EFTA02566466

From: Barrett, Paul S < Sent: Thursday, February 14, 2013 6:30 PM To: Epstein, Jeffrey ([email protected]) Cc: Weissend, Renee E; Ens, Amanda Subject: NEW HY RMBS - $12.98mm of SARM 040-4 B1 @ $59-16 (7.24% yield/ 7.55 durn) Jeffrey We should buy 51MM of this for Jeepers. Paul *** ALL OFFERS ARE SUBJECT US Onshore Clients — Blue Sky (U.S. State Securities Law): Please confirm Blue Sky eligibility before soliciting to a US Onshore client by entering the CUSIP into the web tool located at: http://pscppvl.amer.jpmchase.net:8080/BlueSkyPage.html and review to see if your client's state of residence is listed. If you receive 'NO SECURITY FOUND', 'NO STATES FOUND' or the security DOES NOT HAVE A CUSIP or is not USD- denominated, then please contact your SM or local compliance officer and provide the requested security and client information. Please note that a suitability review and other pre-trade procedures must still be followed. THE BOND: The SARM 04-4 Ei1 is an Alt-A Seasoned Hybrid Sub bond backed by 107 months seasoned Hybrid ARM mortgages. The bond has 3.15% credit enhancement vs 12.99% 60+ delinquencies, for a 0.24x coverage ratio. THE COLLATERAL: The pool consists of 773 Alt-A loans that are 107 months seasoned with an average updated LTV of 69%. 71% of the borrowers have not missed a payment in the past 2 years. The average 6 month CDR and severity has been 2.28% and 36%, respectively. Our base case assumes 2.5% CDR ramping up to 6% CDR over 2 years and a 40% severity ramping down over 2years to 35%. At these assumptions, we are defaulting 18% of the pool when only 13% is in 60+ delinquency and project a 7.24% yield @ 559-16. THE STORY: For investors looking for a housing recovery play backed by seasoned collateral, this bond offers a great convexity story levered to prepayments and overall homeowner performance. Please call the desk with all bids/inquiries related to this bond. X32124 HIGHLIGHTS EFTA_R1_01731677 EFTA02566466 HPI Updated LTV = 69% 71% of the borrowers have not missed a payment in the past 2 years 107 months seasoned 715 FICO $296k average balance "Source: Bloomberg SARM 2004-4 B1 Offered @ 59-16 BOND DESCRIPTION Prepay Rate 4 CPR 8 CPR 10 CPR Cusip: 86359BPE5 Default Rate 3 ramp 24 7 7 ramp 12 2 CDR 2.5 ramp 2466 ramp 122 CDR 2.5 ramp 2466 ramp 122 CDR Original Face: 12,976,407 Default Severity 45 ramp 36 40 40 ramp 24 35 2 EFTA_R1_01731678 EFTA02566467 40 ramp 18 35 Current Face: 6,718,757 Delinq Rate 13 Percent 13 Percent 13 Percent Bond Type: Alt-A Hybrid Sub Delinq Advance (% of P&I) 85 95 100 Ratings (S&P/Moodys/Fitch): CCC/-/- Call No No No Current Coupon: 2.899% Yield @ Base Case 7.241% Price @ 59-16 Stress Case Base Case 3 EFTA_R1_01731679 EFTA02566468 Recovery Case WAL @ Base Case 9.93 Yield 1.864 7.241 7.920 Principal Window @ Base Case Mar13 to Sep47 Spread over Tsy 25 514 581 Writedown % 31.89% Duration 7.52 7.55 7.42 Current Credit Enhancement: 3.15% WAL 7.31 9.93 9.99 60+ Delinquencies 4 EFTA_R1_01731680 EFTA02566469 12.99 Principal Window Mar13 to Aug46 Mar13 to Sep47 Mar13 to Sep47 60+ Delinquency Coverage 0.24x Principal Writedown 61.68% 31.89% 26.50% Total Collat Loss 2.71% 2.13% 2.03% UNDERLYING COLLATERAL DESCRIPTION Total Liquidation 23.10% 17.88% 16.41% Average Loan Balance ($,000s) 296 Loan Count 773 HISTORICAL PERFORMANCE 5 EFTA_R1_01731681 EFTA02566470 Mortgage Type Alt-A Hybrid ARMs 1 MOS 3 MOS 6 MOS Wtd Avg Mortgage Coupon 3.169% CPR 9.36 10.04 8.97 Wtd Avg FICO Score 715 CDR 3.43 1.86 2.28 Wtd Avg Orig Loan-to-Value 67.20% SEV 37.02 43.01 6 EFTA_R1_01731682 EFTA02566471 36.28 HPI Adj LTV 68.75% Weighted Avg Loan Age 107 Owner Occupied 69.07 Top 1 Geo Concentration CA 44% Top 2 Geo Concentration CO 10% Top 3 Geo Concentration FL 5% Always Current (24 mos) 70.79% IMPORTANT DISCLAIMER: Non-agency RM85 is a complex fixed income product and is not suitable for all investors. Please note that while desk assumptions are driven by a number of collateral and macro factors, the historical performance of a deal is not indicative of its future performance. Additionally, this message is a product of sales and trading and is not a research report. Other key risks to consider are outlined below: All investments are subject to possible loss of principal 7 EFTA_R1_01731683 EFTA02566472 Non-Agency bonds may have limited liquidity and clients should be aware that the secondary market for mortgage-backed securities has experienced periods of illiquidity and may do so in the future. Illiquidity means that there may not be any purchasers for your class of certificates. Although any class of certificates may experience illiquidity, it is more likely that classes that are lower in the capital structure and non-investment grade related may experience greater illiquidity than more senior, investment-grade rated classes. High Yield Non-Agency bonds are speculative non-investment grade bonds that have higher risk of default or other adverse credit events which are appropriate for high risk investors only Non-Agency bonds are intended for clients with a minimum total net worth of $50mm. Please make sure your client fulfills this requirement before soliciting this order. This commentary is a product of JPMorgan Global Wealth Managements Taxable Fixed Income Trading Desk and not JPMorgan's Research Department. The views expressed in this trading desk commentary may differ from those of JPMorgan's Research Department. Any opinions expressed in this trading desk commentary are subject to change without notice and JPMorgan is under no obligation to update or keep this information current. Bee-Ann Benson I Vice President I J.P. Morgan Global Wealth Management 270 Park Avenue, Floor 5, New York, New York 10017 This email is confidential and subject to important disclaimers and conditions including on offers for the purchase or sale of securities, accuracy and completeness of information, viruses, confidentiality, legal privilege, and legal entity disclaimers, available at http://www.jpmorgan.com/pages/disclosures/email. 8 EFTA_R1_01731684 EFTA02566473