Hildene Capital closes new non-QM deal

Hildene Capital has closed its fourth nonqualified mortgage securitization of 2025 with Crosscountry Mortgage, continuing what has been fairly consistent issuance amid policy shifts this year.

The $453.9 million transaction that Goldman Sachs structured with JPMorgan acting as joint lead received top AAA ratings from Fitch and KBRA for 99.5% of its underlying loans. The collateral has the following weighted averages: FICO, 748; and loan-to-value ratio, 70.25%.

The continuing non-QM securitization at Hildene, which also recently led a $5 million Series A funding round for home-equity fintech Button Finance, highlights the focus on both these product sets in the current market. 

Lenders have been originating more second-lien and non-QM products because many outstanding borrowers have primary mortgages with lower-than-market rates. Seconds or home equity financing may not disrupt first liens, non-QM borrowers have other considerations.

"The completion of our latest securitization underscores our differentiated approach to asset-based credit," said Justin Gregory, portfolio manager at Hildene, in a press release.

Shifts in the non-QM securitization landscape during 2025

Hildene closed a non-QM securitization every month this year in a market with broader volatility that has led to some variation in the market's execution levels.

A $511.5 million deal with 987 loans closed in January, followed by a $426.8 million March transaction with 860 mortgages and a $413.4 million April securitization with a 830 unit count.

Angel Oak reported last month that it refrained from securitizing non-QM for the first quarter, returning to the market in the second. The company reported spreads widened and then came back in, and it has been able to sell whole loans to investors like insurers as an alternative.

Since Hildene and Crosscountry's partnership was announced in 2022, the two have issued 14 non-QM securitizations totaling around $5.4 billion.

In addition to broader market volatility linked to uncertainties around shifting plans for international tariffs, other new trends that the non-QM market has had to adapt because of policy changes include more stringent rules around immigration.

Some of the Hildene transactions have historically included loans made to non-citizens with Individual Tax Identification Numbers or who have Deferred Action for Childhood Arrivals status, according to NMN affiliate Asset Securitization Report.  The Trump Administration has recent had this group in its crosshairs, eliminating their ability to get USDA loans.

Only 2% of loans in the latest securitization were made to ITIN or DACA borrowers, according to Kroll, which adjusted default and credit score assumptions in its ratings for this based in part on limits at the government-sponsored enterprises and the Federal Housing Administration.

"While lending to ITIN holders is fully permitted by law, mortgages to ITIN borrowers cannot be readily sold to the GSEs or insured by the FHA which limits credit availability to these borrowers and can reduce their ability to refinance," the rating agency wrote. "In addition, such borrowers may be subject to political risks affecting their ability to legally reside in the U.S."

Non-QM mortgages are typically made to borrowers who want to use nontraditional means of proving their ability to repay which more typically includes income they generate as a contractor, small business owner or investor.