Standard & Poor’s Ratings Services has awarded AAA ratings to the vast majority of the classes of a jumbo prime residential mortgage-backed securitization from JPMorgan Chase & Co. (JPM).
The offering, titled J.P. Morgan Mortgage Trust 2014-2, is the second jumbo prime RMBS from JPMorgan in 2014, 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 average balance of the securitization’s loans is $558,361 and has a weighted average loan-to-value of 61.8%.
S&P joined Kroll Bond Ratings Agency, DBRS and Fitch Ratings in awarding AAA ratings to the securitization.
In its presale report, S&P noted the high-quality collateral included in the pools as one of the reasons for the quality of the ratings it awarded.
Kroll also recognized the collateral quality as a reason for the AAA ratings. “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,” Kroll noted in its presale documents.
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%.
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 in its report.