JPMorgan sponsors $608M non-QM pool of 'super-prime' mortgages

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JPMorgan Chase is marketing its second securitization of “super-prime” non-qualified jumbo mortgages.

The $608.8 million Chase Home Lending Mortgage Trust 2019-ATR2 is a pool of 769 high-balance residential mortgages to buyers with significant equity and strong credit quality, according to presale reports from Kroll Bond Rating Agency and Fitch Ratings.

Borrowers of the included loans – all originated and serviced by JPMorgan – have a weighted average FICO of 773 according to Kroll and 775 by Fitch; median incomes of $265,092 and liquid reserves of $516,393; and monthly free cash flow of $13,993.

Their homes have an average current loan balances of $691,720 with average current loan-to- value ratios of 69.6%, providing “a substantial margin of safety against potential home declines.”

The transaction has a senior-subordinate note structure, with nine classes of Class A principal term notes or interest-only notes with preliminary AAA ratings from each agency. The largest tranche of $272.12 million is at the top of the cash flow with 12% credit enhancement support.

Kroll modeled its ratings with loss expectations of 3.91% on the deal. That is partly due to the non-qualified nature of the loans under the QM standards established by the Consumer Financial Protection Bureau as well as the fact 88% are subject to “TRID” disclosure rules that assign liability to JPMorgan over Truth in Lending Act and Real Estate Settlement Procedures Act cost disclosure standards intended to protect borrowers.

While the loans are considered non-qualified, it is mostly due to exceptions from documentation requirements under asset-qualifier rules for wealthy borrowers. A majority of the borrowers used tax transcripts rather than signed tax returns as required under CFPB standards, with others citing non-wage income to meet JPMorgan underwriting standards. About 40% of the loans have approved underwriting exceptions outside of the qualifying standards for self-employment, such as a short history of business income or a lack of canceled-check verification for businesses.

All the loans were verified through third-party due diligence reviews.

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