Friday, April 24, 2015

RAM Ratings: Passing of Public Home Financing Board Act 2015 has no immediate rating impact on Cagamas MBS


Published on 24 April 2015
RAM Ratings opines that the passing of the Public Sector Home Financing Board Act 2015, which was reported by the media on 10 April 2015, has no immediate rating impact on Cagamas MBS Berhad (Cagamas MBS). The Act had been passed by Parliament, following 2 readings, i.e. on 26 March and 2 April 2015. As a consequence, the existing Housing Loans Fund Act 1971 (Act 42) will be repealed while all the assets and liabilities of Bahagian Pinjaman Perumahan (BPP) will be vested to a separate body corporate (i.e. the Public Sector Home Financing Board or the Board).
BPP is the primary servicer of Cagamas MBS’s securitisation transactions that are backed by government home-financing facilities, i.e. CMBS 2005-1, CMBS 2005-2, CMBS 2007-1-i and CMBS 2007-2 (collectively, the transactions), which all carry AAA/Stable ratings. Cagamas MBS is a limited-purpose entity incorporated for the purpose of securitising government staff housing loans and government staff Islamic home-financing facilities.
Beyond the passing of the Bill, further details with regards to the implementation of the Board have not been disclosed. We do not foresee major changes to the transactions’ servicing quality in the immediate term despite potential administrative issues that may arise during the transition period. Nevertheless, RAM will continue to monitor the developments on this front and the potential impact, if any, on the transactions.
Based on the Bill that had been passed, the Board will be responsible for collecting and recovering the repayments on public-sector home financing, which is undertaken through direct deductions from the borrowers’ salaries or pensions, as well as legal proceedings (for mortgages-in-arrears). The Board will be self-financing, by way of borrowings (subject to the approval of the appointed finance minister) and collections from the mortgage pools, but may receive provisions from Parliament. Moreover, the Board will have autonomy over its human resources, although the appointment of the CEO will require the approval of the finance minister, who will also appoint several board members.

 Transaction
Total issue amount (RM billion)
Issue rating
 Sukuk Musyarakah Islamic residential
 mortgage-backed securities, CMBS 2005- 1
2.05
AAA/Stable
 Residential mortgage-backed securities,
 CMBS 2005-2
2.06
AAA/Stable
 Sukuk Musyarakah Islamic residential
 mortgage-backed securities, CMBS 2007-1-i
2.11
AAA/Stable
 Residential mortgage-backed
 securities, CMBS 2007-2
2.41
AAA/Stable
Media contact
Chin Jin Han
03 7628 1168
jinhan@ram.com.my

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