<table><tr><th>From:</th><th>Barrett, Paul S &lt;</th></tr><tr><td>Sent:</td><td>Thursday, February 14, 2013 6:30 PM</td></tr><tr><td>To:</td><td>Epstein, Jeffrey (jeevacation@gmail.com)</td></tr><tr><td>Cc:</td><td>Weissend, Renee E; Ens, Amanda</td></tr><tr><td>Subject:</td><td>NEW HY RMBS - $12.98mm of SARM 040-4 B1 @ $59-16 (7.24% yield/ 7.55 durn)</td></tr></table>

Jeffrey

We should buy 51MM of this for Jeepers.

Paul

## *** ALL OFFERS ARE SUBJECT

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 SARM 04-4 Ei1is an Alt-A Seasoned Hybrid Sub bond backed by 107 months seasoned Hybrid ARM mortgages. The bond has 3.15% credit enhancement vs 12.99% 60+ delinquencies, for a 0.24x coverage ratio.

## THE COLLATERAL:

The pool consists of 773 Alt-A loans that are 107 months seasoned with an average updated LTV of 69%. 71% of the borrowers have not missed a payment in the past 2 years. The average 6 month CDR and severity has been 2.28% and 36%, respectively. Our base case assumes 2.5% CDR ramping up to 6% CDR over 2 years and a 40% severity ramping down over 2years to 35%. At these assumptions, we are defaulting 18% of the pool when only 13% is in 60+ delinquency and project a 7.24% yield @ 559-16.

## 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

## THE STORY: (cont.)

- HPI Updated LTV = 69%

- 71% of the borrowers have not missed a payment in the past 2 years

- 107 months seasoned

- 715 FICO

$296k average balance

**Source: Bloomberg
SARM 2004-4 B1 Offered @ 59-16

BOND DESCRIPTION

Prepay Rate

4 CPR

8 CPR

10 CPR

Cusip:

86359BPE5

Default Rate

3 ramp 24 7 7 ramp 12 2 CDR

2.5 ramp 24 6 6 ramp 12 2 CDR

2.5 ramp 2466 ramp 122 CDR

Original Face:

12,976,407

Default Severity

45 ramp 36 40

40 ramp 24 35

## THE STORY: (cont.)

40 ramp 18 35

Current Face:
6,718,757

Delinq Rate
13 Percent
13 Percent
13 Percent

Bond Type:
Alt-A Hybrid Sub

Delinq Advance (% of P&I)
85
95
100

Ratings (S&P/Moodys/Fitch):
CCC/-/-

Call
No
No
No

Current Coupon:
2.899%

Yield @ Base Case
7.241%

Price @ 59-16

Stress Case

Base Case

## THE STORY: (cont.)

<table><tr><th>Recovery Case</th></tr><tr><td>WAL @ Base Case</td></tr><tr><td>9.93</td></tr><tr><td>Yield</td></tr><tr><td>1.864</td></tr><tr><td>7.241</td></tr><tr><td>7.920</td></tr><tr><td>Principal Window @ Base Case</td></tr><tr><td>Mar13 to Sep47</td></tr><tr><td>Spread over Tsy</td></tr><tr><td>25</td></tr><tr><td>514</td></tr><tr><td>581</td></tr><tr><td>Writedown %</td></tr><tr><td>31.89%</td></tr><tr><td>Duration</td></tr><tr><td>7.52</td></tr><tr><td>7.55</td></tr><tr><td>7.42</td></tr><tr><td>Current Credit Enhancement:</td></tr><tr><td>3.15%</td></tr><tr><td>WAL</td></tr><tr><td>7.31</td></tr><tr><td>9.93</td></tr><tr><td>9.99</td></tr><tr><td>60+ Delinquencies</td></tr></table>

4

## THE STORY: (cont.)

12.99

<table><tr><th>12.99 </th></tr><tr><td>Principal Window</td></tr><tr><td>Mar13 to Aug46</td></tr><tr><td>Mar13 to Sep47</td></tr><tr><td>Mar13 to Sep47</td></tr><tr><td>60+ Delinquency Coverage</td></tr><tr><td>0.24x </td></tr><tr><td>Principal Writedown</td></tr><tr><td>61.68% </td></tr><tr><td>31.89% </td></tr><tr><td>26.50% </td></tr><tr><td>Total Collat Loss</td></tr><tr><td>2.71% </td></tr><tr><td>2.13% </td></tr><tr><td>2.03% </td></tr><tr><td>UNDERLYING COLLATERAL DESCRIPTION</td></tr><tr><td>Total Liquidation</td></tr><tr><td>23.10% </td></tr><tr><td>17.88% </td></tr><tr><td>16.41% </td></tr><tr><td>Average Loan Balance ($,000s)</td></tr><tr><td>296 </td></tr><tr><td>Loan Count</td></tr><tr><td>773 </td></tr><tr><td>HISTORICAL PERFORMANCE</td></tr></table>

## THE STORY: (cont.)

Mortgage Type

Alt-A Hybrid ARMs

1 MOS

3 MOS

6 MOS

Wtd Avg Mortgage Coupon

3.169%

CPR

9.36

10.04

8.97

Wtd Avg FICO Score

715

CDR

3.43

1.86

2.28

Wtd Avg Orig Loan-to-Value

67.20%

SEV

37.02

43.01

## THE STORY: (cont.)

36.28

HPI Adj LTV

68.75%

Weighted Avg Loan Age

107

Owner Occupied

69.07

Top 1 Geo Concentration

CA 44%

Top 2 Geo Concentration

CO 10%

Top 3 Geo Concentration

FL 5%

Always Current (24 mos)

70.79%

Non-agency RM85 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
       7

## THE STORY: (cont.)

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.

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.

Bee-Ann Benson I Vice President I J.P. Morgan Global Wealth Management

270 Park Avenue, Floor 5, New York, New York 10017

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