DBRS Morningstar Finalizes Provisional Ratings on Citigroup Mortgage Loan Trust 2022-RP5

DBRS, Inc. (DBRS Morningstar) finalized its provisional ratings on the Mortgage-Backed Notes, Series 2022-RP5 (the Notes) issued by Citigroup Mortgage Loan Trust 2022-RP5 (the Trust):

-- $247.3 million Class A-1 at AAA (sf)
-- $21.7 million Class A-2 at AA (sf)
-- $269.0 million Class A-3 at AA (sf)
-- $286.3 million Class A-4 at A (sf)
-- $296.1 million Class A-5 at BBB (sf)
-- $17.2 million Class M-1 at A (sf)
-- $9.8 million Class M-2 at BBB (sf)
-- $7.4 million Class B-1 at BB (sf)
-- $6.3 million Class B-2 at B (sf)

The AAA (sf) rating on the A-1 Notes reflects 23.25% of credit enhancement provided by subordinated certificates. The AA (sf), A (sf), BBB (sf), BB (sf), and B (sf) ratings reflect 16.50%, 11.15%, 8.10%, 5.80%, and 3.85% of credit enhancement, respectively.

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

The Notes are backed by 1,705 loans with a total principal balance of $322,199,110 as of the Cut-Off Date (September 30, 2022).

The mortgage loans are approximately 166 months seasoned. As of the Cut-Off Date, 97.1% of the loans are current (including 0.5% bankruptcy-performing loans) and 2.9% of the loans are 30 days delinquent under the Mortgage Bankers Association (MBA) delinquency method. Under the MBA delinquency method, 28.8% and 87.8% of the mortgage loans have been zero times 30 days delinquent for the past 24 months and 12 months, respectively.

The portfolio contains 96.6% modified loans as determined by the Issuer. For purposes of this review, DBRS Morningstar did not consider deferrals or forbearance caused by a Coronavirus Disease (COVID-19) pandemic-related hardship as modifications. As such, DBRS Morningstar considered 87.5% of the pool to have been modified. The modifications happened more than two years ago for 64.9% of the loans that DBRS Morningstar classified as modified. Within the pool, 846 mortgages have an aggregate non-interest-bearing deferred amount of $26,674,967, which comprises 8.3% 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.

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’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 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.

CORONAVIRUS PANDEMIC IMPACT
The coronavirus pandemic and the resulting isolation measures 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 downward, as forbearance periods come to an end for many borrowers.

As of the Cut-Off Date, there are no 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: September 2022 Update,” dated September 19, 2022.

The ratings reflect transactional strengths that include the following:
-- LTVs
-- 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.

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 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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