DBRS, Inc. (DBRS) finalized its provisional ratings on the following Mortgage-Backed Notes, Series 2018-RP2 (the Notes) issued by Citigroup Mortgage Loan Trust 2018-RP2 (the Trust):
-- $204.8 million Class A-1 at AAA (sf)
-- $204.8 million Class A-IO1 at AAA (sf)
-- $204.8 million Class A at AAA (sf)
Class A-IO1 Notes are interest-only notes. The class balance represents a notional amount.
Class A Notes are exchangeable notes. This class can be exchanged for combinations of initial exchangeable notes as specified in the offering documents.
The AAA (sf) ratings on the Notes reflect the 40.25% of credit enhancement provided by subordinated Notes in the pool.
Other than the specified classes above, DBRS does not rate any other classes in this transaction.
This transaction is a securitization of a portfolio of seasoned performing and re-performing first-lien residential mortgages. The Notes are backed by 1,139 loans with a total principal balance of $342,795,260 as of the Cut-Off Date (February 28, 2018).
The loans are approximately 139 months seasoned. As of the Cut-Off Date, all loans are current, including 2.5% bankruptcy-performing loans. Approximately 36.3% and 90.2% of the mortgage loans have been zero times 30 days delinquent for the past 24 months and 12 months, respectively, under the Mortgage Bankers Association delinquency method.
The portfolio contains 85.9% modified loans. The modifications happened more than two years ago for 51.5% of the modified loans. Six hundred and twenty-nine mortgages have aggregate non-interest-bearing deferred amounts of $36,167,466. Included in the deferred amounts are proprietary principal forgiveness and Home Affordable Modification Program principal reduction alternative amounts (collectively, PRA amounts) of $1,999,572. The non-PRA amounts of $34,167,894 comprise approximately 10.0% of the total principal balance.
The Sponsor and Seller, Citigroup Global Markets Realty Corp. (CGMRC), acquired the mortgage loans from various sellers between May 2014 and November 2017, and will contribute the loans to the Trust through an affiliate, Citigroup Mortgage Loan Trust Inc. (the Depositor). As the Sponsor, CGMRC or one of its majority-owned affiliates will acquire and retain a 5% eligible vertical interest in each class of Notes (other than the Class R Notes) to satisfy the credit risk retention requirements. The loans were originated and previously serviced by various entities through purchases in the secondary market. As of the Cut-Off Date, the loans are serviced by Fay Servicing, LLC.
There will not be any advancing of delinquent principal or interest on any mortgages by the Servicer or any other party to the transaction; however, the Servicer is obligated to make advances in respect of homeowner association fees, taxes and insurance as well as reasonable costs and expenses incurred in the course of servicing and disposing of properties.
The transaction employs a sequential-pay cash flow structure. Principal proceeds can be used to cover interest shortfalls on the Notes, but such shortfalls on Class M-2 and more subordinate principal and interest (P&I) bonds will not be paid from principal proceeds until the more senior classes are retired.
The lack of P&I advances on delinquent mortgages may increase the possibility of periodic interest shortfalls to the Noteholders; however, principal proceeds can be used to pay interest to the Notes sequentially and subordination levels are greater than expected losses for the rated Notes, which may provide for timely payment of interest to the rated Notes.
The ratings reflect transactional strengths that include underlying assets that demonstrate improving performance in the recent past and a strong representations and warranties (R&W) provider (CGMRC). Additionally, a comprehensive third-party due diligence review was performed on the portfolio with respect to regulatory compliance, servicing comments, data integrity, payment histories and title and tax review. Updated broker price opinions, desk appraisals or 2055 values were provided for 100% of the pool; however, reconciliations were not performed on the updated values.
The transaction employs a R&W framework that includes certain weaknesses such as knowledge qualifiers, a fraud representation that is limited to the time period when the Seller owned the loans and carveouts for loans with known findings or unavailable information. Mitigating factors include (1) a financially strong R&W provider (CGMRC), (2) a comprehensive due diligence review, (3) automatic or designated breach review triggers dependent on certain conditions and (4) significant loan seasoning and relatively clean performance history in recent years.
The DBRS ratings of AAA (sf) address the timely payment of interest and full payment of principal by the legal final maturity date in accordance with the terms and conditions of the related Notes.
The full description of the strengths, challenges and mitigating factors are detailed in the related report.
All figures are in U.S. dollars unless otherwise noted.
The principal methodologies are RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, Assessing U.S. RMBS Pools Under the Ability-to-Repay Rules, Unified Interest Rate Model for Rating U.S. Structured Finance Transactions, Third-Party Due Diligence Criteria for U.S. RMBS Transactions, Representations and Warranties Criteria for U.S. RMBS Transactions, Operational Risk Assessment for U.S. RMBS Originators, Operational Risk Assessment for U.S. RMBS Servicers and Legal Criteria for U.S. Structured Finance, which can be found on dbrs.com under Methodologies.
The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
Please see the related appendix for additional information regarding sensitivity of assumptions used in the rating process.
The full report providing additional analytical detail is available by clicking on the link under Related Documents or by contacting us at email@example.com.