand the referral base, they should work with investors, who account for 30% of the purchase transactions,” Davis said. “Work directly with the builder, the developer, the real estate investor, to bring new inventory to the market and then bring uninhabitable homes back into the market.
“Unlike a consumer, who might buy a home every five years, an investor, on average, does five transactions a year. A lot of them do a lot more. It’s repeat business. So having a suite of investor solutions, including a second-lien product, really allows originators to differentiate themselves. It gives you a competitive advantage in the marketplace.”
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