Purchase Without Recourse (PWOR)

What is Purchase Without Recourse (PWOR)?

  • Cagamas purchases conventional loans on a without recourse basis, i.e., Cagamas does not have any recourse to the seller institution and assumes the full credit risk of the customer.
  • The seller institution receives proceeds from the sale of the loans up-front and receives a servicer fee as the appointed servicer for servicing and administering such loans on behalf of Cagamas.


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 and/or settlement by way of issuance of Cagamas bonds to the seller institution
  • Seller institution will be paid a servicer fee on a fixed periodic basis post purchase for the services rendered
  • Seller institution will be appointed as servicer for loans sold – customer(s) 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
  9. Does not require large transaction size to achieve economies of scale as in the case of Asset-Backed Securities