Purchase Without Recourse (PWOR)



What is 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
- Outright sale to Cagamas, no recourse for default risk
- Islamic and conventional housing and hire purchase loan / financing
- Standardized structure and documentation
- Pricing from par to premium, depending on quality of assets
- Cash purchase or settlement by Cagamas bonds
- Excess spread paid to seller as servicer fee
- Sellers will be appointed as Servicer for loans sold – customers not affected
Benefits
- Transfer of credit risk
- Full capital relief
- Management of portfolio concentration risk
- Shift to fee based income
- Improve Return on Asset / Return on Risk Weighted Capital
- Improve earning stability
- Sell loans at premium - locking in profits
- Stabilizing marketing strategy
- Avoid curtailment of successful marketing centre or campaign when concentration occurs
- Avoid temporary exit from market when conditions become challenging
- No transaction cost
- Savings on legal, financial advisors, arrangers, SPV set up costs etc
- Fast turnaround time
- 3 weeks compared to 3 – 9 months for ABS
- Flexible transaction size
- Do not require large transaction size to achieve economies of scale as in the case of ABS