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Citi Preps Securitization of Seasoned Home Loans

FEB 21, 2014 4:06pm ET
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Citigroup this week began readying a $374 million securitization backed by performing residential mortgages that have weighted average seasoning of 10 years in what an analyst described as a somewhat notable deal.

Five classes of Citigroup Mortgage Loan Trust 2014-A received preliminary investment-grade ratings ranging from AA(sf) to BBB(sf), and one tranche received a speculative grade preliminary rating of B(sf), according to Standard & Poor's and DBRS reports. The deal has one senior class with a 4% interest rate, one interest-only class, and five subordinate classes with roughly a 5.44% interest rate, according to S&P.

"Citi has issued other seasoned transactions in the past few years (not a lot but a few)," said Quincy Tang, managing director, DBRS told this publication in an e-mail response to a question. "This recent deal, CMLTI 2014-A, is one of the very few, if not the only one that consisted of collateral from collapsed, or terminated, seasoned transactions."

First-lien, one-to-four family, condominium and planned unit development loans back the deal, according to S&P. The borrowers have higher credit scores and more home equity than in comparable securitized prime credit loan pool and approximately 35% of loans are in California. Twenty percent are in New York.

The seller lacks any representations and warranties related to fraud, but currently all the loans in the pool are performing and less than 3% of the pool was modified, according to DBRS.

Seasoned residential mortgage securitization was the first type of private-label residential mortgage-backed securities issuance to return after a severe downturn effectively shut down a boom in loosely underwritten, new origination deals between 2005 and 2007 ended. Loans originated around 10 years ago mark the last vintages originated before the boom. The loans come from terminated Citi securitizations issued in 2004 and 2003, according to DBRS.

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