Radnor Re, 2022-1 is preparing to issue about $303.7 million in mortgage insurance-linked notes, the eighth such transaction from Essent Guaranty, the ceding insurer in the deal.
Reinsurance premiums, eligible investments and related account investment earnings, all of which are related to a pool of mortgage insurance policies linked to residential loans, according to Morningstar | DBRS.
Radnor Re's underlying notes are exposed to risks arising from losses that Essent Guaranty, the ceding insurer, will pay to settle the claims on the underlying mortgage insurance policies, according to DBRS. As of July 31, the deal's cutoff date, the collateral pool consisted of some 151,740 fully amortizing, first-lien, fixed- and variable-rate mortgages underwritten primarily to a full documentation standard, the rating agency said.
While the ratings on the underlying mortgages are mixed, much of the notes are benchmarked to the Secured Overnight Financing Rate.
The notes from Radnor Re has a number of credit strengths, beginning with the fact that virtually all (99.3%) of the underlying insured mortgage loans conform to underwriting guidelines of Freddie Mac and Fannie Mae, DBRS said.
The underlying loans also have high credit quality attributes. About 49.5% of the loans have credit scores of 750 and higher, while about 87.0% have credit scores of 700 and higher, according to DBRS.
DBRS expects to assign ratings ranging from 'BBB' on the notes from the M-1A tranche to 'B' on the level B-1 notes.
Also, some 94.4% of the mortgage insurance policies are borrower paid. Essent Guaranty can terminate the mortgage-linked policies when the unpaid balance is first scheduled to reach 78% of the property value at origination, and the borrower is current on the mortgage insurance.
DBRS also noted that the trust has a low concentration risk, which results in a lower asset correlation relative to recent private-label prime securitizations.
On average, the linked mortgages have a balance of $349,268. On a weighted average (WA) basis, the loans have an original loan-to-value ratio of 92.5%, a FICO score of 747, and a coupon of 4.16%. The loans also have a debt-to-income ratio of 37.6%.
The linked mortgages have a WA original term of 358 months, and some 47.7% of them have a co-borrower, according to DBRS.
