Cagamas - The Fannie Mae of Malaysia

Cagamas (National Mortgage Corporation) is Malaysia's version of Fannie Mae of US except that Cagamas is not a public listed company. It was established in 1986 to promote Secondary Mortgage market in Malaysia seeking to aid Malaysian with affordable housing.

Its Vision Statement - Cagamas is committed to promoting home ownership in Malaysia by providing financial product that make housing loans more accessible to Malaysian, especially the lower income group.

Cagamas purchases housing loans, hire purchase and leasing debts, credit cards receivable, islamic house financing debts, etc. from banks and other financial institution and government. It funds its purchases of loans and debts through the issuance of Cagamas Debts Securities (bonds, notes, etc.). This funding mechanism is different from that used by Fannie Mae that repackaged the debts that was purchased from the banks into mortgage backed securities and sell them to investors. Total Cagamas debts securities still outstanding in March 2009 is Rm 15.795 billion with maturity period varies from 1 to 20 years.

One interesting thing about the loans and debts that Cagamas has purchased from the financial institutions is that Cagamas does not see, check and keep the loans and debts documents that it has purchased. Cagamas appoints the selling institutions as custodian and continue to keep the security document that they have sold (the bank sold the housing loans to Cagamas but the bank still kept all the loans document with them, Cagamas is not required to see and check the document). All that Cagamas received is an annual auditor report from an external auditor of the selling institution that has carried annual audit on loans and debts that the institution has sold to Cagamas (the auditor is paid by the selling institutions and works for the institutions, he is the institution's man). We are talking about Cagamas assets (mainly consists of debts that it has purchased) that were valued at about Rm 24 billion ( 2007 annual reports) that it has purchased but it has no need to see and check the documents that were being kept by the seller and audited by seller's external auditor.