Purchase Without Recourse (PWOR)

What is Purchase Without Recourse (PWOR)?

  • A contract whereby Cagamas purchases conventional and Islamic receivables without recourse for default risk
  • Seller gets principal of the receivables up front and receives excess spread as servicer fee upon collection of loan installments

 

Key Features of PWOR

  • Outright sale to Cagamas, no recourse for default risk
  • Islamic and conventional transaction
  • Standardized structure and documentation
  • Pricing depending on quality of assets
  • Cash purchase or settlement by Cagamas bonds
  • Seller will be paid a Servicer Fee on a fixed periodic basis post purchase for the services rendered
  • Sellers will be appointed as Servicer for loans sold – customers not affected

 

Purchase without Recourse

 

Benefits of PWOR

  1. Transfer of credit risk
  2. Full capital relief
  3. Management of portfolio concentration risk
  4. Shift to fee-based income
  5. Improves Return on Asset / Return on Risk Weighted Capital
  6. Improves earning stability
  7. Savings on rating, legal SPV and advisory fees
  8. Flexible transaction size.
  • Do not require large transaction size to achieve economies of scale as in the case of ABS