MARC has reaffirmed the long-term rating of Cagamas MBS Berhad’s (Cagamas MBS) RM1,555.0 million fixed rate serial bonds (CMBS 2004-1) at AAA.  The reaffirmation reflects the performance of the securitised mortgage portfolio (Portfolio 2004-1) within stressed expectations; overcollateralization of 121.9%; and adequate collection and monitoring procedures employed in respect of Portfolio 2004-1 by Cagamas Berhad (Cagamas), the transaction administrator. 

Cagamas MBS is a limited purpose entity and a wholly-owned subsidiary of Cagamas, established with principal activities restricted to acquiring conventional housing loans or Islamic home financing from the Federal Government of Malaysia (GOM), and securities for the purpose of acquiring the housing loans/home financing thereof.

Portfolio 2004-1 represents the first of three acquisitions to date by Cagamas MBS. Under this transaction, Cagamas MBS had acquired the rights, title, benefit and interest in respect of eligible government staff housing loans (GSHLs) in October 2004 amounting to RM1,935.7 million comprising of only mortgages by pensioners including all charges, guarantees and insurance by way of equitable assignment. The acquisition was funded via the proceeds from the issuance of RM1,555.0 million CMBS 2004-1. The GOM’s housing loan division or Bahagian Pinjaman Perumahan (BPP) is the servicer of the securitised pool of GSHLs.  

As at 28 February 2006, CMBS 2004-1 benefits from overcollateralisation of 121.9% on the basis of total outstanding principal of GSHLs of RM1,399.7 million plus cash of RM496.6 million vis-à-vis the total CMBS 2004-1 outstanding of RM1,555.0 million.

Since closing, the cumulative quarterly prepayment rate was recorded at 5.05% translating to an average quarterly prepayment rate of 0.63%.  In terms of value, total prepayments as at 28 February 2006 stood at RM97.7 million, 40% of which was contributed during the period under review. During the period under review, the highest prepayment was recorded in both the 6th and 8th quarters at 0.76% with average prepayment rate at 0.69%.  MARC notes that the cumulative prepayment rate is relatively high and bulk of the prepayments were voluntary prepayment (76.8%) which is perhaps reflective of the debt-servicing behaviour of government pensioners. The default rate of 0.60% registered for Portfolio 2004-1 as at 28 February 2006 was well below MARC’s stressed expectations.

Since closing, approximately RM80.6 million of GSHLs were repurchased by the GOM and as at 28 February 2006, the outstanding principal balance of repurchased GSHL amounted to RM68.6 million. MARC draws comfort from the terms of the issue in respect of repurchased GSHLs where payment by the GOM would be in a manner as if the repurchase had not occurred, i.e. in accordance to the original repayment schedule instead of repayment  in a lump sum hence ensuring some stability to the cash flows. 

As at 20 October 2006, Portfolio 2004-1’s closing cash balance stood at RM496.6 million representing 85.6% of Series 1 of CMBS 2004-1 due to mature in October 2007.  Should the trend of prepayments and defaults continue going forward, MARC expects sufficient funds to be available for Cagamas MBS to elect for pass through of monies in excess of required minimum of RM66.0 million (post redemption of Series 1) to partially redeem Series 4 in October 2007.