DBRS Morningstar Assigns Provisional Ratings to J.P. Morgan Mortgage Trust 2021-12

DBRS, Inc. (DBRS Morningstar) assigned provisional ratings to the Mortgage Pass-Through Certificates, Series 2021-12 (the Certificates) to be issued by J.P. Morgan Mortgage Trust 2021-12 as follows:

-- $1.5 billion Class A-1 at AAA (sf)
-- $1.4 billion Class A-2 at AAA (sf)
-- $1.3 billion Class A-3 at AAA (sf)
-- $1.3 billion Class A-3-A at AAA (sf)
-- $1.3 billion Class A-3-X at AAA (sf)
-- $1.0 billion Class A-4 at AAA (sf)
-- $1.0 billion Class A-4-A at AAA (sf)
-- $1.0 billion Class A-4-X at AAA (sf)
-- $336.9 million Class A-5 at AAA (sf)
-- $336.9 million Class A-5-A at AAA (sf)
-- $336.9 million Class A-5-B at AAA (sf)
-- $336.9 million Class A-5-X at AAA (sf)
-- $809.4 million Class A-6 at AAA (sf)
-- $809.4 million Class A-6-A at AAA (sf)
-- $809.4 million Class A-6-X at AAA (sf)
-- $538.2 million Class A-7 at AAA (sf)
-- $538.2 million Class A-7-A at AAA (sf)
-- $538.2 million Class A-7-B at AAA (sf)
-- $538.2 million Class A-7-X at AAA (sf)
-- $201.3 million Class A-8 at AAA (sf)
-- $201.3 million Class A-8-A at AAA (sf)
-- $201.3 million Class A-8-X at AAA (sf)
-- $86.4 million Class A-9 at AAA (sf)
-- $86.4 million Class A-9-A at AAA (sf)
-- $86.4 million Class A-9-X at AAA (sf)
-- $250.5 million Class A-10 at AAA (sf)
-- $250.5 million Class A-10-A at AAA (sf)
-- $250.5 million Class A-10-X at AAA (sf)
-- $101.4 million Class A-11 at AAA (sf)
-- $101.4 million Class A-11-X at AAA (sf)
-- $101.4 million Class A-11-A at AAA (sf)
-- $101.4 million Class A-11-AI at AAA (sf)
-- $101.4 million Class A-11-B at AAA (sf)
-- $101.4 million Class A-11-BI at AAA (sf)
-- $101.4 million Class A-12 at AAA (sf)
-- $101.4 million Class A-13 at AAA (sf)
-- $98.8 million Class A-14 at AAA (sf)
-- $98.8 million Class A-15 at AAA (sf)
-- $98.8 million Class A-15-A at AAA (sf)
-- $98.8 million Class A-15-X at AAA (sf)
-- $1.4 billion Class A-16 at AAA (sf)
-- $108.3 million Class A-17 at AAA (sf)
-- $1.5 billion Class A-X-1 at AAA (sf)
-- $1.5 billion Class A-X-2 at AAA (sf)
-- $101.4 million Class A-X-3 at AAA (sf)
-- $98.8 million Class A-X-4 at AAA (sf)
-- $27.2 million Class B-1 at AA (high) (sf)
-- $27.2 million Class B-1-A at AA (high) (sf)
-- $27.2 million Class B-1-X at AA (high) (sf)
-- $25.5 million Class B-2 at A (high) (sf)
-- $25.5 million Class B-2-A at A (high) (sf)
-- $25.5 million Class B-2-X at A (high) (sf)
-- $16.5 million Class B-3 at BBB (high) (sf)
-- $7.4 million Class B-4 at BB (high) (sf)
-- $6.6 million Class B-5 at B (high) (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-11-AI, A-11-BI, A-15-X, A-X-1, A-X-2, A-X-3, A-X-4, B-1-X, and B-2-X are interest-only certificates. The class balances represent notional amounts.

Classes A-1, A-2, A-3, A-3-A, A-3-X, A-4, A-4-A, A-4-X, A-5, A-5-A, A-5-B, A-5-X, A-6, A-7, A-7-A, A-7-B, A-7-X, A-8, A-9, A-10, A-11-A, A-11-AI, A-11-B, A-11-BI, A-12, A-13, A-14, A-15, A-16, A-17, A-X-2, A-X-3, B-1, and B-2 are exchangeable certificates. These classes can be exchanged for combinations of exchange certificates 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-5-B, A-6, A-6-A, A-7, A-7-A, A-7-B, A-8, A-8-A, A-9, A-9-A, A-10, A-10-A, A-11, A-11-A, A-11-B, 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) ratings on the Certificates reflect 6.00% of credit enhancement provided by subordinated certificates. The AA (high) (sf), A (high) (sf), BBB (high) (sf), BB (high) (sf), and B (high) (sf) ratings reflect 4.35%, 2.80%, 1.80%, 1.35%, and 0.95% of credit enhancement, respectively.

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

This securitization is a portfolio of first-lien, fixed-rate, prime residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 1,715 loans with a total principal balance of $1,646,634,432 as of the Cut-Off Date (September 1, 2021).

The pool consists of fully amortizing fixed-rate mortgages with original terms to maturity of primarily 30 years and a weighted-average loan age of three months. Approximately 96.2% of the pool are traditional, nonagency, prime jumbo mortgage loans. The remaining 3.8% of the pool are conforming, high-balance mortgage loans that were underwritten using an automated underwriting system designated by Fannie Mae or Freddie Mac and were eligible for purchase by such agencies. Details on the underwriting of conforming loans can be found in the Key Probability of Default Drivers section of the presale. In addition, 86.8% of the pool were originated in accordance with the new general Qualified Mortgage rule.

The originators for the aggregate mortgage pool are United Wholesale Mortgage, LLC (UWM; 77.0%), loanDepot.com, LLC (loanDepot; 14.0%), and various other originators, each representing less than 10% of the pool. Also, approximately 2.4% of the loans by balance were acquired by the Seller from MAXEX Clearing LLC. The mortgage loans will be serviced by UWM (77.0%), JPMorgan Chase Bank, N.A. (JPMCB; rated AA with a Stable trend by DBRS Morningstar; 8.5%), loanDepot (14.0%), and various other servicers and subservicers each representing less than 1.0% of the pool. For UWM and loanDepot serviced loans, the subservicer is Cenlar FSB. For JPMCB serviced loans, the subservicer is Shellpoint Mortgage Servicing (SMS).

Servicing will be transferred to JPMCB from SMS on the servicing transfer date (December 1, 2021, or a later date) as determined by the Issuing Entity and JPMCB. For this transaction, the servicing fee payable for mortgage loans serviced by JPMCB, loanDepot, SMS, and UWM comprises 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 Mortgage LLC will act as the Master Servicer. Citibank, N.A. (rated AA (low) with a Stable trend by DBRS Morningstar) will act as the Securities Administrator and Delaware Trustee. Wells Fargo Bank, N.A. (rated AA with a Negative trend by DBRS Morningstar) will act as the Custodian. Pentalpha Surveillance LLC will serve as the Representations and Warranties Reviewer.

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

Coronavirus Disease (COVID-19) Pandemic Impact
The coronavirus pandemic and the resulting isolation measures have caused an immediate economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar saw increases in delinquencies for many residential mortgage-backed securities (RMBS) asset classes, shortly after the onset of the coronavirus.

Such mortgage delinquencies were mostly in the form of forbearance, which are generally short-term payment reliefs that may perform very differently from traditional delinquencies. At the onset of the coronavirus, because the option to forebear mortgage payments was so widely available, it drove forbearance to a very high level. When the dust settled, coronavirus-induced forbearance in 2020 performed better than expected, thanks to government aid, low loan-to-value ratio, and good underwriting in the mortgage market in general. Across nearly all RMBS asset classes, delinquencies have been gradually trending down in recent months as the forbearance period comes to an end for many borrowers.

As of the Cut-Off Date, none of the loans are currently subject to a coronavirus-related forbearance plan. In the event a borrower requests or enters into a coronavirus-related forbearance plan after the Cut-Off Date but prior to the Closing Date, the Mortgage Loan Seller will remove such loan from the mortgage pool and remit the related Closing Date substitution amount. Loans that enter a coronavirus-related forbearance plan after the Closing Date will remain in the pool.

For more information regarding the economic stress assumed under its baseline scenario, please see the following DBRS Morningstar commentary: “Baseline Macroeconomic Scenarios For Rated Sovereigns,” dated September 8, 2021.

The ratings reflect transactional strengths that include high-quality credit attributes, well-qualified borrowers, satisfactory third-party due-diligence review, structural enhancements, and 100% current loans.

The ratings reflect transactional weaknesses that include the representations and warranties framework, and financial capability of the counterparties.

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

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodology is the RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (April 1, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

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 [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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