Purchase of Loans and Debts on Cost-Plus Basis
As part of Cagamas’ ongoing effort to offer finer pricing to its customers, the Company offers to purchase conventional loans and debts on a cost-plus basis in addition to the published rates at which Cagamas stands ready to purchase. The cost-plus pricing is computed based on the effective cost of funds i.e Cagamas debt securities issued to fund the purchases plus Cagamas’ margin. This pricing approach may enable the sellers to enjoy lower rates as compared with the published Cagamas rates.
An illustration of the pricing under cost-plus is shown below.
Cost Comparison Between Cost-Plus Cagamas Rate and
Published Cagamas Rate and Swap Rate |
The illustration is based on data as at 31 December 2005 |
Contract Period
Published Cagamas Rate
Purchase Value
Review Date Value*
Indicative Cagamas Bond Yield
2 years (3.81%)
3 years (3.95%)
4 years (4.08%) |
3 years
4.25%
RM200 million
RM 90 million
RM164 million
RM36 million
|
5 years
4.50%
RM200 million
RM100 million
RM 50 million
RM150 million |
|
Swap Rate
Liquidity Premium
Swap Rate All-In Cost
|
4.03%
0.15%
4.18% |
4.33%
0.15%
4.48% |
|
Effective Cost of Funds
Cagamas Margin
Cost-Plus Cagamas Rate
|
3.84%
0.25%
4.09% |
4.05%
0.25%
4.30% |
Cost Savings vs Published Cagamas Rate
Cost Savings vs Swap Rate All-In Cost
|
0.16%
0.09%
|
0.20%
0.18%
|
| * Expected principal balance outstanding after amortisation at the end of the contract period |
The sellers are allowed to sell conventional housing loans and industrial property loans on fixed or floating rate basis under the cost-plus arrangement. Hire purchase and leasing debts can only be sold on fixed rate basis. The minimum pool size for sale under the scheme is RM200 million, contributed by a single seller or a group of selling institutions agreeing to sell on a cost-plus basis at the same time. Sellers are not allowed to abort their sale of loans and debts under this arrangement.
|
