2026 Performing Note Yields Dropping – Who's Adjusting Buy Boxes?

Question

Note buyers – performing residential paper hitting sub-9% yields with rates steady. Sellers holding tight on locked-in low payments, but equity building fast.

Anyone tightening criteria?

• LTV caps (70% now vs 80% last year?)
• Min seasoning (15 months?)
• Skipping anything over 10% rate?

Sourcing channels shifting too – BP quieter, brokers busier with institutional flow. What's your Q1 pipeline look like?

Chris Seveney · Answer

I would say anyone buying paper with 80% or greater ltv in todays market is not making wise financial decisions

Jamie Bateman · Answer

This may seem obvious but the seasoning-vs.-underwriting topic for me really comes down to when the note was originated. A lot of the paper we buy was originated many years ago. So, many things may have changed with regard to the borrower's circumstances and the property that what has actually happened (seasoning) tends to be much more valuable to me than infomation gathered decades ago in an effort to predict what would happen (underwriting).

As with most things in this space, there's a lot of gray. It depends. (To be clear, I do see a ton of terribly originated paper, especially when it comes to seller financing.) @Taylor Dasch @Doug Smith

Taylor Dasch · Answer

Great perspective on the seasoning vs. underwriting debate. I think a lot of newer note investors get hung up on the 12-month payment history as a safety blanket, but you're right—if the origination was sloppy, that payment history might just be luck or a borrower burning through reserves. In this yield-compressed environment, I'm definitely leaning more into analyzing the original file quality rather than just checking the "seasoned" box. Are you seeing this sloppy origination more in specific asset classes recently?

Doug Smith · Answer

I’ll offer a slightly different perspective on seasoning, based on a long background in bank credit and residential underwriting. I understand why seasoning became popular, especially after the last cycle, but I think it’s often misunderstood and sometimes overemphasized. Seasoning doesn’t create credit quality, it only proves that a borrower has been able to make payments for a short period of time under a specific set of conditions. A newly originated note from an experienced lender that is fully underwritten to a defined buy box, complete with credit, income, assets, reserves, verified value, and conservative LTV, can be every bit as strong as a seasoned note, and in some cases stronger. Early payment performance is useful, but it doesn’t replace proper underwriting, borrower capacity analysis, or collateral evaluation. In banking, we never relied on “seasoning” alone to determine loan quality, we relied on ability, willingness, and capacity to repay, supported by documentation. I also see investors pass on well-structured new paper while accepting seasoned notes that were poorly underwritten just because they show a payment history, which can be a false sense of safety. To me, the real risk isn’t lack of seasoning, it’s lack of discipline at origination. I’m not saying seasoning has no value, but I do think the industry sometimes treats it as a proxy for credit quality when it’s really just one data point. Curious how others here weigh underwriting quality versus payment history when yields compress like this.

2026 Performing Note Yields Dropping – Who's Adjusting Buy Boxes?

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