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Moody’s Grants Provisional Rating to J.P. Morgan Prime RMBS

shutterstock_606090050-1-300x200-1Moody's Investors Service announced that they have assigned provisional ratings to 19 classes of residential mortgage-backed securities (RMBS) issued by J.P. Morgan Mortgage Trust 2017-6 (JPMMT 2017-6).

JPMMT 2017-6 is J.P. Morgan Acquisition Corporation's sixth prime jumbo transaction of 2017, according to Moody’s. Ratings for the J.P. Morgan RMBS range from (P)Aaa (sf) to (P)B3 (sf).

The certificates are backed by nearly 1,500 30-year fixed rate mortgage loans, totaling a balance of $883,819,918 as of December 1, 2017. Moody’s report states, “Similar to prior JPMMT transactions, JPMMT 2017-6 includes conforming fixed-rate mortgage loans originated by JPMorgan Chase Bank, N. A. (Chase) and LoanDepot, and underwritten to the government sponsored enterprises (GSE) guidelines in addition to prime jumbo non-conforming mortgages purchased by JPMMAC from various originators and aggregators.”

Moody’s said that the transaction’s strengths included high income levels for the prime jumbo borrowers, and the fact that the conforming loans adhere to underwriting guidelines set by the GSEs. On the other hand, weaknesses “include high geographic concentrations and higher percentage of loans with LTVs greater than 80.0 percent compared to JPMMT 2017-4,” explained Moody’s.

JPMorgan Chase Bank, N.A. and LoanDepot will be servicing the loans originated by JPMorgan Chase and LoanDepot, respectively. The prime jumbo loans will be serviced by Shellpoint Mortgage Servicing, LoanDepot, USAA, Guaranteed Rate, PHH Mortgage, First Republic Bank, TIAA, FSB, and Johnson Bank. Wells Fargo Bank, N.A. will be the master servicer and securities administrator, U.S. Bank National Association will serve as trustee, and Pentalpha Surveillance LLC will be the representations and warranties breach reviewer, according to Moody’s.

Moody’s said they expect cumulative net loss on the aggregate pool of RMBS to be “0.45 percent in a base scenario” and to reach 5.35 percent “at a stress level consistent with the Aaa ratings.”

“We calculated losses on the pool using our US Moody's Individual Loan Analysis (MILAN) model based on the loan-level collateral information as of the cut-off date,” explained Moody’s report. “Loan-level adjustments to the model results included adjustments to probability of default for higher and lower borrower debt-to-income ratios (DTIs), for borrowers with multiple mortgaged properties, self-employed borrowers, and for the default risk of Homeownership association (HOA) properties in super lien states. Our final loss estimates also incorporate adjustments for originator assessments and the financial strength of Representation & Warranty (R&W) providers.

Moody’s added that they also base their provisional ratings on “the certificates on the credit quality of the mortgage loans, the structural features of the transaction, our assessments of the aggregators, originators and servicers, the strength of the third-party due diligence and the representations and warranties (R&W) framework of the transaction.”

You can read the full Moody’s report by clicking here.

About Author: David Wharton

David Wharton, Managing Editor at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has over 15 years of experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. Wharton and his family currently reside in Arlington, Texas. He can be reached at David.Wharton@theMReport.com.

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