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Saturday, July 5, 2008

Cagamas HKMC launches mortgage guarantee scheme

CAGAMAS HKMC Bhd has launched the country's first mortgage guarantee programme (MGP), a scheme that helps banks free up their capital so that they can give out more loans.

This is the first product rolled out by the company, an equal venture between national mortgage firm Cagamas Bhd and The Hong Kong Mortgage Corp Ltd.

The tie-up is part of Cagamas' plans to expand abroad. Cagamas HKMC plans to offer its services to markets in the Asean and Middle Eastern region after it gauges the reception in Malaysia.

"The launch of the MGP should help banks expand mortgage lending business without compromising their prudent underwriting standards," Cagamas HKMC executive director James H. Lau said.

The MGP, which covers conventional and Islamic loans, will enable financial institutions to pass on a portion of the credit risk associated with mortgage loans to Cagamas HKMC for a fee.

Banks must keep a certain amount of capital against its loans. Passing on this risk frees its money that could be used for new loans.

Cagamas Bhd's president and chief executive officer Steven Choy said the facility is especially relevant with the advent of the Basel II framework, an international standard created to promote better risk management in banks.

Basel II standards require banks to hold an equal amount of capital for the amount of risk it is exposed to, to safeguard its solvency and overall economic stability.

By New Straits Times (by Presenna Nambiar)

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