Posted Date: August 26, 2016
MARC has affirmed its AAA rating on Cagamas MBS Berhad’s (Cagamas MBS) RM2,410.0 million asset-backed fixed rate serial bonds (CMBS 2007-2) with a stable outlook. The rating action affects RM1,140.0 million of outstanding bonds. Cagamas MBS is a wholly-owned special purpose vehicle of Cagamas Holdings Berhad and was established to issue mortgage-backed securities via the securitisation of eligible government staff housing loans (GSHL) under Islamic and conventional principles. CMBS 2007-2 is backed by a pool of mortgage loans granted to eligible civil servants and government pensioners (Portfolio 2007-2).
The affirmed rating is supported by CMBS 2007-2’s strong credit enhancement level of 161.3% based on an outstanding principal of non-defaulted mortgages of Portfolio 2007-2 amounting to RM1,212.7 million and collection account balance of RM626.2 million as of November 30, 2015 (Quarter 35). As mortgage instalments in relation to Portfolio 2007-2 are made through direct salary/pension deductions, the repayment risk is low. The deductions are administered by the Accountant General’s Department/Pension Administrator and form the source of repayment for CMBS 2007-2. Following the passing of the Public Sector Home Financing Board Act 2015, Bahagian Pinjaman Perumahan (BPP) was replaced by Lembaga Pembiayaan Perumahan Sektor Awam (LPPSA), which is also under the Ministry of Finance, as the servicer of Portfolio 2007-2 on January 1, 2016. MARC notes that there were no changes in the servicer’s operations as LPPSA retained BPP’s existing resources and system.
Portfolio 2007-2 has continued to demonstrate strong performance as of the reporting date as reflected by a cumulative default rate of 0.48% of the initial pool balance. This is comfortably below MARC’s assumed rate of 3.47%. GSHL defaults, defined as accounts in arrears for more than nine months, were mainly attributed to lags and delays in deductions due to changes in eligibility status of borrowers and time taken on processing insurance claims on deceased borrowers. However, Portfolio 2007-2’s total delinquent rate as of Quarter 35 (mortgages in arrears for three months or less) declined significantly to 2.42% from 15.1% in Quarter 30. The previously high delinquent rate is attributed to BPP’s migration to a new system (Sistem Pinjaman Perumahan Bersepadu) and subsequent data reconciliation issues.
The cumulative prepayments on Portfolio 2007-2 rose to 12.82% of the initial pool balance from 11.38% since MARC’s last review. At the same time, the average quarterly prepayment rate of 0.64% remained relatively unchanged from the 0.63% in the previous rating review period. In the event of high prepayments, the transaction’s structure allows for early redemptions of the back-ended tranches which in turn would reduce concerns on negative carry and asset-liability mismatches. As at Quarter 35, Portfolio 2007-2’s outstanding principal of the collateral pool declined to RM1,227.2 million from RM1,471.5 million in Quarter 30. The collateral pool represents 48,001 mortgages with an average size of RM25,565, weighted term to maturity of 9.7 years and weighted average seasoning of 14.8 years. MARC’s sensitivity analysis indicates that the projected collection of Portfolio 2007-2 is able to cover the next lumpy repayment of RM525.0 million in 2017 under the scenarios of stressed default rate (three times MARC’s assumed base default rate) and a 50% reduction in prepayment.
The stable outlook is premised on the rating agency’s expectation that the collateral pool will continue to demonstrate stable servicing and sustained high overcollateralisation that remains supportive of the rating.
Contacts:
Neoh Jiun Yan, +603-2082 2263/ jiunyan@marc.com.my;
Sharidan Salleh, +603-2082 2254/ sharidan@marc.com.my.
MARC has affirmed its AAA rating on Cagamas MBS Berhad’s (Cagamas MBS) RM2,410.0 million asset-backed fixed rate serial bonds (CMBS 2007-2) with a stable outlook. The rating action affects RM1,140.0 million of outstanding bonds. Cagamas MBS is a wholly-owned special purpose vehicle of Cagamas Holdings Berhad and was established to issue mortgage-backed securities via the securitisation of eligible government staff housing loans (GSHL) under Islamic and conventional principles. CMBS 2007-2 is backed by a pool of mortgage loans granted to eligible civil servants and government pensioners (Portfolio 2007-2).
The affirmed rating is supported by CMBS 2007-2’s strong credit enhancement level of 161.3% based on an outstanding principal of non-defaulted mortgages of Portfolio 2007-2 amounting to RM1,212.7 million and collection account balance of RM626.2 million as of November 30, 2015 (Quarter 35). As mortgage instalments in relation to Portfolio 2007-2 are made through direct salary/pension deductions, the repayment risk is low. The deductions are administered by the Accountant General’s Department/Pension Administrator and form the source of repayment for CMBS 2007-2. Following the passing of the Public Sector Home Financing Board Act 2015, Bahagian Pinjaman Perumahan (BPP) was replaced by Lembaga Pembiayaan Perumahan Sektor Awam (LPPSA), which is also under the Ministry of Finance, as the servicer of Portfolio 2007-2 on January 1, 2016. MARC notes that there were no changes in the servicer’s operations as LPPSA retained BPP’s existing resources and system.
Portfolio 2007-2 has continued to demonstrate strong performance as of the reporting date as reflected by a cumulative default rate of 0.48% of the initial pool balance. This is comfortably below MARC’s assumed rate of 3.47%. GSHL defaults, defined as accounts in arrears for more than nine months, were mainly attributed to lags and delays in deductions due to changes in eligibility status of borrowers and time taken on processing insurance claims on deceased borrowers. However, Portfolio 2007-2’s total delinquent rate as of Quarter 35 (mortgages in arrears for three months or less) declined significantly to 2.42% from 15.1% in Quarter 30. The previously high delinquent rate is attributed to BPP’s migration to a new system (Sistem Pinjaman Perumahan Bersepadu) and subsequent data reconciliation issues.
The cumulative prepayments on Portfolio 2007-2 rose to 12.82% of the initial pool balance from 11.38% since MARC’s last review. At the same time, the average quarterly prepayment rate of 0.64% remained relatively unchanged from the 0.63% in the previous rating review period. In the event of high prepayments, the transaction’s structure allows for early redemptions of the back-ended tranches which in turn would reduce concerns on negative carry and asset-liability mismatches. As at Quarter 35, Portfolio 2007-2’s outstanding principal of the collateral pool declined to RM1,227.2 million from RM1,471.5 million in Quarter 30. The collateral pool represents 48,001 mortgages with an average size of RM25,565, weighted term to maturity of 9.7 years and weighted average seasoning of 14.8 years. MARC’s sensitivity analysis indicates that the projected collection of Portfolio 2007-2 is able to cover the next lumpy repayment of RM525.0 million in 2017 under the scenarios of stressed default rate (three times MARC’s assumed base default rate) and a 50% reduction in prepayment.
The stable outlook is premised on the rating agency’s expectation that the collateral pool will continue to demonstrate stable servicing and sustained high overcollateralisation that remains supportive of the rating.
Contacts:
Neoh Jiun Yan, +603-2082 2263/ jiunyan@marc.com.my;
Sharidan Salleh, +603-2082 2254/ sharidan@marc.com.my.
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