Banking giant JPMorgan Chase issued its third private-label residential mortgage-backed securities deal of the year, with the transaction deploying a relatively weak representations and warranties framework, credit ratings agencies report.
Compared to other post-crisis reps and warrants plans, this deal employs an anemic standard, which includes materiality factors, the use of knowledge qualifiers as well as sunset provisions that allow for certain representations to expire within three to six years after the closing date, analysts withDBRS suggested.
The platform, J.P. Morgan Mortgage Trust, Series 2013-3($56.05 -0.45%) reported a total balance of $345.05 million.
Kroll Bond Ratings pre-rated the deal, giving the majority of the deal’s tranches AAA ratings. DBRS and Standard & Poor's both pre-rated the deal, as well, also giving the majority of the transaction’s tranches AAA ratings.
The platform will contain 389 loans in the deal with all of the loans in the pool classified as 30-year fixed mortgages. JPMorgan mortgages will make up the majority of the loan transaction, or roughly 44.5%. Other originators include First Republic Bank, Residential Pacific Mortgage, PHH Mortgage and Coldwell Banker Home Loans. JPM and First Republic origination nearly 83% of the loans in this issuance, which featured a weighted average borrower credit score at 763.
A notable weakness in the deal compared to other RMBS transactions is the high geographic concentration of the pool, with significant exposures to assets located in California as well as a number of other major metropolitan areas.
The agencies rating the deal downplayed this potential risk. "JPMCB operates a major mortgage banking business and has significant experience originating jumbo mortgage loans. The underwriting processes and guidelines and quality assurance processes employed by the bank in the origination of the loans in the pool have been robust," Kroll concluded in its pre-issuance report.