EXHIBIT 10.33
MBS PURCHASE AND SALE AGREEMENT
MORTGAGE LOAN PURCHASE AND SALE AGREEMENT
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between
[NVR MORTGAGE FINANCE, INC.]
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Seller
and
PRUDENTIAL SECURITIES REALTY FUNDING CORPORATION
Purchaser
TABLE OF CONTENTS
Page
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SECTION 1 DEFINITIONS..................................................................................... 2
Section 2. Procedures for Purchases of Participation Certificates.......................................... 143
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Section 3. Takeout Commitments............................................................................. 144
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Section 4. Completion Fee.................................................................................. 144
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Section 5. Issuance of Securities.......................................................................... 145
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Section 6. Servicing of the Mortgage Loans................................................................. 147
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Section 7. Transfers of Participation Certificates and Securities by Purchaser............................. 150
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Section 8. Record Title to Mortgage Loans; Intent of Parties; Security Interest............................ 151
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Section 9. Representations and Warranties.................................................................. 151
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Section 10. Covenants of Seller............................................................................. 154
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Section 11. Term............................................................................................ 156
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Section 12. Exclusive Benefit of Parties; Assignment........................................................ 156
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Section 13. Amendments: Waivers: Cumulative Rights........................................................ 156
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Section 14. Execution in Counterparts....................................................................... 157
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Section 15. Effect of Invalidity of Provisions.............................................................. 157
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Section 16. Governing Law................................................................................... 157
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Section 17. Notices......................................................................................... 157
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Section 18. Entire Agreement................................................................................ 157
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Section 19. Costs of Enforcement............................................................................ 157
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Section 20. Consent to Service.............................................................................. 158
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Section 21. Submission to Jurisdiction...................................................................... 158
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Section 22. Jurisdiction Not Exclusive...................................................................... 158
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Section 23. Construction.................................................................................... 158
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MORTGAGE LOAN PURCHASE AND SALE AGREEMENT
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This is a MORTGAGE LOAN PURCHASE AND SALE AGREEMENT ("Agreement"),
dated as of January 15, 1997 between PRUDENTIAL SECURITIES REALTY FUNDING
CORPORATION ("Purchaser and [NVR MORTGAGE FINANCE, INC.] ("Seller").
PRELIMINARY STATEMENT
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Seller desires to sell to Purchaser from time to time all of Seller's
right, title and interest in and to designated pools of full amortizing first
lien residential Mortgage Loans eligible in the aggregate to back Securities
with the terms described in related Takeout Commitments, each in the form of a
100% ownership interest evidenced by a Participation Certificate.
Purchaser desires and may in its sole discretion purchase such
Participation Certificates from Seller in accordance with the terms and
conditions set forth in this Agreement. Seller, subject to the terms hereof,
will cause (a) Mortgage Loans evidenced by a Participation Certificate to back a
GNMA Security issued by Seller and guaranteed by GNMA, a FNMA Security issued
and guaranteed by FNMA or a FHLMC Security issued and guaranteed by FHLMC and
(b) Delivery of such GNMA Security, FNMA Security or FHLMC Security by GNMA,
FNMA or FHLMC to Purchaser or its designee, which GNMA Security, FNMA Security
or FHLMC Security will be purchased by a Takeout Investor.
Purchaser's willingness to purchase any Participation Certificate
evidencing particular Mortgage Loans is based on Purchaser's expectation, in
reliance upon Seller's representations and warranties herein, that such Mortgage
Loans in the aggregate, constitute a pool or pools of mortgage loans that are
eligible to back a Security and that the Security, in the amount and with the
terms described in the related Takeout Commitment, will be issued and Purchaser
will receive Delivery thereof within the time period agreed upon between
Purchaser and Seller and reflected in the terms of such Participation
Certificate.
The amount of the Purchase Price and the Completion Fee to be paid by
Purchaser to Seller with respect to each Participation Certificate will be
calculated on the expectation of Purchaser, based upon the representations and
warranties of the Seller herein, that Purchaser will receive Delivery of the
Security to be backed by the Mortgage Loans evidenced by the Participation
Certificate purchased by Purchaser on the specified Anticipated Delivery Date
and that failure to receive such Delivery will result in a material decrease in
the market value of the Participation Certificate and the underlying Mortgage
Loans considered as a whole. During the period from the purchase of a
Participation Certificate to Delivery of the related Security, Purchaser expects
to rely entirely upon Seller to service the Mortgage Loans evidenced by the
applicable Participation Certificate, it being acknowledged that the continued
effectiveness of Seller's Approvals during such period constitutes an essential
factor in the calculation by Purchaser of the Purchase Price and the Completion
Fee paid to Seller for the related Participation Certificate and that loss of
such Approvals by Seller would result in a material decrease in the market value
of the Participation Certificate and the underlying Mortgage Loans considered as
a whole.
The parties hereto hereby agree as follows:
Section 1. Definitions.
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Capitalized terms used but not defined herein shall have the meanings
set forth in the Custodial Agreement. As used in this Agreement, the following
terms shall have the following meanings:
"Act of Insolvency": With respect to Seller, (a) the commencement by
Seller as debtor of any case or proceeding under any bankruptcy,
insolvency, reorganization, liquidation, dissolution or similar law, or
Seller's seeking the appointment of a receiver, trustee, custodian or
similar official for Seller or any substantial part of its property, or (b)
the commencement of any such case or proceeding against Seller, or another
seeking such appointment, or the filing against Seller of an application
for a protective decree which (1) is consented to or not timely contested
by Seller, (2) results in the entry of an order for relief, such an
appointment, the issuance of such a protective decree or the entry of an
order having a similar effect, or (3) is not dismissed within thirty (30),
(c) the making by Seller of a general assignment for the benefit of
creditors, or (d) the admission in writing by Seller that Seller is unable
to pay its debts as they become due or the nonpayment generally by Seller
of its debts as they become due.
"Affiliate": With respect to any specified entity, any other entity
controlling or controlled by or under common control with such specified
entity. For the purposes of this definition, "control" when used with
respect to any specified entity means the power to direct the management
and policies of such entity, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" having meanings correlative to the
foregoing.
"Agency Guide": The FHLMC Guide, the FNMA Guide or the GNMA Guide, as
applicable.
"Agency Program": The FHLMC Program, the FNMA Program or the GNMA
Program, as applicable.
"Anticipated Delivery Date": With respect to a Security, the
date specified in the related Form HUD 11705 (Schedule of Subscribers),
▇▇▇▇▇▇ ▇▇▇ Form 2014 (Delivery Schedule), or FHLMC Form 939 (Settlement and
Information Multiple Registration Form), as applicable, on which it is
anticipated that Delivery of the Security by the Applicable Agency will be
made.
"Applicable Agency": GNMA, FNMA or FHLMC, as applicable.
"Approvals": With respect to the Seller, the approvals obtained by the
Applicable Agency in designation of such Seller as a GNMA-approved issuer, a
GNMA-approved servicer, a FHA-approved mortgagee, a VA-approved lender, a FNMA
approved lender or a FHLMC-approved Seller/Servicer, as applicable, in good
standing.
"Assignee": As defined in Section 7.
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"Assignment of Mortgage": As defined in Section 7.
"Collateral": As defined in Section 8(c).
"Completion Fee": With respect to each Participation Certificate, an amount
equal to the Final Installment plus the Net Carry Adjustment, less any reduction
pursuant to Section 4(c), which amount shall be payable to Seller by Purchaser
as compensation to Seller for its services in connection with the issuance of a
Security.
"Confirmation": A written confirmation of Purchaser's intent to purchase a
Participation Certificate, which written confirmation shall be substantially in
the form attached hereto as Exhibit F.
"Custodial Account": As defined in Section 6(b).
"Custodial Agreement": The Custodial Agreement, dated of even date
herewith, among Seller, Purchaser and Custodian.
"Custodian": ________ (which, under the appropriate circumstance, may
include FHLMC as Custodian) and its permitted successors under the Custodial
Agreement.
"Defective Mortgage Loan": With respect to a Participation Certificate, a
mortgage loan that is not in Strict Compliance with the GNMA Program, FNMA
Program or FHLMC Program, as applicable.
"Delivery": The later to occur of (a) the issuance of the related Security
and (b) the transfer of all of the right , title and ownership interest in that
Security to Purchaser.
"Discount": With respect to each Participation Certificate, the portion of
the Trade Principal of the related Security agreed upon by Seller and Purchaser,
as set forth in the related Confirmation, to reserve for the possibility that
Seller may be unable to perform its obligations under this Agreement in
accordance with their terms.
"FDIC": The Federal Deposit Insurance Corporation or any successor
thereto.
"FHA": The Federal Housing Administration or any successor thereto.
"FHLMC": The Federal Home Loan Mortgage Corporation or any successor
thereto.
"FHLMC as Custodian": With respect to FHLMC Participation Certificates,
the circumstances in which Seller elects to appoint FHLMC (as opposed to some
other third party as permitted by the FHLMC Guide) as Custodian for the FHLMC
Mortgage Loans subject to the FHLMC Participation Certificates to be purchased
by Purchaser hereunder.
"FHLMC Guide": The ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇' and Servicers' Guide, as such
Guide may hereafter from time to time be amended.
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"FHLMC Mortgage Loan": With respect to any FHLMC Participation Certificate
or any FHLMC Security, a mortgage loan that is in Strict Compliance with the
eligibility requirements specified for the applicable FHLMC Program described in
the FHLMC Guide.
"FHLMC Participation Certificate": With respect to the FHLMC Program, a
certificate, in the form of Exhibit A, issued by Seller and authenticated by
Custodian, evidencing the 100% undivided ownership interest in the Mortgage
Loans that are either (a) set forth on a copy of the FHLMC Form 11 (Mortgage
Submission Schedule) attached to such Participation Certificate or ((b))
identified on a computer tape compatible with MIDANET as belonging to the
mortgage loan pool described in such Participation Certificate.
"FHLMC Program": The FHLMC Home Mortgage Guarantor Program or the FHLMC
FHA/VA Home Mortgage Guarantor Program, as described in the FHLMC Guide.
"FHLMC Security": A modified pass-through mortgage-backed participation
certificate, evidenced by a book-entry account in a depository institution
having book-entry accounts at the Federal Reserve Bank of New York, issued and
guaranteed, with respect to timely payment of interest and ultimate payment of
principal, by FHLMC and backed by a pool of FHLMC Mortgage Loans, in
substantially the principal amount and with substantially the other terms as
specified with respect to such FHLMC Security in the related Takeout Commitment,
if any.
"Final Installment": The amount equal to the difference between the Trade
Principal and the Initial Installment.
"FNMA" or "▇▇▇▇▇▇ ▇▇▇": Federal National Mortgage Association or any
successor thereto.
"FNMA" Guide": The ▇▇▇▇▇▇ Mae MBS Selling and Servicing Guide, as such
Guide may hereafter from time to time be amended.
"FNMA" Mortgage Loan": With respect to any FNMA" Participation Certificate
or any FNMA Security, a mortgage loan that is in Strict Compliance with the
eligibility requirements specified for the applicable FNMA Program described in
the FNMA Guide.
"FNMA" Participation Certificate": With respect to the FNMA Program, a
certificate, in the form of Exhibit A, authenticated by Custodian, evidencing
the 100% undivided ownership interest in the Mortgage Loans set forth on ▇▇▇▇▇▇
▇▇▇ Form 2005 (Schedule of Mortgages).
"FNMA Program": The FNMA Guaranteed Mortgage-Backed Securities Programs,
as described in the FNMA Guide.
"FNMA Security": An ownership interest in a pool of FNMA Mortgage Loans,
evidenced by a book-entry account in a depository institution having book-entry
accounts at the Federal Reserve Bank of New York, in substantially the principal
amount and with substantially the other terms as specified with respect to such
FNMA Security in the related Takeout Commitment, if any.
"GNMA": Government National Mortgage Association or any successor thereto.
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"GNMA Guide": The GNMA Mortgage-Backed Securities Guide I or II, as such
Guide may hereafter from time to time be amended.
"GNMA Mortgage Loan": With respect to any GNMA Participation Certificate
or any GNMA Security, a mortgage loan that is in Strict Compliance with the
eligibility requirements specified for the applicable GNMA Program in the
applicable GNMA Guide.
"GNMA Participation Certificate": With respect to the GNMA Program, a
certificate, in the form of Exhibit A, issued by Seller and authenticated by
Custodian, evidencing the 100% undivided ownership interest in the Mortgage
Loans set forth on the Form HUD 11706 (Schedule of Pooled Mortgages).
"GNMA Program": The GNMA Mortgage-Backed Securities Programs, as described
in a GNMA Guide.
"GNMA Security": A fully-modified pass-through mortgage-backed certificate
guaranteed by GNMA, evidenced by a book-entry account in a depository
institution having book-entry accounts at Participants Trust Company and backed
by a pool of GNMA Mortgage Loans, in substantially the principal amount and with
substantially the other terms as specified with respect to such GNMA Security in
the related Takeout Commitment, if any.
"HUD": United States Department of Housing and Urban Development or any
successor thereto.
"Initial Installment": The excess of the Trade Principal over the
Discount.
"Issuance Date": With respect to a Security, the first day of the month in
the month when the Security is issued.
"Losses": Any and all losses, claims, damages, liabilities or expenses,
including reasonable administrative expenses and attorneys' fees and expenses,
incurred by any person specified; provided, however, that "Losses" shall not
include any losses, claims, damages, liabilities or expenses which would have
been avoided had such person taken reasonable actions to mitigate such losses,
claims, damages, liabilities or expenses.
"MIDANET": The FHLMC automated system by which sellers and servicers of
mortgage loans to FHLMC transfer mortgage summary and record data or mortgage
accounting and servicing information from their computer system or service
bureau to FHLMC, as more fully described in the FHLMC Guide.
"Mortgage": A mortgage, deed of trust or other security instrument,
securing a Mortgage Note.
"Mortgage Loan": A GNMA Mortgage Loan, a FNMA Mortgage Loan or a FHLMC
Mortgage Loan.
"Mortgage Note": A promissory note or other evidence of indebtedness of
the obligor thereunder, evidencing a Mortgage Loan, and secured by the related
Mortgage.
"Net Carry Adjustment": As defined in Section 4(b).
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"OTS": Office of Thrift Supervision or any successor thereto.
"Parent Company": A corporation or other entity owning at least 50% of the
outstanding shares of voting stock of Seller.
"Participation Certificate": A GNMA Participation Certificate, a FNMA
Participation Certificate or a FHLMC Participation Certificate, as applicable.
"Purchase Date": With respect to a Participation Certificate, the date on
which Purchaser elects to purchase such Participation Certificate.
"Purchase Price": With respect to each Participation Certificate, the
Trade Principal of the Security to be backed by the Mortgage Loans evidenced by
the Participation Certificate. Such Purchase Price shall be payable (i) on the
Purchase Date in an amount equal to the Initial Installment and (ii) on the
Settlement Date in an amount equal to the Final Installment. Accrued interest
shall be allocated in accordance with Section 4(c).
"Purchaser": Prudential Securities Realty Funding Corporation and its
successors in interest, including, but not limited to, any lender, designee or
assignee to whom a Participation Certificate or a Security shall be pledged or
assigned.
"Receipt": The Delivery of a Security, upon notice by Seller to Purchaser,
not later than 12:00 noon, Eastern Standard Time, on the second business day
prior to the applicable Settlement Date, of (a) the amount of any change in the
principal amount of the Mortgage Loans backing such Security, and (b) with
respect to FHLMC Securities, the FHLMC Mortgage Loan pool number applicable to
such Security. If the Seller fails to so notify Purchaser, "Receipt" shall be
deemed to have occurred on the later of (1) the second business day after the
date on which Seller provides such notification to Purchaser and (2) the date on
which Purchaser receives Delivery of the Security.
"RTC": Resolution Trust Corporation or any successor thereto.
"Security": A GNMA Security, a FNMA Security or a FHLMC Security.
"Security Issuance Deadline": The date by which the Security must be
issued and delivered to the Purchaser, which, unless otherwise agreed to by the
Purchaser as provided herein, shall be the Anticipated Delivery Date.
"Security Issuance Failure": Failure of the Security to be issued for any
reason whatsoever on or before the Security Issuance Deadline.
"Servicing Termination Events": As defined in Section 6(e).
"Settlement Date": The date specified in a Takeout Commitment upon which
the related Security is scheduled to be delivered, against payment, to the
specified Takeout Investor.
"Strict Compliance": shall mean compliance of Seller and the Mortgage
Loans with the requirements of the GNMA. Guide, FNMA Guide or FHLMC Guide, as
applicable and as amended by
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any agreements between Seller and the Applicable Agency, sufficient to enable
Seller to issue and GNMA to guarantee or FNMA or FHLMC to issue and guarantee a
Security, provided that until copies of any such agreements between Seller and
the Applicable Agency have been provided to Purchaser by Seller, such agreements
shall be deemed, as between Seller and Purchaser, not to amend the requirements
of the GNMA Guide, FNMA Guide or FHLMC Guide, as applicable.
"Successor Servicer": An entity with the necessary Approvals, as the
circumstances may require, and designated by Purchaser, in conformity with
Sections 5 (c) (2) or 6 (e), to replace Seller as issuer and servicer, mortgagee
or seller/servicer of the Mortgage Loans or the Securities related thereto.
"Takeout Commitment": A fully executed trade confirmation from the
Takeout Investor to Seller confirming the details of a forward trade between the
Takeout Investor and Seller with respect to one or more Securities, which trade
confirmation shall be enforceable and in full force and effect, and shall be
validly and effectively assigned to Purchaser pursuant to a Trade Assignment,
and relate to pools of Mortgage Loans that satisfy the "good delivery standards"
of the Public Securities Association as set forth in the Public Securities
Association Uniform Practices Guide.
"Takeout Investor": A securities dealer or other financial
institution, acceptable to Purchaser, who has made a Takeout Commitment.
"Trade Assignment": A letter substantially in the form of Exhibit B.
"Trade Price": The price (expressed as a percentage of the initial
principal amount of the Security) specified in a Takeout Commitment at which a
Takeout Investor is obligated to purchase the Security specified in such Takeout
Commitment.
"Trade Principal": The product of the Trade Price and the initial
principal amount of the related Security.
"Transaction Rate": The rate of interest borne by the related
Participation Certificate, which rate or rates shall be set forth, and shall
adjust as described, in the related Confirmation.
"VA": United States Department of Veterans Affairs or any successor
thereto.
"Warehouse Lender": Any lender providing financing to the Seller for
the purpose of originating Mortgage Loans, which has a security interest in such
Mortgage Loans as collateral for the obligations of Seller to such lender.
"Wire Instructions": The wire instructions set forth opposite the
name of the Warehouse Lender in a letter, in the form of Exhibit G to the
Custodial Agreement, executed by Seller and Custodian, receipt of which has been
acknowledged by Purchaser.
SECTION 2. PROCEDURES FOR PURCHASES OF PARTICIPATION CERTIFICATES.
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(a) Purchaser may, in its sole discretion from time to time, purchase
one or more Participation Certificates from Seller. Seller, on behalf of
Purchaser, shall arrange for the Delivery to Purchaser of a Security backed by
the Mortgage Loans evidenced need by any Participation Certificate so
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purchased, which Security shall be subject to a Takeout Commitment. Purchaser's
obligation to purchase any Participation Certificate which Purchaser elects to
purchase, shall be subject to the receipt by the Purchaser of the documents
listed in Exhibit C from Seller, in form and substance satisfactory to
Purchaser, and the execution of the Custodial Agreement relating to the
Participation Certificate by Seller and Custodian and delivery thereof to
Purchaser. Notwithstanding the satisfaction of the conditions specified in this
Section 2(a), Purchaser is not obligated to purchase any Participation
Certificate offered to it hereunder.
(b) If Purchaser elects to purchase any Participation Certificate,
Purchaser shall pay to Seller, on the Purchase Date, the amount of the Initial
Installment for such Participation Certificate. In the event that Purchaser
does not transmit the Initial Installment, (i) any Participation Certificate
delivered by Custodian to Purchaser in anticipation of such purchase shall
automatically be null and void, (ii) Purchaser will not consummate the
transactions contemplated in the applicable Trade Assignment and (iii) to the
extent that Purchaser shall nevertheless receive the Security backed by the
Mortgage Loans to which such Participation Certificate relates prior to its
becoming null and void as provided in clause (i) above, Purchaser shall take all
reasonable actions necessary to ensure that such Security shall be delivered in
accordance with Seller's delivery instructions specified in Annex A.
(c) The terms and conditions of the purchase of each Participation
Certificate shall be as set forth in this Agreement. Each Participation
Certificate shall be deemed to incorporate, and Seller shall be deemed to make
as of the applicable dates specified in Section 9, for the benefit of Purchaser
and each Assignee of such Participation Certificate, the representations and
warranties set forth in Section 9.
(d) Purchaser shall provide a Confirmation to Seller as soon as
practicable after the Purchase Date. In the event of any conflict between the
terms of a Confirmation and this Agreement, the Confirmation shall prevail.
SECTION 3. TAKEOUT COMMITMENTS.
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Seller hereby assigns to Purchaser, free of any security interest,
lien, claim or encumbrance of any kind, Seller's rights under each Takeout
Commitment to deliver the Security specified therein to the related Takeout
Investor and to receive the purchase price therefor from such Takeout Investor.
Subject to Purchaser rights hereunder, Purchaser agrees that it will satisfy the
Takeout Commitment on the Settlement Date specified therein. Seller understands
that, as a result of this Section 3 and each Trade Assignment, Purchaser will
succeed to the rights and obligations of Seller with respect to each Takeout
Commitment subject to a Trade Assignment, and that in satisfying each such
Takeout Commitment, Purchaser, will stand in the shoes of Seller and,
consequently, will be acting as a non-dealer in exercising its rights and
fulfilling its obligations assigned pursuant to this Section 3 and each Trade
Assignment. Each Trade Assignment delivered by Seller to Purchaser shall be
delivered by Seller in a timely manner sufficient to enable Purchaser to
facilitate the settlement of the related trade on the trade date in accordance
with Chapter 8 of the Public Securities Association's Uniform Practices for the
Clearance and Settlement of Mortgage Backed Securities and other Related
Securities, as amended from time to time .
SECTION 4. COMPLETION FEE.
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(a) With respect to each Participation Certificate that Purchaser
elects to purchase hereunder, Purchaser shall pay to the Seller a Completion
Fee. The Completion Fee shall be payable by
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Purchaser as provided in subsection (e) below; but in any case, such Completion
Fee shall not be payable by the Purchaser less than four (4) business days after
the Purchaser's election to purchase hereunder.
(b) For purposes of calculating that portion of the Completion Fee
composed of the "Net Carry Adjustment", the Net Carry Adjustment shall be an
amount (which may be a negative number) equal to (A) the product obtained by
multiplying the number of days in the period beginning on the Purchase Date to
but not including the Settlement Date for the related Security and the
difference between (i) the product of the rate of interest to be borne by the
related Security and the aggregate principal amount of the Mortgage Loans
evidenced by a Participation Certificate and (ii) the daily application of the
applicable Transaction Rate to the Initial Installment (B) divided by 360.
(c) If a Participation Certificate is purchased by Purchaser after
the first day of the month in which the Settlement Date occurs, Purchaser shall
also pay to Seller on the date of Receipt by Purchaser of the Security backed by
the related Mortgage Loans an amount equal to the accrued interest on the
related Security at the rate specified in the related Takeout Commitment from
the first day of such month to and including the day immediately preceding the
date Purchaser purchased such Participation Certificate. If a Participation
Certificate is Purchased by Purchaser in the month prior to the month in which
the Settlement Date occurs, the Completion Fee shall be reduced by an amount
equal to all interest payments which accrue on such Participation Certificate
during the period from the date of purchase of such Participation Certificate
through and including the last day of the month prior to the month in which such
Settlement Date
(d) It is understood by Seller and Purchaser that, if Seller
requests and Purchaser agrees to pay the Completion Fee prior to the Settlement
Date of the related Security, the amount of such Completion Fee shall be
adjusted as mutually agreed by Seller and Purchaser.
(e) The Completion Fee relating to each Participation Certificate
is payable on the earlier to occur of (1) the date of receipt by Purchaser of
the Trade Price and (2) the satisfaction by Seller of its obligations pursuant
to this Agreement notwithstanding the exercise by Purchaser of any remedial
election authorized herein.
SECTION 5. ISSUANCE OF SECURITIES.
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(a)(1) With respect to Mortgage Loans evidenced by a Participation
Certificate which Purchaser has elected to purchase, Seller shall instruct (and,
if Seller fails to instruct, then Purchaser may instruct) Custodian to deliver
to the Applicable Agency, the documents listed in Exhibits ▇-▇, ▇-▇ or B-3 of
the Custodial Agreement in respect of such Mortgage Loans, in the manner and at
the time set forth in the Custodial Agreement. Seller shall thereafter promptly
deliver to the Applicable Agency any and all additional documents requested by
the Applicable Agency to enable the Applicable Agency to make Delivery to
Purchaser of a Security backed by such Mortgage Loans on the related Anticipated
Delivery Date. Seller shall not revoke such instructions to Custodian and shall
not revoke its instructions to the Applicable Agency to make Delivery to
Purchaser or its designee of a Security backed by such Mortgage Loans.
(a)(2) Seller shall notify Purchaser, not later than 12:00 noon,
Eastern Standard Time, on the second business day prior to the applicable
Settlement Date, (i) of the amount of any change in the principal amount of the
Mortgage Loans backing each such Security related to such Settlement Date and
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(ii) with respect to FHLMC Securities, the FHLMC mortgage loan pool number
applicable to each Security to which such Settlement Date relates. Upon
Delivery of such Security to Purchaser or its designee, Purchaser shall cease to
have any interest under such Participation Certificate in the Mortgage Loans
backing such Security, notwithstanding anything to the contrary in the
Participation Certificate.
(a)(3) With respect to each Participation Certificate that Purchaser
elects to purchase hereunder, Purchaser shall owe to Seller a Completion Fee.
Notwithstanding any provision hereof to the contrary, no amounts shall be owed
by Purchaser to Seller upon issuance of such Security in the circumstances
contemplated in Section 5(c)(2). Except as otherwise provided in Section 4 and
in Section 5(b), and subject to Purchaser's right of set-off set forth in
Section 5(g), any Completion Fee owed by Purchaser with respect to a
Participation Certificate shall be paid by Purchaser to Seller not later than
the Settlement Date of the related Security.
(b) Unless Receipt of a Security backed by the Mortgage Loans
evidenced by a Participation Certificate purchased hereunder has occurred by
12:00 noon, Eastern Standard Time, on the related Settlement Date, (1) the
Completion Fee relating to such Participation Certificate shall be reduced daily
for the period from the Settlement Date to but not including the earlier of the
date of Receipt of such Security and the date of satisfaction of the obligations
of Seller pursuant to the exercise by Purchaser of any remedial election
authorized by this Section 5 by an amount equal to (A) the Initial Installment
for such Participation Certificate multiplied by (B) the result obtained by
dividing (i) the Transaction Rate for the Participation Certificate plus one
percent by (ii) three hundred and sixty (360) and (2) the Completion Fee, if
any, relating to such Participation Certificate shall not be payable until the
end of the period specified in clause (1) of this paragraph.
(c)(1) If a breach by Seller of this Agreement results in any Mortgage
Loan being a Defective Mortgage Loan at the time of the delivery of the related
Participation Certificate to Purchaser, Purchaser in its sole discretion may
require that Seller, upon receipt of notice from Purchaser of its exercise of
such right, either (i) immediately repurchase Purchaser's ownership interest in
such Defective Mortgage Loan by remitting to Purchaser the allocable amount paid
by Purchaser for such Defective Mortgage Loan plus interest at the Transaction
Rate on the principal amount thereof from the date of Purchaser's purchase of
such Participation Certificate to the date of such repurchase together with any
Losses suffered by Purchaser relating to such repurchase (including, without
limitation, any Losses incurred by Purchaser resulting from adjustments to the
trade required by the Takeout Investor), or (ii) deliver to Custodian a Mortgage
Loan eligible to back such Security in exchange for such Defective Mortgage
Loan, which newly delivered Mortgage Loan shall be in all respects acceptable to
Purchaser in Purchaser's sole discretion, and such newly delivered Mortgage Loan
will thereupon become one of the Mortgage Loans evidenced by the Participation
Certificate. If the aggregate principal balance of any Mortgage Loans that are
accepted by Purchaser pursuant to clause (ii) of the immediately preceding
sentence is less than the aggregate principal balance of any Defective Mortgage
Loan that is being replaced by such Mortgage Loan, Seller shall remit with such
Mortgage Loan to Purchaser an amount equal to the difference between the
aggregate principal balance of the new Mortgage Loan accepted by Purchaser and
the aggregate principal balance of the Defective Mortgage Loan being replaced
thereby.
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(c)(2) If Seller fails to comply with its obligations in the manner
described in Section 5(c)(1), or Seller is in breach of Section 9 (a) (viii) or
9(b)(vii), not later than the third calendar day after receipt by Seller of
notice from Purchaser (or if such day is not a business day, the next business
day thereafter), Seller's rights and obligations to service the Mortgage Loans
evidenced by such Participation Certificate, as provided in this Agreement,
shall terminate. If at any time an Act of Insolvency occurs or any of Seller's
Approvals are withdrawn or materially modified, Seller's rights and obligations
to service the Mortgage Loans, as provided in this Agreement, shall terminate
immediately, without any notice or action by Purchaser. Upon any such
termination, Purchaser is hereby authorized and empowered as the exclusive agent
for Seller to sell and transfer such rights to service the Mortgage Loans for
such price and on such terms and conditions as Purchaser shall reasonably
determine. Seller shall not otherwise attempt to sell or transfer such rights
to service without the prior consent of Purchaser. Seller shall perform all
acts and take all action so that the Mortgage Loans and all files and documents
relating to such Mortgage Loans held by Seller, together with all escrow amounts
relating to such Mortgage Loans, are delivered to Successor Servicer. To the
extent that the approval of the Applicable Agency is required for any such sale
or transfer, Seller shall fully cooperate with Purchaser to obtain such
approval. Upon exercise by Purchaser of its remedies under this Section
5(c)(2), Seller hereby authorizes Purchaser to receive all amounts paid by any
purchaser of such rights to service the Mortgage Loans and to remit such amounts
to Seller subject to Purchaser's rights of set-off under this Agreement. Upon
exercise by Purchaser of its remedies under this Section 5(c)(2), Purchaser's
obligation to pay and Seller's right to receive any portion of the Completion
Fee relating to such Mortgage Loans shall automatically be canceled and become
null and void, provided that such cancellation shall in no way relieve Seller or
otherwise affect the obligation of Seller to indemnify and hold Purchaser
harmless as specified in Section 5(e).
(d) Mortgage Loans required to be delivered to Successor Servicer
by Section 5(c)(2) shall be delivered free of any servicing rights in favor of
Seller and free of any title, interest, lien, encumbrance or claim of any kind
of Seller. Seller shall deliver or cause to be delivered all files and documents
relating to such Mortgage Loans held by Seller to Successor Servicer. Seller
shall promptly take such actions and furnish to Purchaser such documents that
Purchaser deems necessary or appropriate to enable Purchaser to obtain a
Security backed by such Mortgage Loans or to enforce such Mortgage Loans, as
appropriate.
(e) Seller agrees to indemnify and hold Purchaser and its assigns
harmless from and against all Losses (including, without limitation, Losses
incurred by Purchaser on account of fees paid by Purchaser to the Applicable
Agency to cause the Securities to be issued or any Losses in connection with any
indemnification by Purchaser of the Applicable Agency) resulting from or
relating to any breach or failure to perform by Seller of any representation,
warranty, covenant, term or condition made or to be performed by Seller under
this Agreement.
(f) No exercise by Purchaser of its rights under this Section 5
shall relieve Seller of responsibility or liability for any breach of this
Agreement.
(g) Seller hereby grants Purchaser a right of set-off against the
payment of any amounts that may be due and payable to Purchaser from Seller,
such right to be upon any and all monies or other property of Seller held or
received by Purchaser or due and owing from Purchaser to Seller.
SECTION 6. SERVICING OF THE MORTGAGE LOANS.
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(a) Seller and Purchaser each agrees and acknowledges that each
Mortgage Loan shall be sold to Purchaser on a servicing retained basis and that
Purchaser is engaging, and Purchaser does hereby engage, Seller to provide
interim servicing of each Mortgage Loan for the benefit of Purchaser (and any
other registered holder of the Participation Certificate) on the Purchase Date
for each transaction. The Seller shall have no further servicing obligations or
duties to the Purchaser under the terms of this Agreement with respect to the
relevant Mortgage Loans upon issuance of the Security.
Except as expressly provided herein, Seller shall neither
assign, encumber or pledge servicing (including any "excess servicing".)
hereunder in whole or in part, nor delegate its rights or duties under this
Agreement without the prior written consent of Purchaser. The granting of such
consent shall be in the sole discretion of Purchaser, the Seller hereby
acknowledging that (i) Purchaser shall be entering into this Agreement in
reliance upon Seller's representations as to the adequacy of its (and each
subservicer's) financial standing, servicing facilities, personnel, records,
procedures, reputation and integrity, and the continuance thereof; and (ii)
Seller's engagement hereunder to provide mortgage servicing for the benefit of
Purchaser (and any other registered holder of the Participation Certificate) is
intended by the parties to be a "personal service contract" and the Seller is
hereunder intended by the parties to be an "independent contractor".
(b) Seller shall service and administer the Mortgage Loans evidenced
by a Participation Certificate on behalf of Purchaser in accordance with prudent
mortgage loan servicing standards and procedures generally accepted in the
mortgage banking industry and in accordance with the requirements of the GNMA
Program, FNMA Program or FHLMC Program, as the case may be, provided that Seller
shall at all times comply with applicable law, FHA regulations and VA
regulations and the requirements of any private mortgage insurer so that the FHA
insurance, VA guarantee or any other applicable insurance or guarantee in
respect of any Mortgage Loan is not voided or reduced. Seller shall at all times
maintain accurate and complete records of its servicing of the Mortgage Loans,
and Purchaser may, at any time during Seller's business hours on reasonable
notice, examine and make copies of such records. In addition, if Delivery of a
Security is not made to Purchaser on or before the Anticipated Delivery Date,
Seller shall deliver to Purchaser monthly reports regarding the status of those
Mortgage Loans for which a Security has not yet been issued, which reports shall
include, but shall not be limited to, a description of those Mortgage Loans in
default for more than thirty (30) days, and such other circumstances with
respect to any Mortgage Loans (whether or not such Mortgage Loans are included
in the foregoing list) that could materially adversely affect any of such
Mortgage Loans, Purchaser's ownership of any of such Mortgage Loans or the
collateral securing any of such Mortgage Loans. Seller shall deliver such a
report to Purchaser every thirty (30) days until (i) Delivery of the related
Security to Purchaser or (ii) the exercise by Purchaser of any remedial election
pursuant to Section 5.
(c) Within five (5) business days of notice from Purchaser, Seller,
as servicer, shall establish and maintain a separate custodial account (the
"Custodial Account") entitled "[_____________] Custodial Account, in trust for
Prudential Securities Realty Funding Corporation and its assignees under the
Mortgage Loan Purchase and Sale Agreement dated [the date of this Agreement]"
and shall promptly deposit into such account in the form received, with any
necessary endorsements, all collections received in respect of the Mortgage
Loans that are payable to Purchaser as the owner of the Mortgage Loans.
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(d) Amounts deposited in the Custodial Account with respect to any
Mortgage Loan shall be held in trust for Purchaser as the owner of the Mortgage
Loans and shall be released only as follows:
(1) Except as otherwise provided in Section 6(d)(2), upon Delivery of
the Security backed by such Mortgage Loans to Purchaser and either (i)
receipt by Purchaser or its designee of the purchase price for the Security
from the Takeout Investor or (ii) if earlier, on the date required by the
GNMA Guide, FNMA Guide or FHLMC Guide, as the case may be, amounts
deposited in the Custodial Account shall be released in accordance with
Sections 4(c) and 5(a)(3). Notwithstanding the foregoing, all amounts
deposited in the Custodial Account shall be paid to Seller upon the
Delivery of the related Security to Purchaser if, and to the extent that,
the amounts due and payable to Purchaser hereunder have been set-off
against the Purchase Price for the related Participation Certificate or the
Completion Fee relating to the Mortgage Loans underlying such Participation
Certificate. The amounts paid to Seller (if any) pursuant to this Section
6(d)(1) shall constitute Seller's sole compensation for servicing the
Mortgage Loans as provided in this Section 6.
(2) If Successor Servicer takes delivery of such Mortgage Loans
either under the circumstances set forth in Section 3 or otherwise, all
amounts deposited in the Custodial Account shall be paid to Purchaser
promptly upon such delivery.
(3) If a Security is not issued during the month in which the related
Settlement Date occurs, in any period thereafter during which Seller
remains as servicer, all amounts deposited in the Custodial Account shall
be released only in accordance with Purchaser's written instructions.
(e) In the event of a Security Issuance Failure, Purchaser, in its
sole discretion, may terminate the Seller's rights and duties as servicer of the
affected Mortgage Loans, provided that upon purchaser's election so to terminate
Seller as servicer, Seller's obligations respecting transfer of servicing to a
successor servicing entity shall remain in force. Without limiting Purchaser's
rights to terminate Seller as servicer as provided above, Purchaser (or any
other registered holder of the related Participation Certificate) shall
nonetheless be entitled, by written notice to Seller to effect termination of
Seller's interim servicing rights and obligations respecting the affected
Mortgage Loans in the event any of the following circumstances or events
("Servicing Termination Events") occur and are continuing:
(i) any failure by the Seller to remit to Purchaser (or other
registered holder of the Participation Certificate) any payment
required to be made under the terms of this Agreement or such
Participation Certificate which payment failure continues unremedied
for a period of 2 business days, and after Seller's receipt of demand
for payment from purchaser or other registered holder of the
Participation Certificate; or
(ii) failure by the Seller duly to observe or perform in any
material respect any of Seller's other covenants or agreements set
forth in this Agreement or in the Custodial Agreement which continues
unremedied for a period of 2 business days (or such longer period
provided in the relevant notice to Seller) after the date on which
written notice of such failure, requiring the same to be remedied,
shall have been given to the Seller by Purchaser; or
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(iii) an Act of Insolvency with respect to the Seller or any
Parent Company; or
(iv) the Seller ceases to meet the qualifications for
maintaining all Approvals; or
(v) the Seller attempts to assign its right to servicing
compensation hereunder or to resell an ownership interest in a
Mortgage Loan in a manner inconsistent with the terms hereof, or the
Seller attempts without the consent of the Purchaser to sell or
otherwise dispose of all or substantially all of its property or
assets or to assign this Agreement or the servicing responsibilities
hereunder or to delegate its duties hereunder or any portion thereof
(to other than a subservicer); or
(vi) the Seller or any of its Affiliates fails to operate or
conduct its business operations or any material portion thereof in the
ordinary course, or Seller experiences any other material adverse
change in its business operations or financial condition, and such
event continues unremedied for more than 5 business days.
In the case of the event described in subclause (iii), immediately
upon the occurrence of any such event, regardless of whether notice of such
event shall have been given to or by the Purchaser or Seller, and in each and
every other case, so long as the Servicing Termination Event shall not have been
remedied (but only to the extent, and within the time period, of any remedy
period provided above), in addition to whatever rights the Purchaser may have at
law or equity to damages, including injunctive relief and specific performance,
by notice in writing to the Seller, Purchaser may terminate all the interim
servicing rights and obligations of the Seller under this Agreement.
Upon receipt by the Seller of such written notice, all authority and
power of the Seller respecting its interim mortgage servicing rights and duties
under this Agreement, shall pass to and be vested in the successor servicer
appointed by Purchaser (a "Designated Servicer"). Upon written request by
Purchaser, the Seller shall prepare, execute and deliver to the Designated
Servicer any and all documents and other instruments, place in such successor's
possession all files pertaining to such Mortgage Loans and do or cause to be
done all other acts or things necessary or appropriate to effect the purposes of
such notice of termination, including, but not limited to, the transfer,
endorsement and assignment of the Mortgage Loans and related documents, at the
Seller's sole expense.
(f) The Seller shall indemnify and hold Purchaser harmless against
any and all actions, claims, liabilities or other losses resulting from or
otherwise arising in connection with the failure of Seller to perform Seller's
obligations (including, without limitation, any failure to perform interim
servicing obligations) in strict compliance with the terms of this Agreement.
SECTION 7. TRANSFERS OF PARTICIPATION CERTIFICATES AND SECURITIES BY PURCHASER.
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Purchaser may, in its sole discretion and without the consent of
Seller, assign all of its right, title and interest or grant a security interest
in any Participation Certificate, any Mortgage Note, Mortgage and any assignment
of Mortgages (an "Assignment of Mortgage"), each Security in respect thereof of
which Delivery is made to Purchaser and all rights of Purchaser under this
Agreement (including, but not limited to, the Custodial Account) in respect of
such Participation Certificate, Mortgage Note, Mortgage, Assignment of Mortgage
and such Security, to any person (an "Assignee"), subject only to an
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obligation on the part of the Assignee to deliver each such Security to a
Takeout Investor or to Purchaser to permit Purchaser or its designee to make
delivery thereof to a Takeout Investor. Assignment by Purchaser of a
Participation Certificate as provided in this Section 7 will not release
Purchaser from its obligations otherwise under this Agreement.
Without limitation of the foregoing, an assignment of the
Participation Certificate to an Assignee, as described in this Section 7, shall
be effective upon delivery of the Participation Certificate to the Assignee or
its designee, together with a duly executed Assignment substantially in the form
of Exhibit E.
SECTION 8. RECORD TITLE TO MORTGAGE LOANS; INTENT OF PARTIES; SECURITY
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INTEREST.
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(a) From and after the issuance and delivery of the related
Participation Certificate, and subject to the remedies of Purchaser in Section
5, Seller shall remain the last named payee or endorsee of each Mortgage Note
and the mortgagee or assignee of record of each Mortgage, in trust for the
benefit of Purchaser, for the sole purpose of facilitating the servicing of such
Mortgage Loan and the issuance of a Security backed by such Mortgage Loan.
Where Seller has appointed FHLMC as Custodian, the parties hereto acknowledge
that the Mortgage Notes acquired hereunder have been deposited with FHLMC to
facilitate the issuance of FHLMC Securities with respect thereto and that prior
to such issuance FHLMC is holding such Mortgage Notes as Custodian for Purchase.
(b) Seller shall maintain a complete set of books and records for
each Mortgage Loan which shall be clearly marked to reflect the ownership
interest in each Mortgage Loan of the holder of the related Participation
Certificate.
(c) Purchaser and Seller confirm that the transactions contemplated
herein are intended to be sales of the Mortgage Loans by Seller to Purchaser
rather than borrowings secured by the Mortgage Loans. In the event, for any
reason, any transaction is construed by any court or regulatory authority as a
borrowing rather than as a sale, the Seller and Purchaser intend that Purchaser
or its Assignee, as the case may be, shall have a perfected first priority
security interest in the Participation Certificates, the Custodial Account, the
Mortgage Loans subject to each Participation Certificate, all documents
evidencing the Mortgage Loans, the Securities to be issued as contemplated
hereunder and all proceeds thereof, the Takeout Commitments and the proceeds of
any and all of the foregoing (collectively, the "Collateral") free and clear of
adverse claims. In such case, Seller shall be deemed to have hereby granted to
Purchaser or its Assignee, as the case may be, a first priority security
interest in and lien upon the Collateral, free and clear of adverse claims. In
such event, this Agreement shall constitute a security agreement, the Custodian
shall be deemed to be an independent custodian for purposes of perfection of the
security interest granted to Purchaser, and Purchaser or each such Assignee
shall have all of the rights of a secured party under applicable law.
SECTION 9. REPRESENTATIONS AND WARRANTIES.
-------------------------------------------
(a) Seller hereby represents and warrants to Purchaser as of the date
hereof and as of the date of each issuance and delivery of a Participation
Certificate that:
(i) All representations and warranties made and all information
(including, without limitation, any financial information concerning
Seller) and documents or copies of documents
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furnished by Seller to Purchaser pursuant to or in connection with this
Agreement are and will be true and correct at the time when made and at all
times thereafter or, if limited to a specific date, as of the date to which
they refer;
(ii) Seller is duly organized and validly existing under the laws
of the jurisdiction of its organization, and it has qualified to do
business in each jurisdiction in which it is legally required to do so.
Seller has the authority under its charter and applicable law to enter into
this Agreement and the Custodial Agreement and to perform all acts
contemplated hereby and thereby or in connection herewith and therewith;
this Agreement, the Custodial Agreement and the transactions contemplated
hereby and thereby have been approved by the Board of Directors of Seller,
and Seller has taken all action necessary to make this Agreement and the
Custodial Agreement its valid and binding obligation enforceable in
accordance with the terms hereof;
(iii) This Agreement, the Custodial Agreement and every document
to be executed by Seller pursuant to this Agreement is and will be valid,
binding and subsisting obligations of Seller, enforceable in accordance
with their respective terms. No consents or approvals are required to be
obtained by Seller or its Parent Company for the execution, delivery and
performance of this Agreement or the Custodial Agreement by Seller;
(iv) The consummation of the transactions contemplated by this
Agreement and the Custodial Agreement are in the ordinary course of
business of Seller and will not result in the breach of any provision of
the charter or by-laws of Seller or result in the breach of any provision
of, or conflict with or constitute a default under or result in the
acceleration of any obligation under, any agreement, indenture, loan or
credit agreement or other instrument to which Seller, the Mortgage Loans or
any of Seller's property is subject, or result in the violation of any law,
rule, regulation, order, judgment or decree to which Seller, the Mortgage
Loans or Seller's property is subject. Without limiting the generality of
the foregoing, the consummation of the transactions contemplated herein or
therein will not violate any policy, regulation or guideline of the FHA or
VA or result in the voiding or reduction of the FHA insurance, VA guarantee
or any other insurance or guarantee in respect of any Mortgage Loan, and
such insurance or guarantee is in full force and effect or shall be in full
force and effect as required by the applicable GNMA Guide, FNMA Guide or
FHLMC Guide;
(v) Seller has not sold, assigned, transferred, pledged or
hypothecated any interest in any Participation Certificate to any person
other than Purchaser, and upon delivery of a Participation Certificate to
Purchaser, Purchaser will be the sole owner thereof, free and clear of any
lien, claim or encumbrance;
(vi) All information relating to Seller that Seller has delivered
or caused to be delivered to Purchaser, including, but not limited to, all
documents related to this Agreement, the Custodial Agreement or Seller's
financial statements, does not contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements made
therein or herein in light of the circumstances under which they were made,
not misleading;
(vii) There is no action, suit, proceeding, inquiry or
investigation, at law or in equity, or before or by any court, public board
or body pending or, to Seller's knowledge, threatened against or affecting
Seller (or, to Seller's knowledge, any basis therefor) wherein an
unfavorable decision,
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ruling or finding would adversely affect the validity or enforceability of
this Agreement, the Custodial Agreement or any agreement or instrument to
which Seller is a party and which is used or contemplated for use in the
consummation of the transactions contemplated hereby, would adversely
affect the proceedings of Seller in connection herewith or would or could
materially and adversely affect Seller's ability to carry out its
obligations hereunder;
(viii) Seller has all requisite Approvals;
(ix) The Custodian is an eligible custodian under the Agency
Guide and Agency Program, and is not an Affiliate of the Seller; and
(x) The Agreement and the Custodial Agreement, any other
document contemplated hereby or thereby and each transaction have not been
entered into fraudulently by Seller hereunder or the Custodian, or with the
intent to hinder, delay or defraud any creditor or the Purchaser.
(b) Seller hereby represents and warrants to Purchaser with
respect to each Mortgage Loan as of the date of the payment by Purchaser of the
Purchase Price of the related Participation Certificate that:
(i) Such Mortgage Loan was, immediately prior to the sale to
Purchaser of the related Participation Certificate, owned solely by Seller,
is not subject to any lien, claim or encumbrance, including, without
limitation, any such interest pursuant to a loan or credit agreement for
warehousing mortgage loans, and was originated and serviced in accordance
with all applicable law and regulations, including without limitation the
Federal Truth-in-Lending Act, the Real Estate Settlement Procedures Act,
regulations issued pursuant to any of the aforesaid, and any and all rules,
requirements, guidelines and announcements of the Applicable Agency, and,
as applicable, the FHA and VA, as the same may be amended from time to
time;
(ii) The improvements on the land securing such Mortgage Loan are
and will be kept insured at all times by responsible insurance companies
reasonably acceptable to Purchaser against fire and extended coverage
hazards under policies, binders or certificates of insurance with a
standard mortgagee clause in favor of Seller and its assigns, providing
that such policy may not be canceled without prior notice to Seller. Any
proceeds of such insurance shall be held in trust for the benefit of
Purchaser. The scope and amount of such insurance shall satisfy the rules,
requirements, guidelines and announcements of the Applicable Agency, and
shall in all cases be at least equal to the lesser of (A) the principal
amount of such Mortgage Loan or (B) the maximum amount permitted by
applicable law, and shall not be subject to reduction below such amount
through the operation of a coinsurance, reduced rate contribution or
similar clause;
(iii) Each Mortgage is a valid first lien on the mortgaged
property and is covered by an attorney's opinion of title acceptable to
GNMA, FNMA or FHLMC, as applicable, or by a policy of title insurance on a
standard ALTA or similar lender's form in favor of Seller and its assigns,
subject only to exceptions permitted by the GNMA, FNMA or FHLMC Program, as
applicable. Seller shall hold in trust for Purchaser such policy of title
insurance, and, upon request of Purchaser, shall immediately deliver such
policy to Purchaser or to the Custodian on behalf of Purchaser;
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(iv) To the extent applicable, such Mortgage Loan is either
insured by the FHA under the National Housing Act, guaranteed by the VA
under the Servicemen's Readjustment Act of 1944 or is otherwise insured or
guaranteed in accordance with the requirements of the GNMA, FNMA or FHLMC
Program, as applicable, and is not subject to any defect that would prevent
recovery in full or in part against the FHA, VA or other insurer or
guarantor, as the case may be;
(v) Such Mortgage Loan is in Strict Compliance with the
requirements and specifications (including, without limitation, all
representations and warranties required in respect thereof) set forth in
the GNMA Guide, FNMA Guide or FHLMC Guide, as applicable;
(vi) Such Mortgage Loan conforms in all respects with all
requirements of the Takeout Commitment applicable to the Security to be
backed by such Mortgage Loan; and
(vii) To the extent applicable, each Mortgage Loan is being
serviced by a mortgage sub-servicer having all Approvals necessary to make
such Mortgage Loan eligible to back a GNMA, FNMA or FHLMC Security, as
applicable.
The representations and warranties of Seller in this Section 9 are
unaffected by and supersede any provision in any endorsement of any Mortgage
Loan or in any assignment with respect to such Mortgage Loan to the effect that
such endorsement or assignment is without recourse or without representation or
warranty.
SECTION 10. COVENANTS OF SELLER.
---------------------------------
Seller hereby covenants and agrees with Purchaser as follows:
(a) Seller shall deliver to Purchaser:
(1) Within one hundred twenty (120) days after the end of each
fiscal year of Seller, consolidated balance sheets of Seller and its
consolidated subsidiaries and the related consolidated statements of income
showing the financial condition of Seller and its consolidated subsidiaries
as of the close of such fiscal year and the results of operations during
such year, and a consolidated statement of cash flows, as of the close of
such fiscal year, setting forth, in each case, in comparative form the
corresponding figures for the preceding year, all the foregoing
consolidated financial statements to be reported on by, and to carry the
report (acceptable in form and content to Purchaser) of, an independent
public accountant of national standing acceptable to Purchaser;
(2) Within sixty (60) days after the end of each of the first
three fiscal quarters of each fiscal year of Seller, unaudited consolidated
balance sheets and consolidated statements of income, all to be in a form
acceptable to Purchaser, showing the financial condition and results of
operations of Seller and its consolidated subsidiaries on a consolidated
basis as of the end of each such quarter and for the then elapsed portion
of the fiscal year, setting forth, in each case, in comparative form the
corresponding figures for the corresponding periods of the preceding fiscal
year, certified by a financial officer of Seller (acceptable to Purchaser)
as presenting fairly the financial position and results of operations of
Seller and its consolidated subsidiaries and as having
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been prepared in accordance with generally accepted accounting principles
consistently applied, in each case, subject to normal year-end audit
adjustments;
(3) Promptly upon receipt thereof, a copy of each other report
submitted to Seller by its independent public accountants in connection
with any annual, interim or special audit of Seller;
(4) Promptly upon becoming aware thereof, notice of (i) the
commencement of, or any determination in, any legal, judicial or regulatory
proceedings, (ii) any dispute between Seller or its Parent Company and any
governmental or regulatory body, (iii) any event or condition, which, in
any case of (i) or (ii), if adversely determined, would have a material
adverse effect on (A) the validity or enforceability of this Agreement, (B)
the financial condition or business operations of Seller, (C) the Approvals
of Seller or (D) the ability of Seller to fulfill its obligations under
this Agreement or (iv) any material adverse change in the business,
operations, prospects or financial condition of Seller, including, without
limitation, the insolvency of Seller or its Parent Company;
(5) Promptly upon becoming available, copies of all financial
statements, reports, notices and proxy statements sent by its Parent
Company, Seller or any of Seller's consolidated subsidiaries in a general
mailing to their respective stockholders and of all reports and other
material (including copies of all registration statements under the
Securities Act of 1933, as amended) filed by any of them with any
securities exchange or with the Securities and Exchange Commission or any
governmental authority succeeding to any or all of the functions of said
Commission;
(6) Promptly upon becoming available, copies of any press releases
issued by its Parent Company or Seller and copies of any annual and
quarterly financial reports and any reports on Form H-(b)12 which its
Parent Company or Seller may be required to file with the OTS or the RTC or
comparable reports which a Parent Company or Seller may be required to file
with the FDIC or any other federal banking agency containing such financial
statements and other information concerning such Parent Company's or
Seller's business and affairs as is required to be included in such reports
in accordance with the rules and regulations of the OTS, the RTC, the FDIC
or such other banking agency, as may be promulgated from time to time;
(7) Such supplements to the aforementioned documents and such other
information regarding the operations, business, affairs and financial
condition of its Parent Company, Seller or any of Seller's consolidated
subsidiaries as Purchaser may request; and
(8) A copy of (i) the articles of incorporation of Seller and any
amendments thereto, certified by the Secretary of State of Seller's state
of incorporation, (ii) a copy of Seller's by-laws, together with any
amendments thereto, (iii) a copy of the resolutions adopted by Seller's
Board of Directors authorizing Seller to enter into this Agreement and the
Custodial Agreement and authorizing one or more of Seller's officers to
execute the documents related to this Agreement and Custodial Agreement,
and (iv) a certificate of incumbency and signature of each officer of
Seller executing any document in connection with this Agreement;
(b) Neither the Seller nor any affiliate thereof will acquire at any
time any Participation Certificate or any other economic interest in or
obligation with respect to any Mortgage Loan.
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(c) Under generally accepted accounting principles ("GAAP") and for
federal income tax purposes, the Seller will report each sale of a Participation
Certificate to the Purchaser as a sale of the ownership interest in the Mortgage
Loans evidenced by that Participation Certificate. The Seller has been advised
by or has confirmed with its independent public accountants that the foregoing
transactions will be so classified under GAAP.
(d) The consideration received by the Seller upon the sale of each
Participation Certificate will constitute reasonably equivalent value and fair
consideration for the ownership interest in the Mortgage Loans evidenced by that
Participation Certificate.
(e) The Seller will be solvent at all relevant times prior to, and
will not be rendered insolvent by, any sale of a Participation Certificate to
the Purchaser.
(f) The Seller will not sell any Participation Certificate to the
Purchaser with any intent to hinder, delay or defraud any of the Seller's
creditors.
(g) Seller shall take all necessary action to maintain its Approvals
at all times during the term of this Agreement. If, for any reason, Seller
ceases to maintain such Approvals, Seller shall so notify Purchaser immediately.
(h) Seller will comply in all material respects with all laws, rules
and regulations to which it is or may become subject.
(i) Seller shall, upon request of Purchaser, promptly execute and
deliver to Purchaser all such other and further documents and instruments of
transfer, conveyance and assignment, and shall take such other action as
Purchaser may require more effectively to transfer, convey, assign to and vest
in Purchaser and to put Purchaser in possession of the property to be
transferred, conveyed, assigned and delivered hereunder and otherwise to carry
out more effectively the intent of the provisions under this Agreement.
SECTION 11. TERM.
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This Agreement shall continue in effect until terminated as to future
transactions by written instruction signed by either Seller or Purchaser and
delivered to the other, provided that no termination will affect the obligations
hereunder as to any of the Participation Certificates then outstanding hereunder
or any Security not yet delivered to the related Takeout Investor.
SECTION 12. EXCLUSIVE BENEFIT OF PARTIES; ASSIGNMENT.
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This Agreement is for the exclusive benefit of the parties hereto and
their respective successors and assigns and shall not be deemed to give any
legal or equitable right to any other person, including the Takeout Investor and
Custodian. Except as provided in Section 7, no rights or obligations created by
this Agreement may be assigned by either party hereto without the prior written
consent of the other party.
SECTION 13. AMENDMENTS; WAIVERS; CUMULATIVE RIGHTS.
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This Agreement may be amended from time to time only by written
agreement of Seller and Purchaser. Any forbearance, failure or delay by
Purchaser in exercising any right, power or remedy hereunder shall not be deemed
to be a waiver thereof,' and any single or partial exercise by Purchaser of any
right, power or remedy hereunder shall not preclude the further exercise
thereof. Every right, power and remedy of Purchaser shall continue in full
force and effect until specifically waived by Purchaser in writing. No right,
power or remedy shall be exclusive, and each such right, power or remedy shall
be cumulative and in addition to any other right, power or remedy, whether
conferred hereby or hereafter available at law or in equity or by statute or
otherwise.
SECTION 14. EXECUTION IN COUNTERPARTS.
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This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which shall constitute one and the
same instrument.
SECTION 15. EFFECT OF INVALIDITY OF PROVISIONS.
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In case any one or more of the provisions contained in this Agreement
should be or become invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein or therein shall in no way be affected, prejudiced or disturbed thereby.
SECTION 16. GOVERNING LAW.
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This Agreement shall be governed by and construed in accordance with
the laws of the State of New York, without regard to conflict of laws rules.
SECTION 17. NOTICES.
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Any notices, consents, elections, directions and other communications
given under this Agreement shall be in writing and shall be deemed to have been
duly given when telecopied or delivered by overnight courier to, personally
delivered to, or on the third day following the placing thereof in the mail,
first class postage prepaid to, the parties hereto at the related address set
forth in Annex I or to such other address as either party shall give notice to
the other party pursuant to this Section. Notices to any Assignee shall be
given to such address as the Assignee shall provide to Seller in writing.
SECTION 18. ENTIRE AGREEMENT.
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This Agreement, the Participation Certificates and the Custodial
Agreement contain the entire agreement between the parties hereto with respect
to the subject matter hereof, and supersede all prior and contemporaneous
agreements between them, oral or written, of any nature whatsoever with respect
to the subject matter hereof.
SECTION 19. COSTS OF ENFORCEMENT.
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In addition to any other indemnity specified in this Agreement, in the
event of a breach by Seller of this Agreement, the Custodial Agreement, a
Participation Certificate or a Takeout Commitment,
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Seller agrees to pay the reasonable attorneys' fees and expenses of Purchaser
and/or any Assignee incurred as a consequence of such breach.
SECTION 20. CONSENT TO SERVICE.
--------------------------------
Each party irrevocably consents to the service of process by
registered or certified mail, postage prepaid, to it at its address provided
pursuant to Section 17.
SECTION 21. SUBMISSION TO JURISDICTION.
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With respect to claim arising out of this Agreement each party (a)
irrevocably submits to the nonexclusive, jurisdiction of the courts of the State
of New York and the United States District Court located in the Borough of
Manhattan in New York City, and (b) irrevocably waives (i) any objection which
it may have at any time to the laying of venue of any suit, action or proceeding
arising out of or relating hereto brought in any such court, (ii) any claim that
any such suit, action or proceeding brought in any such court has been brought
in any inconvenient forum and (iii) the right to object, with respect to such
claim, suit, action or proceeding brought in any such court, that such court
does not have jurisdiction over such party.
SECTION 22. JURISDICTION NOT EXCLUSIVE.
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Nothing herein will be deemed to preclude either party hereto from
bringing an action or proceeding in respect of this Agreement in any
jurisdiction other than as set forth in Section 21.
SECTION 23. CONSTRUCTION.
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The headings in this Agreement are for convenience only and are not
intended to influence its construction. References to Sections, Exhibits and
Annexes in this Agreement are to the Sections of and Exhibits and Annexes to
this Agreement. The Exhibits and Annexes are part of this Agreement. In this
Agreement, the singular includes the plural, the plural the singular, and the
words ''and'' and ''or'' are used in the conjunctive or disjunctive as the sense
and circumstances may require.
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IN WITNESS WHEREOF, Purchaser and Seller have duly executed this Agreement
as of the date and year set forth on the cover page hereof.
PRUDENTIAL SECURITIES REALTY
FUNDING CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
[NVR MORTGAGE FINANCE, INC.]
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
159