Mortgage notes secure $303.7 million, Radnor Re

Radnor Re, 2022-1 is preparing to issue approximately $303.7 million in mortgage insurance-linked notes, the eighth such transaction by Essent Guaranty, the ceding insurer under the agreement.

Reinsurance Premiums, Qualifying Investments, and Related Account Investment Income, All of Which Are Linked to a Bundle of Residential Loan-Linked Mortgage Insurance Policies, 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 claims on the underlying mortgage insurance policies, according to DBRS. As of July 31, the deal’s deadline, the collateral pool consisted of some 151,740 fully amortized, fixed- and variable-rate first mortgages, underwritten primarily to a full documentation standard, the agency said. rating.

Although the ratings of the underlying mortgages are mixed, most notes are benchmarked at the guaranteed overnight rate.

Radnor Re’s ratings have a number of credit strengths, starting with the fact that nearly all (99.3%) of the underlying insured mortgages meet Freddie Mac’s underwriting guidelines and Fannie Mae, DBRS said.

The underlying loans also exhibit high credit quality characteristics. About 49.5% of loans have credit scores of 750 and above, while about 87.0% have credit scores of 700 and above, according to DBRS.

DBRS expects to assign ratings ranging from “BBB” for Tranche M-1A Notes to “B” for Level B-1 Notes.

In addition, some 94.4% of mortgage loan insurance policies are paid for by the borrower. Essent Guaranty can terminate mortgage policies when the outstanding balance is expected to reach 78% of the original property value and the borrower is current on mortgage insurance.

DBRS also noted that the trust has low concentration risk, resulting in lower asset correlation compared to recent private label blue chip securitizations.

On average, linked mortgages have a balance of $349,268. On a weighted average (WA) basis, the loans have an initial loan-to-value ratio of 92.5%, a FICO score of 747 and a coupon of 4.16%. The loans also have a leverage ratio of 37.6%.

The linked mortgages have an original WA term of 358 months, and some 47.7% of them have a co-borrower, according to DBRS.

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