About $210 million of prime jumbo mortgages acquired by the New York-based company’s investment bank from lenders back the deal, DBRS Ltd. said late last week in a statement. The credit grader plans to assign AAA rankings to $196.3 million of the debt.
“The ratings reflect transactional strengths that include high quality underlying assets, well qualified borrowers and satisfactory third-party due diligence review,” DBRS said.
Scott Helfman, a spokesman for Citigroup, declined to comment.
Nonagency bond issuance was growing earlier this year after halting five years ago amid tumbling home values and soaring defaults. Sales have slowed since July when investors began demanding higher relative yields on the securities. Shellpoint Partners LLC recently cancelled a planned deal. It instead sold the loans without packaging them into bonds.
There have been about $12.5 billion in deals tied to new loans this year. There were $3.5 billion in all of 2012 and a peak of $1.2 trillion in each of 2005 and 2006, according to data compiled by Bloomberg. Citigroup has helped underwrite post-crisis deals by other issuers and sponsored transactions that packaged older bonds and loans.
A weakness of the bank’s planned transactions is that Citigroup’s “backstop” on the warranties of loan quality provided by originators can lapse after a certain period of time, DBRS said.
Jumbo home loans are ones larger than allowed in government-supported programs, currently as much as $729,750 for single-family properties in high-cost areas. Limits for Fannie Mae and Freddie Mac loans with the lowest costs for most types of borrowers cover a range from $417,000 to $625,500.