Citigroup Global Markets Realty Corp. is in the market with a $207.6 million deal backed by prime residential mortgages, according to presales from DBRS and Fitch Ratings.
Split into a number of tranches, Citigroup Mortgage Loan Trust 2014-J2 securitizes mortgages from an array of originators. Stearns Lending is the largest contributor to the pool, accounting for 36.2%; next is Chicago Mortgage Solutions Corporation d/b/a Interbank Mortgage Company, with 18.6%; and, after that, Nationstar Mortgage, with 9.9%.
Fay Servicing will service the bulk of the loans, some 92.4%. PennyMac Corp. will service its own batch of loans, equal to 7.6%.
The deal includes super-senior tranches. Sized at $129.2 million, the super-senior Class A-1A tranche is preliminarily rated triple-A by DBRS and Fitch. The super-senior A-1B notes for a total $51.8 million is also triple-A at the two agencies.
DBRS pointed out that some of the originators in the deal might have a limited track record. Under stress they also may find it difficult to repurchase loans if there are breaches of representations and warranties, which basically state that loans were properly underwritten.
Mitigating this risk is a reps & warranties backstop from Citigroup Global Market Realty that goes into effect in a number of circumstances, though it does not last through the entire life of the deal.
While borrowers in the pool are deemed low risk, DBRS pointed out that they are not as solid as previous deals off the Citigroup Mortgage Loan Trust shelf.
The weighted average (WA) FICO score of the borrowers in Citi’s 2014-J2 deal, for instance, is 761, a bit lower than the 770 for the previous transaction 2014-J1 and 774 for the one before that, 2013-J1. The WA original combined loan-to-value ratio went up as well, reaching 71.1% in the current deal, from 68.6% previously and 67.6% in last year’s transaction.
Some 71.7% of the loan pool behind 2014-J2 consist of qualified mortgages (QM) and the remaining 28.3% is not subject to QM.
Citigroup is the underwriter on the deal.