Citigroup Inc. is planning its first sale of bonds tied to new home loans without government backing since the market’s collapse in 2008.
About $210 million of prime jumbo mortgages acquired by the New York-based company’s investment bank from lenders back the deal,
“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.
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.
