Cagamas MBS Bhd (2004-1) - 2010

MARC has affirmed the AAA rating of Cagamas MBS Berhad’s (Cagamas MBS) asset-backed fixed rate serial bonds of RM1,555.0 million (CMBS 2004-1). The affirmed rating reflects an increase in the transaction’s credit enhancement levels due to loan payoffs and amortisation in addition to the satisfactory performance of the securitised mortgage portfolio to date with regard to its stable delinquency and low cumulative default rates. Underpinning the stable performance of the pool is its weighted average seasoning of 17.5 years and the high credit quality obligors. 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 securitising government staff housing loans (GSHLs), originated under both Islamic and conventional principles, from the Government of Malaysia (GOM), by issuing asset-backed securities. The collateral backing this transaction is a pool of eligible GSHLs (Portfolio 2004-1) granted to government pensioners and serviced by direct deductions from the borrowers’ pension accounts. The GOM’s Housing Loans Division, or Bahagian Pinjaman Perumahan (BPP), is the servicer of Portfolio 2004-1.  

Based on Cagamas’ quarterly report for Portfolio 2004-1’s performance dated July 20, 2010 (the reporting date), outstanding mortgage portfolio consisted of 41,314 fixed-rate mortgages with an outstanding pool balance of RM728.1 million, compared to the portfolio’s position at issuance which consisted of 68,396 fixed-rate mortgages worth RM1,935.7 million in total. At the same time, credit enhancement level for the total outstanding bonds of RM635.0 million stood at 168.0%, based on cash and permitted investments of RM308.9 million in CMBS 2004-1’s Collection Account and the principal balance of performing mortgages within the collateral pool. 

Meanwhile, the collateral pool continued has experienced only RM8.93 million in defaults (loan amounts in arrears for more than 9 months) since inception, which translates to a cumulative default rate of 0.46% that is substantially lower than MARC’s assumed cumulative default rate of 4.89% for the same period. In addition, the pool’s cumulative prepayment rate of 15.85% remained within AAA-rated thresholds. Cagamas’ report attributes the majority of the defaults to  administrative and technical delays in salary and pension deductions. These technical issues are being addressed on an ongoing basis by Jabatan Perkhidmatan Awam and the Ministry of Defence, the bodies responsible for administering pension deductions, as well as BPP. 

Going forward, MARC expects Portfolio 2004-1 to continue to perform well based on its historical performance. Cagamas MBS is likely to be able to exercise its option to partially redeem the last tranche of CMBS 2004-1 on the next scheduled redemption date, but on condition that RM66 million remains in the Collection Account post redemption. Given the high credit enhancement level available, MARC views that an early partial redemption would have minimal impact on the bonds.

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