Citigroup is preparing its first securitization of prime jumbo mortgages of the year, according to rating agency presale reports.  

The deal, Citigroup Mortgage Loan Trust 2014-J1, is backed by a portfolio of 285 fixed-rate 15-year and 30-year prime residential mortgages totaling about $218 million. 

The loans were originated by Stearns Lending Inc., Nationstar Mortgage LLC, Freedom Mortgage Co., and others.

Fitch Ratings assigned preliminary ‘AAA’ ratings to the class A and class B notes, including the notional class A-1O and class A-2O notes.  The $197.22 million class A-1 of super-senior notes benefit from credit enhancement of 9.53%. The $6.92 million of class A-2 notes benefit from credit enhancement of 6.35%. DBRS also gave preliminary triple-A status to all of the class A tranches of notes.

Compared with Citigroup’s previous residential mortgage securitization, CMLTI 2013-J1, the weighted average seasoning for the loans has increased from four months to eleven months.  The number of loans also increased from 274 in the previous deal. However Fitch still considers this larger number to be a risk factor; it applies a penalty adjustment for pools with a weighted average number of loans of less than 300, which, for this transaction, was approximately 1.09x the pool's lifetime default expectations, to account for the small loan count risk.

Approximately 12% of the loans in the pool are designated as safe-harbor qualified mortgages (QM), according to Fitch. This status was verified by the third-party due diligence firm. The remainder of the loans were made before the qualified mortgage rule took effect on Jan. 10.

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