EXHIBIT 10.6(E)
PLEDGE AGREEMENT
Dated: March ____, 1998
This PLEDGE AGREEMENT ("Pledge Agreement") is made by and between DLJ Mortgage
Capital, Inc. ("DLJ"), on behalf of itself and holders from time to time of
interests in the Promissory Note, and BNC Mortgage, Inc. ("Customer").
PRELIMINARY STATEMENT
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Customer and DLJ have entered into a Whole Loan Financing Facility, dated the
date hereof (as amended from time to time, the "Facility"), pursuant to which
DLJ may make certain Advances (as defined below) to Customer. Customer has
agreed to secure its Obligations (as defined below) by granting a security
interest in the Collateral (as defined below) pursuant to the terms hereof. The
parties hereto have agreed that certain items of Collateral are to be deposited
with and retained by Custodian (as defined below), acting as bailee of and agent
for DLJ and its affiliates, successors and assigns.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. DEFINITIONS. The following terms have the meanings indicated when used
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herein:
"Advance" means an Advance as defined in the Facility.
"Agency" means any of the Government National Mortgage Association ("GNMA"), the
Federal National Mortgage Association ("FNMA") or the Federal Home Loan Mortgage
Corporation ("FHLMC").
"Agency Mortgage Loan" means a mortgage loan described in a Collateral Receipt
and eligible and intended to secure or underlie Agency Securities or eligible
for purchase by an Agency.
"Agency Securities" means securities or certificates issued or guaranteed by
GNMA, FNMA or FHLMC.
"Business Day" means any day other than a Saturday, Sunday or a public or bank
holiday in New York City.
"Collateral" shall have the meaning assigned to it in Section 2.1 hereof.
"Collateral Receipt" means a document duly executed by Customer and Custodian
with respect to each delivery of Mortgage Loans and containing a schedule of all
Mortgage Loans submitted therewith, in the form attached to the Custody
Agreement.
"Collateral Value" means the lesser of the Market Value or the unpaid principal
amount of an item of Collateral; provided, however, that (i) if the principal of
and/or interest on any item of Collateral remains due and unpaid for more than
forty-five (45) days, such item of Collateral shall have a Collateral Value of
zero; (ii) for any item of Collateral that constitutes a Wet Mortgage Loan, if
Customer fails to deliver to Custodian the documents required to be delivered
under the related Custody Agreement within five (5) days of the date of the
related Advance, such Wet Mortgage Loan shall have a Collateral Value of zero;
and (iii) if any item of Collateral been sent to an Agency or a Nonagency
Purchaser pursuant to a Bailee Letter under a Custody Agreement and has remained
outside the possession of the Custodian for more than thirty (30) days, such
item of Collateral shall have a Collateral Value of zero, unless otherwise
agreed by DLJ in writing.
"Custodian" means each entity acting as bailee of and agent for DLJ with respect
to any item of Collateral.
"Custody Agreement" means each Tri-Party Custody Agreement, as amended from time
to time, among Customer, DLJ and a Custodian, with respect to any Collateral
delivered in conjunction with this Pledge Agreement.
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"Default" means any event that, with the giving of notice or the lapse of time
or both, would constitute an Event of Default.
"Default Rate" means the Default Rate as defined in the Promissory Note.
"DLJSC" means ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation
"Event of Default" means an Event of Default as defined in the Promissory Note.
"FHA/VA Commitment" means a commitment issued by the Federal Housing
Administration ("FHA") or the Department of Veterans Affairs ("VA") to insure or
guarantee a Mortgage Loan.
"Good Delivery" shall have the meaning ascribed to such term in the PSA Guide in
connection with the standard requirements for the delivery and settlement of an
Agency Security.
"Market Value" means the market bid price obtainable for an item of Collateral,
as reasonably determined by DLJ.
"Mortgage Loan" means an Agency Mortgage Loan or a Nonagency Mortgage Loan.
"Nonagency Purchaser" means any bona fide purchaser acceptable to DLJ in its
sole discretion.
"Nonagency Mortgage Loan" means a mortgage loan described in a Collateral
Receipt intended to be purchased for cash by a Nonagency Purchaser.
"Notice of Borrowing" means a Notice of Borrowing as defined in the Facility.
"Obligations" means (a) all indebtedness, obligations and liabilities (including
without limitation, guarantees and other contingent liabilities) of Customer to
DLJ, its affiliates or Custodian arising under, or in connection with, the
Program Documents or any other related document, whether now existing or
hereafter arising, including without limitation each Advance made or to be made;
(b) any and all sums paid by DLJ or on behalf of DLJ in order to preserve the
Collateral or its security interest therein and lien thereon; (c) in the event
of any proceeding for the collection or enforcement of any indebtedness,
obligations or liabilities of Customer referred to in clause (a) after an Event
of Default shall have occurred and be continuing, the reasonable expenses of
retaking, holding, collecting, preparing for sale, selling or otherwise
disposing of or realizing on the Collateral, or of any exercise by DLJ of its
rights under the Program Documents, including without limitation reasonable
attorneys' fees and disbursements and court costs; and (d) all indemnity
obligations of Customer to DLJ or Custodian pursuant to the Program Documents.
"Pool Insurer" means General Electric Mortgage Insurance Corporation, PMI
Mortgage Insurance Company, United Guaranty Insurance Company or any other pool
insurer acceptable to DLJ in its sole discretion.
"Program Documents" means the Facility, this Pledge Agreement, the Promissory
Note, each Custody Agreement, each Notice of Borrowing and each Collateral
Receipt.
"Promissory Note" means the Promissory Note, dated the date hereof, executed by
Customer, as amended from time to time.
"PSA Guide" means The Uniform Practices for the Clearance and Settlement of
Mortgage-Backed Securities and Other Related Securities, published (and
periodically updated as supplemented) by the Public Securities Association
("PSA").
"Purchase Commitment" means an obligation of (i) a bona fide purchaser to
purchase an Agency Security, (ii) an Agency to purchase Agency Mortgage Loans or
(iii) a Nonagency Purchaser to purchase Nonagency Mortgage Loans, in each case
at a specific price and on or by a specific date.
"Required Documents" means Required Documents as defined in the Custody
Agreement.
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"Second Mortgage" means the mortgage that is the second lien (as customarily
referred to in the industry) on the real property securing the related mortgage
note.
"Servicing Records" means all servicing records, including but not limited to
any and all servicing agreements, subservicing agreements, custodial agreements,
files, documents, records, data bases, customer lists, computer software,
computer tapes, copies of computer tapes, proof of insurance coverage, insurance
policies, appraisals, other closing documentation, payment history records, and
any other data and records relating to or evidencing the servicing of the
Mortgage Loans described in each Collateral Receipt.
"Wet Closing Notice" shall have the meaning assigned to it in the respective
Custody Agreement or, if not defined therein, shall be inapplicable for purposes
of the related Advance under the Program Documents.
"Wet Mortgage Loan" shall have the meaning assigned to it in the respective
Custody Agreement or, if not defined therein, shall be inapplicable for purposes
of any Advance under the Program Documents.
2. SECURITY INTEREST.
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2.1 GRANT OF SECURITY INTEREST TO DLJ. In consideration for the making of each
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respective Advance and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Customer does hereby convey,
transfer, mortgage, hypothecate, pledge, grant and assign to DLJ and its
successors and assigns, as security for the payment of the Obligations, a first
priority perfected security interest in and lien on all of Customer's right,
title and interest in, under and to the following properties, estates, rights
and privileges, whether now existing or hereafter acquired (collectively, the
"Collateral"):
(a) All Mortgage Loans described in a Collateral Receipt or a Wet Closing
Notice, all payments of principal and interest thereon and all related items
constituting the complete file for each such Mortgage Loan (including, without
limitation, all escrow payments, mortgage notes, mortgages, title insurance
policies, primary mortgage insurance policies, guarantees, applications,
appraisals, surveys and all other documents evidencing or relating to the
Mortgage Loan), wherever located and whether now or hereafter held in whole or
in part by a Custodian, DLJ, Customer or otherwise;
(b) All FHA/VA Commitments and Purchase Commitments related to the Mortgage
Loans that are described in, and all other documents required to be submitted in
connection with, a Collateral Receipt, wherever located and whether now or
hereafter held in whole or in part by a Custodian, DLJ, Customer or otherwise;
(c) All Agency Securities related to the Mortgage Loans that are described in a
Collateral Receipt, wherever located and whether now or hereafter held in whole
or in part by a Custodian, DLJ, DLJSC, Customer or otherwise;
(d) All securities or cash on deposit with, or received by, DLJ or Custodian
for the account of Customer in connection with any transaction or in respect of
such Mortgage Loans or Agency Securities, or representing proceeds of
Collateral;
(e) All tangible and intangible personal property of whatever kind, including
all payments with respect thereto and all proceeds thereof, that relates to such
Mortgage Loans, Agency Securities, FHA/VA Commitments or Purchase Commitments,
wherever located and whether now or hereafter held in whole or in part by a
Custodian, DLJ, Customer or otherwise;
(f) All property held for the account of Customer by Custodian or any affiliate
of DLJ;
(g) All rights, powers and privileges of Customer related to the servicing of
the Mortgage Loans, including all Servicing Records;
(h) All proceeds of any of the foregoing; and
(i) Such other items as Customer and DLJ shall agree upon from time to time.
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2.2 GRANT OF SUBORDINATED SECURITY INTERESTS. To induce DLJ and its affiliate
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation ("DLJSC") to accept
assignment of Purchase Commitments for Agency Securities related to the Mortgage
Loans, Customer does hereby convey, transfer, mortgage, hypothecate, pledge,
grant and assign to DLJ and DLJSC as security for Customer's performance under
such Purchase Commitments, a security interest in, and lien on, the Collateral
that is solely subordinate to, and junior to, the liens set forth in Section 2.1
hereof.
2.3 RELEASE OF COLLATERAL. Upon the full satisfaction of all outstanding
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principal, accrued interest on, and all other Obligations owing with respect to
any Advance, if no Default or Event of Default has occurred and is continuing,
but subject to the rights of any holder of a lien on the items of Collateral of
which DLJ has notice, DLJ shall, and shall direct Custodian to, release the
Collateral related to such Advance. Subject to the provisions of this Section
2.3, on the Maturity Date of each Advance, if requested by Customer, DLJ will
deliver against payment any related Agency Securities being held by it as
security for such Advance, and apply the net proceeds received from such sale to
the repayment of such Advance.
3. REPRESENTATIONS AND WARRANTIES.
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Customer, as of the date hereof and as of the date of each Advance, hereby
represents and warrants to DLJ as follows:
3.1 OWNERSHIP OF COLLATERAL; NO ENCUMBRANCE. Customer is the sole legal and
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equitable owner and holder of the Collateral, free and clear of all security
interests, liens, pledges, participation interests or other encumbrances
whatsoever, except (i) the security interests and liens granted hereunder, (ii)
if payment hereunder will satisfy any existing security interest, lien or other
encumbrance on the Collateral, and (iii) with respect to Mortgage Loans that are
secured by Second Mortgages, the first lien on the related mortgaged property.
All Agency Securities, FHA/VA Commitments and Purchase Commitments have been or
will be duly authorized and validly issued, and all Mortgage Loans that are part
of the Collateral are duly and validly originated by or conveyed to Customer.
All of the items of Collateral (a) comply with all of the requirements of this
Pledge Agreement and (b) have been duly and validly pledged or assigned to DLJ
in such a manner that DLJ's first priority security interest therein is fully
perfected.
3.2 AUTHORITY TO PLEDGE COLLATERAL. Customer has, and will continue to have,
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the full right, power and authority to grant to DLJ a first priority perfected
security interest in the Collateral.
3.3 CONFORMITY; ELIGIBILITY.
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(a) All Agency Mortgage Loans, Required Documents applicable thereto and
related Purchase Commitments conform to the requirements for submission to the
relevant Agency, and Customer has furnished to Custodian all mortgage documents
required to be submitted to the relevant Agency or Custodian in connection with
the issuance of the Agency Securities or the cash purchase of the Agency
Mortgage Loans by the relevant Agency.
(b) All Nonagency Mortgage Loans, Required Documents applicable thereto and
Purchase Commitments conform to the underwriting requirements of the relevant
Nonagency Purchaser and, unless otherwise agreed by DLJ, any relevant Pool
Insurer.
3.4 MORTGAGE LOANS. (a) Each Agency Mortgage Loan and, to the extent a
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Purchase Commitment is in effect with respect thereto, each Nonagency Mortgage
Loan meets all of the following requirements as of the date delivered to
Custodian, and except for (viii) below, continuously while it is part of the
Collateral:
(i) It is eligible, and in the form required, for securitization or
purchase under the relevant Agency program or by the relevant Nonagency
Purchaser. It is a bona fide Mortgage Loan of the type that it purports to
be, made to one or more borrowers each having substantially the credit
standing he or she is represented to have;
(ii) It has been fully advanced in the face amount thereof;
(iii) It is and will be secured by a valid and enforceable "first lien" (as
customarily referred to in the industry), except
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that with respect to Mortgage Loans that are secured by Second Mortgages,
it is and will be secured by a valid and enforceable "second lien", in each
case upon an existing site-built residential real property of the type
represented to secure the loan, having substantially the value represented
in the appraisal;
(iv) The documents related thereto have been duly executed and delivered
by the parties thereto;
(v) It has been made in compliance with all applicable laws,
regulations, rules, directives and orders of all governmental authorities,
including all requirements of the Real Estate Settlement Procedures Act and
the Federal Truth-In-Lending Act;
(vi) The promissory note, mortgage or deed of trust and all other
documents related to the Mortgage Loan are and will be valid and
enforceable in accordance with their terms, without defense, offset or
right of rescission, and they have not been and will not be modified or
amended nor any requirements thereof waived;
(vii) Any private mortgage insurance with respect to such loan is by a
company of recognized standing acceptable to the relevant Agency or the
relevant Nonagency Purchaser at the time that such loan was originated and
at the time that the respective Advance is made;
(viii) No default, nor any event that, with notice or lapse of time or
both, would become a default, has occurred and is continuing under any such
Mortgage Loan. With respect to Mortgage Loans that are secured by Second
Mortgages, no default, nor any event that, with notice or lapse of time or
both, would become a default, has occurred and is continuing under the
first lien;
(ix) With respect to each Mortgage Loan that is secured by a Second
Mortgage, it was originated and has been serviced in compliance with all
applicable federal, state and local laws regarding Mortgage Loans secured
by second liens;
(x) With respect to each Mortgage Loan that is secured by a Second
Mortgage, the Customer has the right to cure any default with respect to
the mortgage loan that constitutes the first lien;
(xi) Each Wet Mortgage Loan conforms in all respects to the description
thereof set forth on the related Wet Closing Notice, and Customer will
perform, and has no reason to believe that it will be unable to perform,
its obligation to deliver to Custodian within the time period agreed to in
the Custody Agreement the documents required to be delivered with respect
thereto.
(b) Each Nonagency Mortgage Loan, to the extent no Purchase Commitment is in
effect with respect thereto, meets all of the representations set forth on
Appendix A hereto as of the date delivered to Custodian and continuously while
it is a part of the Collateral.
3.5 COMPLIANCE WITH FHA/VA REQUIREMENTS. Each Mortgage Loan that is designated
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by Customer as being insured by the FHA or partially guaranteed by the VA has
complied and will comply with all laws, rules and regulations with respect to
such insurance or guaranty, and such insurance or guaranty is, or will be, in
full force and effect.
3.6 INSURANCE POLICIES IN EFFECT. Each fire and casualty insurance policy
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covering each of the premises securing a Mortgage Loan that is a part of the
Collateral:
(a) Affords and will afford sufficient insurance against fire and such other
risks as are usually insured against in the broad form of extended coverage
insurance from time to time available, as well as insurance against flood
hazards if the same is required by (i) the FHA, the VA or the relevant Agency or
(ii) the relevant Nonagency Purchaser;
(b) Is a standard policy of insurance for the locale where the premises are
located; is in full force and effect; and the amount of the insurance is in the
amount of the full insurable value of the premises on a replacement cost basis
or the unpaid principal balance of the Mortgage Loan, whichever is less;
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(c) Names and will name the present owner of the premises as the insured; and
(d) Contains a standard mortgagee loss payable clause in favor of the servicer
of the loan.
3.7 PURCHASE COMMITMENTS. All Purchase Commitments that are part of the
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Collateral are valid and enforceable obligations and have been approved by all
necessary authorities.
4. COVENANTS OF CUSTOMER.
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4.1. DEFENSE OF TITLE. Customer warrants and will defend the right, title and
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interest of DLJ in and to all Collateral against all adverse claims and demands.
4.2. NO AMENDMENT OR COMPROMISE. Without DLJ's prior consent, Customer and
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those acting on behalf of Customer shall not amend or modify, or waive any term
or condition of, or settle or compromise any claim in respect of, any item of
Collateral or any related rights.
4.3. NO ASSIGNMENT. Customer shall not sell, assign, transfer or otherwise
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dispose of, or grant any option with respect to, or pledge, hypothecate or grant
a security interest in or lien on or otherwise encumber (except pursuant to this
Pledge Agreement), any of the Collateral or any interest therein, provided that
this section shall not prevent any transfer of Collateral in accordance with
this Pledge Agreement and/or the Custody Agreement.
4.4. SERVICING OF MORTGAGES.
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(a) Customer shall service, or cause to be serviced, all Mortgage Loans that
are part of the Collateral in accordance with the standard industry practices,
employing at least the same procedures and exercising the same care that it
customarily employs in servicing Mortgage Loans for its own account, and in
accordance with all applicable requirements of the relevant Agency, Nonagency
Purchaser or Pool Insurer that covers any of such Mortgage Loans. Customer shall
notify or cause to be notified all servicers of DLJ's interest hereunder.
Customer shall notify DLJ of the name and address of all servicers. DLJ shall
have the right to approve each servicer and the form of all servicing
agreements, and hereby confirms its approval of existing servicing arrangements
with Temple Inland Mortgage Corporation and (Option One Mortgage Services).
Customer shall hold or cause to be held all escrow funds collected with respect
to such Mortgage Loans in trust accounts and shall apply the same for the
purposes for which such funds were collected.
(b) Upon DLJ's request, Customer shall provide to DLJ a letter addressed to
each servicer of Mortgage Loans (the "Servicer Letters"), in form and substance
reasonably satisfactory to DLJ, advising such servicer of DLJ's security
interest in the Collateral and such other matters as DLJ may reasonably request.
(c) If Customer should discover that, for any reason whatsoever, it or any
entity responsible to it by contract for managing or servicing any such Mortgage
Loan has failed to perform fully Customer's obligations under the Program
Documents or any of the obligations of such entities with respect to the
Collateral, Customer shall promptly so notify DLJ.
4.5 PRESERVATION OF COLLATERAL. Customer shall do all things necessary to
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preserve the Collateral so that it remains effective security hereunder.
Without limiting the foregoing, Customer will, in its dealings with the
Collateral, comply with all rules, regulations and other laws of any
governmental authority and cause the Collateral to comply with all applicable
rules, regulations and other laws. Customer will not allow any default for
which it is responsible to occur under any Collateral, and Customer shall fully
perform or cause to be performed when due all of its obligations under any
Collateral.
4.6. MAINTENANCE OF PAPERS, RECORDS AND FILES.
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(a) Customer shall acquire and it or its servicer shall build, maintain and
have available a complete file in accordance with industry custom and practice
for each Mortgage Loan that is part of the Collateral. Customer or such servicer
will maintain all such papers, records and files not in the possession of
Custodian in good and complete condition in accordance with
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industry practices and preserve them against loss.
(b) Customer shall collect and maintain or cause to be collected and maintained
all papers, records and files relating to the Collateral in accordance with
industry custom and practice, including those maintained pursuant to
subparagraph (a) above, and all such materials shall be in Custodian's or
Customer's possession unless DLJ otherwise approves. Customer will not allow any
such papers, records or files that are an original or an only copy to leave its
or Custodian's possession, except for individual items removed in connection
with servicing a specific Mortgage Loan, in which event Customer will obtain or
cause to be obtained a receipt from a financially responsible person for any
such paper, record or file.
(c) For so long as DLJ has a security interest in or lien on any Collateral,
Customer will hold or cause to be held any paper, record or file related to the
Collateral in trust for DLJ. Customer shall notify every other party holding any
such paper, record or file of the security interests and liens granted hereby.
(d) Upon reasonable advance notice from Custodian or DLJ, and during regular
business hours, Customer shall make any and all such papers, records or files
available to Custodian or DLJ to examine any such papers, records and files,
either by its own officers or employees, or by agents or contractors, or both,
and make copies of all or any portion thereof.
4.7. PRESERVATION AND PERFECTION OF SECURITY INTEREST. Customer shall execute
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and deliver such further instruments and shall do and perform all matters and
things necessary or expedient to be done or observed for the purpose of
effectively treating, perfecting, maintaining and preserving the security
interests, liens and other benefits intended to be afforded by this Pledge
Agreement. This shall include, upon request of DLJ, the delivery of documents
to Custodian, or additional filings and recordations with governmental
authorities.
4.8. STAMP. Customer shall, upon request of DLJ, stamp on its records
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concerning the Collateral or a portion thereof a notation, in form and substance
satisfactory to DLJ, of the security interest and lien of DLJ hereunder.
4.9. ADDITIONAL RIGHTS OF DLJ. Upon the occurrence of an Event of Default,
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DLJ, at its option, shall have the right to do, or to request Custodian to do,
any or all of the following, and upon a request therefor by DLJ, Customer agrees
to cooperate with DLJ and Custodian, as the case may be, to accomplish such
request:
(a) DLJ or, at its direction, DLJ's designee may take possession of all
original papers, records and files relating to the Collateral. In Custodian's
discretion, Custodian shall move such records and files to a location acceptable
to and under the control of Custodian.
(b) Customer will instruct all persons servicing the Mortgage Loans that are
part of the Collateral to take instructions from and make all reports to
Custodian for the account of Customer. If DLJ so desires, Customer will change
the servicer for any such Mortgage Loans to a company acceptable to DLJ.
(c) Customer shall cause all sums received with respect to the Collateral to
be deposited with Custodian.
4.10. DLJ APPOINTED ATTORNEY-IN-FACT. Upon the occurrence of an Event of
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Default, DLJ is hereby appointed the attorney-in-fact of Customer for the
purpose of carrying out the provisions hereof and taking any action and
executing any instruments that DLJ may deem necessary or advisable to accomplish
the purposes hereof, which appointment is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing, DLJ shall have the
right and power to receive, endorse and collect all checks made payable to the
order of Customer representing any payment on account of the Collateral and to
give full discharge for the same.
5. DEFAULT - RIGHTS AND REMEDIES.
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5.1. EVENTS OF DEFAULT; REMEDIES.
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(a) Should any Event of Default occur, DLJ, at its option, in addition to its
rights and remedies under the Promissory Note,
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shall have any or all of the following rights and remedies, which may be
exercised by DLJ or by Custodian in accordance with the instructions of DLJ:
(i) DLJ may cause the disposition of all or any portion of the Collateral
to be conducted immediately upon the occurrence of an Event of Default, or
upon the expiration of any period of delay or notice required by law.
Should DLJ decide to conduct more than one such sale or disposition, DLJ
may at its option cause the same to be conducted simultaneously or
successively on the same day or upon such different days or at such
different times and in such order as DLJ may deem to be in the best
interests of the holders of interests in the Promissory Note. Customer
waives, to the fullest extent permitted by law, any prejudice resulting to
it from any such decision.
(ii) DLJ shall have the right to sell the Collateral in one or more lots,
at one or more times, at such place or places, at public or private sales
and with or without notice of any kind, as DLJ may elect, at such prices
and on such terms, as to cash or credit, as DLJ may deem proper. However,
notwithstanding any provision of this Pledge Agreement to the contrary, two
(2) Business Days' notice of all sales of all or any portion of the
Collateral shall be given to Customer. DLJ shall have the right to become a
purchaser at any such sale that is open to the public and to apply all
unpaid Obligations toward the purchase price of all or any portion of the
Collateral sold to DLJ. If notice is given of public sale, it is agreed
that notice shall be satisfactorily given if such notice is published at
least once in The Wall Street Journal not less than two (2) Business Days
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prior to such sale. The foregoing notice provisions shall not preclude
DLJ's rights to foreclose upon the Collateral in any other manner permitted
under the Uniform Commercial Code as in effect in the applicable
jurisdiction. However, a sale of the Collateral in accordance with such
notice requirements shall be deemed a disposal of the Collateral in a
commercially reasonable manner. DLJ shall have the right to sell the
Collateral, or to foreclose, ▇▇▇ upon or otherwise seek to enforce with
respect thereto in its own name or in the name of either Custodian or
Customer. Subject to the foregoing provisions of this paragraph, if an
Event of Default shall have occurred and be continuing, DLJ shall have the
right to renew, extend the time of payment of or otherwise modify, amend,
supplement, settle or compromise in any manner any obligations for the
payment of money included in the Collateral, any security therefor and any
other agreements, instruments, claims or choses in action of any kind, that
may be included in the Collateral. In view of the nature of the Collateral,
the parties agree that liquidation of the Collateral does not require a
public sale and that one or more good faith private sales, including such
private sales at which DLJ shall have the right to become a purchaser, is a
commercially reasonable disposition of the Collateral.
(iii) DLJ, or upon its direction Custodian, may take possession of all or
any portion of the Collateral that is not already in its or Custodian's
possession, and Customer agrees to assemble and make available the
Collateral to DLJ at a convenient location. DLJ, acting through Custodian
if it so desires, may manage and protect the Collateral, do any acts that
DLJ deems proper to protect the Collateral as security hereunder, and ▇▇▇
upon any contract or claim relating to the Collateral and receive any
payments due thereon or any damages thereunder, and apply all sums received
to the payment of the Obligations in accordance with the same order of
priorities as set forth in Section 5.3 hereof. Any such actions of DLJ or
Custodian shall not, absent written ratification by DLJ, be deemed to
impose upon DLJ or Custodian any of Customer's obligations under any
contracts.
(iv) DLJ may direct the servicers to take such action with respect to the
Collateral as DLJ determines is appropriate.
(b) DLJ shall, without regard to the adequacy of the security for the
Obligations, be entitled to the appointment of a receiver by any court having
jurisdiction, without notice, to take possession of and protect, collect,
manage, liquidate, and sell the Collateral or any portion thereof, collect the
payments due with respect to the Collateral or any portion thereof, and do
anything that DLJ or Custodian are authorized hereunder to do. Customer shall
pay all costs and expenses incurred by DLJ in connection with the appointment
and activities of such receiver.
(c) DLJ may enforce its rights and remedies hereunder without prior judicial
process or hearing, and Customer hereby expressly waives, to the extent
permitted by law, any right Customer might otherwise have to require DLJ to
enforce its rights by judicial process. Customer also waives, to the extent
permitted by law, any defense Customer might otherwise have to the Obligations
arising from use of nonjudicial process, enforcement and sale of all or any
portion of the Collateral or from
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any other election of remedies. Customer recognizes that nonjudicial remedies
are consistent with the usages of the trade, are responsive to commercial
necessity and are the result of a bargain at arm's length.
(d) Notwithstanding the foregoing, upon the occurrence of any Event of Default
described in paragraphs 6(e) and 6(f) of the Promissory Note, DLJ shall have the
right to exercise any of its rights and/or remedies without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Customer.
5.2. DELAY NOT WAIVER; REMEDIES ARE CUMULATIVE.
-----------------------------------------
(a) No failure on the part of DLJ or Custodian to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise by DLJ or Custodian of any
right, power or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right, power or remedy.
(b) All remedies of DLJ or Custodian provided for herein are cumulative and in
addition to any and all other rights and remedies provided by law, the Program
Documents and the other instruments and agreements contemplated hereby and
thereby. DLJ may exercise at any time after the occurrence of an Event of
Default one or more remedies, as it so desires, and may thereafter at any time
and from time to time exercise any other remedy or remedies.
5.3. APPLICATION OF PROCEEDS. The proceeds of any sale or disposition of each
-----------------------
item of the Collateral pursuant to this Article shall be applied as follows:
(a) First, to the payment of the costs and expenses of such sale or
disposition, or any other enforcement action pursuant hereto, including
reasonable attorney's fees (including the allocated expenses of internal counsel
to DLJ and Custodian), and all other expenses incurred in connection therewith,
with a reasonable reserve for any liabilities incurred in connection therewith
and full repayment with interest of all advances made or incurred in connection
therewith;
(b) Second, to the payment in full, in such order as DLJ shall determine, of
(i) the accrued interest on the Advance secured by the item of Collateral sold
or otherwise disposed of, (ii) the outstanding principal on the Advance secured
by the item of Collateral sold or otherwise disposed of and (iii) all other
Obligations due and owing to the holder of such Advance secured by the item of
Collateral sold or otherwise disposed of, whether such holder is DLJ or an
assignee of DLJ;
(c) Third, to the payment in full, in such order as DLJ shall determine, of (i)
the accrued interest on the Promissory Note, (ii) the outstanding principal on
the Promissory Note and (iii) all other Obligations; and
(d) Finally, to the payment to the person or persons entitled thereto, or as a
court of competent jurisdiction directs.
If the proceeds of any such sale are insufficient to cover the costs and
expenses of such sale, as aforesaid, and the payment in full of the Promissory
Note, including without limitation all Advances thereunder, and all other
Obligations, Customer shall remain liable for any deficiency.
5.4. REIMBURSEMENT. All sums expended by DLJ or Custodian in connection with
-------------
the exercise of any right or remedy provided for herein shall be and remain the
obligation of Customer. At the option of DLJ, all such sums may be paid from
the Collateral, or may be advanced by DLJ or Custodian, in which event they
shall be deemed to have been advanced to Customer and shall be reimbursed by
Customer to the party advancing such amount, with interest at the Default Rate
until reimbursement is made. During the continuance of an Event of Default,
Customer waives, and shall not have, any right to restrict or control the
expenditures by DLJ or Custodian from any cash which constitutes Collateral.
Customer agrees to pay, with interest at the Default Rate, the reasonable out-
of-pocket expenses (including estimated allocated costs for internal counsel)
and reasonable attorneys' fees incurred by DLJ or Custodian in connection with
the administration and enforcement of the Program Documents, the taking of any
action, including legal action, required or permitted to be taken by DLJ or
Custodian pursuant thereto, or in connection with any refinancing or
restructuring in the nature of a "workout".
9
5.5. INDEMNITY.
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(a) The powers conferred on DLJ or Custodian hereunder are solely for their
protection and do not impose any duty on them to exercise any such powers.
Following an Event of Default, DLJ and Custodian shall have no duty of care to
Customer as to any Collateral or with respect to the taking of any necessary
steps to preserve rights against other parties, or any other obligation
pertaining to the Collateral. Customer, its successors and assigns, waive all
rights whatsoever against DLJ or Custodian for any loss, expense, liability or
damage suffered by Customer as a result of actions taken pursuant to this Pledge
Agreement, including those arising under any "mortgagee in possession" or
similar doctrine. Customer agrees to indemnify and hold harmless DLJ and
Custodian, and any contractors hired by them, and their respective officers,
agents, attorneys and employees, from each and every cost, expense, loss or
other liability resulting from, or arising out of the Program Documents and all
other documents related thereto, and all actions taken pursuant thereto
(including without limitation any action taken by DLJ or Custodian pursuant to
Section 5 hereof), other than those caused by the gross negligence or willful
misconduct of DLJ or Custodian.
(b) Without limiting the application of Section 5.5(a), Customer agrees to pay,
or reimburse DLJ and Custodian for all fees and taxes in connection with the
recording or filing of instruments and documents in public offices, payment or
discharge of any taxes or liens upon or in respect of the Collateral and all
other fees, costs and other expenses in connection with protecting, maintaining
or preserving the Collateral and DLJ's interest therein, whether through
judicial proceedings or otherwise, or in defending or prosecuting any actions,
suits or proceedings arising out of or relating to the Collateral.
(c) The indemnity obligations of Customer contained in this section shall
continue in full force and effect notwithstanding the full payment of the
Promissory Note and all of the other Obligations and notwithstanding the
discharge thereof.
5.6. WAIVER OF REDEMPTION AND DEFICIENCY RIGHTS. Customer hereby expressly
------------------------------------------
waives, to the fullest extent permitted by law, every statute of limitation, any
right of redemption, any moratorium or redemption period, any limitation on a
deficiency judgment, any reduction in the proceeds of any Collateral as a result
of restrictions upon DLJ or Custodian contained in the Program Documents or any
other instrument delivered in connection therewith, and any right that it may
have to direct the order in which any of the Collateral shall be disposed of in
the event of any disposition pursuant hereto.
6. MISCELLANEOUS.
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6.1. NOTICES. All written communications hereunder shall be mailed,
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telecopied or delivered at the respective address set forth in the Custody
Agreement or at such other address as shall be designated by a party in a
written notice to the other parties pursuant to the Custody Agreement. All such
notices and communications shall be effective when received by the party to
which such notice is to be given.
6.2. ENTIRE AGREEMENT. This Pledge Agreement supersedes and integrates all
----------------
negotiations, contracts, agreements and understandings between the parties
relating thereto, and it, together with the other Program Documents and the
other documents delivered pursuant hereto or thereto, contains the entire final
agreement of the parties. No prior negotiation, agreement, understanding or
prior contract shall have any validity hereafter.
6.3. AMENDMENTS, ETC. No amendment or waiver of any provision of this Pledge
---------------
Agreement nor any consent to any failure to comply herewith shall in any event
be effective unless the same shall be in writing and signed by all the parties
hereto, and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
6.4. SEVERABILITY. If any provision of this Pledge Agreement is declared
------------
invalid by any court of competent jurisdiction, such invalidity shall not affect
any other provision, and this Pledge Agreement shall be enforced to the fullest
extent permitted by law.
6.5. BINDING EFFECT; GOVERNING LAW. This Pledge Agreement shall be binding
-----------------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns. Customer may not assign this Pledge Agreement or any of Customer's
rights or obligations hereunder. DLJ may assign, in whole or in part, its rights
hereunder, including without limitation its
10
security interest in and lien on those items of Collateral securing a particular
Advance, whether in conjunction with an assignment of DLJ's interest, in whole
or in part, in the Promissory Note, a particular Advance thereunder or
otherwise. Nothing contained herein shall preclude DLJ from continuing to
exercise all of its rights hereunder for the benefit of any such assignee of
DLJ, and Customer shall continue to take directions solely from DLJ unless
otherwise notified by DLJ in writing. This Pledge Agreement shall be construed
in accordance with, and governed by, the law of the State of New York, without
giving effect to the conflict of laws principles thereof.
IN WITNESS WHEREOF, this Pledge Agreement has been executed by the parties
hereto as of the date first above written.
BNC Mortgage, Inc., as Customer
-------------------------------
By:__________________________________
Name:________________________________
Title:_______________________________
DLJ Mortgage Capital, Inc.
By:__________________________________
Name:________________________________
Title:_______________________________
11
APPENDIX A
REPRESENTATIONS AND WARRANTIES REGARDING NONAGENCY MORTGAGE LOANS WITHOUT A
PURCHASE COMMITMENT
(A) MORTGAGE LOANS AS DESCRIBED. The information set forth in the Collateral
---------------------------
Receipt, the related mortgage loan schedule (the "Mortgage Loan Schedule") and
the Wet Closing Notice, if any, is complete, true and correct.
(B) PAYMENTS CURRENT; NO DEFAULT. All payments required to be made under the
----------------------------
terms of the mortgage note have been made and credited. No payment required
under the Mortgage Loan has been delinquent at any time since the date the
Mortgage Loan was originated. There is no default, breach, violation or event of
acceleration existing under the mortgage or the mortgage note and no event that,
with the passage of time or with notice and the expiration of any grace or cure
period, would constitute a default, breach, violation or event of acceleration,
and neither Customer nor its predecessors have waived any default, breach,
violation or event of acceleration.
(C) NO OUTSTANDING CHARGES. There are no defaults in complying with the terms
----------------------
of the mortgage, and all taxes, governmental assessments, insurance premiums,
water, sewer and municipal charges, leasehold payments or ground rents that
previously became due and owing have been paid, or an escrow of funds has been
established in an amount sufficient to pay for every such item that remains
unpaid and that has been assessed but is not yet due and payable. Customer has
not advanced funds, or induced, solicited or knowingly received any advance of
funds by a party other than the mortgagor, directly or indirectly, for the
payment of any amount required under the Mortgage Loan, except for interest
accruing from the date of the mortgage note or date of disbursement of the
Mortgage Loan proceeds, whichever is greater, to the day that precedes by one
month the due date of the first installment of principal and interest.
(D) ORIGINAL TERMS UNMODIFIED. The terms of the mortgage note and mortgage
-------------------------
have not been impaired, waived, altered or modified in any respect, except by a
written instrument that has been recorded, if necessary to protect the interest
of DLJ and that has been delivered to DLJ or its designee (including the
Custodian). The substance of any such waiver, alteration or modification has
been approved by the issuer of any related PMI Policy (as defined below) and the
title insurer, to the extent required by the policy, and its terms are reflected
on the Mortgage Loan Schedule. No mortgagor has been released, in whole or in
part, except in connection with an assumption agreement approved by the issuer
of any related PMI Policy (as defined below) and the title insurer, to the
extent required by the policy, and which assumption agreement is included in the
mortgage file delivered to DLJ or its designee (including the Custodian) 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, or subject to any right
of rescission, set-off, counterclaim or defense, including without limitation
the defense of usury, and no such right of rescission, set-off, counterclaim or
defense has been asserted with respect thereto.
(F) INSURANCE POLICIES IN EFFECT. The fire and casualty insurance policy
----------------------------
covering the mortgaged property (1) affords and will afford sufficient insurance
against fire and such other risks as are usually insured against in the broad
form of extended coverage insurance from time to time available, as well as
insurance against flood hazards if the mortgaged property is in an area
identified by the Federal Emergency Management Agency as having special flood
hazards; (2) is a standard policy of insurance for the locale where the
mortgaged property is located, is in full force and effect, and the amount of
insurance is in the amount of the full insurable value of the mortgaged property
on a replacement cost basis or the unpaid balance of the Mortgage Loans,
whichever is less; (3) names (and will name) the present owner of the mortgaged
property as the insured; and (4) contains a standard mortgagee loss payable
clause in favor of Customer.
(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 procedure, consumer credit protection, equal credit
opportunity or disclosure laws applicable to the Mortgage Loan have been
complied with, and Customer shall maintain in its possession,
i
available for DLJ's inspection, and shall deliver to DLJ 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.
(I) USE OF MORTGAGED PROPERTY. No portion of the mortgaged property is used
-------------------------
for commercial purposes.
(J) VALID FIRST LIEN. The mortgage is a valid, existing and enforceable first
----------------
lien (except with respect to Second Mortgages) on the mortgaged property,
including all buildings on the mortgaged property and all installations and
mechanical, electrical, plumbing, heating and air conditioning systems located
in or annexed to such building, 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 the 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 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) referred to or otherwise considered in the appraisal
made for the originator of the Mortgage Loan or (B) that do not materially
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 that do
not materially interfere with the benefits of the security intended to be
provided by the mortgage or the use, enjoyment, value or marketability of
the related mortgaged property.
Any security agreement, chattel mortgage or equivalent document related to
and delivered in connection with the Mortgage Loan establishes and creates
a valid, subsisting and enforceable first lien and first priority security
interest on the property described therein and Customer has full right to
pledge and assign the same to DLJ or its designee (including Custodian).
(K) VALIDITY OF MORTGAGE DOCUMENTS. The mortgage note and the mortgage are
------------------------------
genuine, and each is the legal, valid and binding obligation of the maker
thereof enforceable in accordance with its terms. All parties to the mortgage
note and the mortgage had legal capacity to enter into the Mortgage Loan and to
execute and deliver the mortgage note and the mortgage, and the mortgage note
and the mortgage have been duly and properly executed by such parties.
(L) FULL DISBURSEMENT OF PROCEEDS. The proceeds of the Mortgage Loan have been
-----------------------------
fully disbursed and there is no requirement of 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) DOING BUSINESS. All parties that have had any interest in the Mortgage
--------------
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the
period in which they held and disposed of such interest, were) (1) in compliance
with any and all applicable licensing requirements of the laws of the state
wherein the mortgaged property is located, and (2) organized under the laws of
such state, or (3) qualified to do business in such state, or (4) federal
savings and loan associations or national banks having principal offices in such
state, or (5) not doing business in such state.
(N) LTV; PMI POLICY. The original LTV of the Mortgage Loan either was not more
---------------
than 85% or the excess over 85% is and will be insured as to payment defaults by
a policy of primary mortgage guaranty insurance issued by a generally accepted
insurance carrier (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 in full force and effect, and all premiums due
thereunder have been paid. Any Mortgage Loan subject to a PMI Policy obligates
the mortgagor thereunder to maintain the PMI Policy and
ii
to pay all premiums and charges in connection therewith. The mortgage interest
rate for the Mortgage Loan as set forth on the Mortgage Loan Schedule is net of
any such insurance premium.
(O) TITLE INSURANCE. The Mortgage Loan is covered by either (1) an attorney's
---------------
opinion of title and abstract of title the form and substance of which is
acceptable to mortgage lending institutions making mortgage loans in the area
where the mortgaged property is located or (2) an ALTA lender's title insurance
policy or other generally acceptable form of policy of insurance, issued by a
title insurer and qualified to do business in the jurisdiction where the
mortgaged property is located, insuring Customer, its successors and assigns, as
to the first priority lien of the mortgage in the amount of 100% of the original
principal amount of the Mortgage Loan, subject only to the exceptions contained
in clauses (1), (2) and (3) of paragraph (j) above and, with respect to
adjustable rate Mortgage Loans, 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.
Customer is the sole insured of such lender's title insurance policy, and such
lender's title insurance policy is in full force and effect and will be in force
and effect upon the consummation of the transactions contemplated by this Pledge
Agreement. No claims have been made under such lender's title insurance policy,
and no prior holder of the mortgage, including Customer, has done, by act or
omission, anything that would impair the coverage of such lender's title
insurance policy.
(P) NO MECHANICS' LIENS. There are no mechanics' or similar liens or claims
-------------------
that have been filed for work, labor or material (and no rights are outstanding
that under the law could give rise to such liens) affecting the mortgaged
property that are or may be liens prior to, or equal or coordinate with, the
lien of the Mortgage, unless title insurance coverage exists with respect to
such liens or claims in an amount at least equal to such liens or claims.
(Q) LOCATION OF IMPROVEMENTS; NO ENCROACHMENTS. All improvements that were
------------------------------------------
considered in determining the appraised value of the mortgaged property lay
wholly within the boundaries and building restriction lines of the mortgaged
property and no improvements on adjoining properties encroach upon the mortgaged
property. No improvement located on or being part of the mortgaged property is
in violation of any applicable zoning law or regulation.
(R) ORIGINATION; PAYMENT TERMS. The Mortgage Loan was originated by Customer
--------------------------
or a savings and loan association, a savings bank, a commercial bank or similar
banking institution that is supervised and examined by a Federal or State
authority. The originator of the Mortgage Loan is a HUD-approved mortgagee. The
documents, instruments and agreements submitted for loan underwriting were not
falsified by Customer or, to Customer's knowledge by any other person and
contain, to Customer's knowledge, 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. With respect to adjustable
rate Mortgage Loans, the mortgage interest rate is adjusted annually on each
interest rate adjustment date to equal the index plus the gross margin, rounded
up or down to the nearest 1/8%, subject to the mortgage interest rate cap. With
respect to fixed rate Mortgage Loans, the mortgage note is payable each month in
equal monthly installments of principal and interest. With respect to adjustable
rate Mortgage Loans, installments of interest are subject to change due to the
adjustments to the mortgage interest rate on each interest rate adjustment date,
with interest calculated and payable in arrears, sufficient to amortize the
Mortgage Loan fully by the stated maturity date, over an original term of not
more than thirty years from commencement of amortization.
(S) DEEDS OF TRUST. In the event the mortgage constitutes a deed of trust, a
--------------
trustee, duly qualified under applicable law to serve as such, has been properly
designated and currently so serves and is named in the mortgage, and no fees or
expenses are or will become payable by DLJ to the trustee under the deed of
trust, except in connection with a trustee's sale after default by the
mortgagor.
(T) ACCEPTABLE INVESTMENT. Except as set forth in Customer's underwriting
---------------------
criteria, which criteria has been approved by DLJ, Customer has no knowledge of
any circumstances or conditions with respect to the mortgage, the mortgaged
property, the mortgagor or the mortgagor's credit standing that can reasonably
be expected to cause private institutional investors to regard the Mortgage Loan
as an unacceptable investment, cause the Mortgage Loan to become delinquent, or
adversely affect the value or marketability of the Mortgage Loan.
(U) DUE ON SALE. The Mortgage contains an enforceable provision for the
-----------
acceleration of the payment of the unpaid principal
iii
balance of the Mortgage Loan in the event that the mortgaged property is sold or
transferred without the prior written consent of the mortgagee thereunder.
(V) BUYDOWN PROVISIONS; GRADUATED PAYMENTS OR CONTINGENT INTERESTS. With
--------------------------------------------------------------
respect to mortgage loans which contain provisions pursuant to which monthly
payments are paid or partially paid with funds deposited in any separate account
established by Customer, the mortgagor or anyone on behalf of the mortgagor,
which may constitute a "buydown" provision, the amount of each assistance
payment shall be the sum necessary to make up the difference between the monthly
principal and interest payment required by the terms of the note and the reduced
monthly payment, as stated in the buydown certification. However, if for any
reason the assistance payments from the escrow funds are not made by the escrow
agent as contemplated, it shall be the obligation of the mortgagor to make the
monthly payments required by the terms of the note.
With respect to graduated payment mortgage loans, the scheduled annual payment
adjustments are sufficient to cover all interest due and to fully amortize the
loan in 15 years.
(W) CONSOLIDATION OF FUTURE ADVANCES. Any future advances made prior to the
--------------------------------
date such Mortgage Loan was delivered to Custodian have been consolidated with
the outstanding principal amount secured by the mortgage, and the secured
principal amount, as consolidated, bears a single interest rate and single
repayment term. The lien of the mortgage securing the consolidated principal
amount is expressly insured as having first lien priority by a title insurance
policy or an endorsement to the policy insuring the mortgagee's consolidated
interest or by other title evidence acceptable to DLJ. The consolidated
principal amount does not exceed the original principal amount of the Mortgage
Loan.
(X) MORTGAGED PROPERTY UNDAMAGED. There is no proceeding pending or threatened
----------------------------
for the total or partial condemnation of the mortgaged property. The mortgaged
property is undamaged by waste, fire, earthquake or earth movement, windstorm,
flood, tornado or other casualty so as to materially affect adversely the value
of the mortgaged property as security for the Mortgage Loan or the use for which
the premises were intended.
(Y) COLLECTION PRACTICES; ESCROW DEPOSITS; INTEREST RATE ADJUSTMENTS. The
----------------------------------------------------------------
origination and collection practices used with respect to the Mortgage Loan have
been in all respects in accordance with industry custom and practice, and have
been in all respects legal and proper. With respect to escrow deposits and
escrow payments, all such payments are in the possession of Customer 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. 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 Customer have been capitalized under the Mortgage or the
mortgage note. All mortgage interest rate adjustments have been made in strict
compliance with state and federal law and the terms of the related mortgage
note. Any interest required to be paid pursuant to state and local law has been
properly paid and credited.
(Z) 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, duly appointed by Customer, 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 satisfies 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.
iv