A portfolio of 1,804 modified loans will secure the latest issuance from Citigroup Mortgage Loan Trust, which intends to raise some $476.5 million in notes from the capital markets.
Virtually all of the mortgages in the underlying pool of loans have about 149 months of seasoning, and some 98.3% are current. Morningstar | DBRS considers some 61.6% of the pool to had been modified about two years ago, but in the context of the report, the rating agency did not consider deferrals or forbearance because of hardships stemming from the COVID-19 pandemic.
Citigroup Global Markets Realty Corp., is sponsoring the deal, Citigroup Mortgage Loan Trust 2022-RP4. Select Portfolio Servicing will service the loans, and those duties will be transferred from one to three interim servicers on the related dates. The trust, however, will not advance delinquent principal and interest on any mortgages by the servicer or any other party to the transaction.
On a weighted average (WA) basis, the loans have a coupon of 4.09%, a FICO score of 701, original cumulative loan-to-value (CLTV) ratio of 82.6%, and current CLTV of 61.4%, according to DBRS.
DBRS expects to assign a 'AAA' rating to the $383.8 million, class A-1 notes; 'AA' to the $28.5 million, class A-2 notes as well as the $412.4 million, class A-3 notes.
One aspect of the transaction specifies that a directing noteholder can purchase all of the mortgage loans and real-estate owned properties from the issuer, should the aggregate pool balance drop to less than 25% of the balance as of the cut-off date.
Citigroup Mortgage Loan, 2022-RP4, employs a sequential-pay structure, considered a credit strength. Principal collected will pay interest on the classes A-1 and A-2, and then to pay the respective classes until the balances fall to zero, according to DBRS.
Yet the transaction has some potential credit vulnerabilities. The servicer will not advance any principal and interest on mortgages in delinquency, an action that would most likely result in lower loss severities, because the trust will not have to reimburse the advanced funds.
Yet another potentially negative credit aspect of the deal is the percentage of mortgage loans that had been granted relief plans related to COVID-19, 58.0%. Yet even this risk has been mitigated, as about 96.7% of the loans that had been granted pandemic relief have been current for the last six months.
