EXECUTION COPY
NOVASTAR MORTGAGE, INC.
as Seller,
NOVASTAR MORTGAGE FUNDING CORPORATION III
as Transferor,
RESIDENTIAL ASSET FUNDING CORPORATION
as Depositor,
FIRST UNION NATIONAL BANK
as Certificate Administrator
and
THE CHASE MANHATTAN BANK
as Trustee
MORTGAGE LOAN PURCHASE AGREEMENT
Dated as of September 1, 2000
Fixed and Adjustable Rate Mortgage Loans
NovaStar Mortgage Funding Trust, Series 2000-2
NovaStar Home Equity Loan Asset-Backed Certificate, Series 2000-2
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS.............................................................................................1
Section 1.01 Definitions...................................................................................1
ARTICLE II SALE OF MORTGAGE LOANS AND RELATED PROVISIONS..........................................................2
Section 2.01 Sale of Initial Mortgage Loans, MI Policies and Cap Agreements................................2
Section 2.02 Conveyance of the Subsequent Mortgage Loans...................................................5
Section 2.03 Pre-Funding Account...........................................................................9
Section 2.04 Interest Coverage Account.....................................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH...................................................9
Section 3.01 Seller Representations and Warranties.........................................................9
Section 3.02 Transferor Representations and Warranties....................................................22
Section 3.03 Depositor Representations and Warranties.....................................................23
ARTICLE IV SELLER'S COVENANTS....................................................................................24
Section 4.01 Covenants of the Seller......................................................................24
Section 4.02 Payment of Expenses..........................................................................25
ARTICLE V CONDITIONS TO INITIAL MORTGAGE LOAN PURCHASE...........................................................25
Section 5.01 Conditions of Transferor's and the Depositor's Obligations...................................25
ARTICLE VI INDEMNIFICATION BY THE SELLER WITH RESPECT TO THE MORTGAGE LOANS......................................26
Section 6.01 Indemnification With Respect to the Mortgage Loans...........................................26
Section 6.02 Limitation on Liability of the Seller........................................................26
ARTICLE VII TERMINATION..........................................................................................26
Section 7.01 Termination..................................................................................26
ARTICLE VIII MISCELLANEOUS PROVISIONS............................................................................28
Section 8.01 Amendment....................................................................................28
Section 8.02 Governing Law................................................................................28
Section 8.03 Notices......................................................................................28
Section 8.04 Severability of Provisions...................................................................29
Section 8.05 Relationship of Parties......................................................................29
Section 8.06 Counterparts.................................................................................29
Section 8.07 Further Agreements...........................................................................30
Section 8.08 Intention of the Parties.....................................................................30
Section 8.09 Successors and Assigns; Assignment of Purchase Agreement.....................................30
Section 8.10 Survival.....................................................................................31
Section 8.11 Liability of the Trustee.....................................................................31
Exhibits
Exhibit 1 Mortgage Loan Schedule for Initial Mortgage Loans
Exhibit 2 Subsequent Transfer Instrument
i
THIS MORTGAGE LOAN PURCHASE AGREEMENT (this "Purchase
Agreement"), dated as of September 1, 2000, is made among NovaStar Mortgage,
Inc. (the "Seller"), NovaStar Mortgage Funding Corporation III (the
"Transferor"), Residential Asset Funding Corporation (the "Depositor"), First
Union National Bank (the "Certificate Administrator") and The Chase Manhattan
Bank (the "Trustee").
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the terms of this Purchase Agreement, the
Seller will sell the Initial Mortgage Loans and the related MI Policies to the
Transferor on the Closing Date, who will then sell the Initial Mortgage Loans
and the related MI Policies, and assign all of its rights under this Purchase
Agreement, to the Depositor on the Closing Date;
WHEREAS, pursuant to the terms of the Pooling and Servicing
Agreement, the Depositor will transfer the Initial Mortgage Loans, the related
MI Policies and the Cap Agreements, and assign all of its rights under the
Purchase Agreement, to the Trustee, without recourse, on the Closing Date;
WHEREAS, pursuant to the terms of the Pooling and Servicing
Agreement, the Trustee will issue the Certificates;
WHEREAS, pursuant to the terms of the Pooling and Servicing
Agreement, the Trustee will transfer to the Depositor the Certificates;
WHEREAS, pursuant to the terms of the Underwriting Agreement,
the Depositor will sell the Underwritten Certificates to the Underwriter;
WHEREAS, pursuant to the terms of this Purchase Agreement, the
Depositor will transfer the Retained Certificates to the Transferor;
WHEREAS, pursuant to the terms of the REMIC Interests Sale
Agreement, the Transferor will sell the Retained Certificates to NRFC;
WHEREAS, pursuant to the terms of the Pooling and Servicing
Agreement, the Servicer will service the Mortgage Loans; and
WHEREAS, pursuant to the terms of the Converted Loan Purchase
Agreement, the Converted Loan Purchaser will purchase the Converted Mortgage
Loans from the Trustee.
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
For all purposes of this Purchase Agreement, except as
otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Definitions contained in Section
1
1.01 of the Pooling and Servicing Agreement, dated as of September 1, 2000,
among the Certificate Administrator, the Trustee, the Depositor and NovaStar
Mortgage, Inc. as seller and servicer (the "Servicer") which is incorporated by
reference herein. All other capitalized terms used herein shall have the
meanings specified herein.
ARTICLE II
SALE OF MORTGAGE LOANS AND RELATED PROVISIONS
Section 2.01 Sale of Initial Mortgage Loans, MI Policies and Cap
Agreements.
(a) The Seller hereby sells, and the Transferor hereby purchases on
the Closing Date, (i) the Initial Mortgage Loans identified (and the related MI
Policies) on the Mortgage Loan Schedule annexed hereto as Exhibit 1, the
proceeds thereof and all rights under the Related Documents (including the
related Mortgage Files) and (ii) the Cap Agreements identified on Exhibit 2 and
the Transferor hereby sells, and the Depositor hereby purchases on the Closing
Date (i) the Initial Mortgage Loans identified (and the related MI Policies) on
the Mortgage Loan Schedule annexed hereto as Exhibit 1, the proceeds thereof and
all rights under the Related Documents (including the related Mortgage Files)
and (ii) the Cap Agreements identified on Exhibit 2. The Initial Mortgage Loans
consist of conventional, residential first lien mortgage loans with fixed and
adjustable interest rates. The Initial Mortgage Loans will have a Principal
Balance as of the close of business on the Cut-off Date, after giving effect to
any payments due on or before such date whether or not received, of
approximately $188,723,314.17. The sale of the Initial Mortgage Loans will take
place on the Closing Date, subject to and simultaneously with the deposit of the
Initial Mortgage Loans and the Original Pre-Funded Amount and the Interest
Coverage Amount into the Trust Fund, the issuance of the Securities by the
Trustee and the sale of the Underwritten Certificates pursuant to the
Underwriting Agreement. The purchase price (the "Purchase Price") for the
Initial Mortgage Loans to be paid by the Transferor to the Seller on the Closing
Date shall consist of the following:
(i) a payment in an amount equal to $333,384,450 representing the
net proceeds of the sale of the Underwritten Certificates, which payment shall
be paid to the Seller by wire transfer in immediately available funds on the
Closing Date by or on behalf of the Transferor, or as otherwise agreed by the
Transferor; and
(ii) a payment in an amount equal to $20,000 representing the
proceeds of the sale of the Retained Certificates by the Transferor to NRFC
pursuant to the REMIC Interests Sale Agreement, which payment shall be paid to
the Seller by wire transfer in immediately available funds on the Closing Date
by or on behalf of the Transferor, or as otherwise agreed by the Transferor.
(b) The purchase price for the Initial Mortgage Loans to be paid by
the Depositor to the Transferor shall be (i) a payment in an amount equal to
$333,384,450 which payment shall be paid to the Transferor by wire in
immediately available funds on the Closing Date by or on behalf of the
Depositor, or as otherwise agreed by the Depositor and (ii) delivery to the
Transferor or its assignee on the Closing Date of the Retained Certificates.
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(c) In connection with such conveyances by the Seller, the Seller
shall on behalf of and at the direction of the Transferor deliver to, and
deposit with the Certificate Administrator on behalf of the Trustee, on or
before the Closing Date in the case of an Initial Mortgage Loan, and two
Business Days prior to the related Subsequent Transfer Date in the case of a
Subsequent Mortgage Loan, the following documents or instruments with respect to
each Mortgage Loan (the "Mortgage File"):
(i) the original Mortgage Note endorsed to "The Chase Manhattan
Bank, as Trustee of the NovaStar Mortgage Funding Trust, Series 2000-2, relating
to the NovaStar Home Equity Loan Asset-Backed Certificates, Series 2000-2";
(ii) the original Mortgage with evidence of recording thereon, or,
if the original Mortgage has not yet been returned from the public recording
office, a copy of the original Mortgage certified by the Seller or the public
recording office in which such original Mortgage has been recorded;
(iii) an original assignment (which may be included in one or
more blanket assignments if permitted by applicable law) of the Mortgage
endorsed to "The Chase Manhattan Bank, as Trustee of the NovaStar Mortgage
Funding Trust, Series 2000-2, relating to the NovaStar Home Equity Loan
Asset-Backed Certificates, Series 2000-2", and otherwise in recordable form;
(iv) originals of any intervening assignments of the Mortgage,
with evidence of recording thereon, or, if the original of any such intervening
assignment has not yet been returned from the public recording office, a copy of
such original intervening assignment certified by the Seller or the public
recording office in which such original intervening assignment has been
recorded;
(v) the original policy of title insurance (or a commitment for
title insurance, if the policy is being held by the title insurance company
pending recordation of the Mortgage);
(vi) with respect to each Mortgage Loan insured by a MI Policy, a
certificate of insurance or other evidence of such MI Policy;
(vii) a true and correct copy of each assumption, modification,
consolidation or substitution agreement, if any, relating to the Mortgage Loan;
and
(viii) an executed copy of the notice of assignment and
acknowledgement of assignment with respect to the Mortgage Loans covered by the
MI Policies.
If a material defect in any Mortgage File is discovered which may
materially and adversely affect the value of the related Mortgage Loan, or the
interests of the Trustee (as pledgee of the Mortgage Loans), or the
Certificateholders in such Mortgage Loan, including if any document required to
be delivered to the Certificate Administrator has not been delivered (provided
that a Mortgage File will not be deemed to contain a defect for an unrecorded
assignment under clause (i) above for 180 days following submission of the
assignment if the Seller has submitted such assignment for recording pursuant to
the terms of the following paragraph), the Seller shall cure such defect,
repurchase the related Mortgage Loan at the
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Repurchase Price or substitute an Eligible Substitute Mortgage Loan for the
related Mortgage Loan upon the same terms and conditions set forth in Section
3.01 hereof as to the Initial Mortgage Loans and the Subsequent Mortgage Loans
and Section 2.02(c) hereof as to the Subsequent Mortgage Loans for breaches of
representations and warranties.
Promptly after the Closing Date in the case of an Initial Mortgage
Loan or, in the case of a Subsequent Mortgage Loan, promptly after the
Subsequent Transfer Date (or after the date of transfer of any Eligible
Substitute Mortgage Loan), the Seller at its own expense shall complete and
submit for recording in the appropriate public office for real property records
each of the assignments referred to in clause (i) above, with such assignment
completed in favor of the Trustee. While such assignment to be recorded is being
recorded, the Certificate Administrator shall retain a photocopy of such
assignment. If any assignment is lost or returned unrecorded to the Certificate
Administrator because of any defect therein, the Seller is required to prepare a
substitute assignment or cure such defect, as the case may be, and the Seller
shall cause such substitute assignment to be recorded in accordance with this
paragraph.
In instances where an original Mortgage or any original intervening
assignment of Mortgage is not, in accordance with clause (ii) or (iv) above,
delivered by the Seller to the Certificate Administrator, on behalf of the
Trustee, prior to or on the Closing Date in the case of an Initial Mortgage Loan
or, in the case of a Subsequent Mortgage Loan, prior to or on the Subsequent
Transfer Date, the Seller will deliver or cause to be delivered the originals of
such documents to the Certificate Administrator, on behalf of the Trustee,
promptly upon receipt thereof.
Effective on the Closing Date, the Transferor hereby acknowledges
its acceptance of all right, title and interest to the Initial Mortgage Loans
and other property, existing on the Closing Date and thereafter created and
conveyed to it pursuant to this Section 2.01 and the Depositor hereby
acknowledges its acceptance of all right, title and interest to the Initial
Mortgage Loans and other property existing on the Closing Date and thereafter
created and conveyed to it pursuant to this Section 2.01.
The Trustee, as assignee or transferee of the Transferor and the
Depositor, shall be entitled to all scheduled principal payments due after the
Cut-off Date, all other payments of principal due and collected after the
Cut-off Date, and all payments of interest on the Initial Mortgage Loans. No
scheduled payments of principal due on or before the Cut-off Date and collected
after the Cut-off Date shall belong to the Transferor or the Depositor pursuant
to the terms of this Purchase Agreement. The Pooling and Servicing Agreement
shall provide that any late payment charges collected in connection with a
Mortgage Loan shall be paid to the Servicer as provided therein.
(d) In connection with the sale of the Cap Agreements, the
Transferor shall, on the Closing Date, deliver original executed Cap Agreements
naming the Trustee as a party thereto.
(e) The parties hereto intend that the transactions set forth herein
constitute a sale by the Seller to the Transferor on the Closing Date of all the
Seller's right, title and interest in and to the Initial Mortgage Loans and
other property as and to the extent described above and
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a sale by the Transferor to the Depositor on the Closing Date of all of the
Transferor's right, title and interest in and to the Initial Mortgage Loans and
other property as and to the extent described above. In the event the
transactions set forth herein shall be deemed not to be a sale, the Seller
hereby grants to the Transferor as of the Closing Date a security interest in
all of the Seller's right, title and interest in, to and under the Initial
Mortgage Loans and such other property, to secure all of the Seller's
obligations hereunder, and the Transferor grants to the Depositor as of the
Closing Date a security interest in all of the Transferor's right, title and
interest in, to and under the Initial Mortgage Loans and such other property,
to secure all of the Transferor's obligations hereunder and this Purchase
Agreement shall constitute a security agreement under applicable law and in such
event, the parties hereto acknowledge that the Certificate Administrator, in
addition to holding the Initial Mortgage Loans on behalf of the Trustee for the
benefit of the Certificateholders, holds the Initial Mortgage Loans as designee
of the Transferor and the Depositor. The Seller agrees to take or cause to be
taken such actions and to execute such documents, including without limitation
the filing of all necessary UCC-1 financing statements filed in the State of
Virginia and the State of Kansas (which shall have been submitted for filing as
of the Closing Date and each Subsequent Transfer Date, as applicable), any
continuation statements with respect thereto and any amendments thereto required
to reflect a change in the name or corporate structure of the Seller or the
filing of any additional UCC-1 financing statements due to the change in the
principal office of the Seller, as are necessary to perfect and protect the
interests of the Transferor, the Depositor and their respective assignees in
each Initial Mortgage Loan and the proceeds thereof and the interests of the
Trustee and its assignees in each Subsequent Mortgage Loan and the proceeds
thereof. The Transferor agrees to take or cause to be taken such actions and to
execute such documents, including without limitation the filing of all necessary
UCC-1 financing statements, and continuation statements with respect thereto and
any amendments thereto as are necessary to perfect and protect the interests of
the Depositor and its assignees in each Initial Mortgage Loan.
Section 2.02 Conveyance of the Subsequent Mortgage Loans.
(a) Subject to the conditions set forth in paragraph (b) below in
consideration of the Trustee's delivery on the related Subsequent Transfer Dates
of all or a portion of the balance of funds in the Pre-Funding Account, the
Seller shall on any Subsequent Transfer Date sell, transfer, assign, set over
and convey, without recourse, to the Transferor, who shall then sell, transfer,
assign, set over and convey, without recourse, to the Trustee, but subject to
the other terms and provisions of this Purchase Agreement, all of the right,
title and interest of the Seller in and to (i) the Subsequent Mortgage Loans
(and the related MI Policies) identified on the related Mortgage Loan Schedule
attached to the related Subsequent Transfer Instrument delivered by the Seller
on such Subsequent Transfer Date, (ii) principal due and interest accruing on
the Subsequent Mortgage Loans after the related Subsequent Cut-off Date and (i)
with respect to such Subsequent Mortgage Loans all items to be delivered
pursuant to Section 2.01(c) above and the other items in the related Mortgage
Files; provided, however, that the Seller reserves and retains all right, title
and interest in and to principal received and interest accruing on the
Subsequent Mortgage Loans prior to the related Subsequent Cut-off Date. The
transfer by the Seller to the Transferor, and by the Transferor to the Trustee,
of the Subsequent Mortgage Loans identified on each Mortgage Loan Schedule
attached to the related Subsequent Transfer Instrument shall be absolute and is
intended by the Trustee, the Transferor and the Seller to
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constitute and to be treated as a sale of the Subsequent Mortgage Loans by the
Seller to the Transferor, and a sale of the Subsequent Mortgage Loans by the
Transferor to the Trustee.
In the event such transactions shall be deemed not to be a sale, the
Seller hereby grants to the Transferor as of each Subsequent Transfer Date a
security interest in all of the Seller's right, title and interest in, to and
under the related Subsequent Mortgage Loans and such other property, to secure
all of the Seller's obligations hereunder, and this Purchase Agreement shall
constitute a security agreement under applicable law, and in such event, the
parties hereto acknowledge that the Certificate Administrator, in addition to
holding the Subsequent Mortgage Loans and the related MI Policies on behalf of
the Trustee for the benefit of the Certificateholders, holds the Subsequent
Mortgage Loans and the related MI Policies as designee of the Transferor. The
Seller agrees to take or cause to be taken such actions and to execute such
documents, including without limitation the filing of all necessary UCC-1
financing statements filed in the State of Virginia and the State of Kansas
(which shall be submitted for filing as of the related Subsequent Transfer
Date), any continuation statements with respect thereto and any amendments
thereto required to reflect a change in the name or corporate structure of the
Seller or the filing of any additional UCC-1 financing statements due to the
change in the principal office of the Seller as are necessary to perfect and
protect the interests of the Transferor and its assignees in the Subsequent
Mortgage Loans.
In the event such transactions shall be deemed not to be a sale, the
Transferor hereby grants to the Trustee as of each Subsequent Transfer Date a
security interest in all of the Transferor's right, title and interest in, to
and under the related Subsequent Mortgage Loans and such other property, to
secure all of the Transferor's obligations hereunder, and this Purchase
Agreement shall constitute a security agreement under applicable law, and in
such event, the parties hereto acknowledge that the Certificate Administrator,
in addition to holding the Subsequent Mortgage Loans and the related MI Policies
on behalf of the Trustee for the benefit of the Certificateholders, holds the
Subsequent Mortgage Loans and the related MI Policies as designee of the
Trustee. The Transferor agrees to take or cause to be taken such actions and to
execute such documents, including without limitation, the filing of all
necessary UCC-1 financing statements filed in the State of Delaware and the
State of Kansas (which shall be submitted for filing as of the related
Subsequent Transfer Date), any continuation statements with respect thereto and
any amendments thereto required to reflect a change in the name or corporate
structure of the Transferor or the filing of any additional UCC-1 financing
statements due to the change in the principal office of the Transferor, as are
necessary to perfect and protect the interests of the Trustee and its assignees
in subsequent Mortgage Loans.
The related Mortgage File for each Subsequent Mortgage Loan shall be
delivered to the Certificate Administrator, on behalf of the Trustee, two
Business Days prior to the related Subsequent Transfer Date.
The Trustee on each Subsequent Transfer Date shall acknowledge its
acceptance of all right, title and interest to the related Subsequent Mortgage
Loans and other property, existing on the Subsequent Transfer Date and
thereafter created, conveyed to it pursuant to this Section 2.02.
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The Trustee, as trustee of the Trust Fund, shall be entitled to all
scheduled principal payments due after each Subsequent Cut-off Date, all other
payments of principal due and collected after each related Subsequent Cut-off
Date, and all payments of interest on the Subsequent Mortgage Loans, minus that
portion of any such payment which is allocable to the period prior to the
related Subsequent Cut-off Date. No scheduled payments of principal due on or
before the related Subsequent Cut-off Date and collected after the related
Subsequent Cut-off Date shall belong to the Trust Fund pursuant to the terms of
this Purchase Agreement.
The purchase price paid by the Certificate Administrator, at the
direction of the Trustee, from amounts released from the Pre-Funding Account
shall be one-hundred percent (100%) of the aggregate Principal Balances of the
Subsequent Mortgage Loans so transferred (as identified on the Mortgage Loan
Schedule attached to the related Subsequent Transfer Instrument provided by the
Seller).
(b) The Seller shall transfer to the Transferor, who shall transfer
to the Trustee, the Subsequent Mortgage Loans and the other property and rights
related thereto described in Section 2.02(a) above, and the Certificate
Administrator shall cause to be released funds from the related Pre-Funding
Account, only upon the satisfaction of each of the following conditions on or
prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Transferor, who shall have
provided the Certificate Administrator, and the Certificate Administrator shall
have provided the Trustee, with a timely Addition Notice, which notice shall be
given no fewer than six Business Days prior to the related Subsequent Transfer
Date and shall designate the Subsequent Mortgage Loans to be sold to the
Transferor and then to the Trustee and the aggregate Principal Balances of such
Subsequent Mortgage Loans as of the related Subsequent Cut-off Date and any
other information reasonably requested by the Certificate Administrator with
respect to the Subsequent Mortgage Loans;
(ii) the Seller shall have delivered to the Transferor, who shall
have delivered to the Trustee, who shall have delivered to the Certificate
Administrator and the Trustee, a duly executed Subsequent Transfer Instrument
substantially in the form of Exhibit 2(A) or 2(B), as applicable, (A) confirming
the satisfaction of each condition precedent and representations specified in
this Section 2.02(b), Section 2.02(c) and in the related Subsequent Transfer
Instrument and (B) including a Mortgage Loan Schedule attached thereto listing
the Subsequent Mortgage Loans;
(iii) as of each Subsequent Transfer Date, as evidenced by
delivery of the Seller's Subsequent Transfer Instrument in the form of Exhibit
2(A) and the Transferor's Subsequent Transfer Instrument is the form of Exhibit
2(B), neither the Seller nor the Transferor shall be insolvent or have been made
insolvent by such transfers, nor shall they be aware of any pending insolvency;
(iv) such sale and transfer shall not result in a material adverse
tax consequence to the Certificateholders;
(v) the Funding Period shall not have terminated; and
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(vi) the Seller shall have delivered to the Certificate
Administrator, the Trustee, and the Rating Agencies Opinions of Counsel
addressed to the Rating Agencies, the Trustee and the Certificate Administrator
with respect to the transfers of the Subsequent Mortgage Loans substantially in
the form of the Opinion of Counsel delivered to the Certificate Administrator,
the Trustee and the Rating Agencies on the Closing Date (1) regarding certain
corporate matters and (2) confirming the existence of a true sale.
(c) The obligation of the Trustee to purchase a Subsequent Mortgage
Loan on any Subsequent Transfer Date is subject to the following conditions: (1)
each such Subsequent Mortgage Loan shall satisfy the representations and
warranties specified in the related Subsequent Transfer Instrument and this
Purchase Agreement; (2) the Seller shall not select such Subsequent Mortgage
Loans in a manner that it reasonably believes is adverse to the interests of the
Majority Certificateholders; (3) the Seller shall have delivered certain
Opinions of Counsel required pursuant to Section 2.02(b)(vii) hereof; (4) as of
the related Subsequent Cut-off Date, the Subsequent Mortgage Loans shall satisfy
the following criteria: (i) each Subsequent Mortgage Loan shall not be 30 or
more days contractually delinquent as of the related Subsequent Cut-off Date;
(ii) the remaining stated term to maturity of each Subsequent Mortgage Loan
shall not exceed 360 months; (iii) the lien securing each Subsequent Mortgage
Loan shall be first priority; (iv) each Subsequent Mortgage Loan shall have an
outstanding Principal Balance of at least $10,000; (v) each Subsequent Mortgage
Loan shall be underwritten in accordance with the Underwriting Guidelines; (vi)
each Subsequent Mortgage Loan shall have a Loan-to-Value Ratio of no more than
103%; (vii) each Subsequent Mortgage Loan shall have a stated maturity of no
later than January 1, 2031; (viii) no Subsequent Mortgage Loan shall permit
negative amortization; (ix) each Subsequent Mortgage Loan shall either have a
fixed Mortgage Rate of at least 8% or, if an adjustable loan, a Gross Margin of
at least 3.5%; (x) a minimum of 75% of the Subsequent Mortgage Loans (by
Subsequent Cut-off Date Principal Balance) shall have an adjustable Mortgage
Rate; (xi) the weighted average Loan-to-Value Ratio of the Subsequent Mortgage
Loans (by Subsequent Cut-off Date Principal Balance) shall be no more than 87%;
(xii) approximately 97% of the Subsequent Mortgage Loans shall either (A) have a
Loan-to-Value Ratio of no more than 50% or (B) have a Loan-to-Value Ratio of
greater than 50% and be covered by an MI Policy; (xiii) the Subsequent Mortgage
Loans (by Subsequent Cut-off Date Principal Balance) shall have a weighted
average coupon of at least 10.40%; (xiv) pursuant to the Underwriting
Guidelines, no fewer than 40% of the Subsequent Mortgage Loans (by Subsequent
Cut-off Date Principal Balance) shall be AAA and AA credit risks, no fewer than
20% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal
Balance) shall be A and A- credit risks, and no fewer than 10% of the Subsequent
Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall be B, C, and
C- credit risks; (xv) no greater than 20% of such Subsequent Mortgage Loans (by
Subsequent Cut-off Date Principal Balance) shall be FICO Enhanced loans pursuant
to the Underwriting Guidelines; (xvi) the Subsequent Mortgage Loans (by
Subsequent Cut-off Date Principal Balance) shall have a weighted average FICO
score issued by a consumer credit rating agency of at least 605; (xvii) at least
85% of such Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal
Balance) shall be loans for primary residences; (xviii) no more than 35% of the
Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall
have stated loan documentation; (xix) at least 70% of the Subsequent Mortgage
Loans (by Subsequent Cut-off Date Principal Balance) shall be loans for single
family residences; (xx) no more than 50% of the
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Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall
be loans that are the subject of cash-out refinances.
The acceptance of the Subsequent Mortgage Loans by the Trustee is
subject to the Seller receiving a written consent from each of the Rating
Agencies that states that the addition of such Subsequent Mortgage Loans will
not cause the Rating Agencies to downgrade any of their ratings on the
Underwritten Certificates.
Notwithstanding the foregoing, Subsequent Mortgage Loans with
characteristics varying from those set forth above may be purchased by the
Trustee and included in the Trust Fund, if (i) the aggregate credit risk of such
Subsequent Mortgage Loans is similar to that of the Initial Mortgage Loans and
(ii) the Seller receives a written consent from each of the Rating Agencies that
states that the addition of such Subsequent Mortgage Loans will not cause the
Rating Agencies to downgrade any of their ratings of the Underwritten
Certificates.
(d) Within five Business Days after the end of the Funding Period,
the Seller shall deliver to the Rating Agencies, the Trustee and the Certificate
Administrator a copy of the updated Mortgage Loan Schedule including the
Subsequent Mortgage Loans in electronic format.
Section 2.03 Pre-Funding Account.
(a) No later than the Closing Date, the Certificate Administrator
will establish and maintain, on behalf of the Trustee, pursuant to the Pooling
and Servicing Agreement the Pre-Funding Account. On the Closing Date, the
Trustee will deposit in the Pre-Funding Account the Original Pre-Funded Amount
from the net proceeds of the sale of the Underwritten Certificates.
Section 2.04 Interest Coverage Account.
(a) No later than the Closing Date, the Certificate Administrator
will establish and maintain, on behalf of the Trustee, pursuant to the Pooling
and Servicing Agreement the Interest Coverage Account. On the Closing Date, the
Trustee will deposit in the Interest Coverage Account the Interest Coverage
Amount from the net proceeds of the sale of the Underwritten Certificates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.01 Seller Representations and Warranties.
The Seller hereby represents and warrants to the Transferor and the
Trustee as of the date hereof, as of the Closing Date (or if otherwise specified
below, as of the date so specified) and as of each Subsequent Transfer Date:
(a) As to the Seller:
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(i) The Seller (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Virginia and (ii)
is qualified and in good standing as a foreign corporation to do business in
each jurisdiction where such qualification is necessary, except where the
failure so to qualify would not have a material adverse effect on the Seller's
ability to enter into this Purchase Agreement and each Seller's Subsequent
Transfer Instrument and to consummate the transactions contemplated hereby and
thereby;
(ii) The Seller has the power and authority to make, execute,
deliver and perform its obligations under this Purchase Agreement and each
Seller's Subsequent Transfer Instrument and all of the transactions contemplated
under this Purchase Agreement and each Seller's Subsequent Transfer Instrument,
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Purchase Agreement and each Seller's Subsequent
Transfer Instrument;
(iii) The Seller is not required to obtain the consent of any
other Person or any consent, approval or authorization from, or registration or
declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Purchase Agreement or any Seller's Subsequent Transfer Instrument, except for
such consents, approvals or authorization, or registration or declaration, as
shall have been obtained or filed, as the case may be;
(iv) The execution and delivery of this Purchase Agreement and
each Seller's Subsequent Transfer Instrument and the performance of the
transactions contemplated hereby by the Seller will not violate any provision of
any existing law or regulation or any order or decree of any court applicable to
the Seller or any provision of the certificate of incorporation or bylaws of the
Seller, or constitute a material breach of any mortgage, indenture, contract or
other agreement to which the Seller is a party or by which the Seller may be
bound;
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the knowledge
of the Seller threatened, against the Seller or any of its properties or with
respect to this Purchase Agreement or any Seller's Subsequent Transfer
Instrument, the Certificates which in the opinion of the Seller has a reasonable
likelihood of resulting in a material adverse effect on the transactions
contemplated by this Purchase Agreement or any Seller's Subsequent Transfer
Instrument;
(vi) This Purchase Agreement and each Seller's Subsequent Transfer
Instrument constitute the legal, valid and binding obligations of the Seller,
enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity);
(vii) This Purchase Agreement constitutes a valid transfer and
assignment to the Transferor of all right, title and interest of the Seller in
and to the Cut-off Date Principal Balance of the Initial Mortgage Loans, all
monies due or to become due with respect thereto, and all proceeds of such
Cut-off Date Principal Balance of the Initial Mortgage Loans, and this
10
Purchase Agreement and the related Seller's Subsequent Transfer Instrument
constitutes a valid transfer and assignment to the Trustee of all right, title
and interest of the Seller in and to the Subsequent Cut-off Date Principal
Balance of the Subsequent Mortgage Loans, all monies due or to become due with
respect thereto, and all proceeds of such Subsequent Cut-off Date Principal
Balance of the Subsequent Mortgage Loans;
(viii) The Seller is not in default with respect to any order or
decree of any court or any order or regulation of any federal, state or
governmental agency, which default might have consequences that would materially
and adversely affect the condition (financial or other) or operations of the
Seller or its properties or might have consequences that would materially
adversely affect its performance hereunder; and
(ix) The Servicer or any Subservicer who will be servicing any
Mortgage Loan pursuant to the Pooling and Servicing Agreement or a Subservicing
Agreement is qualified to do business in all jurisdictions in which its
activities as Servicer or Subservicer of the Mortgage Loans serviced by it
require such qualifications except where failure to be so qualified will not
have a material adverse effect on such servicing activities.
(b) As to each Initial Mortgage Loan as of the Closing Date, and
with respect to each Subsequent Mortgage Loan as of the Subsequent Transfer
Date, except as otherwise expressly stated:
(i) The information set forth on the Mortgage Loan Schedule with
respect to each Initial Mortgage Loan is true and correct in all material
respects as of the Closing Date, and with respect to each Subsequent Mortgage
Loan is true and correct in all material respects as of the related Subsequent
Transfer Date, and the information regarding the Initial Mortgage Loans and the
Subsequent Mortgage Loans on the computer diskette or tape delivered to the
Trustee prior to the Closing Date or Subsequent Transfer Date, as applicable, is
true and accurate in all material respects and describes the same Mortgage Loans
as the Mortgage Loans on the Mortgage Loan Schedule;
(ii) The Mortgage Loans are not being transferred with any intent
to hinder, delay or defraud any creditors;
(iii) No more than 4.31% of the Initial Mortgage Loans (by Cut-off
Date Principal Balance) were secured by condominium units; no more than 4.67% of
the Initial Mortgage Loans (by Cut-off Date Principal Balance) were secured by
attached housing; and no more than 11.73% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) were secured by properties in planned unit
developments;
(iv) As of the Cut-off Date, (a) the remaining term of each
Mortgage Loan is not more than 360 months and not less than 115;
(v) No more than 39.14% of the Initial Mortgage Loans (by Cut-off
Date Principal Balance) have been the subject of cash-out refinances;
11
(vi) No more than 10.51% of the Initial Mortgage Loans (by Cut-off
Date Principal Balance) have been the subject of rate and term (no cash-out)
refinances;
(vii) No fewer than 50.20% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) are purchase money loans;
(viii) No more than 12.69% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) are secured by Mortgaged Properties located in
the State of Florida, no more than 11.61% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) are secured by Mortgaged Properties located in
the State of California and no more than 10% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) are located in any other state;
(ix) The original Principal Balances of the Initial Mortgage Loans
that have an adjustable mortgage rate (by Cut-off Date Principal Balance) ranged
from $6.375 to $13.625, respectively; the average outstanding Principal Balance
of the Initial Mortgage Loans that have an adjustable mortgage rate is
approximately $127,656.90; the original Principal Balances of the Initial
Mortgage Loans that have a fixed mortgage rate (by Cut-off Date Principal
Balance) range from $8.75 to $13.375, respectively; the average outstanding
Principal Balance of the Initial Mortgage Loans that have an fixed rate is
approximately $98,254.52.
(x) At least 77.22% of the Initial Mortgage Loans (by Cut-off Date
Principal Balance) were secured by a first lien on a parcel of real property
improved by a detached single family residence; no more than 4.67% of the
Initial Mortgage Loans (by Cut-off Date Principal Balance) were secured by a
first lien on a parcel of real estate improved by a two-to four-unit single
family residence; and no more than 2.08% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) were secured by a first lien on a parcel of real
estate improved by manufactured housing;
(xi) [RESERVED];
(xii) The Mortgage Rates borne by adjustable rate Initial Mortgage
Loans as of the Cut-off Date range from 6.375% per annum to 13.625% per annum,
and the weighted average Mortgage Rate (by Cut-off Date Principal Balance) of
the Initial Mortgage Loans was 10.509%, per annum; the Mortgage Rates borne by
fixed rate Initial Mortgage Loans as of the Cut-off Date range from 8.875% per
annum to 13.375% per annum, and the weighted average Mortgage Rate (by Cut-off
Date Principal Balance) of the Initial Mortgage Loans was 10.976% per annum;
(xiii) Approximately 58.61% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) have a Loan-to-Value Ratio in excess of 80%. No
Initial Mortgage Loan in the Mortgage Pool had a Loan-to-Value Ratio at
origination in excess of 100%, and the weighted average Loan-to-Value Ratio, (by
Cut-off Date Principal Balance) of the Initial Mortgage Loans was equal to or
less than 83.22%.
(xiv) All of the Initial Mortgage Loans are secured by first liens
on the related Mortgaged Property;
(xv) [Reserved]
12
(xvi) There is no valid offset, right of rescission, defense,
claim or counterclaim of any obligor under any Mortgage Note or Mortgage,
including the obligation of the Mortgagor to pay the unpaid principal of or
interest on such Mortgage Note, and any applicable right of rescission has
expired, nor will the operation of any of the terms of such Mortgage Note or
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, recoupment, counterclaim or defense, including, without
limitation, the defense of usury, and no such right of rescission, set-off,
recoupment, counterclaim or defense has been asserted with respect thereto, and,
to the best of Seller's knowledge, no Mortgagor of the applicable Mortgage was a
debtor in any state or federal bankruptcy or insolvency proceeding;
(xvii) There are no mechanics' liens or claims for work, labor or
material affecting any Mortgaged Property which are or may be a lien prior to,
or equal with, the lien of such Mortgage, except those which are insured against
by the title insurance policy referred to in clause (xix) below;
(xviii) As of the Cut-off Date in the case of an Initial Mortgage
Loan or as of the related Subsequent Cut-off Date in the case of a Subsequent
Mortgage Loan, each Mortgaged Property is free of material damage and is in good
repair and there is no proceeding pending or threatened for the total or partial
condemnation of any Mortgage Property;
(xix) Each Mortgage is a valid and enforceable first lien on the
Mortgaged Property securing the related Mortgage Note and each Mortgaged
Property is owned by the Mortgagor in fee simple (except with respect to common
areas in the case of condominiums, PUDs and de minimis PUDs) subject only to (1)
the lien of nondelinquent current real property taxes and assessments, (2)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording of such Mortgage, such
exceptions appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal made in connection with the
origination of the related Mortgage Loan or referred to in the lender's title
insurance policy delivered to the originator of the related Mortgage Loan 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 such Mortgage. Immediately prior to the sale of such Mortgage Loan to the
Transferor in the case of an Initial Mortgage Loan and to the Trustee in the
case of a Subsequent Mortgage Loan pursuant to this Purchase Agreement, the
Seller had full right to sell and assign the same to the Transferor or the
Trustee, as the case may be. Immediately following the sale of such Mortgage
Loan to the Transferor and the Transferor's assignment and sale thereof to the
Depositor in the case of an Initial Mortgage Loan, the Depositor will have good
title thereto subject to no claims or liens. Immediately following the sale of
such Mortgage Loan to the Depositor in the case of an Initial Mortgage Loan and
the Depositor's assignment and sale thereof of such Mortgage Loan to the Trustee
in the case of an Initial Mortgage Loan, the Trustee will have good title
thereto subject to no claims or liens. Immediately following the sale of such
Mortgage Loan to the Transferor and the Transferor's assignment and sale thereof
to the Trustee in the case of a Subsequent Mortgage Loan, the Trustee will have
good title thereto subject to no claims or liens;
(xx) Each Mortgage Loan at origination complied in all material
respects with applicable state and federal laws, including, without limitation,
usury, equal credit opportunity,
13
real estate settlement procedures, the Truth In Lending Act of 1968, as amended,
and disclosure laws and consummation of the transactions contemplated hereby,
including without limitation, the receipt of interest by the owner of such
Mortgage Loan or the Holders of Certificates secured thereby, will not violate
any such laws. Each Mortgage Loan is being serviced in all material respects in
accordance with applicable state and federal laws, including, without
limitation, the Truth In Lending Act of 1968, as amended, and other consumer
protection laws, real estate settlement procedures, usury, equal credit
opportunity and disclosure laws;
(xxi) Neither the Seller nor any prior holder of any Mortgage has
impaired, waived, altered or modified the Mortgage or Mortgage Notes in any
material respect (except that a Mortgage Loan may have been modified by a
written instrument which has been recorded, if necessary to protect the
interests of the owner of such Mortgage Loan or the Certificates, and which has
been delivered to the Trustee); satisfied, canceled or subordinated such
Mortgage in whole or in part; released the applicable Mortgaged Property in
whole or in part from the lien of such Mortgage; or executed any instrument of
release, cancellation or satisfaction with respect thereto;
(xxii) A lender's policy of title insurance (on an ALTA or CLTA
form) or binder, or other assurance of title customary in the relevant
jurisdiction insuring the first lien priority of the Mortgage Loan in an amount
at least equal to the original Principal Balance of each such Mortgage Loan or a
commitment binder or commitment to issue the same was effective on the date of
the origination of each Mortgage Loan, each such policy is valid and remains in
full force and effect, and each such policy was issued by a title insurer
qualified to do business in the jurisdiction where the Mortgaged Property is
located, which policy insures the Seller and successor owners of indebtedness
secured by the insured Mortgage as to the first or second priority lien of the
Mortgage as applicable. The Seller is, and such successor owners will be, the
sole insured under such lender's title insurance policy; no claims have been
made under such mortgage title insurance policy; no prior holder of the
applicable Mortgage, including the Seller, has done, by act or omission,
anything which would impair the coverage of such mortgage title insurance
policy; and each such policy, binder or assurance contains all applicable
endorsements;
(xxiii) All of the improvements which were included for the
purpose of determining the Appraised Value of the Mortgaged Property lie wholly
within the boundaries and building restriction lines of such property and no
improvements on adjoining properties encroach upon the Mortgaged Property;
(xxiv) No improvement located on or being part of the Mortgaged
Property is in violation of any applicable zoning law or regulation, subdivision
law or ordinance, except where the failure to comply would not have a material
adverse effect on the market value of the Mortgaged Property. 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 and fire underwriting certificates, have been made or obtained from
the appropriate authorities and the Mortgaged Property is lawfully occupied
under applicable law except where the failure to comply would not have a
material adverse effect on the market value of the Mortgaged Property;
14
(xxv) Each Mortgage Note and the applicable Mortgage are genuine,
and each is the legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency, reorganization, moratorium, receivership and other similar laws
relating to creditors' rights generally or by equitable principles (regardless
of whether such enforcement is considered in a proceeding in equity or at law).
All parties to the Mortgage Note and the Mortgage had legal capacity to execute
the Mortgage Note and the Mortgage and each Mortgage Note and Mortgage has been
duly and properly executed by such parties;
(xxvi) The proceeds of the Mortgage Loans have been fully
disbursed, there is no requirement for future advances thereunder and any and
all requirements as to completion of any on-site or off-site improvements and as
to disbursement of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making, closing or recording the Mortgage Loans
were paid and the Mortgagor is not entitled to any refund of amounts paid or due
under the Mortgage Note;
(xxvii) Each Mortgage contains customary and enforceable
provisions that render the rights and remedies of the holder thereof adequate
for the realization against the Mortgaged Property of the benefits of the
security, including (i) in the case of a Mortgage designated as a deed of trust,
by trustee's sale, and (ii) otherwise by judicial foreclosure or if applicable,
non-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 title to the property, subject to any applicable rights of
redemption;
(xxviii) With respect to each Mortgage constituting a deed of
trust, either a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is named in such
Mortgage or if no duly qualified trustee has been properly designated and so
serves, the Mortgage contains satisfactory provisions for the appointment of
such trustee by the holder of the Mortgage at no cost or expense to such holder,
and no fees or expenses are or will become payable by the Certificateholders to
the trustee under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor;
(xxix) There exist no deficiencies with respect to escrow deposits
and payments, if such are required, for which customary arrangements for
repayment thereof cannot be made, and no escrow deficits or payments of other
charges or payments due the Seller have been capitalized under the Mortgage or
the applicable Mortgage Note;
(xxx) The Mortgage Note is not and has not been secured by any
collateral, pledged account or other security other than real estate securing
the Mortgagor's obligations and no Mortgage Loan is secured by more than one
Mortgaged Property;
(xxxi) As of the Closing Date in the case of an Initial Mortgage
Loan and as of the related Subsequent Transfer Date in the case of a Subsequent
Mortgage Loan, the improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy substantially acceptable to FNMA and
acceptable to the Seller which policy provides for fire extended coverage and
such other hazards as are customary in the area where
15
the Mortgaged Property is located representing coverage in an amount not less
than the lesser of (A) the maximum insurable value of the improvements securing
such Mortgage Loan and (B) the outstanding Principal Balance of the related
Mortgage Loan; if the improvement on the Mortgaged Property is a condominium
unit, it is included under the coverage afforded by a blanket policy for the
condominium project. All individual insurance policies contain a standard
mortgagee clause naming the Seller or the original holder of the Mortgage, and
its successors in interest, as mortgagee, and the Seller has received no notice
that any premiums due and payable thereon have not been paid; the Mortgage
obligates the Mortgagor thereunder to maintain all such insurance at the
Mortgagor's cost and expense, and upon the Mortgagor's failure to do so,
authorizes the holder of the Mortgage to obtain and maintain such insurance at
the Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor. There has been no 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;
(xxxii) If the Mortgaged Property is in an area identified in the
Federal Register by the Federal Emergency Management Agency as having special
flood hazards, a flood insurance policy in a form meeting the requirements of
the current guidelines of the Flood Insurance Administration is in effect with
respect to such Mortgaged Property with a generally acceptable carrier in an
amount representing coverage not less than the least of (A) the outstanding
Principal Balance of the Mortgage Loan, (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis and (C) the maximum
amount of flood coverage that is available under federal law;
(xxxiii) Except for the Mortgage Loans referred to in clause (xii)
as being delinquent, there is no material monetary default, breach, violation or
event of acceleration existing under the Mortgage or the applicable Mortgage
Note; and no material event which, with the passage of time or with notice and
the expiration of any grace or cure period, would constitute a material default,
breach, violation or event of acceleration, and neither the Seller, any of its
affiliates nor any servicer or subservicer of any related Mortgage Loan has
waived any default, breach, violation or event of acceleration; no foreclosure
action is threatened or has been commenced with respect to the Mortgage Loan;
(xxxiv) Each Mortgage Loan is being serviced by the Servicer;
(xxxv) There is no obligation on the part of the Seller or any
other party to make any payments with respect to the related Mortgage Loan in
addition to the Monthly Payments required to be made by the applicable
Mortgagor;
(xxxvi) Any future advances made prior to the Cut-off Date in the
case of an Initial Mortgage Loan and as of the related Subsequent Transfer Date
in the case of a Subsequent Mortgage Loan, with respect to any Mortgage Loan
have been consolidated with the outstanding principal amount secured by such
Mortgage, and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term reflected on the Mortgage Loan Schedule.
Except with respect to the Negative Amortization Loans, the consolidated
principal amount does not exceed the original principal amount of the Mortgage
Loan. The Mortgage Note with respect to any Mortgage Loan does not permit or
obligate the Servicer to make future advances to the Mortgagor at the option of
the Mortgagor;
16
(xxxvii) The Seller has caused or will cause to be performed any
and all acts required to preserve the rights and remedies of the Transferor, the
Depositor and the Trustee evidencing an interest in the Mortgage Loans in any
insurance policies applicable to the Mortgage Loans including, without
limitation, any necessary notifications of insurers, assignments of policies or
interests therein, and establishments of coinsured, joint loss payee and
mortgagee rights in favor of Trustee;
(xxxviii) Except as set forth in clause (xlii), there are no
defaults by the Mortgagor in complying with the terms of any Mortgage, and all
taxes, governmental assessments, insurance premiums, water, sewer and municipal
charges which previously became due and owing have been paid, or, if required by
the terms of the Mortgage Loan, 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. Except for (A) payments in the
nature of escrow payments and (B) interest accruing from the date of the
Mortgage Note or date of disbursement of the Mortgage proceeds to the day which
precedes by one month the Due Date of the first installment of principal and
interest, including, without limitation, taxes and insurance payments, the
Servicer 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 by the Mortgage;
(xxxix) At the time of origination, each Mortgaged Property was
the subject of an appraisal which conforms to the underwriting requirements of
the related originator; and the Mortgage File contains an appraisal of the
applicable Mortgaged Property;
(xl) None of the Mortgage Loans are graduated payment Mortgage
Loans or growth equity Mortgage Loans;
(xli) 79.20% of the Initial ARM Mortgage Loans are Convertible
Mortgage Loans;
(xlii) Except with respect to no more than 1% of the Initial
Mortgage Loans (by Cut-off Date Principal Balance), none of the payments of
principal of or interest on or in respect of any Initial Mortgage Loans shall be
30 days or more but less than 60 days past due as of the Cut-off Date; except
with respect to no more than 0.5% of the Initial Mortgage Loans (by Cut-off Date
Principal Balance), none of the payments of principal or interest on or in
respect of any Initial Mortgage Loans shall be 60 days or more but less than 90
days past due as of the Cut-off Date; and no Initial Mortgage Loan was 90 days
or more past due as of the Cut-off Date (except that one Initial Mortgage Loan
was past 90 days due as of the Cut-off Date, such loan having been repurchased
by the Seller); (b) except as set forth in clause (a) above, no Initial Mortgage
Loan has been contractually delinquent for more than one monthly installment
period during the twelve months preceding the Cut-off Date; (c) except as set
forth in clause (a) above, all payments required to be made by the Mortgagor
under the terms of the Mortgage Note have been made and credited; and (d) to the
Seller's knowledge, there was no delinquent recording, tax or assessment lien
against the property subject to any Mortgage, except where such lien was being
contested in good faith and a stay had been granted against levying on the
property;
17
(xliii) Upon payment of the Purchase Price for the Mortgage Loans
by the Transferor or the Trustee, as applicable, pursuant to this Purchase
Agreement, the Seller has transferred to the Transferor in the case of an
Initial Mortgage Loan and to the Trustee in the case of a Subsequent Mortgage
Loan, good and marketable title to each Mortgage Note and Mortgage free and
clear of any and all liens, claims, encumbrances, participation interests,
equities, pledges, charges or security interests of any nature and has or had
full right and authority, subject to no participation of or agreement with any
other person, to sell and assign the same, and following the sale of each
Initial Mortgage Loan, the Transferor or the Trustee, as applicable, will own
such Mortgage Loan free and clear of any encumbrance, equity interest,
participation interest, lien, pledge, charge, claim or security interest;
(xliv) The Seller acquired any right, title and interest in and to
the Mortgage Loans in good faith and without notice of any adverse claim;
(xlv) The Mortgage Note, the Mortgage, the related Assignment of
Mortgage and any other documents required to be delivered by the Seller have
been delivered to the Certificate Administrator. The Certificate Administrator
is in possession of a complete, true and accurate Mortgage File in accordance
with Section 2.01 hereof. Substantially all Mortgage Loans have monthly payments
due on the first day of each month and each Mortgage Loan had an original term
to maturity of no greater than 30 years;
(xlvi) Each Mortgage Loan contains a due-on-sale provision,
although each Mortgage Loan may be assumable if permitted by the Servicer under
certain circumstances;
(xlvii) Each of the Mortgage and the Assignment of Mortgage is in
recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located;
(xlviii) 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;
(xlix) To the best of the Seller's knowledge, there exists no
violation of any local, state, or federal environmental law, rule or regulation
in respect of the Mortgaged Property which violation has or could have a
material adverse effect on the market value of such Mortgaged Property. The
Seller has no knowledge of any pending action or proceeding directly involving
the related Mortgaged Property in which compliance with any environmental law,
rule or regulation is in issue; and, to the best of the Seller's knowledge,
nothing further remains to be done to satisfy in full all requirements of each
such law, rule or regulation constituting a prerequisite to the use and
employment of such Mortgaged Property;
(l) Each Mortgage Loan conforms, and all such Mortgage Loans in
the aggregate conform, to the description thereof set forth in the Prospectus
and Prospectus Supplement in all material respects;
(li) Immediately prior to the transfer to the Transferor or the
Trustee, as applicable, the Seller had good and marketable title thereto, and
the Seller is the sole owner of beneficial title to and holder of the Mortgage
Loan. The Seller is conveying the same to the
18
Transferor or the Trustee, as applicable, free and clear of any and all liens,
claims, encumbrances, participation interests, equities, pledges, charges or
security interests of any nature and has full right and authority to sell and
assign the same pursuant to this Purchase Agreement, except for liens which will
be released simultaneously with such conveyance;
(lii) For each Mortgage Loan, the related Mortgage File contains a
true, accurate and correct copy of each of the documents and instruments
required to be included therein;
(liii) The Servicer meets all applicable requirements under the
Pooling and Servicing Agreement, is properly qualified to service each Mortgage
Loan and has been servicing each Mortgage Loan prior to the Cut-off Date or the
related Subsequent Cut-Off Date, as the case may be;
(liv) No instrument of release or waiver has been executed in
connection with the Mortgage Loans, and no Mortgagor has been released, in whole
or in part from its obligations in connection with a Mortgage Loan except in
connection with an assumption agreement which has been delivered to the Trustee;
(lv) On the basis of a representation by the Mortgagor at the time
of origination of the Mortgage Loans, at least 92% of the Initial Mortgage
Loans, respectively, (by Cut-off Date Principal Balance) will be secured by
Mortgages on owner-occupied primary residence properties;
(lvi) 67.92%, of the Initial Mortgage Loans, (by Cut-off Date
Principal Balance) provide for a balloon payment and each Mortgage Note with
respect to each such Mortgage Loan requires monthly payments of principal based
on 30 year amortization schedules and have scheduled maturity dates of 15 years
from the due date of the first monthly payment;
(lvii) No Mortgage Loan was originated based on an appraisal of
the related Mortgaged Property made prior to completion of construction of the
improvements thereon;
(lviii) None of the Mortgage Loans is a "buy down" mortgage loan;
(lix) [reserved]
(lx) No selection procedure reasonably believed by the Seller to
be adverse to the interests of the Certificateholders was utilized in selecting
the Mortgage Loans;
(lxi) The terms of the Mortgage Note related to each Adjustable
Rate Mortgage Loan provide that, following an initial period of one year and
nine months, two years, three years, five years, seven years or ten years
following the month in which such Mortgage Loan was originated and semiannually
or annually thereafter (each such date, an "Adjustment Date"), the Mortgage Rate
on such Mortgage Loan will be adjusted to equal the sum of (a) the related Index
and (b) a fixed percentage amount specified in the related Mortgage Note (each,
a "Gross Margin"); provided, however, that the Mortgage Rate generally will not
increase or decrease by the related Periodic Rate Cap, and will not increase
above a specified maximum Mortgage Rate over the life of the Adjustable Rate
Mortgage Loan (the "Maximum Mortgage Rate") or
19
decrease below a specified minimum Mortgage Rate over the life of the Adjustable
Rate Mortgage Loan (the "Minimum Mortgage Rate");
(lxii) None of the Initial Mortgage Loans (by Cut-off Date
Principal Balance) are negative amortization loans, and none of the Subsequent
Mortgage Loans shall be negative amortization loans;
(lxiii) No material misrepresentation, fraud or similar occurrence
with respect to a Mortgage Loan has taken place on the part of the Seller, its
affiliates or employees or any other person involved in the origination of the
Mortgage Loan or in the application for any insurance, including, but not
limited to the MI Policy, in relation to such Mortgage Loan;
(lxiv) Each 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;
(lxv) With respect to each Mortgage Loan secured by manufactured
housing, such manufactured housing is permanently affixed to a foundation and
constitutes real estate under applicable state law;
(lxvi) No Mortgage Loans are date of payment or simple interest
loans;
(lxvii) The sale, transfer, assignment and conveyance of Mortgage
Loans by the Seller pursuant to this Purchase Agreement is not subject to and
will not result in any tax, fee or governmental charge payable by the
Transferor, the Depositor, the Trustee, the Certificate Administrator or the
Trustee to any federal, state or local government ("Transfer Taxes") other than
Transfer Taxes which have or will be paid by the Seller as due; and
(lxviii) [reserved]
(lxix) Approximately 97.64% of the Initial Mortgage Loans (by
Cut-Off Date Principal Balance) with a Loan-to-Value Ratio greater than 50% are
covered by a MI Policy issued by an MI Insurer;
(lxx) Each of the Initial Mortgage Loans that is identified on
Schedule 1 hereto is covered by a MI Policy issued by the MI Insurer;
(lxxi) All requirements for the valid transfer of each MI Policy,
including any assignments or notices required in each MI Policy, have been
satisfied; and
(lxxii) As of the Closing Date with respect to each Initial
Mortgage Loan that is subject to a MI Policy and as of each Subsequent Transfer
Date with respect to each Subsequent Mortgage Loan that is subject to a MI
Policy, the Seller is unaware of any existing circumstances which would cause
the MI Insurer to deny a claim with respect to such Mortgage Loan.
Upon discovery by the Seller or upon notice from the Transferor,
the Depositor, the Trustee, or the Certificate Administrator, as applicable, of
a breach of any representation or
20
warranty in subsection (a) of this Section which materially and adversely
affects the interests of the Certificateholders the Seller shall, within 45 days
of its discovery or its receipt of notice of such breach, either (i) cure such
breach in all material respects or (ii) to the extent that such breach is with
respect to a Mortgage Loan or a Related Document, either (A) repurchase such
Mortgage Loan from the Trustee at the Repurchase Price, or (B) substitute one or
more Eligible Substitute Mortgage Loans for such Mortgage Loan, in each case in
the manner and subject to the conditions and limitations set forth below.
Upon discovery by the Seller or upon notice from the
Transferor, the Depositor, the Trustee, or the Certificate Administrator, as
applicable, of a breach of any representation or warranty in this subsection (b)
with respect to any Mortgage Loan or upon the occurrence of a Repurchase Event,
which materially and adversely affects the value of the related Mortgage Loan or
the interests of any Certificateholders or of the Transferor or the Trustee in
such Mortgage Loan (notice of which shall be given to the Transferor and the
Trustee by the Seller, if it discovers the same) the Seller shall, within 90
days after the earlier of its discovery or receipt of notice thereof, either
cure such breach or Repurchase Event in all material respects or either (i)
repurchase such Mortgage Loan from the Trustee at the Repurchase Price, or (ii)
substitute one or more Eligible Substitute Mortgage Loans for such Mortgage
Loan, in each case in the manner and subject to the conditions set forth below.
The Repurchase Price for any such Mortgage Loan repurchased by the Seller shall
be deposited or caused to be deposited by the Servicer in the Collection Account
maintained by it pursuant to Section 3.06 of the Pooling and Servicing
Agreement.
In the event that the Seller elects to substitute an Eligible
Substitute Mortgage Loan or Loans for a Deleted Mortgage Loan pursuant to this
Section 3.01, the Seller shall deliver to the Certificate Administrator on
behalf of the Trustee, with respect to such Eligible Substitute Mortgage Loan or
Loans, the original Mortgage Note and all other documents and agreements as are
required by Section 2.01 hereof, with the Mortgage Note endorsed as required by
such Section 2.01 hereof. No substitution will be made in any calendar month
after the Determination Date for such month. Monthly Payments due with respect
to Eligible Substitute Mortgage Loans in the month of substitution shall not be
part of the Trust Fund and will be retained by the Servicer and remitted by the
Servicer to the Seller on the next succeeding Payment Date. For the month of
substitution, distributions to the Payment Account pursuant to the Pooling and
Servicing Agreement will include the Monthly Payment due on a Deleted Mortgage
Loan for such month and thereafter the Seller shall be entitled to retain all
amounts received in respect of such Deleted Mortgage Loan. The Servicer shall
amend or cause to be amended the Mortgage Loan Schedule to reflect the removal
of such Deleted Mortgage Loan and the substitution of the Eligible Substitute
Mortgage Loan or Loans and the Servicer shall deliver the amended Mortgage Loan
Schedule to the Certificate Administrator and the Trustee. Upon such
substitution, the Eligible Substitute Mortgage Loan or Loans shall be subject to
the terms of this Purchase Agreement and the Pooling and Servicing Agreement in
all respects, the Seller shall be deemed to have made the representations and
warranties with respect to the Eligible Substitute Mortgage Loan contained
herein set forth in this Section 3.01(b), to the extent set forth in the
definition of "Eligible Substitute Mortgage Loan", as of the date of
substitution, and the Seller shall be obligated to repurchase or substitute for
any Eligible Substitute Mortgage Loan as to which a Repurchase Event has
occurred as provided herein. In connection with the substitution of one or more
Eligible Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
21
Servicer will determine the amount (such amount, a "Substitution Adjustment
Amount"), if any, by which the aggregate principal balance of all such Eligible
Substitute Mortgage Loans as of the date of substitution is less than the
aggregate principal balance of all such Deleted Mortgage Loans (after
application of the principal portion of the Monthly Payments due in the month of
substitution that are to be distributed to the Payment Account in the month of
substitution). The Seller shall pay the amount of such shortfall to the Servicer
for deposit into the Collection Account on the day of substitution, without any
reimbursement therefor.
Upon receipt by the Trustee of written notification, signed by
a Servicing Officer, of the deposit of such Repurchase Price or of such
substitution of an Eligible Substitute Mortgage Loan and deposit of any
applicable Substitution Adjustment Amount as provided above, the Certificate
Administrator shall, on behalf of the Trustee, cause to be released to the
Seller the related Mortgage File for the Mortgage Loan being repurchased or
substituted for and the Trustee shall execute and deliver such instruments of
transfer or assignment prepared by the Servicer, in each case without recourse,
as shall be necessary to vest in the Seller or its designee such Mortgage Loan
released pursuant hereto and thereafter such Mortgage Loan shall not be an asset
of the Trustee.
It is understood and agreed that the obligation of the Seller
to cure any breach with respect to or to repurchase or substitute for, any
Mortgage Loan as to which such a breach has occurred and is continuing shall,
except to the extent provided in Section 5.01 of this Purchase Agreement,
constitute the sole remedy respecting such breach available to the Transferor,
the Depositor, the Trustee, the Certificateholders (or the Certificate
Administrator on behalf of the Trustee for the benefit of Certificateholders)
against the Seller.
It is understood and agreed that the representations and
warranties set forth in this Section 3.01 shall survive delivery of the
respective Mortgage Files to the Certificate Administrator.
(c) As to the Cap Agreements as of the Closing Date:
(i) The information set forth on Exhibit 2 with respect to each
Cap Agreement is true and correct in all material respects as of the Closing
Date;
(ii) The Cap Agreements are not being transferred with any intent
to hinder, delay or defraud any creditors; and
(iii) Immediately prior to the transfer to the Transferor, the
Seller had good and marketable title to its rights under the Cap Agreements. The
Seller is conveying the same to the Transferor or the Trustee, as applicable,
free and clear of any and all liens, claims, encumbrances, participation
interests, equities, pledges, charges or security interests of any nature and
has full right and authority to sell and assign the same pursuant to this
Purchase Agreement, except for liens which will be released simultaneously with
such conveyance.
Section 3.02 Transferor Representations and Warranties.
The Transferor hereby represents and warrants to the Seller as of
the date hereof and as of the Closing Date that:
22
(a) The Transferor is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted.
(b) The Transferor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its property
or the conduct of its business shall require such qualifications and in which
the failure to so qualify would have a material adverse effect on the business,
properties, assets or condition (financial or other) of the Transferor and the
ability of the Transferor to perform under this Purchase Agreement.
(c) The Transferor has the power and authority to execute and
deliver this Purchase Agreement and to carry out its terms; the Transferor has
full power and authority to purchase the property to be purchased from the
Seller and the Transferor has duly authorized such purchase by all necessary
corporate action; and the execution, delivery and performance of this Purchase
Agreement have been duly authorized by the Transferor by all necessary corporate
action.
(d) The consummation of the transactions contemplated by this
Purchase Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Transferor, or any indenture, agreement or other
instrument to which the Transferor is a party or by which it is bound; nor
result in the creation or imposition of any Lien upon any of its properties
pursuant to the terms of any such indenture, agreement or other instrument
(other than pursuant to the Basic Documents); nor violate any law or, to the
best of the Transferor's knowledge, any order, rule or regulation applicable to
the Transferor of any court or of any federal or state regulatory body,
administrative agency or other governmental instrumentality having jurisdiction
over the Transferor or its properties.
(e) The Transferor (A) is a solvent entity and is paying its debts
as they become due and (B) after giving effect to the transfer of the Mortgage
Loans, will be a solvent entity and will have sufficient resources to pay its
debts as they become due.
Section 3.03 Depositor Representations and Warranties.
The Depositor hereby represents and warrants to the Seller as of the
date hereof and as of the Closing Date that:
(a) The Depositor is duly organized and validly existing as a
corporation in good standing under the laws of the State of North Carolina, with
power and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted.
(b) The Depositor is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its property
or the conduct of its business shall require such
23
qualifications and in which the failure to so qualify would have a material
adverse effect on the business, properties, assets or condition (financial or
other) of the Depositor and the ability of the Depositor to perform under this
Purchase Agreement.
(c) The Depositor has the power and authority to execute and deliver
this Purchase Agreement and to carry out its terms; the Depositor has full power
and authority to purchase the property to be purchased from the Transferor and
the Depositor has duly authorized such purchase by all necessary corporate
action; and the execution, delivery and performance of this Purchase Agreement
have been duly authorized by the Depositor by all necessary corporate action.
(d) The consummation of the transactions contemplated by this
Purchase Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Depositor, or any indenture, agreement or other
instrument to which the Depositor is a party or by which it is bound; nor result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); nor violate any law or, to the best of the
Depositor's knowledge, any order, rule or regulation applicable to the Depositor
of any court or of any federal or state regulatory body, administrative agency
or other governmental instrumentality having jurisdiction over the Depositor or
its properties.
ARTICLE IV
SELLER'S COVENANTS
Section 4.01 Covenants of the Seller.
The Seller hereby covenants as of the date hereof and as of the
Closing Date that, except for the transfer hereunder, on and after the Closing
Date, the Seller will not sell, pledge, assign or transfer to any other Person,
or grant, create, incur or assume any Lien on, any Mortgage Loan, whether now
existing or hereafter created, or any interest therein; the Seller will notify
the Certificate Administrator and the Trustee of the existence of any such Lien
on any Mortgage Loan immediately upon discovery thereof; and the Seller will
defend the right, title and interest of the Trustee, on its own behalf and as
assignee of the Transferor and the Depositor, in, to and under the Mortgage
Loans, whether now existing or hereafter created, against all claims of third
parties claiming through or under the Seller.
In the event that the Certificate Administrator or the Trustee
receives actual notice of any Transfer Taxes arising out of the transfer,
assignment and conveyance of the Mortgage Loans, on written demand by the
Certificate Administrator, or upon the Seller's otherwise being given notice
thereof by the Certificate Administrator, the Seller shall pay any and all such
Transfer Taxes (it being understood that the Holders of the Certificates, the
Depositor, the Certificate Administrator and the Trustee shall have no
obligation to pay such Transfer Taxes).
24
Section 4.02 Payment of Expenses.
(a) The Seller will pay on the Closing Date all expenses incident to
the performance of its obligations under this Purchase Agreement and the
Underwriting Agreement, including (i) the preparation, printing and any filing
of the preliminary prospectus, Prospectus Supplement and Prospectus (including
any schedules or exhibits and any document incorporated therein by reference)
originally filed and of each amendment or supplement thereto, (ii) the
preparation, printing and delivery to the Underwriter of this Purchase Agreement
and the Underwriting Agreement, the Pooling and Servicing Agreement and such
other documents as may be required in connection with the offering, purchase,
sale and delivery of the Certificates, (iii) the preparation, issuance and
delivery of the certificates for the Class A Certificates to the Underwriter,
including any charges of DTC, CEDEL, S.A. and the Euroclear System in connection
therewith; (iv) the qualification of the Class A-1 Certificates, Mezzanine
Certificates and Class AIO Certificates under securities laws in accordance with
the provisions of Section 3(f) of the Underwriting Agreement, including filing
fees and the reasonable fees and disbursements of counsel for the Underwriter in
connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto for delivery to potential investors, (v) in
addition to the initial printing and filing costs under (i) above, the printing
and delivery to the Underwriter of copies of each preliminary prospectus and of
the Prospectus and any amendments or supplements thereto for delivery to
potential investors, (vi) the fees and expenses of the Trustee and the
Certificate Administrator, including the fees and disbursements of counsel for
the Trustee, the Certificate Administrator in connection with the Pooling and
Servicing Agreement and the Certificates and (vii) any fees payable in
connection with the rating of the Certificates.
(b) If the Underwriting Agreement is terminated by the Underwriter
in accordance with the provisions of Section 5 or Section 9(a)(i) thereof, the
Seller shall reimburse the Underwriter for all of their out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the Underwriter.
ARTICLE V
CONDITIONS TO INITIAL MORTGAGE LOAN PURCHASE
Section 5.01 Conditions of Transferor's and the Depositor's Obligations.
The Transferor's and the Depositor's respective obligations to
purchase the Initial Mortgage Loans which each accepts for purchase hereunder
shall be subject to each of the following conditions:
(i) the Mortgage File for each Initial Mortgage Loan shall have
been delivered in accordance with this Purchase Agreement;
(ii) the representations and warranties set forth in Section
3.01(b) hereof with respect to each Initial Mortgage Loan shall be true as of
the Closing Date;
(iii) The Underwriter or its affiliates shall have had an
opportunity to perform a due diligence review of each Mortgage Loan; and
25
(iv) The Seller shall have provided to the Underwriter or its
affiliates such other documents which are then required to have been delivered
under this Purchase Agreement or which are reasonably requested by the
Underwriter or its affiliates, which other documents may include UCC financing
statements, a favorable opinion or opinions of counsel with respect to matters
which are reasonably requested by the Underwriter, and/or an Officers'
Certificate.
ARTICLE VI
INDEMNIFICATION BY THE SELLER
WITH RESPECT TO THE MORTGAGE LOANS
Section 6.01 Indemnification With Respect to the Mortgage Loans.
The Seller shall indemnify and hold harmless the Transferor and the
Depositor from and against any loss, liability or expense arising from the
breach by the Seller of its representations and warranties in Section 3.01 of
this Purchase Agreement which materially and adversely affects the value of any
Mortgage Loan or the Transferor's or the Depositor's assignees' interest in any
Mortgage Loan or from the failure by the Seller to perform its obligations under
this Purchase Agreement in any material respect.
Section 6.02 Limitation on Liability of the Seller.
None of the directors, officers, employees or agents of the Seller
shall be under any liability to the Transferor or the Depositor, it being
expressly understood that all such liability is expressly waived and released as
a condition of, and as consideration for, the execution of this Purchase
Agreement. Except as and to the extent expressly provided in the Basic
Documents, the Seller shall not be under any liability to the Trustee, the
Certificate Administrator or the Certificateholders. The Seller and any
director, officer, employee or agent of the Seller may rely in good faith on any
document of any kind prima facie properly executed and submitted by any Person
respecting any matters arising hereunder.
ARTICLE VII
TERMINATION
Section 7.01 Termination.
(a) Except as provided in Section 7.01(b) hereof, the respective
obligations and responsibilities of the Seller, the Transferor, the Depositor,
the Trustee and the Certificate Administrator created hereby shall terminate,
except for the Seller's indemnity obligations as provided herein, upon the
termination of the Trust Fund pursuant to the terms of the Pooling and Servicing
Agreement.
(b) The Depositor may terminate this Purchase Agreement, by notice
to the Seller, at any time at or prior to the Closing Date:
26
(i) if the Underwriting Agreement is terminated by the Underwriter
pursuant to the terms of the Underwriting Agreement or if there has been, since
the time of execution of this Purchase Agreement or since the respective dates
as of which information is given in the Prospectus, any material adverse change
in the financial condition, earnings, business affairs or business prospects of
the Seller, whether or not arising in the ordinary course of business, or
(ii) if there has occurred any material adverse change in the
financial markets in the United States, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Underwriter, impracticable to market the Class A-1
Certificates, Mezzanine Certificates, the Class P Certificates and Class AIO
Certificates or to enforce contracts for the sale of the Class A-1 Certificates,
Mezzanine Certificates, the Class P Certificates and Class AIO Certificates, or
(iii) if trading in any securities of the Seller has been
suspended or limited by the Commission or the New York Stock Exchange, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the NASDAQ National Market System has been suspended or limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority,
(iv) if a banking moratorium has been declared by either Federal
or New York authorities,
(v) either (A) a change in control of the Seller shall have
occurred other than in connection with and as a result of the issuance and sale
by the Seller or registered, publicly offered common stock; or (B) the
Underwriter determines in its sole discretion that any material adverse change
has occurred in the management of the Seller,
(vi) there is (A) a material breach by the Seller of any
representation and warranty contained in this Purchase Agreement or the
Underwriting Agreement other than a representation or warranty relating to
particular Mortgage Loans, and the Underwriter has reason to believe in good
faith either that such breach is not curable within two (2) days or that such
breach may not have been cured in all material respects at the expiration of two
(2) days following discovery thereof by the Seller or (B) a failure by the
Seller to make any payment payable by it under this Purchase Agreement or (C)
any other failure by the Seller to observe and perform in any material respect
its material covenants, agreements and obligations with the Transferor or the
Depositor, including without limitation those contained in this Purchase
Agreement, and the Transferor or the Depositor has reason to believe in good
faith that such failure may not have been cured in all material respects at the
expiration of two (2) days following discovery thereof by the Seller, or
(vii) the Seller fails to provide written notification to the
Underwriter of any change in its loan origination, acquisition or appraisal
guidelines or practices, or the Seller,
27
without the prior consent of the Underwriter (which shall not be unreasonably
withheld), amends in any material respect its loan origination, acquisition or
appraisal guidelines or practices.
If this Purchase Agreement is terminated pursuant to this Section
7.01(b), such termination shall be without liability of any party to any other
party except as provided in Section 4.02 hereof.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01 Amendment.
This Purchase Agreement may be amended from time to time by the
Seller, the Transferor and the Depositor by written agreement signed by the
Seller, the Transferor and the Depositor.
Section 8.02 Governing Law.
This Purchase Agreement shall be governed by and construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
Section 8.03 Notices.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by registered mail, postage prepaid, addressed as follows:
(i) if to the Seller:
NovaStar Mortgage, Inc.
ββββ ββββ ββββ βββββ
βββββ βββ
ββββββββ, ββββββ βββββ
Attention: βββββ β. βββββββ
or, such other address as may hereafter be furnished to the Transferor in
writing by the Seller.
(ii) if to the Transferor:
NovaStar Mortgage Funding Corporation III
ββββ β. ββββ βββββ
βββββ βββ
ββββββββ, ββββββ βββββ
Attention: βββββ ββββββββ
or such other address as may hereafter be furnished to the Seller in writing by
the Transferor.
28
(iii) if to the Depositor:
Residential Asset Funding Corporation
βββ βββββ βββββββ ββββββ
βββββββββ, βββββ ββββββββ βββββ
or such other address as may hereafter be furnished to the Seller in writing by
the Depositor.
(iv) if to the Certificate Administrator:
First Union National Bank
βββ β. βββββ ββββββ--ββββ βββββ
βββββββββ, βββββ ββββββββ βββββ-ββββ
Attention: NovaStar Mortgage Funding Trust,
Series 2000-2
or such other address as may hereafter be furnished to the Seller in writing by
the Certificate Administrator.
(v) if to the Trustee
The Chase Manhattan Bank
βββ ββββ ββββ ββββββ ββββ βββββ
βββ ββββ, βββ ββββ βββββ
Attention: Capital Markets Fiduciary Services,
NovaStar 2000-2
or such other address as may hereafter be furnished to the Seller in writing by
the Trustee.
Section 8.04 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or
terms of this Purchase Agreement shall be held invalid for any reason
whatsoever, then such covenants, agreements, provisions or terms shall be deemed
severable from the remaining covenants, agreements, provisions or terms of this
Purchase Agreement and shall in no way affect the validity or enforceability of
the other provisions of this Purchase Agreement.
Section 8.05 Relationship of Parties.
Nothing herein contained shall be deemed or construed to create a
partnership or joint venture between the parties hereto, and the services of the
Seller shall be rendered as an independent contractor and not as agent for the
Transferor or the Depositor.
Section 8.06 Counterparts.
This Purchase Agreement may be executed in two or more
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed to be an original and such
counterparts together shall constitute one and the same agreement.
29
Section 8.07 Further Agreements.
The Transferor, the Seller and the Depositor each agree to execute
and deliver to the other such additional documents, instruments or agreements as
may be necessary or appropriate to effectuate the purposes of this Purchase
Agreement. Each of the Transferor, the Seller and the Depositor agrees to use
its best reasonable efforts to take all actions necessary to be taken by it to
cause the Class A-1 Certificates to be rated "Aaa" by βββββ'β and "AAA" by S&P,
the Class AIO Certificates to be rated "Aaa" by βββββ'β and "AAAr" by S&P, the
Class M-1 Certificates to be rated "Aa2" by βββββ'β and "AA" by S&P, the Class
M-2 Certificates to be rated "A2" by βββββ'β and "A" by S&P, the Class M-3
Certificates to be rated "Baa2" by βββββ'β and "BBB" by S&P, the Class P
Certificates to be rated "AAA" by βββββ'β, and each party will cooperate with
the other in connection therewith.
Section 8.08 Intention of the Parties.
It is the intention of the parties that (i) the Transferor is
purchasing on the Closing Date, and the Seller is selling on the Closing Date,
the Initial Mortgage Loans, rather than the Transferor providing to the Seller a
loan secured by the Initial Mortgage Loans on the Closing Date, (ii) the
Depositor is purchasing on the Closing Date, and the Transferor is selling on
the Closing Date, the Initial Mortgage Loans, rather than the Depositor
providing to the Transferor a loan secured by the Initial Mortgage Loans, (iii)
the Trustee is purchasing on the Closing Date, and the Depositor is selling on
the Closing Date, the Initial Mortgage Loans, rather than the Trustee providing
to the Depositor a loan secured by the Initial Mortgage Loans, (iv) the
Transferor will be purchasing on each Subsequent Transfer Date, and the Seller
will be selling on each Subsequent Transfer Date, the related Subsequent
Mortgage Loans, rather than the Transferor providing to the Seller a loan
secured by the related Subsequent Mortgage Loans on each Subsequent Transfer
Date, and (v) the Trustee will be purchasing on each Subsequent Transfer Date,
and the Transferor will be selling on each Subsequent Transfer Date, the related
Subsequent Mortgage Loans, rather than the Trustee providing to the Transferor a
loan secured by the related Subsequent Mortgage Loans on each Subsequent
Transfer Date. Accordingly, the parties hereto each intend to treat these
transactions as (i) a sale by the Seller, and a purchase by the Transferor, of
the Initial Mortgage Loans on the Closing Date, (ii) a sale by the Transferor,
and a purchase by the Depositor, of the Initial Mortgage Loans on the Closing
Date, (iii) a sale by the Depositor, and a purchase by the Trustee, of the
Initial Mortgage Loans on the Closing Date, (iv) a sale by the Seller, and a
purchase by the Transferor, of the related Subsequent Mortgage Loans on each
Subsequent Transfer Date, and (v) a sale by the Transferor, and a purchase by
the Trustee, of the related Subsequent Mortgage Loans on each Subsequent
Transfer Date.
Section 8.09 Successors and Assigns; Assignment of Purchase Agreement.
This Purchase Agreement shall bind and inure to the benefit of and
be enforceable by the Seller, the Transferor, the Depositor, the Trustee, the
Certificate Administrator, and their respective successors and assigns. The
obligations of the Seller under this Purchase Agreement cannot be assigned or
delegated to a third party without the consent of the Transferor and the
Depositor, which consent shall be at the Transferor's and the Depositor's
discretion. The parties
30
hereto acknowledge that (i) the Transferor is acquiring the Initial Mortgage
Loans for the purpose of selling them to the Depositor, who is acquiring the
Initial Mortgage Loans to sell them to the Trustee, who will in turn pledge the
Initial Mortgage Loans to the Trustee for the benefit of the Certificateholders
and (ii) the Transferor is acquiring the Subsequent Mortgage Loans for the
purpose of selling them to the Trustee, who will hold the Subsequent Mortgage
Loans for the benefit of the Certificateholders. As an inducement to the
Transferor, the Depositor and the Trustee to purchase the Mortgage Loans, the
Seller acknowledges and consents to (i) the assignment by the Transferor to the
Depositor of all of the Transferor's rights against the Seller pursuant to this
Purchase Agreement and to the enforcement or exercise of any right or remedy
against the Seller pursuant to this Purchase Agreement by the Transferor, the
Depositor and the Trustee, and (ii) the assignment by the Depositor to the
Trustee of all of Depositor's rights or remedies against the Seller pursuant to
this Purchase Agreement and to the enforcement or exercise of any rights against
the Seller pursuant to this Purchase Agreement by the Transferor, the Depositor
and the Trustee. Such enforcement of a right or remedy by the Transferor, the
Depositor, the Trustee or the Trustee, as applicable, shall have the same force
and effect as if the right or remedy had been enforced or exercised by the
Transferor directly.
Section 8.10 Survival.
The representations and warranties made herein by the Seller and the
provisions of Article V hereof shall survive the purchase of the Mortgage Loans
hereunder.
Section 8.11 Liability of the Trustee.
The Trustee is entering into the Basic Documents to which it is a
party solely as Trustee, hereunder and thereunder, and not in its individual
capacity, and all persons having any claim against the Trustee by reason of the
transactions contemplated by this Agreement or any other Basic Document shall
look only to the Trust Fund for payment or satisfaction thereof.
31
IN WITNESS WHEREOF, the Seller, the Transferor, the Depositor, the
Certificate Administrator and the Trustee have caused their names to be signed
to this Mortgage Loan Purchase Agreement by their respective officers thereunto
duly authorized as of the day and year first above written.
NOVASTAR MORTGAGE, INC.
as Seller
By: /s/ βββββ ββββββββ
--------------------------------------
Name: βββββ ββββββββ
-------------------------------------
Title: Vice President
------------------------------------
NOVASTAR MORTGAGE FUNDING
CORPORATION III
as Transferor
By: /s/ βββββ ββββββββ
--------------------------------------
Name: βββββ ββββββββ
-------------------------------------
Title: Vice President
------------------------------------
RESIDENTIAL ASSET FUNDING CORPORATION
as Depositor
By: /s/ ββββ ββββββ
--------------------------------------
Name: ββββ ββββββ
-------------------------------------
Title: Vice President
------------------------------------
[Mortgage Loan Purchase Agreement Signature Page]
FIRST UNION NATIONAL BANK
as Certificate Administrator
By: /s/ ββββββ ββββββββ
--------------------------------------
Name: ββββββ ββββββββ
-------------------------------------
Title: Vice President
------------------------------------
THE CHASE MANHATTAN BANK,
not in its individual capacity,
but solely as Trustee
By: /s/ βββββ β. ββββββ
--------------------------------------
Name: βββββ β. ββββββ
-------------------------------------
Title: Vice President
------------------------------------
[Mortgage Loan Purchase Agreement Signature Page]
EXHIBIT 1
INITIAL MORTGAGE LOAN SCHEDULE
[On File With βββββ ββββββββββ LLP]
EXHIBIT 2(A)
SELLER'S SUBSEQUENT TRANSFER INSTRUMENT
Pursuant to this Seller's Subsequent Transfer Instrument (the
"Seller's Instrument"), dated as of September 1, 2000, between NovaStar
Mortgage, Inc. as seller (the "Seller"), and NovaStar Mortgage Funding
Corporation III, as transferor (the "Transferor"), and pursuant to the Mortgage
Loan Purchase Agreement, dated as of September 1, 2000 (the "Purchase
Agreement"), among the Seller, the Transferor, Residential Asset Funding
Corporation as depositor (the "Depositor"), First Union National Bank, as
Certificate Administrator and The Chase Manhattan Bank, as Trustee (the
"Trustee"), the Seller and the Transferor agree to the sale by the Seller and
the purchase by the Transferor of the subsequent Mortgage Loans listed on the
attached Mortgage Loan Schedule (the "Subsequent Mortgage Loans") and the
related MI Policies.
Capitalized terms used and not defined herein have their respective
meanings as set forth in the definitions contained in the Pooling and Servicing
Agreement, dated as of September 1, 2000 (the "Pooling and Servicing
Agreement"), between the Trustee, the Certificate Administrator, the Depositor
and the Seller/Servicer which definitions are incorporated by reference herein.
All other capitalized terms used herein shall have the meanings specified
herein.
Section 1. Conveyance of Subsequent Mortgage Loans.
(a) The Seller does hereby sell, transfer, assign, set over and
convey to the Transferor, without recourse, all of its right, title and interest
in and to the Subsequent Mortgage Loans and the related MI Policies, all
scheduled payments of principal and interest on the Subsequent Mortgage Loans
due after the Subsequent Cut-off Date, and all other payments of principal and
interest on the Subsequent Mortgage Loans collected after the Subsequent Cut-off
Date (minus that portion of any such payment which is allocable to the period
prior to the Subsequent Cut-off Date); provided, however, that no scheduled
payments of principal and interest due on or before the Subsequent Cut-off Date
and collected after the Subsequent Cut-off Date shall belong to the Transferor
pursuant to the terms of this Seller's Instrument. The Seller, contemporaneously
with the delivery of this Seller's Instrument, has delivered or caused to be
delivered to the Certificate Administrator, at the direction of the Transferor,
each item set forth in Section 2.02(b) of the Purchase Agreement with respect to
such Subsequent Mortgage Loans and the related MI Policies. The transfer to the
Transferor by the Seller of the Subsequent Mortgage Loans identified on the
attached Mortgage Loan Schedule shall be absolute and is intended by the Seller,
the Transferor, the Certificate Administrator, the Trustee and the
Certificateholders to constitute and to be treated as a sale by the Seller.
The parties hereto intend that the transactions set forth herein
constitute a sale by the Seller to the Transferor on the Subsequent Transfer
Date of all the Seller's right, title and interest in and to the Subsequent
Mortgage Loans and the related MI Policies, and other property as and to the
extent described above. In the event the transactions set forth herein shall be
deemed not to be a sale, the Seller hereby grants to the Transferor as of the
Subsequent Transfer Date a security interest in all of the Seller's right, title
and interest in, to and under the
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Subsequent Mortgage Loans, and such other property, to secure all of the
Seller's obligations hereunder, and this Purchase Agreement shall constitute a
security agreement under applicable law, and in such event, the parties hereto
acknowledge that the Certificate Administrator, in addition to holding the
Subsequent Mortgage Loans and the related MI Policies on behalf of the Trustee
for the benefit of the Certificateholders, holds the Subsequent Mortgage Loans
and the related MI Policies as designee and agent of the Transferor. The Seller
agrees to take or cause to be taken such actions and to execute such documents,
including without limitation the filing of all necessary UCC-1 financing
statements filed in the State of Maryland and the State of Kansas (which shall
be submitted for filing as of the Subsequent Transfer Date), any continuation
statements with respect thereto and any amendments thereto required to reflect a
change in the name or corporate structure of the Seller or the filing of any
additional UCC-1 financing statements due to the change in the principal office
of the Seller, as are necessary to perfect and protect the interests of the
Transferor and its assignees in each Subsequent Mortgage Loan, the related MI
Policies and the proceeds thereof.
(b) The expenses and costs relating to the delivery of the
Subsequent Mortgage Loans, this Seller's Instrument and such other items
required under the Mortgage Loan Purchase Agreement shall be borne by the
Seller.
(c) Additional terms of the sale are set forth on Attachment A
hereto.
Section 2. Representations and Warranties; Conditions Precedent.
(a) The Seller hereby affirms the representations and warranties set
forth in Section 3.01 of the Purchase Agreement that relate to the Seller and
the Subsequent Mortgage Loans as of the date hereof. The Seller hereby confirms
that each of the conditions set forth in Section 2.02(b) of the Purchase
Agreement are satisfied as of the date hereof and further represents and
warrants that each Subsequent Mortgage Loan complies with the requirements of
this Seller's Instrument and Section 2.02(c) of the Purchase Agreement.
(b) The Seller is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by the execution and delivery of
this Seller's Instrument or by the performance of its obligations hereunder nor
is it aware of any pending insolvency; no petition of bankruptcy (or similar
insolvency proceeding) has been filed by or against the Seller prior to the date
hereof;
(c) All terms and conditions of the Purchase Agreement are hereby
ratified and confirmed; provided, however, that in the event of any conflict the
provisions of this Seller's Instrument shall control over the conflicting
provisions of the Purchase Agreement.
Section 3. Recordation of the Seller's Instrument.
To the extent permitted by applicable law, this Seller's Instrument,
or a memorandum thereof if permitted under applicable law, is subject to
recordation in all appropriate public offices for real property records in all
of the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer, but only when accompanied by an Opinion of Counsel to the effect that
such
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recordation materially and beneficially affects the interests of the
Certificateholders or is necessary for the administration or servicing of the
Mortgage Loans.
Section 4. Governing Law.
This Seller's Instrument shall be construed in accordance with the
laws of the State of New York and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws, without
giving effect to principles of conflicts of law.
Section 5. Counterparts.
This Seller's Instrument may be executed in one or more counterparts
and by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed to be an original; such counterparts,
together, shall constitute one and the same instrument.
Section 6. Successors and Assigns.
This Seller's Instrument shall inure to the benefit of and be
binding upon the Seller and the Transferor and their respective successors and
assigns. The Certificate Administrator and the Trustee shall be express third
party beneficiaries hereto.
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Seller's Instrument as of the day and year first written above.
NOVASTAR MORTGAGE, INC.,
as Seller
By:
--------------------------------
Name: βββββ β. βββ
Title: Vice President
NOVASTAR MORTGAGE FUNDING CORPORATION III,
as Transferor
By:
---------------------------------
Name: βββββ β. βββ
Title: Vice President
4
NOVASTAR HOME EQUITY LOAN ASSET-BACKED CERTIFICATES, SERIES 2000-2
ATTACHMENT A TO SELLER'S SUBSEQUENT TRANSFER INSTRUMENT
_________ __, 2000
A. Profile of Subsequent Mortgage Loans:
1. Subsequent Cut-off Date: ____ __, 2000
2. Subsequent Transfer Date: ____ __, 2000
3. Aggregate Principal Balance of the Subsequent
Mortgage Loans as of the Subsequent
Cut-off Date: $____
4. Purchase Price: 100.00%
B. As to all the Subsequent Mortgage Loans the subject of this Instrument:
I. Longest stated term to maturity: 360 months
II. Minimum Mortgage Rate: ____%
III. Maximum Mortgage Rate: ____%
IV. WAC of all Mortgage Loans: ____%
V. WAM of all Mortgage Loans: ____%
VI. Largest Principal Balance: $____
VII. Non-owner occupied Mortgaged Properties: ____%
VIII. California zip code concentration: ____%
IX. Condominiums: ____%
X. Single-family: ____%
XI. Weighted average term since origination: ____ months
XII. Mortgage Loans Covered by MI Policies ____%
EXHIBIT 2(B)
TRANSFEROR'S SUBSEQUENT TRANSFER INSTRUMENT
Pursuant to this Transferor's Subsequent Transfer Instrument (the
"Transferor's Instrument"), dated as of _______ __, 2000, between NovaStar
Mortgage Funding Corporation III, as transferor (the "Transferor"), and The
Chase Manhattan Bank, as trustee (the "Trustee"), and pursuant to the Mortgage
Loan Purchase Agreement, dated as of September 1, 2000 (the "Purchase
Agreement"), among NovaStar Mortgage, Inc., as seller (the "Seller"), the
Transferor, Residential Asset Funding Corporation, as depositor (the
"Depositor"), First Union National Bank, as Certificate Administrator
("Certificate Administrator"), and the Trustee, the Transferor and the Trustee
agree to the sale by the Transferor and the purchase by the Trustee of the
subsequent Mortgage Loans listed on the attached Mortgage Loan Schedule (the
"Subsequent Mortgage Loans") and the related MI Policies, and the pledge of the
Subsequent Mortgage Loans by the Trustee.
Capitalized terms used and not defined herein have their respective
meanings as set forth in the definitions contained in the Pooling and Servicing
Agreement, dated as of September 1, 2000 (the "Pooling and Servicing
Agreement"), between the Certificate Administrator, the Trustee, the Depositor
and the Servicer which definitions are incorporated by reference herein. All
other capitalized terms used herein shall have the meanings specified herein.
Section 1. Conveyance of Subsequent Mortgage Loans.
(a) The Transferor does hereby sell, transfer, assign, set over and
convey to the Trustee, without recourse, (i) all of its right, title and
interest in and to the Subsequent Mortgage Loans and the related MI Policies,
all scheduled payments of principal and interest on the Subsequent Mortgage
Loans due after the Subsequent Cut-off Date, and all other payments of principal
and interest on the Subsequent Mortgage Loans collected after the Subsequent
Cut-off Date (minus that portion of any such payment which is allocable to the
period prior to the Subsequent Cut-off Date); provided, however, that no
scheduled payments of principal and interest due on or before the Subsequent
Cut-off Date and collected after the Subsequent Cut-off Date shall belong to the
Trustee pursuant to the terms of this Transferor's Instrument and (ii) all of
its right, title and interest in and to the Seller's Subsequent Transfer
Instrument, dated as of ______ __, 2000 (the "Seller's Instrument"), between the
Seller and the Transferor. The Transferor, contemporaneously with the delivery
of this Transferor's Instrument, has delivered or caused to be delivered to the
Certificate Administrator each item set forth in Section 2.02(b) of the Purchase
Agreement with respect to such Subsequent Mortgage Loans. The transfer to the
Trustee by the Transferor of the Subsequent Mortgage Loans identified on the
attached Mortgage Loan Schedule and the related MI Policies shall be absolute
and is intended by the Transferor, the Trustee, the Certificate Administrator
and the Certificateholders to constitute and to be treated as a sale by the
Transferor.
The parties hereto intend that the transactions set forth herein
constitute a sale by the Transferor to the Trustee on the Subsequent Transfer
Date of all the Transferor's right, title and interest in and to the Subsequent
Mortgage Loans and the related MI Policies, and other
1
property as and to the extent described above. In the event the transactions set
forth herein shall be deemed not to be a sale, the Transferor hereby grants to
the Trustee as of the Subsequent Transfer Date a security interest in all of the
Transferor's right, title and interest in, to and under the Subsequent Mortgage
Loans, and such other property, to secure all of the Transferor's obligations
hereunder, and this Transferor's Instrument shall constitute a security
agreement under applicable law, and in such event, the parties hereto
acknowledge that the Certificate Administrator on behalf of the Trustee, in
addition to holding the Subsequent Mortgage Loans and the related MI Policies
for the benefit of the Certificateholders, holds the Subsequent Mortgage Loans
and the related MI Policies as designee and agent of the Trustee. The Transferor
agrees to take or cause to be taken such actions and to execute such documents,
including without limitation the filing of all necessary UCC-1 financing
statements filed in the State of Delaware and the State of Kansas (which shall
be submitted for filing as of the Subsequent Transfer Date), any continuation
statements with respect thereto and any amendments thereto required to reflect a
change in the name or corporate structure of the Transferor or the filing of any
additional UCC-1 financing statements due to the change in the principal office
of the Transferor, as are necessary to perfect and protect the interests of the
Trustee and its assignees in each Subsequent Mortgage Loan, the related MI
Policies and the proceeds thereof.
(b) The expenses and costs relating to the delivery of the
Subsequent Mortgage Loans, this Transferor's Instrument and such other items
required under the Purchase Agreement shall be borne by the Transferor.
Section 2. Representations and Warranties; Conditions Precedent.
(a) The Transferor hereby affirms the representations and warranties
set forth in Section 3.02 of the Purchase Agreement that relate to the
Transferor as of the date hereof.
(b) The Transferor is solvent, is able to pay its debts as they
become due and has capital sufficient to carry on its business and its
obligations hereunder; it will not be rendered insolvent by the execution and
delivery of this Transferor's Instrument or by the performance of its
obligations hereunder nor is it aware of any pending insolvency; no petition of
bankruptcy (or similar insolvency proceeding) has been filed by or against the
Transferor prior to the date hereof;
(c) All terms and conditions of the Purchase Agreement are hereby
ratified and confirmed; provided, however, that in the event of any conflict the
provisions of this Transferor's Instrument shall control over the conflicting
provisions of the Mortgage Loan Purchase Agreement.
Section 3. Grant from Trustee to Certificate Administrator.
The Trustee, as trustee for the benefit of the Certificateholders,
hereby grants as of the Subsequent Transfer Date to the Certificate
Administrator, to secure all of the Trustee's obligations under the Pooling and
Servicing Agreement, all of the Trustee's right, title and interest in and to,
whether now existing or hereafter created, (a) the Subsequent Mortgage Loans,
the related MI Policies and the proceeds thereof and all rights under the
Related Documents
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(including the related Mortgage Files); (b) all funds on deposit from time to
time in the Collection Account allocable to the Subsequent Mortgage Loans,
excluding any investment income from such funds; (c) all its rights under the
Seller's Instrument and this Transferor's Instrument; and (d) all present and
future claims, demands, causes and choses in action in respect of any or all of
the foregoing and all payments on or under, and all proceeds of every kind and
nature whatsoever in respect of, any or all of the foregoing and all payments on
or under, and all proceeds of every kind and nature whatsoever in the conversion
thereof, voluntary or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts acceptances, checks,
deposit accounts, rights to payment of any and every kind, and other forms of
obligations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing.
Section 4. Recordation of Instrument.
To the extent permitted by applicable law, this Transferor's
Instrument, or a memorandum thereof if permitted under applicable law, is
subject to recordation in all appropriate public offices for real property
records in all of the counties or other comparable jurisdictions in which any or
all of the properties subject to the Mortgages are situated, and in any other
appropriate public recording office or elsewhere, such recordation to be
effected by the Servicer, but only when accompanied by an Opinion of Counsel to
the effect that such recordation materially and beneficially affects the
interests of the Certificateholders or is necessary for the administration or
servicing of the Mortgage Loans.
Section 5. Governing Law.
This Transferor's Instrument shall be construed in accordance with
the laws of the State of New York and the obligations, rights and remedies of
the parties hereunder shall be determined in accordance with such laws, without
giving effect to principles of conflicts of law.
Section 6. Counterparts.
This Transferor's Instrument may be executed in one or more
counterparts and by the different parties hereto on separate counterparts, each
of which, when so executed, shall be deemed to be an original; such
counterparts, together, shall constitute one and the same instrument.
Section 7. Successors and Assigns.
This Transferor's Instrument shall inure to the benefit of and be
binding upon the Transferor and the Trustee and their respective successors and
assigns. The Certificate Administrator shall be an express third party
beneficiary hereto.
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IN WITNESS WHEREOF, the parties hereto have executed and
delivered this Transferor's Instrument as of the day and year first written
above.
NOVASTAR MORTGAGE FUNDING CORPORATION III,
as Transferor
By:
---------------------------------
Name: βββββ β. βββ
Title: Vice President
THE CHASE MANHATTAN BANK
as Trustee
By:
---------------------------------
Name:
-------------------------------
Title
-------------------------------
Acknowledged and Agreed:
FIRST UNION NATIONAL BANK,
as Certificate Administrator
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
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