Mortgage Guarantee Programme (MGP)
What is MGP
- MGP offers ‘first loss’ protection on a mortgage portfolio while the mortgage assets remain on the Originator’s books through Cagamas’ wholly owned subsidiary, Cagamas SRP Berhad (CSRP).
- By reducing the credit risk on Originators’ mortgage loan/financing portfolio, Originators can improve their Capital Adequacy Ratio.
- 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.
Eligible Loan/Financing Type
- Standardised and centralised guarantee programme offered to banks for both conventional and Islamic mortgage financing.
- Residential mortgage loan/financing complying with the Standard Eligibility Criteria.
- 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.
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 Cagamas SRP to the Originator.
- For Islamic mortgage financing there is no 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.
- This fee is applicable only for Islamic mortgage financing.
- Wakalah fee is either a one-off payment for the entire protection tenure or on an annual fee basis paid by the Originator.
- 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.
- 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