DBRS Assigns Provisional Ratings to Citigroup Mortgage Loan Trust 2019-IMC1

DBRS, Inc. (DBRS) assigned provisional ratings to the following Mortgage Pass-Through Certificates, Series 2019-IMC1 (the Certificates) to be issued by Citigroup Mortgage Loan Trust 2019-IMC1 (CMLTI 2019-IMC1 or the Trust):

-- $245.8 million Class A-1 at AAA (sf)
-- $20.8 million Class A-2 at AA (sf)
-- $40.8 million Class A-3 at A (sf)
-- $21.0 million Class M-1 at BBB (sf)
-- $17.4 million Class B-1 at BB (sf)
-- $11.4 million Class B-2 at B (sf)

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

The AAA (sf) rating on the Class A-1 Certificates reflects 32.20% of credit enhancement provided by subordinated Certificates in the pool. The AA (sf), A (sf), BBB (sf), BB (sf) and B (sf) ratings reflect 26.45%, 15.20%, 9.40%, 4.60% and 1.45% of credit enhancement, respectively.

This transaction is a securitization of a portfolio of fixed- and adjustable-rate, prime, expanded prime and non-prime first-lien residential mortgages funded by the issuance of the Certificates. The Certificates are backed by 932 mortgage loans with a total principal balance of $362,580,636 as of the Cut-Off Date (August 1, 2019).

Impac Mortgage Corp (Impac) is the Originator of the loans, and Fay Servicing LLC (Fay) is the Servicer.

The mortgages were originated under the following programs:

(1) iQM Bank Statement — Generally made to self-employed borrowers using bank statements to support self-employed income for qualification purposes.

(2) iQM Agency Plus — Generally made to prime borrowers with loan amounts exceeding the government-sponsored enterprise (GSE) loan limits who may fall outside the Qualified Mortgage (QM) requirements based on debt-to-income or loans that have special features that do not meet GSE guidelines.

(3) iQM Investor Program — Generally made to borrowers seeking business-purpose loans for investment properties.

(4) iQM Asset Qualification — Generally made to borrowers with significant assets equal to 60 months of all other monthly debts or more.

Although the mortgage loans were originated to satisfy the Consumer Financial Protection Bureau’s Ability-to-Repay (ATR) rules, they were made to borrowers who generally do not qualify for agency, government or private-label non-agency prime jumbo products for various reasons. In accordance with the QM/ATR rules, 64.2% of the loans, including 1.9% made to investors that could not be verified as being for business purposes, are designated as non-QM. Approximately 35.8% of the loans are made to investors for business purposes and, hence, are not subject to the QM/ATR rules.

Within the investor loan population, 26.7% of the aggregate pool comprises loans originated through a debt service coverage ratio (DSCR) program. Such DSCR borrowers were qualified using property cash flows rather than traditional income. This transaction has a larger concentration of DSCR loans than typical DBRS-rated non-QM deals, which have ranged from approximately 0.0% to 17.2%. Of the DSCR loans, 73.0% have a current lease in place, which contains a rental value used in the DSCR calculation. In its analysis, DBRS applies penalties to DSCR loans as described in the Key Probability of Default Drivers section of the related presale. DBRS also considers whether a borrower has a lease in place and reduces the penalty for such loan.

Citigroup Global Markets Realty Corp. (CGMRC) is the Mortgage Loan Seller and Sponsor of the transaction. DBRS rates the Long-Term Issuer Rating and Long-Term Senior Debt of CGMRC’s parent company, Citigroup Inc., at A (high) with a Stable trend and its Short-Term Instruments at R-1 (low) with a Stable trend. Citigroup Mortgage Loan Trust Inc. is the Depositor and an affiliate of the Sponsor.

Wells Fargo Bank, N.A. (Wells Fargo; rated AA with a Stable trend by DBRS) will act as the Custodian. U.S. Bank National Association (rated AA (high) with a Stable Trend by DBRS) will serve as Trust Administrator.

The Sponsor, directly or indirectly through a majority-owned affiliate, will retain an eligible vertical residual interest in at least 5% of the Certificates issued by the Issuer (other than the Class R Certificates) to satisfy the credit risk-retention requirements under Section 15G of the Securities Exchange Act of 1934 and the regulations promulgated thereunder.

On or after the earlier of (1) the two-year anniversary of the Closing Date or (2) the date when the aggregate stated principal balance of the mortgage loans is reduced to 30% of the Cut-Off Date balance, the Clean-up Call Party has the option to purchase all the mortgage loans from the Trust at a price equal to the aggregate outstanding balance of the mortgage loans plus accrued and unpaid interest as well as unreimbursed advances and fees. The Controlling Holder (the majority holder of the most subordinate certificates outstanding) will serve as the Clean-up Call Party unless the Controlling Holder is the Mortgage Loan Seller or an affiliate, in which case the Servicer will act as the Clean-up Call Party.

The Servicer will fund advances of delinquent principal and interest on any mortgage until such loan becomes 180 days delinquent. The Servicer is also obligated to make advances in respect of taxes, insurance premiums and reasonable costs incurred in the course of servicing and disposing of properties.

The transaction employs a sequential-pay cash flow structure with a pro rata principal distribution among the senior tranches. Principal proceeds can be used to cover interest shortfalls on the Certificates as the outstanding senior Certificates are paid in full. Furthermore, excess spread can be used to cover realized losses first before being allocated to unpaid cap carryover amounts up to
Class B-2.

The ratings reflect transactional strengths that include the following:
-- Strong Representations and Warranties Framework
-- Robust Loan Attributes and Pool Composition
-- Satisfactory Third-Party Due Diligence Review
-- Improved Underwriting Standards
-- Compliance with the ATR Rules

The transaction also includes the following challenges and mitigating factors:
-- Certain Non-Prime, Non-QM and Investor Loans
-- Servicer Advances of Delinquent Principal and Interest
-- Servicer’s Financial Capability

Notwithstanding the above mitigating factors, DBRS adjusted the expected losses upward across all rating categories to account for the aforementioned challenges.

These strengths and challenges, along with other transaction details, are discussed in depth in the relevant sections of the presale report.

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

The principal methodology is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology, which can be found on dbrs.com under Methodologies & Criteria.

The rated entity or its related entities did participate in the rating process for this rating action. 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 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@dbrs.com.

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

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