JP Morgan is prepping another securitization of 15-year mortgages.

The $263.23 milllion JP Morgan Mortgage Trust 2014-5is backed securities backed by 15-year loans to borrowers with “very strong credit quality,” according to both Fitch Ratings and Kroll Bond Ratings Agency. 

As a result the rating agencies have assigned the senior, class A notes,‘AAA' ratings with credit enhancement at 10%.

By comparison, JP Morgan’s OAK 4 transaction, which was backed by 30-year mortgages, was charged credit enhancement at 15% for the senior, ‘AAA’ notes.

JP Morgan was last in the market with a deal backed by 15-year, fixed rated mortgages in June; that 'AAA' rated tranche of that deal also had 10% credit enhancement.

“Fixed-rate loans with shorter terms have historically exhibited strong performance when compared to typical 30-year product, as loans achieve faster amortization and borrowers experience increased equity build-up through higher relative payments,” KBRA stated in its presale report.

The deal also benefits from strong borrower equity in the properties as evidenced by the low loan to value ration of 55.9%. According to KBRA the pool has the lowest LTV ratio of any post-crisis, prime jumbo RMBS transaction it has rated.

First Republic Bank originated 54% of the loans and JPMorgan Chase Bank originated 36.4% of the loans.

Fitch said that one downside risk is the limited number of loans backing the transaction. At 373, the count exposes the deal to the risk that that portfolio performance may be negatively affected by a few assets that underperform relative to the statistically derived assumptions underlying their ratings.  

Only 121 loans in the pool are subject to the ability to replay/Qualified Mortgage rule, became effective for loans with application dates on and after Jan. 10, 2014. All of these loans benefit are designated as QM and so beneift from a safe harbor.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.