The Citigroup Mortgage Loan Trust 2021-INV3 is preparing to issue approximately $ 236.6 million in mortgage-backed securities, secured by compliant fixed-rate loans to investors, some of whom have multiple mortgages.
DBRS Morningstar noted that mortgages are largely on compliant single-family homes, 65.3%, with another quarter of mortgages issued on homes with two to four families.
Citigroup Global Markets is the original purchaser of the notes in the transaction, for which Citigroup’s real estate company is the loan seller and the transaction sponsor. PennyMac Corp. acts as the vendor, initiator and initial vendor, according to DBRS.
The transaction is based on a first ranking capital structure with variable interest.
While mortgage forbearance plans were common during the COVID-19-induced recession, none of the borrowers in Citigroup Mortgage 2021-INV3’s collateral pool took advantage of this type of relief, DBRS said.
The deal has other strengths, according to DBRS, such as high-quality credit attributes such as low loan-to-value ratios, strong borrower credit, and full documentation on all loans. Borrowers have a weighted average FICO (WA) score of 762 and a debt-to-income ratio of 35.1%.
The borrowers are also highly qualified, DBRS said. All borrowers have annual incomes of approximately $ 219,377 and approximately $ 235,982 in liquid reserves on average.
While the collateral pool contains around 764 compliant loans that Fannie Mae or Freddie Mac, government-sponsored companies (GSEs) have filtered with their automated underwriting systems, DBRS sees the dominance of owner-investors as a challenge for the portfolio. Investment properties present a higher risk of default than properties occupied by their owner. In addition, 25 of the investor borrowers have multiple properties, representing 58 loans, or 7.3% of the pool.
Valuations of real estate guarantees were not uniformly rigorous, suggests DBRS, noting that GSEs have granted valuation waivers for a moderate amount of loans, 15%. Also, some loans have been approved with an outside appraisal only at the origin, where the home appraiser observes the property from the street.
California is the state with the greatest geographic concentration, at 36.6%; followed by Washington with 5.9% and Arizona with 5.6%.
DBRS expects to assign “AAA” ratings to most Notes.