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Rating Action:

Moody's assigns definitive ratings to Prime RMBS issued by J.P. Morgan Mortgage Trust 2018-6

29 Jun 2018

New York, June 29, 2018 -- Moody's Investors Service ("Moody's") has assigned definitive ratings to 19 classes of residential mortgage-backed securities (RMBS) issued by J.P. Morgan Mortgage Trust 2018-6 (JPMMT 2018-6). The ratings range from Aaa (sf) to B2 (sf).

The certificates are backed by two pools of prime quality 30-year and 15-year, fully-amortizing fixed rate mortgage loans with a total balance of $938,152,649 as of June 1, 2018 cut-off date. The first pool consists primarily of 30-year mortgages (Group 1) and the second pool consists of 15-year mortgages (Group 2). Similar to prior JPMMT transactions, JPMMT 2018-6 includes conforming fixed-rate mortgage loans originated by JPMorgan Chase Bank, N. A. (Chase) and underwritten to the government sponsored enterprises (GSE) guidelines in addition to prime jumbo non-conforming mortgages purchased by J.P. Morgan Mortgage Acquisition Corp. (JPMMAC) from various originators and aggregators. Chase, AmeriHome Mortgage Company LLC, Quicken Loans, Inc., loanDepot.com, LLC, and Shellpoint Mortgage Servicing will be the servicers for the conforming loans, while Shellpoint Mortgage Servicing, loanDepot.com, LLC, AmeriHome Mortgage Company LLC, TIAA, FSB, Fifth Third Mortgage Company, USAA Federal Savings Bank, Guaranteed Rate Inc., Johnson Bank and PHH Mortgage Corporation will be the servicers for the prime jumbo loans. Wells Fargo Bank, N.A. (Wells Fargo) will be the master servicer and securities administrator. U.S. Bank Trust National Association will be the trustee. Pentalpha Surveillance LLC will be the representations and warranties breach reviewer. Distributions of principal and interest and loss allocations are based on a typical shifting-interest structure that benefits from cross-collateralization and a senior and subordination floor.

The complete rating actions are as follows:

Issuer: J.P. Morgan Mortgage Trust 2018-6

Cl. 1-A-1, Definitive Rating Assigned Aaa (sf)

Cl. 1-A-2, Definitive Rating Assigned Aaa (sf)

Cl. 1-A-3, Definitive Rating Assigned Aaa (sf)

Cl. 1-A-4, Definitive Rating Assigned Aaa (sf)

Cl. 1-A-5, Definitive Rating Assigned Aaa (sf)

Cl. 1-A-6, Definitive Rating Assigned Aaa (sf)

Cl. 1-A-7, Definitive Rating Assigned Aaa (sf)

Cl. 1-A-8, Definitive Rating Assigned Aaa (sf)

Cl. 1-A-9, Definitive Rating Assigned Aaa (sf)

Cl. 1-A-10, Definitive Rating Assigned Aa1 (sf)

Cl. 2-A-1, Definitive Rating Assigned Aaa (sf)

Cl. 2-A-2, Definitive Rating Assigned Aaa (sf)

Cl. 2-A-3, Definitive Rating Assigned Aa1 (sf)

Cl. A-M, Definitive Rating Assigned Aa1 (sf)

Cl. B-1, Definitive Rating Assigned A1 (sf)

Cl. B-2, Definitive Rating Assigned A3 (sf)

Cl. B-3, Definitive Rating Assigned Baa2 (sf)

Cl. B-4, Definitive Rating Assigned Ba2 (sf)

Cl. B-5, Definitive Rating Assigned B2 (sf)

RATINGS RATIONALE

Summary Credit Analysis and Rating Rationale

Our base case expected cumulative net loss is 0.40% and 0.15% for Group 1 and Group 2, respectively, and our stress case cumulative net loss consistent with Aaa (sf) ratings is 5.25% and 1.35% for Group 1 and Group 2, respectively.

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. 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.

We base our definitive ratings on the certificates on the credit quality of the mortgage loans, the structural features of the transaction, our assessments of the origination quality and servicing arrangement, the strength of the third party due diligence and the representations and warranties (R&W) framework of the transaction.

Collateral Description

JPMMT 2018-6 is a securitization of a pool of 1,678 primarily 30-year and 15-year, fully-amortizing mortgage loans with a total balance of $938,152,649 as of the cut-off date, with a weighted average (WA) remaining term to maturity of 345 months, and a WA seasoning of 3 months. The borrowers in this transaction have high FICO scores and sizeable equity in their properties. The WA current FICO score of the aggregate pool is 772 and the WA original combined loan-to-value ratio (CLTV) is 69.2%. The characteristics of the loans underlying the aggregate pool are generally comparable to other JPMMT transactions backed by 30-year and 15-year fixed mortgage loans that we have rated.

In this transaction, 37.5% of the aggregate pool by loan balance was underwritten by Chase to Fannie Mae's and Freddie Mac's guidelines (conforming loans). The conforming loans in this transaction have a high average current loan balance at $477,357. The higher conforming loan balance of loans in JPMMT 2018-6 is attributable to the greater amount of properties located in high-cost areas, such as the metro areas of New York City and San Francisco. AmeriHome Mortgage Company LLC and loanDepot.com, LLC each originated approximately 17.6% and 11.3%, respectively, of the mortgage loans in the aggregate pool. The remaining originators each account for less than 10% of the principal balance of the loans in the aggregate pool and provide R&W to the transaction.

Third-party Review and Reps & Warranties

Five third party review (TPR) firms verified the accuracy of the loan-level information that the sponsor gave us. These firms conducted detailed credit, collateral, and regulatory reviews on 100% of the mortgage pool. The TPR results indicated compliance with the originators' underwriting guidelines for the vast majority of loans, no material compliance issues, and no appraisal defects. The loans that had exceptions to the originators' underwriting guidelines had strong documented compensating factors such as low DTIs, low LTVs, high reserves, high FICOs, or clean payment histories. The TPR firms also identified minor compliance exceptions for reasons such as inadequate RESPA disclosures (which do not have assignee liability) and TILA/RESPA Integrated Disclosure (TRID) violations related to fees that were out of variance but then cured and disclosed. We did not make any adjustments to our expected or Aaa loss levels due to the TPR results.

JPMMT 2018-6's R&W framework is in line with other JPMMT transactions where an independent reviewer is named at closing, and costs and manner of review are clearly outlined at issuance. Our review of the R&W framework takes into account the financial strength of the R&W providers, scope of R&Ws (including qualifiers and sunsets) and enforcement mechanisms.

The R&W providers vary in financial strength. Chase (rated Aa2) along with its affiliate, JPMMAC, is the R&W provider for approximately 39% (by loan balance) of the loans, is the strongest R&W provider. We made no adjustments to the loans for which Chase and JPMMAC provided R&Ws or to the loans for which USAA Federal Savings Bank (a subsidiary of USAA Capital Corporation which is rated Aa1) and Fifth Third Mortgage Company, a wholly-owned subsidiary of Fifth Third Bank, Ohio (rated A3), provided R&Ws, since they are highly rated entities. In contrast, the rest of the R&W providers are unrated and/or financially weaker entities. Moreover, JPMMAC will not backstop any R&W providers who may become financially incapable of repurchasing mortgage loans. We made an adjustment for these loans in our analysis to account for this risk.

For loans that JPMMAC acquired via the MAXEX platform, Central Clearing and Settlement LLC, (CCS) MAXEX's subsidiary and seller under the assignment, assumption and recognition agreement with JPMMAC, will make the R&Ws. The R&Ws provided by CCS to JPMMAC and assigned to the trust are in line with the R&Ws found in the JPMMT transactions. MAXEX backstops all validated R&W violations through a combination of enforcement and insolvency guarantees.

Trustee and Master Servicer

The transaction trustee is U.S. Bank Trust National Association. The custodians functions will be performed by Wells Fargo Bank, N.A. The paying agent and cash management functions will be performed by Wells Fargo Bank, N.A., rather than the trustee. In addition, Wells Fargo, as Master Servicer, is responsible for servicer oversight, and termination of servicers and for the appointment of successor servicers. In addition, Wells Fargo is committed to act as successor if no other successor servicer can be found.

Tail Risk & Subordination Floor

This deal has a standard shifting-interest structure, with a subordination floor to protect against losses that occur late in the life of the pool when relatively few loans remain (tail risk). When the total senior subordination is less than 0.70% of the original pool balance, the subordinate bonds do not receive any principal and all principal is then paid to the senior bonds. In addition, if the subordinate percentage drops below 6.00% of current pool balance, the senior distribution amount will include all principal collections and the subordinate principal distribution amount will be zero. The subordinate bonds also benefit from a floor. When the total current balance of a given subordinate tranche plus the aggregate balance of the subordinate tranches that are junior to it amount to less than 0.55% of the original pool balance, those tranches do not receive principal distributions. Principal those tranches would have received are directed to pay more senior subordinate bonds pro-rata.

Transaction Structure

The transaction is structured as a two-pool 'Y' structure in which the senior bonds benefit from a number of protections. Funds collected, including principal, are first used to make interest payments to the senior bonds in each group. Next, principal payments are made to the senior bonds in each group based on the principal collections for the underlying assets in each group. Next, available distribution amounts are used to reimburse realized losses and certificate write-down amounts for the senior bonds (after subordinate bond have been reduced to zero I.e. the credit support depletion date). Finally, interest and then principal payments are paid to the subordinate bonds in sequential order.

Realized losses are allocated in a reverse sequential order, first to the lowest subordinate bond. After the balance of the subordinate bonds is written off, losses from the pool begin to write off the principal balance of the senior support bond in the related group until their principal balance is reduced to zero. Next, losses are allocated to the senior support bonds in the unrelated group. Next realized losses are allocated to super senior bond in the related group until their principal balance is written off and finally losses are allocated to the super senior bonds in the unrelated group.

In addition, the pass-through rate on the bonds is based on the net WAC in each pool as reduced by the sum of (i) the reviewer annual fee rate and (ii) the capped trust expense rate. In the event that there is a small number of loans remaining, the last outstanding bonds' rate can be reduced to zero.

Factors that would lead to an upgrade or downgrade of the ratings:

Down

Levels of credit protection that are insufficient to protect investors against current expectations of loss could drive the ratings down. Losses could rise above Moody's original expectations as a result of a higher number of obligor defaults or deterioration in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market. Other reasons for worse-than-expected performance include poor servicing, error on the part of transaction parties, inadequate transaction governance and fraud.

Up

Levels of credit protection that are higher than necessary to protect investors against current expectations of loss could drive the ratings of the subordinate bonds up. Losses could decline from Moody's original expectations as a result of a lower number of obligor defaults or appreciation in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market.

Methodology

The principal methodology used in these ratings was "Moody's Approach to Rating US Prime RMBS" published in February 2015. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

In addition, Moody's publishes a weekly summary of structured finance credit ratings and methodologies, available to all registered users of our website, www.moodys.com/SFQuickCheck.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1131613.

The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows.

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Padma Rajagopal
VP - Senior Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Sang Shin
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
© 2018 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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