EXHIBIT 10.18.1
BARCLAYS BANK PLC
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March 10, 2006
American Home Mortgage Acceptance, Inc.
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Re: Transactions for Mortgage Loans
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Ladies and Gentlemen:
Reference is made to the Master Repurchase Agreement, dated as of
▇▇▇▇▇ ▇▇, ▇▇▇▇ (▇▇▇ "▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ Agreement"), by and among BARCLAYS BANK
PLC ("Buyer") and AMERICAN HOME MORTGAGE ACCEPTANCE, INC. ("Seller").
Capitalized terms used herein but not defined herein shall have the meanings
given in the Master Repurchase Agreement.
This letter agreement (the "Letter Agreement") sets forth the terms
and conditions on which the Buyer may enter into Transactions with the Seller
with respect to the whole mortgage loans referenced on Schedule A attached
hereto (the "Mortgage Loans"). This Letter Agreement shall be deemed to
constitute a part of, and be read together with, the Master Repurchase
Agreement. In the event of any inconsistency between the Master Repurchase
Agreement and this Letter Agreement, this Letter Agreement shall prevail. This
Letter Agreement shall be governed by and construed in accordance with the laws
of the State of New York, without regard to its conflicts of laws principles.
In consideration of the willingness of the Buyer to enter into
Transactions for the Mortgage Loans, from time to time, the Seller and the Buyer
agree as follows:
1. Mortgage Loans. For all purposes of the Master Repurchase Agreement,
all references to Securities and Purchased Securities shall be deemed to include
the Mortgage Loans. This Letter Agreement shall apply to any Transaction for
Purchased Securities where the Purchased Securities are the Mortgage Loans,
without the requirement of any further action or notice being taken by the Buyer
or the Seller. The parties hereto acknowledge and agree that the Repurchase Date
for any Transaction for Mortgage Loans shall not extend beyond May 10, 2006. The
Seller expressly acknowledges and agrees that the Buyer shall not have any
obligation to make any future advances under the Mortgage Loans and any
requirements under the Mortgage Loans to disburse additional proceeds shall be
satisfied solely and exclusively by the Seller.
2. Definitions.
(a) The following definitions in Section 2 of the Master Repurchase
Agreement are hereby deleted in their entirety and replaced with the language
set forth below solely for purposes of any Transaction for the Mortgage Loans:
"Buyer's Margin Percentage", 102.00%;
"Market Value", the price at which such Mortgage Loan could readily
be sold as determined by Buyer in its good faith discretion,
provided that Market Value shall be deemed zero for any Mortgage
Loan with respect to which there is a breach of a representation or
warranty made by Seller in the Letter Agreement;
"Pricing Rate", the per annum percentage rate for determination of
the Price Differential, which shall equal (a) on the date hereof
until and including April 10, 2006, LIBOR plus 0.40%, (b) on and
after April 11, 2006, LIBOR plus 1.25% and (c) after the occurrence
and during the continuance of an Event of Default on the part of
Seller, LIBOR plus 6.00%;
(b) The following definitions are hereby added to Section 2 of the Master
Repurchase Agreement for purposes of any Transaction for the Mortgage Loans:
"Affiliate" means, with respect to any Person, another Person that
directly or indirectly controls, or is under common control with, or
is controlled by, such Person. As used in this definition, "control"
(including its correlative meanings, "controlled by" and "under
common control with") means possession, directly or indirectly, of
power to direct or cause the direction of management or policies
(whether through ownership of securities or partnership or other
ownership interests, by contract or otherwise).
"Capital Lease", as applied to any Person or entity, shall mean any
lease of any property (whether real, personal or mixed) by that
Person or entity as lessee that, in conformity with GAAP, is
accounted for as a capital lease on the balance sheet of that Person
or entity.
"Custodial Agreement" means that custodial agreement, dated as of
the date hereof and as further amended, modified or supplemented
from time to time, by and among Buyer, Seller and Custodian.
"Custodian" means the custodian under the Custodial Agreement. The
initial custodian is Deutsche Bank National Trust Company.
"GAAP" means with respect to the financial statements or other
financial information of any Person, generally accepted accounting
principles in the United States that are in effect from time to
time.
"Guaranty" means that certain Guaranty made by the Guarantor in
favor of the Buyer, dated as of the date hereof, as the same may be
amended from time to time, which shall be substantially in the form
of Schedule C hereof.
"Guarantor" means American Home Mortgage Investment Corp., or
any successors in interest or assigns.
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"Electronic Tracking Agreement" means an Electronic Tracking
Agreement, dated as of the date hereof, among Buyer, Seller,
Mortgage Electronic Registration Systems, Inc. and MERSCORP,
Inc., as the same may be amended from time to time.
"Indebtedness" means, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by
loan, the issuance and sale of debt securities or the sale of
property to another Person subject to an understanding or agreement,
contingent or otherwise, to repurchase such property from such
Person); (b) obligations of such Person to pay the deferred purchase
or acquisition price of property or services, other than trade
accounts payable (other than for borrowed money) arising, and
accrued expenses incurred, in the ordinary course of business so
long as such trade accounts payable are payable within ninety (90)
days of the date the respective goods are delivered or the
respective services are rendered; (c) Indebtedness of others secured
by a lien on the property of such Person, whether or not the
respective indebtedness so secured has been assumed by such Person;
(d) obligations of such Person in respect of letters of credit or
similar instruments issued or accepted by banks and other financial
institutions for account of such Person; (e) Capital Leases of such
Person; and (f) any of the foregoing types of indebtedness of others
guaranteed by such Person (without duplication).
"LIBOR" means the rate per annum calculated two (2) Business Days
prior to each Repurchase Date determined by Buyer on the basis of
the offered rate for one month deposits of not less than U.S.
$1,000,000, that appears on the date of determination on Dow ▇▇▇▇▇
Market Service Page 3750 as of 11:00 a.m., London time (or such
other page as may replace the Dow ▇▇▇▇▇ Market Service Page on that
service for the purposes of displaying London interbank offered
rates of major banks). All percentages resulting from any
calculations of LIBOR referred to in this Letter Agreement shall be
rounded up to the nearest multiple of 1/100 of 1% and all U.S.
Dollar amounts used in or resulting from such calculations shall be
rounded to the next higher cent.
"Lien" means any lien, claim, charge, restriction, pledge, security
interest, mortgage, deed of trust or other encumbrance.
"Material Adverse Effect" means a material adverse effect on (a) the
business, assets, property or condition (financial or otherwise) of
Seller, or (b) the validity or enforceability of (i) the Master
Repurchase Agreement (or any material provision thereof) or (ii) the
rights, remedies or interests of Buyer hereunder or thereunder.
"MERS" means Mortgage Electronic Registration Systems, Inc., a
corporation organized and existing under the laws of the State of
Delaware or any successor thereto.
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"MERS(R) System" means MERSCORP, INC's mortgage electronic registry
system, as more particularly described in the MERS Procedures
Manual.
"Mortgage" means a mortgage, deed of trust, deed to secure debt or
other instrument, creating a valid, enforceable first lien on, or a
first priority ownership interest in an estate in fee simple in,
real property and the improvements thereon, securing a mortgage note
or similar evidence of indebtedness.
"Mortgage Note" means a note or other evidence of indebtedness of a
Mortgagor secured by a Mortgage.
"Mortgaged Property" means the real property securing repayment of
the debt evidenced by a Mortgage Note.
"Person" means an individual, partnership, limited liability
company, corporation, joint stock company, trust or unincorporated
organization or a governmental agency or political subdivision
thereof.
"Price Differential Payment Date" means the seventh business day of
each calendar month.
"Program Documents" means the Master Repurchase Agreement, this
Letter Agreement, the Guaranty, the Custodial Agreement and the
Electronic Tracking Agreement.
"Subsidiary" means, as to any Person, a corporation, partnership or
other entity of which shares of stock or other ownership interests
having ordinary voting power (other than stock or such other
ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this
Agreement shall refer to a Subsidiary or Subsidiaries of Seller.
"Uniform Commercial Code" means the Uniform Commercial Code as in
effect on the date in effect from time to time in the State of New
York; provided, that if by reason of mandatory provisions of law,
the perfection or the effect of perfection or non-perfection of the
security interest in any Collateral is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York,
"Uniform Commercial Code" shall mean the Uniform Commercial Code as
in effect in such other jurisdiction for purposes of the provisions
hereof relating to such perfection or effect of perfection or
non-perfection.
(c) The following definitions in Section 2 of the Master Repurchase
Agreement are hereby deleted for purposes of any Transaction for the Mortgage
Loans: "Margin Excess", "Seller's Margin Amount" and "Seller's Margin
Percentage".
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3. Margin Excess. Section 4(b) of the Master Repurchase Agreement (and all
references to Section 4(b) in any other Section of the Master Repurchase
Agreement) are hereby deleted in their entirety.
4. Purchase Price; Maximum Purchase Price. The Purchase Price with respect
to any Transaction for the Mortgage Loans shall be equal to, with respect to
each Mortgage Loan, 98% of the lesser of (a) the Market Value of such Mortgage
Loan and (b) the outstanding principal balance of such Mortgage Loan, provided
that the maximum Purchase Price with respect to all Transactions for the
Mortgage Loans shall not exceed $1,000,000,000.
5. Security Interest. Solely for purposes of any Transaction for the
Mortgage Loans, Section 6 of the Master Repurchase Agreement is hereby deleted
in its entirety and replaced with the following:
(a) Buyer and Seller intend that the Transactions hereunder be sales to
Buyer of the Mortgage Loans and not loans from Buyer to Seller secured by the
Mortgage Loans. However, in order to preserve Buyer's rights under the Master
Repurchase Agreement in the event that a court or other forum recharacterizes
the Transactions hereunder as loans, and as security for the performance by
Seller of all of Seller's obligations to Buyer under, the Master Repurchase
Agreement and the Transactions entered into pursuant to the Master Repurchase
Agreement, Seller grants to Buyer a security interest in the Mortgage Loans, the
Program Documents (to the extent such Program Documents and the Seller's right
thereunder relate to the Mortgage Loans), servicing records, purchase
commitments, insurance and guarantees relating to the Mortgage Loans, Mortgage
Notes, Mortgages, income, any and all ▇▇▇▇▇▇, any and all servicing agreements
and any collection accounts and escrow accounts relating to the Mortgage Loans
and all cash or other property or amounts on deposit therein and any other
general intangibles, instruments, supporting obligations, and other assets
relating to the Mortgage Loans or any interest in the Mortgage Loans and the
servicing of the Mortgage Loans and any and all replacements or substitutions
for, distributions on or proceeds of any and all of the foregoing, in all
instances, whether now owned or hereafter acquired, now existing or hereafter
created (collectively, and together with any other property or interests in
which Seller grants a security interest to Buyer, the "Collateral").
(b) Seller shall pay all fees and expenses associated with perfecting and
maintaining Buyer's security interest (and ownership interest) in the Collateral
(including the cost of filing financing statements under the Uniform Commercial
Code and recording assignments of Mortgage, as and when required by Buyer in its
discretion). Seller shall take such further actions as are necessary in order to
perfect Buyer's first priority security interest in any ▇▇▇▇▇▇.
6. Payment, Transfer and Custody. Solely for purposes of any Transaction
involving Mortgage Loans, Section 7 of the Master Repurchase Agreement is hereby
deleted in its entirety and replaced with the following:
(a) On the Purchase Date for each Transaction, ownership of the Mortgage
Loans shall be transferred to Buyer or its designee (including Custodian)
against the simultaneous transfer of the Purchase Price to an account of Seller
specified in the Confirmation. Seller, simultaneously with the delivery to Buyer
or its designee (including Custodian) of the Mortgage
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Loans relating to each Transaction, hereby sells, transfers, conveys and assigns
to Buyer or its designee (including Custodian) without recourse, but subject to
the terms of the Master Repurchase Agreement, all the right, title and interest
of Seller in and to the Mortgage Loans together with all right, title and
interest in and to the proceeds of any related insurance policies.
(b) In connection with each sale, transfer, conveyance and assignment, on
or prior to each Purchase Date with respect to each Mortgage Loan, Seller shall
deliver or cause to be delivered and released to Custodian the following
original documents (collectively the "Mortgage File"), pertaining to each of the
Mortgage Loans delivered therewith:
(i) the original Mortgage Note bearing all intervening
endorsements (or allonges), endorsed "Pay to the order of
___________, without recourse" and signed in the name of the last
endorsee (the "Last Endorsee") by an authorized officer (in the
event that the Mortgage Loan was acquired by the Last Endorsee in a
merger, the signature must be in the following form: "[the Last
Endorsee], successor by merger to [name of predecessor]"; in the
event that the Mortgage Loan was acquired or originated while doing
business under another name, the signature must be in the following
form: "[the Last Endorsee], formerly known as [previous name]");
(ii) the original of any guarantee executed in connection with
the Mortgage Note (if any);
(iii) the original Mortgage with evidence of recording thereon
or a copy certified by Seller, its agent or the title company on
behalf of Seller that have been sent for recording;
(iv) the originals of all assumption, modification,
consolidation or extension agreements, with evidence of recording
thereon or copies certified by Seller, its agent or the title
company on behalf of Seller to have been sent for recording, if any;
(v) Except with respect to Mortgage Loans registered on MERS,
the original assignment of Mortgage in blank for each Mortgage Loan,
in form and substance acceptable for recording and signed in the
name of the last endorsee thereof (in the event that the Mortgage
Loan was acquired by the last endorsee in a merger, the signature
must be in the following form: "[the last endorsee], successor by
merger to [name of predecessor]"; in the event that the Mortgage
Loan was acquired or originated while doing business under another
name, the signature must be in the following form: "[the last
endorsee], formerly known as [previous name]");
(vi) the originals of all intervening assignments of mortgage
with evidence of recording thereon or copies certified by Seller to
have been sent for recording (intervening assignments shall not be
required for any Mortgage that has been originated in the name of
MERS and registered under the MERS System), if any;
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(vii) the original of any security agreement, chattel mortgage
or equivalent document executed in connection with the Mortgage (if
any); and
(viii) the original mortgagee policy of title insurance, to
the extent delivered; and
(ix) the original power of attorney, if any, or a copy thereof
certified by Seller to have been sent for recording, for any
document described above.
(c) Buyer shall deposit the Mortgage Files representing the Mortgage
Loans, or direct that the Mortgage Files be deposited directly, with Custodian.
The Mortgage Files shall be maintained in accordance with the Custodial
Agreement.
(d) Any Mortgage Files not delivered to Buyer or its designee (including
Custodian) are and shall be held in trust by Seller or its designee for the
benefit of Buyer as the owner thereof. Seller or its designee shall maintain a
copy of the Mortgage File and the originals of the Mortgage File not delivered
to Buyer or its designee. The possession of the Mortgage File by Seller or its
designee is at the will of Buyer for the sole purpose of servicing the related
Mortgage Loan, and such retention and possession by Seller or its designee is in
a custodial capacity only. The books and records (including any computer records
or tapes) of Seller or its designee shall be marked appropriately to reflect
clearly the sale of the related Mortgage Loan to Buyer. Seller or its designee
(including Custodian) shall release its custody of the Mortgage File only in
accordance with written instructions from Buyer, unless such release is required
as incidental to the servicing of the Mortgage Loans or is in connection with a
repurchase of any Mortgage Loan by Seller.
7. Representations and Warranties. In addition to the representations and
warranties set forth in Section 10 of the Master Repurchase Agreement, but
solely for purposes of any Transaction for the Mortgage Loans pursuant to this
Letter Agreement, the following shall apply:
(a) Seller represents and warrants to Buyer that as of the Purchase Date
for the purchase of any Mortgage Loans by Buyer from Seller and as of the date
of this Letter Agreement and any Transaction hereunder and at all times while
this Letter Agreement and any Transaction for Mortgage Loans hereunder is in
full force and effect:
(i) Organization. Seller is duly organized, validly existing
and in good standing under the laws of the State of Maryland and is
duly licensed, qualified, and in good standing in every state where
Seller transacts business and in any state where any Mortgaged
Property is located if the laws of such state require licensing or
qualification in order to conduct business of the type conducted by
Seller, as the case may be, therein, except where the failure to be
so licensed, qualified, and in good standing would not result in a
Material Adverse Effect.
(ii) No Litigation. There is no action, suit, proceeding,
arbitration or investigation pending or, to Seller's knowledge,
threatened against Seller which, either in any one instance or in
the aggregate, is likely to result in any Material Adverse Effect.
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(iii) No Broker. Seller has not dealt with any broker,
investment banker, agent, or other person, except for Buyer, who may
be entitled to any commission or compensation in connection with the
sale of Mortgage Loans pursuant to the Master Repurchase Agreement.
(iv) Good Title to Collateral. The Mortgage Loans shall be
free and clear of any lien, encumbrance or impediment to transfer,
and Seller has good, valid and marketable title and the right to
sell and transfer such Mortgage Loans to Buyer free and clear of all
liens.
(v) Delivery of Mortgage File. With respect to each Mortgage
Loan, the Mortgage Note, the Mortgage, the assignment of Mortgage
and any other documents required to be delivered under this Letter
Agreement and the Custodial Agreement for the Mortgage Loans have
been or will be delivered to Custodian. Seller or its designee is in
possession of a complete, true and accurate Mortgage File with
respect to the Mortgage Loans, except for such documents that have
been delivered to Custodian.
(vi) Selection Process. The Purchased Mortgage Loans were
selected from among the outstanding mortgage loans in Seller's
portfolio as to which the representations and warranties set forth
in this Letter Agreement could be made and such selection was not
made in a manner so as to affect adversely the interests of Buyer.
(vii) No Untrue Statements. Neither this Letter Agreement nor
any written statement made, or any report or other document issued
or delivered or to be issued or delivered by or on behalf of Seller,
pursuant to this Letter Agreement or in connection with the
transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary to make
the statements contained herein not misleading.
(viii) Origination Practices. The origination practices used
by Seller with respect to each Mortgage Loan (A) have been and are
in all respects legal and proper in the mortgage origination
business and (B) are in accordance with the underwriting guidelines
previously supplied by Seller to Buyer.
(ix) Performance of Agreement. Seller does not believe, nor
does it have any reason or cause to believe, that it cannot perform
each and every covenant contained in the Master Repurchase Agreement
on its part to be performed.
(x) Seller Not Insolvent. Seller is not, and with the passage
of time does not expect to become, insolvent.
(xi) No Event of Default. No default or Event of Default has
occurred and is continuing hereunder.
(xii) Financial Condition.
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(A) The consolidated balance sheet of American Home
Mortgage Investment Corp. and its respective consolidated
Subsidiaries, as at September 30, 2005, and the related
consolidated statements of income and of cash flows for the
quarter ended on such date, copies of which have heretofore
been furnished to Buyer, are complete and correct and present
fairly in accordance with GAAP the consolidated or
consolidating financial condition of each such Person and its
Subsidiaries as at such dates, and the results of their
operations and their cash flows for the quarter then ended.
(B) All such financial statements, including the related
schedules and notes thereto, have been prepared in accordance
with GAAP applied consistently throughout the periods
involved.
(C) Neither American Home Mortgage Investment Corp. nor
any of its Subsidiaries had, at the date of the most recent
financial statements referred to above, any material guarantee
obligation, contingent liability or liability for taxes, or
any long-term lease or unusual forward or long-term commitment
(including any interest rate or foreign currency swap or
exchange transaction, or other financial derivative), that is
not reflected in the foregoing statements or in the notes
thereto.
(xiii) No Change. Since September 30, 2005, there has been no
development or event, nor any prospective development or event,
which has had or is reasonably expected to have a Material Adverse
Effect.
(xiv) Corporate Power; Compliance with Law. Seller (a) has the
corporate power and authority, and the legal right, to own and
operate its property, to lease the property it operates as lessee,
to carry on its business as now being or as proposed to be
conducted, to originate, acquire and own Mortgage Loans, to sell and
repurchase such Mortgage Loans pursuant to this Agreement, and to
make, deliver and perform the Master Repurchase Agreement, and (b)
is in compliance in all material respects with all legal
requirements (including environmental law and the Real Estate
Settlement Procedures Act, the Home Ownership and Equity Protection
Act and related state law).
(xv) Enforceability. This Agreement has been duly and validly
executed and delivered by Seller and constitutes a legal, valid and
binding obligation of Seller, enforceable against Seller in
accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles (whether enforcement
is sought by proceedings in equity or at law).
(xvi) Collateral; Collateral Security.
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(A) If the Transactions are recharacterized as secured
financings, the provisions of this Agreement are effective to
create in favor of Buyer a valid security interest in all
right, title and interest of Seller in, to and under the
Collateral.
(B) Upon receipt by Custodian of each Mortgage Note,
endorsed in blank by a duly authorized officer of Seller,
Buyer shall have a fully perfected first priority security
interest therein, in the Mortgage Loan evidenced thereby, and
Seller's interest in the related Mortgaged Property.
(C) Financing Statements on Form UCC-1 having been filed
naming Buyer as "Secured Party" and Seller as "Debtor", and
describing the Collateral, the security interests granted
hereunder in the Collateral (other than Mortgage Notes) will
constitute fully perfected first priority security interests
under the Uniform Commercial Code in all right, title and
interest of Seller in, to and under such Collateral, which can
be perfected by filing under the Uniform Commercial Code.
(xvii) Taxes. Seller has filed all Federal income tax returns
and all other material tax returns that are required to be filed by
it and has paid all taxes due pursuant to such returns or pursuant
to any claims or assessment received by it, except for any such
taxes or assessments, if any, that are being appropriately contested
in good faith by appropriate proceedings diligently conducted and
with respect to which adequate reserves in conformity with GAAP have
been established. No tax lien has been filed against Seller.
(xviii) Investment Company Act; Other Regulations. Seller is
not an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company
Act of 1940, as amended.
(xix) Subsidiaries. Seller has provided to Buyer a true,
complete and correct schedule of all of its Subsidiaries in
existence as of the date hereof.
(b) Seller represents and warrants to Buyer that each Mortgage Loan sold
hereunder and each pool of Mortgage Loans sold in a Transaction hereunder, as of
the related Purchase Date, conforms in all material respects to the
representations and warranties set forth in Schedule B attached hereto. It is
understood and agreed that the representations and warranties set forth in
Schedule B hereto, if any, shall survive delivery of the respective Mortgage
File to Buyer or its designee (including Custodian).
(c) On the Purchase Date for any Transaction, Seller shall be deemed to
have made all the foregoing representations as of such Purchase Date.
8. Events of Default. In addition to the Events of Default set forth in
Section 11 of the Master Repurchase Agreement, but solely for purposes of any
Transaction for the Mortgage Loans pursuant to this Letter Agreement, the
following shall be deemed Events of Default on the part of Seller for all
purposes of the Master Repurchase Agreement:
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(i) any governmental, regulatory, or self-regulatory authority
takes any action to remove, limit, restrict, suspend or terminate
the rights, privileges, or operations of Seller or any of its
Affiliates, including suspension as an issuer, lender or
seller/servicer of mortgage loans, which action results in a
Material Adverse Effect, and which continues for more than 24 hours;
(ii) Seller dissolves, merges or consolidates with another
entity (unless (A) it is the surviving party or (B) the entity into
which it merges has equity and a market value of at least that of
Seller immediately prior to such merger and such entity expressly
assumes its obligations under the Master Repurchase Agreement), or
Seller or Guarantor sells, transfers, or otherwise disposes of a
material portion of its business or assets, except for the sale or
transfer of Mortgage Loans in the ordinary course of business;;
(iii) Buyer, in its reasonable good faith judgment, believes
that there has been a material adverse change in the business,
operations, corporate structure or financial condition of Seller or
Guarantor or that Seller or Guarantor will not meet any of its
obligations under the Master Repurchase Agreement or any other
agreement between the parties;
(iv) Guarantor or any of its Subsidiaries shall fail to
perform or shall violate the Master Repurchase Agreement or any
other agreement or instrument between any of them and Buyer or any
of its Affiliates and such failure or violation continues unremedied
after any applicable grace period therefor, or Guarantor or any of
Guarantor 's Subsidiaries shall fail to pay when due or within any
applicable grace period therefor any portion of any single
obligation constituting Indebtedness of Guarantor or any of
Guarantor's Subsidiaries in excess of $2,500,000; or any default or
other event shall occur under or with respect to any agreement under
which any single obligation constituting Indebtedness of Guarantor
or any of Guarantor's Subsidiaries in excess of $2,500,000 was
created or is governed, the effect of which is to cause, or to
permit the holder or holder of such indebtedness to cause, such
indebtedness to become due prior to its stated maturity; or any
single obligation constituting indebtedness of Guarantor or any of
Guarantor's Subsidiaries in excess of $2,500,000 shall be declared
to be due and payable, or required to be prepaid (other than by a
regularly scheduled payment), prior to the stated maturity thereof;
(v) A final judgment by any competent court in the United
States of America for the payment of money in an amount of at least
$2,500,000 is rendered against Seller or Guarantor, and the same
remains undischarged or unpaid for a period of thirty (30) days
during which execution of such judgment is not effectively stayed;
(vi) The Master Repurchase Agreement shall for any reason
cease to create a valid, first priority security interest in any of
the Mortgage Loans purported to be covered hereby;
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(vii) any Person or entity or any group (within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended)
of Persons and/or entities, shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934, as amended),
directly or indirectly, in one or more transactions, of securities
of Seller or Guarantor (or other securities convertible into such
securities) representing more than 50% of the combined voting power
of all securities of such entity entitled to vote in the election of
directors (other than the Person or entities owning such securities
on the date of this Letter Agreement or any other Affiliate of
Seller); or
(viii) Guarantor revokes its status as a REIT or ceases to
qualify as a REIT or Seller ceases to qualify as a qualified REIT
subsidiary as defined in Section 856 of the Internal Revenue Code;
or
(ix) any of the events set forth in Section 11 of the Master
Repurchase Agreement and defined as "Events of Default" shall apply
to the Guarantor.
9. Remedies. In Section 11(d)(i) of the Master Repurchase Agreement, the
phrase in the eighth through tenth lines which reads "the price therefor on such
date, obtained from a generally recognized source or the most recent closing bid
quotation from such a source," is hereby deleted in its entirety with respect to
any Transaction for Mortgage Loans and replaced with the following: "the Market
Value of the Mortgage Loans". In addition to the foregoing, Buyer may enforce
its rights and remedies hereunder without prior judicial process or hearing.
Seller also waives any defense (other than a defense of payment or performance)
Seller might otherwise have arising from the use of nonjudicial process,
enforcement and sale of all or any portion of the Collateral, or from any other
election of remedies, and upon the occurrence of one or more Events of Default,
the Buyer shall have the right to obtain physical possession of all files of the
Seller relating to the Mortgage Loans and all documents relating to the Mortgage
Loans which are then or may thereafter come in to the possession of the Seller
or any third party acting for the Seller. The Buyer shall be entitled to
specific performance of all agreements of the Seller contained in the Master
Repurchase Agreement.
10. Guaranty. On the date hereof, American Home Mortgage Investment Corp.
(in such capacity, the "Guarantor") shall deliver to the Buyer the Guaranty of
the full and timely payment of the Repurchase Price with respect to any
Transaction for the Mortgage Loans.
11. Indemnification. Seller agrees to hold Buyer harmless from and
indemnify Buyer (and its directors, officers, employees and agents) against all
liabilities, losses, damages, judgments, reasonably incurred out-of-pocket costs
and expenses of any kind that may be imposed on, incurred by or asserted against
Buyer (collectively, the "Costs") relating to or arising out of the Transactions
for Mortgage Loans or the Master Repurchase Agreement, including reasonable
legal costs and settlement costs, except if a court of competent jurisdiction
determines by final and nonappealable judgment that such losses, liabilities,
claims, damages or expenses result from the gross negligence or willful
misconduct of the indemnified party ("Excluded Causes"). Without limiting the
generality of the foregoing, Seller agrees to hold
12
Buyer harmless from and indemnify Buyer against all Costs with respect to all
Mortgage Loans relating to or arising out of any violation or alleged violation
of any environmental law, rule or regulation or any consumer credit laws,
including ERISA, the Truth in Lending Act, the Home Ownership and Equity
Protection Act and/or the Real Estate Settlement Procedures Act, that, in each
case, results from anything other than Excluded Causes. In any suit, proceeding
or action brought by Buyer in connection with any Mortgage Loan for any sum
owing thereunder, or to enforce any provisions of any Mortgage Loan, Seller will
save, indemnify and hold Buyer harmless from and against all expense, loss or
damage suffered by reason of any defense, set-off, counterclaim, recoupment or
reduction or liability whatsoever of the account debtor or obligor thereunder or
arising out of any other agreement, indebtedness or liability at any time owing
to or in favor of such account debtor or obligor or its successors from Seller.
Seller also agrees to reimburse Buyer as and when billed by Buyer for all
Buyer's ongoing due diligence and auditing expenses and costs and expenses
incurred in connection with the enforcement or the preservation of Buyer's
rights under the Master Repurchase Agreement or any Transaction for Mortgage
Loans contemplated hereby, including the reasonable fees and disbursements of
its counsel and other third party agents. Seller hereby acknowledges that the
obligation of Seller hereunder is a recourse obligation of Seller.
12. Expenses. Seller shall be responsible for (a) all reasonable
out-of-pocket costs and expenses incurred by Buyer in connection with the
preparation, execution, delivery and administration of this Letter Agreement and
the Master Repurchase Agreement and any amendment or waiver with respect thereto
(including reasonable fees and disbursements and other charges of counsel), (b)
all out-of-pocket costs and expenses incurred by Buyer in connection with the
enforcement of this Letter Agreement and the Master Repurchase Agreement
(including the fees and disbursements and other reasonable charges of counsel)
and (c) ongoing due diligence and auditing expenses of Buyer (including
reasonable fees and disbursements of third party agents).
13. Servicing. Seller (directly or through an Affiliate of Seller) shall
service the Mortgage Loans in accordance with standards as are customary with
other prudent mortgage lenders with respect to mortgage loans similar to the
Mortgage Loans and are acceptable to Buyer. In the event that Buyer must
liquidate the Mortgage Loans after an Event of Default, Seller acknowledges such
Mortgage Loans may be sold on a servicing-released basis and that no servicing
termination fee will be payable to Seller or any sub-servicers, if applicable.
Any sub-servicer that is not an Affiliate of Seller must be approved by Buyer.
14. Set-off. In addition to any rights and remedies of Buyer hereunder and
by law, Buyer shall have the right, without prior notice to Seller, upon any
amount becoming due and payable (after the expiration of any applicable grace
period) by Seller hereunder or under Seller obligations (whether at the stated
maturity, by acceleration or otherwise) to set-off and appropriate and apply
against such amount any and all deposits (general or special, time or demand,
provisional or final), and any other credits, indebtedness or claims, in each
case whether direct or indirect, absolute or contingent, matured or unmatured,
at any time held or owing by Buyer or any Affiliate thereof to or for the credit
or the account of Seller. Buyer agrees promptly to notify Seller after any such
set-off and application made by Buyer, provided that the failure to give such
notice shall not affect the validity of such set-off and application.
13
15. CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
THE BUYER AND THE SELLER AND GUARANTOR HEREBY IRREVOCABLY AND
UNCONDITIONALLY:
(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR
PROCEEDING RELATING TO THIS LETTER AGREEMENT AND THE OTHER PROGRAM
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY, OR
FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF,
TO THE EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF
NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE
SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY
THEREOF;
(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH
COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION
THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS
BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM
THE SAME;
(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY
BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED
MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID,
TO ITS ADDRESS SET FORTH HEREIN; AND
(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE
OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE
RIGHT TO ▇▇▇ IN ANY OTHER JURISDICTION.
THE BUYER AND THE SELLER AND THE GUARANTOR HEREBY IRREVOCABLY WAIVE,
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS LETTER
AGREEMENT, ANY OTHER PROGRAM DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY.
16. Price Differential Payment Date. The Seller shall pay to the Buyer the
accrued and unpaid Price Differential on each Price Differential Payment Date.
17. Collateral Information. On each Purchase Date (with respect to
Mortgage Loans purchased on such date) and by no later than the fifth business
day of each month (with respect to all Mortgage Loans subject to Transactions as
of the last day of the preceding month), Seller
14
shall deliver to Buyer, either by direct modem electronic transmission or via a
computer diskette, information in Excel format with respect to each Mortgage
Loan the following data: (i) Seller's loan number, (ii) the Mortgagor's name,
(iii) the address of the Mortgaged Property, (iv) the current interest rate, (v)
the original balance, (vi) the current balance as of the most recent paid to
date, (vii) the paid to date and the next payment date, (viii) the appraised
value of the Mortgaged Property at the time the Mortgage Loan was originated,
(ix) whether the interest rate is fixed or adjustable (and if adjustable, the
"ARM" code, that includes the index, adjustment frequency, spread, caps and
other terms), (x) the lien position of the Mortgage Loan on the Mortgaged
Property, (xi) the occupancy status of the Mortgaged Property (including whether
owner occupied), (xii) whether the Mortgage Loan is a balloon Mortgage Loan,
(xiii) the first payment date, (xiv) the maturity date, (xv) the principal and
interest payment, (xvi) the property type of the Mortgaged Property, (xvii) the
Mortgagor's FICO Score (where available in the Mortgage File), (xviii) the
applicable Mortgage Loan grade, (xix) the social security number of the
Mortgagor, (xx) the Mortgage Note date, and (xxi) the prepayment penalty and
prepayment penalty type, (xxii) the delinquency status and (xxiii) Mortgage Loan
purpose (i.e., refinance, cash out refinance, home improvement, debt
consolidation) and (xxiv) LNA Flag (y/n). In addition to the above, please
include a field for the original combined loan to value ratio (CLTV).
18. Buyer's Appointment As Attorney-In-Fact.
(a) The Seller hereby irrevocably constitutes and appoints the Buyer and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Seller and in the name of the Seller or in its own name, from
time to time in the Buyer's discretion, for the purpose of carrying out the
terms of this Letter Agreement and the Master Repurchase Agreement, to take any
and all appropriate action and to execute any and all documents and instruments
which may be reasonably necessary or desirable to accomplish the purposes of
this Letter Agreement and the Master Repurchase Agreement, and, without limiting
the generality of the foregoing, the Seller hereby gives the Buyer the power and
right, on behalf of the Seller, without assent by, but with notice to, the
Seller, if an Event of Default shall have occurred and be continuing, to do the
following:
(i) in the name of the Seller, or in its own name, or
otherwise, to take possession of and endorse and collect any checks,
drafts, notes, acceptances or other instruments for the payment of
moneys due with respect to any other Repurchase Assets and to file
any claim or to take any other action or proceeding in any court of
law or equity or otherwise deemed appropriate by the Buyer for the
purpose of collecting any and all such moneys due with respect to
any other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral;
(iii) (A) to direct any party liable for any payment under any
Collateral to make payment of any and all moneys due or to become
due thereunder directly to the Buyer or as the Buyer shall direct;
(B) to ask or demand for, collect, receive
15
payment of and receipt for, any and all moneys, claims and other
amounts due or to become due at any time in respect of or arising
out of any Collateral; (C) to sign and endorse any invoices,
assignments, verifications, notices and other documents in
connection with any Collateral; (D) to commence and prosecute any
suits, actions or proceedings at law or in equity in any court of
competent jurisdiction to collect the Collateral or any proceeds
thereof and to enforce any other right in respect of any Collateral;
(E) to defend any suit, action or proceeding brought against the
Seller with respect to any Collateral; (F) to settle, compromise or
adjust any suit, action or proceeding described in clause (E) above
and, in connection therewith, to give such discharges or releases as
the Buyer may deem appropriate; and (G) generally, to sell,
transfer, pledge and make any agreement with respect to or otherwise
deal with any Collateral as fully and completely as though the Buyer
were the absolute owner thereof for all purposes, and to do, at the
Buyer's option and the Seller's expense, at any time, and from time
to time, all acts and things which the Buyer deems necessary to
protect, preserve or realize upon the Collateral and the Buyer's
Liens thereon and to effect the intent of this Letter Agreement and
the Repurchase Agreement, all as fully and effectively as the Seller
might do.
(b) The Seller hereby ratifies all that said attorneys shall lawfully do
or cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.
(c) The Seller also authorizes the Buyer, if an Event of Default shall
have occurred, from time to time, to execute, in connection with any sale
provided for in Section 11 of the Master Repurchase Agreement, any endorsements,
assignments or other instruments of conveyance or transfer with respect to the
Collateral.
(d) The powers conferred on the Buyer hereunder are solely to protect the
Buyer's interests in the Collateral and shall not impose any duty upon it to
exercise any such powers. The Buyer shall be accountable only for amounts that
it actually receives as a result of the exercise of such powers, and neither it
nor any of its officers, directors, employees or agents shall be responsible to
the Seller for any act or failure to act hereunder, except for its or their own
gross negligence or willful misconduct.
16
Please indicate your agreement to the terms and conditions of this
Letter Agreement in the space provided below where upon this Letter Agreement
shall become a binding agreement between us.
Very truly yours,
BARCLAYS BANK PLC
By: /s/ ▇▇▇ ▇▇▇
-----------------------------
Name: ▇▇▇ ▇▇▇
Title: Managing Director
Accepted and Agreed as of
the date first above written:
AMERICAN HOME MORTGAGE ACCEPTANCE, INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President,
General Counsel & Secretary
17
Schedule B
Representations and Warranties Regarding
Mortgage Loans
Seller represents and warrants to Buyer that, with respect to each
Mortgage Loan sold in a Transaction hereunder, as of the related Purchase Date:
(a) Mortgage Loans as Described. The information set forth in the schedule
of Mortgage Loans attached as schedule A to the Letter Agreement (the "Mortgage
Loan Schedule") is complete, true and correct in all material respects and all
information included in the Collateral Information previously delivered to the
Buyer is complete, true and correct in all material respects.
"Collateral Information" means the following information with respect to
each Mortgage Loan: (i) Seller's loan number, (ii) the Mortgagor's name, (iii)
the address of the Mortgaged Property, (iv) the current interest rate, (v) the
original balance, (vi) the current balance as of the most recent paid to date,
(vii) the paid to date and the next payment date, (viii) the appraised value of
the Mortgaged Property at the time the Mortgage Loan was originated, (ix)
whether the interest rate is fixed or adjustable (and if adjustable, the "ARM"
code, that includes the index, adjustment frequency, spread, caps and other
terms), (x) the lien position of the Mortgage Loan on the Mortgaged Property,
(xi) the occupancy status of the Mortgaged Property (including whether owner
occupied), (xii) whether the Mortgage Loan is a balloon Mortgage Loan, (xiii)
the first payment date, (xiv) the maturity date, (xv) the principal and interest
payment, (xvi) the property type of the Mortgaged Property, (xvii) the
Mortgagor's FICO Score (where available in the Mortgage File), (xviii) the
applicable Mortgage Loan grade, (xix) the social security number of the
Mortgagor, (xx) the Mortgage Note date, and (xxi) the prepayment penalty and
prepayment penalty type, (xxii) the delinquency status, (xxiii) Mortgage Loan
purpose (i.e., refinance, cash out refinance, home improvement, debt
consolidation) and (xxiv) LNA Flag (y/n). In addition to the above, please
include a field for the original combined loan to value ratio (CLTV).
(b) Market Value. The Mortgage Loan does not have a Market Value that is
deemed to be zero pursuant to the definition of Market Value.
(c) No Outstanding Charges. There are no defaults in complying with the
terms of the Mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground rents
that previously became due and owing have been paid, or an escrow of funds has
been established in an amount sufficient to pay for every such item that remains
unpaid and that has been assessed but is not yet due and payable. Seller has not
advanced funds, or induced, solicited or knowingly received any advance of funds
by a party other than the Mortgagor, directly or indirectly, for the payment of
any amount required under the Mortgage Loan, except for interest accruing from
the date of the Mortgage Note or date of disbursement of the Mortgage Loan
proceeds, whichever is greater, to the day that precedes by one month the due
date of the first installment of principal and interest.
Schedule B - 1
(d) Original Terms Unmodified. The terms of the Mortgage Note and Mortgage
have not been impaired, waived, altered or modified in any respect, except by a
written instrument that has been recorded, if necessary to protect the interests
of Buyer and that has been delivered to Buyer or its designee (including
Custodian). The substance of any such waiver, alteration or modification has
been approved by the title insurer, to the extent required by the policy, and
its terms are reflected on the Mortgage Loan Schedule. No Mortgagor has been
released, in whole or in part, except in connection with an assumption agreement
approved by the title insurer, and which assumption agreement is included in the
Mortgage File delivered to Buyer or its designee (including Custodian) and the
terms of which are reflected in the Mortgage Loan Schedule and/or Collateral
Information.
(e) No Defenses. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
nor will the operation of any of the terms of the Mortgage Note or the Mortgage,
or the exercise of any right thereunder, render either the Mortgage Note or the
Mortgage unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including the defense of usury,
and no such right of rescission, set-off, counterclaim or defense has been
asserted with respect thereto.
(f) Insurance Policies in Effect. The fire and casualty insurance policy
covering the Mortgaged Property (i) affords (and will afford) sufficient
insurance against fire and such other risks as are usually insured against in
the broad form of extended coverage insurance from time to time available, as
well as insurance against flood hazards if the Mortgaged Property is an area
identified by the Federal Emergency Management Agency as having special flood
hazards; (ii) is a standard policy of insurance for the locale where the
Mortgaged Property is located, is in full force and effect, and the amount of
the insurance is in the amount of the full insurable value of the Mortgaged
Property on a replacement cost basis or the unpaid balance of the Mortgage
Loans, whichever is less; (iii) names the present owner of the Mortgaged
Property as the insured; and (iv) contains a standard mortgagee loss payable
clause in favor of Seller. All individual insurance policies with respect to the
Mortgage Loan are the valid and binding obligation of the insurer and contain a
standard mortgagee clause naming Seller, its successors and assigns, as
Mortgagee. All premiums thereon have been paid. The Mortgage obligates the
Mortgagor thereunder to maintain all such insurance policies at the Mortgagor's
cost and expense, and upon the Mortgagor's failure to do so, authorizes the
holder of the Mortgage to obtain and maintain such insurance at the Mortgagor's
cost and expense and to seek reimbursement therefor from the Mortgagor.
(g) Compliance with Applicable Laws. Any and all requirements of any
federal, state or local law including usury, truth-in-lending (including the
Home Ownership and Equity Protection Act), real estate settlement procedures,
consumer credit protection, equal credit opportunity or disclosure laws
applicable to the origination and servicing of the Mortgage Loan have been
complied with, and Seller shall maintain in its possession, available for
Buyer's inspection, and shall deliver to Buyer upon demand, evidence of
compliance with all such requirements.
(h) No Satisfaction of Mortgage. The Mortgage has not been satisfied,
canceled, subordinated or rescinded, in whole or in part, and the Mortgaged
Property has not been released
Schedule B - 2
from the lien of the Mortgage, in whole or in part, nor has any instrument been
executed that would effect any such release, cancellation, subordination or
rescission.
(i) Location and Type of Mortgaged Property. The Mortgaged Property is
located in the state identified in the Mortgage Loan Schedule and consists of a
parcel of real property with a single family residence erected thereon, or a
two- to four-family dwelling, or an individual condominium unit in a condominium
project, or an individual unit in a planned unit development and no residence or
dwelling is a mobile home or a manufactured dwelling (other than a mobile home
or a manufactured dwelling permanently affixed to real property owned by
Mortgagor). No portion of the Mortgaged Property is used for commercial
purposes.
(j) Valid First Lien. The Mortgage is a valid, subsisting and enforceable
first lien on the Mortgaged Property, including all buildings on the Mortgaged
Property and all installations and mechanical, electrical, plumbing, heating and
air conditioning systems located in or annexed to such buildings, and all
additions, alterations and replacements made at any time with respect to the
foregoing. The lien of the Mortgage is subject only to:
(i) the lien of current real property taxes and special assessments
not yet due and payable;
(ii) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date of
recording acceptable to mortgage lending institutions generally and
specifically referred to in the lender's title insurance policy delivered
to the originator of the Mortgage Loan and (i) referred to or otherwise
considered in the appraisal made for the originator of the Mortgage Loan
or (ii) that do not adversely affect the appraised value of the Mortgaged
Property set forth in such appraisal;
(iii) in the case of a Mortgaged Property that is a condominium or
an individual unit in a planned unit development, liens for common charges
permitted by statute; and
(iv) other matters to which like properties are commonly subject
which do not materially interfere with the benefits of the security
intended to be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to
and delivered in connection with the Mortgage Loan establishes and creates a
valid, subsisting and enforceable first lien and first priority security
interest on the property described therein and Seller has full right to pledge
and assign the same to Buyer or its designee (including Custodian).
(k) Validity of Mortgage Documents. The Mortgage Note and the Mortgage are
genuine, and each is the legal, valid and binding obligation of the maker
thereof enforceable in accordance with its terms, except as such enforcement may
be limited by bankruptcy, insolvency, reorganization, receivership, moratorium
or other similar laws relating to or affecting the rights of creditors
generally, and by general equity principles (regardless of whether such
enforcement is considered in a proceeding in equity or at law). All parties to
the Mortgage Note
Schedule B - 3
and the Mortgage had legal capacity to enter into the Mortgage Loan and to
execute and deliver the Mortgage Note and the Mortgage, and the Mortgage Note
and the Mortgage have been duly and properly executed by such parties. The
Mortgagor is a natural person or living trust (meeting the requirements of
▇▇▇▇▇▇ ▇▇▇) who is a party to the Mortgage Note and the Mortgage in an
individual or trustee capacity, respectively.
(l) Payments Current. No payment required under the Mortgage Loan is 30
days or more delinquent nor has any payment under the Mortgage Loan been 30 days
or more delinquent at any time since the origination of the Mortgage Loan.
(m) Ownership. Seller is the sole owner of record and holder of the
Mortgage Loan. The Mortgage Loan is not assigned or pledged except as provided
in this Agreement, and Seller has good and marketable title thereto, and has
full right to pledge and assign the Mortgage Loan to Buyer or its designee
(including Custodian) free and clear of any encumbrance, equity, participation
interest, lien, pledge, charge, claim or security interest, and has full right
and authority subject to no interest or participation of, or agreement with, any
other party, to sell and assign each Mortgage Loan pursuant to this Agreement.
(n) Doing Business. All parties that have had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held and disposed of such interest, were) (1) in compliance
with any and all applicable licensing requirements of the laws of the state
wherein the Mortgaged Property is located, and (2) organized under the laws of
such state, or (3) qualified to do business in such state, or (4) federal
savings and loan associations or national banks having principal offices in such
state, or (5) not doing business in such state; provided, if a warehouse lender
that was the assignee of the Mortgage Loans was not authorized to do business in
the jurisdiction where the Mortgaged Property is located, the Seller represents
and warrants that the financing of the Mortgage Loan by such warehouse lender,
the taking an assignment of such Mortgage Loan and the holding of an interest in
the Mortgage Loan by the warehouse lender did not constitute doing business in
that jurisdiction.
(o) Loan-to-Value Ratio. No Mortgage Loan has a Loan-to-Value Ratio of
more than 100%.
"Loan-to-Value Ratio" means with respect to any Mortgage Loan, the
fraction, expressed as a percentage, the numerator of which is the principal
balance of such Mortgage Loan at the date of origination and the denominator of
which is the lowest of (a) the value of the related Mortgaged Property as set
forth in the appraisal of such Mortgaged Property obtained in connection with
the origination of such Mortgage Loan or (b) in the case of a Mortgage Loan that
is a purchase money mortgage, the purchase price of the Mortgaged Property.
(p) Title Insurance. The Mortgage Loan is covered by an ALTA mortgage
title insurance policy or such other form of policy acceptable to ▇▇▇▇▇▇ ▇▇▇ or
▇▇▇▇▇▇▇ Mac, issued by and constituting the valid and binding obligation of a
title insurer generally acceptable to prudent mortgage lenders that regularly
originate or purchase mortgage loans comparable to the Mortgage Loans for sale
to prudent investors in the secondary market that invest in mortgage loans such
as the Mortgage Loans and qualified to do business in the jurisdiction where the
Schedule B - 4
Mortgaged Property is located, insuring Seller, its successors and assigns, as
to the first priority lien of the Mortgage in the case of a Mortgage Loan
secured by a first Mortgage, in the original principal amount of the Mortgage
Loan. Seller is the sole named insured of such mortgage title insurance policy,
the assignment to Buyer or Custodian as assignee of Buyer of Seller's interest
in such mortgage title insurance policy does not require the consent of or
notification to the insurer or the same has been obtained, and such mortgage
title insurance policy is in full force and effect and will be in full force and
effect and inure to the benefit of Buyer upon the consummation of the
transactions contemplated by this Agreement. No claims have been made under such
mortgage title insurance policy and no prior holder of the related Mortgage,
including Seller, has done, by act or omission, anything that would impair the
coverage of such mortgage title insurance policy.
(q) No Defaults. There is no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any grace
or cure period, would constitute a default, breach, violation or event of
acceleration, and neither Seller nor its predecessors have waived any default,
breach, violation or event of acceleration.
(r) No Mechanics' Liens. There are no mechanics' or similar liens or
claims that have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting the
Mortgaged Property that are or may be liens prior to, or equal or coordinate
with, the lien of the Mortgage.
(s) Location of Improvements; No Encroachments. Except as may be expressly
noted and considered in the appraisal of the Mortgaged Property, all
improvements that were considered in determining the appraised value of the
Mortgaged Property lay wholly within the boundaries and building restriction
lines of the Mortgaged Property and no improvements on adjoining properties
encroach upon the Mortgaged Property. No improvement located on or being part of
the Mortgaged Property is in violation of any applicable zoning law or
regulation.
(t) Origination. The Mortgage Loan was originated by Seller, an affiliate
of Seller. The documents, instruments and agreements submitted for loan
underwriting were not falsified and contain no untrue statement of material fact
or omit to state a material fact required to be stated therein or necessary to
make the information and statements therein not misleading.
(u) Customary Provisions. The Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the benefits of
the security provided thereby, including, (i) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (ii) otherwise by judicial
foreclosure. There is no homestead or other exemption available to a Mortgagor
that would preclude the right to sell the Mortgaged Property at a trustee's sale
or the right to foreclose the Mortgage.
(v) Occupancy of the Mortgaged Property. The Mortgaged Property is
lawfully occupied under applicable law. All inspections, licenses and
certificates required to be made or issued with respect to all occupied portions
of the Mortgaged Property and, with respect to the use and occupancy of the
same, including but not limited to certificates of occupancy and fire
Schedule B - 5
underwriting certificates, have been made or obtained from the appropriate
authorities. The occupancy status of the Mortgaged Property is as was
represented by the Mortgagor at the time of origination of the Mortgage Loan.
(w) No Additional Collateral. The Mortgage Note is not and has not been
secured by any collateral except the lien of the corresponding Mortgage and the
security interest of any applicable security agreement or chattel mortgage
referred to in (i) above.
(x) Deeds of Trust. In the event the Mortgage constitutes a deed of trust,
a trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the Mortgage, and no
fees or expenses are or will become payable by Buyer to the trustee under the
deed of trust, except in connection with a trustee's sale after default by the
Mortgagor.
(aa) Acceptable Investment. Seller has no knowledge of any circumstances
or conditions with respect to the Mortgage, the Mortgaged Property, the
Mortgagor (other than the Mortgagor's credit standing) that can reasonably be
expected to cause private institutional investors that regularly invest in
mortgage loans of the same type as the Mortgage Loan to regard the Mortgage Loan
as an unacceptable investment or adversely affect the value or marketability of
the Mortgage Loan to other similar institutional investors.
(bb) Purchase of Mortgage Documents. The Mortgage File and any other
documents required by Buyer to be delivered for the Mortgage Loan by Seller
under the Letter Agreement have been delivered to Custodian. Seller is in
possession of a complete, true and accurate Mortgage File except for such
documents the originals of which have been delivered to Buyer or its designee
(including Custodian). Each of the documents and instruments included in the
Mortgage File is duly executed and in due and proper form and each such document
or instrument is in a form generally acceptable to prudent institutional
mortgage lenders that regularly originate and purchase subprime or high
loan-to-value mortgage loans. With respect to each Mortgage Loan, the Seller
shall segregate and maintain continuous custody and control in secure and fire
resistant facilities in accordance with customary standards for such custody of
the original policy of title insurance or a true copy thereof or, if such policy
has not yet been delivered by the insurer, the commitment or binder to issue the
same (which may be marked by the title insurance company) and a certified copy
of mortgage insurance, if applicable.
(cc) Condominiums/Planned Unit Developments. If the Mortgaged Property is
a condominium unit or a planned unit development (other than a de minimus
planned unit development) such condominium or planned unit development project
meets Seller's underwriting guidelines.
(dd) Transfer of Mortgage Loans. The assignment of Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located.
(ee) Due on Sale. The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the Mortgage Loan
in the event
Schedule B - 6
that the Mortgaged Property is sold or transferred without the prior written
consent of the mortgagee thereunder.
(ff) No Buydown Provisions; No Graduated Payments or Contingent Interests.
The Mortgage Loan does not contain provisions pursuant to which monthly payments
are paid or partially paid with funds deposited in any separate account
established by Seller, the Mortgagor or anyone on behalf of the mortgagor, or
paid by any source other than the Mortgagor nor does it contain any other
similar provisions currently in effect that may constitute a "buydown"
provision. The Mortgage Loan is not a graduated payment mortgage loan and the
Mortgage Loan does not have a shared appreciation or other contingent interest
feature.
(gg) Consolidation of Future Advances. Any future advances made prior to
the Purchase Date have been consolidated with the outstanding principal amount
secured by the Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term. The lien of the Mortgage
securing the consolidated principal amount is expressly insured as having first
lien priority, as the case may be, by a title insurance policy or an endorsement
to the policy insuring the mortgagee's consolidated interest. The consolidated
principal amount does not exceed the original principal amount of the Mortgage
Loan.
(hh) No Condemnation; Mortgaged Property Undamaged. There is no proceeding
pending or, to Seller's knowledge, threatened for the total or partial
condemnation of the Mortgaged Property. The Mortgaged Property is undamaged by
waste, fire, earthquake or earth movement, windstorm, flood, tornado or other
casualty so as to affect adversely the value of the Mortgaged Property as
security for the Mortgage Loan or the use for which the premises were intended.
(ii) Collection Practices; Escrow Deposits Interest Rate Adjustments. The
origination and collection practices used with respect to the Mortgage Loan have
been in all respects in accordance with industry custom and practice, and have
been in all respects legal and proper. With respect to escrow deposits and
escrow payments, all such payments are in the possession of Seller and there
exist no deficiencies in connection therewith for which customary arrangements
for repayment thereof have not been made. All escrow payments have been
collected in full compliance with state and federal law. If an escrow of funds
has been established, it is not prohibited by applicable law and has been
established in an amount sufficient to pay for every item that remains unpaid
and has been assessed but is not yet due and payable. No escrow deposits or
escrow payments or other charges or payments due Seller have been capitalized
under the Mortgage or the Mortgage Note. All mortgage interest rate adjustments
have been made in strict compliance with state and federal law and the terms of
the related Mortgage Note. Any interest required to be paid pursuant to state
and local law has been properly paid and credited.
(jj) Georgia Mortgage Loan. No Mortgage Loan originated between October 1,
2002 and March 7, 2003 (both inclusive) and secured by a Mortgaged Property
located in the State of Georgia is a "home loan" and is either a "covered" or
"high cost loan" as defined in the Georgia Fair Lending Act, as amended. No
Mortgage Loan originated after March 7, 2003 and secured by a Mortgaged Property
located in the State of Georgia is a "home loan" and is a "high cost loan" as
defined in the Georgia Fair Lending Act, as amended.
Schedule B - 7
(kk) Appraisal. The Mortgage File for each Mortgage Loan contains an
appraisal of the related Mortgaged Property signed prior to the approval of the
Mortgage Loan application by a qualified appraiser, duly appointed by the
originator of the Mortgage Loan, who had no interest, direct or indirect in the
Mortgaged Property or in any loan made on the security thereof, other than as an
employee of the lender, and whose compensation is not affected by the approval
or disapproval of the Mortgage Loan, and the appraisal and appraiser both
satisfy the requirements of Title XI of the Federal Institutions Reform,
Recovery, and Enforcement Act of 1989 and the regulations promulgated
thereunder, all as in effect on the date the Mortgage Loan was originated.
(ll) Servicemembers Civil Relief Act of 2003. The Mortgagor has not
notified the Seller, and the Seller has no knowledge of any relief requested or
allowed to the Mortgagor under the Servicemembers Civil Relief Act of 2003.
(mm) Environmental Matters. The Mortgaged Property is free from any and
all toxic or hazardous substances and there exists no violation of any local,
state or federal environmental law, rule or regulation.
(nn) Reserved.
(oo) No Construction Loans. No Mortgage Loan is a construction loan or
relates to manufactured housing that is not permanently affixed to real
property.
(pp) Selection by Seller. No Mortgage Loan was selected for inclusion
under this Agreement on any basis that was intended to have a material adverse
effect on Buyer.
(qq) Reserved.
(rr) CERCLA. To the best of Seller's knowledge, no Mortgaged Property was,
as of the Purchase Date, located within a one-mile radius of any site listed in
the National Priorities List as defined under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, or on any similar
state list of hazardous waste sites that are known to contain any hazardous
substance or hazardous waste.
(ss) No Bankruptcy of Mortgagor. None of the Mortgage Loans are subject to
a bankruptcy plan.
(tt) Conformance to Underwriting Standards. Each Mortgage Loan was
underwritten in all material respects in accordance with the related Seller's
underwriting guidelines supplied to Buyer.
(uu) Qualified Mortgage. Each Mortgage Loan constitutes a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code.
(vv) Reserved.
Schedule B - 8
(ww) Securitization Standards. The Mortgage Loan conforms to the current
standards of securitization (or whole loan sale at market rates for similar
performing assets) applicable to similar assets as determined in the reasonable
judgment of Buyer.
(xx) Non-Eligible Mortgage Loans. No Mortgage Loan (w) is classified as a
"high cost" loan under the Home Ownership and Equity Protection Act of 1994 or
"high cost," "threshold," or "predatory" loans under any other applicable state,
federal or local law (or a similarly classified loan using different terminology
under a law, regulation or ordinance imposing heightened regulatory scrutiny or
additional legal liability for residential mortgage loans having high interest
rates, points and/or fees), (x) is a "stated income" Mortgage Loan to a
Mortgagor with a credit rating of "C" or lower or (y) is a cash-out refinancing
secured by a Mortgaged Property located in Texas. None of the proceeds of the
Mortgage Loan were used to finance single-premium credit life insurance
policies. Each Mortgage Loan at the time it was made complied in all material
respects with applicable local, state, and federal laws, including, but not
limited to, all applicable predatory and abusive lending laws.
(yy) Compliance with Anti-Money Laundering Laws. With respect to each
Mortgage Loan, Seller has complied with all applicable anti-money laundering
laws and regulations, including the USA Patriot Act of 2001 (collectively, the
"Anti-Money Laundering Laws"); Seller has established an anti-money laundering
compliance program as required by the Anti-Money Laundering Laws, has conducted
the requisite due diligence in connection with the origination of each Mortgage
Loan for purposes of the Anti-Money Laundering Laws, including with respect to
the legitimacy of the applicable Mortgagor and the origin of the assets used by
the said Mortgagor to purchase the property in question, and maintains, and will
maintain, sufficient information to identify the applicable Mortgagor for
purposes of the Anti-Money Laundering Laws;
(zz) Lost Instrument Affidavits. In the event any Mortgage File contains a
lost note affidavit in lieu of a Mortgage Note, such lost note affidavit, when
assigned, will be sufficient to effect the transfer of title to the related
Mortgage Loan, without the need for a judicial proceeding, administrative
action, court or regulatory order, or similar action or order.
It is understood and agreed that the representations and warranties set forth in
this Schedule B shall survive each Purchase date and delivery of the respective
Mortgage Files to Custodian on behalf of Buyer.
Schedule B - 9