EFTA01764893.pdf

From: Barrett, Paul S Sent: Friday, October 19, 2012 3:48 PM To: Jeffrey Cc: Giuffrida, David J; Schaffer, Susannah Subject: RE: To Do - NEW HY RMBS - $7.521mm of SEMT 03-5 B1 @ $80-16 (6.15% yield / 5.62 durn) lets also sell our Citi Pfds yielding 3.50% ytw. We are up 225K all in since we bought them 2yrs ago. Don't think it makes much sense to hold these at these low yields. Paul Paul Barrett, CFA Managing Director Global Investment Opportunities Group JPMorgan Private Bank 320 Park Avenue, 14th Floor, New York, NY 10022 NMLS ID'S 853441 paul.s.barrett@jpmorgan.com <mailto:paul.s.barrett@jpmorgan.com> From: Jeffrey lmailtojeevacation@gmailcomj Sent: Friday, October 19, 2012 11:28 AM To: Barrett, Paul S Subject: Re: To Do - NEW HY RMBS - $7.521mm of SEMI 03-5 B1 @ $80-16 (6.15% yield / 5.62 durn) EFTA_R1_00072558 EFTA01764893 Ok Sorry for all the typos .Sent from my iPhone On Oct 19, 2012, at 5:17 PM, "Barrett, Paul 5" wrote: Hi Jeffrey This bond looks interesting. I would like to take profits on our Barclays Pfd which is yielding 3.70% and buy this mortgage bond. We are up $154K all in on the Barclays Pfd. 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 SEMT 03-5 B1 is a prime subordinate bond rated BB+/B2/BBB and is backed by 110 month seasoned Prime Vanilla ARM mortgages. The pool has 60.35% updated LTV, 84% always current borrowers (looking back 2 years), 271k average balance and most importantly, 4.rA credit support vs only 3.55% 60+ delinquency. The way I look at it, if 10O% of the 60+ delinquent borrowers were immediately evicted and foreclosed on and the repossessed homes sold for $0, the pool would incur 3.55% losses. In this grim scenario I painted, this B1bond would still receive no writedowns. 2 EFTA_R1_00072559 EFTA01764894  Additionally, this deal is immediately callable by the servicer since the collateral factor is below the 10% range. This deal becomes more callable as time passes and in the scenario where rates were to back up, the ARM mortgages in this pool would be worth considerably more on bank balance sheets. With only 3.55% delinquent loans, this deal is already clean enough to call, it's really a matter of economics for the servicer at this point. In our recovery scenario, we are assuming the deal is called 3 years from today even though the bonds are callable right now. In our stress scenario, we default approximately 2.6x the current 60+ delinquent population at 60 severity ramping down over 2 years to 40. We're also running half the 6 month speeds and see this bond producing a 5.02% yield for a 6.03 duration bond. 'THIS BOND IS OFFERED TO US AND THE STREET AT 84-16. I see value in this bond @ 80-16 but there is no guarantee we can trade it there. HIGHLIGHTS HPI Updated LTV = 60% 84% of the borrowers have not missed a payment in the past 2 years 110 months seasoned 732 FICO $271k average balance •'Source: Bloomberg SEMI 2003-5 B1 Offered @ 80-16 BOND DESCRIPTION Prepay Rate 3 CPR 5 CPR 8 CPR Cusip: 81743PCR5 Default Rate 2.5 ramp 241 CDR 3 EFTA_R1_00072560 EFTA01764895 2 ramp 24 0.75 0.5 CDR 2 ramp 24 0.5 CDR Original Face: 7,521,500 Default Severity 60 ramp 24 40 50 40 ramp 24 35 45 ramp 24 30 Current Face: 1,863,319 Delinq Rate 4 Percent 4 Percent 4 Percent Bond Type: Seasoned Prime Subs Delinq Advance (% of P&I) 100 100 100 Ratings (S&P/Moodys/Fitch): Bf3+/B3/BBB/*- Optional Servicer Call N N 10/2015 4 EFTA_R1_00072561 EFTA01764896 Current Coupon: 1.119% * 1' Run to Fwd LIBOR Yield @ Base Case 6.149% WAL @ Base Case 7.11 Principal Window @ Base Case Nov12 to Aug33 Price @ 80-16 Stress Case Base Case Recovery Case Writedown % 0.00% Yield 5.015 6.149 10.416 Current Credit Enhancement: 4.70% Spread over Tsy 357 481 5 EFTA_R1_00072562 EFTA01764897 996 60+ Delinquencies 3.55 Duration 6.03 5.62 2.29 60+ Delinquency Coverage 1.32x WAL 7.69 7.11 2.53 Principal Window Nov12 to Aug33 Nov12 to Aug33 Nov12 to Nov15 UNDERLYING COLLATERAL DESCRIPTION Principal Writedown 8.63% 0.00% 0.00% Average Loan Balance ($,000s) 271 Total Collat Loss 0.56% 6 EFTA_R1_00072563 EFTA01764898 0.41% 0.35% Loan Count 211 Total Liquidation 9.20% 5.13% 2.57% Mortgage Type Seasoned Prime Vanilla ARMs Wtd Avg Mortgage Coupon 2.332% HISTORICAL PERFORMANCE Wtd Avg FICO Score 732 1 MOS 3 MOS 6 MOS Wtd Avg Orig Loan-to-Value 60.67% CPR 4.30 7 EFTA_R1_00072564 EFTA01764899 6.01 6.52 HPI Adj LTV 60.35% CDR 0.00 0.00 0.00 Weighted Avg Loan Age 110 SEV NA NA NA Owner Occupied 84.21 Top 1 Geo Concentration CA 14% Top 2 Geo Concentration FL 13% Top 3 Geo Concentration GA 11% Always Current (24 mos) 84.06% 8 EFTA_R1_00072565 EFTA01764900  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 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 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> . 9 EFTA_R1_00072566 EFTA01764901