NEW YORK--(BUSINESS WIRE)--
Fitch Ratings expects to rate J.P. Morgan Mortgage Trust, Series 2013-1 as follows:
--$244,401,000 class 1A-1 certificate 'AAAsf'; Outlook Stable;
--$244,401,000 class 1-A-IO notional certificate 'AAAsf'; Outlook Stable;
--$326,256,000 class 2A-1 certificate 'AAAsf'; Outlook Stable;
--$326,256,000 class 2-A-IO notional certificate 'AAAsf'; Outlook Stable;
--$15,406,000 class B-1 certificate 'AAsf'; Outlook Stable;
--$9,244,000 class B-2 certificate 'Asf'; Outlook Stable;
--$7,703,000 class B-3 certificate 'BBBsf'; Outlook Stable;
--$5,238,000 class B-4 certificate 'BBsf'; Outlook Stable;
The $8,012,381 class B-5 certificate will not be rated.
KEY RATING DRIVERS
High-Quality Mortgage Pool: The collateral pool consists of a mixture of 15-, 20-, and 30-year fixed rate mortgages (77%) and seven- and 10-year hybrid ARMs (23%) to borrowers with strong credit profiles, full documentation, low leverage, and significant liquid reserves. A 65.1% CLTV provides a significant buffer against potential home price declines. Strong borrower quality is reflected in the 768 weighted average (WA) FICO and $633,428 WA household income. In addition, third-party due diligence was conducted on 100% of the pool and the results indicated strong underwriting controls.
Weak Representations and Warranties (R&Ws) Framework: While the transaction benefits from strong rep providers, Fitch believes the value of the R&W framework is significantly diluted by qualifying and conditional language that substantially reduces lender loan breach liability and the inclusion of sunsets for a number of provisions including fraud. While the agency believes that the high credit quality pool and clean diligence results mitigate the R&W risks to some degree, Fitch considered the weaker framework in its expected loss estimation and credit enhancement analysis.
Strong Counterparties: The transaction benefits from strong counterparties with 88.8% originated by JPMCB and FRB, two entities with 'above average' origination platforms and strong financial capacities to meet potential repurchase obligations. With respect to servicing, Fitch maintains a 'RPS2+' servicer rating on JPMCB and views FRB as an acceptable servicer. The transaction also benefits from the participation of an experienced master servicer, Wells Fargo Bank, N.A. (rated 'RMS1').
Limited Alignment of Interests: While JPMCB will be providing R&Ws into the transaction as the originator of 48.1% of the collateral pool, the sponsor, J.P. Morgan Mortgage Acquisition Corp. (JPMMAC), does not anticipate retaining any portion of the capital structure or associated credit risk. The lack of shared risk between the issuer and investors is a divergence from recent transactions that Fitch has rated.
Fitch's analysis incorporates sensitivity analyses to demonstrate how the ratings would react to steeper market value declines (MVDs) than assumed at both the metropolitan statistical area (MSA) and national levels. The implied rating sensitivities are only an indication of some of the potential outcomes and do not consider other risk factors that the transaction may become exposed to or be considered in the surveillance of the transaction.
Fitch conducted sensitivity analysis on areas where the model projected lower home price declines than that of the overall collateral pool. The model currently projects sustainable MVDs (sMVDs) at the MSA level. For three of the top 15 regions in the mortgage pool, Fitch's SHP model does not project declines in home prices, and for another region in the top 15, the projected decline is less than 5.00%. These regions include Chicago-Joliet-Naperville in Illinois (5.6%), Boston-Quincy in Massachusetts (4.1%), Phoenix-Mesa-Glendale in Arizona (2.3%), and Houston-Sugar Land-Baytown in Texas (1.7%). The sensitivity analyses indicated no impact on ratings for all bonds in each scenario.
Another sensitivity analysis focused on how the ratings would react to steeper MVDs at the national level. The analysis assumes MVDs of 10%, 20%, and 30%, in addition to the model projected 14% for this pool. The analysis indicates there is some potential rating migration with higher MVDs, compared with the model projection.
Fitch's stress and rating sensitivity analysis are discussed in the presale report titled ' J.P. Morgan Mortgage Trust, Series 2013-1', dated March 20, 2013, which is available on Fitch's web site, www.fitchratings.com.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'U.S. RMBS Loan Loss Model Criteria' (Aug. 10, 2012);
--'U.S. RMBS Rating Criteria' (July 10, 2012).
Applicable Criteria and Related Research J.P. Morgan Mortgage Trust, Series 2013-1 (US RMBS)
Global Structured Finance Rating Criteria
U.S. RMBS Loan Loss Model Criteria
U.S. RMBS Rating Criteria
- Security Upgrades & Downgrades
- Fitch Ratings
Fitch Ratings, Inc.
One State Street Plaza
New York, NY