NMI sponsoring $364m Oaktown Re VII mortgage insurance-linked notes

Mortgage insurance group NMI Holdings, Inc. has returned to the capital markets to sponsor its second mortgage insurance-linked notes issuance of the year, targeting an almost $364 million source of collateralised mortgage reinsurance with an Oaktown Re VII Ltd. transaction.

Earlier this year, NMI sponsored its largest issuance of mortgage insurance-linked securities (ILS) yet, with the successful completion of a $367 million Oaktown Re VI Ltd. deal.

NMI has been sourcing capital market investor backed fully-collateralized mortgage reinsurance protection for its wholly owned subsidiary National Mortgage Insurance Corporation through these Oaktown Re transactions.

Details of every Oaktown Re mortgage ILS deal can be found in our extensive insurance-linked securities (ILS) Deal Directory.

Now, 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 settle 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.

You can read all about this new Oaktown Re VII Ltd. mortgage ILS transaction from NMI Holdings and every other mortgage ILS deal our comprehensive catastrophe bond and insurance-linked security Deal Directory.