What if non-QM mortgage lenders fail in a cascade?
Non-QM lender failures on early-payment-default surges freeze private-label securitization and mark down warehouse-lending banks; trade short non-bank originators and HY, watch JPMorgan-type warehouse exposure. Rhymes with the 2007 subprime originator collapse (New Century) that preceded the broader freeze, and the spring-2020 non-QM seizure when Angel Oak-type issuers halted. Transmission runs through warehouse lines into bank credit books. Forward angle: the non-QM/private-credit channel is bigger and more opaque now, so the securitization freeze can propagate faster than 2007. Roots sensible.
Every number ships with its receipt — the odds, the range, the precedents, and a public grade at Reality Check. The statistical machinery that produces it is proprietary.
The butterfly cascade
How this trigger trickles across markets, left → right — the root shock, its first‑order moves, then the ripple effects. Drag any node; tap a market for its real price history.
Resolution timeline — how this probability is moving
Our model's odds (electric blue) over time vs the market's (Polymarket, amber), from the past toward the 0–6 months horizon. Each dot is a real macro event that nudged the probability — green pushed it up, red pushed it down. Tap a dot for the source. Loading the probability audit trail…
What it would mean
If this plays out, it is a risk-off shock. Non-qualified-mortgage lenders fail as early-payment defaults surge, freezing private-label securitization. The trigger decomposes into signed root‑shocks — Credit spreads ▲ · Financial conditions ▲ · Recession signal ▲ — which propagate through our causal graph to the markets below.