Arch MI issues $418m of mortgage ILNs

Arch Mortgage Insurance Company (Arch MI) has secured nearly $452 million of indemnity reinsurance on a pool representing approximately $31 billion of mortgages from Bellemeade Re 2020-3, a special purpose reinsurer.

The coverage was obtained by issuing approximately $418 million in bonds and $34 million in direct reinsurance

The mortgage insurance-linked notes (MILN) relate to a portfolio of MI policies linked to 112,274 loans insured by Arch MI and affiliates primarily from June through August of 2020.

This is Arch’s third MILN trade in 2020, which between them have netted over $1.5 billion of indemnity reinsurance. The most senior M-1A class of notes received an A2 rating by Moody’s Investors Service and a BBB (high) from DBRS Morningstar.

Bellemeade Re 2020-3 is funding its reinsurance obligations through the issuance of five classes of amortising notes with 10-year legal final maturities.The MILNs consist of: $83,412,000 class M-1A notes with a coupon equal to one-month Libor plus 200 basis points; $78,407,000 class M-1B notes with a coupon equal to one-month Libor plus 285 basis points; $134,696,000 class M-1C notes with a coupon equal to one-month Libor plus 370 basis points; $104,265,000 class M-2 notes with a coupon equal to one-month Libor plus 485 basis points; and $17,378,000 class B-1 notes with a coupon equal to one-month Libor plus 635 basis points.

An additional $33,658,000 was placed with a panel of reinsurers.

Jim Bennison, executive vice president of alternative markets for Arch MI, said: “Each subsequent Bellemeade deal of 2020 has had a lower attachment point than the previous, signaling that investors are increasingly comfortable taking on mortgage credit risk as they get more clarity on COVID-19’s effect on the housing market.”