Housing Loans

Cagamas purchases conventional housing loans granted for the purchase of residential houses originated by the financial institutions. In addition, staff housing loans originated by the Government and selected corporations are also purchased by the Company.

The selling institutions are required to execute a Master Sale and Purchase Agreement with Cagamas.The housing loans are purchased at their book value i.e. the principal balance outstanding on a date which is closest to the purchase date but not earlier than the end of the month preceding the purchase date. The selling institutions are required to pay instalments (known as "Cagamas Instalments") to the Company at regular intervals. The required rate of return for the Company, which is based on the Cagamas Rate, forms the basis for determining the Cagamas Instalments.

At the Review Date, i.e. at the end of the contracted review period, the selling institutions are given the option to repurchase the pool of housing loans sold to Cagamas if the new rate of interest offered by Cagamas is not acceptable, or continue the contract for a further review period.

Eligibility Criteria of Housing Loans

To be eligible for sale to Cagamas, the housing loans must:

• be for financing or refinancing the purchase, construction or renovation of residential properties;
  
• be fully disbursed;
  
• not be more than 3 months in arrears at the time of sale; and
  
• have a remaining life which expires on or after the Review Date.

Other requirements for a housing loan to be eligible for sale to Cagamas are provided in the Revised Cagamas Mortgage Guide.

Types of Purchase Facilities Offered by Cagamas

• Fixed Rate
  The Cagamas Fixed Rates are quoted for review periods of 3 to 10 years. The contracted Cagamas Rate is fixed for the whole review period for each transaction.
  
  
• Floating Rate
  The Cagamas Floating Rates are quoted for review periods of 3 to 7 years at a fixed margin above the 3-month or 6-month KLIBOR. The Cagamas Rate is reset once every 3 or 6 months depending on the benchmark of the contract (i.e. 3-month or 6-month KLIBOR).
  
  
• Convertible Rate
  The Cagamas Convertible Rates are quoted for a review period of 3 years only. The option is given to the selling institution to convert the mode of the Cagamas Rate from a fixed rate to a floating rate or vice versa, about once or twice during the 3-year transaction period.
  
  
• Back-to-Back Arrangement
  The back-to-back purchase facility enables originators of housing loans who cannot sell their loans directly to Cagamas, to sell their loans through an intermediary financial institution (IFI) for onward sale to Cagamas. The originator is required to execute a Master Agreement with an IFI. Similarly, the IFI is required to execute a Master Sale and Purchase Agreement with Cagamas before it can offer housing loans for sale to Cagamas. The originator is required to pay the IFI a one-off up front arrangement fee as the arranger of the sale transaction.

Options Available

• Replacement Option
  Upon entering into a purchase contract with Cagamas, the selling institution has to opt, whether to replace or not to replace, any housing loan it may repurchase from Cagamas during the contracted review period, with a new eligible loan of an equivalent value or at a value not exceeding the amount of the loan repurchased by more than RM5,000.
  
  
• Repayment Option
  The selling institution also has the option to pay the instalments in respect of each pool of housing loans sold to Cagamas, on a monthly, quarterly or half-yearly basis, depending on its funding requirements. This option has to be exercised upon entering into the purchase contract with Cagamas. For quaterly and half-yearly repayment options, the Cagamas rates are 5 basis points and 12 basis points higher than the published Cagamas rates respectively.

Mode of Purchase

• Spot Commitment
  The sale is based on an agreed purchase date. The selling institution is required to sell all loans that were committed to Cagamas within 7 business days from the confirmation date of sale at the published Cagamas rate. The Cagamas rates are published daily in the News Straits Times and The Star newspapers and are also available in the REUTERS.
  
  
• Forward Commitment
  The sale is based on an agreed amount to be fully drawndown within a specified period of up to a maximum of 60 days at an agreed price. The selling institution may deliver its committed amount on a staggered basis or in full or choose to transfer any undelivered committed amount to another financial institution within the specified period.