Mortgage Guarantee Programme (MGP)

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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.

Product Features

  1. Product Description
    • 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.
  2. 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.
  3. 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/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.
  4. 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.
  5. Guarantee fee
    • 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.
  6. Wakalah Fee
    • 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.
  7. Protection Exclusion
    • 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.

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