EXHIBIT 10.19
MORTGAGE LOAN
PURCHASE AND SALE OPERATING AGREEMENT
AGREEMENT made as of this day of February, 1996 between
AMERICAN HOME MORTGAGE, a New York corporation having its office and principal
place of business at ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ (hereinafter
referred to as "Seller") and INDEPENDENCE SAVINGS BANK, a New York State Banking
Corporation, having an office and principal place of business at ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, (hereinafter referred to as "Purchaser").
W I T N E S S E T H:
WHEREAS, Seller is a New York State Licensed Mortgage Banker engaged
in the business of making loans to individual consumers (hereinafter referred to
as "Borrowers") secured by first mortgage liens on real property improved by
owner-occupied one to four family homes, individual condominium units or first
liens on ownership interests in owner-occupied cooperative apartment units
(hereinafter collectively referred to as "Loan" or "Loans"); and
WHEREAS, Seller desires to sell Loans from time to time, on a non
exclusive basis and Purchaser is willing to purchase Loans on a non exclusive
basis offered to it by the Seller, under all of the terms and conditions
hereinafter set forth; and
WHEREAS, Purchaser and Seller have mutually agreed that upon the
sale of any Loan under the terms and conditions hereinafter set forth, the
servicing of the Loan sold shall be released to the Purchaser.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, it is agreed by and between the parties
hereto as follows:
1. PURCHASE AND SALE
The Seller agrees to submit Loans to the Purchaser from time to time
and the Purchaser agrees to purchase the Loans so delivered subject to
compliance with and satisfaction of all terms and conditions set forth in this
Agreement. Seller shall submit approximately $3,000,000.00 in such Loans to
Purchaser per month, totalling approximately $36,000,000.00 in such Loans per
year. It is understood however that the aforementioned minimum dollar amounts
may be amended from time-to-time by mutual agreement of the Seller and
Purchaser.
2. PROCEDURE
Individual Loans shall be purchased and sold according to the
following procedure:
2.1 Seller in the course of its business shall solicit individual Loan
applications and register each such application with Purchaser by delivering a
Notice of Registration in the form annexed as Exhibit "A". Such Notice of
Registration shall include, among other things, the Borrower's name, address of
the property to be liened, loan amount requested, mortgage product requested,
anticipated loan-to-value ratio, and loan term. Upon receipt of such Notice,
Purchaser in its sole discretion may accept or reject such application. In the
event Purchaser accepts such application, Purchaser shall sign and date the
Notice and confirm the interest rate applicable for such application. This
interest rate shall equal a rate which is one quarter of one (0.25%) percent
below the "Advertised Rate" as set forth in Exhibit "E" and shall be locked in
for a period expiring ninety (90) days after the
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Notice of Registration is so dated by the Purchaser. The "Advertised Rate" may
be changed from time-to-time, in the Purchaser's sole discretion, by written
notice to the Seller in the form set forth as Exhibit "E".
2.2 Seller shall thereafter deliver such applications to the Purchaser
together with complete credit packages for each application, so registered (the
"Application Package"). Each Application Package shall include all documents as
set forth in Exhibit "B".
2.3 Upon receipt of each Application Package, Purchaser shall review such
Package promptly by application of its underwriting standards in effect at the
time of receipt of the Application Package and provide Seller with written
notice of Purchaser's acceptance or rejection of the Application Package by
written Notice of Acceptance/Rejection. Purchaser's decision with respect to the
acceptance or rejection of any Application Package shall be in Purchaser's sole
discretion. Such Notice shall be given to Seller not later than three (3)
business days after receipt of the Application Package by Purchaser, shall be in
the form annexed as Exhibit "C" and shall include the names of the Borrowers,
loan terms, address of the property to be liened and any additional terms or
conditions to closing.
2.4 Seller must close the Loan prior to the expiration date of the lock-in
period as set forth in the Notice of Registration. After Seller closes the Loan,
Seller shall deliver to Purchaser all documents set forth in Exhibit "D" annexed
hereto. The form of all such documents shall be subject to the review and
approval of Purchaser prior to the sale of the first Loan. All costs and
expenses of origination and
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assignment of each Loan shall be borne by the Seller. Provided however that the
Purchaser shall reimburse the Seller for the payment of the one quarter of one
(0.25%) percent mortgage tax required to be paid by lenders pursuant to New York
State Tax Law Section 253-A. All Loans shall be closed by counsel for Seller as
approved by Purchaser. Purchaser agrees that it will not object to closing
documents prepared and accepted by closing counsel approved by Purchaser.
2.5 Following the closing, provided Purchaser has (i) received all of the
documents set forth above in Section 2.3 and Exhibit "D"; and (ii) determined
such documentation to be acceptable and in accordance with all terms and
conditions of the Notice of Acceptance/Rejection, Purchaser shall pay to Seller
the Purchase Price as defined pursuant to Section 3 hereof. Purchaser shall
inform Seller immediately as to any defect in the documentation delaying such
purchase and shall allow Seller up to five (5) business days within which time
any such defect must be corrected.
3. TERMS/TYPES OF LOANS-PURCHASE PRICE
Each Loan submitted to Purchaser shall conform in all respects to
the Purchaser's One, Two, Three, Four or Five Year ARM loan product being
offered at the time the application is registered. Each loan must be secured by
a first mortgage lien on either real property improved by a one to four family
residence or an individual condominium unit or a first lien on the stock and
proprietary lease representing all ownership interest in an individual
cooperative apartment unit (collectively, the "Mortgaged Property"). Each such
Mortgaged Property must be occupied by the Borrower as his primary residence and
each Mortgaged Property must
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be located in one of the following counties in New York State: New York, Kings,
Queens, Bronx, Richmond, Westchester, Nassau, Suffolk, Westchester and Rockland;
in Fairfield County in Connecticut or in Passaic, Union, ▇▇▇▇▇▇ Middlesex,
Bergen or Essex Counties in New Jersey. No Loan shall exceed the principal sum
of $500,000.00. Upon the purchase of any Loan, the Purchaser will pay to the
Seller the purchase price (hereinafter referred to as "Purchase Price") equal to
one hundred and one half (100.5%) percent of the original principal balance of
the Loan as closed for all Loans with original principal balances of $300,000.00
or less, and one hundred (100%) of the original principal balance of the Loan as
closed for Loans exceeding $300,000.00, up to and including $500,000.00.
Purchaser shall also pay to Seller per diem interest calculated at the Loan note
rate from the date the Seller funded the Loan until date of receipt of Purchase
Price by Seller as well as any mortgage tax reimbursement required under Section
2.4 and adjustments for any real estate, insurance and/or other escrows as may
be applicable.
4. PAYMENT OF PURCHASE PRICE
Payment of the Purchase Price shall be made by the Purchaser by wire
transfer of funds in accordance with the written instructions of the Seller.
Purchaser agrees to pay Seller the Purchase Price hereof, as adjusted,
immediately upon Seller's delivery to Purchaser and Purchaser's approval of the
Loan Documents as set forth in Section 2.4 hereof but not prior to expiration of
the Borrower's Right of Rescission.
5. PREPAYMENT RESERVE ACCOUNT
Prior to the purchase of the first Loan by Purchaser, Seller shall
deliver to Purchaser the sum of $12,500.00 to be held in an
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interest bearing account to be maintained by the Purchaser designated "American
Home Mortgage - Prepayment Reserve" (hereinafter the "Reserve Account"). Seller
shall continue to make payments into the Reserve Account equal to $12,500.00
each, at three (3) month intervals until such time as the balance in the Reserve
Account equals $50,000.00. The amount to be held in the Reserve Account
thereafter shall be reviewed annually commencing with the anniversary date of
the purchase of the first Loan under this agreement and shall be adjusted to
equal the greater of $50,000.00 or one eighth of one (0.125%) percent of the
total dollar amount of all loans purchased by the Purchaser in the preceding
year.
5.1 (a) In the event a Borrower exercises an option to prepay a Loan in
full within twelve (12) months after purchase, Purchaser shall debit the Reserve
Account for an amount equal to the premium above par that the Purchaser
originally paid for the Loan.
(b) Should any such prepayment occur within ninety (90) days from
the date the Loan was purchased, the Seller shall reimburse the Reserve Account
for the full amount of the debit caused by such prepayment.
5.2 Any amount collected by Purchaser as a penalty for prepayment of any
Loan shall be retained by the Purchaser.
5.3 Upon termination of this Agreement or in the event that the Purchaser
does not purchase any Loan from Seller pursuant to the terms of this Agreement
for a period in excess of six (6) months, the Purchaser shall retain in the
Reserve Account for a period of one year from the date of such termination a sum
equal to the greater of
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$50,000.00 or one eighth of one (0.125%) percent of the total dollar amount of
all Loans purchased by Purchaser during the preceding twelve month period.
5.4 Purchaser agrees that for the purposes of this Section 5, the term
"prepayment" shall only include a full prepayment of the entire principal
balance of the Loan resulting from Borrower's exercise of his option to prepay.
Any other unscheduled repayment of the Loan, whether by acceleration or
otherwise, shall not be deemed a prepayment nor be subject to the provisions of
this Section.
5.5 Purchaser further agrees that prepayment of any Loan brought about by
Purchaser's offer to or solicitation of a Borrower to refinance the Loan shall
not subject the Reserve Account to any debit.
6. SERVICING OF LOANS
Purchaser shall service each Loan purchased hereunder. Both
Purchaser and Seller shall deliver to the Borrower for each Loan such notices of
transfer of servicing as each are required to provide pursuant to the Federal
Real Estate Settlement Procedures Act. Purchaser may sell any Loan or the
servicing on any Loan at any time after such Loan is sold to Purchaser.
7. REPRESENTATIONS OF THE SELLER
As of the date hereof, and upon the sale of any Loan to Purchaser,
the Seller represents to the Purchaser that:
7.1 The Seller is a corporation duly organized, validly existing, in good
standing and a Licensed Mortgage Banker under the laws of the State of New York,
has all necessary licensing and authorizations to originate and close
Residential Loans in New Jersey and Connecticut and has the corporate power and
authority to enter into and perform its obligations under this Agreement.
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7.2 The Seller is authorized to do business in the State of New York and
in any other state in which it makes loans.
7.3 The Seller shall be the sole owner of each Loan, and shall have full
authority to sell, transfer and assign the same to the Purchaser.
7.4 Each borrower will have been at the time of completion of the
Application and at the closing of a Loan, of full age and have a valid interest
in the Mortgaged Property and all information in the Application Package is
true, accurate and complete in all respects.
7.5 No Loan is subject, in whole or in part, to any right of rescission,
set-off, counterclaim or defense, including the defense of usury, and no such
right of rescission, set-off, counterclaim or defense has been asserted with
respect thereto.
7.6 No Borrower shall be in default under any provision of the Loan note;
the payment of the principal amount shown in the Loan note shall be secured by
either a first mortgage or, for coop loans, a first lien, covering the Mortgaged
Property; the mortgage, and for coop loans the loan security agreement, shall
have been executed in the manner required by law for the conveyance of a first
lien by all persons having an interest in the Mortgaged Property as set forth in
the title insurance policy or, for coop loans, cooperative apartment search; and
at the date of purchase by the Purchaser, the mortgage and the mortgage
assignment and, for coop loans, the UCC-1 and UCC-3 financing statements shall
have been submitted for recording in the land records of the jurisdiction in
which the Mortgaged Property is situate.
7.7 Each lien is a valid and subsisting first lien on the Mortgaged
Property, and the Mortgaged Property is free and clear of all
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encumbrances and liens having priority over the lien of the mortgage except for
those prior liens in the amounts set forth in the title report or cooperative
apartment search or otherwise disclosed in writing to and approved by the
Purchaser and liens for real estate taxes and special assessments not yet due
and payable; the terms of the lien shall not have been waived, altered or
modified in any respect, except those acceptable to Purchaser, in instruments of
record described in a title insurance policy accompanying the mortgage or loan
security agreement, as the case may be; the mortgage/loan security agreement
shall not have been satisfied, in whole or in part, and the Mortgaged Property
shall not have been released from the lien of the mortgage/loan security
agreement, in whole or in part; and the Mortgaged Property shall be free of any
and all asbestos and hazardous waste material and shall not have been damaged so
as to adversely affect the value thereof.
7.8 Seller has complied with all applicable State, Federal and local laws,
rules and regulations as they are amended from time to time with respect to the
brokering and processing of applications, loan commitments and the origination
of the Loans, including but limited to: a) The Federal Truth in Lending Act and
Regulation Z, b) The Federal Equal Credit Opportunity Act and Regulation B, c)
The Federal Fair Credit Reporting Act, d) The Federal Real Estate Settlement
Procedures Act and Regulation X, e) The Home Mortgage Disclosure Act and
Regulation C, f) The Flood Hazard Protection Act and National Flood Insurance
Reform Act of 1994, g) The Fair Housing Act, h) The National Affordable Housing
Act, i) Parts 38, 39 and 82 of the General Regulations of the New York State
Banking Board, and j) all applicable New Jersey and
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Connecticut state laws and regulations.
7.9 In the event of a breach of any of Seller's representations contained
in this Agreement and provided Purchaser notifies Seller in writing within
ninety (90) days after the Purchaser becomes aware of such breach, Seller shall,
within a reasonable time after such notice from Purchaser, repurchase the Loan
for the then outstanding balance together with any premium over par paid by the
Purchaser on the original sale of the Loan, and accrued but unpaid interest.
Notice by Purchaser hereunder shall set forth in detail the facts constituting
such breach. Seller shall also repurchase any Loan which falls more than sixty
(60) days delinquent within one year after its sale to Purchaser. Any Loan
repurchased by Seller hereunder shall thereafter be serviced by Seller.
7.10 It is understood and agreed that Purchaser shall in no way or event
be liable to Seller for any and all claims made by any third party against
Seller or in any way connected with Seller's origination of the Loans. Seller
hereby indemnifies and holds the Purchaser, its directors, officers, and
employees harmless from any and all claims, liabilities, loss, injury and/or
damages including but not limited to incidental and consequential damages
together with all costs and expenses relating thereto whether arising out of or
resulting from a breach of any of Seller's representations in this Agreement or
in any way connected with Seller's origination and sale of Loans under this
Agreement. Seller hereby grants Purchaser a right of setoff against any and all
property and/or accounts of Seller which Purchaser may have or control
including, but not limited to the Reserve Fund, in the event any amounts due and
owing under this indemnity or Section 7.9 remain unpaid
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beyond ninety (90) days after notice and demand.
7.11 Seller agrees that it shall not engage in any kind of advertising or
promotion regarding this Agreement with the Purchaser.
7.12 While this Agreement is in full force and effect, Seller will permit
Purchaser or its designees, at any reasonable time or times, to inspect, audit,
check and make abstracts from Seller's books, accounts, records, correspondence
or other papers or any matters pertaining to Loans purchased hereunder. Seller
shall also submit annually to the Purchaser an audited annual financial
statement within ninety (90) days after the end of each calendar year.
7.13 Prior to any change in the equity ownership or composition of the
Seller, Seller shall inform Purchaser in writing of such change.
8. REPRESENTATIONS OF THE PURCHASER
The Purchaser hereby represents to the Seller as follows:
8.1 The Purchaser is duly qualified and permitted to transact the business
contemplated by this Agreement;
8.2 The execution of this Agreement on behalf of the Purchaser and the
performance by the Purchaser of its obligations hereunder have been authorized
by all necessary corporate action.
8.3 After Purchaser's acceptance of any Application Package Purchaser
shall not hold Seller liable in any way for any fraud, misrepresentation or
other misstatement of or by the Borrower in connection with such Application
Package, except any such fraud, misrepresentation or misstatement of which
Seller has actual knowledge or should have knowledge by application of prudent
underwriting standards.
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9. INDEPENDENT CONTRACTOR
This Agreement shall not be construed as creating an
employer-employee or agency relationship, it being within the contemplation of
the parties that all acts performed by the Seller in carrying out the provisions
hereof shall be those of an independent contractor.
10. TERMINATION
This Agreement may be terminated by either party without cause on
five (5) business days prior written notice to the other. Any such termination
shall not apply to Loans for which a Notice of Registration has been issued by
Purchaser. Upon termination, the obligations of the parties to each other shall
cease, except those obligations on Loans for which a Notice of Registration has
been issued, and except as set forth in Sections 5, 6, 7.9 and 7.10 hereof which
shall continue, and the Purchaser and the Seller mutually agree to pay the
appropriate party any monies that may be due under this Agreement as soon as
practicable after the termination date.
11. GOVERNING LAW
This Agreement shall be governed by the laws of the State of New
York.
12. ASSIGNMENT
Neither this Agreement nor any of the rights granted hereunder may
be assigned, or otherwise transferred by Seller without the prior written
consent of the other. Any change in the composition of the ownership of the
Seller, without the prior written approval of the Purchaser, shall be deemed to
be an assignment under this paragraph.
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13. NOTICES
Any notice provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered personally or otherwise
actually received or five (5) business days after deposit in the United States
mail, certified, postage prepaid, addressed as follows:
If to the Seller:
If to the Purchaser: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, First Vice President
Independence Savings Bank
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
or at such other place as either party may designate by notice given in
accordance with this Section 13.
14. AGREEMENT NON-EXCLUSIVE
Both Purchaser and Seller understand that the mutual agreement to
purchase and sell Loans is non-exclusive and that both parties are free to
contract for the purchase and/or sale of loans under any other arrangement with
any third parties as Purchaser and Seller, in their respective sole discretion,
may decide.
15. CONFIDENTIALITY
Both Purchaser and Seller shall hold in confidence any information
concerning any Borrower acquired in connection with the origination,
administration and sale of any Loan under the terms of this Agreement.
16. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the parties
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and shall not be modified except in writing and executed by duly authorized
representatives of both the Purchaser and the Seller. This Agreement supersedes
and incorporates all representations, promises, and statements, oral or written,
made in connection with the subject matter of this Agreement and the negotiation
hereof, and no such representation, promise or statement not written herein
shall be binding on the parties. This Agreement shall be binding on the parties
hereto and their successors in interest.
17. SEVERABILITY
Any provision of this Agreement which is prohibited or unenforceable
in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions thereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
18. WAIVER
Any waiver by either party of any of its rights hereunder, shall not
be a waiver of any other, or further rights, either hereunder, or cognizable at
law or equity, and shall apply only to the particular rights waived.
19. COUNTERPARTS
This Agreement may be executed in several counterparts all of which
taken together shall constitute one single agreement between the parties.
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20. HEADINGS
The section headings are for reference and convenience only and
shall not enter into the interpretation hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective proper corporate officers on the day and year first
above written.
AMERICAN HOME MORTGAGE, Seller
BY: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
INDEPENDENCE SAVINGS BANK, PURCHASER
BY: [ILLEGIBLE]
-------------------------------------
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
On the 29 day of February, 1996, before me personally came ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
to me known who, being by me duly sworn, did depose and say that he resides at
New York, that he is the President of AMERICAN HOME MORTGAGE CORP., the
corporation described in, and which executed the foregoing instrument by order
of the Board of Directors of said corporation, and that he signed his name
thereto by like order.
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇.
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Notary Public
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇
Notary Public, State of New York
No. 4950344
Qualified in Suffolk County
Commission Expires April 24,1997
▇▇
▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇ )
) SS.:
COUNTY OF KINGS )
On the 27th day of February, 1996, before me personally came ▇▇▇▇▇▇ ▇.
[ILLEGIBLE] to me known who, being by me duly sworn, did depose and say that he
resides at [ILLEGIBLE], that he is the Executive Vice President of INDEPENDENCE
SAVINGS BANK, the corporation described in, and which executed the foregoing
instrument by order of the Board of Trustees of said corporation, and that he
signed his name thereto by like order.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
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Notary Public
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Notary Public, State of New York
No. ▇▇-▇▇▇▇▇▇▇
Qualified in Richmond County
Commission Expires June 20, 1996
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