Cagamas MBS Bhd (2007-2) - 2008

MARC has affirmed the AAA rating of Cagamas MBS Berhad’s (Cagamas MBS) asset-backed fixed rate serial bonds (CMBS 2007-2) of RM2,410.0 million. The affirmed rating reflects the satisfactory performance of the securitised mortgage portfolio to date, particularly its stable delinquency and low cumulative default rates. As of August 2008, CMBS 2007-2 benefited from a marginally higher credit enhancement level of 25.6%, supported by both principal overcollateralisation and a cash reserve of RM195.5 million. The affirmed rating is also supported by the adequate monitoring capabilities of 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 Government of Malaysia (GOM), and issuing asset-backed securities to pay for the purchase of the GSHLs.

At transaction close in August 2007, Cagamas MBS acquired from the GOM rights, title, interest and benefit in respect of eligible GSHLs (Portfolio 2007-2) amounting to RM3,016.0 million arising from 63,461 mortgage loans, by way of equitable assignment. All loans in the pool are fixed rate loans with monthly mortgage installments being made via direct salary/pension deductions. The acquisition of Portfolio 2007-2 was funded by proceeds raised from the issuance of RM2,410.0 million CMBS 2007-2 comprising seven tranches with maturities on the third, fifth, seventh, tenth, twelfth, fifteenth and twentieth anniversary from the issuance date.  The GOM’s Housing Loans Division or Bahagian Pinjaman Perumahan (BPP) is the servicer of Portfolio 2007-2. 

As of August 2008, CMBS 2007-2’s credit enhancement level rose marginally to 25.6% compared to 25.1% at transaction close reflecting the commendable performance of Portfolio 2007-2. Total cash balance in the Collection Account 2007-2 stood at RM195.5 million, translating to 37.9% of the Tranche 1 bonds’ RM515.0 million maturing in August 2010. For the first 12 months since closing, Portfolio 2007-2 has performed well as is evident in the significantly lower than expected cumulative default rate of 0.03% against MARC’s initial projection of 0.91% for the same period. In addition, the cumulative prepayment rate of a low 0.97% as of August 2008, is within the range of MARC’s stressed prepayment scenarios. Furthermore, MARC observes that 92.5% of the prepayments were voluntary and takes comfort from the fact that the reinvestment risk is mitigated by the structure’s in-built conditional pass-through provision which allows for partial redemption of Tranche 7 and Tranche 6 of CMBS 2007-2 ahead of their legal maturities.

Strengths

• Satisfactory performance of the mortgage portfolio to date;
• Higher credit enhancement available in the form of principal overcollateralization and cash reserve; and
• Adequate monitoring capabilities of the transaction administrator, Cagamas.