Cagamas MBS Bhd (2007-1-i)- 2009

MARC has affirmed the long-term rating of AAAIS accorded to Cagamas MBS Berhad’s (Cagamas MBS or the Issuer) RM2,110.0 million mortgage-backed Sukuk Musyarakah issuance (CMBS 2007-1-i). CMBS 2007-1-i is the fourth securities issuance by Cagamas MBS, comprising seven tranches with maturities on the third, fifth, seventh, tenth, twelfth, fifteenth and twentieth anniversary from the issuance date, May 29, 2007.

The rating reflects the satisfactory performance of the mortgage portfolio, underpinned by low cumulative default and manageable prepayment rates. This has ultimately resulted in a marginal increase in credit enhancement to 21.6% compared to 21.1% recorded in January 2008 (taking into account cash at bank and permitted investments) since transaction close. The rating also incorporates adequate monitoring capabilities and appropriate procedures employed in administering the mortgage 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 aforesaid GSHLs. The proceeds raised from the issuance of CMBS 2007-1-i was used to acquire the rights, title, interest and benefits in respect of the portfolio of eligible Government Staff Islamic Home Financing (GSIHFs) (Portfolio 2007-1-i) amounting to RM2,538.2 million, the principal outstanding amount as at 31 January 2007.  

The GOM’s Housing Loans Division, or Bahagian Pinjaman Perumahan (BPP), is the servicer for Portfolio 2007-1-I, and will continue to administer the foregoing after the securitisation exercise. All GSIHFs were originated by BPP, with monthly mortgage payments/instalments automatically deducted at source from the monthly salaries and/or monthly pensions payable to the relevant obligors/borrowers.

Since closing, the collateral has performed within expectations. As of January 2009, Portfolio 2007-1-i consisted of 25,707 accounts with a total outstanding principal amount of RM2,335.6 million.

As at January 2009, CMBS 2007-1-’s credit enhancement is derived in the form of overcollateralisation amounting to 110.7%, down from 115.8% as recorded in January 2008. The fall is principally due to the gradual reduction in the outstanding principal amount from RM2,444.2 million (January 2008) to RM2,335.6 million (January 2009). Since transaction close, a total of RM29.0 million has been prepaid, the majority of which comprises voluntary prepayments (84.2%). During the period under review, Portfolio 2007-1-i registered a cumulative prepayment rate of 1.14%, translating to an average quarterly prepayment rate of 0.14%. MARC noted that total prepayments ballooned to RM29.0 million on the back of high voluntary prepayments standing at approximately RM24.5 million.

Portfolio 2007-1-i’s delinquency rate fell to 2.6% (compared to 7.5% recorded in January 2008). The arising of such delinquencies is primarily attributable to operational and administrative delays in executing the relevant deduction from the borrowers/obligors.

Portfolio 2007-1-i’s cash balance (including permitted investments) stood firmly at RM236.2 million, denoting 71.6% of the nominal value of Tranche 1 under the CMBS 2007-1-i. Going forward, MARC expects Portfolio 2007-1-i to continue to perform within its stressed expectations.

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Challenges/Risk