MARC has affirmed the long-term rating of Cagamas MBS Berhad’s (Cagamas MBS) RM1,555.0 million fixed rate serial bonds (CMBS 2004-1) at AAA. The affirmation reflects the performance of the securitised Government Staff Housing Loans (GSHL) portfolio (comprising of mortgages of government pensioners only) which is within expectations, aided by the stringent core and portfolio eligibility criteria; availability of overcollateralization of 124.5%; deductions of mortgage payments at source; and adequate collection and monitoring procedures employed in respect of Portfolio 2004-1 by The Government of Malaysia’s (GOM) Housing Loan Division or Bahagian Pinjaman Perumahan (BPP) and Cagamas Berhad.

Cagamas MBS is a limited purpose entity, wholly-owned subsidiary of Cagamas Berhad (Cagamas), established with principal activities restricted to acquiring conventional housing loans or Islamic home financing from the GOM, and issuing asset-backed securities or any other forms of securities for the purpose of acquiring the housing loans/home financing thereof.

Under this transaction, the originator, GOM, had sold its rights, title, benefit and interest in, to, under and in respect of mortgage assets with outstanding principal balance of RM1,935.7 million to Cagamas MBS funded by proceeds from issuance of RM1,555.0 million fixed rate serial bonds.

The mortgage assets or government staff housing loans (GSHL) purchased by Cagamas MBS comprises mortgages of government pensioners only and therefore, monthly mortgage instalments will be made via pension deductions. Jabatan Perkhidmatan Awam (JPA) and Ministry of Defence

(MINDEF) are the government bodies responsible for administering the pension deductions for all civil and military pensioners respectively. BPP is the servicer of the securitised pool of mortgage assets.

During the year under review, the portfolio performed within stressed expectations. Prepayments were at a cumulative 2.14% for the twelve months period since closing, ie 20 October 2004. The highest prepayment was recorded in the second quarter since closing at 0.70% although prepayments in the subsequent three quarters have abated somewhat to 0.62%, 0.49% and 0.58% respectively. Given the level of prepayments during the fifteen months period, closing cash balance as at 20 January 2006 amounted to RM319.4 million representing 55.1% of Series 1 of CMBS 2004-1 due to mature in October 2007. As at 20 January 2006, the outstanding principal balance of active mortgages (i.e. excluding repurchased GSHLs) amounted to RM1,565.9 million.

The average quarterly prepayment rate was reported at 0.54% with the bulk of the prepayments comprising of voluntary prepayments (75.5%) implying certain behavioural patterns and preferences of government pensioners where maintenance of debt obligations are concerned.

During the year under review, approximately RM80.2 million of GSHLs were repurchased by the GOM. MARC draws comfort from the terms of the issue which ensures some stability in cash inflows whereby the mortgage instalments of repurchased GSHLs essentially equate to the original repayment schedule of the repurchased GSHLs. As at 20 January 2006, the outstanding principal balance of repurchased GSHL amounted to RM75.8 million.