Islamic Mortgage Guarantee Programme (MGP-𝙞 )

What is MGP-𝙞 ?

• It is a programme that guarantees 10% of the Islamic house financing amount granted by an Islamic Financial Institutions (IFI) to its Customers.
• It is undertaken by Cagamas SRP Berhad (CSRP), a wholly owned subsidiary of Cagamas Holdings Berhad that offers ‘first loss’ protection on an Islamic mortgage portfolio while the Islamic mortgage assets remain on the IFI’s books
• The programme is formulated under Shariah principle of Kafalah and Wakalah

Product Features

1. Product Description

   • CSRP will provide ‘first loss’ protection to mortgage originators in Malaysia on a portfolio basis. No individual financing can be taken out from the pool other than natural redemption or amortisation to below the protection threshold.

2. Eligible Financing Type
   • Standardised and centralised guarantee programme offered to banks for Islamic mortgage financing.
   • Islamic residential mortgage financing complying with the standard Eligibility Criteria (EC).
3. Guarantee Coverage
   • Current financing-to-value (FTV) ratio of the Mortgaged Property as at the Guarantee Date is not more than 95%.
   • Initial guarantee amount is the difference between the current 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 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.
4. Lapse of Protection

   Protection will lapse automatically once:

   • The “scheduled “ outstanding principal balance of the financing falls below the protection threshold amount (e.g. 79.9% of the property value as at Guarantee Date) by way of financing amortisation or discharge.
   • Non-compliance with Representation, Warranty and Eligibility Criteria.
   • Payment of Guarantee Amount by Cagamas SRP to the Originator.
5. Guarantee fee
   • No guarantee fee for Islamic mortgage financing.
6. Wakalah Fee
   • This fee is applicable for MGP-i.
   • Wakalah fee is either a one-off payment for the entire protection tenure or on an annual fee basis paid by the Originator.
7. Protection Exclusion
   • Exclusion of protection includes events of fraud, misrepresentation of the obligors and/or the financing originators, breach of specified eligibility criteria of the financing as at the Guarantee Date and/or breach of representation or warranty by the financing originators, etc.
8. Eligibility Criteria
   • Financing Terms
     • Maximum outstanding principal balance as at Guarantee Date
       -  Landed property:  RM2 Million
       -  Non-landed property: RM0.7 Million
     • Maximum current financing-to-value ratio is 95% 
     • Remaining 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 financing is a term financing which fully amortised over the financing period. Financing with profit-only payment structure are not eligible.
     • The 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

• Transfers credit risk
• Capital relief is based on BNM Risk Weighted Capital Adequacy Framework
• Facilitates management of portfolio concentration risk
• Improves Return on Risk Weighted Capital
• Improves earning stability
• Limits credit exposure to an acceptable level
• Mortgage assets remain on the balance sheet