DBRS Morningstar Finalizes Provisional Ratings on Citigroup Mortgage Loan Trust 2021-INV3

DBRS, Inc. (DBRS Morningstar) finalized the following provisional ratings on the Mortgage Pass-Through Certificates, Series 2021-INV3 (the Certificates) issued by Citigroup Mortgage Loan Trust 2021-INV3:

-- $120.7 million Class A-1 at AAA (sf)
-- $120.7 million Class A-1-IO1 at AAA (sf)
-- $120.7 million Class A-1-IO2 at AAA (sf)
-- $120.7 million Class A-1-IOX at AAA (sf)
-- $120.7 million Class A-1A at AAA (sf)
-- $120.7 million Class A-1-IO3 at AAA (sf)
-- $120.7 million Class A-1-IO1W at AAA (sf)
-- $120.7 million Class A-1-IO2W at AAA (sf)
-- $120.7 million Class A-1W at AAA (sf)
-- $50.3 million Class A-2 at AAA (sf)
-- $50.3 million Class A-2-IO1 at AAA (sf)
-- $50.3 million Class A-2-IO2 at AAA (sf)
-- $50.3 million Class A-2-IOX at AAA (sf)
-- $50.3 million Class A-2A at AAA (sf)
-- $50.3 million Class A-2B at AAA (sf)
-- $50.3 million Class A-2-IO3 at AAA (sf)
-- $50.3 million Class A-2-IO1W at AAA (sf)
-- $50.3 million Class A-2-IO2W at AAA (sf)
-- $50.3 million Class A-2W at AAA (sf)
-- $201.2 million Class A-3 at AAA (sf)
-- $201.2 million Class A-3-IO1 at AAA (sf)
-- $201.2 million Class A-3-IO2 at AAA (sf)
-- $201.2 million Class A-3-IOX at AAA (sf)
-- $201.2 million Class A-3A at AAA (sf)
-- $201.2 million Class A-3B at AAA (sf)
-- $201.2 million Class A-3-IO3 at AAA (sf)
-- $201.2 million Class A-3-IO1W at AAA (sf)
-- $201.2 million Class A-3-IO2W at AAA (sf)
-- $201.2 million Class A-3W at AAA (sf)
-- $15.7 million Class A-4 at AAA (sf)
-- $15.7 million Class A-4-IO1 at AAA (sf)
-- $15.7 million Class A-4-IO2 at AAA (sf)
-- $15.7 million Class A-4-IOX at AAA (sf)
-- $15.7 million Class A-4A at AAA (sf)
-- $15.7 million Class A-4B at AAA (sf)
-- $15.7 million Class A-4-IO3 at AAA (sf)
-- $15.7 million Class A-4-IO1W at AAA (sf)
-- $15.7 million Class A-4-IO2W at AAA (sf)
-- $15.7 million Class A-4W at AAA (sf)
-- $216.9 million Class A-5 at AAA (sf)
-- $216.9 million Class A-5-IO1 at AAA (sf)
-- $216.9 million Class A-5-IO2 at AAA (sf)
-- $216.9 million Class A-5-IOX at AAA (sf)
-- $216.9 million Class A-5A at AAA (sf)
-- $216.9 million Class A-5-IO3 at AAA (sf)
-- $216.9 million Class A-5-IO1W at AAA (sf)
-- $216.9 million Class A-5-IO2W at AAA (sf)
-- $216.9 million Class A-5W at AAA (sf)
-- $30.2 million Class A-6 at AAA (sf)
-- $30.2 million Class A-6-IO1 at AAA (sf)
-- $30.2 million Class A-6-IO2 at AAA (sf)
-- $30.2 million Class A-6-IOX at AAA (sf)
-- $30.2 million Class A-6A at AAA (sf)
-- $30.2 million Class A-6-IO3 at AAA (sf)
-- $30.2 million Class A-6-IO1W at AAA (sf)
-- $30.2 million Class A-6-IO2W at AAA (sf)
-- $30.2 million Class A-6W at AAA (sf)
-- $150.9 million Class A-7 at AAA (sf)
-- $150.9 million Class A-7-IO1 at AAA (sf)
-- $150.9 million Class A-7-IO2 at AAA (sf)
-- $150.9 million Class A-7-IOX at AAA (sf)
-- $150.9 million Class A-7A at AAA (sf)
-- $150.9 million Class A-7B at AAA (sf)
-- $150.9 million Class A-7-IO3 at AAA (sf)
-- $150.9 million Class A-7-IO1W at AAA (sf)
-- $150.9 million Class A-7-IO2W at AAA (sf)
-- $150.9 million Class A-7W at AAA (sf)
-- $80.5 million Class A-8 at AAA (sf)
-- $80.5 million Class A-8-IO1 at AAA (sf)
-- $80.5 million Class A-8-IO2 at AAA (sf)
-- $80.5 million Class A-8-IOX at AAA (sf)
-- $80.5 million Class A-8A at AAA (sf)
-- $80.5 million Class A-8-IO3 at AAA (sf)
-- $80.5 million Class A-8-IO1W at AAA (sf)
-- $80.5 million Class A-8-IO2W at AAA (sf)
-- $80.5 million Class A-8W at AAA (sf)
-- $40.2 million Class A-11 at AAA (sf)
-- $40.2 million Class A-11-IO at AAA (sf)
-- $40.2 million Class A-12 at AAA (sf)
-- $4.7 million Class B-1 at AA (sf)
-- $4.7 million Class B-1-IO at AA (sf)
-- $4.7 million Class B-1-IOX at AA (sf)
-- $4.7 million Class B-1-IOW at AA (sf)
-- $4.7 million Class B-1W at AA (sf)
-- $3.8 million Class B-2 at A (sf)
-- $3.8 million Class B-2-IO at A (sf)
-- $3.8 million Class B-2-IOX at A (sf)
-- $3.8 million Class B-2-IOW at A (sf)
-- $3.8 million Class B-2W at A (sf)
-- $3.4 million Class B-3 at BBB (high) (sf)
-- $3.4 million Class B-3-IO at BBB (high) (sf)
-- $3.4 million Class B-3-IOX at BBB (high) (sf)
-- $3.4 million Class B-3-IOW at BBB (high) (sf)
-- $3.4 million Class B-3W at BBB (high) (sf)
-- $2.8 million Class B-4 at BB (high) (sf)
-- $1.4 million Class B-5 at BB (low) (sf)

Classes A-1-IO1, A-1-IO2, A-1-IOX, A-1-IO3, A-1-IO1W, A-1-IO2W, A-2-IO1, A-2-IO2, A-2-IOX, A-2-IO3, A-2-IO1W, A-2-IO2W, A-3-IO1, A-3-IO2, A-3-IOX, A-3-IO3, A-3-IO1W, A-3-IO2W, A-4-IO1, A-4-IO2, A-4-IOX, A-4-IO3, A-4-IO1W, A-4-IO2W, A-5-IO1, A-5-IO2, A-5-IOX, A-5-IO3, A-5-IO1W, A-5-IO2W, A-6-IO1, A-6-IO2, A-6-IOX, A-6-IO3, A-6-IO1W, A-6-IO2W, A-7-IO1, A-7-IO2, A-7-IOX, A-7-IO3, A-7-IO1W, A-7-IO2W, A-8-IO1, A-8-IO2, A-8-IOX, A-8-IO3, A-8-IO1W, A-8-IO2W, A-11-IO, B-1-IO, B-1-IOX, B-1-IOW, B-2-IO, B-2-IOX, B-2-IOW, B-3-IO, B-3-IOX, and B-3-IOW are interest-only certificates. The class balances represent notional amounts.

Classes A-1A, A-1-IO3, A-1-IO1W, A-1-IO2W, A-1W, A-2A, A-2B, A-2-IO3, A-2-IO1W, A-2-IO2W, A-2W, A-3, A-3-IO1, A-3-IO2, A-3-IOX, A-3A, A-3B, A-3-IO3, A-3-IO1W, A-3-IO2W, A-3W, A-4A, A-4B, A-4-IO3, A-4-IO1W, A-4-IO2W, A-4W, A-5, A-5-IO1, A-5-IO2, A-5-IOX, A-5A, A-5-IO3, A-5-IO1W, A-5-IO2W, A-5W, A-6A, A-6-IO3, A-6-IO1W, A-6-IO2W, A-6W, A-7, A-7-IO1, A-7-IO2, A-7-IOX, A-7A, A-7B, A-7-IO3, A-7-IO1W, A-7-IO2W, A-7W, A-8, A-8-IO1, A-8-IO2, A-8-IOX, A-8A, A-8-IO3, A-8-IO1W, A-8-IO2W, A-8W, A-11, A-11-IO, A-12, B-1-IOW, B-1W, B-2-IOW, B-2W, B-3-IOW, and B-3W are exchangeable certificates. These classes can be exchanged for combinations of initial exchangeable certificates as specified in the offering documents.

Classes A-1, A-2, and A-6 certificates are super-senior certificates. These classes benefit from additional protection from the senior support certificates (Class A-4) with respect to loss allocation.

The AAA (sf) ratings on the Certificates reflect 8.35% of credit enhancement provided by subordinated certificates. The AA (sf), A (sf), BBB (high) (sf), BB (high) (sf), and BB (low) (sf) ratings reflect 6.35%, 4.75%, 3.30%, 2.10%, and 1.50% of credit enhancement, respectively.

Other than the classes specified above, DBRS Morningstar does not rate any other classes in this transaction.

This deal is a securitization of a portfolio of first-lien, fixed-rate, prime conventional investment-property residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 764 loans with a total principal balance of $236,660,840 as of the Cut-Off Date (September 1, 2021).

Similar to the prior CMLTI 2021-INV2 deal, this portfolio consists of conforming mortgages with original terms to maturity of primarily 30 years, acquired by PennyMac Corp. (PMC). The loans were underwritten using an automated underwriting system designated by Fannie Mae or Freddie Mac and were eligible for purchase by such agencies. In addition, the pool contains a moderate concentration of loans (15.0%) that were granted appraisal waivers by the agencies, as well as loans that had exterior-only appraisals at origination (1.5%). In its analysis, DBRS Morningstar applied property value haircuts to such loans, which increased the expected losses on the collateral. Details on the underwriting of conforming loans can be found in the Key Probability of Default Drivers section of the presale.

PMC is the Initial Seller and Servicer of the mortgage loans. Citigroup Global Markets Realty Corp. is the Mortgage Loan Seller and Sponsor of the transaction. Citigroup Mortgage Loan Trust Inc. will act as Depositor of the transaction. U.S. Bank National Association (rated AA (high) with a Stable trend by DBRS Morningstar) will act as the Trust Administrator. U.S. Bank Trust National Association will serve as Trustee, and Deutsche Bank National Trust Company will serve as Custodian.

The transaction employs a senior-subordinate, shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

CORONAVIRUS PANDEMIC IMPACT
The Coronavirus Disease (COVID-19) pandemic and the resulting isolation measures have caused an immediate economic contraction, leading to sharp increases in unemployment rates and income reductions for many consumers. DBRS Morningstar saw increases in delinquencies for many residential mortgage-backed securities (RMBS) asset classes, shortly after the onset of the coronavirus.

Such mortgage delinquencies were mostly in the form of forbearance, which are generally short-term payment reliefs that may perform very differently from traditional delinquencies. At the onset of the coronavirus, because the option to forebear mortgage payments was so widely available, it drove forbearance to a very high level. When the dust settled, coronavirus-induced forbearance in 2020 performed better than expected, thanks to government aid, low loan-to-value ratios, and good underwriting in the mortgage market in general. Across nearly all RMBS asset classes, delinquencies have been gradually trending down in recent months as the forbearance period comes to an end for many borrowers.

As of the Cut-Off Date, no borrower within the pool has been subject to a coronavirus-related forbearance plan with the Servicer.

For more information regarding the economic stress assumed under its baseline scenario, please see the following DBRS Morningstar commentary: “Baseline Macroeconomic Scenarios For Rated Sovereigns,” dated September 8, 2021.

The ratings reflect transactional strengths that include a strong representations and warranties framework, high-quality credit attributes, well-qualified borrowers, structural enhancements, satisfactory third-party due diligence review, and 100% current loans.

The ratings reflect transactional challenges that include 100% investor properties and certain borrowers with multiple mortgages in the securitized pool, loans with government-sponsored entity appraisal waivers, and servicer’s financial capability.

The full description of the strengths, challenges, and mitigating factors is detailed in the related rating report.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The principal methodology is the RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (April 1, 2020), which can be found on dbrsmorningstar.com under Methodologies & Criteria.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482/baseline-macroeconomic-scenarios-application-to-credit-ratings.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar 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 the 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 below or by contacting us at info@dbrsmorningstar.com.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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