DBRS Morningstar Assigns a Provisional Rating to Citigroup Mortgage Loan Trust 2021-RP5

DBRS, Inc. (DBRS Morningstar) assigned the following provisional rating to the Mortgage-Backed Notes, Series 2021-RP5 (the Notes) to be issued by Citigroup Mortgage Loan Trust 2021-RP5 (the Trust):

-- $1.3 billion Class A-1 at AAA (sf)

The AAA (sf) rating on the Notes reflects 18.65% of credit enhancement provided by subordinated certificates.

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

The Trust is a securitization of a portfolio of seasoned performing and reperforming first-lien residential mortgages funded by the issuance of the Notes. The Notes are backed by 14,320 loans with a total principal balance of $1,567,696,085 as of the Cut-Off Date (September 30, 2021).

The mortgage loans, which were purchased from Fannie Mae, are approximately 178 months seasoned. As of the Cut-Off Date, 97.3% of the loans are current, including 142 bankruptcy-performing loans, and 2.7% of the loans are 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method. Approximately 51.9% and 77.4% of the mortgage loans have been zero times 30 days delinquent for the past 24 months and 12 months, respectively, under the MBA delinquency method.

The portfolio contains 86.1% modified loans. The modifications happened more than two years ago for 61.5% of the modified loans. Within the pool, 3,432 mortgages have aggregate noninterest-bearing deferred amounts of $117,376,438, which comprise approximately 7.5% of the total principal balance.

Approximately 7.6% of the loans in the pool are subject to the Consumer Financial Protection Bureau Ability-to-Repay and Qualified Mortgage (QM) rules. Approximately 6.9% of these loans are designated as either Safe Harbor or Temporary Safe Harbor and 0.7% as non-QM. The remainder of the pool is exempt due to seasoning or loan purpose.

The Seller and Sponsor, 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. 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 December 1, 2021. There will not be any advancing of delinquent principal or interest (P&I) 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’s 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 P&I bonds will not be paid from principal proceeds until the more senior classes are retired.

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. Shortly after the onset of the pandemic, DBRS Morningstar saw an increase in 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 forbear 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, delinquencies have been gradually trending downward, as forbearance periods come to an end for many borrowers.

In connection with the economic stress assumed under its moderate scenario (see Baseline Macroeconomic Scenarios For Rated Sovereigns, dated September 8, 2021), DBRS Morningstar may assume higher loss expectations for pools with loans on forbearance plans.

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 full description of the strengths, challenges, and mitigating factors is detailed in the related presale 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.

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 [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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