MAY 23, 2013 4:22pm ET

JPMorgan Readies Another Jumbo Securitization

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JPMorgan has another prime jumbo mortgage-backed securities deal backed by recent originations in the pipeline, according to three companies’ presale ratings reports.

The JPMorgan Mortgage Trust 2013-2 certificates are backed by 544 loans with an aggregate principal balance of about $422.5 million, according to DBRS. JPMorgan Chase Bank originated 92.5% of the loans. Bank of Manhattan originated 5.7%, Dubuque Bank & Trust Co. and Johnson Bank each originated 0.9%.

None of the loans are interest-only products, their weighted average and combined loan-to-value ratio is 69%, and their weighted average credit score is 775, according to Kroll. All the mortgages in the deal are first-lien, fixed-rate 30-year loans.

DBRS assigned its highest provisional rating of AAAsf to seven classes of the deal, reflecting 6.9% credit enhancement provided by subordination. Fitch said it expects to give four classes its top AAAsf rating and assigned a range of ratings to four other classes, going as low as a speculative grade BBsf. Kroll assigned preliminary ratings to 11 classes of mortgage pass-through certificates in the transaction ranging from its top AAAsf rating to a speculative-grade BBsf. Seven classes received Kroll’s top AAAsf preliminary rating.

Analysts noted several strengths such as strong loan credit quality, but also some persisting weaknesses in representations and warrants, even though these are somewhat improved from a previous deal.

“The framework is perceived by DBRS to be weak and limiting as compared to the traditional life-time representations and warranties standard in previous DBRS-rated securitizations. However, the representations and warranties framework in this transaction does show some improvement from the previous JPMMT 2013-1 transaction with respect to the performance trigger and the definition of fraud as related to the sunset provisions,” DBRS analysts said in their presale report.

Fitch found, “The value of the R&W framework is significantly diluted by the presence of qualifying and conditional language that substantially reduces lender loan breach liability and the inclusion of sunsets on three provisions,” but also that “the sunset trigger has been simplified and strengthened in this transaction.”

The loans will be serviced by JPMorgan, Resurgent Capital, Johnson Bank and Dubuque, with the loans serviced by Resurgent Capital expected to be transferred to JPMorgan Chase Bank on or about July 1 in a transaction for which Wells Fargo will serve as master servicer and securities administrator, DBRS said.

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