Essent re-opens the MILN market after five-month layoff

Essent Guaranty is in the market with the first mortgage insurance-linked note (MILN) since April.

Dubbed Radnor Re 2022-1 Ltd, the deal consists of an M-1A tranche rated Ba2 by Moody’s and an M-2A tranche rated B1.

Following the example of the GSEs, it seems B class securities are no longer on offer.

The securities reference a pool of insurance policies written by Essent Guaranty, on a portfolio of mortgage loans predominantly acquired by Fannie Mae and Freddie Mac, and originated and serviced by multiple entities.

The last MILN was the $474m Home Re 2022-1 issued by MGIC Investment Corporation in April, and the only other deal sold this year was the $282m Bellemeade Re 2022-1 from Arch in January.

In contrast, there were 14 offerings in 2021 with an overall dollar value of $6.3bn. However, spreads have widened sharply in the MILN market over the last eight months.

This has deterred many of the regular borrowers, and they have turned instead to the reinsurance market.  Arch is also said to be preparing another Bellemeade deal which will be launched soon, but, say onlookers, issuance by these names is based more on a commitment to the market and a wish to retain investor contact rather than strictly economic rationale.

Simon Boughey