DBRS Morningstar Finalizes Provisional Ratings on Citigroup Mortgage Loan Trust 2021-RP4

DBRS, Inc. (DBRS Morningstar) finalized the following provisional ratings on the Mortgage-Backed Notes, Series 2021-RP4 (the Notes) issued by Citigroup Mortgage Loan Trust 2021-RP4:

-- $2.2 billion Class A-1 at AAA (sf)
-- $142.3 million Class A-2 at AA (sf)
-- $2.3 billion Class A-3 at AA (sf)
-- $2.4 billion Class A-4 at A (sf)
-- $2.5 billion Class A-5 at BBB (sf)
-- $106.7 million Class M-1 at A (sf)
-- $84.3 million Class M-2 at BBB (sf)
-- $61.9 million Class B-1 at BB (sf)
-- $47.4 million Class B-2 at B (sf)

Classes A-3, A-4, and A-5 are exchangeable notes. These classes can be exchanged for combinations of exchange notes.

The AAA (sf) rating on the Notes reflects 17.90% of credit enhancement provided by subordinated certificates. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 12.50%, 8.45%, 5.25%, 2.90%, and 1.10% of credit enhancement, respectively.

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

The Trust is a securitization a securitization of a portfolio of seasoned performing and reperforming first-lien residential mortgages funded by the issuance of mortgage-backed notes (the Notes). The Notes are backed by 14,648 loans with a total principal balance of $2,634,798,746 as of the Cut-Off Date (May 31, 2021).

The mortgage loans, which were purchased from Fannie Mae, are approximately 173 months seasoned. As of the Cut-Off Date, 98.2% of the loans are current, including 113 bankruptcy-performing loans. Approximately 71.0% and 91.8% 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 98.3% modified loans. The modifications happened more than two years ago for 96.5% of the modified loans. Within the pool, 11,115 mortgages have aggregate noninterest-bearing deferred amounts of $558,734,544, which comprise approximately 21.2% of the total principal balance.

Approximately 1.2% of the loans in the pool are subject to the Consumer Financial Protection Bureau Ability-to-Repay and Qualified Mortgage (QM) rules. Approximately 1.2% of these loans are designated as either Safe Harbor or Temporary Safe Harbor and less than 0.1% as non-QM. The remainder of the pool is exempt due to seasoning or loan purpose.

The Seller, Citigroup Global Markets Realty Corp. (CGMRC), acquired the mortgage loans from Fannie Mae following the award of a bid in connection with a competitive auction for the initial pool. The Seller will then 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.

As of the Cut-Off Date, the loans are serviced by an interim servicer. Such servicing will be transferred to Rushmore Loan Management Services, LLC, on September 1, 2021. 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 in super lien states and, in certain cases, taxes and insurance as well as reasonable costs and expenses incurred in the course of servicing and disposing of properties.

When the aggregate pool balance is reduced to less than 25% of the balance as of the Cut-off Date, the directing noteholder may purchase all of the mortgage loans and real-estate-owned properties from the Issuer, as long as the aggregate proceeds meet a minimum price.

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-1 and more subordinate principal and interest bonds will not be paid from principal proceeds until the more senior classes are retired.

CORONAVIRUS 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. Shortly after the onset of the pandemic, DBRS Morningstar saw an increase in the delinquencies for many residential mortgage-backed securities (RMBS) asset classes.

Such mortgage delinquencies were mostly in the form of forbearances, which are generally short-term periods of payment relief that may perform very differently from traditional delinquencies. At the onset of the pandemic, the option to forebear mortgage payments was widely available, driving forbearances to an elevated level. When the dust settled, loans with coronavirus-induced forbearance in 2020 performed better than expected, thanks to government aid, low loan-to-value ratios, and acceptable underwriting in the mortgage market in general. Across nearly all RMBS asset classes in recent months delinquencies have been gradually trending downwards, as forbearance periods come to an end for many borrowers.

In connection with the economic stress assumed under its moderate scenario (see “Global Macroeconomic Scenarios: June 2021 Update,” published on June 18, 2021), DBRS Morningstar may assume higher loss expectations for pools with loans on forbearance plans.

For more information regarding rating methodologies and the coronavirus, please see the following DBRS Morningstar press releases and commentary: "DBRS Morningstar Provides Update on Rating Methodologies in Light of Measures to Contain Coronavirus Disease (COVID-19)," dated March 12, 2020; "DBRS Morningstar Global Structured Finance Rating Methodologies and Coronavirus Disease (COVID-19)," dated March 20, 2020; and “Global Macroeconomic Scenarios: June 2021 Update,” dated June 18, 2021.

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 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.

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.

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 [email protected].

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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