Cagamas MBS Bhd (2007-1-i) - 2008

MARC has affirmed the long term rating of Cagamas MBS Berhad’s (Cagamas MBS) mortgage-backed Sukuk Musyarakah issuance of RM2,110.0 million (CMBS 2007-1-i) at AAAIS. The rating reflects the satisfactory performance of the collateral pool, in particular its low cumulative default rate and slightly lower than projected prepayment rate which has resulted in a modest increase in credit enhancement to 21.1% since transaction close. The rating also incorporates adequate monitoring procedures employed in respect of the securitized portfolio by the transaction administrator, Cagamas Berhad (Cagamas).

Cagamas MBS is a limited purpose entity and a wholly-owned subsidiary of Cagamas Holdings Berhad (Cagamas Holdings), whose principal activities are restricted to acquiring government staff housing loans (GSHLs), originated under both Islamic and conventional principles, from the Federal Government of Malaysia (GOM), and issuing securities for the purpose of acquiring the housing loans/ home financings thereof. The issuance of CMBS 2007-1-i represents the fourth securities issuance by Cagamas MBS. The proceeds from the issuance of CMBS 2007-1-i was used to acquire the rights, title, interest and benefit in respect of portfolio of eligible Government Staff Islamic Home Financing (GSIHFs) (Portfolio 2007-1-i) amounting to RM2,538.2 million comprising of mortgages of mainly public sector employees. The GOM’s Housing Loans Division or Bahagian Pinjaman Perumahan (BPP) is the servicer for Portfolio 2007-1-i.

CMBS 2007-1-i comprises seven tranches with maturities on the third, fifth, seventh, tenth, twelfth, fifteenth and twentieth anniversary from the issuance date. The collateral pool of GSIHFs was acquired based on portfolio valuation as at 31 January 2007. All GSIHFs were originated by BPP and monthly mortgage payments are deducted at source from the monthly salaries and pensions of borrowers. Since closing, the collateral has performed within stressed expectations. As of January 2008, Portfolio 2007-1-i consisted of 25,952 accounts with a total outstanding principal amount of RM2,444.2 million.

As of January 2008, CMBS 2007-1-i benefits from credit enhancement of 21.1%, derived primarily from overcollateralisation of 115.8%. Since transaction close, a total of RM9.6 million has been prepaid, the majority of which comprises voluntary prepayments (84.3%). As of January 2008, Portfolio 2007-1-i registered a cumulative prepayment rate of 0.38% translating to an average quarterly prepayment rate of 0.10%. The lower than projected prepayment rate recorded for the period under review of 0.38% (Projected: 0.44%) is mitigated by lower than expected delinquency and default rates for the same period. For the period under review, Portfolio 2007-1-i’s delinquency rate stood at 7.5%, of which 96.0% is accounted for by technical delinquencies attributable to administrative delays.

As of January 2008, Portfolio 2007-1-i’s cash balance of RM112.2 million represents 34.0% of Tranche 1 CMBS 2007-1-i’s principal amount due in May 2010. MARC expects Portfolio 2007-1-i to continue to perform within its stressed expectations going forward.