A pool of high-quality, fixed-rate and fully amortizing mortgages with maturities of up to 30 years will back a $451.4 million sale of mortgage-backed certificates from the J.P. Mortgage Trust 2023-4.
The deal looks very much like a standard mortgage-backed securities (MBS) deal, except that in the current real estate cycle home prices are currently unsustainable, according to Fitch Ratings, which expects to assign ratings to the notes. Home prices values in the underlying pool are 7.2% above a long-term unsustainable level as of March 2023—despite some moderation.
JPMMT 2023-4, as the deal is known, has a cross-collateralization structure that divides the collateral into two groups that determine the repayment of principal and interest. This is similar to previous JPMMT transactions, Fitch said. Group 1, with a balance of $262.7 million and group 2, with a balance of $188.6 million, will repay principal on its their respective senior certificates, according to Fitch. The trust will repay interest from the aggregate pool, meanwhile subordinate bonds will be cross-collateralized and receive principal and interest from both groups of collateral.
Group 1, with 201 mortgages mostly on single-family loans for purchases, has an average loan balance of $1.3 million, and all of the funds were used to purchase primary residences. The loans have a weighted average (WA) original loan-to-value ratio of 75.8%, according to Fitch.
As for Group 2, it contain 425 home loans with an average mortgage balance of $443.9 million. On a WA basis these loans have an original LTV of 77.2%, and none of them are primary residences.
Taken together, the underlying loans do have a few commonalities, according to Fitch. The pool is made up entirely of fixed-rate mortgages. Almost all of the loans (94.4%) qualify as safe-harbor qualified mortgages, and the remaining 5.6% are qualified mortgages, with a rebuttable presumption.
United Wholesale Mortgage originated 52.5% of the underlying mortgages, while a litany of other mortgage originators originated the remaining 47.5% and contributed less than 10% to the pool.
All of the loans have a legal final maturity of November 2053. Fitch expects to assign ratings of 'AAA' from the 1-A-5-X class of notes through 'AAA' 2-A-5-X; and 'AA+' to the 2-A-6-A through 2-6-X-1 notes. After that the rating agency expects to assign ratings of 'BBB-' on the B-3 notes; 'BB-' to the B-4 notes and 'B-' to the B-5 notes.
