DBRS Morningstar Assigns Provisional Ratings to Citigroup Mortgage Loan Trust 2022-RP1

DBRS, Inc. (DBRS Morningstar) assigned the following provisional ratings to the Mortgage-Backed Notes, Series 2022-RP1 (the Notes) to be issued by Citigroup Mortgage Loan Trust 2022-RP1 (the Trust):

-- $353.0 million Class A-1 at AAA (sf)
-- $18.1 million Class A-2 at AA (high) (sf)
-- $371.1 million Class A-3 at AA (high) (sf)
-- $383.2 million Class A-4 at A (high) (sf)
-- $393.0 million Class A-5 at BBB (high) (sf)
-- $12.1 million Class M-1 at A (high) (sf)
-- $9.8 million Class M-2 at BBB (high) (sf)
-- $6.5 million Class B-1 at BB (high) (sf)
-- $5.0 million Class B-2 at B (high) (sf)
-- $4.2 million Class B-3 at B (sf)

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

The AAA (sf) rating on the Notes reflects 15.35% of credit enhancement provided by subordinated certificates. The AA (high) (sf), A (high) (sf), BBB (high) (sf), BB (high) (sf), B (high) (sf), and B (sf) ratings reflect 11.00%, 8.10%, 5.75%, 4.20%, 3.00%, and 2.00% 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 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 3,709 loans with a total principal balance of $416,999,862 as of the Cut-Off Date (March 31, 2022).

The mortgage loans are approximately 208 months seasoned. As of the Cut-Off Date, 93.7% of the loans are current (including 0.7% bankruptcy-performing loans), 5.2% of the loans are 30 days delinquent, 0.6% of the loans are 60 days delinquent, and 0.4% of the loans are 90+ days delinquent under the Mortgage Bankers Association (MBA) delinquency method. Approximately 68.4% and 83.8% 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 76.0% modified loans. The modifications happened more than two years ago for 81.9% of the modified loans. Within the pool, 1,129 mortgages have aggregate noninterest-bearing deferred amounts of $30,029,299, which comprise approximately 7.2% 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, NewRez LLC doing business as Shellpoint Mortgage Servicing 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 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 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.

In contrast with prior DBRS Morningstar-rated CMLTI RP securitizations, the interest rates on all the Notes are set at the Net Weighted-Average Coupon (Net WAC) of the mortgages rather than a fixed-capped rate for certain classes. This feature prevents the creation of excess spread and Net WAC shortfall amounts. DBRS Morningstar considered this nuanced feature and incorporated it in its cash flow analysis. The cash flow structure is discussed in more detail in the Cash Flow Structure and Features section of the related report.

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 (LTVs), and acceptable underwriting in the mortgage market in general. Across nearly all RMBS asset classes, delinquencies have been gradually trending downwards as forbearance periods come to an end for many borrowers.

As of the Cut-Off Date, there are six loans (0.3% of the loans) that are subject to an active coronavirus-related forbearance plan with the Servicer.

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 March 2022 Update,” dated March 24, 2022.

The ratings reflect transactional strengths that include the following:
-- LTV ratios.
-- Satisfactory third-party due-diligence review.
-- Representations and warranties (R&W) provider.
-- Seasoning.
-- Structural features.

The transaction also includes the following challenges:
-- R&W standard.
-- No servicer advances of delinquent P&I.
-- Assignments and endorsements.
-- Borrowers on forbearance plans.

The full description of the strengths, challenges, and mitigating factors is detailed in the related 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 info@dbrsmorningstar.com.

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

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