National Mortgage Insurance Corp. is the latest carrier choosing to offer insurance-linked notes providing the firm with partial reinsurance on a pool of GSE eligible residential mortgages.
According to a presale report from Moody’s Investors Service, Wisconsin-based National Mortgage is partially transferring the credit risk of potential claims payments to investors through a $531 million bond offering mostly backed by the premiums on private mortgage insurance policies.
The notes will reference a pool of about $45.62 million in insured mortgage loan balances.
The debut issuance of $531 million in bonds is from NMI’s sponsored Oaktown Re VI trust platform. The Oaktown Re deal, when it closes, will be the sixth mortgage-linked insurance transaction in the MBS market this year, and will be the fourth to price since March 24.
The 141,760 loans included in the Oaktown Re transaction are primarily newly originated fixed-rate prime loans, from borrowers with a weighted average borrower FICO of 757.
Similar to GSE CRT transactions from Freddie Mac and Fannie Mae, the ceding-insurer sponsor will hold on to the senior coverage level A portion of the deal as well as B-2 and B-3 coverage level in the capital stack to comply with securitizing risk-retention standards. (Typically, only a portion of the credit risk in CRT deals is handed over to the investor market.)
The shortest-term notes (Class M-1A) total $88.5 million, and have preliminary Baa2 ratings from Moody’s. The Class M-1B notes tranche sized at $119.5 million are rated Baa3, while the M-1C notes totaling $70.8 million and $66.4 million in Class M-2 bonds are each speculative-grade rated at Ba2 and B2, respectively. The bonds will be priced against the Secured Overnight Financing Rate benchmark published by the Federal Reserve Bank of New York.
The expected closing date is April 27, according to Moody’s.
NMI’s deal adds to a MI-linked pipeline of offerings that have priced since March 24 totaling $1.4 billion, including Radian Guaranty, Arch Capital Group (formerly United Guaranty) and Genworth Financial. Genworth’s $303 million Triangle Re 2021-2 transaction was its second CRT deal of the year.
