<table><tr><th>From:</th><th>Barrett, Paul S</th></tr><tr><td>Sent:</td><td>Monday, February 11, 2013 5:08 PM</td></tr><tr><td>To:</td><td>Epstein, Jeffrey (jeevacation@qmail.com)</td></tr><tr><td>Cc:</td><td>Ens, Amanda; Weissend, Renee E</td></tr><tr><td>Subject:</td><td>NEW HY RMBS BWIC - 54.3mm of RFMSI 04-54 1M1 ® 85-16 (6.51% yield/2.97 durn)</td></tr></table>

Jeffrey

We should buy 51MM of this bond.

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 RFMSI 04-S4 1M1is a Prime Seasoned Fix 5.25% Sub bond backed by 105 months seasoned fix mortgages. The bond has 2.38% credit enhancement vs 7.08% 60+ delinquencies, for a 0.34x coverage ratio.

## THE COLLATERAL:

The pool consists of 145 Prime loans that are 105 months seasoned with an average updated LTV of 56%. The average balance of the loans is 5296k — this coupled with the low updated LTV should result in both low CDRs and Severities. In fact, there has been only 2 CDR prints over the last 12 months and the average severity of those 2 prints is 20.64%. Our base case assumes 35% severity ramping down to 30% over 3 years. What's more interesting is that the 5 foreclosure loans in the pipe have an updated LTV of 41%, which is even lower than the overall pool LTV of 56%. According to our model, this should translate to lower severities at liquidation.

## 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.

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

## HIGHLIGHTS

- HPI Updated LTV = 56%

	- 87% of the borrowers have not missed a payment in the past 2 years

## HIGHLIGHTS (cont.)

- 105 months seasoned

- 735 FICO

$296k average balance

**Source: Bloomberg

REMSI 2004-54 1M1 Offered @ 85-16

BOND DESCRIPTION

Prepay Rate

20 CPR

24 CPR

28 CPR

Cusip:

## 76111XHZ9

Default Rate

2 ramp 20 4 3 ramp 12 2 CDR

2 ramp 20 4 3 ramp 36 1.75 CDR

2 ramp 20 4 3 ramp 12 1.5 CDR

Original Face:

4,314,300

Default Severity

40 ramp 36 35

35 ramp 36 30

30

Current Face:

## 76111XHZ9 (cont.)

2,002,760
Delinq Rate
7.5 Percent
7.5 Percent
7.5 Percent
Bond Type:
Prime Fix 5.25% Mezz
Delinq Advance (% of P&I)
100
100
100
Ratings (S&P/Moodys/Fitch):
CCC/-/NR
Current Coupon:
5.250%
Yield @ Base Case
6.509%
Price @ 85-16
WAL @ Base Case
4.03
Yield
2.124

## 76111XHZ9 (cont.)

<table><tr><th>6.509</th></tr><tr><td>9.838</td></tr><tr><td>Principal Window @ Base Case</td></tr><tr><td>Mar13 to Oct37</td></tr><tr><td>Spread over Tsy</td></tr><tr><td>136</td></tr><tr><td>575</td></tr><tr><td>912</td></tr><tr><td>Writedown %</td></tr><tr><td>14.66%</td></tr><tr><td>Duration</td></tr><tr><td>3.18</td></tr><tr><td>2.97</td></tr><tr><td>2.71</td></tr><tr><td>Current Credit Enhancement:</td></tr><tr><td>2.38%</td></tr><tr><td>WAL</td></tr><tr><td>4.05</td></tr><tr><td>4.03</td></tr><tr><td>3.84</td></tr><tr><td>60+ Delinquencies</td></tr><tr><td>7.08</td></tr><tr><td>Principal Window</td></tr><tr><td>Mar13 to Mar36</td></tr><tr><td>Mar13 to Oct37</td></tr><tr><td>Mar13 to Oct37</td></tr></table>

4

## 76111XHZ9 (cont.)

60+ Delinquency Coverage
0.34x

Principal Writedown
29.22%
14.66%
3.28%

Total Collat Loss
0.54%
0.46%
0.39%

UNDERLYING COLLATERAL DESCRIPTION

Total Liquidation
7.59%
6.83%
5.55%

Average Loan Balance ($,000s)
296

Loan Count
145

HISTORICAL PERFORMANCE

Mortgage Type
Seasoned Prime 30yr Fix

## 76111XHZ9 (cont.)

1 MOS

3 MOS

6 MOS

Wtd Avg Mortgage Coupon

5.655%

CPR

27.23

31.87

27.45

Wtd Avg FICO Score

735

CDR

0.00

4.64

2.20

Wtd Avg Orig Loan-to-Value

54.81%

SEV

NA

30.01

30.01

HPI Adj LTV

56.15%

Weighted Avg Loan Age

105

## 76111XHZ9 (cont.)

Owner Occupied

96.17

Top 1 Geo Concentration

CA 49%

Top 2 Geo Concentration

TX 7%

Top 3 Geo Concentration

NY 5%

Always Current (24 mos)

86.81%

Non-agency RM8S 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

## 76111XHZ9 (cont.)

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

T: 212 464 0608 I F: 212 464 1129

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