JPMorgan opted for more geographic diversity in its third securitization this year of prime fixed-rate residential mortgages predominately located in high-priced urban markets.

The deal, JPMorgan Mortgage Trust (JPMMT) 2016-3, is a $395.4 million notes structure consisting of 553 loans for homes primarily in California and major cities like New York, Boston and Washington.

Fitch Ratings has issued preliminary AAA ratings on both the super-senior and senior subordinate notes in the capital stack that comprise all but $24.3 million of the bonds in the transaction. Four of the senior notes are supported by 12.5% credit enhancement, and two others carry 6.15% credit enhancement.

The collateral loans have an average weighted FICO of 765 to consumer who own considerable equity in their homes (a combined loan-to-value ratio of 66.9%). The mortgages carry an average balance of $714,917, down from $816,703 in the prior 2016-2 transaction.

Fitch noted that JPMorgan included a more diverse pool of loans, with only 44% of the loans in California compared to 50% in its previous securitization. In addition, only 54% of the pool were loans from the top five regions of San Francisco, Los Angeles, New York, Boston and Washington.

In 2015, those cities averaged 80% of the JPMMT concentrations, meaning that Fitch has dropped the geographic concentration penalty it applied to previous deals in ratings evaluations.

All of the loans are fixed-rate, 32% are 15-year loans and only 3.4% are interest-only borrowings.

A plurality of the loans (42%) were originated through First Republic Bank; others major lenders in the pool include PHH Home Loans (9.7% of the collateral), Primary Capital Mortgage (6.5%), Open Advisors Inc. (5.6%) and Bank of Oklahoma (5.4%).

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