Fitch Rates J.P. Morgan Tax-Exempt Pass-Through Trust, Series 2011-2

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has assigned the following ratings to the three classes of certificates issued by J.P. Morgan Tax-Exempt Pass-Through Trust, series 2011-2 (the issuer):

-- $17,638,829 class A-1 certificates 'AAAsf', Outlook Stable;

-- $42,500,000 class A-2 certificates 'AAAsf', Outlook Stable;

-- $7,500,000 class A-3 certificates 'AAAsf', Outlook Stable.

The transaction represents a pass-through of all proceeds received in respect of the three 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 three MRBs issued by the Illinois Housing Development Authority (IHDA). The MRBs are collateralized by 26 underlying Ginnie Mae (GNMA) and 55 Fannie Mae (FNMA) guaranteed mortgage-backed securities. The MRBs are all rated 'AAA' by Fitch based on the GNMA and FNMA guarantees of full and timely payment of principal and interest on its securities. The guaranties 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 Stable Outlook by Fitch).

Payments on the certificates will be made monthly and will consist of all interest and principal payments received from the underlying MRBs. The certificates will receive interest equal to the lesser of (i) 3.25% per annum or (ii) the weighted average coupon (WAC) minus trustee fees and extraordinary expenses. The three underlying MRBs each pay a coupon of 3.285%, and the transaction is structured to pass-through all interest and principal proceeds after paying a 0.035% (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the underlying MRBs are deposited into the certificate account where they are held uninvested, and are subsequently withdrawn by the trustee prior to each payment date.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'.

This is the second rating that Fitch has assigned to a structured finance product of this type. While state housing authorities have been issuing housing revenue bonds backed by mortgage-backed securities for some time, Fitch has rated only one resecuritization of such assets to date.

If the underlying MRBs are downgraded, the certificates would also be downgraded. The MRBs would likely be downgraded in the event that the U.S. government's rating is downgraded by Fitch.

The CUSIPS for the three underlying IHDA MRBs are: 45201YYF8, 45201YYG6, and 45201YYH4. Fitch's rating commentary for the IHDA MRBs on Oct. 19, 2011 titled 'Fitch Rates Illinois Housing Development Authority's $67.6MM 2011-1 HRBs 'AAA' 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' (Aug. 4, 2011);

--'Counterparty Criteria for Structured Finance Transactions' (March 14, 2011).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646569

Counterparty Criteria for Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=605425

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