Fitch Rates J.P. Morgan Tax-Exempt Pass-Through Trust, Series 2012-4
Link to Fitch Ratings' Report: J.P. Morgan Tax-Exempt Pass-Through
Trust, Series 2012-4
Fitch Ratings has assigned the following ratings to one class of certificates issued by J.P. Morgan Tax-Exempt Pass-Through Trust, Series 2012-4 (the issuer):
--$87,778,913 class A certificates 'AAAsf'; Outlook Negative.
The transaction represents a pass-through of all proceeds received in respect of two underlying mortgage revenue bonds (MRBs) owned by the trust. The rating is based on the credit quality of the MRBs.
Proceeds from the certificate issuance were used to purchase two maturities of MRBs issued by the Ohio Housing Finance Agency (OHFA). The MRBs are collateralized by 85 Fannie Mae (FNMA) and 13 Ginnie Mae (GNMA) securities. The MRBs are rated 'AAA' with a Negative Outlook by Fitch based on the FNMA and GNMA guarantees of full and timely payment of principal and interest on their respective securities. The guarantees are backed by the rating of the U.S. treasury, which carries the rating of the United States of America (the U.S. government; rated 'AAA/F1+' with a Negative Outlook). Although the FNMA guarantee is not explicitly backed by the full faith and credit of the U.S. government, FNMA continues to benefit from financial support by the U.S. treasury.
Payments on the certificates will be made monthly and will consist of all interest and principal payments received from the underlying MRB. The certificates will receive interest equal to 3.5% per annum less extraordinary expenses. The underlying MRB pays a coupon of 3.527% and the transaction is structured to pass-through all interest and principal proceeds after paying a 0.027% (p.a.) trustee fee and any extraordinary expenses that are incurred. Extraordinary expenses incurred by the trustee are capped at $150,000 per year, and any excess extraordinary expense amount incurred by the trustee is to be paid the following year.
The transaction relies, to a lesser extent, on a series of counterparties to perform particular roles, including the trustee (U.S. Bank, N.A.; rated 'AA-/F1+'; Outlook Stable) and the bank at which the certificate account is established (also U.S. Bank). All distributions from the underlying MRB are deposited into the certificate account where they are held uninvested and are subsequently withdrawn by the trustee prior to each payment date. The certificate account is a segregated trust account, separated from the assets of the bank in the event of its insolvency. In its role as both issuer account bank and trustee, U.S. Bank satisfies the eligibility criteria described in Fitch's 'Counterparty Criteria for Structured Finance Transactions'.
The transaction is established as a grantor trust for federal income tax purposes. Each beneficial owner of the certificates will be treated for federal income tax purposes as owning an undivided interest in each asset held in the trust. To the extent interest on the underlying MRBs is exempt from federal income taxation, the portion thereof received by each beneficial owner of a certificate will also be exempt from federal income taxation. Fitch has received and reviewed legal opinions addressing the true sale of the underlying MRBs to the trust, the classification of the trust as a grantor trust for federal income tax purposes, and the enforceability of the transaction documents.
The CUSIPs for the underlying OHFA MRBs are 676906AQ3 and 676906AR1. Fitch's rating commentary for the OHFA MRBs on Oct. 16, 2012 titled 'Fitch Rates Ohio Housing Fin Agency's $87.8MM 2012 Ser T2 and Ser T3 HRBs 'AAA'; Outlook Negative' is available at 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
The sources of information used to assess this rating were the transaction documents provided by the arranger, J.P. Morgan Securities LLC, and the public domain.
Applicable Criteria & Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'Counterparty Criteria for Structured Finance Transactions' (May 30, 2012).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Counterparty Criteria for Structured Finance Transactions
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