Citigroup plans to issue a non-agency residential mortgage backed security, a person with the bank confirmed.

The bank declined to discuss further details on the deal. The deal, called Series 2013-J1  Mortgage Pass-Through Certificates, will be sized at $210 million and 44% of the mortgage pool is made up of mortgage origination from Nationstar Mortgage.

Loans acquired from Stearns Lending account for 28.5% of  the pool, 12.3% of the pool was acquired from Freedom Mortgage , Fifth Third Mortgage loans make up 7.5%, Real Estate Mortgage Network loans account  for 5.4% and  2.7% come from RMR Financial.

DBRS has assigned preliminary ratings to the deal called,   

The structure will offer investors $189.5 million super senior, ‘AAA’ notes. It also offers a $6.8 million ‘AAA’ –rated, class A-2 tranche. 

Further down the credit curve, the structure is offering  $2.2 million of ‘AA’-rated class B-1 notes; $2.1 million of ‘A’-rated class B-2 notes; $735,000 of ‘BBB’-rated class B-3 notes; and $5.2 million of ‘BB’-rated class B-4 notes.

The notes are backed by 274 prime residential mortgage loans with a total principal balance of $209,953,196. The loans will be serviced by Nationstar Mortgage LLC  and Fifth Third Mortgage Company.

Deutsche Bank National Trust Company will act as the Trust Administrator and Custodian.    

“Compared to other recently-issued prime jumbo transactions, this portfolio contains a very strong FICO score, combined LTV and DTI ratios with much less barbelled distributions,” said DBRS in the presale report.  
The representations and warranties framework calls for an automatic review of seriously delinquent loans, mandatory arbitration and a backstop provided by Citi for representations and warranties.

However, because the backstop is subject to certain sunset provisions that give consideration to prior loan performance .  DBRS said that because of “the limited operating history and the weak financial strength of certain originators and the sunset provisions of the sponsor backstop”, additional penalties and credit enhancement protections were required on the notes.

The deal come as non-agency RMBS issuance has slowed Shellpoint pulled what would have been its second RMBS deal of 2013, Shellpoint Asset Funding Trust (“SAFT”) 2013-2, from the market last week in favor of selling the underlying whole loans. The issuer said it made the decision based on the “substantial pricing disconnect” between the whole loan and new issue RMBS secondary markets. 

According to Standard & Poor’s, year-to-date, non-agency RMBS issuance is $16.5 billion, consisting of $12.2 billion prime jumbo, $2.1 billion seasoned subprime and $2.2 billion non-performing deals. “We expect overall issuance to remain under $20bn in 2013,” said analysts.  



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