Cagamas HKMC to tap into existing mortgage loans

Cagamas HKMC Bhd hopes to tap into existing mortgage loans in financial institutions as well as new loans for its newly launched mortgage guarantee programme.

Executive director Steven Choy said: “We intend to capture a proportion of the banks’ existing outstanding loans of RM150bil and an additional RM50bil in new loans every year.”

Cagamas HKMC Bhd, a newly formed joint venture between national mortgage corporation Cagamas Holdings Bhd and Hong Kong Mortgage Corp Ltd (HKMC), has a start-up capital of RM100mil.

On top of the current conventional mortgage guarantee programme offered in Hong Kong, Cagamas HKMC would also offer a similar programme for syariah-compliant loans in Malaysia, Choy told reporters after the launch of mortgage guarantee programme yesterday.

He said the mortgage guarantee programme offered first loss protection of up to 15% on a mortgage portfolio credit risk while maintaining the mortgage assets on the bank’s book.

By reducing the credit risk on the bank's mortgage loan and financing portfolio, banks would have increased capacity to provide competitive mortgage loans and financing while maintaining an acceptable risk profile, he said.

The programme would help banks transfer credit exposure for better management of portfolio, capital risk and balance sheet, he added.

However, Cagamas HKMC would adopt stringent rules on the selection of loans for its programme and would not provide a guarantee to loans with credit risk above 95%, he added.

On the pricing structure of the programme, Choy said it would vary with the risk level of the loans portfolio.

He said the programme would not only help Malaysian institutions to better manage the credit risk of their mortgage loans but also help to mitigate the risk outside Malaysia, through HKMC.

Choy said Cagamas HKMC hoped to introduce the programme to other Asean countries as well as the Middle East if the response was good in Malaysia.

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Cagamas HKMC to tap into existing mortgage loans