EFTA02565931.pdf

From: Barrett, Paul S Sent: Tuesday, February 5, 2013 9:15 PM To: Jeffrey Epstein Cc: Ens, Amanda; Weissend, Renee E Subject: HY PRIME RMBS #1 - $5.70mm of SEMI 11 B1 @ $74-16 (6.51% yield/ 6.20 durn) Jeffrey The mortgage from this morning traded away at a higher price. I think this is also interesting. Spend $750K. Let me know. Paul 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 SEMT 11 B1 is a Prime subordinate floater (1ML + 145.5bps) backed by 125 month seasoned vanilla ARM mortgages. This bond has 4.03% credit enhancement vs 12.03% 60+ delinquencies, for a 0.33x coverage ratio. THE COLLATERAL: The pool consists of 165 loans that are 125 months seasoned with an average updated LTV of 53%. The average balance of the loans is $238 - this coupled with the low updated LTV should result in both low CDRs and Seventies. THE STORY: For investors looking for a housing recovery play backed by seasoned Prime collateral, this bond offers a great convexity story levered to prepayments and overall homeowner performance. EFTA_R1_01730837 EFTA02565931 Please call the desk with all bids/inquiries related to this bond. X32124 HIGHLIGHTS HPI Updated LTV = 53% 78% of the borrowers have not missed a payment in the past 2 years 125 months seasoned 723 FICO $238k average balance "Source: Bloomberg SEMI 11 B1 Offered @ 74-16 BOND DESCRIPTION Prepay Rate 5 CPR 8 CPR 12 CPR Cusip: 81744AAB4 Default Rate 1 ramp 20 3 3 ramp 12 2 CDR 1 ramp 20 3 3 ramp 12 2 CDR 1 ramp 20 3 3 ramp 12 2 CDR Original Face: 5,700,000 Default Severity 45 ramp 36 40 2 EFTA_R1_01730838 EFTA02565932 40 ramp 24 35 35 ramp 18 30 Current Face: 1,060,043 Delinq Rate 12 Percent 12 Percent 12 Percent Bond Type: Prime Sub Floaters (1ML +145.5 bps) Delinq Advance (% of P&I) 100 100 100 Ratings (S&P/Moodys/Fitch): B-/Caal/B Current Coupon: 1.660% Yield @ Base Case 6.510% Price @ 74-16 Stress Case Base Case Recovery Case WAL @ Base Case 3 EFTA_R1_01730839 EFTA02565933 8.19 Yield 3.520 6.510 7.639 Principal Window @ Base Case Feb13 to Nov32 Spread over Tsy 191 473 584 Writedown % 10.89% Duration 5.80 6.20 6.28 Current Credit Enhancement: 4.03% WAL 7.32 8.19 8.25 60+ Delinquencies 12.03 Principal Window 4 EFTA_R1_01730840 EFTA02565934 Feb13 to Nov32 Feb13 to Nov32 Feb13 to Nov32 60+ Delinquency Coverage 0.33x Principal Writedown 30.94% 10.89% 0.08% Total Collat Loss 0.49% 0.43% 0.37% UNDERLYING COLLATERAL DESCRIPTION Total Liquidation 11.80% 10.54% 9.04% Average Loan Balance ($,000s) 238 Loan Count 165 HISTORICAL PERFORMANCE 5 EFTA_R1_01730841 EFTA02565935 Mortgage Type Prime Vanilla ARMs 1 MOS 3 MOS 6 MOS Wtd Avg Mortgage Coupon 2.176% CPR 0.52 25.69 18.14 Wtd Avg FICO Score 723 COR 0.00 0.00 0.00 WW Avg Orig Loan-to-Value 59.56% SEV NA NA NA HPI Adj LTV 6 EFTA_R1_01730842 EFTA02565936 53.22% Weighted Avg Loan Age 125 Owner Occupied 87.86 Top 1 Geo Concentration FL 21% Top 2 Geo Concentration NY 10% Top 3 Geo Concentration GA 9% Always Current (24 mos) 78.37% IMPORTANT DISCLAIMER: Non-agency RMBS 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 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 7 EFTA_R1_01730843 EFTA02565937 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. Kevin Lynn Vice President I JPMorgan Securities Fixed Income Tradin Desk: 212-464-2124 I Direct: 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 chttp://www.jpmorgan.com/pages/disdosures/email> . 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 <http://www.jpmorgan.com/pages/disdosures/email> . 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_01730844 EFTA02565938