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Oaktown Re VII Ltd.

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Oaktown Re VII Ltd. – At a glance:

  • Issuer: Oaktown Re VII Ltd.
  • Cedent / sponsor: National Mortgage Insurance Corporation
  • Placement / structuring agent/s: Unknown
  • Risk modelling / calculation agents etc: Unknown
  • Risks / perils covered: Mortgage insurance risks
  • Size: $364m
  • Trigger type: Indemnity
  • Ratings: DBRS Morningstar & Moody's rated (details below)
  • Date of issue: Oct 2021

Oaktown Re VII Ltd. – Full details:

This is NMI Holding’s seventh trip to the capital markets to source investor backed fully-collateralized mortgage reinsurance protection for its wholly owned subsidiary National Mortgage Insurance Corporation through an Oaktown Re mortgage insurance-linked securities transaction.

The company has returned with a newly registered Bermuda domiciled special purpose insurer, Oaktown Re VII Ltd., seeking to issue five tranches of notes and secure almost $364 million of additional mortgage reinsurance.

Oaktown Re VII is issuing the five tranches of mortgage insurance-linked notes, which will be sold to investors and the proceeds used to collateralize underlying excess of loss mortgage reinsurance agreements between the issuer, Oaktown Re VII Ltd. and the beneficiary of the coverage, NMI’s subsidiary National Mortgage Insurance Corporation.

In total, almost $364 million of 12.5-year term mortgage insurance-linked notes are on offer from the Oaktown Re VI Ltd. issuance, with this transaction expected to close at the end of this month.

Details of the five tranches being issued by Oaktown Re VII Ltd. , with their pricing in bps above SOFR, plus provisional ratings from DBRS Morningstar and Moody’s are below:

  • $126.5 million Class M-1A, SOFR +160 – DBRS Morningstar BBB (sf) / Moody’s Baa3 (sf)
  • $110.7 million Class M-1B, SOFR +290 – DBRS Morningstar BB (high)(sf) / Moody’s Ba3 (sf)
  • $55.3 million Class M-1C, SOFR +335 – DBRS Morningstar BB (low) (sf)
  • $51.4 million Class M-2, SOFR +370 –  DBRS Morningstar B (sf)
  • $19.8 million Class B-1, SOFR +440 – DBRS Morningstar B (sf)

Once this new Oaktown Re VII Ltd. issuance is completed, National Mortgage Insurance Corporation will benefit from an additional roughly $364 million of fully collateralized excess of loss mortgage reinsurance protection.

Each tranche of notes is exposed to the risk of claims payments on the underlying pool of mortgage insurance policies.

The transaction covers residential mortgage insurance policies, across a pool of 122,629 prime, fixed- and adjustable-rate, one-to-four-unit, mortgage loans with a total insured loan balance of approximately $40 billion, Moody’s explained.

The mortgage loans in the subject pool have an insurance coverage reporting date of between July 1, 2019 through September 30, 2021.

On completion of the transaction, NMI explained that the issuance of notes will provide its subsidiary National Mortgage Insurance Corporation (National MI) with $364 million of fully collateralized excess of loss reinsurance protection, covering an existing portfolio of mortgage insurance policies written primarily from April 1, 2021 through September 30, 2021.

The new excess of loss reinsurance coverage provides National MI protection for aggregate insured losses across the subject portfolio loans, beginning at a 1.85% cumulative claim rate threshold and continuing up to an eventual 7.45% aggregate detachment level, the company said.

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