Mortgage Guarantee Programme (MGP)

What is Mortgage Guarantee Programme (MGP)?

• MGP is undertaken by Cagamas SRP Berhad (CSRP), a wholly owned subsidiary of Cagamas Holdings Berhad and offers ‘first loss’ protection on a mortgage portfolio while the mortgage assets remain on the Originator’s books.
• MGP provides financial institutions with mortgage guarantee facilities for their conventional and Islamic mortgage financing portfolio.
• By reducing the credit risk on Originators’ mortgage loan/financing portfolio, Originators can improve their Capital Adequacy Ratio.

Product Features

1. Product Description
   • CSRP will provide ‘first loss’ protection to mortgage originators in Malaysia on a portfolio basis.  
   • No individual loan/financing can be taken out from the pool other than natural redemption or amortisation to below the protection threshold.
2. Guarantee Coverage
   • Current loan-to-value (CLTV) ratio of the Mortgaged Property as at the Guarantee Date is not more than 95%. 
   • Initial guarantee amount is the difference between the current loan/financing amount and the protection threshold amount (e.g. 79.9% of property value at Guarantee Date). The guarantee amount will reduce in accordance with the individual loan/financing amortisation schedule which will be determined at the Guarantee Date.
   • The guarantee amount is the difference between the “scheduled” outstanding principal balance and the protection threshold.
3. Lapse of Protection

   Protection will lapse automatically once:

   • The “scheduled” outstanding principal balance of the loan/financing falls below the protection threshold amount (e.g. 79.9% of the property value as at Guarantee Date) by way of loan/financing amortisation or discharge.
   • Non-compliance with Representation, Warranty and Eligibility Criteria.
   • Non-payment of guarantee fee by the Originator.
   • Payment of Claim Amount by CSRP to the Originator.
4. Guarantee fee
   • Guarantee fee is either a one-off payment for the entire protection tenure or on an annual fee basis paid by the Originator.
   • Guarantee fee is quoted as a percentage of the total outstanding principal balance of the reference portfolio.
5. Protection Exclusion
   • Exclusion of protection includes events of fraud, misrepresentation of the borrowers/obligors and/or the loan/financing originators, breach of specified eligibility criteria of the loan/financing as at the Guarantee Date and/or breach of representation or warranty by the loan/financing originators, etc.
6. Eligibility Criteria

   Loan/Financing Terms

   • Maximum outstanding principal balance as at Guarantee Date
     - Landed property: RM2 Million
     - Non-landed property: RM0.7 Million 
   • Maximum current loan-to-value ratio is 95% 
   • Remaining loan/financing tenure as at Guarantee Date must not exceed 30 years
   • Minimum 12-month seasoning 
   • No past due over 1 month and no restructuring agreement in the 6-month period prior to the Guarantee Date
   • The loan/financing is a term loan/financing which fully amortise over the loan/financing period. Loans/financing with interest/profit-only repayment structure are not eligible.
   • The loan/financing is for the purchase or refinancing of a completed Residential Unit or for renovation of a residential unit. 

   Obligors

   • Maximum debt-to-income ratio is 50% including all debts and based on gross approach calculation.
   • Full documentation is required for income proof

   Property

   • Must be residential and completed property
   • The Mortgaged Property must be owner occupied 
   • The Mortgaged Property must have fire insurance coverage

   Legal Title and Documentation

   • The Originator must have good and marketable title on the Mortgaged Property free from other encumbrances

Benefits of MGP

• Transfers credit risk
• Capital relief is based on BNM Risk Weighted Capital Adequacy Framework
• Facilitates management of portfolio concentration risk
• Improves Capital Adequacy Ratio (CAR)
• Free up capital for more financing
• Maintain asset growth