J.P. Morgan Mortgage Trust is preparing to offer $186.3 million in notes to investors, where a second-lien, prime home equity line of credit (HELOC) funding 2,269 loans ultimately provides collateral for the notes.
J.P. Morgan Mortgage Acquisition and Blue River Mortgaged IV are sponsoring the transaction, where United Wholesale Mortgage and loandepot.com originated the loans, which is seasoned for just four months, according to ratings analysts at Fitch Ratings and Kroll Bond Rating Agency. The entire underlying loan pool is comprised of adjustable-rate mortgages—based on the prime rate—with 10-year, interest-only terms.
Fitch noted that it assumes 100% of the HELOCs are 100% drawn on day one. As a result, all percentages are based off the maximum HELOC draw amount. Although home prices in the pool are 6.3% higher than long-term sustainable levels, the rating agency noted, the pool itself is made up of high quality prime mortgages extended to borrowers with strong profiles and relatively low leverage.
Notes will be repaid through a modified sequential structure, which calls for the A-1 and M-1 through M-3 classes to receive principal on a pro-rata basis. They will be paid sequentially to the extent they are failing, according to Fitch.
Credit enhancement includes excess spread, Fitch said, plus a lockout feature, which benefits the senior classes if performance deteriorates.
The loans are seasoned at an average of six months, according to Fitch, although it cited deal documents claiming three months of seasoning. Borrowers have a weighted average (WA) FCO score of 747, and 46.2% of the loans have a borrower with an original FICO score equal to or greater than 750. The rating agency says it considers 97.9% of the loans to be fully documented.
All of the borrowers maintain a primary or secondary residence, while 95.6% of the pool is made up of single-family home, planned unit developments, townhouses and single-family attached dwellings. While virtually all of the loans, 97.9%, are cashout refinances, the same percentage of the loans is fully documented and none of the loans in the pool amount to more than $1.0 million.
Aside from J.P. Morgan, AmeriVet Securities, Drexel Hamilton, Loop Capital Markets, Raymond James & Associates, Stifel, Nicolaus and Robert W. Baird are initial note purchasers, according to KBRA.
The A-1 through B4 notes will be benchmarked to the three-month Secured Overnight Financing Rate (SOFR), according to the Asset Securitization Report's deal database.
Fitch expects to assign ratings of 'AAA' on the A-1 notes; 'AA' on the M-1 notes; 'A' on the M-2 notes; 'BBB' on the M-3 notes; 'BB' on the B-1 notes and 'B' on the B-2 notes. KBRA expects to assign similar ratings, especially on the A-1 through M-2 classes. After that, KBRA expects to assign the 'BBB+' to the M-3 notes; 'BBB-' to the B-1 notes; 'BB' to the B-2 notes; and 'B+' to the B-3 notes.
All of the notes have a legal final maturity of November 2053.
