Mortgage Guarantee Programme (MGP)

What is Mortgage Guarantee Programme (MGP)?

• MGP is undertaken by CSRP 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 mortgage loan portfolio.
• By reducing the credit risk on originators’ mortgage loan 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 can be taken out from the mortgage portfolio under protection other than, amongst others, in the case of redemption/prepayment in full or amortisation which results in the outstanding principal balance falling below the protection threshold amount.
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 amount and the protection threshold amount (e.g., 79.9% of mortgaged property value as at guarantee date). The guarantee amount will reduce in accordance with the individual loan 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. Termination of Protection

   Protection will be terminated upon:

   • The “scheduled” outstanding principal balance of the loan falls below the protection threshold amount (e.g., 79.9% of the property value as at Guarantee Date) by way of repayment/prepayment in full or loan amortisation.
   • Non-compliance with Representation, Warranty and Eligibility Criteria.
   • Non-payment of guarantee fee by the originator.
   • Payment of guarantee 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 basis paid by the originator.
   • Guarantee fee is quoted as a percentage of the total outstanding principal balance of the reference portfolio.
5. 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 as at the guarantee date is 95% 
   • Remaining loan tenure as at the 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 is a term loan which fully amortises over the loan period. Loans with interest only repayment structure are not eligible.
   • The loan is for the purchase or refinancing of a completed residential unit or for renovation of a residential unit.

   Customers

   • 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.  Inclusion of additional perils in the fire insurance to cover for other serious damage is encouraged.

   Legal Title and Documentation

   • The originator must have title to 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)
• Frees up capital for more loans
• Maintains asset growth