J.P. Morgan Securities is arranging a $352.7-million RMBS securitizing 677 prime pre-crisis mortgages originated by Merrill Lynch Credit Corp., according to a pre-sale report by Fitch Ratings.

The loans were purchased by J.P. Morgan Mortgage Acquisition Corp. from Everbank.

The borrowers in the pool are high net worth individuals, most of whom had brokerage accounts with Merrill before it was bought by Bank of America in January 2009. The average Fico score is 766 and the average current sustainable loan-to-value ratio is 64.8.

The transaction, called J.P. Morgan Seasoned Mortgage Trust 2014-1, consists of multiple tranches. Among the triple-A rated pieces are $249.8 million in A-1 notes; $50 million in A-2; and $19.4 million in A-3. All the senior tranches have a final maturity of May 2033.

Originated between 2004 and 2007, the loans are adjustable rate with an interest-only period of 10 years.

No loans have been modified due to performance issues and their performance has been strong — only six loans, or about 0.7% of the pool, has experienced a delinquency during the past 36 months. The rest are what Fitch refers to as “clean current” loans. 

The deal has other, less negligible, risks as well.

Since the loans paid out only interest in the first ten years, they have yet to amortize and all of them face higher payments from amortization. That rise “can be sizable relative to the current payment,” Fitch said. What is more, as ARMs they're vulnerable to rate rises.

About a quarter of homes securing the mortgages in the pool are in the New York-Northern New Jersey area.

Everbank is providing the representations and warranties at the loan level, meaning it is standing behind the quality of the mortgages as represented by their documents. For the period between the securitization vehicle’s loan acquisition and the close of the securitization, J.P. Morgan Mortgage Acquisition Corp. will provide the reps and warranties.

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