With the first quarter of 2025 behind us, there is much speculation and uncertainty about the future of the U.S. economy and how it will perform throughout the remainder of the year. But when it comes to the mortgage market, there is good reason for a positive outlook. In fact, Verus is confident that the non-QM sector, in particular, will continue to expand throughout the remainder of 2025, forecasting healthy year over year growth once again. According to the Scotsman Guide, non-QM loans accounted for approximately 5% of total mortgage originations in 2024, up from 3% in 2020. Amidst that backdrop of growth, Verus anticipates 30% expansion in production volumes in 2025.
Consumer interest is helping fuel the market’s expansion. Now more than ever before, homebuyers are being educated about the availability of non-QM loans which is having a positive impact on demand.
Verus, as the largest non-agency securitizer, is also playing a critical role in the sector’s continued growth. With the introduction of several new products in Q1 and Q2, pricing remains competitive, we anticipate buying a minimum of $10 billion in production this year.
Expectations for the Non-QM Market in 2025
The non-QM market is poised for continued expansion throughout the remainder of the year, driven by high margins, volume growth, and strong demand from borrowers who don’t fit the strict requirements of agency loans.
One of the biggest advantages of the non-QM market is its ability to be profitable as compared to traditional government-backed lending where margins remain razor-thin. Verus caters to Non-Agency borrowers who are not served by agency programs – a segment that comprises approximately 33% of the mortgage market which is valued at $4.8 trillion. Originators naturally look for volume and profitability, and in today’s lending environment, that means shifting toward non-QM.
The non-QM market’s growth is accelerating, driven largely by the rising number of self-employed individuals—now over 10% of the U.S. labor force—who typically earn higher incomes and possess greater net worth than salaried households. With millions of these borrowers seeking financing, non-QM lending is positioned as a key growth driver for 2025 and beyond.
Additionally, banks have further fueled non-QM expansion by reducing traditional mortgage offerings, especially for larger homes and specialized programs. This leaves a significant market gap and heightened demand for flexible financing solutions. Verus Mortgage Capital strategically focuses on this underserved market segment, and is ideally positioned to capitalize on these opportunities.
A Fluid Alternative
Investor demand for bonds has increased significantly compared to last year, with many market participants eager to see how many more deals will come to market in the months ahead. The appetite for high-quality securitizations continues to grow, reflecting broader confidence in the strength and resilience of the non-QM sector.
While many firms entered the market with substantial capital to deploy, much of it was put to work by the end of last year. However, the continued demand from bond buyers suggests a strong secondary market that remains highly active. Our securitizations have performed well, reinforcing trust in our execution and loan quality. As we move forward, the steady interest in our offerings positions Verus well for continued success.
Capitalizing on the Growth Trend with Prime Ascent Plus
One of the products we expect to experience significant growth in 2025 is Verus’ Prime Ascent Plus Program. This financing solution is designed for established self-employed business owners/workers, those with non-traditional income, and many other creditworthy consumers with either traditional or alternative income documentation. For consumers who want to buy a primary house, secondary home, or investment property, our Prime Ascent Plus Loan product is an especially attractive financing alternative. Its features include:
- FICOs down to 680
- Standard and alternative documentation options
- DTI up to 43%
- Loan amounts up to $2.5 mm
- Must have minimum 12-month mortgage history
- Interest-only available
- Minimum four years since any foreclosure, short-sale, deed-in-lieu, or bankruptcy
The Persistent Misconception About Non-QM
From an investor perspective, some still mistakenly associate non-agency loans with subprime lending, assuming they target borrowers with poor credit and high debt, making them riskier. However, Verus purchases loans to borrowers with strong credit—our average borrower has a credit score of 730+. Rigorous underwriting and stringent credit standards ensure these aren't high-risk loans.
Moving through 2025, the non-QM market will continue showing resilience and growth. As banks withdraw from traditional lending and more self-employed and non-traditional borrowers seek financing, demand for innovative lending solutions grows. Non-QM loans address this demand, providing robust margins and significant market scalability. For originators, adopting non-QM is now a strategic and financial necessity. Clearly, non-QM lending is not a niche—it’s central to the future of mortgage lending.
1 Source: Invictus, Census Bureau and Federal Reserve Bank Board of Governors, as of 9/30/2024. Net worth from Federal Reserve Bank, Survey of Consumer Finances, as of 12/31/2022.