J.P. Morgan Mortgage Acquisition Corp is preparing to sponsor a deal that will sell $479.4 million in mortgage-backed securities (MBS), backed by a pool of prime jumbo residential loans that have slightly stronger profiles than those that collateralized more recent transactions from the program, to investors.
The transaction, JP Morgan Trust 2024-2, benefits from credit enhancement including subordination, and has a senior subordination floor of 1.50% of the initial pool balance, and a subordinate lockout amount of 1.30% of the pool balance.
Also, the deal will repay investors sequentially and through a shifting interest payment structure, according to ratings analysts from Moody's Investors Service. On a weighted average (WA) basis, the rating agency notes, the mortgages have a FICO score of 773. They also have a low WA debt-to-income ratio of 37.0%, as well as significant liquid cash reserves, the rating agency said.
Some 415 loans are in the pool, for which Nationstar Mortgage will act as master servicer. Otherwise, United Wholesale Mortgage, J.P.Mortgage Chase Bank and National Association are also servicers on the deal, managing more than 5% of the collateral, by loan balance.
Yet the deal does have a few credit balances, according to Moody's, including the collateral pool's high geographic concentration by state. California alone accounts for 35.5% of the pool, the rating agency said.
Further, self-employed borrowers account for a high concentration in the pool, 32.3%. Self employed workers expose the pool to potential risks due to the variable nature of borrowers' cashflow, Moody's suggests. The pool also contains a significant percentage of high-balance loans. Specifically, 32.3% of the loans have balances of more than $1.5 million, and 7.7% of the pool has balances of more than $2 million, the rating agency said.
All of the loans, which are first-lien and fixed rate, were originated according to the new general qualified mortgage (QM) rule, a mix of Fannie Mae and Freddie Mac Single Family Selling Guides. Although the loans are fully documented, the rating agency said, the rating agency increased its loss expectations to account for limited performance history on jumbo mortgages originated along the lines of the GSE standards.
Moody's places Aaa ratings on the A2 through A8X notes; Aa1 on the A9 through AX3 notes; Aa3 on the B1 through B1X notes; Aa3 B1A and B1X notes; A3 on the B2 through B2X notes; Baa3 on the B3 notes; Ba3 on the B4 notes; and B3 on the B5 notes.
