KUALA LUMPUR: Cagamas Bhd expects to propose a guarantee programme for mortgage assets in Malaysia by the end of the year.
The national mortgage corporation yesterday inked a memorandum of understanding (MoU) with Hong Kong Mortgage Corp Ltd (HKMC) to jointly develop the mortgage guarantee programme (MGP). The programme will serve as a prototype for future expansion in the region and the Middle East.
Under the MoU, the parties would provide a mortgage guarantee structure to financial institutions, said Cagamas chairman Datuk Ooi Sang Kuang.
HKMC is wholly owned by the Hong Kong government through the Exchange Fund.
The MGP would allow financial institutions to hedge the credit risk of their mortgage portfolio, while continuing to provide affordable mortgage loans to homebuyers.
“The product that we envision will allow banks to transfer part of their credit risk out of their balance sheet to us for a guarantee fee, and thereby improve the risk profile of their mortgage loan portfolio,” Ooi said.
He said the product would appeal to banks that wished to cap their credit exposure and continue to offer customers competitive loan-to-value ratios. “It will also be attractive to banks that do not wish to reduce their asset position as it would allow them to retain the loans on their balance sheet while removing part of the credit risk,” he said.
Ooi said homebuyers would be able to enjoy access to financing at a high loan-to-value ratio, and this could help increase the level of ownership.
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