J.P. Morgan Mortgage Trust 2026-NQM5 plans to issue about $1 billion in residential mortgage-backed securities.
The transaction is backed by a portfolio of 1,902 fixed- and adjustable-rate prime and non-prime first-lien residential mortgages, according to Morningstar DBRS.
The rating agency gave provisional ratings to 12 tranches, from (P) AAA (sf) down to (P) B (low) (sf). The (P) AAA (sf) rating is supported by 22.4% credit enhancement from subordinated certificates.
DBRS Morningstar noted the loans have an average seasoning of four months, with ages ranging from zero to 44 months. Vista Point Mortgage is the largest originator, representing 25.1% of the pool by balance, while United Wholesale Mortgage accounts for 13.5%. All other originators each make up less than 10%.
DBRS Morningstar highlights the pool's large share of non-QM and investor loans. Under Consumer Financial Protection Bureau (CFPB) Qualified Mortgage rules, 40.1% of the loans by balance are non-QM. About 43.7% of the pool's loans were made to investors for business purposes, exempting them from CFPB Ability-to-Repay and QM rules.
Additionally, 15% of the pool is QM Safe Harbor and 1.2% is QM Rebuttable Presumption, both based on unpaid principal balance.
NewRez (formerly New Penn Financial, doing business as Shellpoint) will service roughly 66.6% of the loans. Carrington Mortgage Services will handle 25.1%, and Selene Finance will service 3.8%. Computershare Trust Company will serve as master servicer, custodian, and securities administrator. Wilmington Savings Fund Society will act as owner trustee.
DBRS Morningstar states that the credit ratings reflect the deal's strengths: solid loan attributes and pool composition, compliance with ATR rules, improved underwriting standards, current loan status, and satisfactory third-party due diligence reviews.
Specifically, the rating agency points out that most borrowers have strong credit profiles, with a weighted average FICO score of 748. About 76.4% of the loans are to borrowers with credit scores of 720 or above. The pool's weighted average original combined loan-to-value ratio is 72.4%, meaning borrowers generally have substantial home equity.
However, DBRS Morningstar also notes several challenges, including debt service coverage ratio loans; certain nonprime, non-QM, and investor loans; loans to foreign national borrowers; limited servicer advances of delinquent principal and interest; and the representations-and-warranties standard.
