The J.P. Morgan Mortgage Trust, 2023-DSC2 is preparing to issue $308.1 million in mortgage-backed certificates from a diverse pool of mortgage loans that are business-purpose investor loans, exclusively.
As of the collateral pool's cutoff date, the mortgage pool consists of 950 newly originated, first-lien and adjustable-rate, fully amortizing residential mortgage loans, according to ratings analysts from S&P Global Ratings. Of that pool, some 113 loans, or 14.23%, have five- or 10-year interest-only features.
Shellpoint Mortgage Servicing is the transaction's servicer, while Nationstar Mortgage is on the deal as the master servicer, S&P said.
In terms of underwriting, a vast majority of the pool, 92.02%, were originated with underwriting using FICO scores, loan-to-value ratios, and debt-service coverage ratios (DSCRs), according to S&P. Those loans are underwritten to the properties' actual or estimated rental incomes, not the mortgagors' incomes. The remaining loans, some 7.8% of the pool by balance, were business-purpose loans underwritten based on agency investor guidelines.
As for other pool characteristics, JPMMT 2023-DSC2 has a weighted average (WA) cumulative LTV ratio of 69.10, a WA FICO score of 748 and a WA current rate of 5.99%. Among some of the deal's strengths is that borrowers have significant home equity, and the classes A-1, A-2 and A-3 certificates benefit from a credit support floor where no principal is paid to the subordinate classes until the class A certificates are retired.
Also, the underlying loans have an average loan balance of $324,367.
Other deal factors could pose some credit issues to the deal, however, S&P analysts said. Among those is the property-focus and investment nature of the loans themselves, and that none of the borrower's incomes were factored into underwriting. S&P says that its ratings model applies an adjustment to the foreclosure frequencies ranging from 3.15x to 5.06x for the DSCR loans.
The loan purpose for 490 loans, which represents 58.28% by pool balance, is a cash-out refinance. The average cash-out amount is $187,356, the rating agency said.
Ratings range from 'AAA' on the class A-1 through A-1-C-X notes to 'AA-' on the A-2 through A-2-C-X notes; 'A-' on the A-3 through A-3-C-X notes; 'BBB-' on the M-1 notes; 'BB-' on the class B-2 notes and 'B-' on the B-2 notes.
