MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT
FLAGSTAR CAPITAL CORPORATION
PURCHASER
FLAGSTAR BANK, FSB
SELLER
DATED AS OF [__________], 1998
DRAFT
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TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 2. AGREEMENT TO PURCHASE. . . . . . . . . . . . . . . . . . . . . 9
[SECTION 3. RESERVED.] . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 4. PURCHASE PRICE. . . . . . . . . . . . . . . . . . . . . . . . . 10
SECTION 5. EXAMINATION OF MORTGAGE FILES. . . . . . . . . . . . . . . . . .10
SECTION 6. CONVEYANCE FROM SELLER TO PURCHASER. . . . . . . . . . . . . . .11
Subsection 6.01. Conveyance of Mortgage Loans; Possession
of Servicing Files. . . . . . . . . . . . . . . . . . 11
Subsection 6.02. Books and Records . . . . . . . . . . . . . . . . . . 11
Subsection 6.03. Delivery of Mortgage Loan Documents . . . . . . . . . 11
SECTION 7. SERVICING OF THE MORTGAGE LOANS . . . . . . . . . . . . . . . . 12
SECTION 8. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE
SELLER; REMEDIES FOR BREACH . . . . . . . . . . . . . . . . . . 13
Subsection 8.01. Representations and Warranties Regarding the Seller . 13
Subsection 8.02. Representations and Warranties Regarding
Individual Mortgage Loans . . . . . . . . . . . . . . .15
Subsection 8.03. Remedies for Breach of Representations
and Warranties . . . . . . . . . . . . . . . . . . . . 27
SECTION 9. CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 10. CLOSING DOCUMENTS . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 11. COSTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
SECTION 12. MERGER OR CONSOLIDATION OF THE SELLER . . . . . . . . . . . . 31
SECTION 13. MANDATORY DELIVERY; GRANT OF SECURITY INTEREST . . . . . . . . 31
SECTION 14. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
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SECTION 15. SEVERABILITY CLAUSE . . . . . . . . . . . . . . . . . . . . . 32
SECTION 16. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 17. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 18. INTENTION OF THE PARTIES . . . . . . . . . . . . . . . . . . . 33
SECTION 19. SUCCESSORS AND ASSIGNS; ASSIGNMENT OF
PURCHASE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 20. WAIVERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 21. EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 22. GENERAL INTERPRETIVE PRINCIPLES . . . . . . . . . . . . . . . 34
SECTION 23. REPRODUCTION OF DOCUMENTS . . . . . . . . . . . . . . . . . . 35
SECTION 24. FURTHER AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 25. RECORDATION OF ASSIGNMENTS OF MORTGAGE . . . . . . . . . . . .35
EXHIBITS
EXHIBIT A CONTENTS OF EACH MORTGAGE FILE
EXHIBIT B FORM OF SERVICING AGREEMENT
EXHIBIT C FORM OF SELLER'S/SERVICER'S OFFICER'S CERTIFICATE
EXHIBIT D FORM OF OPINION OF COUNSEL TO THE SELLER/SERVICER
EXHIBIT E MORTGAGE LOAN SCHEDULE
EXHIBIT F THE UNDERWRITING GUIDELINES OF FLAGSTAR BANK, FSB
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MORTGAGE LOAN PURCHASE AND SALE AGREEMENT
This MORTGAGE LOAN PURCHASE AND SALE AGREEMENT (the "Agreement"),
dated as of [__________,] 1998, by and between Flagstar Capital Corporation, a
Michigan corporation, having an office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Purchaser") and Flagstar Bank, FSB, a federally chartered
savings bank, having an office at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Seller").
W I T N E S S E T H:
WHEREAS, the Seller desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Seller, certain residential first
mortgage loans (the "Mortgage Loans") on a servicing retained basis as described
herein, and which shall be delivered as whole loans on the Closing Date, as
defined below; and
WHEREAS, each Mortgage Loan is secured by a mortgage, deed of trust or
other security instrument creating a first lien on a residential dwelling
located in the jurisdiction indicated on the Mortgage Loan Schedule; and
WHEREAS, the Purchaser and the Seller wish to prescribe the manner of
the conveyance, servicing and control of the Mortgage Loans.
NOW, THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Purchaser and the Seller agree as follows:
SECTION 1.
DEFINITIONS.
For purposes of this Agreement the following capitalized terms shall
have the respective meanings set forth below. Other capitalized terms used in
this Agreement and not defined herein shall have the respective meanings set
forth in the Servicing Agreement attached as Exhibit B hereto.
"Accepted Servicing Practices" means, with respect to any Mortgage
Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage Loan
in the jurisdiction where the related Mortgaged Property is located.
"Act" means The National Housing Act, as amended from time to time.
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"Adjustable Rate Mortgage Loan" means any individual Mortgage Loan
purchased pursuant to this Agreement the interest rate of which adjusts
periodically.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" means this Mortgage Loan Purchase and Warranties Agreement
and all amendments hereof and supplements hereto.
"ALTA" means The American Land Title Association or any successor
thereto.
"Ancillary Income" means all late charges, assumption fees, escrow
account benefits, reinstatement fees, and similar types of fees arising from or
in connection with any Mortgage Loan to the extent not otherwise payable to the
Mortgagor under applicable law or pursuant to the terms of the related Mortgage
Note.
"Appraised Value" means the value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of the
Mortgaged Property.
"Assignment and Assumption Agreement" has the meaning set forth in
Section 19.
"Assignment of Mortgage" means an assignment of the Mortgage delivered
in blank, notice of transfer or equivalent instrument in recordable form,
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect the sale of the Mortgage to the Purchaser.
"Business Day" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking and savings and loan institutions, in the State of
Michigan are authorized or obligated by law or executive order to be closed.
"Closing Date" means [_________], 1998, or such other date as is
mutually agreed upon by the parties.
"Code" means Internal Revenue Code of 1986, as amended.
"Condemnation Proceeds" means all awards or settlements in respect of
a Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan Documents.
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"Conventional Loan" means a conventional residential first lien
mortgage loan which is a Mortgage Loan.
"Convertible Mortgage Loan" means any individual Mortgage Loan
purchased pursuant to this Agreement which contains a provision whereby the
Mortgagor is permitted to convert the Mortgage Loan to a fixed rate Mortgage
Loan in accordance with the terms of the related Mortgage Note.
"Custodial Account" means the separate trust account created and
maintained pursuant to Section 2.04 of the Servicing Agreement.
"Cut-off Date" means [__________], 1998.
"Deleted Mortgage Loan" means a Mortgage Loan that is repurchased or
replaced with a Qualified Substitute Mortgage Loan by the Seller in accordance
with the terms of this Agreement.
"Determination Date" means the earlier of two (2) Business Days prior
to the related Remittance Date or the 15th day of the month in which the related
Remittance Date occurs.
"Due Date" means the day of the month on which the Monthly Payment is
due on a Mortgage Loan, exclusive of any days of grace.
"Escrow Account" means the separate account created and maintained
pursuant to Section 2.06 of the Servicing Agreement with respect to each
Mortgage Loan, as specified in the Servicing Agreement.
"Escrow Payments" means, with respect to any Mortgage Loan, the
amounts constituting taxes, assessments, water rates, sewer rents, municipal
charges, mortgage insurance premiums, fire and hazard insurance premiums,
condominium charges, and any other payments required to be escrowed by the
Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
"FHA" means the Federal Housing Administration, an agency within the
United States Department of Housing and Urban Development, or any successor
thereto and including the Federal Housing Commissioner and the Secretary of
Housing and Urban Development where appropriate under the FHA Regulations.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or any
successor thereto.
"FNMA" means the Federal National Mortgage Association, or any
successor thereto.
"Gross Margin" means, with respect to each Adjustable Rate Mortgage
Loan, the fixed percentage amount set forth in the related Mortgage Note which
amount is added to the Index in accordance with the terms of the related
Mortgage Note to determine on each Interest Rate Adjustment Date the Mortgage
Interest Rate for such Mortgage Loan.
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"HUD" means the Department of Housing and Urban Development, or any
federal agency or official thereof which may from time to time succeed to the
functions thereof with regard to FHA mortgage insurance. The term "HUD," for
purposes of this Agreement, is also deemed to include subdivisions thereof such
as the FHA and Government National Mortgage Association.
"Index" means, with respect to each Interest Rate Adjustment Date of
any Adjustable Rate Mortgage Loan sold pursuant to this Agreement, the weekly
average yield on United States Treasury securities adjusted to a constant
maturity of one year, as made available by the Federal Reserve Board.
"Insurance Proceeds" means, with respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property.
"Interest Rate Adjustment Date" means, with respect to each Adjustable
Rate Mortgage Loan, the date, specified in the related Mortgage Note on which
the Mortgage Interest Rate is adjusted.
"Lifetime Rate Cap" means the provision of each Mortgage Note related
to an Adjustable Rate Mortgage Loan which provides for an absolute maximum
Mortgage Interest Rate thereunder. The Mortgage Interest Rate during the term of
each Adjustable Rate Mortgage Loan shall not at any time exceed the amount per
annum set forth on the Mortgage Loan Schedule.
"Liquidation Proceeds" means cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or assignment
of such Mortgage Loan, trustee's sale, foreclosure sale or otherwise, or the
sale of the related Mortgaged Property if the Mortgaged Property is acquired in
satisfaction of the Mortgage Loan.
"Loan-to-Value Ratio" or "LTV" means, with respect to any Mortgage
Loan, the ratio (expressed as a percentage) of the original principal amount of
the Mortgage Loan to the lesser of (a) the Appraised Value of the Mortgaged
Property at origination and (b) if the Mortgage Loan was made to finance the
acquisition of the related Mortgaged Property, the purchase price of the
Mortgaged Property.
"Monthly Payment" means the scheduled monthly payment of principal
and interest on a Mortgage Loan.
"Mortgage" means the mortgage, deed of trust or other instrument
securing a Mortgage Note, which creates a first lien on an unsubordinated estate
in fee simple in real property securing the Mortgage Note.
"Mortgage File" means the items pertaining to a particular Mortgage
Loan referred to in Exhibit A annexed hereto, and any additional documents
required to be added to the Mortgage File pursuant to this Agreement.
"Mortgage Interest Rate" means the annual rate of interest borne on a
Mortgage Note, which, in
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the case of an Adjustable Rate Mortgage Loan, shall be adjusted from time to
time, with respect to each Mortgage Loan.
"Mortgage Interest Rate Cap" means, with respect to each Adjustable
Rate Mortgage Loan, the limit on each Mortgage Interest Rate adjustment as set
forth in the related Mortgage Note.
"Mortgage Loan" means an individual Mortgage Loan which is the subject
of this Agreement, each Mortgage Loan originally sold and subject to this
Agreement being identified on the applicable Mortgage Loan Schedule, which
Mortgage Loan includes without limitation the Mortgage File, the Monthly
Payments, Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds,
Insurance Proceeds, and all other rights, benefits, proceeds and obligations
arising from or in connection with such Mortgage Loan, excluding replaced or
repurchased mortgage loans.
"Mortgage Loan Documents" means, with respect to each Mortgage Loan,
the following documents pertaining to such Mortgage Loan:
a. The original Mortgage Note (or a lost note affidavit, executed by
an officer of the Seller, with a copy of the original note
attached thereto) bearing all intervening endorsements, endorsed
"Pay to the order of ______________ without recourse" and signed
in the name of the Seller by an authorized officer. To the extent
that there is no room on the face of the Mortgage Note for
endorsements, the endorsement may be contained on an allonge, if
state law so allows. If the Mortgage Loan was acquired by the
Seller in a merger, the endorsement must be by "[Seller],
successor by merger to [name of predecessor]". If the Mortgage
Loan was acquired or originated by the Seller while doing business
under another name, the endorsement must be by "[Seller], formerly
known as [previous name]"; and
b. The original Assignment of Mortgage for each Mortgage Loan in form
and substance acceptable for recording endorsed "Pay to the order
of _____________" and signed in the name of the Seller. If the
Mortgage Loan was acquired by the Seller in a merger, the
Assignment of Mortgage must be made by "[Seller], successor by
merger to [name of predecessor]". If the Mortgage Loan was
acquired or originated by the
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Seller while doing business under another name, the Assignment of
Mortgage must be by "[Seller], formerly known as [previous name]".
With respect to Co-op Loans, the Assignment of Mortgage shall
include an assignment of Security Instruments.
c. The original of any guarantee executed in connection with the
Mortgage Note.
d. The original Mortgage, with evidence of recording thereon. If in
connection with any Mortgage Loan, the Seller cannot deliver or
cause to be delivered the original Mortgage with evidence of
recording thereon on or prior to the Closing Date because of a
delay caused by the public recording office where such Mortgage
has been delivered for recordation, a photocopy of such Mortgage
certified by the Seller to be true and correct will be delivered;
if such Mortgage has been lost or if such public recording office
retains the original recorded Mortgage, the Seller shall deliver
or cause to be delivered to the Purchaser, a photocopy of such
Mortgage, certified by such public recording office to be a true
and complete copy of the original recorded Mortgage.
e. The originals of all assumption, modification, consolidation or
extension agreements, if any, with evidence of recording thereon
or certified copies of such documents if the originals thereof are
unavailable.
f. Originals of all intervening assignments of the Mortgage with
evidence of recording thereon, if such intervening assignment has
been recorded.
g. The original mortgagee policy of title insurance or, in the event
such original title policy is unavailable, a certified true copy
of the related policy binder or commitment for title certified to
be true and complete by the title insurance company.
h. Any security agreement, chattel mortgage or
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equivalent executed in connection with the Mortgage.
i. For Mortgage Loans with original LTV's greater than
85%, evidence of a Primary Insurance Policy.
"Mortgage Loan Schedule" means the schedule of Mortgage Loans attached
hereto as Exhibit E setting forth at least the following information with
respect to each Mortgage Loan: (1) the Seller's Mortgage Loan identifying
number; (2) the Mortgagor's name; (3) the street address of the Mortgaged
Property including the city, state and zip code; (4) a code indicating whether
the Mortgaged Property is owner occupied, second home or investor owned; (5) the
type of residential units constituting the Mortgaged Property; (6) the original
months to maturity; (7) the remaining months to maturity from the Cut-off Date,
based on the original amortization schedule, and, if different, the maturity
expressed in the same manner but based on the actual amortization schedule; (8)
the Loan-to-Value Ratio at origination; (9) the Mortgage Interest Rate as of the
Cut-off Date; (10) the stated maturity date; (11) the amount of the Monthly
Payment as of the Cut-off Date; (12) the original principal amount of the
Mortgage Loan; (13) the principal balance of the Mortgage Loan as of the close
of business on the Cut-off Date, after deduction of payments of principal due on
or before the Cut-off Date whether or not collected; (14) a code indicating the
purpose of the loan (i.e., purchase, rate and term refinance, equity take-out
refinance); (15) a code indicating the documentation style (i.e. full,
alternative or reduced); (16) a code indicating whether the Mortgage Loan is a
Convertible Mortgage Loan; (17) the number of times during the 12 month period
preceding the Closing Date that any Monthly Payment has been received thirty or
more days after its Due Date; (18) the type of Mortgage Loan product, if any;
(19) the first payment Due Date; (19) the initial Mortgage Interest Rate; (20)
the amount of the first Monthly Payment; (21) the name of any Qualified Insurer
with respect to a PMI Policy; and (22) the Servicing Fee Rate. With respect to
any Adjustable Rate Mortgage Loan, (1) the Interest Rate Adjustment Dates; (2)
the Gross Margin; (3) the Lifetime Rate Cap; (4) any Periodic Rate Caps; (5) any
minimum interest rate, if other than the Gross Margin; (6) the first Rate
Adjustment Date after the Cut-off Date; and (8) the name of the applicable
Index, in each case, under the terms of the Mortgage Note. With respect to the
Mortgage Loans in the aggregate, the Mortgage Loan Schedule shall set forth the
following information, as of the Cut-off Date: (1) the number of Mortgage Loans;
(2) the current aggregate outstanding principal balance of the Mortgage Loans;
(3) the weighted average Mortgage Interest Rate of the Mortgage Loans; and (4)
the weighted average maturity of the Mortgage Loans.
"Mortgage Note" means the note or other evidence of the indebtedness of a
Mortgagor secured by a Mortgage.
"Mortgaged Property" means the real property securing repayment of the
debt evidenced by a Mortgage Note.
"Mortgagor" means the obligor on a Mortgage Note.
"Officer's Certificate" means a certificate signed by the Chairman of the
Board or the Vice
10
Chairman of the Board or the President or a Vice President and by the Treasurer
or the Secretary or one of the Assistant Treasurers or Assistant Secretaries of
the Seller, as the case may be, and delivered to the Purchaser as required by
this Agreement.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Seller, reasonably acceptable to the Purchaser.
"Periodic Rate Cap" means the provision of each Mortgage Note related to
each Adjustable Rate Mortgage Loan which provides for an absolute maximum amount
by which the Mortgage Interest Rate therein may increase or decrease on an
Interest Rate Adjustment Date above or below the Mortgage Interest Rate
previously in effect. The Periodic Rate Cap for each Adjustable Rate Mortgage
Loan is the rate set forth on Exhibit E hereto.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization, government or any agency or political subdivision
thereof.
"PMI Policy" or "Primary Insurance Policy" means a policy of primary
mortgage guaranty insurance issued by a Qualified Insurer.
"Prime Rate" means the prime rate announced to be in effect from time to
time, as published as the average rate in The Wall Street Journal (Chicago
edition).
"Principal Prepayment" means any payment or other recovery of principal on
a Mortgage Loan which is received in advance of its scheduled Due Date,
including any prepayment penalty or premium thereon and which is not accompanied
by an amount of interest representing scheduled interest due on any date or
dates in any month or months subsequent to the month of prepayment.
"Purchase Price" means the price paid on the Closing Date by the Purchaser
to the Seller in exchange for the Mortgage Loans purchased on the Closing Date
as set forth in Section 4 of this Agreement.
"Purchaser" means Flagstar Capital Corporation or its successor in
interest or assigns or any successor to the Purchaser under this Agreement as
herein provided.
"Qualified Appraiser" means an appraiser who had no interest, direct
or indirect in the Mortgaged Property or in any loan made on the security
thereof, and whose compensation is not affected by the approval or disapproval
of the Mortgage Loan, and such appraiser and the appraisal made by such
appraiser both satisfy the requirements of Title XI of the Federal Institutions
Reform, Recovery, and Enforcement Act of 1989 and the regulations promulgated
thereunder, all as in effect on the date the Mortgage Loan was originated.
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"Qualified Insurer" means an insurance company duly qualified as such under
the laws of the states in which the Mortgaged Properties are located, duly
authorized and licensed in such states to transact the applicable insurance
business and to write the insurance provided, approved as an insurer by FNMA and
FHLMC with respect to primary mortgage insurance and, in addition, in the two
highest rating categories by Best's with respect to hazard and flood insurance.
"Qualified Substitute Mortgage Loan" means a mortgage loan eligible to
be substituted by the Seller for a Deleted Mortgage Loan which must, on the date
of such substitution, (i) have an outstanding principal balance, after deduction
of all scheduled payments due in the month of substitution (or in the case of a
substitution of more than one mortgage loan for a Deleted Mortgage Loan, an
aggregate principal balance), not in excess of the outstanding principal balance
of the Deleted Mortgage Loan (the amount of any shortfall will be deposited in
the Custodial Account by the Seller in the month of substitution); (ii) have a
Mortgage Interest Rate not less than and not more than 1.00% greater than the
Mortgage Interest Rate of the Deleted Mortgage Loan; (iii) have a remaining term
to maturity not greater than and not more than one year less than that of the
Deleted Mortgage Loan (iv) be of the same type as the Deleted Mortgage Loan
(i.e., Mortgage Loan with the same Mortgage Interest Rate Caps or fixed rate);
and (v) comply with each representation and warranty (respecting individual
Mortgage Loans) set forth in Section 8.02 hereof.
"Remittance Date" means the date specified in the Servicing Agreement
(with respect to each Mortgage Loan, as specified therein).
"Repurchase Price" means, with respect to any Mortgage Loan, a price equal
to (i) the unpaid principal balance of such Mortgage Loan plus (ii) interest on
such unpaid principal balance of such Mortgage Loan at the Mortgage Interest
Rate from the last date through which interest has been paid and distributed to
the Purchaser to the date of repurchase, less amounts received or advanced, if
any, by the Seller in respect of such repurchased Mortgage Loan.
"RESPA" means Real Estate Settlement Procedures Act, as amended from
time to time.
"Seller" means Flagstar Bank, FSB, its successors in interest and
assigns.
"Servicing Agreement" means the agreement, attached as Exhibit B hereto, to
be entered into by the Purchaser and the Seller, as servicer, providing for the
Seller to service the Mortgage Loans as specified by the Servicing Agreement.
"Servicing Fee" means, with respect to each Mortgage Loan, subject to
the Servicing Agreement, the amount of the annual fee the Purchaser shall pay to
the Seller, which shall for a period of one full month be equal to one-twelfth
of the product of (i) the Servicing Fee Rate and (ii) the outstanding principal
balance of such Mortgage Loan. Such fee shall be payable monthly, and shall be
pro rated for any portion of a month during which the Mortgage Loan is serviced
by the Seller under the Servicing Agreement. The obligation of the Purchaser to
pay the Servicing Fee is limited to, and the Servicing Fee
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is payable solely from, the interest portion (including recoveries with respect
to interest from Liquidation Proceeds, to the extent permitted by this
Agreement) of such Monthly Payment collected by the Seller, or as otherwise
provided under this Agreement. In addition to the Servicing Fee, the Seller
shall be entitled to retain Ancillary Income.
"Servicing Fee Rate" means, with respect to each Mortgage Loan, the rate
specified in the Mortgage Loan Schedule with respect to such Mortgage Loan.
"Servicing File" means with respect to each Mortgage Loan, the file
retained by the Seller during the period in which the Seller is acting as
servicer pursuant to the Servicing Agreement consisting of originals of all
documents in the Mortgage File which are not delivered to the Purchaser or its
designee and copies of the Mortgage Loan Documents.
"Stated Principal Balance" means as to each Mortgage Loan, (i) the
principal balance of the Mortgage Loan at the Cut-off Date after giving effect
to payments of principal due on or before such date, whether or not received,
minus (ii) all amounts previously received by the Purchaser with respect to the
related Mortgage Loan representing payments or recoveries of principal or
advances in lieu thereof.
SECTION 2.
AGREEMENT TO PURCHASE.
The Seller agrees to sell and the Purchaser agrees to purchase Mortgage
Loans having an aggregate principal balance on the Cut-off Date in an amount
equal to $[__________], or in such other amount as agreed by the Purchaser and
the Seller as evidenced by the actual aggregate principal balance of the
Mortgage Loans accepted by the Purchaser on the Closing Date.
[SECTION 3. RESERVED.]
SECTION 4.
PURCHASE PRICE.
The Purchase Price for the Mortgage Loans listed on the Mortgage Loan
Schedule shall be $[__________,] or in such other amount as agreed by the
Purchaser and the Seller as evidenced by the actual aggregate principal balance
of the Mortgage Loans accepted by the Purchaser on the Closing Date. The initial
principal amount of the Mortgage Loans shall be the aggregate principal balance
of the Mortgage Loans, so computed as of the Cut-off Date, after application of
scheduled payments of principal due on or before the Cut-off Date whether or not
collected.
In addition to the Purchase Price as described above, the Purchaser
shall pay to the Seller, at closing, accrued interest on the initial principal
amount of the related Mortgage Loans at the weighted average Mortgage Interest
Rate of those Mortgage Loans, minus any amounts attributable to Servicing Fees
as provided in the Servicing Agreement from the Cut-off Date through the day
prior to the Closing
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Date, inclusive.
The Purchase Price plus accrued interest as set forth in the preceding
paragraph shall be paid on the Closing Date by wire transfer of immediately
available funds.
The Purchaser shall be entitled to (i) all scheduled principal due after
the Cut-off Date, (ii) all other recoveries of principal collected on or after
the Cut-off Date (provided, however, that all scheduled payments of principal
due on or before the Cut-off Date and collected after the Cut-off Date shall
belong to the Seller), and (iii) all payments of interest on the Mortgage Loans
net of applicable Servicing Fees collected on or after the Cut-off Date (minus
that portion of any such payment which is allocable to the period prior to the
Cut-off Date). The outstanding principal balance of each Mortgage Loan as of the
Cut-off Date is determined after application of payments of principal due on or
before the Cut-off Date whether or not collected, together with any unscheduled
principal prepayments collected prior to the Cut-off Date; provided, however,
that payments of scheduled principal and interest prepaid for a Due Date beyond
the Cut-off Date shall not be applied to the principal balance as of the Cut-off
Date. Such prepaid amounts shall be the property of the Purchaser. Any such
prepaid amounts shall be deposited into the Custodial Account, which account is
established for the benefit of the Purchaser for subsequent remittance to the
Purchaser.
SECTION 5.
EXAMINATION OF MORTGAGE FILES.
Prior to the date hereof, the Seller has (i) delivered to the Purchaser
or its designee in escrow, for examination with respect to each Mortgage Loan to
be purchased, the related Mortgage File, including a copy of the Assignment of
Mortgage, pertaining to each Mortgage Loan, or (ii) made the related Mortgage
File available to the Purchaser for examination at the Seller's offices or such
other location as shall otherwise be agreed upon by the Purchaser and the
Seller. The fact that the Purchaser or its designee has conducted or has failed
to conduct any partial or complete examination of the Mortgage Files shall not
affect the Purchaser's (or any of its successor's) rights to demand repurchase,
substitution or other relief as provided herein.
SECTION 6. CONVEYANCE FROM SELLER TO PURCHASER.
SUBSECTION 6.01.
CONVEYANCE OF MORTGAGE LOANS; POSSESSION OF SERVICING FILES.
The Seller hereby agrees to sell, transfer, assign, set over and convey to
the Purchaser on the Closing Date, without recourse, but subject to the terms of
this Agreement, all right, title and interest of the Seller in and to the
Mortgage Loans and the Mortgage Files and all rights and obligations arising
under the documents contained therein. The Servicing File shall be retained by
the Seller in accordance with the terms of the Servicing Agreement and, as
provided therein, shall be appropriately identified in the Seller's computer
system and/or books and records, as appropriate, to clearly reflect the sale of
the
14
related Mortgage Loan to the Purchaser.
SUBSECTION 6.02.
BOOKS AND RECORDS.
Record title to each Mortgage Loan as of the Closing Date shall be in
the name of the Seller. Notwithstanding the foregoing, each Mortgage and related
Mortgage Note shall be possessed solely by the Purchaser or the appropriate
designee of the Purchaser, as the case may be. All rights arising out of the
Mortgage Loans including, but not limited to, all funds received by the Seller
after the Cut-off Date on or in connection with a Mortgage Loan shall be vested
in the Purchaser or one or more of its designees; provided, however, that all
funds received on or in connection with a Mortgage Loan shall be received and
held by the Seller in trust for the benefit of the Purchaser or its designee, as
the case may be, as the owner of the Mortgage Loans pursuant to the terms of
this Agreement.
The sale of each Mortgage Loan shall be reflected on the Seller's
balance sheet and other financial statements as a sale of assets by the Seller.
SUBSECTION 6.03.
DELIVERY OF MORTGAGE LOAN DOCUMENTS.
The Seller shall deliver and release to the Purchaser or its designee
on the Closing Date the Mortgage Loan Documents with respect to each Mortgage
Loan set forth on the Mortgage Loan Schedule.
The Seller shall forward to the Purchaser or its designee original
documents evidencing an assumption, modification, consolidation, conversion or
extension of any Mortgage Loan entered into in accordance with this Agreement
within two (2) weeks of their execution, provided, however, that the Seller
shall provide the Purchaser or its designee with a certified true copy of any
such document submitted for recordation within two (2) weeks of its execution,
and shall promptly provide the original of any document submitted for
recordation or a copy of such document certified by the appropriate public
recording office to be a true and complete copy of the original within ninety
(90) days of its submission for recordation. In the event that such original or
copy of any document submitted for recordation to the appropriate public
recording office is not so delivered to the Purchaser or its designee within 90
days following the Closing Date (other than with respect to the Assignments of
Mortgage which shall be delivered to the Purchaser or its designee in blank and
in the event that the Seller does not cure such failure within 30 days of
discovery or receipt of written notification of such failure from the Purchaser,
the related Mortgage Loan shall, upon the request of the Purchaser, be
repurchased by the Seller at the price and in the manner specified in Subsection
8.03. The foregoing repurchase obligation shall not apply in the event that the
Seller cannot deliver, or cause to be delivered, such original or copy of any
document submitted for recordation to the appropriate public recording office
within the specified period due to a delay caused by the recording office in the
applicable jurisdiction; provided that the Seller shall instead deliver, or
cause to be delivered, a recording receipt of such recording office or, if such
recording receipt
15
is not available, an officer's certificate of a servicing officer of the Seller,
confirming that such documents have been accepted for recording; provided that,
upon request of the Purchaser and delivery by the Purchaser to the Seller of a
schedule of the related Mortgage Loans, the Seller shall reissue and deliver to
the Purchaser or its designee said officer's certificate relating to the related
Mortgage Loans.
The Seller shall pay all initial recording fees, if any, for the
Assignments of Mortgage and any other fees or costs in transferring all original
documents to the Purchaser or its designee. The Purchaser or its designee shall
be responsible for recording the Assignments of Mortgage and shall be reimbursed
by the Seller for the reasonable costs associated therewith pursuant to the
preceding sentence.
SECTION 7.
SERVICING OF THE MORTGAGE LOANS.
The Mortgage Loans have been sold by the Seller to the Purchaser on a
servicing retained basis.
The Purchaser shall retain the Seller as independent contract servicer
of the Mortgage Loans pursuant to and in accordance with the terms and
conditions contained in the Servicing Agreement. The Purchaser and the Seller
shall execute the Servicing Agreement on the Closing Date in the form attached
hereto as Exhibit B.
Pursuant to the Servicing Agreement, the Seller shall begin servicing
the Mortgage Loans on behalf of the Purchaser and shall be entitled to the
Servicing Fee and any Ancillary Income with respect to such Mortgage Loans from
the Closing Date until the termination of the Servicing Agreement with respect
to any of the Mortgage Loans as set forth in the Servicing Agreement. The
Seller shall conduct such servicing in accordance with the terms of the
Servicing Agreement.
SECTION 8.
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER;
REMEDIES FOR BREACH.
SUBSECTION 8.01.
REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER.
The Seller represents, warrants and covenants to the following the
Purchaser that as of the date hereof and as of the Closing Date.
(a) Due Organization and Authority; Enforceability. The
Seller is a federally chartered savings bank duly
organized and validly existing under the laws of the
United States and has all licenses necessary to carry
on its business as now being conducted and is
licensed, qualified and in good standing in each
16
state wherein it owns or leases any material
properties or where a Mortgaged Property is located,
if the laws of such state require licensing or
qualification in order to conduct business of the
type conducted by the Seller, and in any event the
Seller is in compliance with the laws of any such
state to the extent necessary to ensure the
enforceability of the related Mortgage Loan in
accordance with the terms of this Agreement; the
Seller has the full corporate power, authority and
legal right to hold, transfer and convey the Mortgage
Loans and to execute and deliver this Agreement and
to perform its obligations hereunder; the execution,
delivery and performance of this Agreement (including
all instruments of transfer to be delivered pursuant
to this Agreement) by the Seller and the consummation
of the transactions contemplated hereby have been
duly and validly authorized; this Agreement and all
agreements contemplated hereby have been duly
executed and delivered and constitute the valid,
legal, binding and enforceable obligations of the
Seller subject to bankruptcy laws and other similar
laws of general application affecting rights of
creditors and subject to the application of the rules
of equity, including those respecting the
availability of specific performance, none of which
will materially interfere with the realization of the
benefits provided thereunder, regardless of whether
such enforcement is sought in a proceeding in equity
or at law; and all requisite corporate action has
been taken by the Seller to make this Agreement and
all agreements contemplated hereby valid and binding
upon the Seller in accordance with their terms.
(b) Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in
the ordinary course of business of the Seller, and
the transfer, assignment and conveyance of the
Mortgage Notes and the Mortgages by the Seller
pursuant to this Agreement are not subject to the
bulk transfer or any similar statutory provisions in
effect in any applicable jurisdiction.
17
(c) No Conflicts. Neither the execution and delivery of
this Agreement, the sale of the Mortgage Loans to the
Purchaser, the consummation of the transactions
nor compliance with the terms and conditions of
this Agreement, will conflict with or result in a
breach of any of the terms, conditions or provisions
of the Seller's charter or by-laws or any legal
restriction or any agreement or instrument to which
the Seller is now a party or by which it is bound, or
constitute a default or result in an acceleration
under any of the foregoing, nor result in the
violation of any law, rule, regulation, order,
judgment or decree to which the Seller or its
property is subject, or result in the creation or
imposition of any lien, charge or encumbrance that
would have an adverse effect upon any of its
properties pursuant to the terms of any mortgage,
contract, deed of trust or other instrument, or
impair the ability of the Purchaser to realize on the
Mortgage Loans, impair the value of the Mortgage
Loans, or impair the ability of the Purchaser to
realize the full amount of any mortgage insurance
benefits accruing pursuant to this Agreement.
(d) Ability to Perform: Solvency. The Seller does not
believe, nor is it aware any reason or cause to
believe, that it cannot perform each and every
covenant contained in this Agreement. The Seller is
solvent and the sale of the Mortgage Loans will not
cause the Seller to become insolvent. The sale of
the Mortgage Loans is not undertaken with the intent
to hinder, delay or defraud any of the Seller's
creditors.
(e) No Litigation Pending. There is no action, suit,
proceeding or investigation pending or threatened
against the Seller, before any court, administrative
agency or other tribunal asserting the invalidity of
this Agreement, seeking to prevent the consummation
of any of the transactions contemplated by this
Agreement or which, either in any one instance or in
the aggregate, could result in any material adverse
18
change in the business, operations, financial
condition, properties or assets of the Seller, or in
any material impairment of the right or ability of
the Seller to carry on its business substantially as
now conducted, or in any material liability on the
part of the Seller, or which would draw into question
the validity of this Agreement or the Mortgage Loans
or of any action taken or to be taken in connection
with the obligations of the Seller contemplated
herein, or which would be likely to impair materially
the ability of the Seller to perform under the terms
of this Agreement.
(f) No Consent Required. No consent, approval,
authorization or order of, or registration or filing
with, or notice to any court or governmental agency
or body including HUD is required for the execution,
delivery and performance by the Seller of or
compliance by the Seller with this Agreement or the
Mortgage Loans, the delivery of a portion of the
Mortgage Files to the Purchaser or its designee or
the sale of the Mortgage Loans or the consummation of
the transactions contemplated by this Agreement, or
if required, such approval has been obtained prior
to the Closing Date.
(g) Selection Process. The Mortgage Loans were selected
from among the outstanding one- to four-family
mortgage loans in the Seller's portfolio at the
Closing Date as to which the representations and
warranties set forth in Subsection 8.02 could be made
and such selection was not made in a manner so as to
affect adversely the interests of the Purchaser;
(h) Initial Portfolio. The aggregate characteristics of
the Mortgage Loans are as set forth under the heading
"Business and Strategy--Description of Initial
Portfolio" in the Prospectus of the Purchaser dated
[___________,] 1998.
(i) No Untrue Information. Neither this Agreement nor
any information, statement, tape, diskette, report,
19
form, or other document furnished or to be furnished
pursuant to this Agreement or in connection with the
transactions contemplated hereby contains or will
contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary
to make the statements contained herein or therein
not misleading.
(j) No Brokers. The Seller has not dealt with any
broker, investment banker, agent or other person other
then that Purchaser's Underwriter, that may be
entitled to any commission or compensation in
connection with the sale of the Mortgage Loans.
SUBSECTION 8.02.
REPRESENTATIONS AND WARRANTIES REGARDING INDIVIDUAL
MORTGAGE LOANS.
The Seller hereby represents and warrants the following to the
Purchaser, as to each Mortgage Loan, as of the Closing Date for such Mortgage
Loan.
(a) Mortgage Loans as Described. The information set
forth in the Mortgage Loan Schedule is complete, true
and correct in all material respects.
(b) Payments Current; Status. All payments required to
be made up to, but not including, the Cut-off Date
for the Mortgage Loan under the terms of the Mortgage
Note have been made and credited. No payment
required under the Mortgage Loan is delinquent nor
has any payment under the Mortgage Loan been 30 days
or more delinquent more than once within the period
falling twelve (12) months prior to the Cut-off Date.
The Mortgage Loan is not, and has not been at any
time in the preceding twelve months, (i) classified,
(ii) in nonaccrual status or (iii) renegotiated due
to the financial deterioration of the Mortgagor.
(c) No Outstanding Charges. There are no defaults in
complying with the terms of the Mortgage, and all
taxes, governmental assessments, insurance premiums,
or water, sewer and municipal charges which
20
previously became due and owing have been paid, or an
escrow of funds has been established in an amount
sufficient to pay for every such item which remains
unpaid and which has been assessed but is not yet due
and payable. The Seller has not advanced funds, or
induced, solicited or knowingly received any advance
of funds by a party other than the Mortgagor,
directly or indirectly, for the payment of any amount
required under the Mortgage Loan, except for interest
accruing from the date of the Mortgage Note or date
of disbursement of the Mortgage Loan proceeds,
whichever is earlier, to the day which precedes by
one month the Due Date of the first installment of
principal and interest.
(d) Original Terms Unmodified. The terms of the Mortgage
Note and Mortgage have not been impaired, waived,
altered or modified in any respect, from the date of
origination except by a written instrument which has
been recorded, if necessary to protect the interests
of the Purchaser, and which has been delivered to the
Purchaser or its designee and the terms of which are
reflected in the Mortgage Loan Schedule, if
applicable. The substance of any such waiver,
alteration or modification has been approved by the
title insurer, if any, to the extent required by the
policy, and its terms are reflected on the Mortgage
Loan Schedule, if applicable. No Mortgagor has been
released, in whole or in part, except in connection
with an assumption agreement, which assumption
agreement is part of the Mortgage Loan File delivered
to the Purchaser or its designee and the terms of
which are reflected in the Mortgage Loan Schedule.
(e) No Defenses. The 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
and no such right of rescission, set-off,
21
counterclaim or defense has been asserted with
respect thereto, and no Mortgagor is now or was, at
the time of origination of the related Mortgage Loan,
a debtor in any state or Federal bankruptcy or
insolvency proceeding.
(f) Hazard Insurance. Pursuant to the terms of the
Mortgage, all buildings or other improvements upon
the Mortgaged Property are insured by a generally
acceptable insurer against loss by fire, hazards of
extended coverage and such other hazards as are set
forth in Section 2.10 of the Servicing Agreement
attached hereto as Exhibit B. If required by the
Flood Disaster Protection Act of 1973, as amended,
the Mortgage Loan is covered by a flood insurance
policy meeting the requirements of the current
guidelines of the Federal Insurance Administration
which policy conforms to FNMA and FHLMC, as well as
all additional requirements set forth in Section 2.10
of the Servicing Agreement attached hereto as Exhibit
B. All individual insurance policies contain a
standard mortgagee clause naming the Seller and its
successors and assigns as mortgagee, and all premiums
thereon have been paid. The Mortgage for each
Mortgage Loan obligates the Mortgagor thereunder to
maintain the hazard insurance policy at the
Mortgagor's cost and expense, and on the Mortgagor's
failure to do so, authorizes the holder of the
Mortgage to obtain and maintain such insurance at
such Mortgagor's cost and expense, and to seek
reimbursement therefor from the Mortgagor. Where
required by state law or regulation, the Mortgagor
has been given an opportunity to choose the carrier
of the required hazard insurance, provided the policy
is not a "master" or "blanket" hazard insurance
policy covering a condominium, or any hazard
insurance policy covering the common facilities of a
planned unit development. The hazard insurance
policy is the valid and binding obligation of the
insurer, is in full force and effect, and will be in
full force and effect and inure to the benefit of the
Purchaser upon the consummation of the transactions
22
contemplated by this Agreement. The Seller has not
engaged in, and has no knowledge of the Mortgagor's
having engaged in, any act or omission which would
impair the coverage of any such policy, the benefits
of the endorsement provided for herein, or the
validity and binding effect of either including,
without limitation, no unlawful fee, commission,
kickback or other unlawful compensation or value of
any kind has been or will be received, retained or
realized by any attorney, firm or other person or
entity, and no such unlawful items have been
received, retained or realized by the Seller.
(g) 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, fair housing, equal
credit opportunity and disclosure laws applicable to
the Mortgage Loan have been complied with, the
consummation of the transactions contemplated hereby
will not involve the violation of any such laws or
regulations, and the Seller shall maintain in its
possession, available for the Purchaser's inspection,
and shall deliver to the Purchaser upon demand,
evidence of compliance with all such requirements.
(h) No Satisfaction of Mortgage. The Mortgage has not
been satisfied, canceled, subordinated or rescinded,
in whole or in part, and the Mortgaged Property has
not been released 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. The
Seller has not waived the performance by the
Mortgagor of any action, if the Mortgagor's failure
to perform such action would cause the Mortgage Loan
to be in default, nor has the Seller waived any
default resulting from any action or inaction by the
Mortgagor.
(i) Location and Type of Mortgaged Property. The
23
Mortgaged Property is located in the state identified
in the Mortgage Loan Schedule and consists of a
single parcel of real property with a detached single
family residence erected thereon, or a townhouse, 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,
provided, however, that any condominium unit or
planned unit development shall conform with
requirements acceptable to FNMA or FHLMC regarding
such dwellings and that no residence or dwelling is a
single parcel of real property with a cooperative
housing corporation erected thereon, a mobile home or
a manufactured dwelling. As of the date of
origination, no portion of the Mortgaged Property is
used for commercial purposes, and since the date of
origination no portion of the Mortgaged Property is
used for commercial purposes.
(j) Valid First Lien. The Mortgage is a valid,
subsisting, enforceable and perfected first lien on
the Mortgaged Property, including all buildings and
improvements on the Mortgaged Property and all
installations and mechanical, electrical, plumbing,
heating and air conditioning systems located in or
annexed to such buildings, and all additions,
alterations and replacements made at any time with
respect to the foregoing. The lien of the Mortgage
is subject only to:
(1) the lien of current real property taxes and
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
prudent mortgage lending institutions generally
and specifically referred to in the lender's
title insurance policy delivered to the
originator of the Mortgage Loan and (a)
specifically referred to or otherwise considered
in the appraisal made for the originator of the
Mortgage Loan
24
or (b) which do not adversely affect the
Appraised Value of the Mortgaged Property set
forth in such appraisal; and
(3) 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 related to and delivered in
connection with the Mortgage Loan establishes and
creates a valid, subsisting, enforceable and perfected
first lien and first priority security interest on the
property described therein and the Seller has full
right to sell and assign the same to the Purchaser.
The Mortgaged Property was not, as of the date of
origination of the Mortgage Loan, subject to a
mortgage, deed of trust, deed to secure debt or other
security instrument creating a lien subordinate to the
lien of the Mortgage (except any such subordinate loan
which was created in connection with the origination
of the related Mortgage Loan details of which are
contained in the related Mortgage File).
(k) Validity of Mortgage Documents. The Mortgage Note
and the Mortgage and any other agreement executed and
delivered by a Mortgagor in connection with a
Mortgage Loan are genuine, and each is the legal,
valid and binding obligation of the maker thereof
enforceable in accordance with its terms. All
parties to the Mortgage Note, the Mortgage and any
other such related agreement had legal capacity to
enter into the Mortgage Loan and to execute and
deliver the Mortgage Note, the Mortgage and any such
agreement, and the Mortgage Note, the Mortgage and any
other such related agreement have been duly and
properly executed by such parties. To the best
knowledge of Seller No fraud, error, omission,
misrepresentation, negligence or similar occurrence
with respect to a Mortgage Loan has taken place on the
part of any Person, including without limitation, the
Mortgagor, any appraiser, any builder or developer, or
any other party involved in the origination of the
Mortgage Loan. The Seller has reviewed all of the
documents constituting the Servicing File and has made
such reasonable inquiries as it deems necessary to
make and confirm the accuracy of
25
the representations set forth herein.
(l) Full Disbursement of Proceeds. The Mortgage Loan has
been closed and the proceeds of the Mortgage Loan
have been fully disbursed 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 Mortgage Loan and the recording of the
Mortgage were paid, and the Mortgagor is not entitled
to any refund of any amounts paid or due under the
Mortgage Note or Mortgage.
(m) Ownership. The Seller is the sole owner of record
and holder of the Mortgage Loan and the indebtedness
evidenced by each Mortgage Note, except for the
assignments of mortgage which have been sent for
recording, and upon recordation the Seller will be
the owner of record of each Mortgage and the
indebtedness evidenced by each Mortgage Note, and
upon the sale of the Mortgage Loans to the Purchaser,
the Seller will retain the Mortgage Files or any part
thereof with respect thereto not delivered to the
Purchaser or its designee in trust only for the
purpose of servicing and supervising the servicing of
each Mortgage Loan. The Mortgage Loan is
not assigned or pledged, and the Seller has good,
indefeasible and marketable title thereto, and has
full right to transfer and sell the Mortgage Loan to
the Purchaser free and clear of any encumbrance,
equity, participation interest, lien, pledge, charge,
claim or security interest, and has full right and
authority subject to no interest or participation of,
or agreement with, any other party, to sell and
assign each Mortgage Loan pursuant to this Agreement
and following the sale of each Mortgage Loan, the
Purchaser will own such Mortgage Loan free and clear
of any encumbrance, equity, participation interest,
lien, pledge, charge, claim or security interest.
26
The Seller intends to relinquish all rights to
possess, control and monitor the Mortgage Loan,
except indirectly for purposes of servicing the
Mortgage Loan as set forth in the Servicing
Agreement. After the Closing Date, the Seller will
have no right to modify or alter the terms of the
sale of the Mortgage Loan and the Seller will have no
obligation or right to repurchase the Mortgage Loan
or substitute another Mortgage Loan, except as
provided in this Agreement.
(n) Doing Business. To Seller's knowledge all parties
which have had any interest in the Mortgage Loan,
whether as mortgagee, assignee, pledgee or otherwise,
are (or, during the period in which they held and
disposed of such interest, were) (1) in compliance
with any and all applicable licensing requirements of
the laws of the state wherein the Mortgaged Property
is located, and (2) either (i) organized under the
laws of such state, or (ii) qualified to do business
in such state, or (iii) a federal savings and loan
association, a savings bank or a national bank having
a principal office in such state, or (3) not doing
business in such state.
(o) LTV, PMI Policy. No Mortgage Loan has an LTV
greater than 95%. The original LTV of each
Mortgage Loan either was not more than 85% or the
excess over 80% is and will be insured as to payment
defaults by a PMI Policy until the LTV of such
Mortgage Loan is reduced to 85%. All provisions
of such PMI Policy have been and are being complied
with, such policy is valid and remains in full force
and effect, and all premiums due thereunder have been
paid. No action, inaction, or event has occurred and
no state of facts exists that has, or will result in
the exclusion from, denial of, or defense to coverage
by the PMI Policy. Any Mortgage Loan subject to
a PMI Policy obligates the Mortgagor thereunder to
maintain the PMI Policy and to pay all premiums and
27
charges in connection therewith. The Mortgage
Interest Rate for each Mortgage Loan as set forth
on the Mortgage Loan Schedule is net of any such
insurance premium.
(p) Title Insurance. The Mortgage Loan is covered by an
ALTA lender's title insurance policy or other
generally acceptable form of policy or insurance
acceptable to FNMA or FHLMC and each such title
insurance policy is issued by a title insurer
acceptable to FNMA or FHLMC and qualified to do
business in the jurisdiction where the Mortgaged
Property is located, insuring the Seller, its
successors and assigns, as to the first priority lien
of the Mortgage in the original principal amount of
the Mortgage Loan, subject only to the exceptions
contained in clauses (1), (2) and (3) of paragraph (j)
of this Subsection 8.02, and against any loss by
reason of the invalidity or unenforceability of the
lien resulting from the provisions of the Mortgage
providing for adjustment to the Mortgage Interest Rate
and Monthly Payment. Where required by state law or
regulation, the Mortgagor has been given the
opportunity to choose the carrier of the required
mortgage title insurance. Additionally, such lender's
title insurance policy affirmatively insures ingress
and egress, and against encroachments by or upon the
Mortgaged Property or any interest therein. The
Seller, its successor and assigns, are the sole
insurers of such lender's title insurance policy, and
such lender's title insurance policy is valid and
remains in full force and effect and will be in force
and effect upon the consummation of the transactions
contemplated by this Agreement. No claims have been
made under such lender's title insurance policy, and
no prior holder of the related Mortgage, including the
Seller, has done, by act or omission, anything which
would impair the coverage of such lender's title
insurance policy, including without limitation, no
unlawful fee, commission, kickback or other unlawful
compensation or value of any kind has been or will be
received, retained or realized by any attorney, firm
or other person or
28
entity, and no such unlawful items have been received, retained
or realized by the Seller.
(q) No Defaults. There is no default, breach, violation or event
which would permit acceleration existing under the Mortgage or
the Mortgage Note and no event which, with the passage of time
or with notice and the expiration of any grace or cure period,
would constitute a default, breach, violation or event which
would permit acceleration, and neither the Seller nor its
predecessors have waived any default, breach, violation or
event which would permit acceleration.
(r) No Mechanics' Liens. At the time of the execution hereof there
are, to Seller's actual knowledge no mechanics' or similar
liens or claims which have been filed for work, labor or
material (and no rights are outstanding that under law could
give rise to such liens) affecting the related Mortgaged
Property which are or may be liens prior to, or equal or
coordinate with, the lien of the related Mortgage.
(s) 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. No improvement located on or being part of
the Mortgaged Property is in violation of any applicable zoning
law or regulation.
(t) Origination; Payment Terms. The Mortgage Loan was originated by
a mortgagee approved by the Secretary of Housing and Urban
Development pursuant to Sections 203 and 211 of the Act, a
savings and loan association, a savings bank, a commercial
bank, credit union, insurance company or similar institution
which is supervised and examined by a federal or state
authority. The documents, instruments and agreements submitted
for loan
29
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. Principal payments on each
Mortgage Loan commenced no more than sixty (60) days after
funds were disbursed in connection with the Mortgage Loan. The
Mortgage Interest Rate, as well as the Lifetime Rate Cap and
the Periodic Rate Cap if the Mortgage Loan is an Adjustable
Rate Mortgage Loan, are as set forth on Exhibit G hereto. The
Mortgage Note is payable on the first day of each month in
equal monthly installments of principal and interest, which
installments of interest are subject to change if the Mortgage
Loan is an Adjustable Rate Mortgage Loan 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. There is no negative
amortization with respect to any Mortgage Loan. Each
Convertible Mortgage Loan contains a provision allowing the
Mortgagor to convert the Mortgage Note from an adjustable
interest rate Mortgage Note to a fixed interest rate Mortgage
Note in accordance with the terms of the Mortgage Note or a
rider to the related Mortgage Note;
(u) Customary Provisions. The Mortgage contains customary and
enforceable provisions such as to render the rights and
remedies of the holder thereof adequate for the realization
against the Mortgaged Property of the benefits of the security
provided thereby, including, (i) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (ii)
otherwise by judicial foreclosure. Upon default by a Mortgagor
on a Mortgage Loan and foreclosure on, or trustee's sale of,
the Mortgaged Property pursuant to the proper procedures, the
holder of the Mortgage Loan will be able to deliver good and
merchantable
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title to the Mortgaged Property. There is no homestead or other
exemption available to a Mortgagor which would interfere with
the right to sell the Mortgaged Property at a trustee's sale or
the right to foreclose the Mortgage, subject to applicable
federal and state laws and judicial precedent with respect to
bankruptcy and right of redemption or similar law. The Mortgage
contains due-on-sale provisions providing for the acceleration
of the payment of the unpaid principal balance of such Mortgage
Loan in the event that all or any part of the Mortgaged
Property is sold or transferred without the prior written
consent of the Mortgagee.
(v) Conformance with Agency and Underwriting Standards. The
Mortgage Loan was underwritten in accordance with the
underwriting standards of Flagstar Bank, FSB (a copy of which
is attached hereto as Exhibit F), or FNMA's underwriting
standards (except that the principal balance of certain
Mortgage Loans may have exceeded the limits of FNMA), in each
case in effect at the time the Mortgage Loan was originated.
The Mortgage Note and Mortgage are on forms acceptable to FHLMC
or FNMA, except with respect to Mortgage Loans underwritten in
accordance with the underwriting guidelines of Flagstar Bank,
which are on forms acceptable to the Purchaser, in the
Purchaser's sole discretion, as evidenced by the Purchaser's
purchase of the related Mortgage Loans, and, in either case,
the Seller has not made any representations to a Mortgagor that
are inconsistent with the mortgage instruments used. All
Mortgage Loans have full asset verification.
(w) Occupancy of the Mortgaged Property. As of the Closing Date,
the Mortgaged Property is lawfully occupied under applicable
law. All inspections, licenses and certificates required to be
made or issued with respect to all occupied portions of the
Mortgaged Property and, with respect to the use and occupancy
of the same, including but not limited to certificates of
occupancy and fire underwriting
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certificates, have been made or obtained from the appropriate
authorities. Unless otherwise specified on the description of
characteristics for the Mortgage Loans delivered pursuant to
Section 10 on the Closing Date in the Mortgage Loan Schedule
attached as Exhibit E hereto, the Mortgagor represented at the
time of origination of the Mortgage Loan that the Mortgagor
would occupy the Mortgaged Property as the Mortgagor's primary
residence.
(x) Additional Collateral. The Mortgage Note is not and has not
been secured by any collateral except the lien of the
corresponding Mortgage and the security interest of any
applicable security agreement or chattel mortgage referred to
in clause (j) above.
(y) Deeds of Trust. In the event the Mortgage constitutes a deed of
trust, a trustee, authorized and 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 the Purchaser to
the trustee under the deed of trust, except in connection with
a trustee's sale after default by the Mortgagor.
(z) Acceptable Investment. There are no circumstances or conditions
with respect to the Mortgage, the Mortgaged Property, the
Mortgagor, the Mortgage File or the Mortgagor's credit standing
that can reasonably be expected to cause the Mortgage Loan to
become delinquent, or adversely affect the value or
marketability of the Mortgage Loan.
(aa) Delivery of Mortgage Documents. The Mortgage Note, the
Mortgage, the Assignment of Mortgage and any other Mortgage
Loan Documents for each Mortgage Loan have been delivered to
the Purchaser or its designee. The Seller is in possession of a
complete, true and accurate Mortgage File in compliance with
Exhibit A hereto, except for such documents the originals of
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which have been delivered to the Purchaser or its designee.
(bb) Condominiums/Planned Unit Developments. If the Mortgaged
Property is a condominium unit or a planned unit development,
such condominium or planned unit development project is
acceptable to FNMA or FHLMC or is located in a condominium or
planned unit development project which has received project
approval from FNMA or FHLMC.
(cc) Transfer of Mortgage Loans. The Assignment of Mortgage with
respect to each Mortgage Loan is in recordable form and is
acceptable for recording under the laws of the jurisdiction in
which the Mortgaged Property is located.
(dd) Assumability. The Mortgage Loan Documents provide that a
related Mortgage Loan may only be assumed if the party assuming
such Mortgage Loan meets certain credit requirements stated in
the Mortgage Loan Documents.
(ee) No Buydown Provisions; No Graduated Payments or Contingent
Interests. The Mortgage Loan does not contain provisions
pursuant to which Monthly Payments are paid or partially paid
with funds deposited in any separate account established by the
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 which may constitute a "buydown"
provision. The Mortgage Loan is not a graduated payment
mortgage loan and the Mortgage Loan does not have a shared
appreciation or other contingent interest feature.
(ff) RESERVED
(gg) Mortgaged Property Undamaged; No Condemnation Proceedings.
There is no proceeding pending or threatened for the total or
partial condemnation of the Mortgaged Property. The Mortgaged
Property is
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undamaged by waste, fire, earthquake or earth movement,
windstorm, flood, tornado or other casualty so as to affect
adversely the value of the Mortgaged Property as security for
the Mortgage Loan or the use for which the premises were
intended and each Mortgaged Property is in good repair. There
have not been any condemnation proceedings with respect to the
Mortgaged Property and the Seller has no knowledge of any such
proceedings in the future.
(hh) Collection Practices; Escrow Deposits; Interest Rate
Adjustments. The origination and collection practices used by
the Seller with respect to the Mortgage Loan have been in all
respects in compliance with Accepted Servicing Practices,
applicable laws and regulations, and have been in all respects
legal and proper. With respect to escrow deposits and Escrow
Payments, all such payments are in the possession of, or under
the control of, the 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
and the provisions of the related Mortgage Note and Mortgage.
An escrow of funds is not prohibited by applicable law and has
been established in an amount sufficient to pay for every item
that remains unpaid and has been assessed but is not yet due
and payable. No escrow deposits or Escrow Payments or other
charges or payments due the Seller have been capitalized under
the Mortgage or the Mortgage Note. All Mortgage Interest Rate
adjustments to the Monthly Payment, if the Mortgage Loan is an
Adjustable Rate Mortgage Loan, have been made in strict
compliance with state and federal law and the terms of the
related Mortgage and Mortgage Note on the related Interest Rate
Adjustment Date. With respect to each Adjustable Rate Mortgage
Loan, the Mortgage Interest Rate adjusts annually as set forth
herein. If, pursuant to the terms of the Mortgage Note, another
index was selected for determining the Mortgage Interest Rate,
the same
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index was used with respect to each Mortgage Note
which required a new index to be selected, and such
selection did not conflict with the terms of the
related Mortgage Note. The Seller executed and
delivered any and all notices required under
applicable law and the terms of the related Mortgage
Note and Mortgage regarding the Mortgage Interest
Rate and the Monthly Payment adjustments. Any
interest required to be paid pursuant to state,
federal and local law has been properly paid and
credited.
(ii) Other Insurance Policies. No action, inaction or
event has occurred and no state of facts exists or
has existed that has resulted or could result in the
exclusion from, denial of, or defense to coverage
under any hazard insurance policy or PMI Policy. In
connection with the placement of any such insurance,
no commission, fee, or other compensation has been or
will be received by the Seller or by any officer,
director, or employee of the Seller or any designee
of the Seller or any corporation in which the Seller
or any officer, director, or employee had a financial
interest at the time of placement of such insurance.
(jj) No Violation of Environmental Laws. To Seller's
knowledge there is no pending action or proceeding
directly involving the Mortgaged Property in which
compliance with any environmental law, rule or
regulation is an issue; there is no violation of any
environmental law, rule or regulation with respect to
the Mortgaged Property; and nothing further remains to
be done to satisfy in full all requirements of each
such law, rule or regulation constituting a
prerequisite to use and enjoyment of said property.
(kk) Soldiers' and Sailors' Civil Relief Act. The
Mortgagor has not notified the Seller and the Seller
has no knowledge of any relief requested or allowed
to the Mortgagor under the Soldiers' and Sailors'
Civil Relief Act of 1940.
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(ll) Appraisal. The Mortgage File contains an appraisal
of the related Mortgaged Property signed prior to the
approval of the Mortgage Loan application by a
Qualified Appraiser who had no interest, direct or
indirect in the Mortgaged Property or in any loan
made on the security thereof, and whose compensation
is not affected by the approval or disapproval of the
Mortgage Loan, and the appraisal and appraiser both
satisfy the requirements of FNMA or FHLMC and Title
XI of the Federal Institutions Reform, Recovery, and
Enforcement Act of 1989 and the regulations
promulgated thereunder, all as in effect on the date
the Mortgage Loan was originated.
(mm) Disclosure Materials. To Seller's knowledge the
Mortgagor has received all disclosure materials
required by and the Seller complied with all
applicable law with respect to the making of the
Mortgage Loans.
(nn) Construction or Rehabilitation of Mortgaged Property.
No Mortgage Loan was made in connection with the
construction or rehabilitation of a Mortgaged
Property or facilitating the trade-in or exchange of
a Mortgaged Property.
(oo) Value of Mortgaged Property. The Seller has no
knowledge of any circumstances existing that could
reasonably be expected to adversely affect the value
or the marketability of any Mortgaged Property or
Mortgage Loan.
(pp) No Defense to Insurance Coverage. No action has been
taken or failed to be taken, no event has occurred
and no state of facts exists or has existed on or
prior to the Closing Date (whether or not known to
the Seller on or prior to such date) which has
resulted or will result in an exclusion from, denial
of, or defense to coverage under any primary mortgage
insurance policy (including, without limitation, any
exclusions, denials or defenses which would limit or
reduce the availability of the timely payment of the
full amount of the loss otherwise due thereunder to
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the insured) whether arising out of actions,
representations, errors, omissions, negligence, or
fraud of the Seller, the related Mortgagor or any
party involved in the application for such coverage,
including the appraisal, plans and specifications and
other exhibits or documents submitted therewith to
the insurer under such insurance policy, or for any
other reason under such coverage, but not including
the failure of such insurer to pay by reason of such
insurer's breach of such insurance policy or such
insurer's financial inability to pay.
(qq) Escrow Analysis. With respect to each Mortgage,
Seller has within the last twelve months (unless such
Mortgage was originated within such twelve month
period) analyzed the required Escrow Payments for
each Mortgage and adjusted the amount of such
payments so that, assuming all required payments are
timely made, any deficiency will be eliminated on or
before the first anniversary of such analysis, or any
overage will be refunded to the Mortgagor, in
accordance with RESPA and any other applicable law.
(rr) Prior Servicing. Each Mortgage Loan has been
serviced in all material respects in compliance with
Accepted Servicing Practices; provided that, in the
event of any breach of the representation and
warranty set forth in this Subsection (rr), the
Seller shall not be required to repurchase any such
Mortgage Loan unless such breach had, and continues
to have, a material and adverse effect on the value
of the related Mortgage Loan or the interest of the
Purchaser therein.
SUBSECTION 8.03.
REMEDIES FOR BREACH OF REPRESENTATIONS AND WARRANTIES.
It is understood and agreed that the representations and warranties set
forth in Subsections 8.01 and 8.02 shall survive the sale of the Mortgage Loans
to the Purchaser and shall inure to the benefit of the Purchaser,
notwithstanding any restrictive or qualified endorsement on any Mortgage Note or
Assignment of Mortgage or the examination or failure to examine any Mortgage
File. Upon discovery
37
by either the Seller or the Purchaser of a breach of any of the foregoing
representations and warranties which materially and adversely affects the value
of the Mortgage Loans or the interest of the Purchaser (or which materially and
adversely affects the interests of the Purchaser in the related Mortgage Loan in
the case of a representation and warranty relating to a particular Mortgage
Loan), the party discovering such breach shall give prompt written notice to the
other.
The Seller, promptly after discovery of a breach of any representation
or warranty, shall notify the Purchaser of such breach and the details thereof.
Within sixty (60) days of the earlier of (i) notice by the Seller pursuant to
the immediately preceding sentence or (ii) notice by the Purchaser to the Seller
of any breach of a representation or warranty with respect to a Mortgage Loan,
the Seller shall use its best efforts promptly to cure such breach in all
material respects and, if such breach cannot be cured, the Seller shall, at the
Purchaser's option and subject to Subsection 8.04, repurchase such Mortgage Loan
at the Repurchase Price, unless the Seller elects to substitute a Qualified
Substitute Mortgage Loan for such Mortgage Loan pursuant to this Subsection. In
the event that a breach shall involve any representation or warranty set forth
in Subsection 8.01, and such breach cannot be cured within sixty (60) days of
the earlier of either discovery by or notice to the Seller of such breach, all
of the Mortgage Loans shall, at the Purchaser's option and subject to Subsection
8.04, be repurchased by the Seller at the Repurchase Price. However, if the
breach shall involve a representation or warranty set forth in Subsection 8.02
and the Seller discovers or receives notice of any such breach within two (2)
years of the Closing Date, the Seller may, at the Seller's option and provided
that the Seller has a Qualified Substitute Mortgage Loan, rather than repurchase
the Mortgage Loan as provided above, remove such Mortgage Loan (a "Deleted
Mortgage Loan") and substitute in its place a Qualified Substitute Mortgage Loan
or Loans, provided that any such substitution shall be effected not later than
two (2) years after the Closing Date. If the Seller has no Qualified Substitute
Mortgage Loan, it shall repurchase the deficient Mortgage Loan. Any repurchase
of a Mortgage Loan or Loans pursuant to the foregoing provisions of this
Subsection 8.03 shall be accomplished by either (a) if the Servicing Agreement
is in effect, deposit in the Custodial Account of the amount of the Repurchase
Price for payment to the Purchaser on the next scheduled Remittance Date, after
deducting therefrom any amount received in respect of such repurchased Mortgage
Loan or Loans and being held in the Custodial Account for future distribution or
(b) if the Servicing Agreement is no longer in effect, by direct remittance of
the Repurchase Price to the Purchaser or its designee in accordance with the
Purchaser's instructions.
At the time of repurchase or substitution, the Purchaser and the
Seller shall arrange for the reassignment of the Deleted Mortgage Loan to the
Seller and the delivery to the Seller of any documents held by the Purchaser or
its designee relating to the Deleted Mortgage Loan. In addition, upon any such
repurchase, all funds maintained in the Escrow Account with respect to such
Deleted Mortgage Loan shall be transferred to the Seller. In the event of a
repurchase or substitution, the Seller shall, simultaneously with such
reassignment, give written notice to the Purchaser that such repurchase or
substitution has taken place, amend the Mortgage Loan Schedule to reflect the
withdrawal of the Deleted Mortgage Loan from this Agreement, and, in the case of
substitution, identify a Qualified Substitute Mortgage Loan and amend the
Mortgage Loan Schedule to reflect the addition of such Qualified Substitute
Mortgage Loan to this Agreement. In connection with any such substitution, the
Seller shall
38
be deemed to have made as to such Qualified Substitute Mortgage Loan the
representations and warranties set forth in this Agreement except that all such
representations and warranties set forth in this Agreement shall be deemed made
as of the date of such substitution. The Seller shall effect such substitution
by delivering to the Purchaser or its designee for such Qualified Substitute
Mortgage Loan the documents required by Subsection 6.03, with the Mortgage Note
endorsed as required by Subsection 6.03. No substitution will be made in any
calendar month after the Determination Date for such month. The Seller shall
deposit in the Custodial Account the Monthly Payment, or in the event that the
Servicing Agreement is no longer in effect remit directly to the Purchaser or
its designee in accordance with the Purchaser's instructions the Monthly Payment
less the Servicing Fee due, if any, on such Qualified Substitute Mortgage Loan
or Loans in the month following the date of such substitution. Monthly Payments
due with respect to Qualified Substitute Mortgage Loans in the month of
substitution shall be retained by the Seller. For the month of substitution,
payments to the Purchaser shall include the Monthly Payment due on any Deleted
Mortgage Loan in the month of substitution, and the Seller shall thereafter be
entitled to retain all amounts subsequently received by the Seller in respect of
such Deleted Mortgage Loan.
For any month in which the Seller substitutes a Qualified Substitute
Mortgage Loan for a Deleted Mortgage Loan, the Seller shall determine the amount
(if any) by which the aggregate principal balance of all Qualified Substitute
Mortgage Loans as of the date of substitution is less than the aggregate Stated
Principal Balance of all Deleted Mortgage Loans (after application of scheduled
principal payments due in the month of substitution). The amount of such
shortfall shall be distributed by the Seller directly to the Purchaser or its
designee in accordance with the Purchaser's instructions within two (2) Business
Days of such substitution.
In addition to such repurchase or substitution obligation, the Seller shall
indemnify the Purchaser and hold it harmless against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments, and other costs and expenses resulting from any claim, demand,
defense or assertion based on or grounded upon, or resulting from, a breach of
the Seller representations and warranties contained in this Agreement. It is
understood and agreed that the obligations of the Seller set forth in this
Subsection 8.03 to cure, substitute for or repurchase a defective Mortgage Loan
and to indemnify the Purchaser as provided in this Subsection 8.03 constitute
the sole remedies of the Purchaser respecting a breach of the foregoing
representations and warranties.
Any cause of action against the Seller relating to or arising out of the
breach of any representations and warranties made in Subsections 8.01 and 8.02
shall accrue as to any Mortgage Loan upon (i) discovery of such breach by the
Purchaser or notice thereof by the Seller to the Purchaser, (ii) failure by the
Seller to cure such breach or repurchase such Mortgage Loan as specified above,
and (iii) demand upon the Seller by the Purchaser for compliance with this
Agreement.
SECTION 9.
CLOSING.
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The closing for the purchase and sale of the Mortgage Loans shall take
place on the Closing Date. At the Purchaser's option, the closing shall be
either: by telephone, confirmed by letter or wire as the parties shall agree, or
conducted in person, at such place as the parties shall agree.
The closing for the Mortgage Loans to be purchased on the Closing Date
shall be subject to each of the following conditions:
(a) all of the representations and warranties of the
Seller under this Agreement and under the Servicing
Agreement (with respect to each Mortgage Loan, as
specified therein) shall be true and correct as of
the Closing Date and no event shall have occurred
which, with notice or the passage of time, would
constitute a default under this Agreement or an
Event of Default under the Servicing Agreement;
(b) the Purchaser shall have received, or the Purchaser's
attorneys shall have received in escrow, all closing
documents as specified in Section 10 of this
Agreement, in such forms as are agreed upon and
acceptable to the Purchaser, duly executed by all
signatories other than the Purchaser as required
pursuant to the terms hereof;
(c) the Seller shall have delivered and released to the
Purchaser or its designee all Mortgage Loan Documents
with respect to each Mortgage Loan; and
(d) all other terms and conditions of this Agreement
shall have been complied with.
Subject to the foregoing conditions, the Purchaser shall pay to the
Seller on the Closing Date the Purchase Price, plus accrued interest pursuant to
Section 4 of this Agreement, by wire transfer of immediately available funds to
the account designated by the Seller.
SECTION 10.
CLOSING DOCUMENTS.
The closing documents for the Mortgage Loans to be purchased on the
Closing Date shall consist of fully executed originals of the following
documents:
1. this Agreement;
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2. the Servicing Agreement, dated as of the Cut-off
Date, in the form of Exhibit B hereto;
3. a Custodial Account Letter Agreement or a Custodial
Account Certification, as applicable, as required
under the Servicing Agreement;
4. an Escrow Account Letter Agreement or an Escrow
Account Certification, as applicable, as required
under the Servicing Agreement;
5. an Officer's Certificate, in the form of Exhibit C
hereto, including all attachments thereto;
6. an Opinion of Counsel of the Seller/Servicer (who may
be an employee of the Seller/Servicer), substantially
in the form of Exhibit D hereto;
7. a certificate or other evidence of merger or change
of name, signed or stamped by the applicable
regulatory authority, if any of the Mortgage
Loans were acquired by the Seller by merger or
acquired or originated by the Seller while conducting
business under a name other than its present name, if
applicable; and
8. the underwriting guidelines of Flagstar Bank, FSB, to
be attached hereto as Exhibit F.
The Seller shall bear the risk of loss of the closing documents until
such time as they are received by the Purchaser or its attorneys.
SECTION 11.
COSTS.
The Purchaser shall pay the legal fees and expenses of its attorneys. All
other costs and expenses incurred in connection with the transfer and delivery
of the Mortgage Loans including recording fees, fees for recording Assignments
of Mortgage, fees for title policy endorsements and continuations, if
applicable, the Seller's attorney's fees, shall be paid by the Seller.
SECTION 12.
MERGER OR CONSOLIDATION OF THE SELLER.
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The Seller will keep in full effect its existence, rights and
franchises as a federally chartered savings bank and will obtain and preserve
its qualification to do business as a foreign corporation in each jurisdiction
in which such qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, or any of the Mortgage Loans and to perform
its duties under this Agreement.
Any Person into which the Seller may be merged or consolidated, or any
corporation resulting from any merger, conversion or consolidation to which the
Seller shall be a party, or any Person succeeding to the business of the Seller,
shall be the successor of the Seller hereunder, without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
anything herein to the contrary notwithstanding; provided, however, that the
successor or surviving Person shall have a tangible net worth of at least
$30,000,000.
SECTION 13.
MANDATORY DELIVERY; GRANT OF SECURITY INTEREST.
The sale and delivery on the Closing Date of the Mortgage Loans
described on the Mortgage Loan Schedule is mandatory from and after the date of
the execution of this Agreement, it being specifically understood and agreed
that each Mortgage Loan is unique and identifiable on the date hereof and that
an award of money damages would be insufficient to compensate the Purchaser for
the losses and damages incurred by the Purchaser (including damages to
prospective purchasers of the Mortgage Loans) in the event of the Seller's
failure to deliver (i) each of the Mortgage Loans or (ii) one or more Qualified
Substitute Mortgage Loans or (iii) one or more Mortgage Loans otherwise
acceptable to the Purchaser on or before the Closing Date. The Seller hereby
grants to the Purchaser a lien on and a continuing security interest in each
Mortgage Loan and each document and instrument evidencing each such Mortgage
Loan to secure the performance by the Seller of its obligations under this
Agreement, and the Seller agrees that it shall hold such Mortgage Loans in
custody for the Purchaser subject to the Purchaser's (i) right to reject any
Mortgage Loan (or Qualified Substitute Mortgage Loan) under the terms of this
Agreement and to require another Mortgage Loan (or Qualified Substitute Mortgage
Loan) to be substituted therefor, and (ii) obligation to pay the Purchase Price
plus accrued interest as set forth in Section 4 hereof for the Mortgage Loans.
All rights and remedies of the Purchaser under this Agreement are distinct from,
and cumulative with, any other rights or remedies under this Agreement or
afforded by law or equity and all such rights and remedies may be exercised
concurrently, independently or successively.
SECTION 14.
NOTICES.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if mailed, by registered or
certified mail, return receipt requested, or, if by other means, when received
by the other party at the address as follows:
(i) if to the Seller:
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Flagstar Bank, FSB
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
(ii) if to the Purchaser:
Flagstar Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Secretary
or such other address as may hereafter be furnished to the other party by like
notice. Any such demand, notice or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by the
date noted on the return receipt).
SECTION 15.
SEVERABILITY CLAUSE.
Any part, provision, representation or warranty of this Agreement which
is prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall be ineffective, as to such jurisdiction, to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof. If the invalidity of any
part, provision, representation or warranty of this Agreement shall deprive any
party of the economic benefit intended to be conferred by this Agreement, the
parties shall negotiate, in good faith, to develop a structure the economic
effect of which is nearly as possible the same as the economic effect of this
Agreement without regard to such invalidity.
SECTION 16.
COUNTERPARTS.
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.
SECTION 17.
GOVERNING LAW.
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The Agreement shall be construed in accordance with the laws of the
State of Michigan and the obligations, rights and remedies of the parties
hereunder shall be determined-in accordance with the substantive laws of the
State of Michigan (without regard to conflicts of laws principles), except to
the extent preempted by Federal law.
SECTION 18.
INTENTION OF THE PARTIES.
It is the intention of the parties that the Purchaser is purchasing,
and the Seller is selling the Mortgage Loans and not a debt instrument of the
Seller or another security. Accordingly, the parties hereto each intend to
treat the transaction for Federal income tax purposes as a sale by the Seller,
and a purchase by the Purchaser, of the Mortgage Loans.
SECTION 19.
SUCCESSORS AND ASSIGNS; ASSIGNMENT OF PURCHASE AGREEMENT.
This Agreement shall bind and inure to the benefit of and be
enforceable by the Seller and the Purchaser and the respective permitted
successors and assigns of the Seller and the successors and assigns of the
Purchaser. This Agreement shall not be assigned, pledged or hypothecated by the
Seller to a third party without the consent of the Purchaser. This Agreement
may be assigned, pledged or hypothecated by the Purchaser without the prior
consent of the Seller. If the Purchaser assigns all or any of its rights as
Purchaser hereunder, the assignee of the Purchaser will become the "Purchaser"
hereunder to the extent of such assignment, provided that at no time shall there
be more than fifteen (15) persons having the status of "Purchaser" hereunder.
The Servicer shall be required to remit all amounts required to be remitted to
the Purchaser hereunder to said assignee commencing with the first Remittance
Date falling after receipt of said copy of the related Assignment and Assumption
Agreement provided that the Seller receives said copy no later than three (3)
Business Days immediately prior to the first day of the month of the related
Remittance Date.
SECTION 20.
WAIVERS.
No term or provision of this Agreement may be waived or modified unless
such waiver or modification is in writing and signed by the party against whom
such waiver or modification is sought to be enforced.
SECTION 21.
EXHIBITS.
The exhibits to this Agreement are hereby incorporated and made a part
hereof and are an integral part of this Agreement.
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SECTION 22.
GENERAL INTERPRETIVE PRINCIPLES.
For purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Agreement have the meanings
assigned to them in this Agreement and include the
plural as well as the singular, and the use of any
gender herein shall be deemed to include the other
gender;
(b) accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with
generally accepted accounting principles;
(c) references herein to "Articles," "Sections,"
"Subsections," "Paragraphs," and other subdivisions
without reference to a document are to designated
Articles, Sections, Subsections, Paragraphs and other
subdivisions of this Agreement;
(d) reference to a Subsection without further reference
to a Section is a reference to such Subsection as
contained in the same Section in which the reference
appears, and this rule shall also apply to Paragraphs
and other subdivisions;
(e) the words "herein," "hereof," "hereunder" and other
words of similar import refer to this Agreement as a
whole and not to any particular provision; and
(f) the term "include" or "including" shall mean without
limitation by reason of enumeration.
SECTION 23.
REPRODUCTION OF DOCUMENTS.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents received by any party at the closing, and (c) financial
statements, certificates and other information previously or hereafter
furnished, may be reproduced by any photographic, photostatic, microfilm, micro-
card, miniature photographic or
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other similar process. The parties agree that any such reproduction shall be
admissible in evidence as the original itself in any judicial or administrative
proceeding, whether or not the original is in existence and whether or not such
reproduction was made by a party in the regular course of business, and that any
enlargement, facsimile or further reproduction of such reproduction shall
likewise be admissible in evidence.
SECTION 24.
FURTHER AGREEMENTS.
The Seller and the Purchaser each agree to execute and deliver to the
other such reasonable and appropriate additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of this
Agreement.
SECTION 25.
RECORDATION OF ASSIGNMENTS OF MORTGAGE.
To the extent permitted by applicable law, each of the Assignments of
Mortgage is subject to recordation in all appropriate public offices for real
property records in all the counties or their comparable jurisdictions in which
any or all of the Mortgaged Properties are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected at the Seller's expense for a single recordation with respect to each
Assignment of Mortgage in the event recordation is either necessary under
applicable law or requested by the Purchaser at its sole option.
IN WITNESS WHEREOF, the parties have executed this Agreement under seal
as of the date and year first above written.
FLAGSTAR CAPITAL CORPORATION
(the Purchaser)
By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
FLAGSTAR BANK, FSB
(the Seller)
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By:
-----------------------------------------
Name:
---------------------------------------
Title:
--------------------------------------
Exhibit A
---------
With respect to each Mortgage Loan, the Mortgage File shall include each of the
following items:
1. The original Mortgage Loan, endorsed as required by this Agreement.
2. The original Mortgage, with evidence of recording thereon, or a copy
thereof certified by the public recording office in which such
Mortgage has been recorded, or if the original Mortgage has not yet
been returned from the applicable public recording office, a true copy
of such original mortgage together with certificate of the Company
certifying that the original Mortgage has been delivered for recording
in the appropriate recording office of the jurisdiction in which the
Mortgage Property is located.
3. Original Assignment in blank which assignment shall be in form and
substance acceptable for recording but not recorded. Subject to the
foregoing, such assignments may be by blanket assignments for Mortgage
Loans covering Mortgaged Properties situated within the same county.
If the Assignment is in blanket form, the assignment need not be
included in the individual Mortgage File but a copy of the blanket
assignment shall be included.
4. In the case of a conventional Mortgage Loan, the original Primary
Mortgage Insurance Policy for all Mortgage Loans where such insurance
is required.
5. Original policy of lender's title insurance or a copy thereof
certified by the title insurer, or original attorney's opinion of
title, or if the policy has not yet been issued, a written commitment
or interim binder or preliminary report of title, by the title
insurance or the escrow company dated as of the date of the Mortgage
Loan was funded, with a statement by the title insurance company, or
related mortgage during the period between the date of the funding of
the related Mortgage Loan and the date of the related title policy
(which title policy shall be dated the date or recording of the
related Mortgage) is insured.
6. Originals, or copies thereof certified by he public recording office
in which such
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documents have been recorded, of each assumption, extension,
modification, written assurance or substitution agreements.
7. Original recorded intervening assignments, or copies thereof certified
by the public recording office in which such Assignments have been
recorded, showing a complete chain of title from the originator to the
Company.
8. In the case of any Mortgage Loan identified on the Mortgage Loan
Schedule as a VA or FHA Loan, the original certificate of insurance
or guaranty, as appropriate.
9. Copy of survey of the Mortgaged Property, if applicable.
10. Copy of each instrument necessary to complete identification of any
exception set forth in the exception schedule in the title policy,
i.e.,map or plat, restrictions, easements, sewer agreements, homeowner
association declarations, etc.
11. Original hazard insurance policy and, if required by law, flood
insurance policy, with extended coverage of the hazard insurance
policy.
12. Mortgage Loan closing statement.
13. Residential loan application.
14. Verification of employment and income.
15. Verification of acceptable evidence of source and amount of down
payment.
16. Credit report on the Mortgagor.
17. Residential appraisal report with pictures and addenda.
18. Photograph of the property.
19. (a) Executed final truth-in-lending disclosure statement.
(b) Executed Disclosures for Adjustable Rate Mortgage Loans, if
applicable.
(c) Right of Rescission Notices of Refinances, if applicable.
(d) Executed Servicing Transfer Disclosure Form.
20. Tax receipts, insurance premium receipts, ledger sheets, payment
records, insurance claim files and correspondence, current and
historical computerized data files, underwriting standards used for
origination or such other papers and records required by the Company
to service the Mortgage Loan.
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21. Mortgage Pool Insurance Certificate, if applicable.
22. Payment Histories.
EXHIBIT B
SERVICING AGREEMENT
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EXHIBIT C
1997
Flagstar Capital corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
OFFICERS CERTIFICATE
--------------------
Now comes _____________________ the _____________________ of Flagstar Bank, FSB,
a federally chartered savings bank (Bank) and hereby certifies as follows:
1. He/She is the duly appointed ___________________ of Bank and is familiar
with the Mortgage Loan Purchase and Warranties Agreement effective __________,
19____ ("Agreement"), with Flagstar Capital Corporation and the transactions
contemplated by these parties ("Transaction").
2. Seller has the full legal authority to sell the Mortgage Loans to Purchaser
pursuant to the Agreement and to enter into the agreement.
3. No approval or other action by any governmental authority, agency or
instrumentality having jurisdiction over Seller is required with respect to any
of the transactions contemplated in the Agreement.
Very Truly Yours,
--------------------
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EXHIBIT D
, 1997
Flagstar Capital Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
RE: Flagstar Bank, FSB, Opinion of Counsel
Dear Sirs:
I have acted as counsel to Flagstar Bank, FSB ("Bank"), a federally chartered
savings bank, concerning the Mortgage Loan Purchase and Warranties Agreement
effective __________, 19____ ("Agreement"), with Flagstar Capital Corporation
and the transactions contemplated by these parties ("Transaction").
OPINION
I have examined the corporate records concerning bank and have made such
examination of law as I deem relevant to this Opinion. Based on the above, and
subject to the qualifications set forth below, it is my opinion that:
1. Bank has the corporate power and authority to execute, deliver, and perform
the Agreement and other related documents and agreements. The execution,
delivery, and performance of the Agreement have been authorized by all
necessary corporate action of Bank. The Agreement has been executed and
delivered by Bank and (assuming Bank's valid authorization, execution, and
delivery of this Agreement) constitutes the valid and binding obligation of
Bank enforceable
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against Bank according to its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, or other similar laws
affecting the enforcement of creditor's rights in general and subject to
general principles of equity (regardless of whether the enforceability is
considered in a proceeding in equity or at law).
2. Bank is a federally chartered savings bank organized, existing, and in good
standing under the laws of the United States of America.
3. Bank's execution, delivery, or performance of the Agreement will not
constitute a violation of its Charter or Bylaws as currently in effect.
4. To the best of my knowledge after reasonable investigation, there are no
actions, suits, or proceedings (governmental or otherwise) pending against,
threatened against, or affecting Bank in any court or before any arbitrator
or any public board or body (a) in which there is a possibility of an
adverse decision that would directly affect Bank's business or financial
position or the results of Bank's operation or (b) that seeks to restrain,
enjoin, or in any way affect the approval, execution, or delivery of the
Agreement and the related transactions.
QUALIFICATION OF OPINION
This Opinion is subject in its entirety to the following qualifications:
1. This Opinion has been prepared solely for your use in connection with the
closing of the Transaction under the Agreement and may not be quoted in
whole or in part or otherwise referred to (except in a list of closing
documents) without my prior written consent. No one other than the
addressee is entitled to rely on this Opinion.
2. This Opinion is based and relies on the current status of the laws, rules,
and regulations of the State of Michigan and the United States and in all
respects is subject to and may be limited by amendments or other changes in
these laws, rules, and regulations and any future laws, rules, and
regulations, as well as by developing case law.
3. This Opinion is limited to the matters set forth here, and no opinions may
be inferred or implied beyond those expressly stated here.
4. I have relied without investigation on certificates and other
communications from public officials as to matters of fact.
Very truly yours,
______________________________
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EXHIBIT E
MORTGAGE LOAN SCHEDULE
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EXHIBIT F
UNDERWRITING GUIDELINES OF FLAGSTAR BANK, FSB
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EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
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