JPMorgan Readies Big RMBS










JPMorgan plans to add $940 million to the growing pipeline of residential mortgage-backed securities.

The bank is marketing a securitization backed by a pool of five-year, adjustable-rate mortgages originated by First Republic Bank.

The pool of 913 loans is more than double the size of the issuer’s previous deal JPMMT 2014-IVR6 ( issued last November), which was backed by a pool of 394 loans totaling $397 million. Fitch Ratings plans to rate the senior notes AAA.

Loans included in the pool are underwritten to borrowers with strong credit profiles, low leverage and substantial liquid reserves. The weighted average FICO of borrowers in the pool, for example, is 759 and the weighted average loan to value of the loans is 62.6%.

All of the loans were originated by FRB, which Fitch considers to be an above-average originator of prime jumbo product. Third-party, loan-level due diligence was conducted on 100% of the pool with minimal findings indicating strong underwriting controls.

More than half of the loans pay interest only, which could result in periodic changes in a borrower’s payment and exposes borrowers to payment reset risk. Only 39 loans in this pool that were subject to the ability-to-repay/qualified mortgage rule, which became effective for loans with application dates on and after Jan. 10, 2014. These loans were designated as safe harbor QM and have been confirmed by the third-party due diligence review.

The deal is JPMorgan’s first of 2015; it follows a burst of activity in the fourth quarter 2014, when the bank securitized over $1 billion in prime, jumbo RMBS. A $397 million RMBS issued in November was preceded by two deals issued in October that totaled $582 million. And in September JPMorgan issued $484 million of RMBS. The bank securitized a grand total of $2.5 billion in seven deals in 2014.

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