Latest J.P. Morgan RMBS Pools Only 15-yr Mortgages

J.P. Morgan plans to sell $303 million of rated securities that are backed entirely by a pool of 15-year, prime, jumbo, fixed-rate mortgages under its securitization trust J.P. Morgan Mortgage Trust 2014-2.  

According to Kroll Bond Ratings, this is the first deal, rated by the agency that is backed entirely by the shorter dated, fixed-rate mortgages.  Mortgage pools backing recent securitizations rated by KBRA included 15-year, fixed-rate mortgages in limited concentrations, usually mixed in with hybrid adjustable-rate mortgages or 30-year FRMs.

The shorter dated mortgages reflect a selection of borrowers that take a higher payment in order to pay down debt more quickly.  “Fixed rate loans with shorter terms have exhibited strong historical performance when compared to a typical 30-year product, as loans achieve faster amortization and borrowers experience increased equity build-up through higher relative payments,” the presale report states.

First Republic Bank originated approximately 55% of the mortgage loans and 38% were originated by JPMorgan Chase Bank.

The strong credit quality of the pool also marks a divergence from the recent trend seen in jumbo securitizations of weakening credit characteristics in the form of rising loan to values and decreasing FICOs (WA FICO of 767). At 61.8% and 63.7%, respectively, the JPMMT 2014-2 collateral pool has the lowest weighted average LTV and combined LTV ratios of any post-crisis, prime jumbo RMBS transaction that KBRA has rated.

“The aggregate pool’s notably low LTV and CLTV ratios exhibit significant borrower equity and provide a margin of safety against potential home price declines (HPDs),” said KBRA.

The deal has significant geographic concentration in California (49.0%), particularly in the in the San Francisco (24.2%), Los Angeles (10.7%), and San Jose (5.1%) areas. 

Approximately 2.4% of the transaction pool is comprised of Qualified Mortgage (QM) loans. J.P. Morgan issued its first RMBS of 2014 in February. The issuer issued three transcations in 2013.  The chart below illustrates how the deal tranches were rated by KBRA.

J.P. Morgan is the latest issuer to come to market with residential mortgage backed securities. Earlier this week plans for Citigroup's first deal of 2014 was announced. That deal is backed by a mix of 30-year and 15-year fixed rate mortgages.

Last week, WinWater Home Mortgage, a mortgage conduit formed last year, announced plans to issue $250 million of securities backed by prime jumbo loans. According to a Reutersreport, the deal priced $228.9 million of notes on Thursday. The deal was originally expected to sell $250 million of securities.  J.P. Morgan, one of the lead managers on the deal, declined to discuss pricing details.