Citigroup Mortgage Loan Trust 2021-INV3 is preparing to issue $ 236.6 million of mortgage-backed securities backed by compliant fixed-rate loans to investors, some of whom have multiple mortgages.
DBRS Morningstar found that the majority of the mortgages are on compliant single-family homes (65.3%), with an additional quarter of mortgages being on two- to four-family homes.
Citigroup Global Markets is the first bond buyer in the transaction, for which Citigroup real estate company is the loan seller and deal sponsor. PennyMac Corp. acts according to DBRS as first seller, originator and servicer.
The transaction is based on a senior subordinated capital structure with variable interest rates.
While the COVID-19-induced recession were common deferral plans for mortgage payments, none of the borrowers in Citigroup Mortgage 2021-INV3’s collateral pool took advantage of this type of relief, DBRS said.
According to DBRS, the transaction has other strengths, such as high-quality credit characteristics such as low loan-to-value ratios, strong borrower loans and full documentation of all loans. Borrowers have a weighted average (WA) FICO score of 762 and a debt level of 35.1%.
Borrowers are also highly skilled, DBRS said. All borrowers have an average annual income of about $ 219,377 and about $ 235,982 in cash reserves.
While the collateral pool contains around 764 compliant loans that either Fannie Mae or Freddie Mac, the government-sponsored corporations (GSE) have reviewed with their automated underwriting systems, DBRS views investor-owner dominance as a challenge to the portfolio. Investment properties have a higher risk of default than owner-occupied properties. Also, 25 of the investor borrowers own multiple properties, making up 58 loans, or 7.3% of the pool.
The ratings of the property collateral were not consistently rigorous, suggests DBRS, noting that the GSEs granted a rating waiver for a moderate loan amount of 15%. In addition, some loans were approved when granted with an external-only assessment, in which the appraiser observes the property from the street.
California is the state with the greatest geographic concentration at 36.6%; followed by Washington with 5.9% and Arizona with 5.6%.
DBRS expects to give most of its debt securities an ‘AAA’ rating.