JP Morgan is returning with its second residential mortgage securitization in two weeks.
The latest deal, J.P. Morgan Mortgage Trust 2014-OAK4, is backed by 30-year fixed-rate jumbo loans, according to a presale report from Kroll Bond Rating Agency.
Kroll assigned preliminary ratings to 25 classes of securities to be issued by the deal, seven of them 'AAA.'
By comparison, the previous deal, J.P. Morgan Mortgage Trust 2014-IVR3, launched early last week, is backed exclusively by adjustable-rate mortgages, about one-fifth of which pay interest only for an initial, 10-year period. Most of the loans backing JPMMT 2014-OAK4 are fully amortizing; just 0.5% have interest-only periods.
In other respects, the pools of collateral pool backing the two deals are similar; JPMMT 2014-OAK4 consists of 434 first-lien, residential mortgages with an aggregate principal balance of $355.6 million. The credit quality of the borrowers is strong: the weighted average original credit score is 767, compard with 766 for the deal launched last week.
The borrowers backing the latest deal also have substantial equity in their property, as evidenced by the weighted average loan-to-value ratio of 73.7%; even taking into account other loans held by borrowers, the average combined loan-to-value ratio is 74.0%. While that’s less equity than in any other RMBS transaction Kroll has rated, the rating agency takes some comfort from the fact that there are no borrowers with combined loan-to-value ratios of more than 80%.
JPMMT 2014-OAK4 has three loans with current balances greater than $2 million, which make up 2.1% of the pool. Likewise, JPMMT 2014-IVR3 has 18 loans with current balances greater than $2 million; three of which are above $3 million and make up 2.1% of the pool.
“While the large loans generally exhibit strong credit characteristics, property valuations of luxury homes can be complex and potentially subject to more volatility than valuations of conventional properties. KBRA also believes that the statistical modeling process does not fully address the risk of outlier’ events,” the presale report states.
Most of the loans backing the latest deal, or 77.2%, are not subject to new ability-to-repay rules, either because they were originated prior to Jan. 10 or because they finance investment properties. The remaining loans are qualified mortgages that fall under a safe harbor from liability under ability-to-repay rules.