Cagamas MBS Bhd (CMBS 2004-1) - 2014

MARC has affirmed its AAA rating on Cagamas MBS Berhad’s (Cagamas MBS) asset-backed fixed rate serial bonds of RM1,555.0 million (CMBS 2004-1) with a stable outlook. The rating action affects the final tranche (Series 4) of RM345.0 million bonds issued under CMBS 2004-1. The affirmed rating takes into account the robust credit enhancement levels of 233.5% based on outstanding principal of non-defaulted mortgages (including repurchased mortgages) of RM373.7 million and collection account balance of RM431.8 million. The rating also considers the stable performance of the collateral pool as well as Bahagian Pinjaman Perumahan’s (BPP) satisfactory collateral servicing and transaction administration capability.
 
Cagamas MBS, a wholly-owned subsidiary of Cagamas Holdings Berhad, is a limited purpose entity solely incorporated to acquire government staff housing loans (GSHL) under conventional and Islamic principles from the Federal Government of Malaysia (GOM). The acquisition was funded by the issuance of asset-backed securities. The collateral backing this transaction is a pool of eligible GSHLs (Portfolio 2004-1) granted to selected government pensioners. Direct deductions from monthly pensions of eligible pensioners to service the mortgage instalments partially mitigate the risks of non-timely repayment of CMBS 2004-1.

Based on the 37-quarter servicer report for Portfolio 2004-1 dated January 20, 2014, the collateral pool of 24,224 accounts has a total outstanding principal of RM362.8 million. Portfolio 2004-1 has weighted average seasoning of 19.35 years and average prepayment rate of 0.58% per quarter. The collateral pool continues to exhibit low cumulative default rate (CDR) of 0.47% against MARC’s assumed CDR and stressed CDR of 2.62% and 7.86% respectively. The defaults, which MARC defines as accounts in arrears exceeding nine months, have been mainly due to delay in receiving mortgage reducing term assurance (MRTA) claims from the insurers, BPP’s reconciliation and confirmation from Jabatan Perkhidmatan Awam (JPA) on borrowers’ status after the cessation of repayments. As at the reporting date, the delinquency rate decreased to 4.38% (Quarter 33: 5.87%); 77.03% of the delinquent mortgages are less than or equal to three months in arrears.

As of January 20, 2014, Cagamas MBS’ cash and permitted investment of RM431.8 million is sufficient to redeem Series 4. The stable outlook is premised on MARC’s expectation that Cagamas MBS will continue to maintain the liquidity buffer to meet the final principal repayment of CMBS2004-1 due on October 20, 2014.

Strengths