MASTER REPURCHASE AGREEMENT GOVERNING
PURCHASES AND SALES OF MORTGAGE LOANS
Dated as of December 30, 1998
Between
▇▇▇▇▇▇ COMMERCIAL PAPER INC.,
as Buyer
FIRST ALLIANCE CORPORATION,
as Guarantor
and
FIRST ALLIANCE MORTGAGE COMPANY,
as Seller
1. APPLICABILITY
>From time to time for a period of 364 days from the date hereof, the parties
hereto shall, subject to the terms and conditions hereof, enter into
transactions in which First Alliance Mortgage Company ("SELLER") agrees to
transfer to ▇▇▇▇▇▇ Commercial Paper Inc. ("BUYER") Mortgage Loans against the
transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer
to Seller such Mortgage Loans at a date certain not later than 30 days after the
date of transfer or on demand, as specified in the Confirmation, against the
transfer of funds by Seller. Each such transaction shall be referred to herein
as a "TRANSACTION" and shall be governed by this Agreement and the related
Confirmation, unless otherwise agreed in writing. Each Transaction hereunder
with respect to which the Repurchase Date has not yet occurred shall be
considered an outstanding Transaction.
2. DEFINITIONS
"ACT OF INSOLVENCY" means, with respect to the Seller and its Affiliates, (i)
the filing of a petition, commencing, or authorizing the commencement of any
case or proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law relating to the protection of creditors,
or suffering any such petition or proceeding to be commenced by another which is
consented to, not timely contested or results in entry of an order for relief;
(ii) seeking the appointment of a receiver, trustee, custodian or similar
official for such party or an Affiliate or any substantial part of the property
of either, (iii) the appointment of a receiver, conservator, or manager for such
party or an Affiliate by any governmental agency or authority having the
jurisdiction to do so; (iv) the making or offering by such party or an Affiliate
of a composition with its creditors or a general assignment for the benefit of
creditors, (v) the admission by such party or an Affiliate of such party of its
inability to pay its debts or discharge its obligations as they become due or
mature; or (vi) any governmental authority or agency or any person, agency or
entity acting or purporting to act under governmental authority shall have taken
any action to condemn, seize or appropriate, or to assume custody or control of,
all or any substantial part of the property of such party or of any of its
Affiliates, or shall have taken any action to displace the management of such
party or of any of its Affiliates or to curtail its authority in the conduct of
the business of such party or of any of its Affiliates.
"ADDITIONAL LOANS" means Mortgage Loans or cash provided by Seller to Buyer or
its designee pursuant to Section 4(a).
"ADJUSTED INTEREST COVERAGE RATIO" shall mean EBITDA minus non-cash gains
relating to the sale of financial assets divided by total interest expense.
"ADJUSTED TANGIBLE NET WORTH" shall mean shareholders' equity minus intangible
assets minus 50% of the reported value of any residual interests, excess
servicing rights, interest only securities, subordinated securities or like
instrument.
"AFFILIATE" means an affiliate of a party as such term is defined in the United
States Bankruptcy Code in effect from time to time.
"AGENCY" means FNMA or FHLMC.
"AGREEMENT" means this Master Repurchase Agreement Governing Purchases and Sales
of Mortgage Loans between Buyer and Seller, as amended from time to time.
"BALLOON MORTGAGE LOAN" means any Mortgage Loan that provided on the date of
origination for scheduled payments by the Mortgagor based upon an amortization
schedule extending beyond its maturity date.
"BUSINESS DAY" means a day other than (i) a Saturday or Sunday, or (ii) a day on
which the New York Stock Exchange is authorized or obligated by law or executive
order to be closed.
"BUYER" has the meaning specified in Section 1.
"COLLATERAL" has the meaning specified in Section 6.
"COLLATERAL AMOUNT" means, with respect to any Transaction, the amount obtained
by application of the Collateral Amount Percentage to the Repurchase Price for
such Transaction.
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"COLLATERAL AMOUNT PERCENTAGE" shall be 105% with respect to the calculation of
Market Value or 105% with respect to the calculation of Securitization Value.
"COLLATERAL DEFICIT" has the meaning specified in Section 4(a).
"COLLATERAL EXCESS" has the meaning specified in Section 4(b).
"COLLATERAL INFORMATION" means the following information with respect to each
Mortgage Loan: (i) the 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 15th day of the immediately
preceding month, (vii) the paid to date that corresponds to the current balance,
(viii) the original appraisal value of the Mortgaged Property and date of such
appraisal, (ix) whether interest rate is fixed or adjustable (and if adjustable,
the related ARM terms, including the index, spread, adjustment frequency, caps
and floors), (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 current
principal and interest payment due, (xvi) the amortization term, (xvii) the
Mortgage Note date, (xviii) the property type of the Mortgaged Property, (xix)
whether the Mortgage Loan is convertible from ARM to fixed (xx) the loan grade
including FICO score, (xxi) the delinquency status, and (xxii) the outstanding
balance of the first lien, if a second lien, and such other information as Buyer
may reasonably request.
"CONFIRMATION" has the meaning specified in Section 3(a).
"CUSTODIAL AGREEMENT" means that custodial agreement, dated as of December 30,
1998, by and among Buyer, Seller and the Custodian.
"CUSTODIAL DELIVERY" means the form executed by the Seller in order to deliver
the Mortgage Loan Schedule and/or the Mortgage File to Buyer or its designee
(including the Custodian) pursuant to Section 7, a form of which is attached
hereto as Exhibit II.
"CUSTODIAN" means the custodian under the Custodial Agreement. The initial
custodian is Norwest Bank Minnesota, N.A.
"DELINQUENT" means, with respect to any Mortgage Loan, the period of time from
the date on which a Mortgagor fails to pay an obligation then due under the
terms of such Mortgage Loan to the date on which such payment is made.
"EBITDA" means reported earnings before interest, taxes, depreciation and
amortization.
"EVENT OF DEFAULT" has the meaning specified in Section 13.
"FHA" means the Federal Housing Administration, an agency within HUD.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
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"FHLMC GUIDE" means the FHLMC Sellers/Servicers Guide, as amended from time to
time.
"FNMA" means the Federal National Mortgage Association.
"FNMA GUIDE" means the FNMA Selling, Servicing and MBS Guides, as amended from
time to time.
"FIRST MORTGAGE" means the Mortgage that is the first lien on the Mortgaged
Property.
"GUARANTOR" shall mean First Alliance Corporation.
"GUARANTY" shall mean that certain continuing guaranty made by the Guarantor in
favor of the Buyer as of the date hereof.
"HEDGE" means a hedging instrument or derivative purchased by Seller with
respect to protecting the value of the Purchased Mortgage Loans.
"HUD" means the United States Department of Housing and Urban Development.
"INCOME" means, with respect to any Mortgage Loan at any time, any principal
thereof then payable and all interest, dividends or other distributions payable
thereon less any related servicing fee(s) charged by the Servicer.
"LIBOR" means the London Interbank Offered Rate for one-month, three-month or
six-month United States dollar deposits as set forth on page 3750 of Telerate as
of 11:00 a.m., London time, on the date of determination, as selected by Seller;
provided, however, that Seller may not select the London Interbank Offered Rate
for three-month or six-month dollar deposits if the related Repurchase Date is
shorter than three or six months, respectively.
"LOAN-TO-VALUE RATIO" means with respect to any Mortgage Loan as of any date,
the fraction, expressed as a percentage, the numerator of which is the principal
balance of such Mortgage Loan at the date of determination and the denominator
of which is 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.
"MARKET VALUE" means as of any date with respect to any Mortgage Loan, the price
at which such Mortgage Loan could readily be sold as determined by Buyer in its
sole discretion; provided, however, that Buyer shall not take into account, for
purposes of calculating Market Value, any Mortgage Loan (i) which has been
subject to Transactions for more than 90 days, (ii) which, together with the
other Mortgage Loans subject to then outstanding Transactions, would cause the
30+ Delinquency Percentage to exceed 3%, (iii) which are more than 59 days
delinquent or (iv) with respect to which there is a breach of a representation,
warranty or covenant made by Seller in this Agreement that materially adversely
affects Buyer's interest in such Mortgage Loan and which breach has not been
cured (v) to the extent Mortgage Files with respect to Wet Ink Mortgage Loans
are not delivered to the Custodian as provided in Section 3 below; provided
further, however that the Market Value of any Mortgage Loan shall not in any
event exceed the outstanding principal amount thereof.
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"MORTGAGE" means a mortgage, deed of trust, deed to secure debt or other
instrument, creating a valid and enforceable first or second lien on or a first
or second priority ownership interest in an estate in fee simple in residential
real property and the improvements thereon, securing a mortgage note or similar
evidence of indebtedness.
"MORTGAGE FILE" means the documents specified as the "Mortgage File" in Section
7(d), together with any additional documents and information required to be
delivered to Buyer or its designee (including the Custodian) pursuant to this
Agreement.
"MORTGAGE LOAN" means (i) a non-securitized whole loan, namely a conventional
mortgage loan secured by a first or second lien on a one to four family
residential property or mixed-use property for which a complete Mortgage File
has been delivered to the Custodian (unless such Mortgage loan is a Wet Ink
Mortgage Loan) or (ii) other type of non-securitized whole loan as may be agreed
upon in writing by the parties hereto from time to time.
"MORTGAGE LOAN SCHEDULE" means a schedule of Mortgage Loans attached to each
Trust Receipt, Confirmation and Custodial Delivery.
"MORTGAGE NOTE" means a note or other evidence of indebtedness of a Mortgagor
secured by a Mortgage.
"MORTGAGED PROPERTY" means the residential real property securing repayment of
the debt evidenced by a Mortgage Note.
"MORTGAGEE" means the record holder of a Mortgage Note secured by a Mortgage.
"MORTGAGOR" means the obligor on a Mortgage Note and the grantor of the related
Mortgage.
"NON-USAGE FEE" means, as of each Non-Usage Payment Date, a fee paid by Seller
to Buyer equal to the product of (a) .25% per annum and (b) the positive amount
by which (X) $150,000,000 exceeds (Y) the outstanding Repurchase Price for the
immediately preceding month (calculated on a weighted average daily Repurchase
Price).
"NON-USAGE PAYMENT DATE" has the meaning specified in Section 3(g).
"PERIODIC PAYMENT" has the meaning specified in Section 5(b).
"PERSON" means an individual, partnership, corporation, joint stock company,
trust or unincorporated organization or a governmental agency or political
subdivision thereof.
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"PRICE DIFFERENTIAL" means, with respect to any Transaction hereunder as of any
date, the aggregate amount obtained by daily application of the Pricing Rate for
such Transaction to the Purchase Price for such Transaction on a 360 day per
year basis for the actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending on (but excluding)
the Repurchase Date (reduced by any amount of such Price Differential previously
paid by Seller to Buyer with respect to such Transaction).
"PRICING RATE" means the per annum percentage rate specified in the Confirmation
for determination of the Price Differential which shall not exceed LIBOR plus
the applicable Pricing Spread.
"PRICING SPREAD" means 1.25%, provided that relating to Wet Ink Mortgage Loans
1.75%.
"PRIME RATE" means the rate of interest published by THE WALL STREET JOURNAL,
northeast edition, as the "prime rate".
"PURCHASE DATE" means the date on which Purchased Mortgage Loans are transferred
by Seller to Buyer or its designee (including the Custodian) as specified in the
Confirmation.
"PURCHASE PRICE" means on each Purchase Date, the price at which Purchased
Mortgage Loans are transferred by Seller to Buyer or its designee (including the
Custodian), provided that such price shall not exceed 95% of the lesser of the
(a) par amount, (b) Market Value or (c) Securitization Value of such Purchased
Mortgage Loans.
"PURCHASED MORTGAGE LOANS" means the Mortgage Loans (including any Additional
Assets) sold by Seller to Buyer in a Transaction, any Additional Loans and any
Substituted Mortgage Loans.
"REPLACEMENT LOANS" has the meaning specified in Section 14(b).
"REPURCHASE DATE" means the date on which Seller is to repurchase the Purchased
Mortgage Loans from Buyer, including any date determined by application of the
provisions of Sections 3 or 13, as specified in the Confirmation; provided that
in no event shall such date be more than 30 days after the Purchase Date.
"REPURCHASE PRICE" means the price at which Purchased Mortgage Loans are to be
transferred from Buyer or its designee (including the Custodian) to Seller upon
termination of a Transaction, which will be determined in each case (including
Transactions terminable upon demand) as the sum of the Purchase Price and the
Price Differential as of the date of such determination decreased by all cash,
Income and Periodic Payments actually received by Buyer pursuant to Sections
4(a), 5(a) and 5(b), respectively.
"SECURITIZATION" mean the public or private offering of any securities of the
Seller or its subsidiaries collateralized by, or representing interests in, the
Purchased Mortgage Loans.
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"SECURITIZATION VALUE" means as of any date with respect to any Mortgage Loan,
the price at which such Mortgage Loan could readily be securitized as determined
by Buyer in its sole discretion; provided, however, that Buyer shall not take
into account, for purposes of calculating Market Value, any Mortgage Loan (i)
which has a related Repurchase Date of more than 90 days, (ii) which, together
with the other Mortgage Loans subject to then outstanding Transactions, would
cause the 30+ Delinquency Percentage to exceed 3%, (iii) which are more than 59
days delinquent (iv) with respect to which there is a breach of a
representation, warranty or covenant made by Seller in this Agreement that
materially adversely affects Buyer's interest in such Mortgage Loan and which
breach has not been cured, (v) to the extent Mortgage Files with respect to Wet
Ink Mortgage Loans are not delivered to the Custodian as provided in Section 3
below; provided further, however that the Market Value of any Mortgage Loan
shall not in any event exceed the outstanding principal amount thereof.
"SELLER" has the meaning specified in Section 1.
"SERVICER" has the meaning specified in Section 25.
"SERVICING AGREEMENT" has the meaning specified in Section 25.
"SERVICING RECORDS" has the meaning specified in Section 25.
"SPECIFIED LEVERAGE RATIO" shall mean total debt minus warehouse financing
facilities divided by Adjusted Tangible Net Worth.
"SUBSTITUTED MORTGAGE LOANS" means any Mortgage Loans substituted for Purchased
Mortgage Loans in accordance with Section 9 hereof.
"30+ DELINQUENCY PERCENTAGE" means the fraction, expressed as a percentage, the
numerator of which is the aggregate Purchase Price of Purchased Mortgage Loans
subject to then outstanding Transactions which are more than 30 days Delinquent
and the denominator of which is the aggregate Purchase Price of all Purchased
Mortgage Loans subject to then outstanding Transactions.
"TOTAL LEVERAGE RATIO" shall mean total liabilities divided by Adjusted Tangible
Net Worth.
"TRANSACTION" has the meaning specified in Section 1.
"TRUST RECEIPT" means a trust receipt issued by Custodian to Buyer confirming
the Custodian's possession of certain Mortgage Loan Files which are the property
of and held by Custodian for the benefit of the Buyer or the registered holder
of such trust receipt.
"WET INK MORTGAGE LOAN" means a Mortgage Loan the related underlying documents
comprising the Mortgage File for which have not been physically delivered to the
Custodian.
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3. INITIATION; CONFIRMATION; TERMINATION;
MAXIMUM TRANSACTION AMOUNTS
(a) An agreement to enter into a Transaction may be entered into orally or in
writing at the initiation of either Buyer or Seller. At the initiation of the
Seller, for the term of this Agreement, the Buyer shall be obligated to purchase
eligible Mortgage Loans hereunder, subject to the Seller's compliance with the
terms and conditions hereunder. In any event, Buyer shall confirm the terms of
each Transaction by issuing a written confirmation to Seller promptly after the
parties enter into such Transaction in the form of Exhibit I attached hereto (a
"CONFIRMATION"). Such Confirmation shall describe the Purchased Mortgage Loans,
identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase
Price, (iii) the Repurchase Date, unless the Transaction is to be terminable on
demand, (iv) the Pricing Rate applicable to the Transaction, and (v) additional
terms or conditions not inconsistent with this Agreement. After receipt of the
Confirmation, Seller shall, subject to the provisions of subsection (c) below,
sign the Confirmation and promptly return it to Buyer. The Purchase Price for
any Transaction shall exceed $500,000.
(b) Any Confirmation by Buyer shall be deemed to have been received by Seller on
the date actually received by Seller.
(c) Each Confirmation, together with this Agreement, shall be conclusive
evidence of the terms of the Transaction(s) covered thereby unless objected to
in writing by Seller no more than two (2) Business Days after the date the
Confirmation was received by Seller or unless a corrected Confirmation is sent
by Buyer. An objection sent by Seller must state specifically such objection in
writing, must specify the provision(s) being objected to by Seller, must set
forth such provision(s) in the manner that the Seller believes they should be
stated, and must be received by Buyer no more than two (2) Business Days after
the Confirmation was received by Seller.
(d) In the case of Transactions terminable upon demand, such demand shall be
made by Buyer or Seller by telephone or otherwise, no later than 1:00 p.m. (New
York Time) on the Business Day prior to the day on which such termination will
be effective.
(e) On the Repurchase Date, termination of the Transaction will be effected by
transfer to Seller or its designee of the Purchased Mortgage Loans (and any
Income in respect thereof received by Buyer not previously credited or
transferred to, or applied to the obligations of, Seller pursuant to Section 5)
against the simultaneous transfer of the Repurchase Price to an account of
Buyer. Seller is obligated to obtain the Mortgage Files from Buyer or its
designee at Seller's expense on the Repurchase Date. With respect to any
transfers of Purchased Mortgage Loans on a Repurchase Date in accordance with
the foregoing, Buyer shall cause such Purchased Mortgage Loans to be free of any
liens granted by the Buyer thereon.
(f) With respect to all Transactions hereunder, the aggregate Purchase Price for
all Purchased Mortgage Loans at any one time subject to then outstanding
Transactions shall not exceed $150,000,000.
(g) On the last day of each month following the initial Purchase Date hereunder
(each a "NON-USAGE PAYMENT DATE"), Seller shall pay to Buyer in federal funds by
wire transfer the Non-Usage Fee then due, if any.
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(h) Notwithstanding anything in this Agreement to the contrary, Buyer shall have
no obligation to enter into any Transaction hereunder if Buyer, in its good
faith judgment, believes that there has been a material adverse change in the
business, operations, corporate structure or financial condition of Seller or
that Seller will not meet any of its obligations under any Transaction pursuant
to this Agreement, this Agreement or any other agreement between the parties.
Buyer shall promptly notify Seller of any determination by Buyer that any of the
foregoing has occurred.
(i) Seller covenants to deliver all related Mortgage Files with respect to Wet
Ink Mortgage Loans to the Custodian within 5 Business Days of such Mortgage
Loan's related Purchase Date.
(j) Seller shall deliver to Buyer in an acceptable electronic format, Collateral
Information with respect to any Mortgage Loans to be purchased hereunder by 4:00
p.m. (New York time) on the Business Day prior to the related Purchase Date. On
the 5th Business Day of each month for the term of this Agreement, Seller shall
deliver to Buyer the Collateral Information with respect to the Purchased
Mortgage Loans subject to outstanding Transactions hereunder.
4. COLLATERAL AMOUNT MAINTENANCE
(a) If at any time the aggregate Market Value or Securitization Value of all
Purchased Mortgage Loans subject to all outstanding Transactions is less than
the aggregate Collateral Amount for all such Transactions (a "COLLATERAL
DEFICIT"), then Buyer may by notice to Seller require Seller to transfer to
Buyer or its designee (including the Custodian) Mortgage Loans ("ADDITIONAL
LOANS") or cash, so that the cash and aggregate Market Value of the Purchased
Mortgage Loans, including any such Additional Loans, will thereupon equal or
exceed the aggregate Collateral Amount.
(b) Notice required pursuant to subsections (a) above may be given by any means
of telecopier or telegraphic transmission. A notice for the payment or delivery
in respect of a Collateral Deficit received before 10:00 a.m. on a Business Day,
local time of the party receiving the notice, must be met not later than 5:00
p.m. on the Business Day on which the notice was given, local time of the party
receiving the notice. Any notice given on a Business Day after 10:00 a.m., local
time of the party receiving the notice, shall be met not later than 2:00 p.m.
(New York time) on the following Business Day. The failure of Buyer or Seller,
on any one or more occasions, to exercise its rights under subsections (a) of
this Section, respectively, shall not change or alter the terms and conditions
to which this Agreement is subject or limit the right of the Buyer or Seller to
do so at a later date. Buyer and Seller agree that a failure or delay to
exercise its rights under subsections (a) of this Section shall not limit either
party's rights under this Agreement or otherwise existing by law or in any way
create additional rights for the other party.
(c) In the event that Seller fails to comply with the provisions of this Section
4, Buyer shall not enter into any additional Transactions hereunder after the
date of such failure.
5. INCOME PAYMENTS
(a) All Income from the Purchased Mortgage Loans shall be deposited in a
segregated account ("Lockbox Account") established at the Custodian in the name
of Buyer. Where a particular Transaction's term extends over an Income payment
date on the Purchased Mortgage Loans subject to that Transaction such Income
shall be the property of Buyer. Notwithstanding the foregoing, until Buyer
provides Seller with notice in writing, Seller shall be entitled to all Income
with respect to Purchased Mortgage Loans subject to Transactions. Upon such
written notice from Buyer, Seller shall no longer be entitled to all such Income
and all Income with respect to Purchased Mortgage Loans subject to Transactions
that is on deposit in the Lockbox Account shall be distributed under the
Custodial Agreement.
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(b) Notwithstanding that Buyer and Seller intend that the Transactions hereunder
be sales to Buyer of the Purchased Mortgage Loans, Seller shall pay by wire
transfer to Buyer the accreted value of the Price Differential (less any amount
of such Price Differential previously paid by Seller to Buyer)(each such
payment, a "PERIODIC PAYMENT") on the first Business Day of each month. The
Price Differential shall accrue, be calculated and be compounded on a daily
basis for each Purchased Mortgage Loan.
(c) Buyer shall offset against the Repurchase Price of each such Transaction all
Income and Periodic Payments actually received by Buyer pursuant to Sections
5(a) and (b), respectively.
6. SECURITY INTEREST
(a) Buyer and the Seller intend that the Transactions hereunder be sales to
Buyer of the Purchased Mortgage Loans and not loans from Buyer to Seller secured
by the Purchased Mortgage Loans. However, in order to preserve Buyer's rights
under this 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 this Agreement and the
Transactions entered into pursuant to this Agreement, Seller grants Buyer a
first priority security interest in the Purchased Mortgage Loans, Servicing
Records, insurance relating to the Purchased Mortgage Loans, Income, any and all
custodial accounts and escrow accounts relating to the Purchased Mortgage Loans,
any ▇▇▇▇▇▇ and any other contract rights, general intangibles and other assets
including all proceeds relating to the Purchased Mortgage Loans or any interest
in the Purchased Mortgage Loans and the servicing of the Purchased Mortgage
Loans (collectively, the "COLLATERAL").
(b) Seller shall pay all fees and expenses associated with perfecting Buyer's
security interest in the Collateral, including, without limitation, the cost of
filing financing statements under the Uniform Commercial Code and recording
assignments of Mortgage, as and when reasonably required by Buyer.
7. PAYMENT, TRANSFER AND CUSTODY
(a) Unless otherwise mutually agreed in writing, all transfers of funds
hereunder shall be in immediately available funds.
(b) On or before each Purchase Date, Seller shall deliver or cause to be
delivered to Buyer or its designee the Custodial Delivery in the form attached
hereto as Exhibit II.
(c) On the Purchase Date for each Transaction, ownership of the Purchased
Mortgage Loans shall be transferred to the Buyer or its designee (including the
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 the Custodian) of the Purchased
Mortgage Loans relating to each Transaction hereby sells, transfers, conveys and
assigns to Buyer or its designee (including the Custodian) without recourse, but
subject to the terms of this Agreement, all the right, title and interest of
Seller in and to the Purchased Mortgage Loans together with all right, title and
interest in and to the proceeds of any related insurance policies.
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(d) In connection with such sale, transfer, conveyance and assignment, on or
prior to each Purchase Date with respect to each Mortgage Loan (or with respect
to item (vii) below within five Business Days after the Purchase Date), the
Seller shall deliver or cause to be delivered and released to the Custodian
(other than with respect to Wet Ink Mortgage Loans) the following original
documents (collectively the "MORTGAGE FILE"), pertaining to each of the
Purchased Mortgage Loans identified in the Custodial Delivery delivered
therewith:
(i) the original Mortgage Note bearing all intervening endorsements,
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
copies certified by Seller to 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 to have been sent for recording;
(v) 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 (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;
(vii) 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; and
(viii) the original of any security agreement, chattel mortgage or
equivalent document executed in connection with the Mortgage (if any).
(e) With respect to each Mortgage Loan delivered by Seller to Buyer or its
designee (including the Custodian), Seller shall execute an omnibus power of
attorney substantially in the form of Exhibit III attached hereto irrevocably
appointing Buyer its attorney-in-fact with full power to complete and record the
assignment of Mortgage, complete the endorsement of the Mortgage Note and take
such other steps as may be necessary or desirable to enforce Buyer's rights
against such Mortgage Loans, the related Mortgage Files and the Servicing
Records. Buyer shall notify Seller upon its use of such power of attorney.
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(f) Buyer shall deposit the Mortgage Files representing the Purchased Mortgage
Loans, or direct that the Mortgage Files be deposited directly, with the
Custodian. The Mortgage Files shall be maintained in accordance with the
Custodial Agreement.
(g) Any Mortgage Files not delivered to Buyer or its designee (including the
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 the Buyer for the sole purpose of servicing the
related Purchased Mortgage Loan, and such retention and possession by the Seller
or its designee is in a custodial capacity only. The books and records
(including, without limitation, any computer records or tapes) of Seller or its
designee shall be marked appropriately to reflect clearly the inclusion of the
related Purchased Mortgage Loan in a Transaction. Seller or its designee
(including the 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 Purchased Mortgage Loans or is in
connection with a repurchase of any Purchased Mortgage Loan by Seller.
8. REHYPOTHECATION OR PLEDGE OF PURCHASED MORTGAGE LOANS
Title to all Purchased Mortgage Loans shall pass to Buyer and Buyer shall have
free and unrestricted use of all Purchased Mortgage Loans. Nothing in this
Agreement shall preclude Buyer from engaging in repurchase transactions with the
Purchased Mortgage Loans or otherwise pledging, repledging, hypothecating, or
rehypothecating the Purchased Mortgage Loans, but no such transaction shall
relieve Buyer of its obligations to transfer Purchased Mortgage Loans to Seller
pursuant to Section 3. Nothing contained in this Agreement shall obligate Buyer
to segregate any Purchased Mortgage Loans delivered to Buyer by Seller. Seller
shall cooperate with Buyer's reasonable requests that are necessary to complete
any such assignments, syndications, participations rehypothecations or pledge.
In the event that there is a material adverse change or other material
development in the repurchase market with traditional repurchase counterparties
of Buyer, Buyer may accelerate the Repurchase Date with respect to any
outstanding Transactions.
9. SUBSTITUTION
(a) Subject to Section 9(b), Seller may, upon one (1) Business Days written
notice to Buyer, with a copy to Custodian, substitute other Mortgage Loans for
any Purchased Mortgage Loans. Such substitution shall be made by transfer to
Buyer or its designee (including the Custodian) of the Mortgage File of such
other Mortgage Loans together with a Custodial Delivery and transfer to Seller
or its designee of the Purchased Mortgage Loans requested for release. After
substitution, the substituted Mortgage Loans, shall be deemed to be Purchased
Mortgage Loans subject to the same Transaction as the released Mortgage Loans.
(b) Notwithstanding anything to the contrary in this Agreement, Seller may not
substitute other Mortgage Loans for any Purchased Mortgage Loans (i) if after
taking into account such substitution, a Collateral Deficit would occur or (ii)
such substitution would cause a breach of any provision of this Agreement.
10. REPRESENTATIONS AND WARRANTIES
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(a) Each of Buyer and Seller represents and warrants to the other that (i) it is
duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance; (ii) it will engage in such Transactions as principal; (iii) the
person signing this Agreement on its behalf is duly authorized to do so on its
behalf; (iv) no approval, consent or authorization of the Transactions
contemplated by this Agreement from any federal, state, or local regulatory
authority having jurisdiction over it is required or, if required, such
approval, consent or authorization has been or will, prior to the Purchase Date,
be obtained; (v) the execution, delivery, and performance of this Agreement and
the Transactions hereunder will not violate any law, regulation, order,
judgment, decree, ordinance, charter, by-law, or rule applicable to it or its
property or constitute a default (or an event which, with notice or lapse of
time, or both would constitute a default) under or result in a breach of any
agreement or other instrument by which it is bound or by which any of its assets
are affected; (vi) it has received approval and authorization to enter into this
Agreement and each and every Transaction actually entered into hereunder
pursuant to its internal policies and procedures; and (vii) neither this
Agreement nor any Transaction pursuant hereto are entered into in contemplation
of insolvency or with intent to hinder, delay or defraud any creditor.
(b) Seller and Guarantor represent and warrant to Buyer that as of the Purchase
Date for the purchase of any Purchased Mortgage Loans by Buyer from Seller and
as of the date of this Agreement and any Transaction hereunder and at all times
while this Agreement and any Transaction hereunder is in full force and effect:
(i) ORGANIZATION. Each of Guarantor and Seller is duly organized, validly
existing and in good standing under the laws and regulations of the
state of California and is duly licensed, qualified, and in good
standing in every state where each of Guarantor and Seller,
respectively, 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
Guarantor or Seller, respectively, therein.
(ii) NO LITIGATION. Except as provided on schedule 1 hereto, there is no
action, suit, proceeding or arbitration to which Seller or Guarantor is
a party or investigation, pending or, to the knowledge of Seller or
Guarantor, threatened against Seller, the adverse determination of
which is reasonably likely, either in any one instance or in the
aggregate, to result in a material adverse change in any of the
business, operations, financial condition, properties or assets of
Seller or Guarantor, taken as a whole, or in a material impairment of
the right or ability of Seller or Guarantor to carry on their
respective business substantially as now conducted, or in a material
liability on the part of Seller or Guarantor, or would affect the
validity of this Agreement or any of the Purchased Mortgage Loans or of
any action taken or to be taken in connection with the obligations of
Seller or Guarantor contemplated herein, or would be likely to impair
materially the ability of Seller to perform under the terms of this
Agreement or the Guarantor under the Guaranty;
(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 Purchased
Mortgage Loans pursuant to this Agreement;
(iv) GOOD TITLE TO COLLATERAL. Purchased Mortgage Loans subject to
outstanding Transactions, 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 Purchased
Mortgage Loans to Buyer;
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(v) DELIVERY OF MORTGAGE FILE. The Mortgage Note, the Mortgage, the
assignment of Mortgage and any other documents required to be delivered
under this Agreement and the Custodial Agreement for the Mortgage Loans
have been delivered to the Custodian (other than Wet Ink Mortgage
Loans). 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 the originals of which have been delivered to the
Custodian.
(vi) SELECTION PROCESS. The Purchased Mortgage Loans subject to outstanding
Transactions, were selected from among the outstanding mortgage loans
in Seller's portfolio as to which the representations and warranties
set forth in this Agreement could be made and such selection was not
made in a manner so as to affect adversely the interests of Buyer.
(vii) REUNDERWRITING OF MORTGAGE LOANS. The Purchased Mortgage Loans subject
to outstanding Transactions, that were not originated by the Seller
have been reunderwritten by the Seller using its own underwriting
standards.
(viii)NO UNTRUE STATEMENTS. Neither this Agreement nor any written statement
made, or any report or other document issued or delivered or to be
issued or delivered by Seller pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any
untrue statement of material fact or omits to state a material fact
necessary to make the statements contained herein or therein not
misleading;
(ix) ORIGINATION AND PURCHASE PRACTICES. The origination and purchase
practices used by Seller with respect to each Mortgage Loan have been
and are in all respects legal and proper in the mortgage origination
business;
(x) 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 this Agreement on its part to be performed;
(xi) SELLER NOT INSOLVENT. Seller is not, and with the passage of time does
not expect to become, insolvent; and
(xii) NO EVENT OF DEFAULT. No Event of Default has occurred and is continuing
hereunder.
(c) Seller represents and warrants to the Buyer that each Purchased Mortgage
Loan sold hereunder and each pool of Purchased Mortgage Loans sold in a
Transaction hereunder, as of the related Purchase Date conform to the
representations and warranties set forth in Exhibit V attached hereto and that
each Mortgage Loan delivered hereunder as Additional Loans or Substituted
Mortgage Loans, as of the date of such delivery, conforms to the representations
and warranties set forth in Exhibit V hereto. Seller further represents and
warrants to the Buyer that, as of the first Business Day of each month, the
Collateral Information with respect to each Purchased Mortgage Loan is complete,
true and correct. It is understood and agreed that the representations and
warranties set forth in Exhibit V hereto, if any, shall survive delivery of the
respective Mortgage File to Buyer or its designee (including the Custodian).
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(d) On the Purchase Date for any Transaction, Buyer and Seller shall each be
deemed to have made all the foregoing representations with respect to itself as
of such Purchase Date.
11. NEGATIVE COVENANTS OF THE SELLER
On and as of the date of this Agreement and each Purchase Date and until this
Agreement is no longer in force with respect to any Transaction, each of Seller
(except to the extent Guarantor is specified below) and Guarantor covenants
that:
(a) it shall not take any action which would directly or indirectly impair or
adversely affect Buyer's title to or the value of the Purchased Mortgage Loans;
(b) it shall not pledge, assign, convey, grant, bargain, sell, set over, deliver
or otherwise transfer any interest in the Collateral to any person not a party
to this Agreement nor will the Seller create, incur or permit to exist any lien,
encumbrance or security interest in or on the Collateral except as described in
Sections 6 or 25(b) of this Agreement;
(c) it shall not make any adverse changes to Seller's underwriting guidelines
without the prior written consent of Buyer;
(d) the Guarantor shall not fail to maintain shareholders' equity of
$65,600,000, plus 90% of all additional shareholders' equity raised, determined
in accordance with GAAP, since the date of the Agreement plus 75% of all
cumulative reported net income determined in accordance with GAAP, since the
date of the Agreement;
(e) the Guarantor shall not fail to maintain an Adjusted Tangible Net Worth of
$32,500,000;
(f) the Guarantor shall not fail to report a profit of at least $1.00 for two
consecutive fiscal quarters;
(g) the Guarantor shall not exceed a Total Leverage Ratio of 5.00;
(h) the Guarantor shall not exceed a Specified Leverage Ratio of 2.00; or
(i) the Guarantor shall fail to maintain an Adjusted Interest Coverage Ratio of
2.00.
12. AFFIRMATIVE COVENANTS OF THE SELLER
For so long as this Agreement is in effect:
(a) Each of Guarantor and Seller covenants that it will promptly notify Buyer of
any material adverse change in its business operations and/or financial
condition.
(b) Each of Guarantor and Seller shall provide Buyer with copies of such
documentation as Buyer may reasonably request evidencing the truthfulness of the
representations set forth in Section 10, including but not limited to
resolutions evidencing the approval of this Agreement by Seller's and
Guarantor's respective board of directors or loan committee, copies of the
minutes of the meetings of Seller's and Guarantor's respective board of
directors or loan committee at which this Agreement and the Transactions
contemplated by this Agreement were approved.
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(c) Seller shall, at Buyer's request, take all action necessary to ensure that
Buyer will have a first priority security interest in the Purchased Mortgage
Loans, including, among other things, filing such Uniform Commercial Code
financing statements as Buyer may reasonably request.
(d) Each of Guarantor and Seller shall notify Buyer no later than one (1)
Business Day after an executive officer of the Guarantor or Seller has actual
knowledge thereof, if any event has occurred that constitutes an Event of
Default with respect to the Guarantor or Seller or any event that with the
giving of notice or lapse of time, or both, would become an Event of Default
with respect to the Guarantor or Seller.
(e) [Reserved].
(f) Seller covenants, upon request of Buyer after the occurrence of a Collateral
Deficit, to enter into ▇▇▇▇▇▇ with respect to fixed rate Purchased Mortgage
Loans in order to protect adequately, in the reasonable judgment of Buyer
against interest rate risks. Seller shall assign its rights under the Hedge to
Buyer upon Buyer's request and if such assignment occurs, Buyer shall include in
any determination of Market Value the related value of such Hedge.
(g) [Reserved].
(h) Seller covenants to provide Buyer with a copy of any changes to its
underwriting guidelines, prior to the effectiveness of such changes.
(i) Seller covenants to provide Buyer on the first Business Day of each month,
either by direct modem electronic transmission or via a computer diskette, the
Collateral Information, updated as appropriate, in computer readable format with
respect to all Purchased Mortgage Loans then subject to Transactions.
(j) Guarantor covenants to provide Buyer with the following financial and
reporting information:
(i) Within 95 days after the last day of its fiscal year, Guarantor's
audited consolidated statements of income and statements of cash flow
for such year and balance sheets as of the end of such year in each
case presented fairly in accordance with GAAP, and accompanied, in all
cases, by an unqualified report of one of the "Big Six" independent
certified public accounting firms.
(ii) Within 60 days after the last day of the first three fiscal
quarters in any fiscal year, Guarantor's consolidated statements of
income and statements of cash flow for such quarter and balance sheets
as of the end of such quarter presented fairly in accordance with GAAP.
(iii) Within 30 days after the last day of each calendar quarter an
officer's certificate in the form of Exhibit VI from Guarantor's chief
financial officer or treasurer, addressed to Buyer certifying that, as
of the date of such certificate, (i) each of guarantor and Seller is in
compliance with all of the terms, conditions and requirements of this
Agreement, and (ii) such officer has no actual knowledge, except as
specifically stated therein, of an Event of Default hereunder.
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(iv) As soon as available, copies of all proxy statements, financial
statements, and reports which Guarantor sends to its stockholders, and
copies of all regular, periodic and special reports, and all
registration statements under the Securities Act of 1933, as amended,
which it files with the Securities and Exchange Commission or any
government authority which may be substituted therefor, or with any
national securities exchange.
13. EVENTS OF DEFAULT
(a) If any of the following events (each an "EVENT OF DEFAULT") occur,
Buyer shall have the rights set forth in Section 14, as applicable:
(i) Seller fails to satisfy or perform any material obligation or
covenant under this Agreement; PROVIDED, HOWEVER, that if such
material obligation or covenant relates to a non-monetary obligation
or covenant, such failure shall not constitute an Event of Default
hereunder unless such failure continues for a period of 30 days after
delivery of written notice to the defaulting party;
(ii) an Act of Insolvency occurs with respect to Seller or Guarantor;
(iii) any representation made by Seller or Guarantor shall have been
incorrect or untrue in any material respect when made or repeated or
deemed to have been made or repeated and that has a material adverse
effect on Buyer or Buyer's interest in the Purchased Mortgage Loans;
(iv) Seller shall admit its inability to, or its intention not to, perform
any of its obligations hereunder;
(v) any governmental, regulatory, or self-regulatory authority takes any
action to remove, limit, restrict, suspend or terminate the rights,
privileges, or operations of the Seller or any of its Affiliates,
including suspension as an issuer, lender or seller/servicer of
mortgage loans, which suspension has a material adverse effect on the
ordinary business operations of Seller, as a whole, and which
continues for more than 24 hours;
(vi) Seller dissolves, merges or consolidates with another entity (unless
(A) it is the surviving party or (B) the entity into which it mergers
has equity and a market value of at least that of the Seller
immediately prior to such merger and such entity expressly assumes
the obligations of the Seller at the time of such merger), or sells,
transfers, or otherwise disposes of a material portion of its
business or assets;
(vii) Buyer, in its good faith judgment, believes that there has been a
material adverse change in the business, operations, corporate
structure, prospects or financial condition of Seller or that Seller
will not meet any of its obligations under any Transaction pursuant
to this Agreement, this Agreement or any other agreement between the
parties;
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(viii)Seller or Guarantor is in default under any other indenture or
agreement concerning the borrowing of money to which it is a party
(including, without limitation, the Subordination Agreement),
PROVIDED, HOWEVER, such a default shall not constitute an Event of
Default if the exercise of such remedies as are available to Seller's
(or Guarantor's (as applicable)) counterparty with respect to such
default would not result in a material adverse change in the business
operations or financial condition of the Seller;
(ix) A judgment by any competent court in the United States of America for
the payment of money in an amount of at least $2,000,000 is rendered
against the Seller, and the same remains undischarged and unpaid for
a period of sixty (60) days during which execution of such judgment
is not effectively stayed or a judgment by any competent court of the
United States or a determination by an appropriate regulatory body
that in the sole judgment of Buyer materially adversely effects the
reputation of Buyer;
(x) This Agreement shall for any reason cease to create a valid, first
priority security interest in any of the Purchased Mortgage Loans
purported to be covered hereby;
(xi) A Collateral Deficit occurs with respect to Seller and is not
eliminated within the time period specified in Section 4(b); or
(xii) Guarantor fails to satisfy or perform any material obligation or
covenant under the Guaranty.
14. REMEDIES
(a) If an Event of Default occurs with respect to Seller, the following rights
and remedies are available to Buyer:
(i) At the option of Buyer, exercised by written notice to Seller (which
option shall be deemed to have been exercised, even if no notice is
given, immediately upon the occurrence of an Act of Insolvency), the
Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
(ii) If Buyer exercises or is deemed to have exercised the option referred
to in subsection (a)(i) of this Section,
(A) Seller's obligations hereunder to repurchase all Purchased
Mortgage Loans in such Transactions shall thereupon become immediately
due and payable,
(B) to the extent permitted by applicable law, the Pricing Rate with
respect to each such Transaction shall be increased to the aggregate
amount obtained by daily application of, on a 360 day per year basis
for the actual number of days during the period from and including the
date of the exercise or deemed exercise of such option to but
excluding the date of payment of the Repurchase Price as so increased
the greater of the Prime Rate or the Pricing Rate for each such
Transaction, and
(C) all Income actually received by the Buyer or its designee
(including the Custodian) pursuant to Section 5 shall be applied to
the aggregate unpaid Repurchase Price owed by Seller.
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(iii) After one Business Day's notice to Seller (which notice need not be
given if an Act of Insolvency shall have occurred, and which may be
the notice given under subsection (a)(i) of this Section), Buyer may
(A) immediately sell, without notice or demand of any kind, at a
public or private sale and at such price or prices Buyer may
reasonably deem satisfactory any or all Purchased Mortgage Loans
subject to a Transaction hereunder or (B) in its sole discretion
elect, in lieu of selling all or a portion of such Purchased Mortgage
Loans, to give Seller credit for such Purchased Mortgage Loans in an
amount equal to the Market Value of the Purchased Mortgage Loans
against the aggregate unpaid Repurchase Price and any other amounts
owing by Seller hereunder. The proceeds of any disposition of
Purchased Mortgage Loans shall be applied first to the costs and
expenses incurred by Buyer in connection with Seller's default;
second to consequential damages, including reasonable legal expenses,
the costs of cover and/or related reasonable hedging transactions;
third to the Repurchase Price; fourth to any other outstanding
obligation of Seller to Buyer or its Affiliates; and fifth, if any
amounts remain, to the Seller.
(iv) The parties recognize that it may not be possible to purchase or sell
all of the Purchased Mortgage Loans on a particular Business Day, or
in a transaction with the same purchaser, or in the same manner
because the market for such Purchased Mortgage Loans may not be
liquid. In view of the nature of the Purchased Mortgage Loans, the
parties agree that liquidation of a Transaction or the underlying
Purchased Mortgage Loans does not require a public purchase or sale
and that a good faith private purchase or sale shall be deemed to
have been made in a commercially reasonable manner. Accordingly,
Buyer may elect, in its sole discretion, the time and manner of
liquidating any Purchased Mortgage Loan and nothing contained herein
shall (A) obligate Buyer to liquidate any Purchased Mortgage Loan on
the occurrence of an Event of Default or to liquidate all Purchased
Mortgage Loans in the same manner or on the same Business Day or (B)
constitute a waiver of any right or remedy of Buyer. However, in
recognition of the parties' agreement that the Transactions hereunder
have been entered into in consideration of and in reliance upon the
fact that all Transactions hereunder constitute a single business and
contractual relationship and that each Transaction has been entered
into in consideration of the other Transactions, the parties further
agree that Buyer shall use its best efforts to liquidate all
Transactions hereunder upon the occurrence of an Event of Default as
quickly as is prudently possible in the reasonable judgment of Buyer.
(v) Buyer shall, without regard to the adequacy of the security for the
Seller's obligations under this Agreement, be entitled to the
appointment of a receiver by any court having jurisdiction, without
notice, to take possession of and protect, collect, manage,
liquidate, and sell the Collateral or any portion thereof, and
collect the payments due with respect to the Collateral or any
portion thereof. Seller shall pay all costs and expenses incurred by
Buyer in connection with the appointment and activities of such
receiver.
(vi) Seller agrees that Buyer may obtain an injunction or an order of
specific performance to compel Seller to fulfill its obligations as
set forth in Section 25, if Seller fails or refuses to perform its
obligations as set forth therein.
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(vii) Seller shall be liable to Buyer for the amount of all expenses,
reasonably incurred by Buyer in connection with or as a consequence
of an Event of Default, including, without limitation, reasonable
legal fees and expenses and reasonable costs incurred in connection
with reasonable hedging or covering transactions.
(viii)Buyer shall have all the rights and remedies provided herein,
provided by applicable federal, state, foreign, and local laws
(including, without limitation, the rights and remedies of a secured
party under the Uniform Commercial Code of the State of New York, to
the extent that the Uniform Commercial Code is applicable, and the
right to offset any mutual debt and claim), in equity, and under any
other agreement between Buyer and Seller.
(ix) Buyer may exercise one or more of the remedies available to Buyer
immediately upon the occurrence of an Event of Default and, except to
the extent provided in subsections (a)(i) and (iii) of this Section,
at any time thereafter without notice to Seller. All rights and
remedies arising under this Agreement as amended from time-to-time
hereunder are cumulative and not exclusive of any other rights or
remedies which Buyer may have.
(x) In addition to its rights hereunder, Buyer shall have the right to
proceed against any assets of Seller which may be in the possession
of Buyer or its designee (including the Custodian) including the
right to liquidate such assets and to set off the proceeds against
monies owed by Seller to Buyer pursuant to this Agreement. Buyer may
set off cash, the proceeds of the liquidation of the Purchased
Mortgage Loans, any Collateral or its proceeds, and all other sums or
obligations owed by Seller to Buyer against all of Seller's
obligations to Buyer, whether under this Agreement, under a
Transaction, or under any other agreement between the parties, or
otherwise, whether or not such obligations are then due, without
prejudice to Buyer's right to recover any deficiency. Any cash,
proceeds, or property in excess of any amounts due, or which Buyer
reasonably believes may become due, to it from Seller shall be
returned to Seller after satisfaction of all obligations of Seller to
Buyer.
(xi) Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and Seller hereby expressly waives any
defenses Seller might otherwise have to require Buyer to enforce its
rights by judicial process. Seller also waives any defense 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. Seller recognizes that nonjudicial
remedies are consistent with the usages of the trade, are responsive
to commercial necessity and are the result of a bargain at arm's
length.
(xii) Buyer and Seller hereby agree that sales of the Purchased Mortgage
Loans shall be deemed to include and permit the sales of Purchased
Mortgaged Loans pursuant to a securities offering.
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(xiii)Notwithstanding the foregoing remedies, if the Event of Default
(other than an Event of Default under Section 13(a)(xi)) arises from a
breach of any representation or warranty set forth in Sections
10(b)(iii), (v) or (ix), 10(c) or in Exhibit V attached hereto with
respect to a Purchased Mortgage Loan, then Seller may elect, subject
to Buyer's written consent (which consent shall not be unreasonably
withheld or delayed), to cure such default by repurchasing such
Mortgage Loan or substituting for such Mortgage Loan within ten (10)
Business Days of such Event of Default, PROVIDED, HOWEVER, that Seller
shall not have the right to make the foregoing election if such breach
causes a default with respect to Mortgage Loans that in the aggregate
represent ten percent (10%) or more of the aggregate Purchase Price of
all Purchased Mortgage Loans subject to then outstanding Transactions.
The repurchase price for any such repurchase shall be the outstanding
Repurchase Price of such Mortgage Loan, as the case may be. Any such
substitution shall be performed in accordance with Section 9 of this
Agreement.
Notwithstanding the foregoing, if an Event of Default shall occur hereunder
as a result of a default under an indenture or instrument described in
subsection (viii) of Section 13 (a) hereof, and such default under such
indenture or instrument is subsequently remedied or cured by Seller, then
the Event of Default hereunder shall by reason thereof, after notice of such
cure or remedy is given to Buyer by Seller, be deemed likewise to have been
thereupon remedied or cured without further action upon the part of Seller
or Buyer; PROVIDED, HOWEVER, that Buyer shall not be responsible for the
effects upon Seller of, nor otherwise liable to Seller for, any actions
taken by Buyer in connection with its exercise of remedies under this
Section 14 prior to its receipt of said notice of such cure or remedy,
including, without limitation, the sale of the Purchased Mortgage Loans by
Buyer to a third party.
15. ADDITIONAL CONDITIONS
Seller shall, on the date of the initial Transaction hereunder and, upon the
request of Buyer, on the date of any subsequent Transaction, cause to be
delivered to Buyer, with reliance thereon (other than the opinion of ▇▇▇▇▇▇ ▇▇▇▇
& ▇▇▇▇▇▇▇▇) permitted as to any Person that purchases the Purchased Mortgage
Loans from Buyer in a repurchase transaction, a favorable opinion or opinions of
counsel no more often than quarterly with respect to the matters set forth in
Exhibit IV attached hereto. In addition Seller shall execute a letter agreement
(the "Letter Agreement") with respect to certain fees to be paid hereunder, and
the Guaranty shall be fully executed and delivered by the Guarantor. Within 30
days of the date hereof, Seller shall deliver to Buyer (a) the Master Servicing
Agreement (fully and validly authorized, executed and delivered by all the
parties thereto), (b) the Lockbox Agreement between Norwest Bank Minnesota,
N.A., Buyer and Seller and (c) certain opinions of counsel to Guarantor. Failure
to deliver any of the requirements of the preceding sentence without a written
waiver from Buyer will result in a termination of this Agreement as well as any
commitment or obligation (express or implied) to purchase Mortgage Loans
hereunder by Buyer, without regard to all fees owed to Buyer pursuant to the
above referenced letter agreement. Furthermore, to the extent that within 45
days of the date hereof, Buyer (a) fails to complete a satisfactory due
diligence investigation of the Seller and the Guarantor or (b) fails to obtain
any necessary internal committee approvals relating to proposed Transactions
hereunder or transactions under the Letter Agreement, then the Agreement shall
be terminable at the option of the Buyer with 90 days prior written notice (such
notice to be delivered within the 45 days). To the extent Buyer exercises its
rights under the preceding sentence, Buyer shall deliver to the Guarantor in
immediately available funds pro rata fees actually paid to Buyer by Guarantor
and shall terminate any obligations of the Guarantor to pay additional fees
under the Letter Agreement.
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16. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will enter into
each Transaction hereunder in consideration of and in reliance upon the fact
that, all Transactions hereunder constitute a single business and contractual
relationship and that each has been entered into in consideration of the other
Transactions. Accordingly, each of Buyer and Seller agrees (i) to perform all of
its obligations in respect of each Transaction hereunder, and that a default in
the performance of any such obligations shall constitute a default by it in
respect of all Transactions hereunder, (ii) that each of them shall be entitled
to set off claims and apply property held by them in respect of any Transaction
against obligations owing to them in respect of any other Transactions hereunder
and (iii) that payments, deliveries, and other transfers made by either of them
in respect of any Transaction shall be deemed to have been made in consideration
of payments, deliveries, and other transfers in respect of any other
Transactions hereunder, and the obligations to make any such payments,
deliveries, and other transfers may be applied against each other and netted.
17. NOTICES AND OTHER COMMUNICATIONS
Unless another address is specified in writing by the respective party to whom
any written notice or other communication is to be given hereunder, all such
notices or communications shall be in writing or confirmed in writing and
delivered at the respective addresses set forth in the Confirmation. Notices
hereunder may be given by facsimile transmission.
18. ENTIRE AGREEMENT; SEVERABILITY
This Agreement together with the applicable Confirmation and the Custodial
Agreement constitutes the entire understanding between Buyer and Seller with
respect to the subject matter it covers and shall supersede any existing
agreements between the parties containing general terms and conditions for
repurchase transactions involving Purchased Mortgage Loans. By acceptance of
this Agreement, Buyer and Seller acknowledge that they have not made, and are
not relying upon, any statements, representations, promises or undertakings not
contained in this Agreement. Each provision and agreement herein shall be
treated as separate and independent from any other provision or agreement herein
and shall be enforceable notwithstanding the unenforceability of any such other
provision or agreement.
19. NON-ASSIGNABILITY
The rights and obligations of the parties under this Agreement and under any
Transaction shall not be assigned by Seller without the prior written consent of
Buyer. Subject to the foregoing, this Agreement and any Transactions shall be
binding upon and shall inure to the benefit of the parties and their respective
successors and assigns. Nothing in this Agreement express or implied, shall give
to any person, other than the parties to this Agreement and their successors
hereunder, any benefit or any legal or equitable right, power, remedy or claim
under this Agreement.
20. TERMINABILITY
This Agreement shall terminate upon the earlier of (i) written notice from
Seller to Buyer to such effect and (ii) 364 days from the date of this
Agreement, except that, in either case, this Agreement shall, notwithstanding
clauses (i) or (ii) above, remain applicable to any Transaction then
outstanding. Notwithstanding any such termination or the occurrence of an Event
of Default, all of the representations and warranties hereunder (including those
made in Exhibit V) shall continue and survive.
22
21. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
22. CONSENT TO JURISDICTION AND ARBITRATION
The parties irrevocably agree to submit to the personal jurisdiction of the
United States District Court for the Southern District of New York, the parties
irrevocably waiving any objection thereto. If, for any reason, federal
jurisdiction is not available, and only if federal jurisdiction is not
available, the parties irrevocably agree to submit to the personal jurisdiction
of the Supreme Court of the State of New York, the parties irrevocably waiving
any objection thereto. Notwithstanding the foregoing two sentences, at either
party's sole option exercisable at any time not later than thirty (30) days
after an action or proceeding has been commenced, the parties agree that the
matter may be submitted to binding arbitration in accordance with the commercial
rules of the American Arbitration Association then in effect in the State of New
York and judgment upon any award rendered by the arbitrator may be entered in
any court having jurisdiction thereof within the City, County and State of New
York; PROVIDED, HOWEVER, that the arbitrator shall not amend, supplement, or
reform in any regard this Agreement or the terms of any Confirmation, the rights
or obligations of any party hereunder or thereunder, or the enforceability of
any of the terms hereof or thereof. Any arbitration shall be conducted before a
single arbitrator who shall be reasonably familiar with repurchase transactions
and the secondary mortgage market in the City, County, and State of New York.
23. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any remedy
hereunder by any party shall constitute a waiver of its right to exercise any
other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Any such waiver or modification shall be effective only in the
specific instance and for the specific purpose for which it was given.
24. INTENT
The parties understand and intend that this Agreement and each Transaction
hereunder constitute a "repurchase agreement" and a "securities contract" as
those terms are defined under the relevant provisions of Title 11 of the United
States Code, as amended.
25. SERVICING
(a) Notwithstanding the purchase and sale of the Purchased Mortgage Loans
hereby, Seller shall continue to service or cause the servicing of the Purchased
Mortgage Loans for the benefit of Buyer and, if Buyer shall exercise its rights
to pledge or hypothecate the Purchased Mortgage Loan prior to the related
Repurchase Date pursuant to Section 8, Buyer's assigns; provided, however, that
the obligations of Seller to service the Purchased Mortgage Loans shall cease
upon the payment by Seller to Buyer of the Repurchase Price therefor. Seller
shall service the Purchased Mortgage Loans in accordance with the servicing
standards maintained by other prudent mortgage lenders with respect to mortgage
loans similar to the Mortgage Loans. At all times while Transactions remain
outstanding hereunder, the Seller shall employ a master servicer (the "Master
Servicer") with respect to the Purchased Mortgage Loans pursuant to a master
servicing agreement (the Master Servicing Agreement). The Seller hereby assigns
its rights in the Master Servicing Agreement to Buyer for the term of this
Agreement.
23
(b) Seller agrees that Buyer is the owner of all servicing records, including
but not limited to any and all servicing agreements, files, documents, records,
data bases, computer tapes, copies of computer tapes, proof of insurance
coverage, insurance policies, appraisals, other closing documentation, payment
history records, and any other records relating to or evidencing the servicing
of Purchased Mortgage Loans subject to outstanding Transactions (the "SERVICING
RECORDS"). Seller grants Buyer a security interest in all servicing fees and
rights relating to the Purchased Mortgage Loans and all Servicing Records to
secure the obligation of the Seller or its designee to service in conformity
with this Section and any other obligation of Seller to Buyer. Seller covenants
to safeguard such Servicing Records and to deliver them promptly to Buyer or its
designee (including the Custodian) at Buyer's request.
(c) Upon the occurrence and continuance of an Event of Default, Buyer may, in
its sole discretion, (i) sell its right to the Purchased Mortgage Loans on a
servicing released basis (ii) terminate the Seller as servicer of the Purchased
Mortgage Loans with or without cause, in each case without payment of any
termination fee or (iii) instruct the Master Servicer to transfer and assume the
servicing relating to the Purchased Mortgage Loans pursuant to the Master
Servicing Agreement.
(d) Seller shall not employ sub-servicers to service the Purchased Mortgage
Loans without the prior written approval of Buyer.
(e) Seller shall cause any sub-servicer hereunder to execute a letter agreement
with Buyer acknowledging Buyer's security interest and agreeing that, upon
notice from Buyer (or the Custodian on its behalf) that an Event of Default has
occurred and in continuing hereunder, it shall deposit all Income with respect
to the Purchased Mortgage Loans in the amount specified in the third sentence of
Section 5(a). Seller shall cause the servicer or any sub-servicer hereunder to
segregate and hold for the benefit of Buyer as bailee the credit files relating
to the Purchased Mortgage Loans and upon notice from Buyer cause the servicer or
applicable sub-servicer to deliver such files to the Custodian.
26. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that in the case of
Transactions in which one of the parties is an "insured depository institution"
as that term is defined in Section 1831(a) of Title 12 of the United States
Code, as amended, funds held by the financial institution pursuant to a
Transaction hereunder are not a deposit and therefore are not insured by the
Federal Deposit Insurance Corporation, the Savings Association Insurance Fund or
the Bank Insurance Fund, as applicable.
27. NETTING
If Buyer and Seller are "financial institutions" as now or hereinafter defined
in Section 4402 of Title 12 of the United States Code ("SECTION 4402") and any
rules or regulations promulgated thereunder:
24
(a) All amounts to be paid or advanced by one party to or on behalf of the other
under this Agreement or any Transaction hereunder shall be deemed to be "payment
obligations" and all amounts to be received by or on behalf of one party from
the other under this Agreement or any Transaction hereunder shall be deemed to
be "payment entitlements" within the meaning of Section 4402, and this Agreement
shall be deemed to be a "netting contract" as defined in Section 4402.
(b) The payment obligations and the payment entitlements of the parties hereto
pursuant to this Agreement and any Transaction hereunder shall be netted as
follows. In the event that either party (the "DEFAULTING PARTY") shall fail to
honor any payment obligation under this Agreement or any Transaction hereunder,
the other party (the "NONDEFAULTING PARTY") shall be entitled to reduce the
amount of any payment to be made by the Nondefaulting Party to the Defaulting
Party by the amount of the payment obligation that the Defaulting Party failed
to honor.
28. MISCELLANEOUS
(a) Time is of the essence under this agreement and all Transactions and all
references to a time shall mean New York time in effect on the date of the
action unless otherwise expressly stated in this Agreement.
(b) Buyer shall be authorized to accept orders and take any other action
affecting any accounts of the Seller in response to instructions given in
writing or orally by telephone or otherwise by any person with apparent
authority to act on behalf of the Seller, and the Seller shall indemnify Buyer,
defend, and hold Buyer harmless from and against any and all liabilities,
losses, damages, costs, and expenses of any nature arising out of or in
connection with any action taken by Buyer in response to such instructions
received or reasonably believed to have been received from the Seller.
(c) If there is any conflict between the terms of this Agreement or any
Transaction entered into hereunder and the Custodial Agreement, this Agreement
shall prevail.
(d) If there is any conflict between the terms of a Confirmation or a corrected
Confirmation issued by the Buyer and signed or initialed by the Seller and this
Agreement, the Confirmation shall prevail.
(e) This Agreement may be executed in counterparts, each of which so executed
shall be deemed to be an original, but all of such counterparts shall together
constitute but one and the same instrument.
(f) Seller agrees to reimburse Buyer for all reasonable costs and expenses of
Buyer in connection with this Agreement including, without limitation, the fees,
expenses and disbursement of counsel to Buyer, which fees, expenses and
disbursements shall not exceed $10,000.
(g) The headings in this Agreement are for convenience of reference only and
shall not affect the interpretation or construction of this Agreement.
[Signature page follows.]
25
IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date set forth above.
▇▇▇▇▇▇ COMMERCIAL PAPER INC.,
Buyer
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------
Title: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
AUTHORIZED SIGNATORY
Date:______________________________
FIRST ALLIANCE MORTGAGE COMPANY,
Seller
By: /s/ ▇. ▇▇▇▇▇
-------------------------------
Title: CFO/EVP
----------------------------
Date: 12/30/98
-----------------------------
FIRST ALLIANCE CORPORATION,
Guarantor
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------
Title: CEO
----------------------------
Date: 12/30/98
------------------------------
26
EXHIBITS
--------
EXHIBIT I Confirmation
EXHIBIT II Form of Custodial Delivery
EXHIBIT III Form of Power of Attorney
EXHIBIT IV Opinion of Counsel to Seller
EXHIBIT V Representations and Warranties
Regarding Mortgage Loans
27
SCHEDULE I-OUTSTANDING LITIGATION
28
EXHIBIT I
Form of Confirmation Letter
(date)
First Alliance Mortgage Company
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ______________
Confirmation No.:_____________________
Ladies/Gentlemen:
This letter confirms our oral agreement to purchase from you the Mortgage Loans
listed in Appendix I hereto, pursuant to the Master Repurchase Agreement
Governing the Purchases and Sales of Mortgage Loans between us, dated as of
December 30, 1998 (the "Agreement"), as follows:
Purchase Date:
Mortgage Loans to be Purchased: See Appendix I hereto.
[Appendix I to Confirmation Letter will list Mortgage Loans]
Aggregate Principal Amount of Purchased Mortgage Loans:
Purchase Price:
Pricing Rate:
Repurchase Date:
Repurchase Price:
Account to which Purchase Price will be deposited (ABA, A/C#,
institution):
29
Names and addresses for communications:
Buyer:
▇▇▇▇▇▇ Commercial Paper Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Central Funding Department
Seller:
First Alliance Mortgage Company
▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ______________
▇▇▇▇▇▇ COMMERCIAL PAPER INC.
By:_________________________________
Name:_______________________________
Title:______________________________
Agreed and Acknowledged:
First Alliance Mortgage Company
Seller
By:_________________________________________
Name:_______________________________________
Title:______________________________________
30
EXHIBIT II
Form of Custodial Delivery
On this ___ day of ____, 199_, First Alliance Mortgage Company ("Seller"), as
the Seller under that certain Master Repurchase Agreement Governing Purchases
and Sales of Mortgage Loans, dated as of December 30, 1998 (the "Repurchase
Agreement") between the Seller and ▇▇▇▇▇▇ Commercial Paper Inc. ("Buyer"), does
hereby deliver to Norwest Bank Minnesota, N.A. ("Custodian"), as custodian under
that certain Custodial Agreement, dated as of December 30, 1998, among Buyer,
Seller and Custodian the Mortgage Files with respect to the Mortgage Loans to be
purchased by Buyer pursuant to the Repurchase Agreement, which Mortgage Loans
are listed on the Mortgage Loan Schedule attached hereto and which Mortgage
Loans shall be subject to the terms of the Custodial Agreement on the date
hereof.
With respect to the Mortgage Files delivered hereby, for the purposes of issuing
the Trust Receipt, the Custodian shall review the Mortgage Files to ascertain
delivery of the documents listed in Annex A attached to the Custodial Agreement.
[The Mortgage Loans delivered hereby constitute Additional Loans [delivered
pursuant to Section 7 of the Custodial Agreement].][The Mortgage Loans delivered
hereby constitute Substituted Collateral [pursuant to Section 6 of the Custodial
Agreement] and are intended to be substituted for the Purchased Mortgage Loans
listed on the [schedule attached hereto][Request for Release of Documents and
receipt delivered herewith]. The Purchased Mortgage Loans to be released shall
be delivered to _______________.]
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Custodial Agreement.
31
IN WITNESS WHEREOF, the Seller has caused its name to be signed hereto by its
officer thereunto duly authorized as of the day and year first above written.
FIRST ALLIANCE MORTGAGE COMPANY
Seller
By:__________________________________
Title:_______________________________
Name:________________________________
32
EXHIBIT III
Form of Power of Attorney
"Notice: The powers granted by this document are broad and sweeping. They are
defined in New York General Obligations Law, Article 5, Title 15, sections
5-1502A through 5-1503, which expressly permits the use of any other different
form of power of attorney desired by the parties concerned.
"Know All Men by These Presents, which are intended to constitute a GENERAL
POWER OF ATTORNEY pursuant to Article 5, Title 15 of the New York General
Obligations Law: That First Alliance Mortgage Company ("Seller"), does hereby
appoint ▇▇▇▇▇▇ Commercial Paper Inc. ("Buyer"), its attorney-in-fact to act in
Seller's name, place and stead in any way which Seller could do with respect to
recording the Mortgages purchased by Buyer pursuant to a Master Repurchase
Agreement Governing Purchases and Sales of Mortgage Loans dated as of December
30, 1998 between Seller and Buyer and to take such other steps as may be
necessary or desirable to enforce Buyer's rights against such Mortgage Loans,
the related Mortgage Files and the Servicing Records to the extent that Seller
is permitted by law to act through an agent.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD
PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT
HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO
SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION
OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS
OWN BEHALF AND ON BEHALF OF SELLER'S LEGAL REPRESENTATIVES AND ASSIGNS, HEREBY
AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY
AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD
PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
33
IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed and
the Seller's seal to be affixed this 30th day of December, 1998.
FIRST ALLIANCE MORTGAGE COMPANY
(Seal)
By:_________________________________________
Name:_______________________________________
Title:______________________________________
34
EXHIBIT IV
OPINION OF SELLER'S COUNSEL
35
EXHIBIT V
Representations and Warranties
Regarding Purchased Mortgage Loans.
The Seller represents and warrants to the Buyer that, with respect to
each Purchased Mortgage Loan sold in a Transaction hereunder, as of the related
Purchase Date:
(a) PURCHASED MORTGAGE LOANS AS DESCRIBED. The information set forth in the
Mortgage Loan Schedule is complete, true and correct;
(b) NO OUTSTANDING CHARGES. There are no defaults in complying with the
terms of the Mortgage relating to such Purchased Mortgage Loan, and all
taxes, governmental assessments, insurance premiums, water, sewer and
municipal charges, leasehold payments or ground rents which previously
became due and owing have been paid, or, if any escrows have been
established, an escrow of funds has been established in an amount
sufficient to pay for every such item which remains unpaid and which
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 Purchased Mortgage
Loan, except for interest accruing from the date of the Mortgage Note
or date of disbursement of the Purchased Mortgage Loan proceeds,
whichever is greater, to the day which precedes by one month the due
date of the first installment of principal and interest;
(c) ORIGINAL TERMS UNMODIFIED. The terms of the Mortgage Note and Mortgage
relating to the Purchased Mortgage Loan have not been impaired, waived,
altered or modified in any respect, except by a written instrument
which has been recorded, if necessary to protect the interests of Buyer
and which has been delivered to Buyer or its designee (including the
Custodian). The substance of any such waiver, alteration or
modification has been approved by the issuer, if any, of any related
primary mortgage insurance policy issued by a generally accepted
insurance carrier ( a "PMI Policy") and 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
issuer, if any, of any related PMI Policy and the title insurer, to the
extent required by the policy, and which assumption agreement is
included in the Mortgage File delivered to Buyer or its designee
(including the Custodian) and the terms of which are reflected in the
Mortgage Loan Schedule;
36
(d) NO DEFENSES. The Purchased Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without
limitation 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 without
limitation the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect
thereto;
(e) INSURANCE POLICIES IN EFFECT. The fire and casualty insurance policy
covering the Mortgaged Property (1) 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; (2) 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 Purchased
Mortgage Loans, whichever is less; (3) names (and will name) the
present owner of the Mortgaged Property as the insured; and (4)
contains a standard mortgagee loss payable clause in favor of Seller.
All individual insurance policies with respect to the Purchased
Mortgage Loan are the valid and binding obligation of the insurer and
contain a standard mortgage 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;
(f) COMPLIANCE WITH APPLICABLE LAWS. Any and all requirements of any
federal, state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity or disclosure laws applicable to
the origination and servicing of the Purchased 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;
(g) 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 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;
(h) 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 detached single family
residence (including rowhouses and twin homes) 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. No portion of the Mortgaged Property is used for
commercial purposes;
37
(i) VALID FIRST OR SECOND LIEN. The Mortgage relating to the Purchased
Mortgage Loan is a valid, subsisting and enforceable first or second
lien (provided that no more than 10% of all Purchased Mortgage Loans on
an aggregate Purchase Price basis shall relate to second liens) 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 such Mortgage is subject only to:
(1) the lien of current real property taxes and
special assessments not yet due and payable;
(2) 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 to otherwise considered in the
appraisal made for the originator of the Purchased
Mortgage Loan or (ii) which do not materially
adversely affect the appraised value of the Mortgaged
Property set forth in such appraisal;
(3) 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;
(4) in the case where the Purchased Mortgage Loan is
secured by a second mortgage lien on the Mortgaged
Property (and represented on the Mortgage Loan
Schedule as such), the lien of the First Mortgage;
and
(5) 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 Purchased Mortgage Loan
establishes and creates a valid, subsisting and enforceable first or
second lien and first or second 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 the Custodian).
38
(j) VALIDITY OF MORTGAGE DOCUMENTS. The Mortgage Note and the Mortgage
relating to the Purchased Mortgage Loan 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 creditor's
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 and the Mortgage had legal capacity to
enter into the Purchased Mortgage Loan and to execute and deliver such
Mortgage Note and Mortgage, and such Mortgage Note and Mortgage have
been duly and properly executed by such parties. Either (i) the
Mortgagor is a natural person who is a party to such Mortgage Note and
Mortgage in an individual capacity, and not in the capacity of a
trustee or otherwise or (ii) the Mortgagor is a trust, and such trust
and the related Mortgage conform to the requirements of the FNMA Guide.
(k) FULL DISBURSEMENT OF PROCEEDS. The proceeds of the Purchased Mortgage
Loan have been disbursed in accordance with Seller's underwriting
guidelines and there is no requirement for future advances thereunder,
and any and all requirements as to completion of any on-site or
off-site improvement and as to disbursements of any escrow funds
therefor have been complied with. All costs, fees and expenses incurred
in making or closing the Purchased Mortgage Loan and the recording of
the related Mortgage were paid, and the related Mortgagor is not
entitled to any refund of any amounts paid or due under the related
Mortgage Note or Mortgage;
(l) OWNERSHIP. Seller is the sole owner of record and holder of the
Purchased Mortgage Loan. The Purchased Mortgage Loan is not assigned or
pledged except as provided in this Agreement, and Seller has good,
indefeasible and marketable title thereto, and has full right to pledge
and assign the Purchased Mortgage Loan to Buyer or its designee
(including the 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 Purchased Mortgage Loan pursuant to this Agreement;
(m) DOING BUSINESS. All parties which have had any interest in the
Purchased 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;
(n) LTV. No Purchased Mortgage Loan has a Loan-to-Value Ratio of more than
90%. The Purchased Mortgage Loans (measured by aggregate principal
amount subject to outstanding Transactions) shall not have a weighted
average cumulative Loan-to-Value Ratio in excess of 75%.
39
(o) TITLE INSURANCE. The Purchased Mortgage Loan is covered by either (i)
an attorney's opinion of title and abstract of title or (ii) an ALTA
mortgage title insurance policy or such other policy in form acceptable
to FNMA or FHLMC, 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 Purchased Mortgage Loans for sale to prudent investors in the
secondary market that invest in mortgage loans such as the Purchased
Mortgage Loans and qualified to do business in the jurisdiction where
the related Mortgaged Property is located, insuring Seller, its
successors and assigns, as to the first priority lien of the related
Mortgage in the case of a First Mortgage Loan secured by a First
Mortgage and the second priority lien of the Mortgage in the case of a
Purchased Mortgage Loan secured by a second lien on the related
Mortgaged Property, in the original principal amount of the Purchased
Mortgage Loan. Seller is the sole named insured of such mortgage title
insurance policy, the assignment to Buyer or the 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;
(p) NO DEFAULTS. There is no default, breach, violation or event of
acceleration existing under the Mortgage or the Mortgage Note relating
to the Purchased Mortgage Loan and no event which, with the passage of
time or with notice and the expiration of any grace or cure period,
other than the failure to make, prior to expiration of the applicable
grace period, the monthly payment due immediately prior to the related
Purchase Date if such Purchase Date occurs prior to the expiration of
such grace 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;
(q) NO MECHANICS' LIENS. To the best of Seller's knowledge, there are no
mechanics' or similar liens or claims which 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 which
are or may be liens prior to, or equal or coordinate with, the lien of
the Mortgage except those that are stated in the related title policy
and for which related losses are affirmatively insured against by such
title policy;
(r) LOCATION OF IMPROVEMENTS; NO ENCROACHMENTS. All improvements which 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 except those that are stated in the title
policy and for which related losses are affirmatively insured against
by such title policy. No improvement located on or being part of the
mortgaged property is in violation of any applicable zoning law or
regulation;
(s) ORIGINATION. The Purchased Mortgage Loan was originated or purchased by
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. No fraud was committed in connection with the origination
of the Purchased Mortgage Loan.
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(t) CUSTOMARY PROVISIONS. The Mortgage relating to the Purchased Mortgage
Loan contains customary and enforceable provisions such as to render
the rights and remedies of the holder thereof adequate for the
realization against the related 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 the related Mortgagor which would interfere with the right
to sell the Mortgaged Property at a trustee's sale or the right to
foreclose the Mortgage;
(u) OCCUPANCY OF THE MORTGAGED PROPERTY. As of the related Purchase Date
the Mortgaged Property relating to the Purchased Mortgage Loan is
capable of being lawfully occupied under applicable law. All
inspections, licenses and certificates required by law or regulation 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
underwriting certificates, have been made or obtained from the
appropriate authorities. Either the Mortgagor represented at the time
of origination of the Purchased Mortgage Loan that the Mortgagor would
occupy the Mortgaged Property as the Mortgagor's primary residence or
second home or the Mortgaged Property is capable of being occupied
pursuant to terms that approximate current standard market rental terms
and rates;
(v) NO ADDITIONAL COLLATERAL. The Mortgage Note relating to the Purchased
Mortgage Loan 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;
(w) DEEDS OF TRUST. In the event the Mortgage relating to the Purchased
Mortgage Loan 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;
(x) ACCEPTABLE INVESTMENT. Seller has no knowledge of any circumstances or
conditions with respect to the Mortgage, the Mortgaged Property, the
Mortgagor or the Mortgagor's credit standing that can reasonably be
expected to cause private institutional investors to regard the
Purchased Mortgage Loan as an unacceptable investment, cause the
Purchased Mortgage Loan to become Delinquent, or adversely affect the
value or marketability of the Purchased Mortgage Loan;
(y) PURCHASE OF MORTGAGE DOCUMENTS. The Mortgage File and any other
documents required by Buyer to be delivered for the Purchased Mortgage
Loan by Seller under this Agreement have been delivered to the
Custodian (other than Wet Ink Mortgage Loans). Seller is in possession
of a complete, true and accurate Mortgage File except for such
documents the originals of which have been delivered to the Buyer or
its designee (including the 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 mortgage loans;
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(z) NON-CONFORMING MORTGAGES. NO MORE THAN 15% OF THE PURCHASED MORTGAGE
LOANS ON AN AGGREGATE PURCHASE PRICE BASIS SHALL RELATE TO OBLIGOR
[STATED INCOME] MORTGAGE LOANS.
(aa) TRANSFER OF PURCHASED MORTGAGE LOANS. The assignment of Mortgage
relating to the Purchased Mortgage Loan is in recordable form and is
acceptable for recording under the laws of the jurisdiction in which
the related Mortgaged Property is located;
(bb) DUE ON SALE. The Mortgage relating to the Purchased Mortgage Loan
contains an enforceable provision for the acceleration of the payment
of the unpaid principal balance of the Purchased Mortgage Loan in the
event that the related Mortgaged Property is sold or transferred
without the prior written consent of the Mortgagee thereunder;
(cc) NO BUYDOWN PROVISIONS; NO GRADUATED PAYMENTS OR CONTINGENT INTERESTS.
The Purchased 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 which may constitute a "buydown" provision. The Purchased
Mortgage Loan is not a graduated payment mortgage loan and the
Purchased Mortgage Loan does not have a shared appreciation or other
contingent interest feature;
(dd) 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 relating to the Purchased Mortgage Loan,
and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term. The lien of such Mortgage
securing the consolidated principal amount is expressly insured as
having first or second lien priority by a title insurance policy or an
endorsement to the policy insuring the mortgagee's consolidated
interest or by other title evidence in form acceptable to FNMA or
FHLMC. The consolidated principal amount does not exceed the original
principal amount of the Purchased Mortgage Loan;
(ee) MORTGAGED PROPERTY UNDAMAGED. There is no proceeding pending or
threatened for the total or partial condemnation of the Mortgaged
Property relating to the Purchased Mortgage Loan. Such 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 Purchased
Mortgage Loan or the use for which the premises were intended;
(ff) COLLECTION PRACTICES; ESCROW DEPOSITS; INTEREST RATE ADJUSTMENTS. The
origination and collection practices used with respect to the Purchased
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 any escrow deposits and escrow payments that have been
established, 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
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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 relating to the Purchased Mortgage Loan. 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;
(gg) CONVERSION TO FIXED INTEREST RATE. With respect to the aggregate
outstanding principal balance of the Purchased Mortgage Loans on the
related Purchase Date, no more than 10% of the Mortgage Notes contain a
provision allowing the Mortgagor to convert the Mortgage Note from an
adjustable interest rate Mortgage Note to a fixed interest rate
Mortgage Note for the remaining term thereof all in accordance with the
terms of a rider to the related Mortgage Note;
(hh) APPRAISAL. The Mortgage File contains an appraisal of the related
Mortgaged Property signed prior to the approval of the Purchased
Mortgage Loan application by a qualified appraiser, duly appointed by
the originator of the Purchased 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
Purchased Mortgage Loan. Notwithstanding the preceding sentence, the
compensation of the appraiser referred to therein may include
commissions for referrals to Seller so long as such commissions are not
directly related to the approval or disapproval of such Purchased
Mortgage Loans;
(ii) SOLDIERS' AND SAILORS' RELIEF ACT. The Mortgagor relating to the
Purchased Mortgage Loan has not notified Seller, and Seller has no
knowledge of any relief requested or allowed to the Mortgagor under the
Soldiers' and Sailors' Civil Relief Act of 1940;
(jj) ENVIRONMENTAL MATTERS. To the best of Seller's knowledge based on
customary residential mortgage industry practices, the Mortgaged
Property is free from any and all toxic or hazardous substances other
than those in quantity and type associated with normal household uses
and there exists no violation of any local, state or federal
environmental law, rule or regulation with respect thereto;
(kk) DELINQUENCIES. The Purchased Mortgage Loan (i) together with the other
Purchased Mortgage Loans subject to Transactions, would not cause the
30+ Delinquency Percentage to exceed 3%, (ii) and is not more than 59
days Delinquent;
(ll) BALLOON MORTGAGE LOANS. Except with respect to any Balloon Mortgage
Loan, each Mortgage Loan is payable in monthly installments of
principal and interest which would be sufficient, in the absence of
late payments, to fully amortize such loan within the term thereof,
beginning no later than 60 days after disbursement of the proceeds of
the Mortgage Loan and bears a fixed or adjustable interest rate for the
term of the Mortgage Loan. Each Balloon Mortgage Loan has an original
term of not less than fifteen (15) years and which provides for monthly
payments based on a thirty (30) year amortization schedule and a final
Monthly Payment substantially greater than the preceding Monthly
Payments;
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(mm) NO CONSTRUCTION LOANS. No Purchased Mortgage Loan is a construction
loan;
(nn) SELECTION BY SELLER. No Purchased Mortgage Loan was selected for
inclusion under this Agreement on any basis which was intended to have
a material adverse effect on Buyer;
(oo) SECOND MORTGAGES. With respect to each Purchased Mortgage Loan secured
by a second lien on the related Mortgaged Property:
(1) if the Loan-to-Value Ratio is higher than 70%, either the
related first lien does not provide for a balloon payment or
the maturity date of each Purchased Mortgage Loan, with
respect to which a first lien on the related Mortgaged
Property provides for a balloon payment, is prior to the
maturity date of the mortgage loan relating to such first
lien;
(2) the related first lien on any Mortgaged Property with respect
to which the related Purchased Mortgage Loan secured by a
second lien does not provide for negative amortization;
(3) either no consent for the Purchased Mortgage Loan secured by a
second lien on the related Mortgaged Property is required by
the holder of the related first lien or such consent has been
obtained and is contained in the Mortgage File; and
(4) the related first lien is not held by an individual;
(pp) CERCLA. To the actual knowledge of an executive officer of the Seller,
no Mortgaged Property was, as of the Purchase Date or, with respect to
Additional Loans or Substitute Mortgage Loans, as of the related date
of addition or substitution, 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
which are known to contain any hazardous substance or hazardous waste;
(qq) NO BANKRUPTCY OF MORTGAGOR. None of the Purchased Mortgage Loans are
subject to a bankruptcy plan;
(rr) QUALIFIED MORTGAGE. Each Mortgage Loan constitutes a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code;
(ss) BALLOON LOAN CONCENTRATION. If the Purchased Mortgage Loan is a Balloon
Loan, it, together with the other Purchased Mortgage Loans which are
Balloon Loans subject to Transactions, constitutes less than 3.0% of
the aggregate outstanding Repurchase Price of all Purchased Mortgage
Loans subject to Transactions;
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(tt) NO SHORT MATURITY BALLOON LOANS . The Purchased Mortgage Loan is not a
Balloon Loan with a maturity date occurring within five years from its
related Purchase Date;
(uu) OWNER OCCUPIED. In the event the Purchased Mortgage Loan relates to a
Mortgaged Property which is non-owner occupied, it, together with the
other Purchased Mortgage Loans subject to Transactions relating to
Mortgaged Properties which are non-owner occupied, does not exceed 10%
of the aggregate outstanding Repurchase Price of all Purchased Mortgage
Loans subject to Transactions; and
(vv) PAYMENT TERMS. With respect to adjustable rate Mortgage Loans, the
mortgage interest rate is adjusted annually or semi-annually on each
interest rate adjustment date to equal the index plus the gross margin,
rounded up or down to the nearest 1/8%, subject to the mortgage
interest rate cap. With respect to fixed rate Mortgage Loans, the
mortgage note is payable each month in equal monthly installments of
principal and interest. With respect to adjustable rate Mortgage Loans,
installments of interest are subject to change due to the adjustments
to the mortgage interest rate on each interest rate adjustment date,
with interest calculated and payable in arrears, sufficient to amortize
the Mortgage Loan fully by the stated maturity date, over an original
term of not more than thirty years from commencement of amortization.
(ww) SECURITIZATION. Such Mortgage Loan conforms to the then current
standards of securitization, as determined by Buyer in its sole
discretion.
(xx) WET INK MORTGAGE LOANS. No more than 10% of all Purchased Mortgage
Loans subject to outstanding Transactions on an aggregate Purchase
Price basis shall be Wet Ink Mortgage Loans.
(yy) C- MORTGAGE LOANS. No more than 10% of all Purchased Mortgage Loans on
an aggregate Purchase Price basis shall be Mortgage Loans whose credit
score upon origination was C- or lower.
It is understood and agreed that the representations and
warranties set forth in this Schedule V shall survive delivery of the respective
Mortgage Files to the Custodian on behalf Buyer.
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