JPMorgan Chase ups conforming loans in next RMBS

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JPMorgan Chase’s next private-label mortgage securitization is backed by a higher concentration of conforming loans than its previous transaction, according to ratings agency presale reports.

Just over 46% of the collateral for JPMorgan 2017-4 consists of loans that were underwritten to standards for purchase by Fannie Mae or Freddie Mac, up from nearly 23% for JPMorgan 2017-3. The remainder of the collateral for both deals is loans that meet similar standards but are too large to qualify for purchase by the government-sponsored enterprises.

DBRS and Fitch Ratings expect to assign an AAA to both the super senor tranches of notes to be issued, which benefit from 12% credit enhancement, as well as the senior tranches, which benefit from 6% credit enhancement.

The certificates are backed by 1,461 loans with a total principal balance of $911 million. These loans are fully amortizing fixed-rate mortgages with original terms to maturity of 20 years to 30 years. The pool has a weighted average FICO score of 763 and an original combined loan-to-value ratio of 72.8%, consistent with recent JPMMT transactions.

JPMorgan Chase itself originated 42.8% of the collateral; the rest was originated by United Shore Financial Services, 11.4%; Caliber Home Loans, 7.1%; USAA, 5.4%; and other originators, 33.3%.

The pool’s primary concentration is in California, representing approximately 48% of the pool, with the Los Angeles and San Francisco metropolitan statistical areas, representing 19% and 12% of the pool, respectively.

Seven of the 45 properties securing the loans in the pool are located in ZIP codes identified by the Federal Emergency Management Agency as affected by Hurricane Harvey and Hurricane Irma, respectively. DBRS is awaiting further information as to whether these properties were damaged as a result of the hurricane. However, each originator (or aggregator) has provided a representation that properties have no damage/condemnation that materially adversely affects the value of the property and is expected to cure or repurchase loans which breach this representation upon inspection.

There are also 16 loans located in the area affected by the fires in Northern California; JPMorgan has ordered property inspections and will drop or repurchase the loans if there is damage to the home.

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RMBS GSEs Secondary market Securitization Private-label JPMorgan Chase Fannie Mae Freddie Mac