Morningstar DBRS Assigns Provisional Credit Ratings to J.P. Morgan Mortgage Trust 2025-CES1

DBRS, Inc. (Morningstar DBRS) assigned provisional credit ratings to the Mortgage Pass-Through Certificates, Series 2025-CES1 (the Certificates) to be issued by J.P. Morgan Mortgage Trust 2025-CES1 (JPMMT 2025-CES1 or the Issuer) as follows:

-- $226.7 million Class A-1A at (P) AAA (sf)
-- $20.7 million Class A-1B at (P) AAA (sf)
-- $247.4 million Class A-1 at (P) AAA (sf)
-- $26.2 million Class A-2 at (P) AA (high) (sf)
-- $17.3 million Class A-3 at (P) A (high) (sf)
-- $15.5 million Class M-1 at (P) BBB (high) (sf)
-- $10.8 million Class B-1 at (P) BB (high) (sf)
-- $5.8 million Class B-2 at (P) B (high) (sf)

Class A-1 is an exchangeable certificate. This class can be exchanged for proportionate shares of the depositable certificates (Classes A-1A and A-1B) as specified in the offering documents.

The (P) AAA (sf) credit rating reflects 25.80% of credit enhancement provided by the subordinated notes. The (P) AA (high) (sf), (P) A (high) (sf), (P) BBB (high) (sf), (P) BB (high) (sf), and (P) B (high) (sf) credit ratings reflect 17.95%, 12.75%, 8.10%, 4.85%, and 3.10% of credit enhancement, respectively.

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

This transaction is a securitization of a portfolio of fixed, prime and near-prime, closed-end second-lien (CES) residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 3,417 mortgage loans with a total principal balance of $333,442,357 as of the Cut-Off Date (December 31, 2024).

The portfolio, on average, is six-months seasoned, though seasoning ranges from two to 18 months. Borrowers in the pool represent prime and near-prime credit quality -- with a weighted-average (WA) Morningstar DBRS-calculated FICO score of 740, Issuer-provided original combined loan-to-value ratio (CLTV) of 66.3%, and the vast majority of the loans originated with full documentation standards. All loans are current and vast majority of the loans (approximately 99.6% of the pool) have never been 30+ days delinquent since origination.

JPMMT 2025-CES1 represents the third CES securitization under the JPM shelf. loanDepot.com, LLC (loanDepot; 25.6%), Guild Mortgage Company LLC (18.5%), Deephaven Mortgage LLC (17.6%), and AmeriSave Mortgage Corporation (15.3%) are the top originators for the mortgage pool. The remaining originators each comprise less than 10.0% of the mortgage loans.

NewRez LLC doing business as Shellpoint Mortgage Servicing (68.9%), loanDepot.com, LLC (25.6%), and PennyMac Loan Services (5.5%) are the Servicers of the loans in this transaction.

Wilmington Savings Fund Society, FSB will act as the Securities Administrator and Owner Trustee. Computershare Trust Company, N.A. (rated BBB (high) with a Stable trend by Morningstar DBRS) will act as the Custodian.

On or after the earlier of (1) January 2028 or (2) the date when the unpaid principal balance of the mortgage loans is reduced to 30% of the Cut-Off Date balance, PMIT I LLC (Optional Redemption Holder), or an entity majority owned by the Optional Redemption Holder, may redeem all of the outstanding Certificates at a price equal to (1) the class balances of the related Certificates; (2) accrued and unpaid interest (including any cap carryover amounts); and (3) unpaid expenses. The proceeds will be distributed to the certificateholders in accordance with the priority of distributions.

Although all the mortgage loans were originated to satisfy the Consumer Financial Protection Bureau's Ability-to-Repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government, or private-label nonagency prime jumbo products for various reasons. In accordance with the Qualified Mortgage (QM)/ATR rules, 22.6% of the loans are designated as non-QM, 19.5% are designated as QM Rebuttable Presumption, and 53.6% are designated as QM Safe Harbor. Approximately 4.4% of the mortgages are loans made to investors for business purposes or were originated by a CDFI designated originator and were not subject to the QM/ATR rules.

There will not be any advancing of delinquent principal or interest on any mortgages by the Servicers or any other party to the transaction. In addition, the related servicer is not obligated to make advances in respect of homeowner association fees, taxes, and insurance, installment payments on energy improvement liens, and reasonable costs and expenses incurred in the course of servicing and disposing of properties unless a determination is made that there will be material recoveries.

For this transaction, any loan that is 180 days delinquent under the Mortgage Bankers Association delinquency method, upon review by the related Servicer, may be considered a Charged-Off Loan. With respect to a Charged-Off Loan, the total unpaid principal balance will be considered a realized loss and will be allocated reverse sequentially to the Noteholders. If there are any subsequent recoveries for such Charged-Off Loans, the recoveries will be included in the interest remittance amount and principal remittance amount and applied in accordance with the respective distribution waterfall. In addition, any class principal balances of Certificates that have been previously reduced by allocation of such realized losses may be increased by such recoveries sequentially in order of seniority. Morningstar DBRS' analysis assumes reduced recoveries upon default on loans in this pool.

This transaction incorporates a sequential-pay cash flow structure with a pro rata principal distribution among the senior Class A-1A and A-1B tranches. Principal proceeds and excess interest can be used to cover interest carryforwards on the Certificates, but such interest carryforwards on Class M-1 and more subordinate bonds will not be paid from principal proceeds until the Class A-1A, A-1B, A-2, and A-3 Certificates are retired. For this transaction, the Class A-1A, A-1B, A-2, A-3, and M-1 fixed rates step up by 100 basis points on and after the distribution date in February 2029. On any Distribution Date, interest and principal otherwise payable to the Class B-3 may also be used to pay any Cap Carryover Amounts.

Approximately 16.1% of the mortgage pool contains loans secured by mortgage properties that are located within certain disaster areas (such as those impacted by the Greater Los Angeles wildfires) where FEMA has designated for federal assistance. The Mortgage Loan Seller has ordered post-disaster inspections (PDI) for any property located in a known FEMA designated disaster zone. Loans secured by properties known to be materially damaged will not be included in the final transaction collateral pool. To the extent that a PDI was ordered prior to closing but notice of material damages were not available until after closing, the sponsor will repurchase the related loan/loans. The transaction documents also include representations and warranties regarding the property conditions, which state that the properties have not suffered damage that would have a material and adverse impact on the values of the properties (including events such as fire, windstorm, flood, earth movement, and hurricane).

The transaction assumptions consider Morningstar DBRS' baseline macroeconomic scenarios for rated sovereign economies, available in its commentary, "Baseline Macroeconomic Scenarios for Rated Sovereigns December 2024 Update," published on December 19, 2024. These baseline macroeconomic scenarios replace Morningstar DBRS' moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.

The credit ratings reflect transactional strengths that include the following:
-- Robust equity and prime/near-prime credit quality
-- Certain second-lien attributes
-- Satisfactory third-party due-diligence review
-- Current loan status
-- Improved underwriting standards

The transaction also includes the following challenges:

-- Representations and Warranties Framework
-- No servicer advances of delinquent P&I
-- Limited third-party diligence valuation review

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

Morningstar DBRS' credit rating the Certificates addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are Interest Distribution Amount, Interest Carryforward Amount, and Class Principal Amount.

Morningstar DBRS' credit ratings on the Class A-1A, Class A-1B, Class A-2, Class A-3, and Class M-1 Certificates also address the credit risk associated with the increased rate of interest applicable if the Class A-1A, Class A-1B, Class A-2, Class A-3, and Class M-1 Certificates remain outstanding on or after the distribution date in February 2029 in accordance with the applicable transaction document(s).

Morningstar DBRS' credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations. For example, in this transaction, Morningstar DBRS' credit ratings do not address the payment of any Cap Carryover Amount based on its position in the cash flow waterfall.

Morningstar DBRS' long-term credit ratings provide opinions on risk of default. Morningstar DBRS considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued. The Morningstar DBRS short-term debt rating scale provides an opinion on the risk that an issuer will not meet its short-term financial obligations in a timely manner.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (August 13, 2024) https://dbrs.morningstar.com/research/437781.

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

The principal methodology applicable to the credit ratings is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (January 2, 2025) https://dbrs.morningstar.com/research/445477.

Other methodologies referenced in this transaction are listed at the end of this press release.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

A provisional credit rating is not a final credit rating with respect to the above-mentioned securities and may change or be different than the final credit rating assigned or may be discontinued. The assignment of the final credit ratings on the above-mentioned securities are subject to receipt by Morningstar DBRS of all data and/or information and final documentation that Morningstar DBRS deems necessary to finalize the credit ratings.

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

DBRS, Inc.
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New York, NY 10005 USA
Tel. +1 212 806-3277

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

-- Interest Rate Stresses for U.S. Structured Finance Transactions (February 26, 2024), https://dbrs.morningstar.com/research/428623
-- Third-Party Due-Diligence and Representations & Warranties Criteria for U.S. RMBS Transactions (September 30, 2024), https://dbrs.morningstar.com/research/440091
-- Legal Criteria for U.S. Structured Finance (December 3, 2024), https://dbrs.morningstar.com/research/444064
-- Operational Risk Assessment for U.S. RMBS Originators and Servicers (September 30, 2024), https://dbrs.morningstar.com/research/440086

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