Rating Action: Moody’s assigns provisional ratings to Prime RMBS issued by J.P. Morgan Mortgage Trust 2020-5
Issuer: J.P. Morgan Mortgage Trust 2020-5
Cl. A-1, Rating Assigned (P)Aaa (sf)
Cl. A-2, Rating Assigned (P)Aaa (sf)
Cl. A-3, Rating Assigned (P)Aaa (sf)
Cl. A-3-A, Rating Assigned (P)Aaa (sf)
Cl. A-3-X*, Rating Assigned (P)Aaa (sf)
Cl. A-4, Rating Assigned (P)Aaa (sf)
Cl. A-4-A, Rating Assigned (P)Aaa (sf)
Cl. A-4-X*, Rating Assigned (P)Aaa (sf)
Cl. A-5, Rating Assigned (P)Aaa (sf)
Cl. A-5-A, Rating Assigned (P)Aaa (sf)
Cl. A-5-X*, Rating Assigned (P)Aaa (sf)
Cl. A-6, Rating Assigned (P)Aaa (sf)
Cl. A-6-A, Rating Assigned (P)Aaa (sf)
Cl. A-6-X*, Rating Assigned (P)Aaa (sf)
Cl. A-7, Rating Assigned (P)Aaa (sf)
Cl. A-7-A, Rating Assigned (P)Aaa (sf)
Cl. A-7-X*, Rating Assigned (P)Aaa (sf)
Cl. A-8, Rating Assigned (P)Aaa (sf)
Cl. A-8-A, Rating Assigned (P)Aaa (sf)
Cl. A-8-X*, Rating Assigned (P)Aaa (sf)
Cl. A-9, Rating Assigned (P)Aaa (sf)
Cl. A-9-A, Rating Assigned (P)Aaa (sf)
Cl. A-9-X*, Rating Assigned (P)Aaa (sf)
Cl. A-10, Rating Assigned (P)Aaa (sf)
Cl. A-10-A, Rating Assigned (P)Aaa (sf)
Cl. A-10-X*, Rating Assigned (P)Aaa (sf)
Cl. A-11, Rating Assigned (P)Aaa (sf)
Cl. A-11-A, Rating Assigned (P)Aaa (sf)
Cl. A-11-AI*, Rating Assigned (P)Aaa (sf)
Cl. A-11-B, Rating Assigned (P)Aaa (sf)
Cl. A-11-BI*, Rating Assigned (P)Aaa (sf)
Cl. A-11-X*, Rating Assigned (P)Aaa (sf)
Cl. A-12, Rating Assigned (P)Aaa (sf)
Cl. A-13, Rating Assigned (P)Aaa (sf)
Cl. A-14, Rating Assigned (P)Aa1 (sf)
Cl. A-15, Rating Assigned (P)Aa1 (sf)
Cl. A-16, Rating Assigned (P)Aaa (sf)
Cl. A-17, Rating Assigned (P)Aaa (sf)
Cl. A-X-1*, Rating Assigned (P)Aaa (sf)
Cl. A-X-2*, Rating Assigned (P)Aaa (sf)
Cl. A-X-3*, Rating Assigned (P)Aaa (sf)
Cl. A-X-4*, Rating Assigned (P)Aa1 (sf)
Cl. B-1, Rating Assigned (P)Aa3 (sf)
Cl. B-1-A, Rating Assigned (P)Aa3 (sf)
Cl. B-1-X*, Rating Assigned (P) Aa3 (sf)
Cl. B-2, Rating Assigned (P)A3 (sf)
Cl. B-2-A, Rating Assigned (P)A3 (sf)
Cl. B-2-X*, Rating Assigned (P)A3 (sf)
Cl. B-3, Rating Assigned (P)Baa3 (sf)
Cl. B-3-A, Rating Assigned (P)Baa3 (sf)
Cl. B-3-X*, Rating Assigned (P)Baa3 (sf)
Cl. B-4, Rating Assigned (P)Ba3 (sf)
Cl. B-5, Rating Assigned (P)B3 (sf)
Cl. B-5-Y, Rating Assigned (P)B3 (sf)
Cl. B-X*, Rating Assigned (P)Baa1 (sf)
*Reflects Interest-Only Classes
Summary Credit Analysis and Rating Rationale
Moody’s expected loss for this pool in a baseline scenario-mean is 0.51% and reaches 5.54% at a stress level consistent with our Aaa ratings.
The rapid spread of the coronavirus outbreak, the government measures put in place to contain it and the deteriorating global economic outlook, have created a severe and extensive credit shock across sectors, regions and markets. Our analysis has considered the effect on the performance of US RMBS from the collapse in the US economic activity in the second quarter and a gradual recovery in the second half of the year. However, that outcome depends on whether governments can reopen their economies while also safeguarding public health and avoiding a further surge in infections. The contraction in economic activity in the second quarter was severe and the overall recovery in the second half of the year will be gradual. However, there are significant downside risks to our forecasts in the event that the pandemic is not contained and lockdowns have to be reinstated. As a result, the degree of uncertainty around our forecasts is unusually high. As a result, the degree of uncertainty around our forecasts is unusually high. We increased our median expected losses by 15% (10.5% for the mean) and our Aaa losses by 5% to reflect the likely performance deterioration resulting from of a slowdown in US economic activity in 2020 due to the COVID-19 outbreak.
We regard the COVID-19 outbreak as a social risk under our ESG framework, given the substantial implications for public health and safety.
Servicing practices, including tracking COVID-19-related loss mitigation activities, may vary among servicers in the transaction. These inconsistencies could impact reported collateral performance and affect the timing of any breach of performance triggers, servicer advance recoupment, the extent of servicer fees, and additional expenses for R&W breach reviews when loans become seriously delinquent.
We may infer and extrapolate from the information provided based on this or other transactions or industry information, or make stressed assumptions.
We base our ratings on the certificates on the credit quality of the mortgage loans, the structural features of the transaction, our assessments of the origination quality and servicing arrangement, the strength of the third-party due diligence and the R&W framework of the transaction.
JPMMT 2020-5 is a securitization of a pool of 944 fully-amortizing fixed-rate mortgage loans with a total balance of $749,907,343 as of the cut-off date, with a weighted average (WA) remaining term to maturity of 356 months, and a WA seasoning of 4 months. The WA current FICO score is 767 and the WA original combined loan-to-value ratio (CLTV) is 69.1%. The characteristics of the loans underlying the pool are generally comparable to those of other JPMMT transactions backed by prime mortgage loans that we have rated.
We consider JPMMAC's aggregation platform to be adequate and we did not apply a separate loss-level adjustment for aggregation quality. In addition to reviewing JPMMAC as an aggregator, we have also reviewed the originator(s) contributing a significant percentage of the collateral pool (above 10%). Additionally, we did not make an adjustment for GSE-eligible loans, since those loans were underwritten in accordance with GSE guidelines. We increased our base case and Aaa loss expectations for certain originators of non-conforming loans where we do not have clear insight into the underwriting practices, quality control and credit risk management. In addition, we reviewed the loan performance for some of these originators. We viewed the loan performance as comparable to the GSE loans due to consistently low delinquencies, early payment defaults and repurchase requests. United Shore (originator): Loans originated by United Shore have been included in several prime jumbo securitizations that we have rated. United Shore originated approximately 53.0% of the mortgage loans by pool balance (59.0% for non-conforming loans and 29.0% for conforming loans). The majority of these loans were originated under United Shore's High Balance Nationwide program which are processed using the Desktop Underwriter (DU) automated underwriting system, and are therefore underwritten to Fannie Mae guidelines. The loans receive a DU Approve Ineligible feedback due to the loan amount only. We made a negative origination adjustment (i.e. we increased our loss expectations) for United Shore's loans due mostly to 1) the lack of statistically significant program specific loan performance data and 2) the fact that United Shore's High Balance Nationwide program is unique and fairly new and no performance history has been provided to Moody's on these loans. Under this program, the origination criteria rely on the use of GSE tools (DU/LP) for prime-jumbo non-conforming loans, subject to Qualified Mortgage (QM) overlays. More time is needed to assess United Shore's ability to consistently produce high-quality prime jumbo residential mortgage loans under this program.
We consider the overall servicing arrangement for this pool to be adequate given the strong servicing arrangement of the servicers, as well as the presence of a strong master servicer to oversee the servicers. The servicers are contractually obligated to the issuing entity to service the related mortgage loans. However, the servicers may perform their servicing obligations through sub-servicers. In this transaction, Nationstar Mortgage LLC (Nationstar Mortgage Holdings Inc. rated B2) will act as the master servicer. The servicers are required to advance principal and interest on the mortgage loans. To the extent that the servicers are unable to do so, the master servicer will be obligated to make such advances. In the event that the master servicer, Nationstar, is unable to make such advances, the securities administrator, Citibank (rated Aa3) will be obligated to do so to the extent such advance is determined by the securities administrator to be recoverable.
COVID-19 Impacted Borrowers
Per our conversation with multiple servicers in the market, the process related to borrower relief efforts for COVID-19 impacted loans is generally similar across servicers. Typically, the borrower must contact the servicer and attest they have been impacted by a COVID-19 hardship and that they require payment assistance. The servicer will offer an initial forbearance period to the borrower, which can be extended if the borrower attests that they require additional payment assistance. At the end of the forbearance period, if the borrower is unable to make the forborne payments on such mortgage loan as a lump sum payment or does not enter into a repayment plan, the servicer may defer the missed payments, which could be added as a non-interest-bearing payment due at the end of the loan term. If the borrower can no longer afford to make payments in line with the original loan terms, the servicer would typically work with the borrower to modify the loan (although the servicer may utilize any other loss mitigation option permitted under the pooling and servicing agreement with respect to such mortgage loan at such time or any time thereafter).
Servicing Fee Framework
The servicing fee for loans serviced by JPMCB (and Shellpoint, until the servicing transfer date), loanDepot and United Shore will be based on a step-up incentive fee structure with a monthly base fee of $40 per loan and additional fees for delinquent or defaulted loans. Johnson Bank, NewRez, Quicken, and USAA will be paid a monthly flat servicing fee equal to one-twelfth of 0.25% of the remaining principal balance of the mortgage loans. By establishing a base servicing fee for performing loans that increases when loans become delinquent, the fee-for-service structure aligns monetary incentives to the servicer with the costs of servicing. The servicer receives higher fees for labor-intensive activities that are associated with servicing delinquent loans, including loss mitigation, than they receive for servicing a performing loan, which is less costly and labor-intensive. The fee-for-service compensation is reasonable and adequate for this transaction because it better aligns the servicer's costs with the deal's performance. Furthermore, higher fees for the more labor-intensive tasks make the transfer of these loans to another servicer easier, should that become necessary. The incentive structure includes an initial monthly base servicing fee of $40 for all performing loans and increases according to a pre-determined delinquent and incentive servicing fee schedule. The delinquent and incentive servicing fees will be deducted from the available distribution amount and Class B-6 net WAC. The transaction does not have a servicing fee cap, so, in the event of a servicer replacement, any increase in the base servicing fee beyond the current fee will be paid out of the available distribution amount.
Four third party review firms, AMC Diligence, LLC (AMC), Clayton Services LLC (Clayton), Inglet Blair LLC (IB)and Opus Capital Markets Consultants, LLC (Opus) (collectively, TPR firms) verified the accuracy of the loan-level information that we received from the sponsor. These firms conducted detailed credit, valuation, regulatory compliance and data integrity reviews on 100% of the mortgage pool. The TPR results indicated compliance with the originators' underwriting guidelines for majority of loans, no material compliance issues, and no appraisal defects. Overall, the loans that had exceptions to the originators' underwriting guidelines had strong documented compensating factors such as low DTIs, low LTVs, high reserves, high FICOs, or clean payment histories. The TPR firms also identified minor compliance exceptions for reasons such as inadequate RESPA disclosures (which do not have assignee liability) and TILA/RESPA Integrated Disclosure (TRID) violations related to fees that were out of variance but then were cured and disclosed. In terms of valuation, there are three loans that have property inspection waiver (PIW), of which original valuation reference to AVM or other alternative valuations, instead of appraisal or sales price. These PIW loans are all GSE-eligible refinance loans, underwritten through AUS. We assessed the PIW process and criteria, and considered it less robust than traditional appraisal, and tested the pool loss sensitivity on the property valuation volatilities of these three loans. However, potential impact is de minimis due to the low percentage of PIW loans in pool.
JPMMT 2020-5's R&W framework is in line with that of other JPMMT transactions where an independent reviewer is named at closing, and costs and manner of review are clearly outlined at issuance. Our review of the R&W framework considers the financial strength of the R&W providers, scope of R&Ws (including qualifiers and sunsets) and enforcement mechanisms. The R&W providers vary in financial strength. The creditworthiness of the R&W provider determines the probability that the R&W provider will be available and have the financial strength to repurchase defective loans upon identifying a breach. An investment grade rated R&W provider lends substantial strength to its R&Ws. We analyze the impact of less creditworthy R&W providers case by case, in conjunction with other aspects of the transaction. The R&W providers are unrated and/or financially weaker entities. We applied an adjustment to the loans for which these entities provided R&Ws. For loans that JPMMAC acquired via the MAXEX Clearing LLC (MaxEx) platform, MaxEx under the assignment, assumption and recognition agreement with JPMMAC, will make the R&Ws. The R&Ws provided by MaxEx to JPMMAC and assigned to the trust are in line with the R&Ws found in other JPMMT transactions, hence we applied the same adjustment as other loans in the pool. No other party will backstop or be responsible for backstopping any R&W providers who may become financially incapable of repurchasing mortgage loans. With respect to the mortgage loan R&Ws made by such originators or the aggregator, as applicable, as of a date prior to the closing date, JPMMAC will make a "gap" representation covering the period from the date as of which such R&W is made by such originator or the aggregator, as applicable, to the cut-off date or closing date, as applicable. Additionally, no party will be required to repurchase or substitute any mortgage loan until such loan has gone through the review process.
Trustee and Master Servicer
The transaction Delaware trustee is Citibank. The custodian's functions will be performed by Wells Fargo Bank, N.A. The paying agent and cash management functions will be performed by Citibank. Nationstar, as master servicer, is responsible for servicer oversight, servicer termination and for the appointment of any successor servicer. In addition, Nationstar is committed to act as successor if no other successor servicer can be found. The master servicer is required to advance principal and interest if the servicer fails to do so. If the master servicer fails to make the required advance, the securities administrator is obligated to make such advance.
Tail Risk & Subordination Floor
This deal has a standard shifting interest structure, with a subordination floor to protect against losses that occur late in the life of the pool when relatively few loans remain (tail risk). When the total senior subordination is less than 0.70% of the original pool balance, the subordinate bonds do not receive any principal and all principal is then paid to the senior bonds. The subordinate bonds benefit from a floor as well. When the total current balance of a given subordinate tranche plus the aggregate balance of the subordinate tranches that are junior to it amount to less than 0.65% of the original pool balance, those tranches that are junior to it do not receive principal distributions. The principal those tranches would have received is directed to pay more senior subordinate bonds pro-rata. In addition, until the aggregate class principal amount of the senior certificates (other than the interest only certificates) is reduced to zero, if on any distribution date, the aggregate subordinate percentage for such distribution date drops below 6.00% of current pool balance, the senior distribution amount will include all principal collections and the subordinate principal distribution amount will be zero. We calculate the credit neutral floors for a given target rating as shown in our principal methodology. The senior subordination floor is equal to an amount which is the sum of the balance of the six largest loans at closing multiplied by the higher of their corresponding MILAN Aaa severity or a 35% severity. The credit neutral floor for Aaa rating is $4,914,711. The senior subordination floor of 0.70% and subordinate floor of 0.65% are consistent with the credit neutral floors for the assigned ratings.
The transaction has a shifting interest structure in which the senior bonds benefit from a number of protections. Funds collected, including principal, are first used to make interest payments to the senior bonds. Next, principal payments are made to the senior bonds. Next, available distribution amounts are used to reimburse realized losses and certificate write-down amounts for the senior bonds (after subordinate bond have been reduced to zero i.e. the credit support depletion date). Finally, interest and then principal payments are paid to the subordinate bonds in sequential order. Realized losses are allocated in a reverse sequential order, first to the lowest subordinate bond. After the balance of the subordinate bonds is written off, losses from the pool begin to write off the principal balance of the senior support bond, and finally losses are allocated to the super senior bonds. In addition, the pass-through rate on the bonds (other than the Class A-R Certificates) is based on the net WAC as reduced by the sum of (i) the reviewer annual fee rate and (ii) the capped trust expense rate. In the event that there is a small number of loans remaining, the last outstanding bonds' rate can be reduced to zero. The Class A-11, Class A-11-A, Class A-11-B Certificates will have a pass-through rate that will vary directly with the rate of one-month LIBOR and the Class A-11-X Certificates will have a pass-through rate that will vary inversely with the rate of one-month LIBOR. If the securities administrator notifies the depositor that it cannot determine one-month LIBOR in accordance with the methods prescribed in the sale and servicing agreement and a benchmark transition event has not yet occurred, one-month LIBOR for such accrual period will be one-month LIBOR as calculated for the immediately preceding accrual period. Following the occurrence of a benchmark transition event, a benchmark other than one-month LIBOR will be selected for purposes of calculating the pass-through rate on the Class A-11, Class A-11-A, Class A-11-B certificates.
Factors that would lead to an upgrade or downgrade of the ratings:
Levels of credit protection that are insufficient to protect investors against current expectations of loss could drive the ratings down. Losses could rise above Moody's original expectations as a result of a higher number of obligor defaults or deterioration in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market. Other reasons for worse-than-expected performance include poor servicing, error on the part of transaction parties, inadequate transaction governance and fraud.
Levels of credit protection that are higher than necessary to protect investors against current expectations of loss could drive the ratings of the subordinate bonds up. Losses could decline from Moody's original expectations as a result of a lower number of obligor defaults or appreciation in the value of the mortgaged property securing an obligor's promise of payment. Transaction performance also depends greatly on the US macro economy and housing market.
The principal methodology used in rating all classes except interest-only classes was "Moody's Approach to Rating US RMBS Using the MILAN Framework" published in April 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1201303. The methodologies used in rating interest-only classes were "Moody's Approach to Rating US RMBS Using the MILAN Framework" published in April 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1201303 and "Moody's Approach to Rating Structured Finance Interest-Only (IO) Securities" published in February 2019 and available at https://www.moodys.com/research/Moodys-Approach-to-Rating-Structured-Finance-Interest-Only-IO-Securities--PBS_1111179. Please see the list of ratings at the top of this announcement to identify which classes are interest-only (indicated by the *). Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of these methodologies.
In addition, Moody’s publishes a weekly summary of structured finance credit ratings and methodologies, available to all registered users of our website, www.moodys.com/SFQuickCheck.
For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004. Further information on the representations and warranties and enforcement mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1237792 . The analysis relies on an assessment of collateral characteristics to determine the collateral loss distribution, that is, the function that correlates to an assumption about the likelihood of occurrence to each level of possible losses in the collateral. As a second step, Moody's evaluates each possible collateral loss scenario using a model that replicates the relevant structural features to derive payments and therefore the ultimate potential losses for each rated instrument. The loss a rated instrument incurs in each collateral loss scenario, weighted by assumptions about the likelihood of events in that scenario occurring, results in the expected loss of the rated instrument. Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring. For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com. For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody’s Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.
Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s) announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody’s legal entity that has issued the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.
Dmytro Voytovych Associate Analyst Structured Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Sonny Weng Vice President - Senior Analyst Structured Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653
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Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody’s Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody’s Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.