DBRS Morningstar Finalizes Rating on Citigroup Mortgage Loan Trust 2023-RP2

DBRS, Inc. (DBRS Morningstar) finalized its provisional rating on the following Mortgage-Backed Notes, Series 2023-RP2 (the Notes) issued by Citigroup Mortgage Loan Trust 2023-RP2 (the Trust):

-- $389.0 million Class A-1 at AAA (sf)

The AAA (sf) rating on the Class A-1 Notes reflects 20.25% of credit enhancement provided by subordinated Notes.

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

This transaction 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 2,669 loans with a total principal balance of $487,832,998 as of the Cut-Off Date (May 31, 2023).

The mortgage loans are approximately 96 months seasoned. As of the Cut-Off Date, 97.9% of the loans are current (including 0.3% bankruptcy-performing loans) and 2.1% of the loans are 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method. Under the MBA delinquency method, 61.0% and 65.6% of the mortgage loans have been zero times 30 days delinquent for the past 24 months or since origination and 12 months, respectively.

The portfolio contains 52.9% modified loans. The modifications happened more than two years ago for 59.3% of the loans that DBRS Morningstar classified as modified. Within the pool, 998 mortgages have an aggregate non-interest-bearing deferred amount of $12,072,001, which comprises 2.5% of the total principal balance.

The Seller, Citigroup Global Markets Realty Corp. (CGMRC), acquired the mortgage loans through bulk whole loan acquisitions. 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 Closing Date, Fay Servicing, LLC (Fay) will be the Servicer of the loans. There will not be any advancing of delinquent principal and 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 (HOA) 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 (REO) properties from the Issuer, as long as the aggregate proceeds meet a minimum price that meets or exceeds par plus interest.

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.

The transaction assumptions consider DBRS Morningstar’s baseline macroeconomic scenarios for rated sovereign economies, available in its commentary, Baseline Macroeconomic Scenarios for Rated Sovereigns: April 2023 Update, published April 28, 2023. These baseline macroeconomic scenarios replace DBRS Morningstar’s moderate and adverse coronavirus pandemic scenarios, which were first published in April 2020.

The ratings reflect transactional strengths that include the following:
-- Loan-to-value ratios;
-- Satisfactory third-party due-diligence review;
-- Representations and warranties provider;
-- Seasoning; and
-- Structural features.

The transaction also includes the following challenges:
-- Representations and warranties standard;
-- No servicer advances of delinquent P&I;
-- Assignments and endorsements; and

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

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

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

The principal methodology applicable to the rating is RMBS Insight 1.3: U.S. Residential Mortgage-Backed Securities Model and Rating Methodology (April 1, 2020; https://www.dbrsmorningstar.com/research/359116).

Other methodologies referenced in this transaction are listed at the end of this press release. These may be found at: https://www.dbrsmorningstar.com/about/methodologies.

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 credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.

Please see the related appendix for additional information regarding the sensitivity of assumptions used in the rating process.

DBRS, Inc.
140 Broadway, 43rd Floor
New York, NY 10005 USA
Tel. +1 212 806-3277

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

-- Assessing U.S. RMBS Pools Under the Ability-to-Repay Rules (April 28, 2023),
https://www.dbrsmorningstar.com/research/413297
-- Interest Rate Stresses for U.S. Structured Finance Transactions (June 9, 2023),
https://www.dbrsmorningstar.com/research/415687
-- Third-Party Due-Diligence Criteria for U.S. RMBS Transactions (September 11, 2020),
https://www.dbrsmorningstar.com/research/366613
-- Representations and Warranties Criteria for U.S. RMBS Transactions (May 16, 2023),
https://www.dbrsmorningstar.com/research/414076
-- Legal Criteria for U.S. Structured Finance (December 7, 2022),
https://www.dbrsmorningstar.com/research/407008
-- Operational Risk Assessment for U.S. RMBS Originators (November 23, 2022),
https://www.dbrsmorningstar.com/research/405664
-- Operational Risk Assessment for U.S. RMBS Servicers (November 23, 2022),
https://www.dbrsmorningstar.com/research/405665

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