MARC has affirmed the long term rating of Cagamas MBS Berhad’s (Cagamas MBS) asset-backed Sukuk Musyarakah Issuance (CMBS 2005-1) of RM2,050.0 million at AAAID. The affirmation is premised on the performance of the securitised mortgage portfolio; overcollateralisation of 138.8%; the stringent core and portfolio eligibility criteria, which serves to reduce credit risk of the obligors; deductions of mortgage payments at source; and, adequate monitoring procedures employed in respect of the securitized portfolio by Cagamas Berhad (Cagamas), the transaction administrator.


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


Representing the second of the three acquisitions to date, Cagamas MBS had, on 31 March 2005, acquired rights, title, interest and benefit in, to, under and in respect of selected government staff islamic home financings (GSIHFs) (Portfolio 2005-1) (via retrospective purchase) amounting to RM2,844.5 million comprising mainly mortgages of non-pensioners (public sector employees) including all charges, guarantees and insurances by way of equitable assignment. The acquisition was funded by proceeds raised from the issuance of nominal value RM2,050.0 million CMBS 2005-1. The GOM’s Housing Loans Division or Bahagian Pinjaman Perumahan (BPP) is the servicer of the securitised pool of GSIHFs. CMBS 2005-1 comprises of six tranches with maturities on the third, fifth, seventh, tenth, twelfth and fifteenth anniversary from the issuance date.


Credit enhancement is provided primarily by the overcollateralisation of 138.8%. During the year under review, the portfolio performed within stressed expectations.

Since closing, Portfolio 2005-1 recorded a cumulative prepayment rate of 0.74%, translating to an average quarterly prepayment rate of 0.185%. The cumulative prepayment rate registered is higher than the base case projections, the bulk of which were voluntary prepayments (88.73%). The highest prepayment was recorded in the second quarter since closing at 0.23% and remained stable at around 0.20% in the following quarters. A total prepayment amount of RM20.9 million were collected for the period under review.


During the 12 months period, Portfolio 2005-1’s delinquency rate stood at 0.01% with the first quarter recording the highest delinquency rate of 0.04%. The quarterly delinquency rate has since decreased to 0.01% in the last quarter of the reporting period, possibly indicating the occurrence of technical delinquency in the earlier quarters. Portfolio 2005-1 registered a cumulative default rate of 0.01%, significantly lower than the anticipated rate of 0.89%.

Due to the high prepayment and low default rates, Portfolio 2005-1’s cash balance as at 10 August 2006 stood at RM137.35 million, representing 54.94% of Tranche 1 CMBS 2005-1 due in August 2008. Should the trend of prepayments and defaults in the first four quarters continue going forward, MARC expects sufficient funds will be available in the collection account to partially redeem Tranche 6 in August 2008 (redemption at the option of Cagamas MBS).