New York, June 30, 2020 -- Moody's Investors Service, ("Moody's") has
assigned definitive ratings to seven classes of certificates issued by
Citigroup Mortgage Loan Trust Inc. 2020-EXP1 (CMLTI 2020-EXP1).
The ratings range from Aaa (sf) to B2 (sf). This deal represents
the first CMLTI transaction in 2020 and the tenth rated issue from the
shelf since its inception in 2015. However, this is Citigroup's
first transaction backed by loans underwritten to sellers' expanded prime
programs which typically have certain credit parameters that are outside
of traditional prime jumbo programs. Such programs typically expand
the low end of the eligible FICO range from 680 to 600, while increasing
the high end of the loan to-value (LTV) ratio range from 85%
to 95%, and allow loans with non-QM characteristics,
such as debt-to-income (DTI) ratios greater than 43%
and interest-only loans.
The collateral pool comprises 431 fully amortizing fixed and adjustable-rate
and interest only first lien mortgage loans, with 90.0%
of the loans having an original term to maturity of 30 years. Approximately
7.7% of the loans are interest only with 40 year maturity.
The pool includes loans with non-QM characteristics (43.50%),
such as debt-to-income ratios greater than 43% and
interest only loans.
Shellpoint Mortgage Servicing ("Shellpoint") and Fay Servicing,
LLC ("Fay"), will be primary servicers on the deal,
servicing approximately 59.8% and 40.2% of
the loans, respectively. There is no master servicer in this
transaction. U.S. Bank National Association will
be the trust administrator and the trustee is U.S. Bank
Trust National Association. Moreover, the servicers will
not advance any scheduled principal or interest on delinquent mortgages.
The transaction has a sequential payment structure with an interest reserve
account that will be fully funded at closing by the sponsor and will cover
interest shortfalls to any certificates that pay principal and interest
(P&I certificates) up to and including the Class B-3 certificates.
The required amount in the account will equal three months of interest
distribution for all the P&I certificates as of the distribution date
and will be replenished from interest collections on an ongoing basis,
to the extent it falls below the required amount. Any funds in
the reserve account in excess of the required amount will be released
to the sponsor.
The complete rating action are as follows.
Issuer: Citigroup Mortgage Loan Trust Inc. 2020-EXP1
Cl. A-1-A, Definitive Rating Assigned Aaa (sf)
Cl. A-1-B, Definitive Rating Assigned Aa1 (sf)
Cl. A-2, Definitive Rating Assigned Aa3 (sf)
Cl. A-3, Definitive Rating Assigned A3 (sf)
Cl. M-1, Definitive Rating Assigned Baa3 (sf)
Cl. B-1, Definitive Rating Assigned Ba2 (sf)
Cl. B-2, Definitive Rating Assigned B2 (sf)
Summary credit analysis and rating rationale
Moody's expected loss for this pool in a baseline scenario-mean
is 1.34%, in a baseline scenario-median is
0.86%, and reaches 14.75% at stress
level consistent with our Aaa rating.
Our analysis has considered the effect of the COVID-19 outbreak
on the US economy as well as the effects that the announced government
measures, put in place to contain the virus, will have on
the performance of mortgage loans. Specifically, for US RMBS,
loan performance will weaken due to the unprecedented spike in the unemployment
rate, which may limit borrowers' income and their ability to service
debt. The softening of the housing market will reduce recoveries
on defaulted loans, also a credit negative. Furthermore,
borrower assistance programs, such as forbearance, may adversely
impact scheduled cash flows to bondholders.
The contraction in economic activity in the second quarter will be severe
and the overall recovery in the second half of the year will be gradual.
However, there are significant downside risks to our forecasts in
the event that the pandemic is not contained and lockdowns have to be
reinstated. As a result, the degree of uncertainty around
our forecasts is unusually high. We increased our model-derived
median expected losses by 11% (15% for the mean) and our
Aaa losses by 5% to reflect the likely performance deterioration
resulting from of a slowdown in US economic activity in 2020 due to the
We regard the COVID-19 outbreak as a social risk under our ESG
framework, given the substantial implications for public health
We base our ratings on the certificates on the credit quality of the mortgage
loans, the structural features of the transaction, our assessments
of the origination quality and servicing arrangement, the strength
of the third party due diligence, the representations and warranties
(R&W) framework of the transaction and the degree of alignment of
interest between the sponsor and the investors.
CMLTI 2020-EXP1's collateral pool is comprised of 431 first lien
mortgage loans with an unpaid principal balance of $364,014,993.
Although the pool contains expanded prime loans with some riskier features
such as interest only loans with 40-year maturities, a relatively
high percentage of investor loans, and pockets of loans with prior
derogatory credit events, lower FICOs or higher LTVs, overall,
the majority of the borrowers in the transaction have high FICO scores,
high monthly residual income, significant liquid cash reserves,
high income and sizeable equity in their properties comparable to other
expanded prime jumbo pools we have rated. The primary borrower
has an average monthly income of $18,545 and average liquid
cash reserves of $384,488.
Approximately 43.5% and 3.7% of the mortgage
loans are non-QM or QM mortgage loans under rebuttable presumption,
respectively. As explained in our methodology, we made an
incremental adjustment to our expected loss to account for the potential
increased risk of legal challenges from defaulted borrowers, which
could result in the trust bearing the legal expenses associated with defending
against such claims. This risk is mitigated by the relatively strong
credit quality of the borrowers, since they are less likely to default.
Borrowers with more than three mortgages represented 14.5%
(by loan balance) of the pool. We evaluate loans to borrowers with
multiple properties to determine if the transaction warrants additional
loss adjustments. We have made an adjustment on mortgage loans
where the borrower owns more than 3 properties to reflect an "investor"
level of riskiness associated with multiple properties for loans listed
as owner-occupied or second homes.
89.62% of the loans in the pool have never been delinquent
since origination. 9.68% of the loans were 30 days
delinquent only once, and 0.47% (3 loans) and 0.22%
(1 loan) of the loans were 30 days delinquent more than once and 60 days
delinquent, respectively; all delinquencies are measures using
the Mortgage Banking Association (MBA) method. We made no additional
adjustment to our losses given that the 30-day delinquencies were
due to a servicing transfer. All loans are current as of the cut-off
7.7% of the loans in the pool amortize over 40 years and
have either a 7 year or a 10 year initial interest only period.
To account for this extended maturity profile and lack of amortization
during the early years of the loan, we made an adjustment to our
7.0% of the borrowers in the pool have experienced some
forms of prior credit event such as bankruptcy and/or foreclosure.
However, except for one loan, all these credit events have
taken place more than four years ago. We consider the length of
time since the credit event, the higher WA FICO (733), lower
WA CLTV (77.7%) and low WA DTI (35.9%) for
the affected loans relative to the total pool as mitigating factors,
and as a result, we made no additional adjustment to our collateral
33 loans (5.4% by loan balance) are shared appreciation
loans, i.e. loans where a third party contributed
equity towards the down payment of the mortgage loan. In the loan
tape for this transaction, the equity contribution is accounted
for as a junior lien (without any associated P&I) on the property.
Therefore, this equity contribution by the third party is reflected
in CLTV but is not reflected in LTV
13 loans (2.1% by loan balance) have bi-weekly payments
instead of monthly payments. By making a mortgage payment every
two weeks, the borrower is effectively making 13 monthly payments
per year instead of 12 monthly payments. The actual interest paid
over the life of the loan is also reduced because of faster amortization.
The aggregator of this pool is Citigroup Global Markets Realty Corp.
The aggregator acquired the loans in the pool from various originators
including Commerce Home Mortgage, LoanDepot, VNB and Goldwater
Bank, and other aggregators such as Galton and MaxEx. Approximately
73.4%, 7.9%, 6.1%,
5.2%, 5.2% and 2.2% of
the loans in the pool were acquired from GMRF Mortgage Acquisition Company,
LLC (Galton), Commerce Home Mortgage, LLC, loanDepot.com,
LLC (loanDepot), Valley National Bank (VNB), MaxEx,
LLC, and Goldwater Bank NA, respectively. All the loans
were underwritten to each respective seller's guidelines instead of Citigroup's
Based on the information provided related to Citigroup Global Markets
Realty Corp.'s (CGMRC) valuation and risk management practices,
the 100% due diligence, the transparent representation and
warranty framework, and strong alignment of interests/risk retention,
we did not make any adjustments to our losses based on our review of the
We did not adjust our expected loss assumptions for loans underwritten
to Galton's, loanDepot's, and VNB's programs in spite of certain
weaknesses in underwriting guidelines such as lower FICO score requirement
accompanied with allowance for higher LTV and DTI ratio loans.
This is because quantitative factors such as lower FICO and higher LTV
limits are already captured in our MILAN model. However,
there are some smaller originators/sellers in this pool whose guidelines
we did not review. We increased our loss assumptions for these
originators/sellers in order to account for this uncertainty in origination
We consider the overall servicing arrangement for this pool as adequate,
and as a result we did not make any adjustments to our base case and Aaa
stress loss assumptions based on the servicing arrangement.
Fay and Shellpoint are the two named servicers. The servicing fee
will be based on a step-up incentive fee structure with a minimum
monthly base fee of $10 per loan and additional fees for delinquent
or defaulted loans. In spite of the step-up incentive fee,
the fee will not exceed the aggregate servicing fee of 25 bps for this
transaction. In our cashflow model, we have assumed a servicing
fee of 25 bps.
There is no master servicer in this transaction. U.S.
Bank National Association will be the trust administrator and the trustee
is U.S. Bank Trust National Association. Moreover,
the servicers will not advance any scheduled principal or interest on
delinquent mortgages. We did not apply any adjustment to our expected
losses for the lack of master servicer due to the following: (1)
There is no P&I advancing in this transaction which obviates the need
for a master servicer to step in if the primary servicer is unable to
do so, (2) Although limited in depth and scope, there is still
third party oversight of Fay and Shellpoint from the GSEs, the CFPB,
the accounting firms and state regulators, (3) the complexity of
the loan product is low and the pool credit quality is generally good,
reducing the complexity of servicing and reporting, and (4) U.S.
Bank National Association, as the trust administrator, will
be responsible for aggregating the reports from the servicers and reporting
to investors, but also appoint a replacement servicer at the direction
of the controlling holder. The fees paid to the successor servicer
cannot exceed the aggregate servicing fee of 25 bps.
COVID-19 impacted borrowers
As of the cut-off date, no borrower under any mortgage loan
has entered into a COVID-19 related forbearance plan with the servicer.
However, there is one loan where the servicer has noted that the
borrower has been impacted by COVID-19 hardship. The servicer
is currently evaluating the hardship request.
Generally, the borrower must initially contact the servicer and
attest they have been impacted by a COVID-19 hardship and that
they require payment assistance. The servicer will offer an initial
forbearance period to the borrower, which can be extended if the
borrower attests that they require additional payment assistance.
At the end of the forbearance period, if the borrower is unable
to make the forborne payments on such mortgage loan as a lump sum payment
or does not enter into a repayment plan, the servicer may defer
the missed payments, which could be added as a noninterest-bearing
payment due at the end of the loan term. If the borrower can no
longer afford to make payments in line with the original loan terms,
the servicer would typically work with the borrower to modify the loan
(although the servicer may utilize any other loss mitigation option permitted
under the pooling and servicing agreement with respect to such mortgage
loan at such time or anytime thereafter).
Of note, per the transaction documents, any principal forbearance
amount created in connection with any modification (whether as a result
of a COVID-19 forbearance or otherwise) will be recognized as a
realized loss only if it is written off or forgiven by the servicer.
The Sponsor engaged AMC Diligence, LLC (AMC), Clayton Services,
LLC, and Edge Mortgage Advisory Company, LLC as independent
third-party review firms. They conducted a review of credit,
property valuations, regulatory compliance and data accuracy checks
("full review") for 100% (431) of the loans in the
pool. Each mortgage loan was reviewed by only one of the TPR firms
and each TPR firm produced one or more reports detailing its review procedures
and the related results. These firms conducted detailed credit,
valuation, regulatory compliance and data integrity reviews on 100%
of the mortgage pool. The TPR results indicated compliance with
the originators' underwriting guidelines for majority of loans,
no material compliance issues, and no appraisal defects.
Overall, the loans that had exceptions to the originators' underwriting
guidelines had strong documented compensating factors such as low DTIs,
low LTVs, high reserves, high FICOs, or clean payment
histories. The TPR firms also identified minor compliance exceptions
for reasons such as inadequate RESPA disclosures (which do not have assignee
liability) and TILA/RESPA Integrated Disclosure (TRID) violations related
to fees that were out of variance but then were cured and disclosed.
In this transaction, 63 of the non-conforming loans had a
property valuation review only consisting of a Collateral Underwriter
and no other third-party valuation product such as a CDA and field
review. We consider the use of Collateral Underwriter for non-conforming
loans to be credit negative due to (1) the lack of human intervention
which increases the likelihood of missing emerging risk trends,
(2) the limited track record of the software and limited transparency
into the model and (3) GSE focus on non-jumbo loans which may lower
reliability on jumbo loan appraisals. However, we have not
applied an adjustment to the loss for such loans since the statistically
significant sample size and valuation results of the loans that were reviewed
using a third-party valuation product such as a CDA (which we consider
to be a more accurate third-party valuation product) were sufficient
and the original appraisal balances for such loans were not significantly
higher than that of appraisal values for loans which had both a CU score
and another valuation product.
We assessed CMLTI 2020-EXP1's R&W framework for this transaction
as adequate, consistent with that of other prime jumbo transactions
for which the breach review process is thorough, transparent and
objective, and the costs and manner of review are clearly outlined
at issuance. An effective R&W framework protects a transaction
against the risk of loss from fraudulent or defective loans.
We assessed the R&W framework based on three factors: (a) the
financial strength of the R&W provider, (b) the strength of
the R&Ws (including qualifiers and sunsets), and (c) the effectiveness
of the enforcement mechanisms.
The loan level R&Ws are strong and, in general, either
meet or exceed the baseline set of credit-neutral R&Ws we identified
for US RMBS. The mechanisms for enforcing breaches of R&Ws
are generally strong. The trust administrator is obligated to hire
an independent breach reviewer to perform a review when a loan either
becomes 120 days delinquent or it liquidates at a loss. Of note,
loans in forbearance due to a pandemic or national emergency will not
be reviewed while in forbearance.
Unlike some R&W frameworks that prescribe specific tests for the reviewer
to perform, the scope of the review is open and not specifically
defined. If a material R&W breach is discovered, the
R&W provider will be obligated to cure the defect, repurchase
the loan, or reimburse any realized loss. One exception is
that there will be no obligation to remedy a breach of R&W if the
defect that gave rise to the R&W breach was disclosed in the PPM.
We did not make any R&W adjustment for this deal.
CMLTI 2020-EXP1 features a structure that allocates principal payments
sequentially to the bonds, instead of the shifting-interest
structure that is typical of prime and expanded prime transactions we
rate, benefitting the senior bondholders. In addition,
the excess spread in this transaction can be used to absorb losses before
any excess is released to the sponsor, while in typical prime and
expanded prime structures the excess spread is absorbed by the interest-only
The transaction also features an interest reserve account, which
can be used to pay bondholders in the event delinquent loans and the lack
of P&I advancing to cover their payments causes interest shortfalls.
The combination of the reserve account and the excess spread substantially
mitigate the risk of shortfalls. On the closing date, the
sponsor is expected to fund the interest reserve account up to its target
of three months of interest distributions.
Interest payments to the bonds will be made using the interest remittance
amount; principal will be paid sequentially to all the bonds using
the principal remittance amount. Any excess spread will be used
to first replenish the interest reserve account to its target amount before
being used to reimburse realized loss, Net WAC shortfall and unpaid
expenses/fees. Any funds in the reserve account in excess of the
required amount will be released to the sponsor.
Realized loss and certificate write-down will be allocated in reverse
sequential order starting with Class B-3.
There is more than 2% excess spread (annualized) available in the
deal. When excess spread is a form of credit enhancement,
it can provide a significant amount of credit protection to investors.
However, the amount of protection actually provided by excess spread
will depend on: (1) WAC deterioration or yield compression resulting
from (i) high-yielding mortgage loans prepaying or defaulting at
a faster pace than other mortgage loans; or (ii) modifications of
loan interest rates lowering the average rate (2) the speed with which
mortgage loans prepay or default during the life of the securitization
and (3) The amount of excess spread that "leaks out" of the
transaction before it is needed to protect investors. The risk
of leakage is typically highest in the early months of a transaction when
losses are relatively low.
In our analysis, we accounted for WAC deterioration by applying
a 25% haircut to the weighted average interest rate of the mortgage
loans in the pool. We used this calculated lower interest rate
in our cash flow modeling. Other factors were taken into account
by applying a higher prepayment rate in our cash flow model. We
applied a CPR of approximately 30% which is higher than 20-25%
CPR range in our methodology due to the fact that better credit quality
pools tend to prepay faster. In addition, the higher prepayment
rate was derived based on historical prepayment rates of loans with similar
Factors that would lead to an upgrade or downgrade of the ratings:
Levels of credit protection that are insufficient to protect investors
against current expectations of loss could drive the ratings down.
Losses could rise above Moody's original expectations as a result of a
higher number of obligor defaults or deterioration in the value of the
mortgaged property securing an obligor's promise of payment. Transaction
performance also depends greatly on the US macro economy and housing market.
Other reasons for worse-than-expected performance include
poor servicing, error on the part of transaction parties,
inadequate transaction governance and fraud.
Levels of credit protection that are higher than necessary to protect
investors against current expectations of loss could drive the ratings
of the subordinate bonds up. Losses could decline from Moody's
original expectations as a result of a lower number of obligor defaults
or appreciation in the value of the mortgaged property securing an obligor's
promise of payment. Transaction performance also depends greatly
on the US macro economy and housing market.
The principal methodology used in these ratings was Moody's Approach
to Rating US RMBS Using the MILAN Framework published in April 2020 and
available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1201303.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
Further information on the representations and warranties and enforcement
mechanisms available to investors are available on http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1235991
The analysis includes an assessment of collateral characteristics and
performance to determine the expected collateral loss or a range of expected
collateral losses or cash flows to the rated instruments. As a
second step, Moody's estimates expected collateral losses or cash
flows using a quantitative tool that takes into account credit enhancement,
loss allocation and other structural features, to derive the expected
loss for each rated instrument.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
The Global Scale Credit Rating on this Credit Rating Announcement was
issued by one of Moody's affiliates outside the EU and is endorsed
by Moody's Deutschland GmbH, An der Welle 5, Frankfurt
am Main 60322, Germany, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that issued the credit rating is available on www.moodys.com.
Please see www.moodys.com for any updates on changes to
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Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Vice President - Senior Analyst
Structured Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653