EXHIBIT 10.68
MASTER REPURCHASE AGREEMENT GOVERNING
PURCHASES AND SALES OF MORTGAGE LOANS
Dated as of October 31, 1997
Between
▇▇▇▇▇▇ COMMERCIAL PAPER INC.,
as Buyer
and
PAN AMERICAN BANK, FSB,
as Seller
1. APPLICABILITY
From time to time, the parties hereto may, subject to the terms hereof, enter
into transactions in which Pan American Bank, FSB ("Seller") agrees to transfer
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to ▇▇▇▇▇▇ Commercial Paper Inc. ("Buyer") Mortgage Loans against the transfer of
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funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller
such Mortgage Loans at a date certain not later than the date of transfer
specified in the Confirmation, against the transfer of funds by Seller. Each
such transaction shall be referred to herein as a "Transaction" and shall be
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governed by this Agreement and the related Confirmation, unless otherwise agreed
in writing. This Agreement does not constitute a commitment of Buyer or Seller
to enter into Transactions but rather sets forth the procedures to be followed
in connection with requests to enter into Transactions by the Seller to Buyer.
Seller hereby acknowledges that Buyer is under no obligation to agree to enter
into Transactions under this Agreement.
2. DEFINITIONS
"Act of Insolvency" means, with respect to Buyer or Seller, Seller's corporate
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parent or United PanAm Mortgage Corporation, (i) the filing of a petition,
commencing, or authorizing the commencement of any case or proceeding under any
bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law
relating to the protection of creditors, or suffering any such petition or
proceeding to be commenced by another which is consented to, not timely
contested or results in entry of an order for relief; (ii) the seeking the
appointment of a receiver, trustee, custodian or similar official for such party
or any substantial part of the property of either, (iii) the appointment of a
receiver, conservator, or manager for such party by any governmental
agency or authority having the jurisdiction to do so; (iv) the making or
offering by such party of a composition with its creditors or a general
assignment for the benefit of creditors, (v) the admission by such party of its
inability to pay its debts or discharge its obligations as they become due or
mature; or (vi) that any governmental authority or agency or any person, agency
or entity acting or purporting to act under governmental authority shall have
taken any action to condemn, seize or appropriate, or to assume custody or
control of, all or any substantial part of the property of such party, or shall
have taken any action to displace the management of such party or to curtail its
authority in the conduct of the business of such party.
"Additional Loans" means Mortgage Loans or cash provided by Seller to Buyer or
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its designee pursuant to Section 4(a).
"Affiliate" means an affiliate of a party as such term is defined in the United
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States Bankruptcy Code in effect from time to time.
"Agency" means FNMA, FHLMC or GNMA.
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"Agreement" means this Master Repurchase Agreement Governing Purchases and Sales
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of Mortgage Loans between Buyer and Seller, as amended from time to time.
"Balloon Loan" means any Mortgage Loan with a remaining term of less than 15
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years that provided on the date of origination for scheduled payments by the
Mortgagor based upon an amortization schedule extending beyond its maturity
date.
"Business Day" means a day other than (i) a Saturday or Sunday, or (ii) a day in
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which the New York Stock Exchange is authorized or obligated by law or executive
order to be closed.
"Buyer" has the meaning specified in Section 1.
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"`C' Loan" means a Mortgage Loan made by Seller to a Mortgagor with a `C+', `C'
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or `C-' credit history which is underwritten in accordance with Seller's
underwriting guidelines for `C+', `C' or `C-' credit Mortgage Loans, a copy of
which is attached as Exhibit VI hereto.
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"Collateral" has the meaning specified in Section 6.
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"Collateral Amount" means, with respect to any Transaction, the amount obtained
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by application of the applicable Collateral Amount Percentage to the related
Repurchase Price for such Transaction.
"Collateral Amount Percentage" means the amount set forth in the Confirmation
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which, in any event, (i) shall not be less than 103% with respect to all
Mortgage Loans in determining whether a Market Value Collateral Deficit exists
pursuant to the first sentence of Section 4(a) hereof and (ii) shall not be less
than 105% with respect to all Mortgage Loans in determining whether a
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Securitization Value Collateral Deficit exists pursuant to the second sentence
of Section 4(a) hereof.
"Collateral Deficit" means either a Market Value Collateral Deficit or a
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Securitization Value Collateral Deficit.
"Collateral Information" means the following information with respect to each
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Mortgage Loan: (i) Seller's loan number , (ii) the Mortgagor's name, (iii) the
address of the Mortgaged Property, (iv) the current interest rate, (v) the
original balance, (vi) current balance as of the last day of the immediately
preceding month, (vii) the paid to date, (viii) the appraisal value of the
Mortgaged Property, (ix) whether interest rate is fixed or adjustable (and if
adjustable, the ARM terms, including the index, spread, adjustment frequency,
next adjustment date, caps and floors), (x) whether the Mortgage Loan is
convertible from ARM to fixed, (xi) the lien position of the Mortgage Loan on
the Mortgaged Property (and if a second lien, the outstanding principal balance
of the first lien), (xii) the occupancy status of the Mortgaged Property
(including whether owner occupied), (xiii) whether the Mortgage Loan is a
Balloon Loan, (xiv) the first payment date, (xv) the maturity date, (xvi) the
principal and interest payment , (xvii) the property type of the Mortgaged
Property, (xviii) the applicable credit grade, (xix) the note date, (xx) whether
the Mortgage Loan is a Wet Ink Mortgage Loan and (xxi) whether the Mortgage Loan
is originated by Seller (i.e. a retail loan) or by a correspondent lender (i.e.
a correspondent loan).
"Confirmation" has the meaning specified in Section 3(a).
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"Custodial Agreement" means that custodial agreement, dated as of November 31,
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1997, by and among Buyer, Seller and the Custodian.
"Custodial Delivery" means the form executed by the Seller in order to deliver
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the Mortgage Loan Schedule and/or the Mortgage File to Buyer or its designee
(including the Custodian) pursuant to Section 7, a form of which is attached
hereto as Exhibit II.
"Custodian" means the custodian under the Custodial Agreement. The initial
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custodian is Bankers Trust Company.
"`D' Loan" means a Mortgage Loan made by Seller to a Mortgagor with a `D+', `D'
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or `D-' credit history which is underwritten in accordance with Seller's
underwriting guidelines for `D+', `D' or `D-' credit Mortgage Loans, a copy of
which is attached as Exhibit VI hereto.
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"Delinquent" means, with respect to any Mortgage Loan, the period of time from
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the date on which a Mortgagor fails to pay an obligation under the terms of such
Mortgage Loan (without regard to any applicable grace periods) to the date on
which such payment is made.
"Event of Default" has the meaning specified in Section 13.
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"FHA" means the Federal Housing Administration, an agency within HUD.
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"FHLMC" means the Federal Home Loan Mortgage Corporation.
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"FHLMC Guide" means the FHLMC Sellers/Servicers Guide, as amended from time to
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time.
"First Mortgage" means the Mortgage that is the first lien on the Mortgaged
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Property.
"FNMA" means the Federal National Mortgage Association.
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"FNMA Guide" means the FNMA Selling, Servicing and MBS Guides, as amended from
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time to time.
"GNMA" means the Government National Mortgage Association.
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"GNMA Guide" means the GNMA Mortgage-Backed Securities Guide, as amended from
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time to time.
"Hedge" means, with respect to any or all of the Purchased Mortgage Loans, any
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interest rate swap, cap or collar agreement or similar arrangements providing
for protection against fluctuations in interest rates or the exchange of nominal
interest obligations, either generally or under specific contingencies, entered
into by Seller with Buyer or its Affiliates, and reasonably acceptable to the
Buyer.
"HUD" means the United States Department of Housing and Urban Development.
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"Income" means, with respect to any Purchased Mortgage Loan at any time, any
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principal thereof then payable and all interest, dividends or other
distributions payable thereon less any related servicing fee(s) charged by a
subservicer.
"LIBOR" means the London Interbank Offered Rate for one-month United States
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dollar deposits as set forth on page 3750 of Telerate as of 11:00 a.m., London
time, on the date of determination.
"Loan-to-Value Ratio" means with respect to any Mortgage Loan as of any date,
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the fraction, expressed as a percentage, the numerator of which is the principal
balance of such Mortgage Loan at the date of determination and the denominator
of which is the value of the related Mortgaged Property as set forth in the
appraisal of such Mortgaged Property obtained in connection with the origination
of such Mortgage Loan. For purposes of calculating a Mortgage Loan secured by a
Second Mortgage, the principal balance of the related First Mortgage as well as
the Second Mortgage shall be included in the numerator.
"Market Value" means as of any date with respect to any Mortgage Loan, the price
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at which such Mortgage Loan could readily be sold as determined by Buyer in its
sole discretion; provided, however, that Buyer shall not take into account, for
purposes of calculating Market Value, any Mortgage Loan (i) which has been
subject to Transactions for more than 180 days, (ii) which,
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together with the other Mortgage Loans subject to then outstanding Transactions,
would cause the 30+ Delinquency Percentage to exceed 3%, (iii) which are more
than 59 days Delinquent, (iv) which is a Wet Ink Mortgage Loan for more than 5
Business Days, or (v) with respect to which there is a breach of a
representation, warranty or covenant made by Seller in this Agreement.
"Market Value Collateral Deficit" has the meaning specified in Section 4(a).
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"Mortgage" means a mortgage, deed of trust, deed to secure debt or other
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instrument, creating a valid and enforceable first or second lien on or a first
or second priority ownership interest in an estate in fee simple in real
property and the improvements thereon, securing a mortgage note or similar
evidence of indebtedness.
"Mortgage File" means the documents specified as the "Mortgage File" in Section
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7(d), together with any additional documents and information required to be
delivered to Buyer or its designee (including the Custodian) pursuant to this
Agreement.
"Mortgage Loan" means (i) a non-securitized whole loan, namely a conventional
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mortgage loan secured by a first or second lien on a one to four family
residential property which conform to Seller's underwriting guidelines
(including, without limitation, Wet-Ink Mortgage Loans) or (ii) another type of
non-securitized whole loan as may be agreed upon in writing by the parties
hereto from time to time.
"Mortgage Loan Schedule" means a schedule of Mortgage Loans attached to each
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Trust Receipt, Confirmation and Custodial Delivery.
"Mortgage Note" means a note or other evidence of indebtedness of a Mortgagor
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secured by a Mortgage.
"Mortgaged Property" means the real property securing repayment of the debt
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evidenced by a Mortgage Note.
"Mortgagee" means the record holder of a Mortgage Note secured by a Mortgage.
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"Mortgagor" means the obligor on a Mortgage Note and the grantor of the related
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Mortgage.
"Periodic Payment" has the meaning specified in Section 5(b).
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"Person" means an individual, partnership, corporation, joint stock company,
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trust or unincorporated organization or a governmental agency or political
subdivision thereof.
"Price Differential" means, with respect to any Transaction hereunder as of any
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date, the aggregate amount obtained by daily application of the Pricing Rate for
such Transaction to the Purchase Price for such Transaction on a 360 day per
year basis for the actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and
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ending on (but excluding) the Repurchase Date (reduced by any amount of such
Price Differential previously paid by Seller to Buyer with respect to such
Transaction).
"Pricing Rate" means the per annum percentage rate specified in the Confirmation
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for determination of the Price Differential which shall not exceed LIBOR plus
the applicable Pricing Spread.
"Pricing Spread" means [Material ommitted pursuant to a request for confidential
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treatment and filed separately with the Securities and Exchange Commission.]%;
provided that during any period for which any such Mortgage Loans are Wet Ink
Mortgage Loans, the applicable Pricing Spread shall be [Material ommitted
pursuant to a request for confidential treatment and filed separately with the
Securities and Exchange Commission.]% with respect to such Mortgage Loans.
"Prime Rate" means the rate of interest published by The Wall Street Journal,
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northeast edition, as the "prime rate".
"Purchase Date" means the date on which Purchased Mortgage Loans are transferred
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by Seller to Buyer or its designee (including the Custodian) as specified in the
Confirmation.
"Purchase Price" means on each Purchase Date, the price at which Purchased
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Mortgage Loans are transferred by Seller to Buyer or its designee (including the
Custodian), which, subject to compliance with the collateral maintenance
requirements of Section 4, shall equal the outstanding principal amount of such
Purchased Mortgage Loans; provided, however, that the Purchase Price of any
Mortgage Loan shall not in any event exceed the outstanding principal amount
thereof.
"Purchased Mortgage Loans" means the Mortgage Loans sold by Seller to Buyer in a
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Transaction, any Additional Loans and any Substituted Mortgage Loans.
"Replacement Loans" has the meaning specified in Section 14(b)(ii).
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"Repurchase Date" means the date on which Seller is to repurchase the Purchased
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Mortgage Loans from Buyer, including any date determined by application of the
provisions of Sections 3 or 14, as specified in the Confirmation.
"Repurchase Price" means the price at which Purchased Mortgage Loans are to be
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transferred from Buyer or its designee (including the Custodian) to Seller upon
termination of a Transaction, which will be determined in each case (including
Transactions terminable upon demand) as the sum of the Purchase Price and the
Price Differential as of the date of such determination decreased by all cash,
Income and Periodic Payments actually received by Buyer pursuant to Sections
4(a), 5(a) and 5(b), respectively.
"Second Mortgage" means a Mortgage that is a second lien on the Mortgaged
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Property.
"Securitization Value" means, as of any date with respect to any Mortgage Loans,
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the price at
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which such Mortgage Loans could be securitized and sold in a securitization as
determined by Buyer in its sole discretion; provided, however, that Buyer shall
not take into account, for purposes of calculating Securitization Value, any
Mortgage Loan (i) which has been subject to Transactions for more than 180 days,
(ii) which, together with the other Mortgage Loans subject to then outstanding
Transactions, would cause the 30+ Delinquency Percentage to exceed 2%, (iii)
which are more than 59 days Delinquent, (iv) which is a Wet Ink Mortgage Loan
for more than 5 Business Days or (v) with respect to which there is a breach of
a representation, warranty or covenant made by Seller in this Agreement.
"Securitization Value Collateral Deficit" has the meaning specified in
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Section 4(a).
"Seller" has the meaning specified in Section 1.
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"Servicing Agreement" has the meaning specified in Section 25.
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"Servicing Records" has the meaning specified in Section 25.
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"Substituted Mortgage Loans" means any Mortgage Loans substituted for Purchased
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Mortgage Loans in accordance with Section 9 hereof.
"30+ Delinquency Percentage" means the fraction, expressed as a percentage, the
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numerator of which is the aggregate Purchase Price of Purchased Mortgage Loans
subject to then outstanding Transactions which are more than 30 days Delinquent
and the denominator of which is the aggregate Purchase Price of all Purchased
Mortgage Loans subject to then outstanding Transactions.
"Transaction" has the meaning specified in Section 1.
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"Trust Receipt" means a trust receipt issued by Custodian to Buyer confirming
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the Custodian's possession of certain mortgage loan files which are the property
of and held by Custodian for the benefit of the Buyer or the registered holder
of such trust receipt.
"Wet Ink Mortgage Loan" means a non-securitized whole loan, namely a
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conventional mortgage loans secured by a first lien on a one to four family
residential property for which a Mortgage File has not been delivered to the
Custodian.
3. INITIATION; CONFIRMATION; TERMINATION;
MAXIMUM TRANSACTION AMOUNTS
(a) An agreement to enter into a Transaction may be entered into orally or in
writing at the initiation of either Buyer or Seller. In any event, Buyer shall
confirm the terms of each
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Transaction by issuing a written confirmation to Seller promptly after the
parties enter into such Transaction in the form of Exhibit I attached hereto (a
"Confirmation"). Such Confirmation shall describe the Purchased Mortgage Loans,
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identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase
Price, (iii) the Repurchase Date, unless the Transaction is to be terminable on
demand, (iv) the Pricing Rate applicable to the Transaction, (v) the applicable
Collateral Amount Percentages and (vi) additional terms or conditions not
inconsistent with this Agreement. After receipt of the Confirmation, Seller
shall, subject to the provisions of subsection (c) below, sign the Confirmation
and promptly return it to Buyer. The Purchase Price for any Transaction shall
exceed $1,000,000.
(b) Any Confirmation by Buyer shall be deemed to have been received by Seller
on the date actually received by Seller.
(c) Each Confirmation, together with this Agreement, shall be conclusive
evidence of the terms of the Transaction(s) covered thereby unless objected to
in writing by Seller no more than two (2) Business Days after the date the
Confirmation was received by Seller or unless a corrected Confirmation is sent
by Buyer. An objection sent by Seller must state specifically that writing
which is an objection, must specify the provision(s) being objected to by
Seller, must set forth such provision(s) in the manner that the Seller believes
they should be stated, and must be received by Buyer no more than two (2)
Business Days after the Confirmation was received by Seller.
(d) In the case of Transactions terminable upon demand, such demand shall be
made by Seller by telephone or otherwise, no later than 1:00 p.m. (New York
Time) on the Business Day prior to the day on which such termination will be
effective.
(e) On the Repurchase Date, termination of the Transaction will be effected by
transfer to Seller or its designee of the Purchased Mortgage Loans (and any
Income in respect thereof received by Buyer not previously credited or
transferred to, or applied to the obligations of, Seller pursuant to Section 5)
against the simultaneous transfer of the Repurchase Price to an account of
Buyer. Seller is obligated to obtain the Mortgage Files from Buyer or its
designee at Seller's expense on the Repurchase Date.
(f) With respect to all Transactions hereunder, the aggregate Purchase Price
for all Purchased Mortgage Loans at any one time subject to then outstanding
Transactions shall not exceed $100,000,000.
(g) The aggregate Purchase Price of all Purchased Mortgage Loans which are Wet
Ink Mortgage Loans subject to then outstanding Transactions shall not exceed the
lesser of $15,000,000 or 15% of the aggregate Purchase Price of all Purchased
Mortgage Loans subject to Transactions.
4. COLLATERAL AMOUNT MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased Mortgage Loans
subject to all Transactions is less than the aggregate Collateral Amount for all
such Transactions (a "Market Value Collateral Deficit"), then Buyer may by
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notice to Seller require Seller to transfer to Buyer or its designee (including
the Custodian) Mortgage Loans ("Additional Loans") or cash, so that the cash and
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aggregate Market Value of the Purchased Mortgage Loans, including any such
Additional Loans, will thereupon equal or exceed the aggregate Collateral
Amount. If at any
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time the aggregate Securitization Value of all Mortgage Loans subject to
Transactions is less than the aggregate Collateral Amount for all such
Transactions (a "Securitization Value Collateral Deficit"), then Buyer may by
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notice to Seller require Seller to transfer to Buyer or its designee (including
the Custodian) Additional Loans or cash, so that the cash and aggregate
Securitization Value of such Mortgage Loans, including any such Additional
Loans, will thereupon equal or exceed the aggregate Collateral Amount.
(b) Notice required pursuant to subsection (a) above may be given by any means
of telecopier or telegraphic transmission. A notice for the payment or delivery
in respect of a Collateral Deficit received before 9:00 a.m. on a Business Day,
local time of the party receiving the notice, must be met not later than 5:00
p.m. on the Business Day on which the notice was given, local time of the party
receiving the notice. Any notice given on a Business Day after 9:00 a.m., local
time of the party receiving the notice, shall be met not later than 2:00 p.m.
(New York time) on the following Business Day. The failure of Buyer, on any one
or more occasions, to exercise its rights under subsection (a) of this Section
shall not change or alter the terms and conditions to which this Agreement is
subject or limit the right of the Buyer to do so at a later date. Buyer and
Seller agree that a failure or delay to exercise its rights under subsections
(a) of this Section shall not limit Buyer's rights under this Agreement or
otherwise existing by law or in any way create additional rights for Seller.
(c) In the event that Seller fails to comply with the provisions of this
Section 4, Buyer shall not enter into any additional Transactions hereunder
after the date of such failure.
5. INCOME PAYMENTS
(a) Where a particular Transaction's term extends over an Income payment date
on the Purchased Mortgage Loans subject to that Transaction such Income shall be
the property of Buyer. Notwithstanding the foregoing, so long as no Event of
Default shall have occurred and be continuing, Seller shall be entitled to all
Income with respect to Purchased Mortgage Loans subject to Transactions. Upon
the occurrence and continuance of an Event of Default, all Income with respect
to Purchased Mortgage Loans subject to Transactions shall be held in a
segregated account established by the Custodian for the benefit of Buyer and
distributed under the Custodial Agreement.
(b) Notwithstanding that Buyer and Seller intend that the Transactions
hereunder be sales to Buyer of the Purchased Mortgage Loans, Seller shall pay by
wire transfer to Buyer the accreted value of the Price Differential (less any
amount of such Price Differential previously paid by Seller to Buyer)(each such
payment, a "Periodic Payment") on the first Business Day of each month.
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(c) Buyer shall offset against the Repurchase Price of each such Transaction
all Income and Periodic Payments actually received by Buyer pursuant to Sections
5(a) and (b), respectively.
6. SECURITY INTEREST
(a) Buyer and the Seller intend that the Transactions hereunder be sales to
Buyer of the Purchased Mortgage Loans and not loans from Buyer to Seller secured
by the Purchased Mortgage Loans. However, in order to preserve Buyer's rights
under this Agreement in the event that a court or other forum recharacterizes
the Transactions hereunder as loans and as security for the performance by
Seller of all of Seller's obligations to Buyer under this Agreement and the
Transactions entered into pursuant to this Agreement, Seller grants Buyer a
first priority security interest in the Purchased Mortgage Loans, Servicing
Records, insurance relating to the Purchased Mortgage Loans, Income, any and all
▇▇▇▇▇▇, any and all custodial accounts and escrow
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accounts relating to the Purchased Mortgage Loans and any other contract rights,
general intangibles and other assets relating to the Purchased Mortgage Loans or
any interest in the Purchased Mortgage Loans and the servicing of the Purchased
Mortgage Loans and any and all replacements, substitutions, distributions on or
proceeds of any and all of the foregoing (collectively, the "Collateral").
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(b) Seller shall pay all fees and expenses associated with perfecting Buyer's
security interest in the Collateral, including, without limitation, the cost of
filing financing statements under the Uniform Commercial Code and recording
assignments of Mortgage, as and when required by Buyer in its sole discretion.
(c) Seller covenants to take such further actions as are necessary in order to
perfect Buyer's first priority security interest in the ▇▇▇▇▇▇.
7. PAYMENT, TRANSFER AND CUSTODY
(a) Unless otherwise mutually agreed in writing, all transfers of funds
hereunder shall be in immediately available funds.
(b) On or before each Purchase Date, Seller shall deliver or cause to be
delivered to Buyer or its designee the Custodial Delivery in the form attached
hereto as Exhibit II.
(c) On the Purchase Date for each Transaction, ownership of the Purchased
Mortgage Loans shall be transferred to the Buyer or its designee (including the
Custodian) against the simultaneous transfer of the Purchase Price to an account
of Seller specified in the Confirmation. Seller, simultaneously with the
delivery to Buyer or its designee (including the Custodian) of the Purchased
Mortgage Loans relating to each Transaction hereby sells, transfers, conveys and
assigns to Buyer or its designee (including the Custodian) without recourse, but
subject to the terms of this Agreement, all the right, title and interest of
Seller in and to the Purchased Mortgage Loans together with all right, title and
interest in and to the proceeds of any related insurance policies.
(d) In connection with each sale, transfer, conveyance and assignment, on or
prior to each Purchase Date with respect to each Mortgage Loan which is not a
Wet Ink Mortgage Loan (or with respect to item (vii) below within five Business
Days after the Purchase Date), the Seller shall deliver or cause to be delivered
and released to the Custodian the following original documents (collectively the
"Mortgage File"), pertaining to each of the Purchased Mortgage Loans identified
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in the Custodial Delivery delivered therewith:
(i) the original Mortgage Note bearing all intervening endorsements,
endorsed "Pay to the order of ________ without recourse, and without
representation or warranty, express or implied" and signed in the name of
the last endorsee (the "Last Endorsee") by an authorized officer (in the
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event that the Mortgage Loan was acquired by the Last Endorsee in a merger,
the signature must be in the following form: "[the Last Endorsee],
successor by merger to [name of predecessor]"; in the event that the
Mortgage Loan was acquired or originated while doing business under another
name, the signature must be in the following form: "[the Last Endorsee],
formerly known as [previous name]");
(ii) the original of any guarantee executed in connection with the
Mortgage Note (if any);
(iii) the original Mortgage with evidence of recording thereon or copies
certified by Seller to have been sent for recording;
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(iv) the originals of all assumption, modification, consolidation or
extension agreements, with evidence of recording thereon or copies
certified by Seller to have been sent for recording;
(v) the original assignment of Mortgage in blank for each Mortgage Loan,
in form and substance acceptable for recording and signed in the name of
the Last Endorsee (in the event that the Mortgage Loan was acquired by the
Last Endorsee in a merger, the signature must be in the following form:
"[the Last Endorsee], successor by merger to [name of predecessor]"; in the
event that the Mortgage Loan was acquired or originated while doing
business under another name, the signature must be in the following form:
"[the Last Endorsee], formerly known as [previous name]");
(vi) the originals of all intervening assignments of mortgage with
evidence of recording thereon or copies certified by Seller to have been
sent for recording;
(vii) the original policy of title insurance or a true copy thereof or,
if such policy has not yet been delivered by the insurer, the commitment or
binder to issue the same; and
(viii) the original of any security agreement, chattel mortgage or
equivalent document executed in connection with the Mortgage (if any).
(e) In connection with each sale, transfer, conveyance and assignment with
respect to each Mortgage Loan which is a Wet Ink Mortgage Loan, on or prior to
the fifth Business Day following each Purchase Date, Seller shall deliver or
cause to be delivered to the Custodian a complete Mortgage File. Further, if
requested by Buyer, on the Purchase Date with respect to each Mortgage Loan
which is a Wet Ink Mortgage Loan, Seller shall fax an executed copy of the
respective Mortgage Note to the Custodian. On the date on which the Buyer
receives a Trust Receipt from the Custodian certifying that a complete Mortgage
File with respect to a Wet Ink Mortgage Loan is in the possession of the
Custodian, such Wet Ink Mortgage Loan be deemed a standard Mortgage Loan (and
no longer a Wet Ink Mortgage Loan) for all purposes hereunder including, without
limitation, determination of the Pricing Spread and compliance with subsection
(aaa) of Exhibit V.
(f) With respect to all of the Mortgage Loans delivered by Seller to Buyer or
its designee (including the Custodian), Seller shall execute an omnibus power of
attorney substantially in the form of Exhibit III attached hereto irrevocably
appointing Buyer its attorney-in-fact with full power to complete and record the
assignment of Mortgage, complete the endorsement of the Mortgage Note and take
such other steps as may be necessary or desirable to enforce Buyer's rights
against such Mortgage Loans, the related Mortgage Files and the Servicing
Records.
(g) Buyer shall deposit the Mortgage Files representing the Purchased Mortgage
Loans, or direct that the Mortgage Files be deposited directly, with the
Custodian. The Mortgage Files shall be maintained in accordance with the
Custodial Agreement.
(h) Any Mortgage Files not delivered to Buyer or its designee (including the
Custodian) are and shall be held in trust by Seller or its designee for the
benefit of Buyer as the owner thereof. Seller or its designee shall maintain a
copy of the Mortgage File and the originals of the Mortgage File not delivered
to Buyer or its designee. The possession of the Mortgage File by Seller or its
designee is at the will of the Buyer for the sole purpose of servicing the
related Purchased Mortgage Loan, and such retention and possession by the Seller
or its designee is in a custodial capacity only. The books and records
(including, without limitation, any computer records or tapes) of Seller or its
designee shall be marked appropriately to reflect clearly the sale of the
related Purchased Mortgage Loan to Buyer. Seller or its designee (including the
11
Custodian) shall release its custody of the Mortgage File only in accordance
with written instructions from Buyer, unless such release is required as
incidental to the servicing of the Purchased Mortgage Loans or is in connection
with a repurchase of any Purchased Mortgage Loan by Seller.
8. REHYPOTHECATION OR PLEDGE OF PURCHASED MORTGAGE LOANS
Title to all Purchased Mortgage Loans shall pass to Buyer and Buyer shall have
free and unrestricted use of all Purchased Mortgage Loans. Nothing in this
Agreement shall preclude Buyer from engaging in repurchase transactions with the
Purchased Mortgage Loans or otherwise pledging, repledging, hypothecating, or
rehypothecating the Purchased Mortgage Loans, but no such transaction shall
relieve Buyer of its obligations to transfer Purchased Mortgage Loans to Seller
pursuant to Section 3. Nothing contained in this Agreement shall obligate Buyer
to segregate any Purchased Mortgage Loans delivered to Buyer by Seller.
9. SUBSTITUTION
(a) Subject to Section 9(b), Seller may, upon one (1) Business Days' written
notice to Buyer, with a copy to Custodian, substitute other Mortgage Loans for
any Purchased Mortgage Loans. Such substitution shall be made by transfer to
Buyer or its designee (including the Custodian) of the Mortgage Files of such
other Mortgage Loans together with a Custodial Delivery and transfer to Seller
or its designee of the Purchased Mortgage Loans requested for release. After
substitution, the substituted Mortgage Loans, shall be deemed to be Purchased
Mortgage Loans subject to the same Transaction as the released Mortgage Loans.
(b) Notwithstanding anything to the contrary in this Agreement, Seller may not
substitute other Mortgage Loans for any Purchased Mortgage Loans (i) if after
taking into account such substitution, a Collateral Deficit would occur or (ii)
such substitution would cause a breach of any provision of this Agreement.
10. REPRESENTATIONS AND WARRANTIES
(a) Each of Buyer and Seller represents and warrants to the other that (i) it
is duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance; (ii) it will engage in such Transactions as principal; (iii) the
person signing this Agreement on its behalf is duly authorized to do so on its
behalf; (iv) this Agreement is legal, valid and binding obligation of it,
enforceable against it in accordance with its terms, (v) no approval, consent or
authorization of the Transactions contemplated by this Agreement from any
federal, state, or local regulatory authority having jurisdiction over it is
required or, if required, such approval, consent or authorization has been or
will, prior to the Purchase Date, be obtained; (vi) the execution, delivery, and
performance of this Agreement and the Transactions hereunder will not violate
any law, regulation, order, judgment, decree, ordinance, charter, by-law, or
rule applicable to it or its property or constitute a default (or an event
which, with notice or lapse of time, or both would constitute a default) under
or result in a breach of any agreement or other instrument by which it is bound
or by which any of its assets are affected; (vii) it has received approval and
authorization to enter into this Agreement and each and every Transaction
actually entered into hereunder pursuant to its internal policies and
procedures; and
12
(viii) neither this Agreement nor any Transaction pursuant hereto are entered
into in contemplation of insolvency or with intent to hinder, delay or defraud
any creditor.
(b) Seller represents and warrants to Buyer that as of the Purchase Date for
the purchase of any Purchased Mortgage Loans by Buyer from Seller and as of the
date of this Agreement and any Transaction hereunder and at all times while this
Agreement and any Transaction hereunder is in full force and effect:
(i) Organization. Seller is duly organized, validly existing and in good
------------
standing under the federal laws of the United States and is duly
licensed, qualified, and in good standing in every state where Seller
transacts business and in any state where any Mortgaged Property is
located if the laws of such state require licensing or qualification in
order to conduct business of the type conducted by Seller therein.
(ii) No Litigation. There is no action, suit, proceeding, arbitration or
-------------
investigation pending or threatened against Seller which, either in any
one instance or in the aggregate, may result in any material adverse
change in the business, operations, financial condition, properties or
assets of Seller, or in any material impairment of the right or ability
of Seller to carry on its business substantially as now conducted, or in
any material liability on the part of Seller, or which if adversely
determined would affect the validity of this Agreement or any of the
Purchased Mortgage Loans or of any action taken or to be taken in
connection with the obligations of Seller contemplated herein, or which
would be likely to impair materially the ability of Seller to perform
under the terms of this Agreement;
(iii) No Broker. Seller has not dealt with any broker, investment banker,
---------
agent, or other person, except for Buyer, who may be entitled to any
commission or compensation in connection with the sale of Purchased
Mortgage Loans pursuant to this Agreement;
(iv) Good Title to Collateral. Purchased Mortgage Loans shall be free and
------------------------
clear of any lien, encumbrance or impediment to transfer (other than the
lien of the related First Mortgage with respect to any Purchased Mortgage
Loans secured by a Second Mortgage), and Seller has good, valid and
marketable title and the right to sell and transfer such Purchased
Mortgage Loans to Buyer.
(v) Delivery of Mortgage File. With respect to each Purchased Mortgage Loans
-------------------------
which is not a Wet Ink Mortgage Loan, the Mortgage Note, the Mortgage,
the assignment of Mortgage and any other documents required to be
delivered under this Agreement and the Custodial Agreement for such
Mortgage Loan has been delivered to the Custodian. Seller or its designee
is in possession of a complete, true and accurate Mortgage File with
respect to each Mortgage Loan, except for such documents the originals of
which have been delivered to the Custodian.
(vi) [Reserved].
(vii) [Reserved].
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(viii) No Untrue Statements. Neither this Agreement nor any written statement
--------------------
made, or any report or other document issued or delivered or to be
issued or delivered by Seller pursuant to this Agreement or in
connection with the transactions contemplated hereby contains any untrue
statement of fact or omits to state a fact necessary to make the
statements contained herein or therein not misleading;
(ix) Origination Practices. The origination practices used by Seller with
---------------------
respect to each Mortgage Loan (i) have been and are in all respects
legal and proper in the mortgage origination business and (ii) are in
accordance with the underwriting guidelines attached hereto as
Exhibit VI;
----------
(x) Performance of Agreement. Seller does not believe, nor does it have any
------------------------
reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement on its part to be performed;
(xi) Seller Not Insolvent. Seller is not, and with the passage of time does
--------------------
not expect to become, insolvent; and
(xii) No Event of Default. No Event of Default has occurred and is continuing
-------------------
hereunder.
(c) Seller represents and warrants to the Buyer that each Purchased Mortgage
Loan sold hereunder and each pool of Purchased Mortgage Loans sold in a
Transaction hereunder, as of the related Purchase Date conform to the
representations and warranties set forth in Exhibit V attached hereto and that
each Mortgage Loan delivered hereunder as Additional Loans or Substituted
Mortgage Loans, as of the date of such delivery, conforms to the representations
and warranties set forth in Exhibit V hereto. Seller further represents and
warrants to the Buyer that, as of the date of its delivery, the Collateral
Information with respect to each Purchased Mortgage Loan is complete, true and
correct. It is understood and agreed that the representations and warranties
set forth in Exhibit V hereto, if any, shall survive delivery of the respective
Mortgage File to Buyer or its designee (including the Custodian).
(d) On the Purchase Date for any Transaction, Buyer and Seller shall each be
deemed to have made all the foregoing representations with respect to itself as
of such Purchase Date.
11. NEGATIVE COVENANTS OF THE SELLER
On and as of the date of this Agreement and each Purchase Date and until this
Agreement is no longer in force with respect to any Transaction, Seller
covenants that it will not:
(a) take any action which would directly or indirectly impair or adversely
affect Buyer's title to or the value of the Purchased Mortgage Loans;
(b) pledge, assign, convey, grant, bargain, sell, set over, deliver or
otherwise transfer any interest in the Purchased Mortgage Loans to any person
not a party to this Agreement nor will the Seller create, incur or permit to
exist any lien, encumbrance or security interest in or on the Purchased Mortgage
Loans except as described in Section 6 of this Agreement; or
(c) create, incur or permit to exist any lien, encumbrance or security interest
in or on any of the Collateral without the prior express written consent of
Buyer.
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12. AFFIRMATIVE COVENANTS OF THE SELLER
For so long as this Agreement is in effect:
(a) Seller covenants that it will promptly notify Buyer of any material adverse
change in its business operations and/or financial condition;
(b) Seller shall provide Buyer with copies of such documentation as Buyer may
reasonably request evidencing the truthfulness of the representations set forth
in Section 10, including but not limited to resolutions evidencing the approval
of this Agreement by Seller's board of directors or loan committee, copies of
the minutes of the meetings of Seller's board of directors or loan committee at
which this Agreement and the Transactions contemplated by this Agreement were
approved;
(c) Seller shall, at Buyer's request, take all action necessary to ensure that
Buyer will have a first priority security interest in the Collateral, including,
among other things, filing such Uniform Commercial Code financing statements as
Buyer may reasonably request;
(d) Seller shall notify Buyer no later than one (1) Business Day after
obtaining actual knowledge thereof, if any event has occurred that constitutes
an Event of Default with respect to Seller or any event that with the giving of
notice or lapse of time, or both, would become an Event of Default with respect
to Seller;
(e) Seller covenants to deliver Buyer, at the beginning of each month, a report
listing all present commitments obtained by Seller from credit worthy third-
party investors to purchase the Mortgage Loans within the following sixty days.
Seller must demonstrate based upon such report that it has a whole loan sale
take-out capability to repurchase the Mortgage Loans on the applicable
Repurchase Date;
15
(f) Seller covenants to provide Buyer with a copy of any material changes to
Seller's underwriting guidelines prior to the effectiveness of any such change;
(g) Seller covenants, upon request of Buyer after the occurrence of a
Collateral Deficit, to enter into hedging transactions with respect to fixed
rate Purchased Mortgage Loans in order to protect adequately, in the reasonable
judgment against interest rate risks;
(h) Seller covenants to provide Buyer on the first Business Day of each
month, either by direct modem electronic transmission or via a computer
diskette, the Collateral Information in computer readable format with respect to
all Purchased Mortgage Loans then subject to Transactions;
(i) Seller covenants to provide Buyer or its designee with the option and
right (but not the obligation) of acting as a lead managing underwriter or
placement agent for any securities of the Seller or its subsidiaries
collateralized by, or representing interests in, the Purchased Mortgage Loans
(each such transaction, a "Securitization"). Each Securitization shall contain
--------------
terms mutually acceptable to Buyer and Seller (including, without limitation,
customary provisions regarding representations and warranties, covenants,
delivery terms, conditions, indemnification, contribution and termination). If
Buyer or its affiliate declines to participate in any Securitization, Seller or
its subsidiaries may cause such transaction to be executed by others without
prejudice to Buyer's rights as to future transactions; and
(j) Seller covenants to provide Buyer with the following financial and
reporting information:
(i) Within 90 days after the last day of its fiscal year, Seller's
audited combined and combining statements of income and statements of
changes in cash flow for such year and balance sheets as of the end of
such year in each case presented fairly in accordance with GAAP, and
accompanied, in all cases, by an unqualified report of a "Big Six"
nationally recognized independent certified public accounting firm
consented to by Buyer (which consent shall not be unreasonably
withheld).
(ii) Within 60 days after the last day of the first three fiscal
quarters in any fiscal year, Seller's combined and combining statements
of income and statements of changes in cash flow for such quarter and
balance sheets as of the end of such quarter presented fairly in
accordance with GAAP.
(iii) Within 30 days after the last day of each calendar month an
officer's certificate from a senior officer of the Seller addressed to
Buyer certifying that, as of such calendar month, (x) Seller is in
compliance with all of the terms, conditions and requirements of this
Agreement, and (y) no Event of Default exists.
13. EVENTS OF DEFAULT
(a) If any of the following events (each an "Event of Default") occur, Seller
----------------
and Buyer shall have the rights set forth in Section 14, as applicable:
(i) Seller or Buyer fails to satisfy or perform any material obligation or
covenant under this Agreement;
16
(ii) an Act of Insolvency occurs with respect to Buyer or Seller, Seller's
corporate parent or United PanAm Mortgage Corporation;
(iii) any representation made by Seller shall have been incorrect or untrue
in any material respect when made or repeated or deemed to have been
made or repeated;
(iv) Seller or Buyer shall admit its inability to, or its intention not to,
perform any of its obligations hereunder;
(v) any governmental, regulatory, or self-regulatory authority, including,
but not limited to, the Agencies, takes any action to remove, limit,
restrict, suspend or terminate the rights, privileges, or operations
of the Seller or any of its Affiliates, including suspension as an
issuer, lender or seller/servicer of mortgage loans, which suspension
has a material adverse effect on the ordinary business operations of
Seller or Seller's Affiliate, and which continues for more than 24
hours;
(vi) Seller dissolves, merges or consolidates with another entity (unless
(A) it is the surviving party or (B) the entity into which it mergers
has equity and a market value of at least that of the Seller
immediately prior to such merger and such entity expressly assumes the
obligations of the Seller at the time of such merger), or sells,
transfers, or otherwise disposes of a material portion of its business
or assets;
(vii) Buyer, in its good faith judgment, believes that there has been a
material adverse change in the business, operations, corporate
structure or financial condition of Seller or that Seller will not
meet any of its obligations under any Transaction pursuant to this
Agreement, this Agreement or any other agreement between the parties;
(viii)Seller is in default under any other agreement to which it is a party,
provided, however, such a default shall not constitute an Event of
Default if the exercise of such remedies as are available to Seller's
counterparty with respect to such default would not result in a
material adverse change in the business operations or financial
condition of the Seller;
(ix) A final judgment by any competent court in the United States of
America for the payment of money in an amount of at least $25,000 is
rendered against the Seller, and the same remains undischarged or
unpaid for a period of sixty (60) days during which execution of such
judgment is not effectively stayed;
(x) This Agreement shall for any reason cease to create a valid, first
priority security interest in any of the Purchased Mortgage Loans
purported to be covered hereby;
(xi) A Market Value Collateral Deficit or Securitization Value Collateral
Deficit occurs with respect to Seller or Buyer, as applicable, and is
not eliminated within the time period specified in Section 4(b); or
(xii) An "event of default" has occurred pursuant to a Hedge.
17
(b) In making a determination as to whether an Event of Default has occurred,
the parties hereto shall be entitled to rely on reports published or broadcast
by media sources believed by such party to be generally reliable and on
information provided to it by any other sources believed by it to be generally
reliable, provided that such party reasonably and in good faith believes such
information to be accurate and has taken such steps as may be reasonable in the
circumstances to attempt to verify such information.
14. REMEDIES
(a) If an Event of Default occurs with respect to Seller, the following rights
and remedies are available to Buyer:
(i) At the option of Buyer, exercised by written notice to Seller (which
option shall be deemed to have been exercised, even if no notice is
given, immediately upon the occurrence of an Act of Insolvency), the
Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur,
(ii) If Buyer exercises or is deemed to have exercised the option referred
to in subsection (a)(i) of this Section,
(A) Seller's obligations hereunder to repurchase all Purchased
Mortgage Loans in such Transactions shall thereupon become
immediately due and payable,
(B) to the extent permitted by applicable law, the Repurchase Price
with respect to each such Transaction shall be increased by the
aggregate amount obtained by daily application of, on a 360 day per
year basis for the actual number of days during the period from and
including the date of the exercise or deemed exercise of such option
to but excluding the date of payment of the Repurchase Price as so
increased, (x) the greater of the Prime Rate or the Pricing Rate for
each such Transaction to (y) the Repurchase Price for such
Transaction as of the Repurchase Date as determined pursuant to
subsection (a)(i) of this Section (decreased as of any day by (I) any
amounts actually in the possession of Buyer pursuant to clause (C) of
this subsection, (II) any proceeds from the sale of Purchased
Mortgage Loans applied to the Repurchase Price pursuant to subsection
(a)(xii) of this Section, and (III) any amounts applied to the
Repurchase Price pursuant to subsection (a)(iii) of this Section),
and
(C) all Income actually received by the Buyer or its designee
(including the Custodian) pursuant to Section 5 shall be applied to
the aggregate unpaid Repurchase Price owed by Seller.
(iii) After one Business Day's notice to Seller (which notice need not be
given if an Act of Insolvency shall have occurred, and which may be
the notice given under subsection (a)(i) of this Section), Buyer may
(A) immediately sell, without notice or demand of any kind, at a
public or private sale and at such price or prices Buyer may
reasonably deem satisfactory any or all Purchased Mortgage Loans
subject to a Transaction hereunder or (B) in its sole discretion
elect, in lieu of selling all or a portion of such Purchased Mortgage
Loans, to give Seller credit for such Purchased Mortgage Loans in an
amount equal to the Market Value of the Purchased Mortgage Loans
against the aggregate unpaid Repurchase Price and any other amounts
owing by Seller hereunder. The proceeds of any disposition of
Purchased Mortgage Loans shall be
18
applied first to the costs and expenses incurred by Buyer in
connection with Seller's default; second to consequential damages,
including but not limited to costs of cover and/or related hedging
transactions; third to the Repurchase Price; and fourth to any other
outstanding obligation of Seller to Buyer or its Affiliates.
(iv) The parties recognize that it may not be possible to purchase or sell
all of the Purchased Mortgage Loans on a particular Business Day, or
in a transaction with the same purchaser, or in the same manner
because the market for such Purchased Mortgage Loans may not be
liquid. In view of the nature of the Purchased Mortgage Loans, the
parties agree that liquidation of a Transaction or the underlying
Purchased Mortgage Loans does not require a public purchase or sale
and that a good faith private purchase or sale shall be deemed to
have been made in a commercially reasonable manner. Accordingly,
Buyer may elect, in its sole discretion, the time and manner of
liquidating any Purchased Mortgage Loan and nothing contained herein
shall (A) obligate Buyer to liquidate any Purchased Mortgage Loan on
the occurrence of an Event of Default or to liquidate all Purchased
Mortgage Loans in the same manner or on the same Business Day or (B)
constitute a waiver of any right or remedy of Buyer. However, in
recognition of the parties' agreement that the Transactions hereunder
have been entered into in consideration of and in reliance upon the
fact that all Transactions hereunder constitute a single business and
contractual relationship and that each Transaction has been entered
into in consideration of the other Transactions, the parties further
agree that Buyer shall use its best efforts to liquidate all
Transactions hereunder upon the occurrence of an Event of Default as
quickly as is prudently possible in the reasonable judgment of Buyer.
(v) Buyer shall, without regard to the adequacy of the security for the
Seller's obligations under this Agreement, be entitled to the
appointment of a receiver by any court having jurisdiction, without
notice, to take possession of and protect, collect, manage,
liquidate, and sell the Collateral or any portion thereof, and
collect the payments due with respect to the Collateral or any
portion thereof. Seller shall pay all costs and expenses incurred by
Buyer in connection with the appointment and activities of such
receiver.
(vi) Seller agrees that Buyer may obtain an injunction or an order of
specific performance to compel Seller to fulfill its obligations as
set forth in Section 25, if Seller fails or refuses to perform its
obligations as set forth therein.
(vii) Seller shall be liable to Buyer for the amount of all expenses,
reasonably incurred by Buyer in connection with or as a consequence
of an Event of Default, including, without limitation, reasonable
legal fees and expenses and reasonable costs incurred in connection
with hedging or covering transactions.
(viii)Buyer shall have all the rights and remedies provided herein,
provided by applicable federal, state, foreign, and local laws
(including, without limitation, the rights and remedies of a secured
party under the Uniform Commercial Code of the State of New York, to
the extent that the
19
Uniform Commercial Code is applicable, and the right to offset any
mutual debt and claim), in equity, and under any other agreement
between Buyer and Seller.
(ix) Buyer may exercise one or more of the remedies available to Buyer
immediately upon the occurrence of an Event of Default and, except to
the extent provided in subsections (a)(i) and (iii) of this Section,
at any time thereafter without notice to Seller. All rights and
remedies arising under this Agreement as amended from time-to-time
hereunder are cumulative and not exclusive of any other rights or
remedies which Buyer may have.
(x) In addition to its rights hereunder, Buyer shall have the right to
proceed against any assets of Seller which may be in the possession
of Buyer or its designee (including the Custodian) including the
right to liquidate such assets and to set off the proceeds against
monies owed by Seller to Buyer pursuant to this Agreement. Buyer may
set off cash, the proceeds of the liquidation of the Purchased
Mortgage Loans, any Collateral or its proceeds, and all other sums or
obligations owed by Seller to Buyer against all of Seller's
obligations to Buyer, whether under this Agreement, under a
Transaction, or under any other agreement between the parties, or
otherwise, whether or not such obligations are then due, without
prejudice to Buyer's right to recover any deficiency. Any cash,
proceeds, or property in excess of any amounts due, or which Buyer
reasonably believes may become due, to it from Seller shall be
returned to Seller after satisfaction of all obligations of Seller to
Buyer.
(xi) Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and Seller hereby expressly waives any
defenses Seller might otherwise have to require Buyer to enforce its
rights by judicial process. Seller also waives any defense Seller
might otherwise have arising from the use of nonjudicial process,
enforcement and sale of all or any portion of the Collateral, or from
any other election of remedies. Seller recognizes that nonjudicial
remedies are consistent with the usages of the trade, are responsive
to commercial necessity and are the result of a bargain at arm's
length.
(xii) Buyer and Seller hereby agree that sales of the Purchased Mortgage
Loans shall be deemed to include and permit the sales of Purchased
Mortgaged Loans pursuant to a securities offering.
(xiii)Notwithstanding the foregoing remedies, if the Event of Default
(other than an Event of Default under Section 13(a)(xi)) arises from
a breach of any representation or warranty set forth in Sections
10(b)(iii), (v) or (ix) or in Exhibit V attached hereto with respect
to a Purchased Mortgage Loan, then Seller may elect, subject to
Buyer's written consent (which consent shall not be unreasonably
withheld or delayed), to cure such default by repurchasing such
Mortgage Loan or substituting for such Mortgage Loan within two (2)
Business Days of such Event of Default, provided, however, that
Seller shall not have the right to make the foregoing election if
such breach causes a default with respect to Mortgage Loans that in
the aggregate represent ten percent (10%) or more of the aggregate
Purchase Price of all Purchased Mortgage Loans subject
20
to then outstanding Transactions. The repurchase price for any such
repurchase shall be the outstanding Repurchase Price of such Mortgage
Loan, as the case may be. Any such substitution shall be performed in
accordance with Section 9 of this Agreement.
(b) If an Event of Default occurs with respect to Buyer, the following rights
and remedies are available to Seller:
(i) Upon tender by Seller of payment of the aggregate Repurchase Price
for all such Transactions, Buyer's right, title and interest in all
Purchased Mortgage Loans subject to such Transactions shall be deemed
transferred to Seller, and Buyer shall deliver or cause to be
transferred all such Purchased Mortgage Loans to Seller or its
designee at Buyer's expense.
(ii) If Seller exercises the option referred to in subsection (b)(i) of
this Section and Buyer fails to deliver or cause to be delivered the
Purchased Mortgage Loans to Seller or its designee, after one
Business Day's notice to Buyer, Seller may (A) purchase Mortgage
Loans ("Replacement Loans") that are as similar as is reasonably
-----------------
practicable in characteristics, outstanding principal amounts (as a
pool) and interest rate to any Purchased Mortgage Loans that are not
delivered by Buyer to Seller or its designee as required hereunder or
(B) in its sole discretion elect, in lieu of purchasing Replacement
Loans, to be deemed to have purchased Replacement Loans at a price
therefor on such date, equal to the Market Value of the Purchased
Mortgage Loans.
(iii) Buyer shall be liable to the Seller, and Buyer shall pay to the
Seller on demand, (A) with respect to Purchased Mortgage Loans (other
than Additional Loans), for any excess of the price paid (or deemed
paid) by Seller for Replacement Loans therefor over the Repurchase
Price for such Purchased Mortgage Loans and (B) with respect to
Additional Loans, for the price paid (or deemed paid) by Seller for
the Replacement Loans therefor. In addition, Buyer shall be liable to
Seller for interest on such remaining liability with respect to each
such purchase (or deemed purchase) of Replacement Loans calculated on
a 360-day year basis for the actual number of days during the period
from and including the date of such purchase (or deemed purchase)
until paid in full by Buyer. Such interest shall be at the greater of
the Pricing Rate or the Prime Rate.
(iv) Buyer shall be liable to Seller for the amount of all expenses
reasonably incurred by Seller in connection with or as a consequence
of an Event of Default, including, without limitation, reasonable
legal expenses and reasonable expenses incurred in connection with
covering existing hedging transactions with respect to the Purchased
Mortgage Loans.
(v) Seller shall have all the rights and remedies provided herein,
provided by applicable federal, state, foreign, and local laws, in
equity, and under any other agreement between Buyer and Seller,
including, without limitation, the right to offset any debt or claim.
(vi) Seller may exercise one or more of the remedies available to Seller
immediately upon the occurrence of an Event of Default and at any
time thereafter without notice to Buyer. All rights and remedies
arising under
21
this Agreement as amended from time-to-time hereunder are cumulative
and not exclusive of any other rights or remedies which Seller may
have.
15. ADDITIONAL CONDITION
Seller shall, on the date of the initial Transaction hereunder and, upon the
request of Buyer, on the date of any subsequent Transaction, cause to be
delivered to Buyer, with reliance thereon permitted as to any Person that
purchases the Purchased Mortgage Loan from Buyer in a repurchase transaction, a
favorable opinion or opinions of counsel with respect to the matters set forth
in Exhibit IV attached hereto.
16. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will enter into
each Transaction hereunder in consideration of and in reliance upon the fact
that, all Transactions hereunder constitute a single business and contractual
relationship and that each has been entered into in consideration of the other
Transactions. Accordingly, each of Buyer and Seller agrees (i) to perform all
of its obligations in respect of each Transaction hereunder, and that a default
in the performance of any such obligations shall constitute a default by it in
respect of all Transactions hereunder, (ii) that each of them shall be entitled
to set off claims and apply property held by them in respect of any Transaction
against obligations owing to them in respect of any other Transactions hereunder
and (iii) that payments, deliveries, and other transfers made by either of them
in respect of any Transaction shall be deemed to have been made in consideration
of payments, deliveries, and other transfers in respect of any other
Transactions hereunder, and the obligations to make any such payments,
deliveries, and other transfers may be applied against each other and netted;
provided, however, that the parties hereto acknowledge and agree that each
Purchased Mortgage Loan is identified and unique and nothing in this Agreement
should limit or reduce Buyer's obligation to deliver the Purchased Mortgage
Loans to Seller as and when provided herein.
17. NOTICES AND OTHER COMMUNICATIONS
Unless another address is specified in writing by the respective party to whom
any written notice or other communication is to be given hereunder, all such
notices or communications shall be in writing or confirmed in writing and
delivered at the respective addresses set forth in the Confirmation.
18. ENTIRE AGREEMENT; SEVERABILITY
This Agreement together with the applicable Confirmation constitutes the entire
understanding between Buyer and Seller with respect to the subject matter it
covers and shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions involving
Purchased Mortgage Loans. By acceptance of this Agreement, Buyer and Seller
acknowledge that they have not made, and are not relying upon, any statements,
representations, promises or undertakings not contained in this Agreement. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
19. NON-ASSIGNABILITY
The rights and obligations of the parties under this Agreement and under any
Transaction shall not be assigned by Seller without the prior written consent of
Buyer. Subject to the foregoing,
22
this Agreement and any Transactions shall be binding upon and shall inure to the
benefit of the parties and their respective successors and assigns. Nothing in
this Agreement express or implied, shall give to any person, other than the
parties to this Agreement and their successors hereunder, any benefit or any
legal or equitable right, power, remedy or claim under this Agreement.
20. TERMINABILITY
This Agreement shall terminate upon the written notice from Seller to Buyer to
such effect, except that this Agreement shall, notwithstanding the clause above,
remain applicable to any Transaction then outstanding. Notwithstanding any such
termination or the occurrence of an Event of Default, (i) all of the
representations and warranties hereunder (including those made in Exhibit V) and
the covenant of Seller made in subsection (i) of Section 12 shall each continue
and survive.
21. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
22. CONSENT TO JURISDICTION AND ARBITRATION
The parties irrevocably agree to submit to the personal jurisdiction of the
United States District Court for the Southern District of New York, the parties
irrevocably waiving any objection thereto. If, for any reason, federal
jurisdiction is not available, and only if federal jurisdiction is not
available, the parties irrevocably agree to submit to the personal jurisdiction
of the Supreme Court of the State of New York, the parties irrevocably waiving
any objection thereto. Notwithstanding the foregoing two sentences, at either
party's sole option exercisable at any time not later than thirty (30) days
after an action or proceeding has been commenced, the parties agree that the
matter may be submitted to binding arbitration in accordance with the commercial
rules of the American Arbitration Association then in effect in the State of New
York and judgment upon any award rendered by the arbitrator may be entered in
any court having jurisdiction thereof within the City, County and State of New
York; provided, however, that the arbitrator shall not amend, supplement, or
reform in any regard this Agreement or the terms of any Confirmation, the rights
or obligations of any party hereunder or thereunder, or the enforceability of
any of the terms hereof or thereof. Any arbitration shall be conducted before a
single arbitrator who shall be reasonably familiar with repurchase transactions
and the secondary mortgage market in the City, County, and State of New York.
23. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any remedy
hereunder by any party shall constitute a waiver of its right to exercise any
other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Any such waiver or modification shall be effective only in the
specific instance and for the specific purpose for which it was given.
24. INTENT
23
The parties understand and intend that this Agreement and each Transaction
hereunder constitute a "repurchase agreement" and a "securities contract" as
those terms are defined under the relevant provisions of Title 11 of the United
States Code, as amended.
25. SERVICING
(a) Notwithstanding the purchase and sale of the Purchased Mortgage Loans
hereby, Seller shall continue to service the Purchased Mortgage Loans for the
benefit of Buyer and, if Buyer shall exercise its rights to pledge or
hypothecate the Purchased Mortgage Loan prior to the related Repurchase Date
pursuant to Section 8, Buyer's assigns; provided, however, that the obligations
of Seller to service the Purchased Mortgage Loans shall cease, at Seller's
option, upon the payment by Seller to Buyer of the Repurchase Price therefor.
Seller shall service the Purchased Mortgage Loans in accordance with the
servicing standards maintained by other prudent mortgage lenders with respect to
mortgage loans similar to the Purchased Mortgage Loans.
(b) Seller agrees that Buyer is the owner of all servicing records, including
but not limited to any and all servicing agreements, files, documents, records,
data bases, computer tapes, copies of computer tapes, proof of insurance
coverage, insurance policies, appraisals, other closing documentation, payment
history records, and any other records relating to or evidencing the servicing
of Purchased Mortgage Loans (the "Servicing Records"). Seller grants Buyer a
-----------------
security interest in all servicing fees and rights relating to the Purchased
Mortgage Loans and all Servicing Records to secure the obligation of the Seller
or its designee to service in conformity with this Section and any other
obligation of Seller to Buyer. Seller covenants to safeguard such Servicing
Records and to deliver them promptly to Buyer or its designee (including the
Custodian) at Buyer's request.
(c) Upon the occurrence and continuance of an Event of Default, Buyer may, in
its sole discretion, (i) sell its right to the Purchased Mortgage Loans on a
servicing released basis or (ii) terminate the Seller as servicer of the
Purchased Mortgage Loans with or without cause, in each case without payment of
any termination fee.
(d) Seller shall not employ sub-servicers to service the Purchased Mortgage
Loans without the prior written approval of Buyer, which approval shall not be
unreasonably withheld.
(e) Seller shall cause any sub-servicers engaged by Seller to execute a letter
agreement with Buyer acknowledging Buyer's security interest and agreeing that,
upon notice from Buyer (or the Custodian on its behalf) that an Event of Default
has occurred and in continuing hereunder, it shall deposit all Income with
respect to the Purchased Mortgage Loans in the account specified in the third
sentence of Section 5(a).
26. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that in the case of
Transactions in which one of the parties is an "insured depository institution"
as that term is defined in Section 1831(a) of Title 12 of the United States
Code, as amended, funds held by the financial institution pursuant to a
Transaction hereunder are not a deposit and therefore are not insured by the
Federal Deposit Insurance Corporation, the Savings Association Insurance Fund or
the Bank Insurance Fund, as applicable.
24
27. NETTING
If Buyer and Seller are "financial institutions" as now or hereinafter defined
in Section 4402 of Title 12 of the United States Code ("Section 4402") and any
------------
rules or regulations promulgated thereunder:
(a) All amounts to be paid or advanced by one party to or on behalf of the
other under this Agreement or any Transaction hereunder shall be deemed to be
"payment obligations" and all amounts to be received by or on behalf of one
party from the other under this Agreement or any Transaction hereunder shall be
deemed to be "payment entitlements" within the meaning of Section 4402, and this
Agreement shall be deemed to be a "netting contract" as defined in Section 4402.
(b) The payment obligations and the payment entitlements of the parties hereto
pursuant to this Agreement and any Transaction hereunder shall be netted as
follows. In the event that either party (the "Defaulting Party") shall fail to
----------------
honor any payment obligation under this Agreement or any Transaction hereunder,
the other party (the "Nondefaulting Party") shall be entitled to reduce the
-------------------
amount of any payment to be made by the Nondefaulting Party to the Defaulting
Party by the amount of the payment obligation that the Defaulting Party failed
to honor.
28. MISCELLANEOUS
(a) Time is of the essence under this agreement and all Transactions and all
references to a time shall mean New York time in effect on the date of the
action unless otherwise expressly stated in this Agreement.
(b) Buyer shall be authorized to accept orders and take any other action
affecting any accounts of the Seller in response to instructions given in
writing or orally by telephone or otherwise by any person with apparent
authority to act on behalf of the Seller, and the Seller shall indemnify Buyer,
defend, and hold Buyer harmless from and against any and all liabilities,
losses, damages, costs, and expenses of any nature arising out of or in
connection with any action taken by Buyer in response to such instructions
received or reasonably believed to have been received from the Seller.
(c) If there is any conflict between the terms of this Agreement or any
Transaction entered into hereunder and the Custodial Agreement, this Agreement
shall prevail.
(d) If there is any conflict between the terms of a Confirmation or a corrected
Confirmation issued by the Buyer and this Agreement, the Confirmation shall
prevail.
(e) This Agreement may be executed in counterparts, each of which so executed
shall be deemed to be an original, but all of such counterparts shall together
constitute but one and the same instrument.
(f) The headings in this Agreement are for convenience of reference only and
shall not affect the interpretation or construction of this Agreement.
[Signature page follows.]
25
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the
date set forth above.
▇▇▇▇▇▇ COMMERCIAL PAPER INC.,
Buyer
By: /s/ [SIGNATURE ILLEGIBLE]
----------------------------------
Title: Authorized Signatory
-------------------------------
Date: October 31, 1997
--------------------------------
PAN AMERICAN BANK, FSB,
Seller
By: /s/ ▇▇▇▇▇▇▇▇ ▇. GRILL
----------------------------------
Title: President
-------------------------------
Date: October 31, 1997
--------------------------------
26
EXHIBITS
--------
EXHIBIT I Confirmation
EXHIBIT II Form of Custodial Delivery
EXHIBIT III Form of Power of Attorney
EXHIBIT IV Opinion of Counsel to Seller
EXHIBIT V Representations and Warranties
Regarding Mortgage Loan
EXHIBIT VI Seller's Underwriting Guidelines
27
EXHIBIT I
Form of Confirmation Letter
(date)
Pan American Bank, FSB
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
Confirmation No.:
------------------------------
Ladies/Gentlemen:
This letter confirms our oral agreement to purchase from you the Mortgage Loans
listed in Appendix I hereto, pursuant to the Master Repurchase Agreement
Governing Purchases and Sales of Mortgage Loans between us, dated as of October
31, 1997 (the "Agreement"), as follows:
Purchase Date:
Mortgage Loans to be Purchased: See Appendix I hereto.
[Appendix I to Confirmation Letter will list Mortgage Loans]
Aggregate Principal Amount of Purchased Mortgage Loans:
Purchase Price:
Pricing Rate:
Repurchase Date:
Repurchase Price:
Collateral Amount Percentage with respect
to Market Value:
Collateral Amount Percentage with respect
to Securitization Value:
28
Names and addresses for communications:
Buyer:
▇▇▇▇▇▇ Commercial Paper Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: Central Funding Department
Seller:
Pan American Bank, FSB
▇▇▇▇ ▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇▇▇ COMMERCIAL PAPER INC.
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
Agreed and Acknowledged:
PAN AMERICAN BANK, FSB,
Seller
By:
-------------------------------
Name:
-----------------------------
Title:
----------------------------
29
EXHIBIT II
Form of Custodial Delivery
On this ___ day of ______, 199__, Pan American Bank, FSB ("Seller"), as the
Seller under that certain Master Repurchase Agreement Governing Purchases and
Sales of Mortgage Loans, dated as of October 31, 1997 (the "Repurchase
Agreement") between the Seller and ▇▇▇▇▇▇ Commercial Paper Inc. ("Buyer"), does
hereby deliver to ______ ("Custodian"), as custodian under that certain
Custodial Agreement, dated as of November 6, 1997, among Buyer, Seller and
Custodian the Mortgage Files with respect to the Mortgage Loans to be purchased
by Buyer pursuant to the Repurchase Agreement, which Mortgage Loans are listed
on the Mortgage Loan Schedule attached hereto and which Mortgage Loans shall be
subject to the terms of the Custodial Agreement on the date hereof.
With respect to the Mortgage Files delivered hereby, for the purposes of issuing
the Trust Receipt, the Custodian shall review the Mortgage Files to ascertain
delivery of the documents listed in Annex A attached to the Custodial Agreement.
[The Mortgage Loans delivered hereby constitute Additional Collateral delivered
pursuant to Section 7 of the Custodial Agreement].][The Mortgage Loans delivered
hereby constitute Substituted Collateral pursuant to Section 6 of the Custodial
Agreement and are intended to be substituted for the Purchased Mortgage Loans
listed on the [schedule attached hereto][Request for Release of Documents and
receipt delivered herewith]. The Purchased Mortgage Loans to be released shall
be delivered to _______________.]
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Custodial Agreement.
30
IN WITNESS WHEREOF, the Seller has caused its name to be signed hereto by its
officer thereunto duly authorized as of the day and year first above written.
PAN AMERICAN BANK, FSB,
Seller
By:
-----------------------------
Title:
--------------------------
Name:
---------------------------
31
EXHIBIT III
Form of Power of Attorney
"Know All Men by These Presents, that Pan American Bank, FSB ("Seller"), does
hereby appoint ▇▇▇▇▇▇ Commercial Paper Inc. ("Buyer"), its attorney-in-fact to
act in Seller's name, place and stead in any way which Seller could do with
respect to (i) the completion of the endorsements of the Mortgage Notes and the
Assignments of Mortgages, (ii) the recordation of the assignments of Mortgages
and (iii) the enforcement of the Seller's rights under the Mortgage Loans
purchased by Buyer pursuant to a Master Repurchase Agreement Governing
Purchases and Sales of Mortgage Loans dated as of October 31, 1997 between
Seller and Buyer and to take such other steps as may be necessary or desirable
to enforce Buyer's rights against such Mortgage Loans, the related Mortgage
Files and the Servicing Records to the extent that Seller is permitted by law to
act through an agent.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD
PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT
HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO
SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION
OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS
OWN BEHALF AND ON BEHALF OF SELLER'S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND
HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY
ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON
THE PROVISIONS OF THIS INSTRUMENT.
32
IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed and
the Seller's seal to be affixed this __ day of November, 1997.
PAN AMERICAN BANK, FSB
(Seal)
By:
---------------------------
Name:
----------------------
Title:
------------------------
33
EXHIBIT IV
OPINION OF SELLER'S COUNSEL
34
EXHIBIT V
Representations and Warranties
Regarding Mortgage Loans.
The Seller represents and warrants to the Buyer that, with respect to
each Mortgage Loan sold in a Transaction hereunder, as of the related Purchase
Date:
(a) Mortgage Loans as Described. The information set forth in the Mortgage
---------------------------
Loan Schedule is complete, true and correct;
(b) Payments Current Within 59 Days. The Mortgage Loan (i) together with the
-------------------------------
other Purchased Mortgage Loans subject to Transactions, would not cause the
30+ Delinquency Percentage to exceed 3%, and (ii) is not more than 59 days
Delinquent;
(c) No Outstanding Charges. There are no defaults in complying with the terms
----------------------
of the Mortgage, and all taxes, governmental assessments, insurance
premiums, water, sewer and municipal charges, leasehold payments or ground
rents which previously became due and owing have been paid, or an escrow of
funds has been established in an amount sufficient to pay for every such
item which remains unpaid and which has been assessed but is not yet due
and payable. Seller has not advanced funds, or induced, solicited or
knowingly received any advance of funds by a party other than the
Mortgagor, directly or indirectly, for the payment of any amount required
under the Mortgage Loan, except for interest accruing from the date of the
Mortgage Note or date of disbursement of the Mortgage Loan proceeds,
whichever is greater, to the day which precedes by one month the due date
of the first installment of principal and interest;
(d) Original Terms Unmodified. The terms of the Mortgage Note and Mortgage
-------------------------
have not been impaired, waived, altered or modified in any respect, except
by a written instrument which has been recorded, if necessary to protect
the interests of Buyer and which has been delivered to Buyer or its
designee (including the Custodian). The substance of any such waiver,
alteration or modification has been approved by the issuer of any related
primary mortgage guarantee policy (a "PMI Policy") and the title insurer,
to the extent required by the policy, and its terms are reflected on the
Mortgage Loan Schedule. No Mortgagor has been released, in whole or in
part, except in connection with an assumption agreement approved by the
issuer of any related PMI Policy and the title insurer, to the extent
required by the policy, and which assumption agreement is included in the
Mortgage File delivered to Buyer or its designee (including the Custodian)
and the terms of which are reflected in the Mortgage Loan Schedule;
35
(e) No Defenses. The Mortgage Loan is not subject to any right of rescission,
-----------
set-off, counterclaim or defense, including without limitation the defense
of usury, nor will the operation of any of the terms of the Mortgage Note
or the Mortgage, or the exercise of any right thereunder, render either the
Mortgage Note or the Mortgage unenforceable, in whole or in part, or
subject to any right of rescission, set-off, counterclaim or defense,
including without limitation the defense of usury, and no such right of
rescission, set-off, counterclaim or defense has been asserted with respect
thereto;
(f) Insurance Policies in Effect. The fire and casualty insurance policy
----------------------------
covering the Mortgaged Property (1) affords (and will afford) sufficient
insurance against fire and such other risks as are usually insured against
in the broad form of extended coverage insurance from time to time
available, as well as insurance against flood hazards if the Mortgaged
Property is an area identified by the Federal Emergency Management Agency
as having special flood hazards; (2) is a standard policy of insurance for
the locale where the Mortgaged Property is located, is in full force and
effect, and the amount of the insurance is in the amount of the full
insurable value of the Mortgaged Property on a replacement cost basis or
the unpaid balance of the Mortgage Loans, whichever is less; (3) names (and
will name) the present owner of the Mortgaged Property as the insured; and
(4) contains a standard mortgagee loss payable clause in favor of Seller.
All individual insurance policies with respect to the Mortgage Loan are the
valid and binding obligation of the insurer and contain a standard mortgage
clause naming Seller, its successors and assigns, as Mortgagee. All
premiums thereon have been paid. The Mortgage obligates the Mortgagor
thereunder to maintain all such insurance policies at the Mortgagor's cost
and expense, and upon the Mortgagor's failure to do so, authorizes the
holder of the Mortgage to obtain and maintain such insurance at the
Mortgagor's cost and expense and to seek reimbursement therefor from the
Mortgagor;
(g) Compliance with Applicable Laws. Any and all requirements of any federal,
-------------------------------
state or local law including, without limitation, usury, truth-in-lending,
real estate settlement procedures, consumer credit protection, equal credit
opportunity or disclosure laws applicable to the origination and servicing
of the Mortgage Loan have been complied with, and Seller shall maintain in
its possession, available for Buyer's inspection, and shall deliver to
Buyer upon demand, evidence of compliance with all such requirements;
(h) No Satisfaction of Mortgage. The Mortgage has not been satisfied,
---------------------------
canceled, subordinated or rescinded, in whole or in part, and the Mortgaged
Property has not been released from the lien of the Mortgage, in whole or
in part, nor has any instrument been executed that would effect any such
release, cancellation, subordination or rescission;
(i) Location and Type of Mortgaged Property. The Mortgaged Property is located
---------------------------------------
in the state identified in the Mortgage Loan Schedule and consists of one
or more parcels of real property with a detached single family residence
erected thereon, or a two- to four-family dwelling, or an individual
condominium unit in a condominium project, or an individual unit in a
planned unit development and no residence or dwelling is a mobile home or a
manufactured dwelling which is not permanently affixed to real property.
No portion of the Mortgaged Property is used for commercial purposes;
36
(j) Valid First or Second Lien. The Mortgage is a valid, subsisting and
--------------------------
enforceable first or second lien on the Mortgaged Property, including
all buildings on the Mortgaged Property and all installations and
mechanical, electrical, plumbing, heating and air conditioning systems
located in or annexed to such buildings, and all additions,
alterations and replacements made at any time with respect to the
foregoing. The lien of the Mortgage is subject only to:
(1) the lien of current real property taxes and special assessments not
yet due and payable;
(2) covenants, conditions and restrictions, rights of way, easements and
other matters of the public record as of the date of recording
acceptable to mortgage lending institutions generally and specifically
referred to in the lender's title insurance policy delivered to the
originator of the Mortgage Loan and (i) referred to or to otherwise
considered in the appraisal made for the originator of the Mortgage
Loan or (ii) which do not adversely affect the appraised value of the
Mortgaged Property set forth in such appraisal;
(3) in the case of a Mortgaged Property that is a condominium or an
individual unit in a planned unit development, liens for common
charges permitted by statute;
(4) in the case where the Mortgage Loan is secured by a second mortgage
lien on the Mortgaged Property (and represented on the Mortgage Loan
Schedule as such), the lien of the First Mortgage; and
(5) other matters to which like properties are commonly subject which do
not materially interfere with the benefits of the security intended to
be provided by the Mortgage or the use, enjoyment, value or
marketability of the related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first or second lien and first or second priority
security interest on the property described therein and Seller has full right to
pledge and assign the same to Buyer or its designee (including the Custodian).
(k) Validity of Mortgage Documents. The Mortgage Note and the Mortgage are
------------------------------
genuine, and each is the legal, valid and binding obligation of the maker
thereof enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting the
rights of creditor's generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding in
equity or at law.) All parties to the Mortgage Note and the Mortgage had
legal capacity to enter into the Mortgage
37
Loan and to execute and deliver the Mortgage Note and the Mortgage, and the
Mortgage Note and the Mortgage have been duly and properly executed by such
parties. The Mortgagor is a natural person who is a party to the Mortgage
Note and the Mortgage in an individual capacity, and not in the capacity of
a trustee or otherwise;
(l) Full Disbursement of Proceeds. The proceeds of the Mortgage Loan have been
-----------------------------
fully disbursed and there is no requirement for future advances thereunder,
and any and all requirements as to completion of any on-site or off-site
improvement and as to disbursements of any escrow funds therefor have been
complied with. All costs, fees and expenses incurred in making or closing
the Mortgage Loan and the recording of the Mortgage were paid, and the
Mortgagor is not entitled to any refund of any amounts paid or due under
the Mortgage Note or Mortgage;
(m) Ownership. Seller is the sole owner of record and holder of the Mortgage
---------
Loan. The Mortgage Loan is not assigned or pledged except as provided in
this Agreement, and Seller has good and marketable title thereto, and has
full right to pledge and assign the Mortgage Loan to Buyer or its designee
(including the Custodian) free and clear of any encumbrance, equity,
participation interest, lien, pledge, charge, claim or security interest,
and has full right and authority subject to no interest or participation
of, or agreement with, any other party, to sell and assign each Mortgage
Loan pursuant to this Agreement;
(n) Doing Business. All parties which have had any interest in the Mortgage
--------------
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during
the period in which they held and disposed of such interest, were) (1) in
compliance with any and all applicable licensing requirements of the laws
of the state wherein the Mortgaged Property is located, and (2) organized
under the laws of such state, or (3) qualified to do business in such
state, or (4) federal savings and loan associations or national banks
having principal offices in such state, or (5) not doing business in such
state;
(o) LTV. No Mortgage Loan has a Loan-to-Value Ratio of more than 90%. The
---
Mortgage Loan, together with the other Purchased Mortgage Loans subject to
Transactions, does not have a weighted average cumulative Loan-to-Value
Ratio in excess of 80%;
(p) Title Insurance. The Mortgage Loan is covered by an ALTA mortgage title
---------------
insurance policy or such other form of policy acceptable to FNMA or FHLMC,
issued by and constituting the valid and binding obligation of a title
insurer generally acceptable to prudent mortgage lenders that regularly
originate or purchase mortgage loans comparable to the Mortgage Loans for
sale to prudent investors in the secondary market that invest in mortgage
loans such as the Mortgage Loans and qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring Seller, its
successors and assigns, as to the first priority lien of the Mortgage in
the case of a First Mortgage Loan secured by a First Mortgage and the
second priority lien of the Mortgage in the case of a Mortgage Loan secured
by a second lien on the related Mortgaged Property, in the original
principal amount of the Mortgage Loan. Seller is the sole named insured of
such mortgage title insurance policy, the assignment to Buyer or the
Custodian as assignee of Buyer of Seller's interest in such mortgage title
insurance policy does not require the consent of or notification to the
insurer or the same has been obtained, and such mortgage title insurance
policy is in full
38
force and effect and will be in full force and effect and inure to the
benefit of Buyer upon the consummation of the transactions contemplated by
this Agreement. No claims have been made under such mortgage title
insurance policy and no prior holder of the related Mortgage, including
Seller, has done, by act or omission, anything that would impair the
coverage of such mortgage title insurance policy;
(q) No Defaults. There is no default, breach, violation or event of
-----------
acceleration existing under the Mortgage or the Mortgage Note and no event
which, with the passage of time or with notice and the expiration of any
grace or cure period, other than the failure to make, prior to expiration
of the applicable grace period, the monthly payment due immediately prior
to the related Purchase Date if such Purchase Date occurs prior to the
expiration of such grace period, would constitute a default, breach,
violation or event of acceleration, and neither Seller nor its predecessors
have waived any default, breach, violation or event of acceleration;
(r) No Mechanics' Liens. There are no mechanics' or similar liens or claims
-------------------
which have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting the
Mortgaged Property which are or may be liens prior to, or equal or
coordinate with, the lien of the Mortgage except those that are stated in
the title insurance policy and for which related losses are affirmatively
insured against by such title insurance policy;
(s) Location of Improvements; No Encroachments. All improvements which were
------------------------------------------
considered in determining the appraised value of the Mortgaged Property lay
wholly within the boundaries and building restriction lines of the
Mortgaged Property and no improvements on adjoining properties encroach
upon the Mortgaged Property except those that are stated in the title
insurance policy and for which related losses are affirmatively insured
against by such title insurance policy. No improvement located on or being
part of the mortgaged property is in violation of any applicable zoning law
or regulation;
(t) Origination. The Mortgage Loan was originated either by (x) Seller or (y)
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another mortgage originator that is, if required by applicable law,
licensed, supervised and examined by a Federal or State authority. The
documents, instruments and agreements submitted for loan underwriting were
not falsified and contain no untrue statement of material fact or omit to
state a material fact required to be stated therein or necessary to make
the information and statements therein not misleading.
(u) Customary Provisions. The Mortgage contains customary and enforceable
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provisions such as to render the rights and remedies of the holder thereof
adequate for the realization against the Mortgaged Property of the benefits
of the security provided thereby, including, (i) in the case of a Mortgage
designated as a deed of trust, by trustee's sale, and (ii) otherwise by
judicial foreclosure. There is no homestead or other exemption available
to a Mortgagor which would interfere with the right to sell the Mortgaged
Property at a trustee's sale or the right to foreclose the Mortgage;
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(v) Occupancy of the Mortgaged Property. As of the related Purchase Date the
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Mortgaged Property is capable of being lawfully occupied under applicable
law. All inspections, licenses and certificates required to be made or
issued with respect to all occupied portions of the Mortgaged Property and,
with respect to the use and occupancy of the same, including but not
limited to certificates of occupancy and fire underwriting certificates,
have been made or obtained from the appropriate authorities. Either that
the Mortgagor represented at the time of origination of the Mortgage Loan
that the Mortgagor would occupy the Mortgaged Property as the Mortgagor's
primary residence or second home or the Mortgaged Property is capable of
being occupied pursuant to terms that approximate current standard market
rental terms and rates;
(w) No Additional Collateral. The Mortgage Note is not and has not been
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secured by any collateral except the lien of the corresponding Mortgage and
the security interest of any applicable security agreement or chattel
mortgage referred to in (j) above;
(x) Deeds of Trust. In the event the Mortgage constitutes a deed of trust, a
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trustee, duly qualified under applicable law to serve as such, has been
properly designated and currently so serves and is named in the Mortgage,
and no fees or expenses are or will become payable by Buyer to the trustee
under the deed of trust, except in connection with a trustee's sale after
default by the Mortgagor;
(y) Acceptable Investment. Seller has no knowledge of any circumstances or
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conditions with respect to the Mortgage, the Mortgaged Property, the
Mortgagor or the Mortgagor's credit standing that can reasonably be
expected to cause private institutional investors to regard the Mortgage
Loan as an unacceptable investment, cause the Mortgage Loan to become
delinquent, or adversely affect the value or marketability of the Mortgage
Loan;
(z) Purchase of Mortgage Documents. The Mortgage File and any other documents
------------------------------
required by Buyer to be delivered for the Mortgage Loan by Seller under
this Agreement have been delivered to the Custodian. Seller is in
possession of a complete, true and accurate Mortgage File except for such
documents the originals of which have been delivered to the Buyer or its
designee (including the Custodian). Each of the documents and instruments
included in the Mortgage File is duly executed and in due and proper form
and each such document or instrument is in a form generally acceptable to
prudent institutional mortgage lenders that regularly originate and
purchase mortgage loans;
(aa) Condominiums/Planned Unit Developments. If the Mortgaged Property is a
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condominium unit or a planned unit development (other than a de minimus
planned unit development) such condominium or planned unit development
project would materially meet FNMA eligibility requirements for sale to
FNMA or is located in a condominium or planned unit development project
which has received FNMA project approval and the representations and
warranties required by FNMA with respect to such condominium or planned
unit development have been made and remain true and correct in all
respects;
(bb) Transfer of Mortgage Loans. The assignment of Mortgage is in recordable
--------------------------
form and is acceptable for recording under the laws of the jurisdiction in
which the Mortgaged Property is located;
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(cc) Due on Sale. The Mortgage contains an enforceable provision for the
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acceleration of the payment of the unpaid principal balance of the Mortgage
Loan in the event that the Mortgaged Property is sold or transferred
without the prior written consent of the Mortgagee thereunder;
(dd) No Buydown Provisions; No Graduated Payments or Contingent Interests. The
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Mortgage Loan does not contain provisions pursuant to which monthly
payments are paid or partially paid with funds deposited in any separate
account established by Seller, the Mortgagor or anyone on behalf of the
Mortgagor, or paid by any source other than the Mortgagor nor does it
contain any other similar provisions currently in effect which may
constitute a "buydown" provision. The Mortgage Loan is not a graduated
payment mortgage loan and the Mortgage Loan does not have a shared
appreciation or other contingent interest feature;
(ee) Consolidation of Future Advances. Any future advances made prior to the
--------------------------------
Purchase Date have been consolidated with the outstanding principal amount
secured by the Mortgage, and the secured principal amount, as consolidated,
bears a single interest rate and single repayment term. The lien of the
Mortgage securing the consolidated principal amount is expressly insured as
having first or second lien priority, as applicable, by a title insurance
policy or an endorsement to the policy insuring the mortgagee's
consolidated interest or by other title evidence acceptable to FNMA or
FHLMC. The consolidated principal amount does not exceed the original
principal amount of the Mortgage Loan;
(ff) Mortgaged Property Undamaged. There is no proceeding pending or threatened
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for the total or partial condemnation of the Mortgaged Property. The
Mortgaged Property is undamaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty so as to affect
adversely the value of the Mortgaged Property as security for the Mortgage
Loan or the use for which the premises were intended;
(gg) Collection Practices; Escrow Deposits; Interest Rate Adjustments. The
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origination and collection practices used with respect to the Mortgage Loan
have been in all respects in accordance with industry custom and practice,
and have been in all respects legal and proper. With respect to escrow
deposits and escrow payments, all such payments are in the possession of
Seller and there exist no deficiencies in connection therewith for which
customary arrangements for repayment thereof have not been made. All
escrow payments have been collected in full compliance with state and
federal law. If an escrow of funds has been established, it is not
prohibited by applicable law and has been established in an amount
sufficient to pay for every item that remains unpaid and has been assessed
but is not yet due and payable. No escrow deposits or escrow payments or
other charges or payments due Seller have been capitalized under the
Mortgage or the Mortgage Note. All mortgage interest rate adjustments have
been made in strict compliance with state and federal law and the terms of
the related Mortgage Note. Any interest required to be paid pursuant to
state and local law has been properly paid and credited;
(hh) Conversion to Fixed Interest Rate. With respect to the aggregate
---------------------------------
outstanding principal balance of the Mortgage Loans on the related Purchase
Date, no more than 50% of the Mortgage Notes contain a provision allowing
the Mortgagor to convert the Mortgage
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Note from an adjustable interest rate Mortgage Note to a fixed interest
rate Mortgage Note for the remaining term thereof all in accordance with
the terms of a rider to the related Mortgage Note;
(ii) Appraisal. The Servicing Records contains an appraisal of the related
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Mortgaged Property signed prior to the approval of the Mortgage Loan
application by a qualified appraiser, duly appointed by the originator of
the Mortgage Loan, who had no interest, direct or indirect in the Mortgaged
Property or in any loan made on the security thereof, other than as an
employee of the lender, and whose compensation is not affected by the
approval or disapproval of the Mortgage Loan, and the appraisal and
appraiser both satisfy the requirements of Title XI of the Federal
Institutions Reform, Recovery, and Enforcement Act of 1989 and the
regulations promulgated thereunder, all as in effect on the date the
Mortgage Loan was originated;
(jj) Soldiers' and Sailors' Relief Act. The Mortgagor has not notified Seller,
---------------------------------
and Seller has no knowledge of any relief requested or allowed to the
Mortgagor under the Soldiers' and Sailors' Civil Relief Act of 1940;
(kk) Environmental Matters. To the best of Seller's knowledge based on
---------------------
customary residential mortgage industry practices the Mortgaged Property is
free from any and all toxic or hazardous substances and there exists no
violation of any local, state or federal environmental law, rule or
regulation;
(ll) "C" and "D" Loans. In the event such Mortgage Loan is a "C" Loan or "D"
-----------------
Loan, the aggregate Repurchase Price of such Mortgage Loan, together with
the other Purchased Mortgage Loans subject to then outstanding
Transactions, does not cause the aggregate Purchase Price of all Purchased
Mortgage Loans which are "C" Loans and "D" Loans to exceed 20% of the
aggregate Purchase Price for all Purchased Mortgage Loans which are subject
to then outstanding Transactions;
(mm) Seller Origination. The Mortgage Loan was originated or purchased and
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reunderwritten by Seller;
(nn) First Lien Consent. If the Mortgage Loan is a second lien Mortgage Loan,
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(i) if the related first lien provides for negative amortization, the Loan-
to-Value was calculated at the maximum principal balance of such first lien
that could result upon application of such negative amortization feature,
and (ii) either no consent for the Mortgage Loan is required by the holder
of the first lien or such consent has been obtained and is contained in the
Mortgage File;
(oo) No Construction Loans. No Mortgage Loan is a construction loan or relates
----------------------
to manufactured housing that is not permanently affixed to real property
subject to the mortgage (i.e. not a mobile home);
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(pp) Selection by Seller. No Mortgage Loan was selected for inclusion under
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this Agreement on any basis which was intended to have a material adverse
effect on Buyer;
(qq) Second Mortgages. With respect to each Mortgage Loan secured by a second
----------------
lien on the related Mortgaged Property:
(1) if the LTV is higher than 70%, either the related First Mortgage does
not provide for a balloon payment or the maturity date of each
Mortgage Loan with respect to which a First Mortgage on the related
Mortgaged Property provides for a balloon payment is prior to the
maturity date of the mortgage loan relating to such first lien;
(2) the related first lien on any Mortgaged Property with respect to which
the related Mortgage Loan secured by a second lien does not provide
for negative amortization;
(3) either no consent for the Mortgage Loan secured by a second lien on
the related Mortgaged Property is required by the holder of the
related first lien or such consent has been obtained and is contained
in the Mortgage File; and
(4) the related first lien is not held by an individual.
(rr) CERCLA To the best of the Seller's knowledge, no Mortgaged Property was,
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as of the Purchase Date or, with respect to Additional Loans or Substitute
Mortgage Loans, as of the related date of addition or substitution, located
within a one-mile radius of any site listed in the National Priorities List
as defined under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended, or on any similar state list of
hazardous waste sites which are known to contain any hazardous substance or
hazardous waste;
(ss) No Bankruptcy of Mortgagor. None of the Mortgage Loans are subject to a
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bankruptcy plan;
(tt) Conformance to Underwriting Standards. Each Mortgage Loan conforms to the
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Seller's underwriting guidelines supplied to Buyer by Seller;
(uu) Qualified Mortgage. Each Mortgage Loan constitutes a "qualified mortgage"
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within the meaning of Section 860G(a)(3) of the Code;
(vv) Balloon Loan Concentration. In the event that such Mortgage Loan is a
--------------------------
Balloon Loan, then the aggregate Repurchase Price of such Mortgage Loan,
together with the other Purchased Mortgage Loans which are Balloon Loans
subject to Transactions, constitutes less than 10% of the aggregate
outstanding Repurchase Price of all Purchased Mortgage Loans subject to
Transactions;
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(ww) No Short Maturity Balloon Loans. The Mortgage Loan is not a Balloon Loan
-------------------------------
with a maturity date occurring within five years from its date of the
related Purchase Date;
(xx) Owner Occupied. In the event such Mortgage Loan relates to a Mortgaged
--------------
Property which is non-owner occupied, then such Mortgage Loan, together
with the other Purchased Mortgage Loans subject to Transactions relating
to Mortgaged Properties which are non-owner occupied, does not exceed 15%
of the aggregate outstanding Repurchase Price of all Purchased Mortgage
Loans subject to Transactions;
(yy) Payment Terms. With respect to adjustable rate Mortgage Loans, the
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mortgage interest rate is adjusted annually or semi-annually on each
interest rate adjustment date to equal the index plus the gross margin,
rounded up or down to the nearest 1/8%, subject to the mortgage interest
rate cap. With respect to fixed rate Mortgage Loans, the Mortgage Note is
payable each month in equal monthly installments of principal and interest
sufficient to amortize the Mortgage Loans (other than Balloon Loans) fully
by the stated maturity date, over an original term of not more than thirty
years from commencement of amortization. With respect to adjustable rate
Mortgage Loans, (x) installments of interest are subject to change due to
the adjustments to the mortgage interest rate on each interest rate
adjustment date, with interest calculated and payable in arrears and (y)
installments of principal sufficient to amortize the Mortgage Loans (other
than Balloon Loans) fully by the stated maturity date, over an original
term of not more than thirty years from commencement of amortization; and
(zz) Securitization Standards. Each of the Mortgage Loans conforms to the
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then current standards of securitization as determined in the reasonable
judgment of Buyer.
(aaa) Wet Ink Mortgage Loans. In the event such Mortgage Loan is a Wet Ink
----------------------
Mortgage Loan, the Mortgage Loan, together with the other Purchased
Mortgage Loans subject to then outstanding Transactions does not cause the
aggregate Purchase Price of all Purchased Mortgage Loans which are Wet Ink
Mortgage Loans to exceed the lesser of (x) $15,000,000 and (y) 15% of the
aggregate Purchase Price of all Purchased Mortgage Loans subject to
outstanding Transactions.
It is understood and agreed that the representations and warranties set
forth in this Exhibit V shall survive delivery of the respective Mortgage Files
to the Custodian on behalf of Buyer.
44