The Citigroup Mortgage Loan Trust 2021-INV3 is preparing to issue about $236.6 million in mortgage-backed securities, collateralized by conforming, fixed-rate loans made to investors, some of whom are carrying multiple mortgages.
DBRS Morningstar noted that the mortgages are made largely on conforming single-family homes, 65.3%, with another quarter of the mortgages made to two- to four-family homes.
Citigroup Global Markets is the initial note purchaser on the deal, for which Citigroup’s realty corporation is the loan seller and deal sponsor. PennyMac Corp. is acting as the initial seller, originator and servicer, according to DBRS.
The transaction is based on a senior-subordinate, shifting-interest capital structure.
While mortgage payment forbearance plans were common during the COVID-19 induced recession, none of the borrowers in Citigroup Mortgage 2021-INV3’s collateral pool availed themselves of that kind of relief, DBRS said.
The deal features other strengths, according to DBRS, such as high-quality credit attributes such as low loan-to-value ratios, strong borrower credit and full documentation on all of the loans. Borrowers have a weighted average (WA) FICO score of 762, and a 35.1% debt-to-income ratio.
Borrowers are also highly qualified, DBRS said. All borrowers have annual incomes of about $219,377, and about $235,982 in liquid reserves on average.
While the collateral pool contains about 764 conforming loans that either Fannie Mae or Freddie Mac, the government sponsored enterprises (GSE) had screened with their automated underwriting systems, DBRS considers the dominance of investor owners as a challenge to the portfolio. Investment owned properties have a greater risk of default than owner-occupied properties. Also, 25 of the investor borrowers have multiple properties, which accounts for 58 loans, or 7.3% of the pool.
Appraisals on the property collateral were not uniformly rigorous, DBRS suggests, noting that the GSEs have granted appraisal waivers to a moderate amount of loans, 15%. Also, some loans were approved with an exterior-only appraisal at origination, where the home appraiser observes the property from the street.
California accounts for the state with the largest geographic concentration, at 36.6%; followed by Washington, with 5.9% and Arizona, with 5.6%.
DBRS expects to assign ‘AAA’ ratings to most of the notes.
