DBRS Morningstar Assigns Provisional Ratings to J.P. Morgan Mortgage Trust 2019-LTV3

DBRS, Inc. (DBRS Morningstar) assigned the following provisional ratings to the Mortgage Pass-Through Certificates, Series 2019-LTV3 (the Certificates) to be issued by J.P. Morgan Mortgage Trust 2019-LTV3:

-- $375.8 million Class A-1 at AAA (sf)
-- $341.6 million Class A-2 at AAA (sf)
-- $244.8 million Class A-3 at AAA (sf)
-- $244.8 million Class A-3-A at AAA (sf)
-- $244.8 million Class A-3-X at AAA (sf)
-- $183.6 million Class A-4 at AAA (sf)
-- $183.6 million Class A-4-A at AAA (sf)
-- $183.6 million Class A-4-X at AAA (sf)
-- $61.2 million Class A-5 at AAA (sf)
-- $61.2 million Class A-5-A at AAA (sf)
-- $61.2 million Class A-5-X at AAA (sf)
-- $153.3 million Class A-6 at AAA (sf)
-- $153.3 million Class A-6-A at AAA (sf)
-- $153.3 million Class A-6-X at AAA (sf)
-- $91.5 million Class A-7 at AAA (sf)
-- $91.5 million Class A-7-A at AAA (sf)
-- $91.5 million Class A-7-X at AAA (sf)
-- $30.3 million Class A-8 at AAA (sf)
-- $30.3 million Class A-8-A at AAA (sf)
-- $30.3 million Class A-8-X at AAA (sf)
-- $46.0 million Class A-9 at AAA (sf)
-- $46.0 million Class A-9-A at AAA (sf)
-- $46.0 million Class A-9-X at AAA (sf)
-- $15.2 million Class A-10 at AAA (sf)
-- $15.2 million Class A-10-A at AAA (sf)
-- $15.2 million Class A-10-X at AAA (sf)
-- $96.8 million Class A-11 at AAA (sf)
-- $96.8 million Class A-11-X at AAA (sf)
-- $96.8 million Class A-12 at AAA (sf)
-- $96.8 million Class A-13 at AAA (sf)
-- $34.2 million Class A-14 at AAA (sf)
-- $34.2 million Class A-15 at AAA (sf)
-- $269.3 million Class A-16 at AAA (sf)
-- $106.5 million Class A-17 at AAA (sf)
-- $375.8 million Class A-X-1 at AAA (sf)
-- $375.8 million Class A-X-2 at AAA (sf)
-- $96.8 million Class A-X-3 at AAA (sf)
-- $34.2 million Class A-X-4 at AAA (sf)
-- $6.8 million Class B-1 at AA (sf)
-- $6.8 million Class B-1-A at AA (sf)
-- $6.8 million Class B-1-X at AA (sf)
-- $15.6 million Class B-2 at A (sf)
-- $15.6 million Class B-2-A at A (sf)
-- $15.6 million Class B-2-X at A (sf)
-- $10.7 million Class B-3 at BBB (sf)
-- $10.7 million Class B-3-A at BBB (sf)
-- $10.7 million Class B-3-X at BBB (sf)
-- $8.5 million Class B-4 at BB (sf)
-- $1.9 million Class B-5 at B (sf)

Classes A-3-X, A-4-X, A-5-X, A-6-X, A-7-X, A-8-X, A-9-X, A-10-X, A-11-X, A-X-1, A-X-2, A-X-3, A-X-4, B-1-X, B-2-X, B-3-X, B-X, B-6-Y and B-6-Z are interest-only notes. The class balances represent notional amounts.

Classes A-1, A-2, A-3, A-3-X, A-3-A, A-4, A-4-A, A-4-X, A-5, A-5-A, A-5-X, A-6, A-6, A-7, A-7-A, A-7-X, A-8, A-9, A-10, A-12, A-13, A-14, A-16, A-17, A-X-2, A-X-3, B-1, B-2, B-3, B-X, B-6-Y and B-6-Z are exchangeable notes. These classes can be exchanged for combinations of exchange notes as specified in the offering documents.

Classes A-2, A-3, A-3-A, A-4, A-4-A, A-5, A-5-A, A-6, A-6-A, A-7, A-7-A, A-8, A-8-A, A-9, A-9-A, A-10, A-10-A, A-11, A-12 and A-13 are super-senior certificates. These classes benefit from additional protection from the senior support certificates (Classes A-14 and A-15) with respect to loss allocation.

The AAA (sf) rating on the Class A-1 Notes reflects 10.65% of credit enhancement provided by subordinated notes in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 8.00%, 5.50%, 3.25%, 1.55% and 0.85% of credit enhancement, respectively.

Other than the specified classes above, DBRS Morningstar does not rate any other classes in this transaction.

The Certificates are backed by 675 loans with a total principal balance of $426,992,185 as of the Cut-Off Date (October 1, 2019).

Compared with other post-crisis prime pools, this portfolio consists of higher loan-to-value (LTV), first-lien, fully amortizing fixed-rate mortgages with original terms to maturity of 30 years. The weighted-average original combined LTV (CLTV) for the portfolio is 88.5%, and almost the entire pool (90.5%) comprises loans with current CLTV ratios greater than 79.0%. The high LTV attribute of this portfolio is mitigated by certain strengths, such as high FICO scores, low debt-to-income ratios, robust income and reserves and other strengths detailed in the Key Probability of Default Drivers section of the report.

The mortgage loans were originated by United Shore Financial Services LLC (83.1%) and various other originators, each comprising less than 5.0% of the mortgage loans. Approximately 2.73% of the loans sold to the mortgage loan seller were acquired by MAXEX Clearing LLC, which purchased such loans from the related originators or an unaffiliated third party that directly or indirectly purchased such loans from the related originators.

The mortgage loans will be serviced or sub-serviced by Shellpoint Mortgage Servicing (SMS; 87.4%); Cenlar, FSB (12.5%); and Nationstar Mortgage LLC (Nationstar; 0.1%). Servicing will be transferred from SMS to JPMorgan Chase Bank, N.A. (JPMCB; rated AA with a Stable trend by DBRS Morningstar) on the servicing transfer date (December 1, 2019, or a later date) as determined by the issuing entity and JPMCB. For this transaction, the servicing fee payable for mortgage loans serviced by SMS (and subsequently serviced by JPMCB) is composed of three separate components: the aggregate base servicing fee, the aggregate delinquent servicing fee and the aggregate additional servicing fee. These fees vary based on the delinquency status of the related loan and will be paid from interest collections before distribution to the securities.

Nationstar will act as the Master Servicer. Citibank, N.A. (rated AA (low) with a Stable trend by DBRS Morningstar) will act as Securities Administrator and Delaware Trustee. Wells Fargo Bank, N.A. (rated AA with a Stable trend by DBRS Morningstar) will act as Custodian. Pentalpha Surveillance LLC will serve as the Representations and Warranties (R&W) Reviewer.

The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

The ratings reflect transactional strengths that include high-quality underlying assets, well-qualified borrowers and a satisfactory third-party due diligence review.

This transaction employs an R&W framework that contains certain weaknesses, such as materiality factors, some unrated R&W providers, knowledge qualifiers and sunset provisions that allow for certain R&Ws to expire within three to six years after the Closing Date. The framework is perceived by DBRS Morningstar to be limiting compared with traditional lifetime R&W standards in certain DBRS Morningstar-rated securitizations. To capture the perceived weaknesses in the R&W framework, DBRS Morningstar reduced the originator scores in this pool. A lower originator score results in increased default and loss assumptions and provides additional cushions for the rated securities.

The full description of the strengths, challenges and mitigating factors is detailed in the related presale report.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, which can be found on dbrs.com under Methodologies & Criteria.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

The full report providing additional analytical detail is available by clicking on the link under Related Documents below or by contacting us at info@dbrs.com.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

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