Another month, another offering of private-label residential mortgage bonds from JPMorgan Chase.

Like the first four deals of the year, the $650.5 million J.P. Mortgage Trust 2018-5 is backed by a mix of loans that could have been sold to Fannie Mae or Freddie Mac and loans that meet all of the credit criteria for sale to one of the government-sponsored enterprises, except for their size, according to rating agency presale reports.

However, the latest transaction is slightly more geographically concentrated and it has a lower proportion of loans originated via the retail channel than recent JPMMT transactions, according to rating agency presale reports.

Just over half (52.1% by balance) were originated in California, which includes the metropolitan statistical areas Los Angeles (20.1%), San Francisco (11.2%), and San Diego (6.9%). About 12.6% of the pool was originated in the New York City MSA. The high geographic concentration in high-cost MSAs is reflected in the high average balance of the pool ($619,543).

Moody’s Investors Service also cited as a credit concern the fact that 51.5% of the mortgages by balance were originated through correspondent and broker channels. That’s in contrast to recent prime jumbo transactions where on average 30% are originated through such channels. “Typically, loans originated through a broker or correspondent channel do not perform as well as loans originated through a retail channel, although performance is likely to vary by originator,” the presale report states.

Both Moody’s and S&P Global Ratings cited as a concern the proportion of self-employed borrowers (18.6% of the pool), who tend to have more volatile income than those with salaried employment.

This pool has a lower proportion of purchase loans (57.8% by loan balance) than recent JPMMT transactions, which typically contained about 61% to 74% of such loans. Refinance loans, including debt consolidation, constitute 42.2% of the pool, of which 14.5% are cash-out refinance loans and 2.7% debt-consolidation loans.

The pool contains a number of loans with high principal balances, which exposes the transaction to the risk of losses at the tail of the transaction, when few loans remain. At that time, a default of a large loan would significantly reduce enhancement and result in losses to the bonds. This pool consists of 1,050 loans and the largest 20 loans make up approximately 5.1% of the total balance.

All the loans in the pool are 30-year term loans, except two which are 25-year term loans. The loans are serviced primarily by Shellpoint (53.1%) and JPMorgan Chase (45%). All other servicers are less than 5% of the balance.

Moody’s expected losses on the pool average 0.40% in a base-case scenario and reach 5.20% at a stress level consistent with its Aaa ratings.

Both rating agencies expect to assign triple-A ratings to the super senior certificates to be issued, which benefit from 12% credit enhancement.

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