JP Morgan has sold approximately $440 million in securitizations of prime jumbo mortgages that did not meet qualified mortgage rules, according to Reuters’ International Financing Review.
The bonds were tied to prime jumbo mortgages that were considered non-QM because most of them were underwritten with tax transcripts instead of a signed tax return.
This is a first for the bank, as its past jumbo RMBS bonds securitized mortgages have met qualified mortgage guidelines in 2014 as part of Dodd-Frank regulation.
IFR reporter David Bell wrote in an article that non-QM lending is a “broad spectrum” that could include riskier loans to borrowers with less than perfect credit histories.
“Pristine jumbo mortgages that are too big to be financed by Fannie and Freddie and do not tick the right boxes to be considered qualified – such as the loans in the new JP Morgan deal,” wrote Bell. “The borrowers in the JP Morgan deal are considered strong credits, with a high weighted average FICO score of 772, weighted average loan to value ratio of 72%, and average liquid reserves of US$437,000. The weighted average mortgage size is US$813,000.”