Cagamas MBS Bhd (2004-1) - 2007

MARC has reaffirmed the AAA rating of Cagamas MBS Berhad’s (Cagamas MBS) RM1,555.0 million fixed rate serial bonds (CMBS 2004-1).  The reaffirmed rating reflects the performance of the securitised mortgage portfolio in particular, its low cumulative default rate and significant principal prepayments which have allowed credit enhancement for the transaction to increase to 42.0% from 26.0% since the last rating action. Credit enhancement of 42.0% as of October 2007 is provided by overcollaterisation of RM128.4% and a RM131.8 million cash balance. The rating also reflects the adequate monitoring capabilities of transaction administrator, Cagamas Berhad (Cagamas).

On 19 October 2007, Cagamas MBS had fully redeemed its RM580.0 million CMBS 2004-1 Series 1 bonds. Following the redemption, the outstanding bonds of Series 2, Series 3 and Series 4 now stands at RM975.0 million.

Cagamas MBS is a limited purpose entity established with principal activities restricted to acquiring conventional housing loans or Islamic home financing from the Federal Government of Malaysia (GOM) and issuing asset-backed securities for the purpose of acquiring the housing loans/home financings thereof. Cagamas MBS and Cagamas are expected to become wholly-owned subsidiary of a newly incorporated holding company, Cagamas Holdings Berhad, upon completion of an ongoing restructuring exercise.

CMBS 2004-1 represents the maiden residential mortgage-backed securitisation issuance by Cagamas MBS. Under this transaction, Cagamas MBS had acquired the rights, title, benefit and interest in respect of eligible government staff housing loans (GSHLs) of pensioners in October 2004 amounting to RM1,935.7 million including all charges, guarantees and insurance by way of equitable assignment. The GOM’s housing loan division or Bahagian Pinjaman Perumahan (BPP) is the servicer of Portfolio 2004-1.  

As of 22 October 2007, CMBS 2004-1 benefits from credit enhancement of 42.0% contributed by overcollateralisation of 128.4% and a cash reserve of RM131.8 million. CMBS 2004-1 recorded a higher than expected cumulative prepayment rate of 8.08% since transaction close, which translates into an average quarterly prepayment rate of 0.67%. In value terms, cumulative prepayments as of 22 October 2007 totalled RM156.5 million, 78.9% of which were voluntary prepayments. Portfolio 2004-1 registered a cumulative default rate of 0.47%, lower than stressed cumulative default rate of 1.0%.

Since closing, approximately RM80.6 million of GSHLs have been repurchased by the GOM and as at 22 October 2007, the outstanding principal balance of repurchased mortgages amounted to RM59.5 million (The GOM undertakes to repurchase GSHLs that do not satisfy the mortgage eligibility criteria post-closing). Where the repurchased mortgages are concerned, payment by the GOM would be made in accordance to the original repayment schedule as if the repurchase had not occurred, thus imparting predictability to the cash flows. 

Due to the high prepayment and low cumulative default rates registered since closing, Portfolio 2004-1’s cash balance of RM131.8 million as at 22 October 2007 exceeded the minimum of RM66.0 million threshold above which Cagamas MBS may exercise its prepayment option. The current cash balance is more than sufficient to cover coupon payments of outstanding CMBS 2004-1 up to the next maturity in October 2009.