In late January, Walnut Creek, California--based Arch MI announced the launch of a new company--Arch Mortgage Guaranty Company (AMG)--specifically for loans intended to be retained in portfolio or for private securitizations.
Arch MI is Arch Capital Group Ltd.'s United States mortgage insurance operation, and is licensed to write mortgage insurance in all 50 states and the District of Columbia. It is the leading private mortgage insurer catering to the credit union lender channel, according to Moody's Investors Service, New York. Arch MI has been actively working together with the new company AMG to expand market share beyond the credit union channel to include banks and non-bank mortgage originators.
AMG was launched on Jan. 27 and since by design it is not an approved mortgage insurer with Freddie Mac and Fannie Mae, it will not have to comply with the private mortgage insurer eligibility requirements (PMIERs) currently being designed by Fannie and Freddie's regulator. Arch MI is a Fannie/Freddie-approved mortgage insurer subject to PMIERs requirements.
A press release announcing the new company said, "AMG is uniquely positioned to insure various types of prime, standard and non-standard mortgages, including jumbos, non-QM [Qualified Mortgage] and portfolio mortgages on an individual, bulk or pool basis."
Moody's assigned AMG an A3 insurance financial strength (IFS) rating, which reflects the Baa3 standalone credit assessment of AMG and "three notches of uplift based on explicit and implicit support from Arch [Arch Capital Group] and its affiliated entities."
Moody's identified the new company's credit strengths as including its strong capitalization relative to its net insured exposures (no exposure to pre-2009 mortgages). Other strengths include the fact it is fully integrated with Arch MI "with respect to client relationships including underwriting and sales, operating platform and management team," Moody's noted.
Among the credit challenges singled out by Moody's was: "The strategy depends on increased origination of non-conventional mortgages, in addition to demand for protection on those mortgages." Moody's also noted that the significant investment in operations and infrastructure have yet to produce a meaningful...