DBRS, Inc. (DBRS) has assigned the following provisional ratings to the Mortgage Pass-Through Certificates, Series 2013-J1 issued by Citigroup Mortgage Loan Trust 2013-J1 (the Trust).

-- $ 189.5 million Class A-1# rated at AAA (sf)
-- $ 6.8 million Class A-2 rated at AAA (sf)
-- $ 196.3 million Class A-IO* rated at AAA (sf)
-- $ 2.2 million Class B-1 rated at AA (sf)
-- $ 2.1 million Class B-2 rated at A (sf)
-- $ 735.0 thousand Class B-3 rated at BBB (sf)
-- $ 5.2 million Class B-4 rated at BB (sf)

denotes super senior class. This class benefits from additional protection from the senior support bond (i.e. Class A-2) with respect to loss allocation.

• denotes interest only certificates. The class balances represent notional amounts.

The AAA (sf) ratings on the Certificates reflect 6.50% of credit enhancement provided by subordination. The AA (sf), A (sf), BBB (sf) and BB (sf) ratings reflect 5.45%, 4.45%, 4.10% and 1.60% of credit enhancement, respectively. Other than the specified classes above, DBRS does not rate any other classes in this transaction.

The Certificates are backed by 274 prime residential mortgage loans with a total principal balance of $209,953,196 as of the Cut-off Date (October 1, 2013). The mortgage loans were acquired by Citigroup Global Markets Realty Corp. (“Citi”). The originators for the mortgage pool are Nationstar Mortgage LLC (43.7%), Stearns Lending, Inc. (28.5%), Freedom Mortgage Corporation (12.3%), Fifth Third Mortgage Company (7.5%), Real Estate Mortgage Network, Inc. (5.4%) and RMR Financial, LLC (2.7%).

The loans will be serviced by Nationstar Mortgage LLC (92.5%) and Fifth Third Mortgage Company (7.5%). Deutsche Bank National Trust Company will act as the Trust Administrator and Custodian. The transaction employs a senior-subordinate shifting-interest cash flow structure that is enhanced from a pre-crisis structure.

The ratings reflect transactional strengths that include high quality underlying assets, well qualified borrowers and satisfactory third-party due diligence review. 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. In addition, the pool contains 6.9% 15-year mortgages, no investor loans, no interest only loans and no piggybacks.

The originators provide traditional life-time representations and warranties to the Trust. The enforcement mechanism for breaches of representations includes automatic breach reviews by a third-party reviewer for any seriously delinquent loans, any loans that incur loss upon liquidation and any actual notices provided to the Trust Administrator. Resolution of disputes are ultimately subject to determination in an arbitration proceeding. The loans (except for Fifth Third-originated loans) also benefit from representations and warranties back-stopped by the sponsor, Citi, a wholly owned subsidiary of Citigroup Inc. (DBRS rates Citigroup Inc. at “A” Under Review with Negative Implications), in the event of an originator’s bankruptcy or insolvency proceeding and if the originator fails to cure, repurchase or substitute such breach or loans. However, such backstop is subject to certain sunset provisions that give consideration to prior loan performance.

With respect to the representations and warranties framework, although the transaction employs a strong standard which includes automatic review of seriously delinquent loans, mandatory arbitration and a sponsor backstop for representations and warranties, the limited operating history and the weak financial strength of certain originators and the sunset provisions of the sponsor backstop still demand additional penalties and credit enhancement protections. To capture the perceived weaknesses, DBRS adjusted downward the origination score of the loans to account for the potential inability to fulfill repurchase obligations. Such adjustment resulted in increases in default and loss assumptions for the transaction.

The full description of the strengths, challenges and mitigating factors are detailed in the related pre-sale report.

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

The applicable methodologies are:
• RMBS Insight: U.S. Residential Mortgage-Backed Securities Loss Model and Rating Methodology
• Unified Interest Rate Model for U.S. RMBS Transactions
• Third-Party Due Diligence Criteria for U.S. RMBS Transactions
• Representations and Warranties Criteria for U.S. RMBS Transactions
• Legal Criteria for U.S. Structured Finance Transactions

The full report providing additional analytical detail is available by clicking on the link or by contacting us at info@dbrs.com.

The Rule 17g-7 Report of Representations and Warranties is hereby incorporated by reference and can be found by clicking on the link or by contacting us at info@dbrs.com.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.