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JPMorgan ups concentration of 3rd-party originations in $998M RMBS

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JPMorgan's next offering of residential mortgage bonds features a higher concentration of correspondent- and broker-originated loans, according to presale reports.

The $998 million JPMorgan Mortgage Trust 2018-8 is backed by 1,874 fully amortizing fixed-rate conforming and prime jumbo nonconforming predominantly 30-year mortgages.

According to Moody’s Investors Service, nearly half (49%) of the loans were originated through correspondent and broker channels, which the rating agency says have not performed as well as retail-originated mortgage loans. Recent JPMorgan RMBS deals involving conforming and jumbo loans had non-retail originations of 40.8% (JPMMT 2018-6) and 43.6% (JPMMT 2018-5).

Last year, the trust’s offerings had correspondent-broker loans making up as much of 68% of the pool. Moody’s says residential mortgage securitizations with higher levels of in-house origination channels have historically performed better.

Moody's, Fitch Ratings and DBRS expectations for cumulative net losses range from 0.25% to 0.5%, in line with prior JPMorgan deals.

The JPMMT 2018-8 loans have a weighted average seasoning of three months and include borrowers with a weighted average FICO of 774.

Borrowers have average monthly incomes of $24,887 and “significant” liquid assets averaging $270,842. Self-employed loans make up a slightly higher 17% share of the pool — down slightly from 19.9% for the 2018-6 transaction in June — while multiproperty borrowers make up 33.3% of the pool by loan balance.

The pool’s balance of borrowers with FICOs above 800 is 18.3%, the highest of any of JPMorgan’s pools since early 2017.

The weighted average coupon on the loans is 4.5%, and the original combined loan-to-value ratio is 71.3%, which is “generally comparable” to J.P. Morgan’s other prime mortgage loan securitizations.

The pool also has a higher proportion of purchase loans (73.7% by loan balance) than recent J.P. Morgan mortgage trust transactions that typically have 50%-70% shares. Refinance loans make up 26.3% of the pool, including 14% as cash-out refis.

The conforming loan portion of the pool has an average current loan balance of $465,390, more than double the $230,000 average for Fannie Mae- and Freddie Mac-guaranteed loans across the country. Moody's said this was because of the large number of the pool's loans located in high-cost home markets in New York City (10%), Los Angeles (14.1%) and San Francisco (9.5%). The original loan size average was $553,069.

Nearly 40% of the loans were originated in California. (The trust will repurchase any loans that sustain material damage from ongoing wildfires.)

All of the loans are subject to the qualified mortgage and ability-to-pay rules under Dodd-Frank.

All three rating agencies expect to assign triple-A ratings to the senior tranches of notes to be issued in the transaction.

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RMBS prime jumbo Qualified residential mortgages Jumbo mortgages Mortgages JPMorgan Chase
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