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EXHIBIT 10.1
MASTER REPURCHASE AGREEMENT GOVERNING
PURCHASES AND SALES OF MORTGAGE LOANS
Dated as of March 11, 1998
Between
XXXXXX COMMERCIAL PAPER INC.,
as Buyer
and
AAMES CAPITAL CORPORATION,
as Seller
1. APPLICABILITY
From time to time for a period of six months commencing on March 11, 1998,
Xxxxxx Commercial Paper Inc. ("Buyer") shall, subject to the terms hereof, enter
into transactions upon the request of Aames Capital Corporation ("Seller") in
which Seller agrees to transfer to Buyer Mortgage Loans against the transfer of
funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller
such Mortgage Loans at a date certain after the date of transfer or on demand,
as specified in the Confirmation, against the transfer of funds by Seller. Each
such transaction shall be referred to herein as a "Transaction" and shall be
governed by this Agreement and the related Confirmation, unless otherwise agreed
in writing. Notwithstanding anything in this Agreement to the contrary, Buyer
shall have no obligation to enter into any Transaction hereunder if there shall
have occurred any material adverse change, as determined by Buyer in its
reasonable judgment, in the financial condition of Seller, the financial markets
generally or the secondary market for Mortgage Loans. Buyer shall promptly
notify Seller of any determination by Buyer that any of the foregoing has
occurred.
2. DEFINITIONS
"Act of Insolvency" means, with respect to any party and its Affiliates, (i) the
filing of a petition, commencing, or authorizing the commencement of any case or
proceeding under any bankruptcy, insolvency, reorganization, liquidation,
dissolution or similar law relating to the protection of creditors, or suffering
any such petition or proceeding to be
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commenced by another which is consented to, not timely contested or results in
entry of an order for relief; (ii) the seeking the appointment of a receiver,
trustee, custodian or similar official for such party or an Affiliate or any
substantial part of the property of either, (iii) the appointment of a receiver,
conservator, or manager for such party or an Affiliate by any governmental
agency or authority having the jurisdiction to do so; (iv) the making or
offering by such party or an Affiliate of a composition with its creditors or a
general assignment for the benefit of creditors, (v) the admission by such party
or an Affiliate of such party of its inability to pay its debts or discharge its
obligations as they become due or mature; or (vi) that any governmental
authority or agency or any person, agency or entity acting or purporting to act
under governmental authority shall have taken any action to con demn, seize or
appropriate, or to assume custody or control of, all or any substantial part of
the property of such party or of any of its Affiliates, or shall have taken any
action to displace the management of such party or of any of its Affiliates or
to curtail its authority in the conduct of the business of such party or of any
of its Affiliates.
"Additional Loans" means Mortgage Loans or cash provided by Seller to Buyer or
its designee pursuant to Section 4(a).
"Affiliate" means an affiliate of a party as such term is defined in the United
States Bankruptcy Code in effect from time to time.
"Agreement" means this Master Repurchase Agreement Governing Purchases and Sales
of Mortgage Loans between Buyer and Seller, as amended from time to time.
"Balloon Mortgage Loan" means any Mortgage Loan that provided on the date of
origination for scheduled payments by the Mortgagor based upon an amortization
schedule extending beyond its maturity date.
"Business Day" means a day other than (i) a Saturday or Sunday, or (ii) a day in
which the New York Stock Exchange is authorized or obligated by law or executive
order to be closed.
"Buyer" has the meaning specified in Section 1.
"Collateral" has the meaning specified in Section 6.
"Collateral Amount" means, with respect to any Transaction, the amount obtained
by application of the applicable Collateral Amount Percentage to the Repurchase
Price for such Transaction.
"Collateral Amount Percentage" means the amount set forth in the Confirmation
which, in any event, (i) shall not be less than (x) 103% with respect to
Standard Loans and (y) 117.65% with respect to High LTV Loans in determining
whether a Market Value Collateral Deficit exists pursuant to the first sentence
of Section 4(a) hereof and (ii) shall
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not be less than 105% with respect to all Mortgage Loans in determining whether
a Securitization Value Collateral Deficit exists pursuant to the second sentence
of Section 4(a) hereof.
"Collateral Deficit" means either a Market Value Collateral Deficit or a
Securitization Value Collateral Deficit.
"Collateral Information" means the following information with respect to each
Mortgage Loan: (i) Seller's loan number , (ii) the Mortgagor's name, (iii) the
address of the Mortgaged Property, (iv) the current interest rate, (v) the
original balance, (vi) current balance as of the end of the immediately
preceding month, (vii) the next payment date, (viii) the appraisal value of the
Mortgaged Property, (ix) whether interest rate is fixed or adjustable (and if
adjustable, the ARM code, which includes the index, adjustment frequency and
caps), (x) the lien position of the Mortgage Loan on the Mortgaged Property (and
if a second lien, the outstanding principal balance of the first lien), (xi) the
occupancy status of the Mortgaged Property (including whether owner occupied),
(xii) whether the Mortgage Loan is a Balloon Loan, (xiii) the first payment
date, (xiv) the maturity date, (xv) the principal and interest payment, and
(xvi) the property type of the Mortgaged Property.
"Confirmation" has the meaning specified in Section 3(a).
"Custodial Agreement" means that custodial agreement, dated as of March 11,
1998, by and among Buyer, Seller and the Custodian.
"Custodial Delivery" means the form executed by the Seller in order to deliver a
Mortgage Loan Schedule and/or Mortgage Files to Buyer or its designee (including
the Custodian) pursuant to Section 7, a form of which is attached hereto as
Exhibit II.
"Custodian" means the custodian under the Custodial Agreement. The initial
custodian is Bankers Trust Company of California, N.A.
"Delinquent" means, with respect to any Mortgage Loan, the period of time from
the date on which a Mortgagor fails to pay an obligation under the terms of such
Mortgage Loan to the date on which such payment is made.
"Event of Default" has the meaning specified in Section 13.
"First Mortgage" means the Mortgage that is the first lien on the Mortgaged
Property.
"Guarantor" means Aames Financial Corporation.
"High LTV Loan" means a Mortgage Loan secured by a First Mortgage that has a
Loan-to- Value Ratio greater than 90% but less than or equal to 125%.
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"HUD" means the United States Department of Housing and Urban Development.
"Income" means, with respect to any Mortgage Loan at any time, any principal
thereof then payable and all interest, dividends or other distributions payable
thereon less any related servicing fee(s) charged by the Servicer.
"LIBOR" means the London Interbank Offered Rate for one-month United States
dollar deposits as set forth on page 3750 of Telerate as of 11:00 a.m., London
time, on the date of determination.
"Loan-to-Value Ratio" means with respect to any Mortgage Loan, the fraction,
expressed as a percentage, the numerator of which is the principal balance of
such Mortgage Loan at the date of origination and the denominator of which is
the lowest of (a) the value of the related Mortgaged Property as set forth in
the appraisal of such Mortgaged Property obtained in connection with the
origination of such Mortgage Loan, (b) the purchase price of the Mortgaged
Property or (c) the review appraisal, if any, provided that the appraised value
shown in the review appraisal is less than the appraised value at origination by
a variance of 10% or greater. For purposes of calculating the Loan-to-Value
Ratio of a Mortgage Loan secured by a second Mortgage, the principal balance of
the related First Mortgage as well as the second Mortgage shall be included in
the numerator.
"Market Value" means as of any date with respect to any Mortgage Loan, the price
at which such Mortgage Loan could readily be sold as determined by Buyer in its
sole discretion; provided, however, that Buyer shall not take into account, for
purposes of calculating Market Value, any Mortgage Loan (i) which has been
subject to Transactions for more than 180 days, (ii) which, together with the
other Mortgage Loans subject to then outstanding Transactions, would cause the
30+ Delinquency Percentage to exceed 5.0%, (iii) which are more than 59 days
Delinquent , (iv) which is a Wet Ink Mortgage Loan for more than 7 Business Days
or (v) with respect to which there is a breach of a representation, warranty or
covenant made by Seller in this Agreement that materially adversely affects
Buyer's interest in such Mortgage Loan and which breach has not been cured.
"Market Value Collateral Deficit" has the meaning specified in Section 4(a).
"Mortgage" means a mortgage, deed of trust, deed to secure debt or other
instrument, creating a valid and enforceable first or second lien on or a first
or second priority ownership interest in an estate in fee simple in real
property and the improvements thereon, securing a mortgage note or similar
evidence of indebtedness.
"Mortgage File" means the documents specified as the "Mortgage File" in Section
7(d).
"Mortgage Loan" means (i) non-securitized whole loan, namely a conventional
mortgage loan secured by a first or second lien on a one to four family
residential property or mixed-
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use property including, without limitation, a Wet Ink Mortgage Loan, a High LTV
Loan or a Standard Loan or (ii) other type of non-securitized whole loan as may
be agreed upon in writing by the parties hereto from time to time.
"Mortgage Loan Schedule" means a schedule of Mortgage Loans attached to each
Trust Receipt, Confirmation and Custodial Delivery.
"Mortgage Note" means a note or other evidence of indebtedness of a Mortgagor
secured by a Mortgage.
"Mortgaged Property" means the real property securing repayment of the debt
evidenced by a Mortgage Note.
"Mortgagee" means the record holder of a Mortgage Note secured by a Mortgage.
"Mortgagor" means the obligor on a Mortgage Note and the grantor of the related
Mortgage.
"Periodic Payment" has the meaning specified in Section 5(b).
"Person" means an individual, partnership, corporation, joint stock company,
trust or unincorporated organization or a governmental agency or political
subdivision thereof.
"Price Differential" means, with respect to any Transaction hereunder as of any
date, the aggregate amount obtained by daily application of the Pricing Rate for
such Transaction to the Purchase Price for such Transaction on a 360 day per
year basis for the actual number of days during the period commencing on (and
including) the Purchase Date for such Transaction and ending on (but excluding)
the Repurchase Date (reduced by any amount of such Price Differential previously
paid by Seller to Buyer with respect to such Transaction).
"Pricing Rate" means, with respect to a Transaction, the per annum percentage
rate specified in the related Confirmation for determination of the Price
Differential which shall not exceed LIBOR as of the applicable Purchase Date
plus the applicable Pricing Spread.
"Pricing Spread" means the rate specified in the Confirmation, which shall be
equal to [information omitted and filed separately with the Securities and
Exchange Commission pursuant to a request for confidential treatment].
"Prime Rate" means the rate of interest published by The Wall Street Journal,
northeast edition, as the "prime rate."
"Purchase Date" means the date on which Purchased Mortgage Loans are transferred
by Seller to Buyer or its designee (including the Custodian) as specified in the
Confirmation.
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"Purchase Price" means on each Purchase Date, the price at which Purchased
Mortgage Loans are transferred by Seller to Buyer or its designee (including the
Custodian), which, subject to compliance with the collateral maintenance
requirements of Section 4, shall equal (x) with respect to Standard Loans, the
outstanding principal amount thereof or (y) with respect to High LTV Loans, 85%
of the outstanding principal amount thereof.
"Purchased Mortgage Loans" means the Mortgage Loans (including any Additional
Assets) sold by Seller to Buyer in a Transaction, any Additional Loans and any
Substituted Mortgage Loans.
"Replacement Loans" has the meaning specified in Section 14(b)(ii).
"Repurchase Date" means the date on which Seller is to repurchase the Purchased
Mortgage Loans from Buyer, including any date determined by application of the
provisions of Sections 3 or 13, as specified in the Confirmation; provided that
in no event shall such date be more than 45 days after the Purchase Date.
"Repurchase Price" means the price at which Purchased Mortgage Loans are to be
transferred from Buyer or its designee (including the Custodian) to Seller upon
termination of a Transaction, which will be determined in each case (including
Transactions terminable upon demand) as the sum of the Purchase Price and the
Price Differential as of the date of such determination decreased by all cash,
Income and Periodic Payments actually received by Buyer pursuant to Sections
4(a), 5(a) and 5(b), respectively, with respect to such Transaction.
"Securitization" has the meaning specified in Section 12(h).
"Securitization Value" means, as of any date with respect to any Mortgage Loans,
the price at which such Mortgage Loans could be securitized and sold in a
securitization as determined by Buyer in its sole discretion; provided, however,
that Buyer shall not take into account, for purposes of calculating
Securitization Value, any Mortgage Loan (i) which has been subject to
Transactions for more than 180 days, (ii) which, together with the other
Mortgage Loans subject to then outstanding Transactions, would cause the 30+
Delinquency Percentage to exceed 5.0%, (iii) which are more than 59 days
Delinquent, (iv) which is a Wet Ink Mortgage Loan for more than 7 Business Days
or (v) with respect to which there is a breach of a representation, warranty or
covenant made by Seller in this Agreement that materially adversely affects
Buyer's interest in such Mortgage Loan and which breach has not been cured.
"Securitization Value Collateral Deficit" has the meaning specified in Section
4(a).
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"Seller" has the meaning specified in Section 1.
"Servicing Records" has the meaning specified in Section 25.
"Standard Loan" means a Mortgage Loan that has a Loan-to-Value Ratio less than
or equal to 90%.
"Substituted Mortgage Loans" means any Mortgage Loans substituted for Purchased
Mortgage Loans in accordance with Section 9 hereof.
"30+ Delinquency Percentage" means the fraction, expressed as a percentage, the
numerator of which is the aggregate Purchase Price of Purchased Mortgage Loans
subject to then outstanding Transactions which are more than 30 days Delinquent
and the denominator of which is the aggregate Purchase Price of all Purchased
Mortgage Loans subject to then outstanding Transactions.
"Transaction" has the meaning specified in Section 1.
"Trust Receipt" means a trust receipt issued by Custodian to Buyer confirming
the Custodian's possession of certain mortgage loan files which are the property
of and held by Custodian for the benefit of the Buyer or the registered holder
of such trust receipt.
"Wet Ink Mortgage Loan" means a Mortgage Loan for which a Mortgage File has not
been delivered to the Custodian.
3. INITIATION; CONFIRMATION; TERMINATION;
MAXIMUM TRANSACTION AMOUNTS
(a) Each agreement to enter into a Transaction must be entered into in writing
at the initiation of Seller. In any event, Buyer shall confirm the terms of each
Transaction by issuing a written confirmation to Seller promptly after the
parties enter into such Transaction in the form of Exhibit I attached hereto (a
"Confirmation"). Such Confirmation shall describe the Purchased Mortgage Loans,
identify Buyer and Seller and set forth (i) the Purchase Date, (ii) the Purchase
Price, (iii) the Repurchase Date, unless the Transaction is stated to be
terminable on demand as stated in the Confirmation, (iv) the Pricing Rate
applicable to the Transaction, (v) the applicable Collateral Amount Percentages
and (vi) additional terms or conditions not inconsistent with this Agreement.
After receipt of the Confirmation, Seller shall, subject to the provisions of
subsection (c) below, sign the Confirmation and promptly return it to Buyer. The
Purchase Price for any Transaction shall exceed $750,000.
(b) Any Confirmation by Buyer shall be deemed to have been received by Seller on
the date actually received by Seller.
(c) Each Confirmation, together with this Agreement, shall be conclusive
evidence of the terms of the Transaction(s) covered thereby unless objected to
in writing by Seller no more than two (2) Business Days after the date the
Confirmation was received by Seller or unless a corrected Confirmation is sent
by Buyer. An objection sent by Seller must state
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specifically that writing which is an objection, must specify the provision(s)
being objected to by Seller, must set forth such provision(s) in the manner that
the Seller believes they should be stated, and must be received by Buyer no more
than two (2) Business Days after the Confirmation was received by Seller. Buyer
shall promptly respond to any such objection raised by Seller.
(d) In the case of Transactions terminable upon demand, such demand shall be
made by Buyer or Seller by telephone or otherwise, no later than 1:00 p.m. (New
York Time) on the Business Day prior to the Repurchase Date.
(e) On the Repurchase Date, termination of the Transaction will be effected by
transfer to Seller or its designee of the Purchased Mortgage Loans (and any
Income in respect thereof received by Buyer not previously credited or
transferred to, or applied to the obligations of, Seller pursuant to Section 5)
against the simultaneous transfer of the Repurchase Price to an account of
Buyer. Seller is obligated to obtain the Mortgage Files from Buyer or its
designee at Seller's expense on the Repurchase Date.
(f) With respect to all Transactions hereunder, the aggregate Purchase Price for
all Purchased Mortgage Loans at any one time subject to then outstanding
Transactions shall not exceed $300,000,000.
(g) Except during the first and last five Business Days of each month, Buyer
shall not be obligated to enter into any Transactions with respect to Wet Ink
Mortgage Loans if at such time the Purchase Price of all Wet Ink Mortgage Loans
subject to then outstanding Transactions (including such Transaction) would
represent 20% or more of the aggregate Purchase Price for all Mortgage Loans
which are subject to then outstanding Transactions.
(h) Buyer shall not be obligated to enter into any Transactions with respect to
High LTV Loans if at such time the Purchase Price of all High LTVLoans subject
to then outstanding Transactions (including such Transaction) would represent 5%
or more of the aggregate Purchase Price for all Mortgage Loans which are subject
to then outstanding Transactions.
4. COLLATERAL AMOUNT MAINTENANCE
(a) If at any time the aggregate Market Value of all Purchased Mortgage Loans
subject to all Transactions is less than the aggregate Collateral Amount for all
such Transactions (a "Market Value Collateral Deficit"), then Buyer may by
notice to Seller require Seller to transfer to Buyer or its designee (including
the Custodian) Mortgage Loans ("Additional Loans") or cash, so that the cash and
aggregate Market Value of the Purchased Mortgage Loans, including any such
Additional Loans, will thereupon equal or exceed the aggregate Collateral
Amount. If at any time the aggregate Securitization Value of all Mortgage Loans
subject to Transactions is less than the aggregate Collateral Amount for all
such Transactions (a "Securitization Value Collateral Deficit"), then Buyer may
by notice to Seller require Seller to transfer to Buyer or its designee
(including the Custodian) Additional Loans or cash, so that the cash and
aggregate Securitization Value of the
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Purchased Mortgage Loans, including any such Additional Loans, will thereupon
equal or exceed the aggregate Collateral Amount.
(b) Notice required pursuant to subsection (a) above may be given by any means
of telecopier or telegraphic transmission. A notice for the payment or delivery
in respect of a Collateral Deficit received before 9:00 a.m. on a Business Day,
local time of the party receiving the notice, must be met not later than 5:00
p.m. on the Business Day following the day on which the notice was given, local
time of the party receiving the notice. The failure of Buyer, on any one or more
occasions, to exercise its rights under subsection (a) of this Section shall not
change or alter the terms and conditions to which this Agreement is subject or
limit the right of the Buyer to do so at a later date. Buyer and Seller agree
that a failure or delay to exercise its rights under subsection (a) of this
Section shall not limit Buyer's rights under this Agreement or otherwise
existing by law or in any way create additional rights for Seller.
(c) In the event that Seller fails to comply with the provisions of this Section
4, Buyer shall not enter into any additional Transactions hereunder after the
date of such failure.
5. INCOME PAYMENTS
(a) Where a particular Transaction's term extends over an Income payment date on
the Purchased Mortgage Loans subject to that Transaction such Income shall be
the property of Buyer. Notwithstanding the foregoing, so long as no Event of
Default shall have occurred and be continuing, Seller shall be entitled to all
Income with respect to Purchased Mortgage Loans subject to Transactions. Upon
the occurrence and continuance of an Event of Default, all Income with respect
to Purchased Mortgage Loans subject to Transactions shall be held in a
segregated account established by the Custodian for the benefit of Buyer and
distributed under the Custodial Agreement.
(b) Notwithstanding that Buyer and Seller intend that the Transactions hereunder
be sales to Buyer of the Purchased Mortgage Loans, Seller shall pay by wire
transfer to Buyer the accreted value of the Price Differential (less any amount
of such Price Differential previously paid by Seller to Buyer)(each such
payment, a "Periodic Payment") on the earlier of (x) the fifth day of each month
(or if such day is not a Business Day, the following Business Day) or (y) the
related Repurchase Date. The Price Differential shall accrue, be calculated and
be compounded on a daily basis for each Purchased Mortgage Loan.
(c) Buyer shall offset against the Repurchase Price of each such Transaction all
Income and Periodic Payments actually received by Buyer pursuant to Sections
5(a) and (b), respectively.
6. SECURITY INTEREST
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(a) Buyer and the Seller intend that the Transactions hereunder be sales to
Buyer of the Purchased Mortgage Loans and not loans from Buyer to Seller secured
by the Purchased Mortgage Loans. However, in order to preserve Buyer's rights
under this Agreement in the event that a court or other forum recharacterizes
the Transactions hereunder as loans and as security for the performance by
Seller of all of Seller's obligations to Buyer under this Agreement and the
Transactions entered into pursuant to this Agreement, Seller grants Buyer a
first priority security interest in the Purchased Mortgage Loans, Servicing
Records, insurance relating to the Purchased Mortgage Loans, Income, any and all
xxxxxx, any and all custodial accounts and escrow accounts relating to the
Purchased Mortgage Loans and any other contract rights, general intangibles and
other assets relating to the Purchased Mortgage Loans or any interest in the
Purchased Mortgage Loans and the servicing of the Purchased Mortgage Loans and
any and all replacements, substitutions, distributions on or proceeds of any and
all of the foregoing (collectively, the "Collateral").
(b) Seller shall pay all fees and expenses associated with perfecting Buyer's
security interest in the Collateral, including, without limitation, the cost of
filing financing statements under the Uniform Commercial Code and, upon the
occurrence of an Event of default, recording assignments of Mortgage, as and
when required by Buyer in its sole discretion.
7. PAYMENT, TRANSFER AND CUSTODY
(a) Unless otherwise mutually agreed in writing, all transfers of funds
hereunder shall be in immediately available funds.
(b) On or before each Purchase Date, Seller shall deliver or cause to be
delivered to Buyer or its designee the Custodial Delivery in the form attached
hereto as Exhibit II.
(c) On the Purchase Date for each Transaction, ownership of the Purchased
Mortgage Loans shall be transferred to the Buyer or its designee (including the
Custodian) against the simultaneous transfer of the Purchase Price to an account
of Seller specified in the Confirmation. Seller, simultaneously with the
delivery to Buyer or its designee (including the Custodian) of the Purchased
Mortgage Loans relating to each Transaction hereby sells, transfers, conveys and
assigns to Buyer or its designee (including the Custodian) without recourse, but
subject to the terms of this Agreement, all the right, title and interest of
Seller in and to the Purchased Mortgage Loans together with all right, title and
interest in and to the proceeds of any related insurance policies.
(d) In connection with each sale, transfer, conveyance and assignment, on or
prior to each Purchase Date with respect to each Mortgage Loan which is not a
Wet Ink Mortgage Loan (or with respect to item (vii) below within seven Business
Days after the Purchase Date), the Seller shall deliver or cause to be delivered
and released to the Custodian the following original documents (collectively the
"Mortgage File"), pertaining to each of the Purchased Mortgage Loans identified
in the Custodial Delivery delivered therewith:
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(i) the original Mortgage Note bearing all intervening endorsements (or
allonges), endorsed "Pay to the order of ________, without recourse"
and signed in the name of the last endorsee (the "Last Endorsee") by an
authorized officer (in the event that the Mortgage Loan was acquired by
the Last Endorsee in a merger, the signature must be in the following
form: "[the Last Endorsee], successor by merger to [name of
predecessor]"; in the event that the Mortgage Loan was acquired or
originated while doing business under another name, the signature must
be in the following form: "[the Last Endorsee], formerly known as
[previous name]");
(ii) the original of any guarantee executed in connection with the
Mortgage Note (if any);
(iii) the original Mortgage with evidence of recording thereon or a
copy certified by Seller to have been sent for recording;
(iv) the originals of all assumption, modification, consolidation or
extension agreements, with evidence of recording thereon or copies
certified by Seller to have been sent for recording;
(v) the original assignment of Mortgage in blank for each Mortgage
Loan, in form and substance acceptable for recording and signed in the
name of the Last Endorsee (in the event that the Mortgage Loan was
acquired by the Last Endorsee in a merger, the signature must be in the
following form: "[the Last Endorsee], successor by merger to [name of
predecessor]"; in the event that the Mortgage Loan was acquired or
originated while doing business under another name, the signature must
be in the following form: "[the Last Endorsee], formerly known as
[previous name]");
(vi) the originals of all intervening assignments of mortgage with
evidence of recording thereon or copies certified by Seller to have
been sent for recording;
(vii) the original policy of title insurance or a true copy thereof or,
if such policy has not yet been delivered by the insurer, the
commitment or binder to issue the same; and
(viii) the original of any security agreement, chattel mortgage or
equivalent document executed in connection with the Mortgage (if any).
(e) In connection with each sale, transfer, conveyance and assignment, on or
prior to the seventh Business Day following each Purchase Date with respect to
each Mortgage Loan which is a Wet Ink Mortgage Loan, Seller shall deliver or
cause to be delivered to the Custodian a complete Mortgage File. On the date on
which the Buyer receives a Trust Receipt from the Custodian certifying that a
complete Mortgage File with respect to a Wet Ink Mortgage Loan is in the
possession of the Custodian, such Wet Ink Mortgage Loan be deemed a standard
Mortgage Loan (and no longer a Wet Ink Mortgage Loan) for all
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purposes hereunder, including, without limitation, determination of the Pricing
Spread and compliance with subsection (aaa) of Exhibit V.
(f) With respect to each Mortgage Loan delivered by Seller to Buyer or its
designee (including the Custodian), Seller shall have executed an omnibus power
of attorney substantially in the form of Exhibit III attached hereto irrevocably
appointing Buyer its attorney-in-fact with full power to complete and record the
assignment of Mortgage, complete the endorsement of the Mortgage Note and take
such other steps as may be necessary or desirable to enforce Buyer's rights
against such Mortgage Loans, the related Mortgage Files and the Servicing
Records.
(g) Buyer shall deposit the Mortgage Files representing the Purchased Mortgage
Loans, or direct that the Mortgage Files be deposited directly, with the
Custodian. The Mortgage Files shall be maintained in accordance with the
Custodial Agreement.
(h) Any Mortgage Files not delivered to Buyer or its designee (including the
Custodian) are and shall be held in trust by Seller or its designee for the
benefit of Buyer as the owner thereof. Seller or its designee shall maintain a
copy of the Mortgage File and the originals of the Mortgage File not delivered
to Buyer or its designee. The possession of the Mortgage File by Seller or its
designee is at the will of the Buyer for the sole purpose of servicing the
related Purchased Mortgage Loan, and such retention and possession by the Seller
or its designee is in a custodial capacity only. The books and records
(including, without limitation, any computer records or tapes) of Seller or its
designee shall be marked appropriately to reflect clearly the sale of the
related Purchased Mortgage Loan to Buyer. Seller or its designee (including the
Custodian) shall release its custody of the Mortgage File only in accordance
with written instructions from Buyer, unless such release is required as
incidental to the servicing of the Purchased Mortgage Loans or is in connection
with a repurchase of any Purchased Mortgage Loan by Seller.
8. REHYPOTHECATION OR PLEDGE OF PURCHASED MORTGAGE LOANS
Title to all Purchased Mortgage Loans shall pass to Buyer and Buyer shall have
free and unrestricted use of all Purchased Mortgage Loans. Nothing in this
Agreement shall preclude Buyer from engaging in repurchase transactions with the
Purchased Mortgage Loans or otherwise pledging, repledging, hypothecating, or
rehypothecating the Purchased Mortgage Loans, but no such transaction shall
relieve Buyer of its obligations to transfer Purchased Mortgage Loans to Seller
pursuant to Section 3. Nothing contained in this Agreement shall obligate Buyer
to segregate any Purchased Mortgage Loans delivered to Buyer by Seller. In the
event that there is a material adverse change or other development in the
repurchase markets which results in Buyer being unable to finance its position
through the repurchase market with its traditional repurchase counterparties,
Buyer may accelerate the Repurchase Date for any outstanding Transactions
following reasonable written notice to Seller of the occurrence of such event.
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9. SUBSTITUTION
(a) Subject to Section 9(b), Seller may, upon one (1) Business Days written
notice to Buyer, with a copy to Custodian, substitute other Mortgage Loans for
any Purchased Mortgage Loans. Such substitution shall be made by transfer to
Buyer or its designee (including the Custodian) of the Mortgage File of such
other Mortgage Loans together with a Custodial Delivery and transfer to Seller
or its designee of the Purchased Mortgage Loans requested for release. After
substitution, the substituted Mortgage Loans, shall be deemed to be Purchased
Mortgage Loans subject to the same Transaction as the released Mortgage Loans.
(b) Notwithstanding anything to the contrary in this Agreement, Seller may not
substitute other Mortgage Loans for any Purchased Mortgage Loans (i) if after
taking into account such substitution, a Collateral Deficit would occur or (ii)
such substitution would cause a breach of any provision of this Agreement.
10. REPRESENTATIONS AND WARRANTIES
(a) Each of Buyer and Seller represents and warrants to the other that (i) it is
duly authorized to execute and deliver this Agreement, to enter into the
Transactions contemplated hereunder and to perform its obligations hereunder and
has taken all necessary action to authorize such execution, delivery and
performance; (ii) it will engage in such Transactions as principal; (iii) the
person signing this Agreement on its behalf is duly authorized to do so on its
behalf; (iv) no approval, consent or authorization of the Transactions
contemplated by this Agreement from any federal, state, or local regulatory
authority having jurisdiction over it is required or, if required, such
approval, consent or authorization has been or will, prior to the first Purchase
Date, be obtained; (v) the execution, delivery, and performance of this
Agreement and the Transactions hereunder will not violate any law, regulation,
order, judgment, decree, ordinance, charter, by-law, or rule applicable to it or
its property or constitute a default (or an event which, with notice or lapse of
time, or both would constitute a default) under or result in a breach of any
agreement or other instrument by which it is bound or by which any of its assets
are affected; (vi) it has received approval and authorization to enter into this
Agreement and each and every Transaction actually entered into hereunder
pursuant to its internal policies and procedures; and (vii) neither this
Agreement nor any Transaction pursuant hereto are entered into in contemplation
of insolvency or with intent to hinder, delay or defraud any creditor.
(b) Seller represents and warrants to Buyer that as of the Purchase Date for the
purchase of any Purchased Mortgage Loans by Buyer from Seller and as of the date
of this Agreement and any Transaction hereunder and at all times while this
Agreement and any Transaction hereunder is in full force and effect:
(i) Organization. Seller is duly organized, validly existing and in good
standing under the laws and regulations of the state of California and
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is duly licensed, qualified, and in good standing in every state where
Seller transacts business and in any state where any Mortgaged Property
is located if the laws of such state require licensing or qualification
in order to conduct business of the type conducted by Seller therein.
(ii) No Litigation. There is no action, suit, proceeding, arbitration or
investigation pending or, to Seller's knowledge, threatened against
Seller which, either in any one instance or in the aggregate, may
result in any material adverse change in the business, operations,
financial condition, properties or assets of Seller, or in any material
impairment of the right or ability of Seller to carry on its business
substantially as now conducted, or in any material liability on the
part of Seller, or which if adversely determined would affect the
validity of this Agreement or any of the Purchased Mortgage Loans or of
any action taken or to be taken in connection with the obligations of
Seller contemplated herein, or which would be likely to impair
materially the ability of Seller to perform under the terms of this
Agreement;
(iii) No Broker. Seller has not dealt with any broker, investment banker,
agent, or other person, except for Buyer, who may be entitled to any
commission or compensation in connection with the sale of Purchased
Mortgage Loans pursuant to this Agreement;
(iv) Good Title to Collateral. Purchased Mortgage Loans shall be free and
clear of any lien, encumbrance or impediment to transfer, and Seller
has good, valid and marketable title and the right to sell and transfer
such Purchased Mortgage Loans to Buyer.
(v) Delivery of Mortgage File. With respect to each Purchased Mortgage
Loan (other than a Wet Ink Mortgage Loan), the Mortgage Note, the
Mortgage, the assignment of Mortgage and any other documents required
to be delivered under this Agreement and the Custodial Agreement for
the Mortgage Loans have been delivered to the Custodian. Seller or its
designee is in possession of a complete, true and accurate Mortgage
File with respect to the Mortgage Loans, except for such documents the
originals of which have been delivered to the Custodian.
(vi) Selection Process. The Purchased Mortgage Loans were selected from
among the outstanding mortgage loans in Seller's portfolio as to which
the representations and warranties set forth in this
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Agreement could be made and such selection was not made in a manner so
as to affect adversely the interests of Buyer.
(vii) [Reserved];
(viii)No Untrue Statements. To the best of Seller's knowledge, neither this
Agreement nor any written statement made, or any report or other
document issued or delivered or to be issued or delivered by Seller
pursuant to this Agreement or in connection with the transactions
contemplated hereby contains any untrue statement of fact or omits to
state a fact necessary to make the statements contained herein or
therein not misleading;
(ix) Origination Practices. The origination practices used by Seller with
respect to each Mortgage Loan (i) have been and are in all respects
legal and proper in the mortgage origination business and (ii) are in
accordance with the underwriting guidelines previously supplied by
Seller to Buyer;
(x) Performance of Agreement. Seller does not believe, nor does it have any
reason or cause to believe, that it cannot perform each and every
covenant contained in this Agreement on its part to be performed;
(xi) Seller Not Insolvent. Seller is not, and with the passage of time does
not expect to become, insolvent; and
(xii) No Event of Default. No Event of Default has occurred and is continuing
hereunder.
(c) Seller represents and warrants to the Buyer that each Purchased Mortgage
Loan sold hereunder and each pool of Purchased Mortgage Loans sold in a
Transaction hereunder, as of the related Purchase Date, conforms to the
representations and warranties set forth in Exhibit V attached hereto and that
each Mortgage Loan delivered hereunder as Additional Loans or Substituted
Mortgage Loans, as of the date of such delivery, conforms to the representations
and warranties set forth in Exhibit V hereto. Seller further represents and
warrants to the Buyer that, as of the seventh Business Day of each month, the
Collateral Information delivered on such day with respect to each Purchased
Mortgage Loan is complete, true and correct. It is understood and agreed that
the representations and warranties set forth in Exhibit V hereto, if any, shall
survive delivery of the respective Mortgage File to Buyer or its designee
(including the Custodian).
(d) On the Purchase Date for any Transaction, Buyer and Seller shall each be
deemed to have made all the foregoing representations with respect to itself as
of such Purchase Date.
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11. NEGATIVE COVENANTS OF THE SELLER
On and as of the date of this Agreement and each Purchase Date and until this
Agreement is no longer in force with respect to any Transaction, Seller
covenants that it will not:
(a) take any action which would directly or indirectly impair or adversely
affect Buyer's title to or the value of the Purchased Mortgage Loans;
(b) pledge, assign, convey, grant, bargain, sell, set over, deliver or otherwise
transfer any interest in the Purchased Mortgage Loans to any person not a party
to this Agreement nor will the Seller create, incur or permit to exist any lien,
encumbrance or security interest in or on the Purchased Mortgage Loans except as
described in Section 6 of this Agreement; or
(c) violate any of the financial covenants contained in Section 12 of that
certain Amended and Restated Mortgage Loan Warehousi ng Agreement dated as of
January 15, 1997 (the "Credit Agreement") by and among Seller, the Guarantor,
the lenders party thereto and Nationsbank of Texas, N.A., as administrative
agent, as in effect on the date hereof. Such terms and provisions of the Credit
Agreement are incorporated by reference herein and made a part hereof. In the
event that such Credit Agreement is renewed or amended and contains stricter
financial covenants with respect to the Guarantor on a consolidated basis,
Seller shall not violate such covenants.
12. AFFIRMATIVE COVENANTS OF THE SELLER
For so long as this Agreement is in effect:
(a) Seller covenants that it will promptly notify Buyer of any material adverse
change in its business operations and/or financial condition.
(b) Seller shall provide Buyer with copies of such documentation as Buyer may
reasonably request evidencing the truthfulness of the representations set forth
in Section 10, including but not limited to resolutions evidencing the approval
of this Agreement by Seller's board of directors or loan committee and copies of
the minutes of the meetings of Seller's board of directors or loan committee at
which this Agreement and the Transactions contemplated by this Agreement were
approved.
(c) Seller shall, at Buyer's request, take all action necessary to ensure that
Buyer will have a first priority security interest in the Purchased Mortgage
Loans, including, among other things, filing such Uniform Commercial Code
financing statements as Buyer may reasonably request.
(d) Seller covenants that it will not create, incur or permit to exist any lien,
encumbrance or security interest in or on any of the Collateral without the
prior express written consent of Buyer.
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(e) Seller shall notify Buyer no later than one (1) Business Day after obtaining
actual knowledge thereof, if any event has occurred that constitutes an Event of
Default with respect to Seller or any event that with the giving of notice or
lapse of time, or both, would become an Event of Default with respect to Seller.
(f) Seller covenants that each Purchased Mortgage Loan subject to this Agreement
shall be serviced in accordance with Section 25 hereof.
(g) Seller covenants to provide Buyer with a copy of any changes to Seller's
underwriting guidelines prior to the effectiveness of any such change. Buyer
shall use commercially reasonable efforts to notify Seller within 10 Business
Days of receipt of such changes if such changes are acceptable. If such changes
are not acceptable to Buyer in its sole discretion, Buyer shall not be obligated
to purchase Mortgage Loans hereunder that are originated in accordance with such
changed underwriting guidelines.
(h) Seller covenants to provide Buyer or its designee with the option and right
(but not the obligation) of acting as lead-managing underwriter or placement
agent for any securities of the Seller or its subsidiaries collateralized by, or
representing interests in, the Purchased Mortgage Loans constituting more than
50% of the collateral therefor (each such transaction, a "Securitization"). Each
Securitization shall contain terms mutually acceptable to Buyer and Seller
(including, without limitation, customary provisions regarding representations
and warranties, covenants, delivery terms, conditions, indemnification,
contribution and termination). If Buyer or its affiliate declines to participate
in any Securitization, Seller or its subsidiaries may cause such transaction to
be executed by others without prejudice to Buyer's rights as to future
transactions.
(i) Seller covenants, upon request of Buyer after the occurrence of a Collateral
Deficit, to enter into hedging transactions with respect to fixed rate Purchased
Mortgage Loans in order to protect adequately, in the reasonable judgment
against interest rate risks.
(j) Seller covenants to provide Buyer on the seventh Business Day of each month,
either by direct modem electronic transmission or via a computer diskette, the
Collateral Information in computer readable format with respect to all Purchased
Mortgage Loans then subject to Transactions.
(k) Seller covenants to provide Buyer with the following financial and reporting
information:
(i) Within 90 days after the last day of its fiscal year, Guarantor's
audited consolidated statements of income and statements of changes in
cash flow for such year and balance sheets as of the end of such year
in each case presented fairly in accordance with GAAP, and accompanied,
in all cases, by an unqualified report of Price Xxxxxxxxxx XX or
another nationally recognized independent certified public accounting
firm consented to by Buyer (which consent shall not be unreasonably
withheld);
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(ii) Within 60 days after the last day of the first three fiscal
quarters in any fiscal year, Guarantor's unaudited consolidated
statements of income and statements of changes in cash flow for such
quarter and balance sheets as of the end of such quarter presented
fairly in accordance with GAAP;
(iii) Within 30 days after the last day of each calendar month an
officer's certificate from a senior officer of the Seller addressed to
Buyer certifying that, as of such calendar month, (x) Seller is in
compliance with all of the terms, conditions and requirements of this
Agreement, and (y) no Event of Default exists; and
(iv) As soon as available, copies of all proxy statements, financial
statements, and reports which Guarantor sends to its stockholders, and
copies of all regular, periodic and special reports, and all
registration statements under the Securities Act of 1933, as amended,
which it files with the Securities and Exchange Commission or any
government authority which may be substituted therefor, or with any
national securities exchange.
(l) Seller covenants to repurchase or substitute pursuant to Section 9 hereof
any Mortgage Loan, within two Business Days following written notice from Buyer,
which as to a representation or warranty made by Seller set forth in Exhibit V
hereto proves to be incorrect or untrue in any material respect.
13. EVENTS OF DEFAULT
(a) If any of the following events (each an "Event of Default") occur, Seller
and Buyer shall have the rights set forth in Section 14, as applicable:
(i) Seller or Buyer fails to satisfy or perform any material obligation or
covenant under this Agreement;
(ii) an Act of Insolvency occurs with respect to Seller or Buyer;
(iii) any representation (excluding the representations and warranties made
with respect to the Mortgage Loans set forth on Exhibit V hereto) made
by Seller shall have been incorrect or untrue in any material respect
when made or repeated or deemed to have been made or repeated;
(iv) Seller or Buyer shall admit its inability to, or its intention not
to, perform any of its obligations hereunder;
(v) any governmental, regulatory, or self-regulatory authority takes any
action to remove, limit, restrict, suspend or terminate the rights,
privileges, or operations of the Seller or any of its Affiliates,
including suspension as an issuer, lender or seller/servicer of
mortgage loans, which suspension has a material adverse effect on the
ordinary business operations of Seller or Seller's Affiliate, and
which continues for more than 24 hours;
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(vi) Seller dissolves, merges or consolidates with another entity (unless
(A) it is the surviving party or (B) the entity into which it mergers
has equity and a market value of at least that of the Seller
immediately prior to such merger and such entity expressly assumes the
obligations of the Seller at the time of such merger), or sells,
transfers, or otherwise disposes of a material portion of its business
or assets, except for the sale or transfer of Mortgage Loans in the
ordinary course of business;
(vii) Buyer, in its good faith judgment, believes that there has been a
material adverse change in the business, operations, corporate
structure or financial condition of Seller or that Seller will not
meet any of its obligations under any Transaction pursuant to this
Agreement, this Agreement or any other agreement between the parties;
(viii) Seller is in default under any other agreement to which it is a
party, provided, however, such a default shall not constitute an
Event of Default if the exercise of such remedies as are available to
Seller's counterparty with respect to such default would not result
in a material adverse change in the business operations or financial
condition of Seller;
(ix) A final judgment by any competent court in the United States of
America for the payment of money in an amount of at least $750,000 is
rendered against the Seller, and the same remains undischarged or
unpaid for a period of sixty (60) days during which execution of such
judgment is not effectively stayed; or
(x) This Agreement shall for any reason cease to create a valid, first
priority security interest in any of the Purchased Mortgage Loans
purported to be covered hereby.
(xi) A Market Value Collateral Deficit or Securitization Value Collateral
Deficit occurs with respect to Seller or Buyer, as applicable, and is
not eliminated within the time period specified in Section 4(b).
(b) In making a determination as to whether an Event of Default has occurred,
the parties hereto shall be entitled to rely on reports published or broadcast
by media sources believed by such party to be generally reliable and on
information provided to it by any other sources believed by it to be generally
reliable, provided that such party reasonably and in good faith believes such
information to be accurate and has taken such steps as may be reasonable in the
circumstances to attempt to verify such information.
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14. REMEDIES
(a) If an Event of Default occurs with respect to Seller, the following rights
and remedies are available to Buyer:
(i) At the option of Buyer, exercised by written notice to Seller (which
option shall be deemed to have been exercised, even if no notice is
given, immediately upon the occurrence of an Act of Insolvency), the
Repurchase Date for each Transaction hereunder shall be deemed
immediately to occur.
(ii) If Buyer exercises or is deemed to have exercised the option referred
to in subsection (a)(i) of this Section,
(A) Seller's obligations hereunder to repurchase all Purchased
Mortgage Loans in such Transactions shall thereupon become immediately
due and payable,
(B) to the extent permitted by applicable law, the Repurchase Price
with respect to each such Transaction shall be increased by the
aggregate amount obtained by daily application of, on a 360 day per
year basis for the actual number of days during the period from and
including the date of the exercise or deemed exercise of such option to
but excluding the date of payment of the Repurchase Price as so
increased, (x) the greater of the Prime Rate or the Pricing Rate for
each such Transaction to (y) the Repurchase Price for such Transaction
as of the Repurchase Date as determined pursuant to subsection (a)(i)
of this Section (decreased as of any day by (I) any amounts actually in
the possession of Buyer pursuant to clause (C) of this subsection, (II)
any proceeds from the sale of Purchased Mortgage Loans applied to the
Repurchase Price pursuant to subsection (a)(xii) of this Section, and
(III) any amounts applied to the Repurchase Price pursuant to
subsection (a)(iii) of this Section), and
(C) all Income actually received by the Buyer or its designee
(including the Custodian) pursuant to Section 5 shall be applied to the
aggregate unpaid Repurchase Price owed by Seller.
(iii) After one Business Day's notice to Seller (which notice need not be
given if an Act of Insolvency shall have occurred, and which may be
the notice given under subsection (a)(i) of this Section), Buyer may
(A) immediately sell, without notice or demand of any kind, at a
public or private sale and at such price or prices Buyer may
reasonably deem satisfactory any or all Purchased Mortgage Loans
subject to a Transaction hereunder or (B) in its sole discretion
elect, in lieu of selling all or a portion of such Purchased Mortgage
Loans, to give Seller credit for such Purchased Mortgage Loans in an
amount equal to the Market Value of the Purchased
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Mortgage Loans against the aggregate unpaid Repurchase Price and any
other amounts owing by Seller hereunder. The proceeds of any
disposition of Purchased Mortgage Loans shall be applied first to the
costs and expenses incurred by Buyer in connection with Seller's
default; second to costs of cover and/or related hedging transactions
relating to Transactions and to losses, damages, costs or expenses
directly arising or resulting from the occurrence of the
Event of Default; third to the Repurchase Price; and fourth to any
other outstanding obligation of Seller to Buyer or its Affiliates.
(iv) The parties recognize that it may not be possible to purchase or sell
all of the Purchased Mortgage Loans on a particular Business Day,
or in a transaction with the same purchaser, or in the same manner
because the market for such Purchased Mortgage Loans may not be
liquid. In view of the nature of the Purchased Mortgage Loans, the
parties agree that liquidation of a Transaction or the underlying
Purchased Mortgage Loans does not require a public purchase or
sale and that a good faith private purchase or sale shall be deemed
to have been made in a commercially reasonable manner.
Accordingly, Buyer may elect, in its sole discretion, the time and
manner of liquidating any Purchased Mortgage Loan and nothing
contained herein shall (A) obligate Buyer to liquidate any Purchased
Mortgage Loan on the occurrence of an Event of Default or to
liquidate all Purchased Mortgage Loans in the same manner or on
the same Business Day or (B) constitute a waiver of any right or
remedy of Buyer. However, in recognition of the parties'
agreement that the Transactions hereunder have been entered into
in consideration of and in reliance upon the fact that all
Transactions hereunder constitute a single business and contractual
relationship and that each Transaction has been entered into in
consideration of the other Transactions, the parties further agree
that Buyer shall use its best efforts to liquidate all Transactions
hereunder upon the occurrence of an Event of Default as quickly as
is prudently possible in the reasonable judgment of Buyer.
(v) Buyer shall, without regard to the adequacy of the security for the
Seller's obligations under this Agreement, be entitled to the
appointment of a receiver by any court having jurisdiction, without
notice, to take possession of and protect, collect, manage,
liquidate, and sell the Collateral or any portion thereof, and
collect the payments due with respect to the Collateral or any
portion thereof.
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Seller shall pay all costs and expenses incurred by Buyer in
connection with the appointment and activities of such receiver.
(vi) Seller agrees that Buyer may obtain an injunction or an order of
specific performance to compel Seller to fulfill its obligations as
set forth in Section 25, if Seller fails or refuses to perform its
obligations as set forth therein.
(vii) Seller shall be liable to Buyer for the amount of all expenses,
reasonably incurred by Buyer in connection with or as a consequence
of an Event of Default, including, without limitation, reasonable
legal fees and expenses and reasonable costs incurred in connection
with hedging or covering transactions relating to Transactions.
(viii)Buyer shall have all the rights and remedies provided herein,
provided by applicable federal, state, foreign, and local laws
(including, without limitation, the rights and remedies of a secured
party under the Uniform Commercial Code of the State of New York, to
the extent that the Uniform Commercial Code is applicable, and the
right to offset any mutual debt and claim), in equity, and under any
other agreement between Buyer and Seller.
(ix) Buyer may exercise one or more of the remedies available to Buyer
immediately upon the occurrence of an Event of Default and, except to
the extent provided in subsections (a)(i) and (iii) of this Section,
at any time thereafter without notice to Seller. All rights and
remedies arising under this Agreement as amended from time-to-time
hereunder are cumulative and not exclusive of any other rights or
remedies which Buyer may have.
(x) In addition to its rights hereunder, Buyer shall have the right to
proceed against any assets of Seller which may be in the possession
of Buyer or its agent on Buyer's behalf including the right to
liquidate such assets and to set off the proceeds against monies
owed by Seller to Buyer pursuant to this Agreement. Buyer may
set off cash, the proceeds of the liquidation of the Purchased
Mortgage Loans, any Collateral or its proceeds, and all other sums
or obligations owed by Seller to Buyer against all of Seller's
obligations to Buyer, whether under this Agreement, under a
Transaction, or under any other agreement between the parties, or
otherwise, whether or not such obligations are then due, without
prejudice to Buyer's right to recover any deficiency. Any cash,
proceeds, or property in excess of any amounts due, or which
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Buyer reasonably believes may become due, to it from Seller shall be
returned to Seller after satisfaction of all obligations of Seller to
Buyer.
(xi) Buyer may enforce its rights and remedies hereunder without prior
judicial process or hearing, and Seller hereby expressly waives any
defenses Seller might otherwise have to require Buyer to enforce its
rights by judicial process. Seller also waives any defense Seller
might otherwise have arising from the use of nonjudicial process,
enforcement and sale of all or any portion of the Collateral, or from
any other election of remedies. Seller recognizes that nonjudicial
remedies are consistent with the usages of the trade, are responsive
to commercial necessity and are the result of a bargain at arm's
length.
(xii) Buyer and Seller hereby agree that sales of the Purchased Mortgage
Loans shall be deemed to include and permit the sales of Purchased
Mortgaged Loans pursuant to a securities offering. The net proceeds of
any such sale shall be applied to reduce the Repurchase Price of
outstanding Transactions.
(b) If an Event of Default occurs with respect to Buyer, the following rights
and remedies are available to Seller:
(i) Upon tender by Seller of payment of the aggregate Repurchase Price
for all such Transactions, Buyer's right, title and interest in all
Purchased Mortgage Loans subject to such Transactions shall be deemed
transferred to Seller, and Buyer shall deliver or cause to be
transferred all such Purchased Mortgage Loans to Seller or its
designee at Buyer's expense.
(ii) If Seller exercises the option referred to in subsection (b)(i) of
this Section and Buyer fails to deliver or cause to be delivered the
Purchased Mortgage Loans to Seller or its designee, after one
Business Day's notice to Buyer, Seller may (A) purchase Mortgage
Loans ("Replacement Loans") that are as similar as is reasonably
practicable in characteristics, outstanding principal amounts (as a
pool) and interest rate to any Purchased Mortgage Loans that are not
delivered by Buyer to Seller or its designee as required hereunder or
(B) in its sole discretion elect, in lieu of purchasing Replacement
Loans, to be deemed to have purchased Replacement Loans at a price
therefor on such date, equal to the Market Value of the Purchased
Mortgage Loans.
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(iii) Buyer shall be liable to the Seller (A) with respect to Purchased
Mortgage Loans (other than Additional Loans), for any excess of the
price paid (or deemed paid) by Seller for Replacement Loans therefor
over the Repurchase Price for such Purchased Mortgage Loans and (B)
with respect to Additional Loans, for the price paid (or deemed paid)
by Seller for the Replacement Loans therefor. In addition, Buyer
shall be liable to Seller for interest on such remaining liability
with respect to each such purchase (or deemed purchase) of
Replacement Loans calculated on a 360-day year basis for the actual
number of days during the period from and including the date of such
purchase (or deemed purchase) until paid in full by Buyer. Such
interest shall be at the greater of the Pricing Rate or the Prime
Rate.
(iv) Buyer shall be liable to Seller for the amount of all expenses
reasonably incurred by Seller in connection with or as a
consequence of an Event of Default, including, without limitation,
reasonable legal fees and expenses and reasonable costs incurred in
connection with covering existing hedging transactions with respect
to the Purchased Mortgage Loans.
(v) Seller shall have all the rights and remedies provided herein,
provided by applicable federal, state, foreign, and local laws, in
equity, and under any other agreement between Buyer and Seller,
including, without limitation, the right to offset any debt or claim.
(vi) Seller may exercise one or more of the remedies available to Seller
immediately upon the occurrence of an Event of Default and at any
time thereafter without notice to Buyer. All rights and remedies
arising under this Agreement as amended from time-to-time hereunder
are cumulative and not exclusive of any other rights or remedies
which Seller may have.
15. ADDITIONAL CONDITION
Seller shall, on the date of the initial Transaction hereunder and, upon the
request of Buyer, on the date of any subsequent Transaction, cause to be
delivered to Buyer, with reliance thereon permitted as to any Person that
purchases the Purchased Mortgage Loan from Buyer in a repurchase transaction, a
favorable opinion or opinions of counsel with respect to the matters set forth
in Exhibit IV attached hereto.
16. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereinto and will enter into
each Transaction hereunder in consideration of and in reliance upon the fact
that, all
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Transactions hereunder constitute a single business and contractual relationship
and that each has been entered into in consideration of the other Transactions.
Accordingly, each of Buyer and Seller agrees (i) to perform all of its
obligations in respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in respect
of all Transactions hereunder, (ii) that each of them shall be entitled to set
off claims and apply property held by them in respect of any Transaction against
obligations owing to them in respect of any other Transactions hereunder and
(iii) that payments, deliveries, and other transfers made by either of them in
respect of any Transaction shall be deemed to have been made in consideration of
payments, deliveries, and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments, deliveries, and other
transfers may be applied against each other and netted; provided, however, that
the parties hereto acknowledge and agree that each Purchased Mortgage Loan is
identified and unique and nothing in this Agreement should limit or reduce
Buyer's obligation to deliver the Purchased Mortgage Loans to Seller as and when
provided herein.
17. NOTICES AND OTHER COMMUNICATIONS
Unless another address is specified in writing by the respective party to whom
any written notice or other communication is to be given hereunder, all such
notices or communications shall be in writing or confirmed in writing and
delivered at the respective addresses set forth in the form of Confirmation set
forth in Exhibit I..
18. ENTIRE AGREEMENT; SEVERABILITY
This Agreement together with the applicable Confirmation constitutes the entire
understanding between Buyer and Seller with respect to the subject matter it
covers and shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions involving
Purchased Mortgage Loans. By acceptance of this Agreement, Buyer and Seller
acknowledge that they have not made, and are not relying upon, any statements,
representations, promises or undertakings not contained in this Agreement. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
19. NON-ASSIGNABILITY
The rights and obligations of the parties under this Agreement and under any
Transaction shall not be assigned by Seller without the prior written consent of
Buyer. Subject to the foregoing, this Agreement and any Transactions shall be
binding upon and shall inure to the benefit of the parties and their respective
successors and assigns. Nothing in this Agreement express or implied, shall give
to any person, other than the parties to this Agreement and their successors
hereunder, any benefit or any legal or equitable right, power, remedy or claim
under this Agreement.
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20. TERMINABILITY
This Agreement shall terminate upon the earlier of (i) six months from the date
hereof or (ii) written notice from Seller to Buyer to such effect, except that
this Agreement shall, notwithstanding the above clauses, remain applicable to
any Transaction then outstanding. Notwithstanding any such termination or the
occurrence of an Event of Default, all of the representations and warranties
hereunder (including those made in Exhibit V) shall continue and survive.
21. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF
LAW PRINCIPLES THEREOF.
22. CONSENT TO JURISDICTION AND ARBITRATION
The parties irrevocably agree to submit to the personal jurisdiction of the
United States District Court for the Southern District of New York, the parties
irrevocably waiving any objection thereto. If, for any reason, federal
jurisdiction is not available, and only if federal jurisdiction is not
available, the parties irrevocably agree to submit to the personal jurisdiction
of the Supreme Court of the State of New York, the parties irrevocably waiving
any objection thereto. Notwithstanding the foregoing two sentences, at either
party's sole option exercisable at any time not later than thirty (30) days
after an action or proceeding has been commenced, the parties agree that the
matter may be submitted to binding arbitration in accordance with the commercial
rules of the American Arbitration Association then in effect in the State of New
York and judgment upon any award rendered by the arbitrator may be entered in
any court having jurisdiction thereof within the City, County and State of New
York; provided, however, that the arbitrator shall not amend, supplement, or
reform in any regard this Agreement or the terms of any Confirmation, the rights
or obligations of any party hereunder or thereunder, or the enforceability of
any of the terms hereof or thereof. Any arbitration shall be conducted before a
single arbitrator who shall be reasonably familiar with repurchase transactions
and the secondary mortgage market in the City, County, and State of New York.
23. NO WAIVERS, ETC.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any remedy
hereunder by any party shall constitute a waiver of its right to exercise any
other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless and until such shall be in writing and duly executed by both of the
parties hereto. Any such waiver or modification shall be effective only in the
specific instance and for the specific purpose for which it was given.
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24. INTENT
The parties understand and intend that this Agreement and each Transaction
hereunder constitute a "repurchase agreement" and a "securities contract" as
those terms are defined under the relevant provisions of Title 11 of the United
States Code, as amended.
25. SERVICING
(a) Notwithstanding the purchase and sale of the Purchased Mortgage Loans
hereby, Seller shall continue to service the Purchased Mortgage Loans for the
benefit of Buyer and, if Buyer shall exercise its rights to pledge or
hypothecate the Purchased Mortgage Loan prior to the related Repurchase Date
pursuant to Section 8, Buyer's assigns; provided, however, that the obligations
of Seller to service the Purchased Mortgage Loans shall cease upon the payment
by Seller to Buyer of the Repurchase Price therefor. Seller shall service the
Purchased Mortgage Loans in accordance with the servicing standards maintained
by other prudent mortgage lenders with respect to mortgage loans similar to the
Purchased Mortgage Loans.
(b) Seller agrees that Buyer is the owner of all servicing records, including
but not limited to any and all servicing agreements, files, documents, records,
data bases, computer tapes, copies of computer tapes, proof of insurance
coverage, insurance policies, appraisals, other closing documentation, payment
history records, and any other records relating to or evidencing the servicing
of Purchased Mortgage Loans (the "Servicing Records"). Seller grants Buyer a
security interest in all servicing fees and rights relating to the Mortgage
Loans and all Servicing Records to secure the obligation of the Seller or its
designee to service in conformity with this Section and any other obligation of
Seller to Buyer. Seller covenants to safeguard such Servicing Records and to
deliver them promptly to Buyer or its designee (including the Custodian) at
Buyer's request.
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(c) Upon the occurrence and continuance of an Event of Default, Buyer may, in
its sole discretion, (i) sell its right to the Purchased Mortgage Loans on a
servicing released basis or (ii) terminate the Seller as servicer of the
Purchased Mortgage Loans with or without cause, in each case without payment of
any termination fee.
(d) Seller shall not employ sub-servicers (other than Advanta Mortgage Corp. USA
or an Affiliate of Seller) to service the Purchased Mortgage Loans without the
prior written approval of Buyer.
(e) Seller shall cause any sub-servicer hereunder to execute a letter agreement
with Buyer acknowledging Buyer's security interest and agreeing that, upon
notice from Buyer (or the Custodian on its behalf) that an Event of Default has
occurred and in continuing hereunder, it shall deposit all Income with respect
to the Purchased Mortgage Loans in the account specified in the third sentence
of Section 5(a).
26. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that in the case of
Transactions in which one of the parties is an "insured depository institution"
as that term is defined in Section 1831(a) of Title 12 of the United States
Code, as amended, funds held by the financial institution pursuant to a
Transaction hereunder are not a deposit and therefore are not insured by the
Federal Deposit Insurance Corporation, the Savings Association Insurance Fund or
the Bank Insurance Fund, as applicable.
27. NETTING
If Buyer and Seller are "financial institutions" as now or hereinafter defined
in Section 4402 of Title 12 of the United States Code ("Section 4402") and any
rules or regulations promulgated thereunder:
(a) All amounts to be paid or advanced by one party to or on behalf of the other
under this Agreement or any Transaction hereunder shall be deemed to be "payment
obligations" and all amounts to be received by or on behalf of one party from
the other under this Agreement or any Transaction hereunder shall be deemed to
be "payment entitlements" within the meaning of Section 4402, and this Agreement
shall be deemed to be a "netting contract" as defined in Section 4402.
(b) The payment obligations and the payment entitlements of the parties hereto
pursuant to this Agreement and any Transaction hereunder shall be netted as
follows. In the event that either party (the "Defaulting Party") shall fail to
honor any payment obligation under this Agreement or any Transaction hereunder,
the other party (the "Nondefaulting Party") shall be entitled to reduce the
amount of any payment to be made by the Nondefaulting Party to the Defaulting
Party by the amount of the payment obligation that the Defaulting Party failed
to honor.
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28. MISCELLANEOUS
(a) Time is of the essence under this agreement and all Transactions and all
references to a time shall mean New York time in effect on the date of the
action unless otherwise expressly stated in this Agreement.
(b) Buyer shall be authorized to accept orders and take any other action
affecting any accounts of the Seller in response to instructions given in
writing by any authorized officer of Seller listed on Exhibit VI hereto, as such
list may be amended in writing from time to time. Seller shall indemnify Buyer,
defend, and hold Buyer harmless from and against any and all liabilities,
losses, damages, costs, and expenses of any nature arising out of or in
connection with any action taken by Buyer in response to such instructions
received or reasonably believed to have been received from such authorized
officers of Seller.
(c) If there is any conflict between the terms of this Agreement or any
Transaction entered into hereunder and the Custodial Agreement, this Agreement
shall prevail.
(d) If there is any conflict between the terms of a Confirmation or a corrected
Confirmation issued by the Buyer and this Agreement, the Confirmation shall
prevail.
(e) This Agreement may be executed in counterparts, each of which so executed
shall be deemed to be an original, but all of such counterparts shall together
constitute but one and the same instrument.
(f) Seller agrees to reimburse Buyer for all reasonable costs and expenses of
Buyer in connection with this Agreement including, without limitation, (i) the
fees, expenses and disbursement of outside counsel to Buyer not to exceed
$25,000 and (ii) due diligence expenses and on-going auditing fees not to exceed
$20,000 per year. (g) Seller and Buyer agree to maintain the confidentiality of
this Agreement and its terms and agree not to disclose this Agreement or its
terms to any other party except as required for the enforcement of its terms or
as required by law, regulatory requirements or court order or discovery. In the
event Seller determines that the Agreement must be filed with the Securities and
Exchange Commission pursuant to applicable law, such filing may only be made
after consultation with Buyer and upon redaction of the Pricing Spread.
(h) The headings in this Agreement are for convenience of reference only and
shall not affect the interpretation or construction of this Agreement.
[Signature page follows.]
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IN WITNESS WHEREOF, the parties have entered into this Agreement as of
the date set forth above.
XXXXXX COMMERCIAL PAPER INC.,
Buyer
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------
Title:
------------------------------
Date: March 11, 1998
------------------------------
AAMES CAPITAL CORPORATION,
Seller
By: /s/ Xxxx X. Xxxxxx
------------------------------
Title: Senior Vice President-Finance
------------------------------
Date: March 11, 1998
------------------------------
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EXHIBITS
EXHIBIT I Confirmation
EXHIBIT II Form of Custodial Delivery
EXHIBIT III Form of Power of Attorney
EXHIBIT IV Opinion of Counsel to Seller
EXHIBIT V Representations and Warranties
Regarding Mortgage Loan
EXHIBIT VI Authorized Officers of Seller
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EXHIBIT I
Form of Confirmation Letter
(date)
Aames Capital Corporation
-----------------------------
----------,----
Attention:
Confirmation No.:_____________________
Ladies/Gentlemen:
This letter confirms our agreement to purchase from you the Mortgage Loans
listed in Appendix I hereto, pursuant to the Master Repurchase Agreement
Governing Purchases and Sales of Mortgage Loans between us, dated as of March
11, 1998 (the "Agreement"), as follows:
Purchase Date:
Mortgage Loans to be Purchased: See Appendix I hereto.
[Appendix I to Confirmation Letter will list Mortgage Loans]
Aggregate Principal Amount of Purchased Mortgage Loans:
Purchase Price:
Pricing Rate:
Repurchase Date:
Repurchase Price:
Collateral Amount Percentage with respect
to Market Value:
Collateral Amount Percentage with respect
to Securitization Value:
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Names and addresses for communications:
Buyer:
Xxxxxx Commercial Paper Inc.
000 Xxxxx Xxxxxx
0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Central Funding Department
Seller:
Aames Capital Corporation
000 Xxxxx Xxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxxxx Treasure, Finance Department
XXXXXX COMMERCIAL PAPER INC.,
Buyer
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
Agreed and Acknowledged:
AAMES CAPITAL CORPORATION,
Seller
By: ________________________________
Name: ______________________________
Title: _____________________________
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EXHIBIT II
Form of Custodial Delivery
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EXHIBIT III
Form of Power of Attorney
"Know All Men by These Presents, that Aames Capital Corporation ("Seller"), does
hereby appoint Xxxxxx Commercial Paper Inc. ("Buyer"), its attorney-in-fact to
act in Seller's name, place and stead in any way which Seller could do with
respect to (i) the completion of the endorsements of the Mortgage Notes and the
Assignments of Mortgages, (ii) the recordation of the assignments of Mortgages
and (iii) the enforcement of the Seller's rights under the Mortgage Loans
purchased by Buyer pursuant to a Master Repurchase Agreement Governing Purchases
and Sales of Mortgage Loans dated as of March 11 1998 between Seller and Buyer
and to take such other steps as may be necessary or desirable to enforce Buyer's
rights against such Mortgage Loans, the related Mortgage Files and the Servicing
Records to the extent that Seller is permitted by law to act through an agent.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD
PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT
HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO
SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION
OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS
OWN BEHALF AND ON BEHALF OF SELLER'S ASSIGNS, HEREBY AGREES TO INDEMNIFY AND
HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY
ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON
THE PROVISIONS OF THIS INSTRUMENT.
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IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed and
the Seller's seal to be affixed this _____ day of March, 1998.
AAMES CAPITAL CORPORATION
(Seal)
By: ______________________________
Name: ____________________________
Title: ___________________________
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EXHIBIT IV
OPINION OF SELLER'S COUNSEL
1. Seller is duly organized and validly existing as a corporation in
good standing under the laws of California and has power and
authority to enter into and perform its obligations under the
Agreement and the Custodial Agreement. Seller is duly qualified to
do business and is in good standing in each jurisdiction in which
the character of the business transacted by it requires such
qualification and in which the failure so to qualify would have a
material adverse effect on the business, properties, assets or
condition (financial or other) of Seller and its subsidiaries,
considered as a whole.
2. The Agreement and the Custodial Agreement have each been duly
authorized, executed and delivered by Seller, and each constitutes
a valid and legally binding obligation of Seller enforceable
against Seller in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights generally and to general equity principles.
3. No consent, approval, authorization or order of any state or
federal court or government agency or body is required to be
obtained by Seller for the consummation of the transactions
contemplated by the Agreement or the Custodial Agreement.
4. The consummation of any of the transactions contemplated by the
Agreement and the Custodial Agreement will not conflict with,
result in a breach of, or constitute a default under the charter or
bylaws of Seller or the terms of any indenture or other agreement
or instrument known to us to which Seller is party or bound, or any
order known to such counsel to be applicable to Seller or any
regulations applicable to Seller, of any state or federal court,
regulatory body, administrative agency, governmental body or
arbitrator having jurisdiction over Seller.
5. There is no pending or, to such counsel's knowledge, threatened
action, suit or proceeding before any court or governmental agency,
authority or body or any arbitrator involving Seller or relating to
the transactions contemplated by the Agreement or the Custodial
Agreement which, if adversely determined, would have a material
adverse effect on Seller.
6. The Agreement together with (a) the delivery of such related
Mortgage Loans to Custodian; (b) the endorsement of such Mortgage
Loans in blank; and (c) the delivery of the assignments of
Mortgages related to the Mortgage Loans to the Custodian in
recordable form assigning such Mortgages to Custodian, creates a
valid, perfected security interest in such Mortgage Loans in favor
of Buyer.
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EXHIBIT V
Representations and Warranties
Regarding Mortgage Loans.
The Seller represents and warrants to the Buyer that, with
respect to each Mortgage Loan sold in a Transaction hereunder, as of the related
Purchase Date:
(a) Mortgage Loans as Described. The information set forth in the Mortgage
Loan Schedule is complete, true and correct;
(b) Payments Current Within 59 Days; Delinquency. The Mortgage Loan (i)
together with the other Purchased Mortgage Loans subject to
Transactions, would not cause the 30+ Delinquency Percentage for all
Mortgage Loans to exceed 5% or the 30+ Delinquency Percentage for all
High LTV Loans to exceed 2% and (ii) is not more than 59 days
Delinquent;
(c) No Outstanding Charges. There are no defaults in complying with the
terms of the Mortgage, and all taxes, governmental assessments,
insurance premiums, water, sewer and municipal charges, leasehold
payments or ground rents which previously became due and owing have
been paid, or an escrow of funds has been established in an amount
sufficient to pay for every such item which remains unpaid and which
has been assessed but is not yet due and payable. Seller has not
advanced funds, or induced, solicited or knowingly received any advance
of funds by a party other than the Mortgagor, directly or indirectly,
for the payment of any amount required under the Mortgage Loan, except
for interest accruing from the date of the Mortgage Note or date of
disbursement of the Mortgage Loan proceeds, whichever is greater, to
the day which precedes by one month the due date of the first
installment of principal and interest;
(d) Original Terms Unmodified. The terms of the Mortgage Note and Mortgage
have not been impaired, waived, altered or modified in any respect,
except by a written instrument which has been recorded, if necessary to
protect the interests of Buyer and which has been delivered to Buyer or
its designee (including the Custodian). The substance of any such
waiver, alteration or modification has been approved by the title
insurer, to the extent required by the policy, and its terms are
reflected on the Mortgage Loan Schedule. No Mortgagor has been
released, in whole or in part, except in connection with an assumption
agreement approved by the title insurer, and which assumption agreement
is included in the Mortgage File delivered to Buyer or its designee
(including the Custodian) and the terms of which are reflected in the
Mortgage Loan Schedule;
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(e) No Defenses. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without
limitation the defense of usury, nor will the operation of any of the
terms of the Mortgage Note or the Mortgage, or the exercise of any
right thereunder, render either the Mortgage Note or the Mortgage
unenforceable, in whole or in part, or subject to any right of
rescission, set-off, counterclaim or defense, including without
limitation the defense of usury, and no such right of rescission,
set-off, counterclaim or defense has been asserted with respect
thereto;
(f) Insurance Policies in Effect. The fire and casualty insurance policy
covering the Mortgaged Property (1) affords (and will afford)
sufficient insurance against fire and such other risks as are usually
insured against in the broad form of extended coverage insurance from
time to time available, as well as insurance against flood hazards if
the Mortgaged Property is an area identified by the Federal Emergency
Management Agency as having special flood hazards; (2) is a standard
policy of insurance for the locale where the Mortgaged Property is
located, is in full force and effect, and the amount of the insurance
is in the amount of the full insurable value of the Mortgaged Property
on a replacement cost basis or the unpaid balance of the Mortgage
Loans, whichever is less; (3) names (and will name) the present owner
of the Mortgaged Property as the insured; and (4) contains a standard
mortgagee loss payable clause in favor of Seller. All individual
insurance policies with respect to the Mortgage Loan are the valid and
binding obligation of the insurer and contain a standard mortgage
clause naming Seller, its successors and assigns, as Mortgagee. All
premiums thereon have been paid. The Mortgage obligates the Mortgagor
thereunder to maintain all such insurance policies at the Mortgagor's
cost and expense, and upon the Mortgagor's failure to do so, authorizes
the holder of the Mortgage to obtain and maintain such insurance at the
Mortgagor's cost and expense and to seek reimbursement therefor from
the Mortgagor;
(g) Compliance with Applicable Laws. Any and all requirements of any
federal, state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit
protection, equal credit opportunity or disclosure laws applicable to
the origination and servicing of the Mortgage Loan have been complied
with, and Seller shall maintain in its possession, available for
Buyer's inspection, and shall deliver to Buyer upon demand, evidence of
compliance with all such requirements;
(h) No Satisfaction of Mortgage. The Mortgage has not been satisfied,
canceled, subordinated or rescinded, in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage,
in whole or in part, nor has any instrument been executed that would
effect any such release, cancellation, subordination or rescission;
(i) Location and Type of Mortgaged Property. The Mortgaged Property is
located in the state identified in the Mortgage Loan Schedule and
consists of a parcel of real property with a detached single family
residence erected thereon, or a two- to
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four-family dwelling, or an individual condominium unit in a
condominium project, or an individual unit in a planned unit
development and no residence or dwelling is a mobile home or a
manufactured dwelling (other than a mobile home or a manufactured
dwelling permanently affixed to real property). No portion of the
Mortgaged Property is used for commercial purposes;
(j) Valid First Lien. The Mortgage is a valid, subsisting and enforceable
first or second lien on the Mortgaged Property, including all buildings
on the Mortgaged Property and all installations and mechanical,
electrical, plumbing, heating and air conditioning systems located in
or annexed to such buildings, and all additions, alterations and
replacements made at any time with respect to the foregoing. The lien
of the Mortgage is subject only to:
(1) the lien of current real property taxes and special
assessments not yet due and payable;
(2) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the
date of recording acceptable to mortgage lending institutions
generally and specifically referred to in the lender's title
insurance policy delivered to the originator of the Mortgage
Loan and (i) referred to or otherwise considered in the
appraisal made for the originator of the Mortgage Loan or (ii)
which do not adversely affect the appraised value of the
Mortgaged Property set forth in such appraisal;
(3) in the case of a Mortgaged Property that is a condominium or
an individual unit in a planned unit development, liens for
common charges permitted by statute;
(4) in the case where the Mortgage Loan is secured by a second
mortgage lien on the Mortgaged Property (and represented on
the Mortgage Loan Schedule as such), the lien of the First
Mortgage; and
(5) other matters to which like properties are commonly subject
which do not materially interfere with the benefits of the
security intended to be provided by the mortgage or the use,
enjoyment, value or marketability of the related Mortgaged
Property.
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting and enforceable first or second lien and first or second priority
security interest on the property described therein and Seller has full right to
pledge and assign the same to Buyer or its designee (including the Custodian).
(k) Validity of Mortgage Documents. The Mortgage Note and the Mortgage are
genuine, and each is the legal, valid and binding obligation of the
maker thereof enforceable in accordance with its terms, except as such
enforcement may be limited by bankruptcy, insolvency, reorganization,
receivership, moratorium or other similar laws relating to or affecting
the rights of creditor's generally, and by general equity principles
(regardless of whether such enforcement is considered in a proceeding
in equity or at law.) All parties to the Mortgage Note and the Mortgage
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had legal capacity to enter into the Mortgage Loan and to execute and
deliver the Mortgage Note and the Mortgage, and the Mortgage Note and
the Mortgage have been duly and properly executed by such parties. The
Mortgagor is a natural person or living trust who is a party to the
Mortgage Note and the Mortgage in an individual or trustee capacity,
respectively;
(l) Full Disbursement of Proceeds. The proceeds of the Mortgage Loan have
been fully disbursed and there is no requirement for future advances
thereunder, and any and all requirements as to completion of any
on-site or off-site improvement and as to disbursements of any escrow
funds therefor have been complied with. All costs, fees and expenses
incurred in making or closing the Mortgage Loan and the recording of
the Mortgage were paid, and the Mortgagor is not entitled to any refund
of any amounts paid or due under the Mortgage Note or Mortgage;
(m) Ownership. Seller is the sole owner of record and holder of the
Mortgage Loan. The Mortgage Loan is not assigned or pledged except as
provided in this Agreement, and Seller has good and marketable title
thereto, and has full right to pledge and assign the Mortgage Loan to
Buyer or its designee (including the Custodian) free and clear of any
encumbrance, equity, participation interest, lien, pledge, charge,
claim or security interest, and has full right and authority subject to
no interest or participation of, or agreement with, any other party, to
sell and assign each Mortgage Loan pursuant to this Agreement;
(n) Doing Business. All parties which have had any interest in the Mortgage
Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or,
during the period in which they held and disposed of such interest,
were) (1) in compliance with any and all applicable licensing
requirements of the laws of the state wherein the Mortgaged Property is
located, and (2) organized under the laws of such state, or (3)
qualified to do business in such state, or (4) federal savings and loan
associations or national banks having principal offices in such state,
or (5) not doing business in such state;
(o) LTV. No Mortgage Loan has a Loan-to-Value Ratio of more than 125%. No
Mortgage Loans other than a High LTV Loan has a Loan-to-Value Ratio of
more than 90%. If such Mortgage Loan is a Standard Loan, it, together
with the other Standard Loans subject to Transactions, does not have a
weighted average cumulative Loan-to-Value Ratio in excess of 85%. If
such Mortgage Loan is a High LTV Loan, it, together with the other High
LTV Loans subject to Transactions, does not have a weighted average
cumulative Loan-to-Value Ratio in excess of 110%;
(p) Title Insurance. The Mortgage Loan is covered by an ALTA mortgage
title insurance policy or such other form of policy acceptable to FNMA
or FHLMC, issued by and constituting the valid and binding obligation
of a title insurer generally acceptable to prudent mortgage lenders
that regularly originate or purchase mortgage loans comparable to the
Mortgage Loans for sale to prudent investors in the secondary market
that invest in mortgage loans such as the Mortgage Loans and qualified
to do business in the jurisdiction where the Mortgaged Property is
located, insuring Seller, its successors and assigns, as to the first
priority lien of the Mortgage in the case of a First Mortgage Loan
secured by a First Mortgage and the second
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priority lien of the Mortgage in the case of a Mortgage Loan secured by
a second lien on the related Mortgaged Property, in the original
principal amount of the Mortgage Loan. Seller is the sole named insured
of such mortgage title insurance policy, the assignment to Buyer or the
Custodian as assignee of Buyer of Seller's interest in such mortgage
title insurance policy does not require the consent of or notification
to the insurer or the same has been obtained, and such mortgage title
insurance policy is in full force and effect and will be in full force
and effect and inure to the benefit of Buyer upon the consummation of
the transactions contemplated by this Agreement. No claims have been
made under such mortgage title insurance policy and no prior holder of
the related Mortgage, including Seller, has done, by act or omission,
anything that would impair the coverage of such mortgage title
insurance policy;
(q) No Defaults. Other than a payment default, there is no default, breach,
violation or event of acceleration existing under the Mortgage or the
Mortgage Note and no event which, with the passage of time or with
notice and the expiration of any grace or cure period, would constitute
a default, breach, violation or event of acceleration, and neither
Seller nor its predecessors have waived any default, breach, violation
or event of acceleration;
(r) No Mechanics' Liens. There are no mechanics' or similar liens or claims
which have been filed for work, labor or material (and no rights are
outstanding that under the law could give rise to such liens) affecting
the Mortgaged Property which are or may be liens prior to, or equal or
coordinate with, the lien of the Mortgage;
(s) Location of Improvements; No Encroachments. All improvements which were
considered in determining the appraised value of the mortgaged property
lay wholly within the boundaries and building restriction lines of the
mortgaged property and no improvements on adjoining properties encroach
upon the mortgaged property. No improvement located on or being part of
the mortgaged property is in violation of any applicable zoning law or
regulation;
(t) Origination. The Mortgage Loan was originated by Seller, an affiliate
of Seller or by an originator not affiliated with the Seller licensed
to originate such Mortgage Loan. The documents, instruments and
agreements submitted for loan underwriting were not falsified and
contain no untrue statement of material fact or omit to state a
material fact required to be stated therein or necessary to make the
information and statements therein not misleading.
(u) Customary Provisions. The Mortgage contains customary and enforceable
provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of
the benefits of the security provided thereby, including, (i) in the
case of a Mortgage designated as a deed of trust, by trustee's sale,
and (ii) otherwise by judicial foreclosure. There is no homestead or
other exemption available to a Mortgagor which would interfere with the
right to sell the Mortgaged Property at a trustee's sale or the right
to foreclose the Mortgage;
(v) Occupancy of the Mortgaged Property. As of the related Purchase Date
the Mortgaged Property is capable of being lawfully occupied under
applicable law. All inspections, licenses and certificates required to
be made or issued with respect
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to all occupied portions of the Mortgaged Property and, with respect to
the use and occupancy of the same, including but not limited to
certificates of occupancy and fire underwriting certificates, have been
made or obtained from the appropriate authorities. Either that the
Mortgagor represented at the time of origination of the Mortgage Loan
that the Mortgagor would occupy the Mortgaged Property as the
Mortgagor's primary residence or second home or the Mortgaged Property
is capable of being occupied pursuant to terms that approximate current
standard market rental terms and rates;
(w) No Additional Collateral. The Mortgage Note is not and has not been
secured by any collateral except the lien of the corresponding Mortgage
and the security interest of any applicable security agreement or
chattel mortgage referred to in (j) above;
(x) Deeds of Trust. In the event the Mortgage constitutes a deed of trust,
a trustee, duly qualified under applicable law to serve as such, has
been properly designated and currently so serves and is named in the
Mortgage, and no fees or expenses are or will become payable by Buyer
to the trustee under the deed of trust, except in connection with a
trustee's sale after default by the Mortgagor;
(y) Acceptable Investment. Seller has no knowledge of any circumstances or
conditions with respect to the Mortgage, the Mortgaged Property, the
Mortgagor (other than the Mortgagor's credit standing) that can
reasonably be expected to cause private institutional investors that
regularly invest in subprime or high loan-to-value mortgage loans
similar to the Mortgage Loans to regard the Mortgage Loan as an
unacceptable investment or adversely affect the value or marketability
of the Mortgage Loan to other similar institutional investors;
(z) Purchase of Mortgage Documents. The Mortgage File and any other
documents required by Buyer to be delivered for the Mortgage Loan by
Seller under this Agreement have been delivered (or with respect to Wet
Ink Mortgage Loans, will be delivered within seven Business Days) to
the Custodian. Seller is in possession of a complete, true and accurate
Mortgage File except for such documents the originals of which have
been delivered to the Buyer or its designee (including the Custodian).
Each of the documents and instruments included in the Mortgage File is
duly executed and in due and proper form and each such document or
instrument is in a form generally acceptable to prudent institutional
mortgage lenders that regularly originate and purchase subprime or high
loan-to-value mortgage loans;
(aa) Condominiums/Planned Unit Developments. If the Mortgaged Property is a
condominium unit or a planned unit development (other than a de minimus
planned unit development) such condominium or planned unit development
project meets Seller's Underwriting Guidelines;
(bb) Transfer of Mortgage Loans. The assignment of Mortgage is in recordable
form and is acceptable for recording under the laws of the jurisdiction
in which the Mortgaged Property is located;
(cc) Due on Sale. The Mortgage contains an enforceable provision for the
acceleration of the payment of the unpaid principal balance of the
Mortgage Loan in the event
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that the Mortgaged Property is sold or transferred without the prior
written consent of the Mortgagee thereunder;
(dd) No Buydown Provisions; No Graduated Payments or Contingent Interests.
The Mortgage Loan does not contain provisions pursuant to which monthly
payments are paid or partially paid with funds deposited in any
separate account established by Seller, the Mortgagor or anyone on
behalf of the mortgagor, or paid by any source other than the Mortgagor
nor does it contain any other similar provisions currently in effect
which may constitute a "buydown" provision. The Mortgage Loan is not a
graduated payment mortgage loan and the Mortgage Loan does not have a
shared appreciation or other contingent interest feature;
(ee) Consolidation of Future Advances. Any future advances made prior to the
Purchase Date have been consolidated with the outstanding principal
amount secured by the Mortgage, and the secured principal amount, as
consolidated, bears a single interest rate and single repayment term.
The lien of the Mortgage securing the consolidated principal amount is
expressly insured as having first or second lien priority, as the case
may be, by a title insurance policy or an endorsement to the policy
insuring the mortgagee's consolidated interest. The consolidated
principal amount does not exceed the original principal amount of the
Mortgage Loan;
(ff) Mortgaged Property Undamaged. There is no proceeding pending or, to
Seller's knowledge, threatened for the total or partial condemnation of
the Mortgaged Property. The Mortgaged Property is undamaged by waste,
fire, earthquake or earth movement, windstorm, flood, tornado or other
casualty so as to affect adversely the value of the Mortgaged Property
as security for the Mortgage Loan or the use for which the premises
were intended;
(gg) Collection Practices; Escrow Deposits; Interest Rate Adjustments. The
origination and collection practices used with respect to the Mortgage
Loan have been in all respects in accordance with industry custom and
practice, and have been in all respects legal and proper. With respect
to escrow deposits and escrow payments, all such payments are in the
possession of Seller and there exist no deficiencies in connection
therewith for which customary arrangements for repayment thereof have
not been made. All escrow payments have been collected in full
compliance with state and federal law. If an escrow of funds has been
established, it is not prohibited by applicable law and has been
established in an amount sufficient to pay for every item that remains
unpaid and has been assessed but is not yet due and payable. No escrow
deposits or escrow payments or other charges or payments due Seller
have been capitalized under the Mortgage or the Mortgage Note. All
mortgage interest rate adjustments have been made in strict compliance
with state and federal law and the terms of the related Mortgage Note.
Any interest required to be paid pursuant to state and local law has
been properly paid and credited;
(hh) Conversion to Fixed Interest Rate. With respect to the aggregate
outstanding principal balance of the Mortgage Loans on the related
Purchase Date, no more than 50% of the Mortgage Notes contain a
provision allowing the Mortgagor to convert the Mortgage Note from an
adjustable interest rate Mortgage Note to a
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fixed interest rate Mortgage Note for the remaining term thereof all in
accordance with the terms of a rider to the related Mortgage Note;
(ii) Appraisal. The Mortgage File for each Standard Loan contains an
appraisal of the related Mortgaged Property signed prior to the
approval of the Mortgage Loan application by a qualified appraiser,
duly appointed by the originator of the Mortgage Loan, who had no
interest, direct or indirect in the mortgaged property or in any loan
made on the security thereof, other than as an employee of the lender,
and whose compensation is not affected by the approval or disapproval
of the Mortgage Loan, and the appraisal and appraiser both satisfy the
requirements of Title XI of the Federal Institutions Reform, Recovery,
and Enforcement Act of 1989 and the regulations promulgated thereunder,
all as in effect on the date the Mortgage Loan was originated;
(jj) Soldiers' and Sailors' Relief Act. The Mortgagor has not notified
Seller, and Seller has no knowledge of any relief requested or allowed
to the Mortgagor under the Soldiers' and Sailors' Civil Relief Act of
1940;
(kk) Environmental Matters. To the best of Seller's knowledge based on
customary residential mortgage industry practices the mortgaged
Property is free from any and all toxic or hazardous substances and
there exists no violation of any local, state or federal environmental
law, rule or regulation;
(ll) [Reserved];
(mm) Seller Origination The Mortgage Loan was originated by Seller or an
Affiliate of Seller or was purchased and reunderwritten by Seller;
(nn) Balloon Mortgage Loans. Each Balloon Mortgage Loan has an original term
of not less than fifteen (15) years and which provides for level
monthly payments based on a thirty (30) year amortization schedule and
a final Monthly Payment substantially greater than the preceding
Monthly Payments;
(oo) No Construction Loans. No Mortgage Loan is a construction loan or
relates to manufactured housing (other than manufactured housing
permanently affixed to real property);
(pp) Selection by Seller. No Mortgage Loan was selected for inclusion under
this Agreement on any basis which was intended to have a material
adverse effect on Buyer;
(qq) Second Mortgages. With respect to each Mortgage Loan secured by a
second lien on the related Mortgaged Property:
(1) if the LTV is higher than 70%, either the related first lien
does not provide for a balloon payment or the maturity date of
each Mortgage Loan with respect to which a first lien on the
related Mortgaged Property provides for a balloon payment is
prior to the maturity date of the mortgage loan relating to
such first lien;
(2) the related first lien on any Mortgaged Property with respect
to which the related Mortgage Loan secured by a second lien
does not provide for negative amortization;
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(3) either no consent for the Mortgage Loan secured by a second
lien on the related Mortgaged Property is required by the
holder of the related first lien or such consent has been
obtained and is contained in the Mortgage File; and
(4) the related first lien is not held by an individual;
(rr) CERCLA To the best of the Seller's knowledge, no Mortgaged Property
was, as of the Purchase Date or, with respect to Additional Loans or
Substitute Mortgage Loans, as of the related date of addition or
substitution, located within a one-mile radius of any site listed in
the National Priorities List as defined under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, or on any similar state list of hazardous waste sites which
are known to contain any hazardous substance or hazardous waste;
(ss) No Bankruptcy of Mortgagor. None of the Mortgage Loans are subject to a
bankruptcy plan;
(tt) Conformance to Underwriting Standards. Each Mortgage Loan conforms to
the underwriting guidelines supplied to Buyer by Seller;
(uu) Qualified Mortgage. Each Mortgage Loan constitutes a "qualified
mortgage" within the meaning of Section 860G(a)(3) of the Code;
(vv) Balloon Loan Concentration. If the Mortgage Loan is a Balloon Loan, it,
together with the other Purchased Mortgage Loans which are Balloon
Loans subject to Transactions, constitutes less than 10% of the
aggregate outstanding Repurchase Price of all Purchased Mortgage Loans
subject to Transactions;
(ww) No Short Maturity Balloon Loans. The Mortgage Loan is not a Balloon
Loan with a maturity date occurring within five years from its date of
the related Purchase Date;
(xx) Owner Occupied. In the event the Purchased Mortgage Loan relates to a
Mortgaged Property which is non-owner occupied, it, together with the
other Purchased Mortgage Loans subject to Transactions relating to
Mortgaged Properties which are non-owner occupied, does not exceed 10%
of the aggregate outstanding Repurchase Price of all Purchased Mortgage
Loans subject to Transactions;
(yy) Payment Terms. With respect to adjustable rate Mortgage Loans,
following any applicable initial fixed rate period of 2, 3 or 5 years,
the mortgage interest rate is adjusted annually or semi-annually on
each interest rate adjustment date to equal the index plus the gross
margin, rounded up or down to the nearest 1/8%, subject to the mortgage
interest rate cap. With respect to fixed rate Mortgage Loans, the
mortgage note is payable each month in equal monthly installments of
principal and interest. With respect to adjustable rate Mortgage Loans,
installments of interest are subject to change due to the adjustments
to the mortgage interest rate on each interest rate adjustment date,
with interest calculated and payable in arrears, sufficient to amortize
the Mortgage Loan fully by the stated maturity date, over an original
term of not more than thirty years from commencement of amortization;
(zz) Securitization Standards. Each of the Mortgage Loans conforms to the
then current standards of securitization as determined in the
reasonable judgment of Buyer; and
(aaa) Wet Ink Mortgage Loans. Such Mortgage Loan, together with the other
Mortgage Loans subject to then outstanding Transactions does not cause
the aggregate Repurchase Price of all Mortgage Loans which are Wet Ink
Mortgage Loans to
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exceed 20% of the aggregate Repurchase Price for all Performing Loans
which are subject to then outstanding Transactions.
It is understood and agreed that the representations and warranties set
forth in this Exhibit V shall survive delivery of the respective Mortgage Files
to the Custodian on behalf of Buyer.
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