<table><tr><th>From:</th><th>Barrett, Paul S</th></tr><tr><td>Sent:</td><td>Tuesday, February 5, 2013 9:15 PM</td></tr><tr><td>To:</td><td>Jeffrey Epstein</td></tr><tr><td>Cc:</td><td>Ens, Amanda; Weissend, Renee E</td></tr><tr><td>Subject:</td><td>HY PRIME RMBS #1 - $5.70mm of SEMI 11 B1 @ $74-16 (6.51% yield/ 6.20 durn)</td></tr></table>

Jeffrey

The mortgage from this morning traded away at a higher price. I think this is also interesting.

Spend $750K.

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 USD-denominated, you receive 'NO then SECURITY please contact FOUND', your 'NO SM STATES or local FOUND' compliance or the officer security and DOES provide NOT the HAVE requested A CUSIP security or is not and client information. Please note that a suitability review and other pre-trade procedures must still be followed.

## THE BOND:

The SEMT 11B1 is a Prime subordinate floater (1ML + 145.5bps) backed by 125 month seasoned vanilla ARM mortgages. This bond has 4.03% credit enhancement vs 12.03% 60+ delinquencies, for a 0.33x coverage ratio.

## THE COLLATERAL:

The pool consists of 165 loans that are 125 months seasoned with an average updated LTV of 53%. The average balance of the loans is $238 - this coupled with the low updated LTV should result in both low CDRs and Seventies.

## THE STORY:

For investors looking for a housing recovery play backed by seasoned Prime collateral, this bond offers a great convexity story levered to prepayments and overall homeowner performance.

## THE STORY: (cont.)

Please call the desk with all bids/inquiries related to this bond. X32124

HIGHLIGHTS

	- HPI Updated LTV = 53%

- 78% of the borrowers have not missed a payment in the past 2 years

	- 125 months seasoned

	- 723 FICO

	$238k average balance

**Source: Bloomberg

SEMT 11 B1 Offered @ 74-16

BOND DESCRIPTION

Prepay Rate

5 CPR

8 CPR

12 CPR

Cusip:

81744AAB4

Default Rate

1 ramp 20 3 3 ramp 12 2 CDR

1 ramp 20 3 3 ramp 12 2 CDR

1 ramp 20 3 3 ramp 12 2 CDR

Original Face:

5,700,000

Default Severity

45 ramp 36 40

## THE STORY: (cont.)

40 ramp 24 35

35 ramp 18 30

Current Face:

1,060,043

Delinq Rate

12 Percent

12 Percent

12 Percent

Bond Type:

Prime Sub Floaters (1ML +145.5 bps)

Delinq Advance (% of P&I)

100

100

100

Ratings (S&P/Moodys/Fitch):

B-/Caal/B

Current Coupon:

1.660%

Yield @ Base Case

6.510%

Price @ 74-16

Stress Case

Base Case

Recovery Case

WAL @ Base Case

## THE STORY: (cont.)

<table><tr><th>8.19</th></tr><tr><td>Yield</td></tr><tr><td>3.520</td></tr><tr><td>6.510</td></tr><tr><td>7.639</td></tr><tr><td>Principal Window @ Base Case</td></tr><tr><td>Feb13 to Nov32</td></tr><tr><td>Spread over Tsy</td></tr><tr><td>191</td></tr><tr><td>473</td></tr><tr><td>584</td></tr><tr><td>Writedown %</td></tr><tr><td>10.89%</td></tr><tr><td>Duration</td></tr><tr><td>5.80</td></tr><tr><td>6.20</td></tr><tr><td>6.28</td></tr><tr><td>Current Credit Enhancement:</td></tr><tr><td>4.03%</td></tr><tr><td>WAL</td></tr><tr><td>7.32</td></tr><tr><td>8.19</td></tr><tr><td>8.25</td></tr><tr><td>60+ Delinquencies</td></tr><tr><td>12.03</td></tr><tr><td>Principal Window</td></tr></table>

4

## THE STORY: (cont.)

Feb13 to Nov32
Feb13 to Nov32
Feb13 to Nov32
60+ Delinquency Coverage
0.33x
Principal Writedown
30.94%
10.89%
0.08%
Total Collat Loss
0.49%
0.43%
0.37%
UNDERLYING COLLATERAL DESCRIPTION
Total Liquidation
11.80%
10.54%
9.04%
Average Loan Balance ($,000s)
238
Loan Count
165
HISTORICAL PERFORMANCE

## THE STORY: (cont.)

Mortgage Type
Prime Vanilla ARMs

1 MOS
3 MOS
6 MOS

Wtd Avg Mortgage Coupon
2.176%

CPR
0.52
25.69
18.14

Wtd Avg FICO Score
723

CDR
0.00
0.00
0.00

Wtd Avg Orig Loan-to-Value
59.56%

SEV
NA
NA
NA

HPI Adj LTV

## THE STORY: (cont.)

53.22%

Weighted Avg Loan Age

125

Owner Occupied

87.86

Top 1 Geo Concentration

FL 21%

Top 2 Geo Concentration

NY 10%

Top 3 Geo Concentration

GA 9%

Always Current (24 mos)

78.37%

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

## THE STORY: (cont.)

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 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 Tradin

Desk: 212-464-2124 I Direct:

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