MARC Ratings has affirmed its rating of AAA on Cagamas MBS Berhad’s RM2,060.0 million asset-backed fixed rate serial bonds (CMBS 2005-2) with a stable outlook. 

The rating incorporates CMBS 2005-2’s very high accumulated cash and permitted investments of RM926.4 million as at the reporting date of December 12, 2022, that is more than sufficient to cover the outstanding principal of the issuance amounting to RM265.0 million as well as its remaining coupon obligations of about RM46.9 million under tranche 7. The final redemption is due on December 12, 2025. 

Cagamas MBS was established to undertake the securitisation of conventional and Islamic home financing originated by the Malaysian government. CMBS 2005-2 is backed by a pool of government staff housing loans (GSHL), or Portfolio 2005-2. Direct monthly salary/pension deductions form the source of repayment for CMBS 2005-2. 

CMBS 2005-2’s strong collateral pool performance is reflected by its high credit enhancement level of 518.8%, supported by the portfolio’s historically low cumulative default rate (CDR) of 0.11% of the initial pool balance. The CDR is well below the initial projection. GSHL defaults, accounts in arrears for more than nine months, were mainly due to pending assessment on the status of borrower accounts as well as pending claims on mortgage reducing term assurance (MRTA). 

The pool’s transaction terms allow for prepayments of the last two tranches upon meeting certain conditions; this option has not been exercised as the conditions have not been met. In particular, cash flow arising from the excess prepayments remained short of the projected amount while the outstanding principal of about 15.6% of the initial principal outstanding during the current review period is higher than the threshold of 10% that is required to allow for prepayment.

The stable outlook reflects the fully cash-collateralised position of CMBS 2005-2, among other key factors; the outlook is not expected to change over the redemption period.