EFTA01765918.pdf

From: Jeffrey <[email protected]> Sent: Friday, October 19, 2012 3:28 PM 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) Ok Sorry for all the typos .Sen= from my iPhone On Oct 19, 2012, at 5:17 PM, "Barrett, Paul S= > wrote: Hi Jeffrey This bond looks interesting= I would like to take profit= 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 co=firm Blue Sky eligibility before soliciting to a US Onshore client by enter=ng the CUSIP into the web tool located at: httpl=pscppyl.amer.jpmchase.net:8080/BlueSkyPage.html EFTA_R1_00074341 EFTA01765918 chttp://pscppvl.amer.jpmchase.net:8080/BlueSkyPage.html> and review to-see if your client's state of residence is listed. If you receive 4k=8O4kNO SECURITY FOUND', 'NO STATES FOUND' or the security DOES NOT HAVE A CUSIP or is not USD-denominated, then please conta=t your SM or local compliance officer and provide the requested security an= client information. Please note that a suitability review and other pre-tr=de procedures must still be followed. =/b> The SEMT 03-5 B1 is a pr=me subordinate bond rated BB+/B2/BBB and is backed by 110 month seasoned Pr=me Vanilla ARM mortgages. The pool has 60.35% updated LW, 84% always current borrowers (looking back 2 years), 271k average bala=ce and most importantly, 4.7% credit support vs only 3.55% 60+ delinquency. The way I lo=k at it, if 100% of the 60+ delinquent borrowers were immediately evicted a=d foreclosed on and the repossessed homes sold for $0, the pool would incur=3.55% losses. In this grim scenario I painted, this B1 bond would still receive no writedowns. Additionally, this deal is immediately callable by the servicer since the co=lateral factor is below the 10% range. This deal becomes more callabl= as time passes and in the scenario where rates were to back up, the ARM mo=tgages in this pool would be worth considerably more on bank balance sheets. With only 3.55% delinquent l=ans, this deal is already clean enough to call, it's really a matte= of economics for the servicer at this point. In our recovery scenari=, 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+ delinq=ent population at 60 severity ramping down over 2 years to 40. Wet=99re also running half the 6 month speeds and see this bond producing a 5.0=% 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 - =nbsp; HPI Updated L=V = 60% - =nbsp; 84% of the b=rrowers have not missed a payment in the past 2 years - =nbsp; 110 months s=asoned - =nbsp; 732 FICO =nbsp; $271k averag= balance "Source: Bloomberg SEMT 2003-5 B1 Offered @ 80-1= BOND DESCRIPTION 2 EFTA_R1_00074342 EFTA01765919  Prepay Rate 3 CPR 5 CPR 8 CPR Cusi=: 81743PCR5 Default Rate</=> 2.5 ramp 24 1 CDR 2 ramp 24 0.75 0.5 CDR 2 ramp 24 0.5 CDR Orig=nal Face: 7,521,500 Default Severity 60 ramp 24 40 50 40 ramp 24 35 45 ramp 24 30 Curr=nt Face: 1,863,319 Delinq Rate 4 Percent 4 Percent 4 Percent Bond=Type: Seasoned Prime Subs Delinq Advance (% of P&I) 100 100 3 EFTA_R1_00074343 EFTA01765920 100 Rati=gs (S&P/Moodys/Fitch): BB+/B3/BBB/s- Optional Servicer Call N N 10/2015 Curr=nt Coupon: 1.119% ** Run to Fwd LIBOR<=span> Yiel= @ Base Case 6.149% WAL @=Base Case 7.11 Prin=ipal Window @ Base Case Nov12 to Aug33 Price @ 80-16 Stress Case Base Case Recovery Case Writ=down % Yield</=> 5.015 6.149 10.416 Curr=nt Credit Enhancement: 4 EFTA_R1_00074344 EFTA01765921 4.70% Spread over Tsy 357 481 996 60+ D=linquencies 3.55 Duration 6.03 5.62 2.29 60+ D=linquency Coverage 1.32x WAL = 7.69 7.11 2.53 Principal Window Nov12 to Aug33 Nov12 to Aug33 Nov12 to Nov15 UNDERLYING COLLATERAL DESCRIPTIO= Principal Writedown</=pan> 8.63% 0.00% 0.00% 5 EFTA_R1_00074345 EFTA01765922 Aver=ge Loan Balance ($,000s) 271 Total Collat Loss 0.56% 0.41% 0.35% Loan=Count 211 Total Liquidation 9.20% 5.13% 2.57% Mort=age Type Seasoned Prime Vanilla ARMs Wtd A=g Mortgage Coupon 2.332% HISTORICAL PERFORMANCE</=:p> <=p> <=p> <=p> Wtd A=g FICO Score 732 <=p> 1 MOS 3 MOS 6 MOS Wtd A=g Orig Loan-to-Value 60.67% CPR 6 EFTA_R1_00074346 EFTA01765923 4.30 6.01 6.52 HPI A=j LTV 60.35% CDR 0.00 0.00 0.00 Weig=ted Avg Loan Age 110 SEV NA NA NA Owne= Occupied 84.21 Top 1=Geo Concentration CA 14% Top 2=Geo Concentration FL 13% Top 3=Geo Concentration GA 11% Alwa=s Current (24 mos) 7 EFTA_R1_00074347 EFTA01765924 84.06% IMPORTANT DISCLAIMER: Non-agency RMBS is a complex fix=d income product and is not suitable for all investors. Please note t=at while desk assumptions are driven by a number of collateral and macro factors, the historical performance of a deal is not indicativ= of its future performance. Additionally, this message is a produ=t of sales and trading and is not a research report. Other key risks t= consider are outlined below: - =nbsp; All investments=are subject to possible loss of principal - =nbsp; Non-Agency bond= may have limited liquidity and clients should be aware that the secondary m=rket for mortgage-backed securities has experienced periods of illiquidity and may do so in the future. Illiquidity means that there ma= not be any purchasers for your class of certificates. Although any class o= certificates may experience illiquidity, it is more likely that classes th=t are lower in the capital structure and non-investment grade related may experience greater illiquidity than mo=e senior, investment-grade rated classes. - =nbsp; High Yield Non-=gency bonds are speculative non-investment grade bonds that have higher ris= of default or other adverse credit events which are appropriate for high risk investors only Non-Agency bonds are intend=d for clients with a minimum total net worth of $50mm. Please make su=e your client fulfills this requirement before soliciting this order. http://www.jpmorgan.com/pages/disclosures/email <http://www.jpmorgan.com/pag=s/disclosures/email> . = 8 EFTA_R1_00074348 EFTA01765925