J.P. Morgan’s follow up RMBS to its first securitization of 2015 involves a much smaller pool of mortgages.

JPMMT 2015-IVR2 consists of $372 million of securities backed by a pool of 7-year hybrid adjustable-rate mortgages originated by First Republic Bank.

Kroll Bond Rating Agency and Moody's Investors Service assigned preliminary ‘AAA’/ 'Aaa' ratings to the class A notes which benefit from credit enhancement of 15%. Kroll plans to rate  the class B1 notes ‘AA’/, the class B-2 notes, ‘A’, the class B3 notes ‘BBB’ and the class B4 notes ‘BB’. All of the notes have a final maturity date of January 2045.

The deal follows up on the issuer’s inaugural 2015 RMBS completed in February. That transaction, 2015-IVR, was sized at $940 million and was backed by 5-year ARMS.

JPMMT 2015-IVR2 is backed by a pool of 382 jumbo mortgage loans that have an average balance of $974,964. The loans are underwritten to borrowers with strong credit profiles, low leverage, and substantial liquid reserves. Borrowers in the pool have a weighted average FICO score of 758 and on average the loans have a loan-to-value ratio of 64.7%.

Approximately 39.3% of the loans will pay only on interest for a 10-year period. Kroll noted in the presale report that these products tend to be at risk of fluctuating or increasing monthly payment obligations, which can result in payment shock. “The payment shock to the borrower for hybrid ARMs and IO loans can be significant, particularly in a historically low interest rate market,” stated the presale. “In such an environment, rate increases are likely and refinancing opportunities may be limited."

However the loans are underwritten to high net worth borrowers, who are less likely to suffer payment shock as a result of higher monthly payments

Only 26.0% of the mortgage loans in the pool are subject to the qualified mortgage/ability to repay rule, and all are designated as QM. The rest of the loans are not subject to the QM/ATR rule because either the loans have application dates prior to January 10, 2014 or were originated as investment properties for business purposes or to LLCs.

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