JPMorgan Chase & Co. (JPM) is set to bring its second jumbo prime residential mortgage-backed securitization to the market. And unlike its previous offering, this RMBS is backed by 15-year fixed notes.
The offering is built on a pool of 544 loans with an aggregate loan balance of $303.75 million. The offering, titled J.P. Morgan Mortgage Trust 2014-2, contains loans with an average balance of $558,361 and has a weighted average loan-to-value of 61.8%.
Kroll Bond Ratings Agency, DBRS and Fitch Ratings all released presale ratings of the offering and awarded AAA ratings to the vast majority of the securitization’s classes.
Kroll noted the collateral quality of the loans as a positive for the deal. “PMMT 2014-2 represents the first KBRA-rated transaction consisting entirely of fixed rate mortgages with maturities of 15 years or less, marking a departure from the collateral makeup typically seen in the majority of post-crisis transactions,” Kroll stated in its report.
“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.”
Both Kroll and DBRS also noted the low LTV and debt-to-income ratios of the deal as positives as well. “At 61.8% and 63.7%, respectively, the JPMMT 2014-2 collateral pool has the lowest weighted average loan-to-value and combined LTV ratios of any post-crisis, prime jumbo RMBS transaction that KBRA has rated,” Kroll said.
The DTI ratio of the offering is 27.4%.
Of note in the makeup of the offering is the geographic concentration. Nearly half (49%) of the loans are based in California, with a concentration in San Francisco (24.2%), Los Angeles (10.7%), and San Jose (5.1%).
Also of note is that only 63% of the loans in the offering are for the borrower’s primary residence. By comparison, in the four previous offerings from JPMorgan, at least 89% of the borrower’s loans were for their primary residence.
DBRS notes that approximately 49% of the loans are to self-employed borrowers, and were analyzed separately from the remainder of the pool. “Compared with the salaried borrowers in the pool, the self-employed borrowers have lower CLTVs, higher income and higher reserves,” DBRS said.
Fitch noted that the pool’s percentage of investor properties is approximately 30%. “This is the highest investor concentration in recent prime jumbo RMBS transactions,” Fitch said. “Investment properties exhibit a higher likelihood of default than owner-occupied primary home properties.”
First Republic Bank (55.1%) and JPMorgan Chase (38.2%) are the top originators of the pool. Each of the banks also acts as the servicer for the same percentage of loans.