The private banking arm of Citigroup is about to issue its very first MBS deal, inaugurating what is likely to be a regular issuance program securitizing the "super-jumbo" hybrid adjustable-rate mortgages (ARMs) of Citibank's private elite class of high-net-worth clients - some with single mortgage loans as high as $700,000.

The first such deal, a securitization of approximately $487 million of 5/1 hybrid ARMs, is set to close May 30, sources said. The prospectus was not published as of press time last Thursday, but it was expected to be printed either Friday or early this week.

"This is the first MBS transaction to come out of that pocket of the institution," said Peter DiMartino, the head of asset-backed research at Salomon Smith Barney. "And it looks as though they are positioning themselves as a programmatic issuer."

Whereas typical jumbo ARM deals have average loan sizes of between $300,000 and $500,000 per mortgage, this "super-jumbo" deal will securitize mortgages of $600,000 and greater. The average worth of the clients whose mortgages are involved is approximately $40 million.

"These are all Citi-originated mortgages - no brokers involved," DiMartino added. Forty percent of the pool is from the New York area, and 22% is from California. The deal has an average loan size of $629,000 and an average LTV of 63 - lower than typical for a mortgage transaction.

"Citigroup wants to create more balance-sheet for possible acquisitions," said an outside source knowledgable about the transaction. "By moving these assets off balance sheet, it creates more balance-sheet strength, giving them other ways to use their capital."

Salomon's mortgage finance unit has done similar deals in the past, such as a super-jumbo ARM securitization completed last October for First Republic. That deal, however, was a securitization of COFI product off of one-year CMT and Libor.

However, hybrid ARM securitizations have become much more prevalent this year, sources say, as a result of rates coming down and the build-up of banks' balance sheets, particular 5/1 hybrid ARMs.

Super-jumbo securitizations are sporadic, however, and there are only a few institutions that issue them, including the Boston Company (a unit of Mellon Bank), First Republic, as well as PNC and Banc of America, although the last two institutions usually securitize loans in the range of $400,000 to $450,000, sources noted.

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