EFTA02405938.pdf

From: Barrett, Paul S <1 1MIM> Sent: Tuesday, February 5, 2013 4:33 PM To: Epstein, Jeffrey (jeevacation@qmail.com) Cc: Ens, Amanda; Weissend, Renee E Subject: FW: NEW HY PRIME RMBS #2 - $5.00mm of CWALT 04-2CB M @ 875-00 (6.21% yield/4.71 durn) Jeffrey We should buy $1.25MM of this bond 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 CWALT 04-2CB M is an Alt-A Fix 5.692% Men backed by 109 month seasoned Fix mortgages. This bond has 4.51% credit enhancement vs 10.23% 60+ delinquencies, for a 0.44x coverage ratio. THE COLLATERAL: The pool consists of 3,343 loans that are 109 months seasoned with an average updated LTV of 59.5%. The average balance of the loans is $104k, which is relatively low, and explains the higher severity prints we see on such a low LTV pool. That being said, the 6 month historical trend in severities is showing slow improvement. 6month average severity in June 2012 showed 50.71% vs 48.09% in Jan 2013. As expected, recovery will be slow and that is what we are modeling in our stress and base case assumptions. 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 HPI Updated LTV = 60% 73% of the borrowers have not missed a payment in the past 2 years EFTA_R1_01447094 EFTA02405938 109 months seasoned 710 FICO $104k average balance "Source: Bloomberg CWALT 2004-2CB M Offered @ 75-00 BOND DESCRIPTION Prepay Rate 8 CPR 10 CPR 12 ramp 20 15 CPR Cusip: 12667FA28 Default Rate 4 ramp 20 6 5 ramp 12 2.5 CDR 4 for 24 3 ramp 24 2 CDR 4 for 24 3 ramp 24 2 CDR Original Face: 5,000,000 Default Severity 50 ramp 24 45 50 ramp 18 45 45 ramp 36 40 Current Face: 3,400,764 2 EFTA_R1_01447095 EFTA02405939 Delirig Rate 11 Percent 11 ramp 12 10.5 Percent 11 ramp 12 10 Percent Bond Type: Alt-A Men Pass-Through Del i nq Advance (% of P& I) 100 100 100 Ratings (S&P/Moodys/Fitch): CCC/-/- Current Coupon: 5.692% Yield @ Base Case 6.208% Price @ 75.00 Stress Case Base Case Recovery Case WAL @ Base Case 7.02 Yield 0.122 6.208 3 EFTA_R1_01447096 EFTA02405940 9.704 Principal Window @ Base Case Mar13 to Feb34 Spread over Tsy -120 467 827 Writedown % 34.77% Duration 5.11 4.71 4.15 Current Credit Enhancement: 4.51% WAL 6.11 7.02 6.58 60+ Delinquencies 10.23 Principal Window Mar13 to Jan34 Mar13 to Feb34 Mar13 to Jan34 60+ Delinquency Coverage 4 EFTA_R1_01447097 EFTA02405941 0.44x Principal Writedown 59.43% 34.77% 16.07% Total Collat Loss 2.62% 2.24% 1.96% UNDERLYING COLLATERAL DESCRIPTION Total Liquidation 18.51% 14.37% 12.23% Average Loan Balance ($,000s) 104 Loan Count 3,343 HISTORICAL PERFORMANCE Mortgage Type Alt•A 30yr Fix 5 EFTA_R1_01447098 EFTA02405942 1 MOS 3 MOS 6 MOS Wtd Avg Mortgage Coupon 6.054% CPR 15.78 13.83 12.76 Wtd Avg FICO Score 710 CDR 1.96 2.32 3.22 Wtd Avg Orig Loan-to-Value 60.12% SEV 57.88 51.28 48.09 HPI Adj LTV 59.52% Weighted Avg loan Age 109 6 EFTA_R1_01447099 EFTA02405943 Owner Occupied 62.95 Top 1 Geo Concentration CA 24% Top 2 Geo Concentration NY 7% Top 3 Geo Concentration FL 7% Always Current (24 mos) 72.56% 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. 7 EFTA_R1_01447100 EFTA02405944 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 Trading kevin.lynn@jpmorgan.com <mailto:kevin.lynn@jpmorgan.com> Desk: 212-464-21241 Direct: 212-464-0716 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_01447101 EFTA02405945