Radnor Re 2021-2 Ltd.

This is the seventh mortgage insurance-linked securities (ILS) transaction to be sponsored by specialist insurer Essent Guaranty.

It is the second issuance of 2021 from the companies Radnor Re mortgage ILS platform and sees Essent Guaranty looking to secure almost $435 million of fully-collateralized and capital market investor backed excess-of-loss mortgage reinsurance protection.

As is typical, Essent Guaranty has registered a new Bermuda domiciled special purpose insurance company (SPI) for the purposes of this mortgage ILS issuance, Radnor Re 2021-2 Ltd. (RMIR 2021-2).

Radnor Re 2021-2 Ltd. aims to issue four tranches of mortgage insurance-linked notes with this issuance, totalling almost $435 million.

Each tranche of notes will be offered and sold to investors and the proceeds used to provide collateral to support underlying excess-of-loss mortgage reinsurance agreements between the SPI, Radnor Re 2021-2 and the ultimate sponsoring beneficiary of the reinsurance protection Essent Guaranty.

This latest mortgage ILS deal consists of:

• $139.5 million Class M-1A (DBRS Morningstar rated BBB (low) (sf); Moody’s rated Baa3 (sf)).
• $147.8 million Class M-1B (DBRS Morningstar rated BB (sf); Moody’s rated Ba3 (sf)).
• $130.4 million Class M-2 (DBRS Morningstar rated B (sf)).
• $21.7 million Class B-1 (DBRS Morningstar rated B (low) (sf))

Rating agency DBRS Morningstar commented on the subject business, “As of the cut-off date, the pool of insured mortgage loans consists of 146,713 fully amortizing first-lien fixed- and variable-rate mortgages underwritten primarily to a full documentation standard with original loan-to-value ratios less than or equal to 99%, which have never been reported to the Ceding Insurer as 60 or more days delinquent, and have not been reported to be in a payment forbearance plan as of the cut-off date. The mortgage loans have MI policies effective on or after April 2021 and on or before September 2021.”

The notes will have a ten-year term, so shorter than Essent Guaranty’s last mortgage ILS deal which had shifted up to the 12.5 year duration.

Moody’s also provided some background on the covered pool of mortgage insurance policies, saying, “Each mortgage loan has an insurance coverage effective date on or after April 1, 2021, but on or before September 30, 2021. The reference pool consists of 146,713 prime, fixed- and adjustable-rate, one- to four-unit, first-lien fully-amortizing, predominantly conforming mortgage loans with a total insured unpaid principal balance of approximately $47 billion. All loans in the reference pool had a loan-to-value (LTV) ratio at origination that was greater than 80%, with a weighted average of 92.3%. The borrowers in the pool have a weighted average FICO score of 744, a weighted average debt-to-income ratio of 36.8% and a weighted average mortgage rate of 3.1%.The weighted average risk in force (MI coverage percentage) is approximately 26.3% of the reference pool unpaid principal balance.

“The weighted average LTV of 92.3% is far higher than those of recent private label prime jumbo deals, which typically have LTVs in the high 60’s range, however, it is in line with those of recent MI CRT transactions. All these insured loans in the reference pool were originated with LTV ratios greater than 80%. 100% of insured loans were covered by MI at origination with 99.0% covered by BPMI and 1.0% covered by LPMI based on risk in force.”