[RAM] RAM Ratings reaffirms AAA/Stable ratings of Cagamas MBS's CMBS 2005-2, CMBS 2007-1-i and CMBS 2007-2

RAM Ratings has reaffirmed the AAA/Stable ratings of Cagamas MBS Berhad’s residential mortgage-backed securities (CMBS 2005-2, CMBS 2007-1-i and CMBS 2007-2). Cagamas MBS is a limited-purpose entity incorporated to securitise government staff housing loans (GSHL) and government staff Islamic home financing facilities (GSIHF). Repayment of the GSHL and GSIHF stems from non-discretionary direct deductions of civil servant salaries and pensions by Lembaga Pembiayaan Perumahan Sektor Awam (LPPSA). This reduces exposure to the credit risks of the borrowers.

The reaffirmation of the ratings of CMBS 2005-2 and CMBS 2007-2 reflects their fully cash-backed position. Accumulated reserves in both transactions are sufficient to cover all outstanding principal and remaining profit obligations up to the maturity of the last maturing tranches in December 2025 (CMBS 2005-2) and August 2027 (CMBS 2007-2). 

The reaffirmation of the CMBS 2007-1-i rating is premised on the transaction’s strong asset cover as seen in an improved OC ratio of 104.34% as at end-October 2020 (end-October 2019: 101.67%). This was driven by the portfolio’s better than assumed loss performance which resulted in faster than expected deleveraging. The available OC affords the transaction strong credit protection against losses arising from default, commensurate with the level assumed under AAA rating stress, and mitigates liquidity risk in a zero prepayment scenario.

To date, LPPSA’s performance as the servicer of the transaction has been satisfactory. While all its staff currently work from home pursuant to Movement Control Order 3.0, we have not observed any material lapses in LPPSA’s servicing quality. The Covid-19 pandemic has not affected the overall performance of the transactions’ underlying portfolios, given that the mortgages had not come under any form of relief. Based on our discussion with LPPSA, the government’s recent move to deduct a portion of civil servant allowances between July and September 2021 for the National Disaster Relief Trust Fund is anticipated to have a negligible impact owing to the marginal deductible amount.

Analytical contacts
Liew Kar Ling
(603) 3385 2586

Tan Han Nee
(603) 3385 2529