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JPMorgan private bank marks entry into super-prime jumbo RMBS

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JPMorgan’s wealth management division is sponsoring its first-ever securitization of super-prime jumbo mortgages originated solely for its private-banking clients.

According to presale reports, the new trust established by JPMorgan Chase Asset and Wealth Management Private Bank will market a series of senior and subordinate notes backed by mortgages that were originated by the private bank arm of JPMorgan Chase.

Although the $407.5 million JP Morgan Wealth Management Mortgage Trust (JPMWM) 2020-ATR1 transaction represents a debut deal from the wealth management unit, it is not the first securitization of non-qualified jumbo mortgages from the bank itself.

Last year, JPMorgan Chase backed two deals (Chase Home Lending Mortgage Trust 2019-ATR1 and 2019-ATR2) that marked JPMorgan's initial RMBS deals consisting of large-balance mortgages that were not tested to meet the qualified-mortgage standards of the Consumer Financial Protection Bureau.

JPMWM 2020-ATR1 consists of 402 large loans (an average remaining balance of $972,877) from borrowers with substantial assets: median annual income of $345,131 and monthly free cash flow of $11,779. The borrowers' weighted-average original FICOs is 764.

According to ratings agency reports, 148 of the loans have a balance over $1 million with the largest loan total at $2.78 million. The loans in the pool have a total balance of $391.1 million.

Most of the loans are well-seasoned and originated between 2015 and 2019, and are serviced by JPMorgan Chase. More than 98% are aged more than two years, with high levels of equity (an average current loan-to-value of 69.9%) that “provide a substantial margin of safety against potential home price declines,” noted Kroll in a presale report.

The loans were underwritten to standard full-income documentation, but are designated as non-qualified mortgages under the Consumer Financial Protection Bureau’s ability-to-repay rules since they were not tested for QM status under the bureau’s Appendix Q standards, according to the presale reports.

(Appendix Q was adapted from Federal Housing Administration income- and employment-documentation standards, and is considered more difficult to apply to self-employed, contract or high-asset borrowers with non-traditional income sources.)

Only 22.8% of the loans are to self-employed borrowers, and only two were underwritten to two non-permanent U.S. residents.

The transaction includes six tranches of Class A term notes (with corresponding interest-only notes) with preliminary AAA ratings from Fitch and Kroll. Fitch is alone rating several subordinate note classes with ratings ranging from AA to single B.

None of the loans are in pandemic-related forbearance, according to Fitch and Kroll. Fitch says it has accounted for any potential COVID-19 disruption to the payment flow to noteholders by assuming deferred payments on a minimum of 25% of the pool for the first six months of the deal.

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RMBS prime jumbo JPMorgan Chase Wealth management Qualified Mortgages CFPB