Exhibit 10.2
OPERATING AGREEMENT
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Banc One Corporation 000 Xxxx Xxxxx Xxxxxx, Xxxxxxxx, Xxxx 00000 0251
Bank One Mortgage Corporation, 000 Xxxxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000
Type Of Business Entity: Bank Holding Company
Date of Agreement: April 1, 1998 Contact Person:
Phone No:
Fax No:
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This Operating Agreement (the "Operating Agreement") is entered into and
effective as of the date shown above by and among Banc One Corporation ("Banc
One"), Banc One Mortgage Corporation (the "Affiliate Mortgage Company") and
HomeSide Lending, Inc. ("HomeSide Lending")
RECITALS.
1. Banc One and HomeSide Lending have entered into the Asset Purchase Agreement.
2. The Asset Purchase Agreement contemplates, subject to the terms herein,
origination and servicing arrangements between Banc One and HomeSide Lending on
and after the Effective Date.
3. Banc One and HomeSide Lending desire to set forth the specific terms and
conditions of such arrangements.
IN CONSIDERATION of the mutual promises made in this Operating Agreement and
other good and valuable consideration, the receipt and sufficiency of which are
acknowledged, Banc One and HomeSide Lending agree as follows:
ARTICLE 1.
DEFINITIONS.
As used in this Operating Agreement, the following capitalized terms shall have
the meanings given to them below:
"Acquired Affiliate" means an Affiliate acquired by Banc One after the Closing
Date which is engaged in any production or servicing mortgage banking activity.
"Affiliate" means an entity that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with,
another entity. For purposes of this definition, "control", "controlled by", and
"under common control with" means the direct or indirect possession of ordinary
voting power to elect a majority of the board of directors or comparable body of
an entity.
"Affiliate Mortgage Company" means Banc One Mortgage Corporation or any
Affiliate which succeeds to or otherwise continues its mortgage banking
activities of the type which are the subject matter of the ancillary agreements.
"Agency" means the Federal National Mortgage Association, Federal Home Loan
Mortgage Corporation and/or Government National Mortgage Association, as the
context may require.
"Ancillary Agreements" means this Operating Agreement and the attached
Correspondent Agreement, Delegated Underwriting Agreement, the PMSR Flow
Agreement and the Servicing Agreement.
"Asset Purchase Agreement" means the Asset Purchase Agreement entered into by
and between Banc One Corporation, Affiliate Mortgage Company, and HomeSide
Lending as of April 1, 1998, as may be amended from time to time.
"Average SRP" shall have the meaning given to it in Section 4.3.1 below.
"Banc One" means: (a) the entity defined as "Banc One" above, (b) any of its
Affiliate banks, and (c) its Affiliate Mortgage Company, as applicable within
the context used.
"Correspondent Agreement" means the Correspondent Loan Purchase Agreement
entered into by and between HomeSide Lending, and the Affiliate Mortgage Company
as of the Effective Date ,and which shall govern the terms under which the
Affiliate Mortgage Company shall originate and fund, and HomeSide shall acquire
the New Secondary Market Mortgage Loans and related Servicing Rights. The
Correspondent Agreement is attached to this Operating Agreement as Exhibit A.
"Closing Date" means the date on which Banc One sells and transfers beneficial
title to HomeSide Lending certain of the servicing assets of Affiliate Mortgage
Company pursuant to the Asset Purchase Agreement.
"Delegated Underwriting Agreement" means the Correspondent Lender Delegated
Underwriting Agreement entered into by and between HomeSide Lending and the
Affiliate Mortgage Company as of the Effective Date and which shall govern the
terms under which the Affiliate Mortgage Company shall underwrite certain New
Secondary Market Mortgage Loans. The Delegated Underwriting Agreement is
attached to this Operating Agreement as Exhibit G.
"Effective Date" means the date on which the Asset Purchase Agreement is signed.
"Excluded Affiliate" means an Acquired Affiliate that (a)
(i) is a depository institution or an Affiliate thereof that is acquired by
Banc One after the Closing Date, and
(ii) engages in, either directly or through its own pre-existing Affiliate,
the business of originating and/or servicing Mortgage Loans, and
(b) as of the time it becomes an Acquired Affiliate
(i) generated retail Mortgage Loan production (exclusive of wholesale
production) of $2 Billion or more in the preceding 12 months, or
(ii) services a Mortgage Loan portfolio of $15 Billion or more.
"Existing Agreements" has the meaning set forth in Section 3.6 herein.
"Existing Mortgage Loans" means all Mortgage Loans serviced by Banc One on or
before the Closing Date.
"Existing Portfolio Mortgage Loans" means Mortgage Loans owned by Banc One and
serviced by Banc One on or before the Closing Date.
"Existing Portfolio Servicing Rights" means the Servicing Rights to the Existing
Portfolio Mortgage Loans.
"Existing Servicing Rights" means the Servicing Rights to the Existing Mortgage
Loans.
"FHA" means the Federal Housing Administration or any successor to the FHA.
"Home Equity Loan" shall mean a residential mortgage loan, whether closed end or
open end, secured by a first or junior lien on residential real property that
was not used for, or to refinance a loan used for, the acquisition or initial
construction of such real property.
"HomeSide, Inc." means HomeSide, Inc., a business corporation organized under
the laws of the state of Delaware and with its principal place of business at
0000 Xxxxxxxxxx Xxx, Xxxxxxxxxxxx, XX 00000.
"HomeSide Lending" means HomeSide Lending, Inc., a business corporation
organized under the laws of the state of Florida and with its principal place of
business at 0000 Xxxxxxxxxx Xxx, Xxxxxxxxxxxx, Xxxxxxx 00000.
"Marketing Agreement" means the Marketing Agreement to be entered into by and
between HomeSide, Inc. and Banc One as of the Effective Date and which shall
govern the terms under which HomeSide Lending's mortgagors may be solicited for
certain products and services.
"Mortgage Loan" means a first lien mortgage or deed of trust on a residential
1 to 4 family dwelling.
Mortgage Loan shall not include an open-end Home Equity Loan.
"New Mortgage Loan" means a New Portfolio Mortgage Loan and/or New Secondary
Market Mortgage Loan.
"New Portfolio Mortgage Loan" means each Mortgage Loan which Banc One: (a) shall
originate on or after the Closing Date and retain the ownership subject to the
New Servicing Rights, or (b) has originated prior to the Closing Date but not
closed or funded, and intends to retain the ownership subject to the New
Servicing Rights.
"New Portfolio Servicing Rights" means the Servicing Rights to the New Portfolio
Mortgage Loans.
"New Secondary Market Conforming Mortgage Loan" means each New Secondary Market
Mortgage Loan, other than a New Secondary Market Unique Mortgage Loan, that is
eligible for sale to an Agency.
"New Secondary Market Mortgage Loan" means each Mortgage Loan, other than a New
Portfolio Mortgage Loan, which Banc One: (a) will originate on or after the
Closing Date, or (b) has originated prior to the Closing Date but not closed or
funded.
"New Secondary Market Nonconforming Mortgage Loan" means each New Secondary
Market Mortgage Loan, other than a New Secondary Market Unique Mortgage Loan,
that is (a) not a New Secondary Market Conforming Mortgage Loan, and (b)
satisfies HomeSide's underwriting and product requirements in effect from time
to time.
"New Secondary Market Servicing Rights" means the Servicing Rights to the New
Secondary Market Mortgage Loans.
"New Secondary Market Unique Mortgage Loan" means each New Secondary Market
Mortgage Loan that (a) is a unique product developed by HomeSide Lending, (b) is
provided to Banc One, and (c) satisfies HomeSide Lending's underwriting and
product requirements.
"New Servicing Rights" means the Servicing Rights to the New Mortgage Loans.
"Operating Agreement" has the meaning set forth in the recitals above. The
Exhibits to this Operating Agreement shall not be considered to be part of this
Operating Agreement.
"Pipeline Mortgage Loan" means a Mortgage Loan that has not closed or been
purchased from a correspondent or broker originator and with respect to which
Banc One has (a) issued a commitment or otherwise agreed with applicant to fund,
(b) determined to fund, (c) committed to a specific interest rate, or (d) issued
a commitment or otherwise agreed with a correspondent originator to purchase.
"PMSR Flow Agreement" means the agreement to be entered into by and among
HomeSide Lending and Banc One as of the Effective Date and which shall govern
the terms under which Banc One will sell the New Portfolio Servicing Rights to
HomeSide. The PMSR Flow Agreement is attached to this Operating Agreement as
Exhibit B.
"Portfolio Mortgage Loans" means the Existing Portfolio Mortgage Loans and the
New Portfolio Mortgage Loans.
"Previously Committed Loan" means a Mortgage Loan that is the subject of a
commitment entered into by Banc One prior to the Closing Date pursuant to which
such loan shall be sold to a third party.
"REO" means any residential real property owned by Banc One whether for its own
account or on behalf of any Agency, FHA, VA or other investor as a result of a
foreclosure.
"Servicing Agreement" means the agreement to be entered into by and between
HomeSide Lending and Banc One as of the Effective Date and which shall govern
the terms under which HomeSide will service the Portfolio Mortgage Loans. The
Servicing Agreement is attached to this Operating Agreement as Exhibit C.
"Servicing Rights" means the rights and obligations to service a Mortgage Loan,
including, but not limited to, one or more of the following functions or a
portion thereof: (a) administering and collecting payments for the reduction of
principal and/or the application of interest on a Mortgage Loan, (b) collecting
tax and insurance payments, (c) remitting appropriate portions of collected
payments, (d) administering escrow account funds, (e) pursuing foreclosures and
alternate remedies against the property securing a Mortgage Loan, (f)
administering and liquidating REO properties, (g) receiving servicing
compensation and any ancillary fees and income arising from or relating to the
servicing of a Mortgage Loan, and (h) receiving the rights and privileges
relating to the above including, but not limited to, the related escrow accounts
and the right to enter into arrangements with third parties that generate
ancillary fees and benefits relating to the serviced Existing Mortgage Loans and
New Mortgage Loans.
"Subprime Mortgage Loan" means a Mortgage Loan that, as of the date it is made,
is not then eligible or, based upon the standards of eligibility in effect as of
the Effective Date, would not have been eligible as of the Effective Date for
sale to, , securitization with or insurance or guaranty by an Agency, FHA or VA
by virtue of, among other reasons, the failure of the borrower to satisfy the
applicable underwriting criteria.
"VA" means the Department of Veterans Affairs, or any successor to the VA.
"Warehouse Mortgage Loan" means a Mortgage Loan that is owned by Banc One.
ARTICLE 2.
EXISTING SERVICING ARRANGEMENTS.
2.1 TERMINATION OF EXISTING SERVICING AGREEMENTS BETWEEN BANC ONE AFFILIATES.
Banc One Corporation shall cause any servicing agreements between any of Banc
One's Affiliates relating to the Existing Mortgage Loans to terminate as of the
Closing Date.
2.2. TRANSFER OF EXISTING SERVICING RIGHTS TO HOMESIDE LENDING.
Banc One acknowledges that, as of the Closing Date, HomeSide Lending shall own
all right, title and interest in the Existing Servicing Rights, subject to the
terms of (a) the Servicing Agreement with respect to the Existing Portfolio
Mortgage Loans, and (b) the applicable investor servicing agreements with
respect to the remaining Existing Mortgage Loans.
ARTICLE 3.
ORIGINATION AND SERVICING OF NEW MORTGAGE LOANS.
3.1. NEW SECONDARY MARKET MORTGAGE LOANS SHALL BE SOLD TO HOMESIDE.
During the term hereof and subject to Sections 3.6, 4.8 and 4.9 below, Banc
One shall sell to HomeSide Lending all right, title and interest in:
(a) all New Secondary Market Conforming Mortgage Loans and related Servicing
Rights;
(b) all New Secondary Market Unique Mortgage Loans and related Servicing Rights;
and
(c) no less than 50% of the principal balance of all New Secondary Market
Nonconforming Mortgage Loans and related Servicing Rights.
3.2. AGREEMENTS GOVERNING SALE OF NEW SECONDARY MARKET MORTGAGE LOANS.
Each New Secondary Market Mortgage Loan and related Servicing Rights shall be
sold to HomeSide Lending under the terms of this Operating Agreement, the
Correspondent Agreement, and the Delegated Underwriting Agreement.
3.3. NEW PORTFOLIO SERVICING RIGHTS SHALL BE SOLD TO HOMESIDE.
Banc One shall sell and grant to HomeSide Lending all right, title and interest
in all New Portfolio Servicing Rights in accordance with the terms of this
Operating Agreement and the PMSR Flow Agreement.
3.4. SERVICING OF NEW PORTFOLIO MORTGAGE LOANS.
Each New Portfolio Mortgage Loan shall be serviced by HomeSide Lending under the
terms of this Operating Agreement and the Servicing Agreement.
3.5. NO WHOLESALE PRODUCTION.
During the term of this Operating Agreement, Banc One shall not originate or
purchase any New Mortgage Loan through or from a mortgage broker, correspondent
lender or other lender, without HomeSide Lending's prior written consent. If
HomeSide Lending grants such consent, Banc One shall offer to sell each such New
Mortgage Loan and related Servicing Rights to HomeSide Lending.
3.6. THIRD PARTY DELIVERY OBLIGATIONS.
Subsequent to the Effective Date, Banc One shall not enter into any agreement
with a third party which obligates Banc One to deliver any New Mortgage Loan
and/or the related Servicing Rights during the term of this Operating Agreement
if such delivery would be contrary to its obligations under this Article 3. Banc
One represents and warrants that the attached Exhibit H contains a complete list
of existing agreements with third parties which obligate Banc One to deliver any
New Mortgage Loan and/or the related Servicing Rights during the term of this
Operating Agreement (the "Existing Agreements"). At no cost or liability to
HomeSide Lending, Banc One shall resolve its delivery obligations under the
Existing Agreements in a fashion which is acceptable to HomeSide Lending and
which does not materially diminish Banc One's delivery obligations pursuant to
this Article 3; provided further, that Banc One shall not either deliver
Mortgage Loans under the Existing Agreements in excess of the minimum amount
expressly required to be delivered or amend such Existing Agreements without the
prior written consent of HomeSide Lending.
3.7. EXCLUDED LOANS.
Notwithstanding any provision to the contrary contained in this Operating
Agreement, it is the intent of this Agreement that on and after the Closing
Date, Banc One shall not be obligated to sell to HomeSide Lending any (a)
Subprime Mortgage Loan or related Servicing Rights, (b) Home Equity Loans or
related Servicing Rights, (c) open-end real estate secured loan or related
servicing rights or (d) home improvement or construction loan or related
servicing rights; provided, however, that Banc One represents and warrants that
as of the Effective Date, substantially all of the New Mortgage Loans are
originated by the Affiliate Mortgage Company.
ARTICLE 4.
PRODUCTS, PRICING, CUSTOMER SERVICE AND RELATED ISSUES.
4.1. PRODUCTS.
HomeSide Lending covenants as follows:
(a) Subject to investor availability, HomeSide Lending shall continue to offer
all secondary market and portfolio Mortgage Loan products currently offered by
HomeSide Lending immediately prior to the Closing Date.
(b) HomeSide Lending may, in its reasonable discretion, add new Mortgage Loan
products that Banc One can demonstrate are being offered by a significant
competitor, including major national competitors. Such new product offerings
shall be subject to (i) investor availability, (ii) HomeSide's reasonable
profitability concerns, and (iii) the resources reasonably available to
HomeSide.
(c) HomeSide Lending shall work with the Affiliate Mortgage Company to create
Mortgage Loan products: (i) that may be new to Banc One's Mortgage Loan
production market and Banc One believes offers significant opportunity to Banc
One or HomeSide Lending, or (ii) for which Banc One believes there may be
significant demand. Such new product offerings shall be subject to (x) investor
availability, (y) HomeSide's reasonable profitability concerns, and (z) the
resources reasonably available to HomeSide.
(d) HomeSide Lending shall formalize a product development committee and
process. The Affiliate Mortgage Company's production and operations
representatives shall participate in the activities of such product development
committee and process.
(e) HomeSide Lending shall not discontinue Mortgage Loan products without giving
reasonable advance notice to the Affiliate Mortgage Company. The product
development committee shall determine the Mortgage Loan products to be offered,
subject to investor availability.
(f) Subject to Section 3.1(c) above, if (i) HomeSide Lending does not offer a
Mortgage Loan product (including a New Secondary Market Nonconforming Mortgage
Loan) that Banc One desires to sell within a reasonable time after Banc One's
request, Banc One may sell such Mortgage Loan product to another lender on a
servicing-released basis; or (ii) HomeSide Lending requires a minimum amount of
production in order to offer a new Mortgage Loan product and Banc One cannot
satisfy such minimum production amount, Banc One may sell such Mortgage Loan
product to another lender on a servicing-released basis.
4.2. MORTGAGE LOAN PRICING
(a) Banc One will receive the higher of either: (i) the most favorable HomeSide
Lending pricing offered to correspondents, or (ii) HomeSide Lending's pricing as
determined by the screen price/dealer price each morning on a business day for
HomeSide Lending, based on the delivery month for the appropriate Mortgage Loan
interest rate lock term. For example, a Mortgage Loan which has an interest rate
locked on March 1st for 70 days closed and back will be priced for June
delivery. If such Mortgage Loan is delivered to HomeSide Lending on the 70th day
of the lock-in period, the applicable date would be May 10th . HomeSide
Lending's cutoff date for May pools is approximately May 1st, therefore
requiring such Mortgage Loan to be delivered in a June pool. The cutoff date for
June pools is approximately June 1st. On average, HomeSide Lending's 70-day
locks are rolled on the 20th day of each month.
(b) HomeSide Lending shall delegate to the Affiliate Mortgage Company the
renegotiation and application of the repricing grids in an effort to avoid
departmental duplication and maintain the highest customer service levels.
HomeSide Lending may change such repricing grids from time to time upon
reasonable prior notice to the Affiliate Mortgage Company.
(c) HomeSide Lending shall not apply its daily volume cap policy to Banc One.
(d) HomeSide Lending shall administer its intra-day, daily, and emergency
pricing in the manner set forth in HomeSide Lending's secondary marketing buy
price policy, as may be amended from time to time. A copy of the current
secondary marketing buy price policy is set forth in Exhibit D, as amended by
the Addendum to such policy, which Addendum is also included within Exhibit D.
4.3. SERVICING RELEASED PREMIUMS.
4.3.1. Banc One Receives Most Favorable Correspondent Servicing Released
Premiums.
(a) Subject to subparagraph (c) below, HomeSide Lending shall pay to Banc One
HomeSide Lending's most favorable correspondent lender servicing released
premiums.
(b) Every two months, HomeSide Lending shall calculate an average servicing
released premium for each New Secondary Market Conforming Mortgage Loan within a
wholesale peer group (the "Average SRP") in the following manner:
(i) The wholesale peer group shall include HomeSide Lending and nine (9)
additional wholesalers with the highest wholesale Mortgage Loan
production, as measured semi-annually by SMR Research. If the SMR report
is no longer available, HomeSide Lending shall use a comparable report.
(ii)The Average SRP for each New Secondary Market Conforming Mortgage Loan
shall exclude the peer group's highest and lowest servicing released
premium.
(iii)Servicing released premiums shall be measured on a comparable basis
taking into consideration such factors as Mortgage Loan product types,
Mortgage Loan amounts, fees, volume incentives and other data necessary
and appropriate to accurately compare competitor pricing
(c) The servicing released premiums paid to Banc One for each New Secondary
Market Conforming Mortgage Loan shall be no more than 5 (five) basis points
below the most recent Average SRP for the comparable New Secondary Market
Conforming Mortgage Loan previously calculated by HomeSide Lending. The
servicing released premiums paid to Banc One for each New Secondary Market
Nonconforming Mortgage Loan shall be no more than 10 (ten) basis points below
the most recent Average SRP for the comparable New Secondary Market
Nonconforming Mortgage Loan previously calculated by HomeSide Lending.
4.4. CUSTOMER SERVICE LEVELS.
(a) HomeSide Lending shall maintain a dedicated customer service liaison
department within its correspondent lending division to respond specifically to
Banc One issues and concerns.
(b) HomeSide Lending shall establish an advisory/monitoring committee, including
Banc One representatives, which shall meet as needed to address operational
issues, customer service issues for both servicing and secondary marketing, and
other internal and external customer concerns.
4.5. BANC ONE FUNCTIONS.
After the Closing Date, Banc One shall:
(a) Originate the New Mortgage Loans.
(b) Process the New Mortgage Loans.
(c) Perform all underwriting functions for which HomeSide Lending has delegated
authority from HomeSide Lending's investors, subject to the Delegated
Underwriting Agreement.
(d) Close and fund all New Mortgage Loans.
(e) Perform such post closing functions in the manner set forth in the
Correspondent Agreement.
(f) Obtain all FHA insurance for all FHA New Mortgage Loans and VA guarantees
for all VA New Mortgage Loans.
(g) Perform all completion control functions including, but not limited to,
following-up with missing/incorrect Mortgage Loan documents and with New
Mortgage Loans containing other problems.
(h) Perform all compliance review functions for all New Mortgage Loans.
(i) Perform quality control functions for all New Portfolio Mortgage Loans and
New Mortgage Loans insured by the FHA or guaranteed by the VA.
(j) Perform up-front quality control for all New Secondary Market Mortgage Loans
in the manner required by the applicable secondary market investor.
(k) Distribute interest rate information relating to the New Mortgage Loans to
Banc One's Mortgage Loan origination channels.
(l) Perform lock-in reconciliations for all New Mortgage Loans.
(m) Cause Banc One's secondary marketing liaison group to interface with
production and HomeSide Lending.
(n) Perform funding reconciliations for all New Mortgage Loans.
(o) Perform New Mortgage Loan document follow-up functions in the manner set
forth in HomeSide Lending's preferred seller manual.
4.6. HOMESIDE LENDING FUNCTIONS.
After the Closing Date, HomeSide Lending shall, in connection with the New
Secondary Market Mortgage Loans being delivered to HomeSide Lending by Banc One:
(a) Perform secondary marketing functions for the New Secondary Market Mortgage
Loans.
(b) Perform pipeline management and hedging functions for the New Secondary
Market Mortgage Loans.
(c) Perform shipping functions for all New Secondary Market Mortgage Loans.
(d) Perform post closing quality control functions for the New Secondary Market
Mortgage Loans, with the exception of services provided by Banc One under
Section 4.5 above, in the manner described in the Correspondent Agreement.
(e) Perform post closing quality control functions for the New Secondary Market
Mortgage Loans in the manner required by the applicable secondary market
investor.
(f) Perform record retention and retrieval functions for the New Secondary
Market Mortgage Loans.
(g) Perform legal review and payment functions for the New Secondary Market
Mortgage Loans under the terms of the Correspondent Agreement and Delegated
Underwriting Agreement.
4.7. FEES.
Banc One shall pay to HomeSide Lending the fees set forth in the Servicing
Agreement, Correspondent Agreement, and the Exhibits thereto.
4.8. WAREHOUSE MANAGEMENT.
As of the Effective Date the following shall apply to the Warehouse Mortgage
Loans closed prior to the Closing Date but not delivered to an investor:
4.8.1. Mortgage Loans Locked With Other Entities. The following shall apply to
such Warehouse Mortgage Loans that are Previously Committed Loans:
(a) HomeSide Lending shall not purchase any Previously Committed Loan to be sold
by Banc One on a servicing-released basis and shall not purchase the related
Servicing Rights.
(b) HomeSide Lending:
(i) shall not purchase the Previously Committed Loans to be sold by Banc One
on a servicing retained basis, and (ii) shall purchase the related Servicing
Rights.
Banc One shall cause:
(x) HomeSide Lending to be designated as the servicer of such Previously
Committed Loans; and
(y) such Servicing Rights to be assigned and delivered to HomeSide Lending.
4.8.2. Mortgage Loans to Be Included in Agency Securities. Subject to Section
3.6 above, HomeSide Lending:
(i) shall purchase the Servicing Rights relating to conforming Warehouse
Mortgage Loans that will be exchanged for mortgage backed securities or
participation certificates that have been committed for sale to a third
party; and
(ii) shall not purchase the Warehouse Mortgage Loan assets.
Banc One shall cause:
(x) HomeSide to be designated as the concurrent servicer of such Warehouse
Mortgage Loans; and
(y) such Servicing Rights to be assigned and delivered to HomeSide Lending
under the terms of the Correspondent Agreement.
Banc One shall be solely responsible for issuing and settling the related
mortgage backed securities. Any proceeds resulting from the settlement of such
mortgage backed securities shall be the sole property of Banc One.
4.8.3. Mortgage Loans Locked With HomeSide Lending. Banc One shall, in the
ordinary course of Banc One's business, deliver to HomeSide Lending all New
Secondary Market Mortgage Loans locked in with HomeSide Lending prior to the
Closing Date under the terms of the Correspondent Agreement.
4.8.4. Eligible Secondary Market Mortgage Loans Not Locked With Any Entity. Banc
One shall obtain a commitment from HomeSide Lending for New Secondary Market
Mortgage Loans that (i) do not have a rate lock commitment from any entity or
have not been committed for sale to any entity pursuant to an Existing
Agreement, (ii) do not have related mortgage backed securities or participation
certificates that have been committed for sale to a third party, and (iii)
satisfy HomeSide Lending's current Mortgage Loan product offerings and
guidelines. Banc One shall sell and deliver each such Secondary Market Mortgage
Loan to HomeSide Lending under the terms of the Correspondent Agreement.
4.8.5. Mortgage Loans Ineligible For Secondary Market Sale. HomeSide Lending
shall not purchase from Banc One any Warehouse Mortgage Loan that:
(a) as of the Closing Date, is not eligible for sale to the secondary market for
any reason, including, but not limited to, documentation deficiencies,
underwriting deficiencies, poor credit quality, delinquency status and fraud; or
(b) is closed one hundred and twenty (120) or more days prior to the Closing
Date.
Banc One may keep each such Warehouse Mortgage Loan as a retained asset, or sell
at its discretion.
4.8.6. Register Loans With HomeSide On Effective Date. On and after the
Effective Date, Banc One shall register and/or lock in Warehouse Mortgage Loans
with HomeSide Lending.
4.9. PIPELINE MANAGEMENT.
As of the Effective Date, the following shall apply to Banc One's Pipeline
Mortgage Loans that have not closed prior to the Closing Date:
4.9.1. New Portfolio Servicing Rights. Banc One shall sell and deliver the New
Portfolio Servicing Rights to HomeSide Lending under the terms of the PMSR Flow
Agreement.
4.9.2. New Secondary Market Mortgage Loans. New Secondary Market Mortgage Loans
rate locked with HomeSide Lending shall be delivered to HomeSide Lending under
the terms of the Correspondent Agreement.
4.9.3. Mortgage Loans Locked In With Another Entity. The following shall apply
to Pipeline Mortgage Loans that are Previously Committed Loans prior to the
Closing Date:
(a) HomeSide Lending shall not purchase any Previously Committed Loan to be sold
by Banc One on a servicing-released basis.
(b) HomeSide Lending shall purchase the Servicing Rights relating to the
Previously Committed Loans to be sold by Banc One on a servicing retained basis,
but shall not purchase such Previously Committed Loans. Banc One shall cause:
(x) HomeSide Lending to be designated as the servicer of such Previously
Committed Loans, and (y) such Servicing Rights to be assigned and delivered to
HomeSide Lending under the terms of the Correspondent Agreement.
4.9.4. Mortgage Loans That Are Not Rate Locked. HomeSide Lending shall not be
obligated to purchase any New Secondary Market Mortgage Loan that is not rate
locked with any entity prior to the Closing Date unless such New Secondary
Market Mortgage Loan (i) is rate locked with HomeSide Lending, and (ii)
satisfies HomeSide Lending's current Mortgage Loan product offerings and
guidelines.
4.9.5. Lock In Loans with HomeSide on Effective Date. On and after the Effective
Date, Banc One shall lock in Pipeline Mortgage Loans with HomeSide Lending.
4.10. REPURCHASE AND INDEMNIFICATION OBLIGATIONS.
4.10.1. Liability Under the Asset Purchase Agreement. Banc One shall be liable
for indemnification and repurchase obligations relating to the Existing Mortgage
Loans under the terms of the Asset Purchase Agreement.
4.10.2. Liability Under the Correspondent Agreement. Banc One shall be liable
for indemnification and repurchase obligations relating to the New Secondary
Market Mortgage Loans it sells to HomeSide Lending under the terms of the
Correspondent Agreement and Delegated Underwriting Agreement.
4.11. REPORTING.
HomeSide Lending shall furnish Banc One each month with the following management
reports, together with other reports usual and customary for HomeSide Lending
correspondents.
(a) Pipeline Report. All registered New Secondary Market Mortgage Loans, whether
floating rate or locked-in rate, together with all required information,
including, but not limited to, the rate lock expiration dates and prices.
(b) Problem Loan Report: All New Secondary Market Mortgage Loans received by
HomeSide Lending with exceptions that are tracked by HomeSide Lending's legal
review system.
(c) Document Tracking Report. Information determining whether follow-up mortgage
documents have been received by HomeSide Lending, including, but not limited to,
recorded security instruments and title policies.
(d) Quality Control Report. Monthly/ Quarterly quality control reports on a
sample of New Secondary Market Mortgage Loans for production by bank/branch with
an overall summary indicating trends, fraud and certain other matters mutually
agreed upon by the parties.
(e) New Loan Tracking Report. A report identifying at what stage in HomeSide
Lending's process a New Secondary Market Mortgage Loan may be identified (e.g.
identifying whether a New Secondary Market Mortgage Loan has been reviewed or
set-up on HomeSide Lending's servicing system).
4.12. TECHNOLOGY.
4.12.1 Banc One Computer Feeds. HomeSide Lending and Banc One will use their
best efforts to develop computer feeds (both ways) as quickly as possible to
prevent degradation of service relating to Banc One's pricing and HomeSide
Lending's funding time.
4.12.2 Automated Interfaces. HomeSide Lending shall provide automated interfaces
and reporting with Banc One and overall support consistent with the service
levels currently provided including, but not limited to, the following items:
(i) General Ledger feed and balancing reports (ii) monthly report of interest
accruals (iii) monthly report of non-accrual loans (iv) monthly accrual of net
deferred fees (v) call report schedule RC-C, RC-N and RI and (vi) monthly basic
loan data file. The parties shall mutually agree upon reasonable fees to be paid
by Banc One to HomeSide Lending for developing the capacity for automated
interface, based upon the actual hours worked by HomeSide Lending. If any such
interface is not functional as of the Effective Date, HomeSide Lending and the
Affiliate Mortgage Company shall in good faith cooperate with each other to
provide the reports and support described above on manual basis.
4.12.3 Banc One Retains Indianapolis Applications Support Group. Banc One shall
retain the Indianapolis applications support group and supported applications,
including but not limited to, LoanXchange.
4.12.4 Leverage Existing Technologies. Banc One and HomeSide Lending shall work
together to leverage existing technology relating to Mortgage Loan production
functions.
4.13. OPERATIONS.
4.13.1. Additional Operating Plan. At a time mutually acceptable to the parties,
HomeSide Lending shall provide Banc One with an operating plan reflecting the
terms described in Exhibit E to this Operating Agreement.
4.13.2. Correspondent Operations Manual. HomeSide Lending has provided Banc One
with a copy of HomeSide Lending's Correspondent Operations Manual, attached as
Exhibit F, which shall govern the operational issues between HomeSide Lending
and Banc One contained in the Correspondent Operations Manual.
4.14. SALE OF SERVICING RIGHTS.
HomeSide Lending may not sell Servicing Rights to the Portfolio Mortgage Loans
except in compliance with the provisions of this Section 4.14.
(a) HomeSide Lending shall not sell the Servicing Rights relating to the
Portfolio Mortgage Loans to any other party unless HomeSide Lending shall have
first offered to sell such Servicing Rights to Banc One at fair market value and
in connection with such offer shall have offered to subservice on commercially
reasonable terms.
(b) No lender which takes a security interest in the assets of HomeSide Lending
and no transferees of such a lender shall be bound by the provisions of this
Section 4.14.
4.15. NATURE OF RELATIONSHIP.
Both parties recognize the importance of maintaining their competitive
advantages in their businesses and understand that the success of each is
inextricably bound in the other. Beyond the responsibilities explicitly outlined
in this Operating Agreement, both parties agree to work together to attempt to
create synergies and develop innovations that can result in sustainable
competitive advantages for both. HomeSide Lending shall cooperate in good faith
with Banc One to respond promptly to any reasonable request made by Banc One
with respect to the enhancement of the services, products and systems offered by
HomeSide Lending consistent with HomeSide Lending's access to capital.
ARTICLE 5.
MISCELLANEOUS.
5.1. AFFILIATES EXECUTE AGREEMENTS.
5.1.1 Affiliates in General.
With the exception of an Acquired Affiliate, Banc One shall cause any of its
current or future Affiliates to execute agreements identical to the Ancillary
Agreements, in the event such Affiliate desires to engage in any mortgage
banking activity of a type which is the subject matter of such Ancillary
Agreements.
5.1.2. Acquired Affiliates.
On and after the Effective Date and subject to Section 5.1.4 below, Banc One
shall cause any Acquired Affiliate to execute agreements identical to the
Ancillary Agreements on the following conditions:
(a) With regard to Servicing Rights owned by any such Acquired Affiliate, Banc
One shall within 120 days of acquisition provide to HomeSide Lending an
independent valuation of the Servicing Rights at Banc One's cost. The
independent valuation shall be performed by an independent appraiser jointly
selected by Banc One and HomeSide Lending. HomeSide Lending shall then have 120
days thereafter to consider the valuation, including access to customary data
necessary to confirm the valuation. If HomeSide Lending does not agree in
writing to purchase the Servicing Rights at Banc One's valuation price by the
end of the aforesaid 120 days pursuant to a purchase agreement which shall be
reasonably acceptable to Banc One and HomeSide Lending, Banc One shall be
entitled to sell such Servicing Rights to any party in its sole discretion at a
price not less than that set forth in the independent evaluation unless pursuant
to a good faith, bona fide closed bid competitive auction in which HomeSide
Lending may participate.
(b) If the Acquired Affiliate is in the business of originating Mortgage Loans,
and HomeSide Lending elects to have such Acquired Affiliate execute Ancillary
Agreements for the purchase of Mortgage Loans and/or Servicing Rights from such
production, Banc One shall be entitled to a reasonable period of time (not to
exceed 120 days) to coordinate the transition of any origination activities into
deliveries under the Operating Agreement. HomeSide Lending agrees to reasonably
cooperate with Banc One in this transition.
(c) Banc One shall not be required to cause any Acquired Affiliate to execute
any Ancillary Agreement if such execution would constitute a material default
under any agreement that was entered into in good faith prior to the time that
Banc One entered into discussions for a transaction pursuant to which such
Acquired Affiliate became an Acquired Affiliate or that was entered into without
the intent or purpose, in whole or in part, of avoiding an obligation to enter
into any Ancillary Agreement.
5.1.3 Acquired Mortgage Banking Assets.
In the event Banc One acquires Servicing Rights in bulk pertaining to Mortgage
Loans (which are not excluded loans discussed in Section 3.7) after the Closing
Date, not in the context of an Acquired Affiliate or Excluded Affiliate
acquisition, Banc One shall offer to sell to HomeSide Lending the related
Servicing Rights in a fashion similar to that outlined in Section 5.1.2(a).
5.1.4. Excluded Affiliates. Banc One covenants that, so long as it does not
(a) merge, consolidate or otherwise combine any Excluded Affiliate with the
Affiliate Mortgage Company; or
(b) divert any Mortgage Loan production or origination from the Affiliate
Mortgage Company to any Excluded Affiliate;
then an Excluded Affiliate will not be required to sell any Mortgage Loans or
related Servicing Rights to HomeSide Lending, execute any agreement under
Section 5.1.2 above, or be bound by any other terms or conditions of this
Agreement.
Provided further, that in the event Banc One does merge, consolidate or
otherwise combine any Excluded Affiliate with the Affiliate Mortgage Company,
Banc One covenants that it shall thereafter for the balance of the term hereof
cause to be delivered to HomeSide Lending New Mortgage Loans and New Servicing
Rights in a percentage amount not less than the pro rata percentage set forth
below:
Where:
X = the dollar volume of retail originations of the Affiliate Mortgage Company
for the preceding 12 months prior to the merger, consolidation or combination;
Y = the dollar volume of retail originations of the Excluded Affiliate for the
preceding 12 months prior to such merger, consolidation or combination;
Then:
The minimum annual delivery for the balance of the term hereof shall be equal
to:
[X / (X+Y) ] x Annual combined dollar volume of annual retail originations for
the Affiliate Mortgage Company and the Excluded Affiliate together.
Furthermore, in the event Banc One does merge, consolidate or otherwise combine
any Excluded Affiliate with the Affiliate Mortgage Company, Banc One Shall cause
the Excluded Affiliate to execute any agreements required under Section 5.1.2.
5.2. CONTROLLING AGREEMENTS.
To the extent that the terms of the Marketing Agreement or the Asset Purchase
Agreement, on the one hand, are inconsistent with the terms of this Operating
Agreement on the other hand, the terms of the Marketing Agreement or the Asset
Purchase Agreement, as the case may be, shall control.
To the extent that the terms of this Operating Agreement are inconsistent with
the terms of the other Ancillary Agreements, the terms of this Operating
Agreement shall control.
5.3. SUCCESSORS.
This Operating Agreement shall inure to the benefit of and be binding upon the
parties to this Operating Agreement.
5.4. ASSIGNMENT AND DELEGATION.
No party may assign this Operating Agreement or delegate any of its functions
hereunder to any other party without the prior written consent of HomeSide
Lending or the applicable Banc One Affiliate; provided (i) such consent shall
not be unreasonably withheld, (ii) there shall be no material defaults under
the Ancillary Agreements, (iii) all Ancillary Agreements shall be assigned
together, as necessary and/or appropriate and (iv) the assignor shall remain
liable for the performance of the assignee. Notwithstanding the foregoing,
either party may assign and/or delegate, in whole or in part, any of its rights
under this Operating Agreement to any of its Affiliates without the prior
written consent of HomeSide Lending or Banc One.
5.5. FORCE MAJEURE.
Each party shall be excused for delays or errors hereunder to the extent that
such delays or errors are directly or indirectly caused by or results from an
occurrence commonly known as force majeure, including without limitation, any
act of God, governmental action, natural disaster, armed hostilities, floods,
power or technological failure or failure of essential equipment, strikes or
labor disturbances or any other circumstances beyond the reasonable control of
such party; provided, however, that each party represents and warrants that its
business resumption plan in the event of a force majeure is in compliance with
Agency guidelines and provided further that any party's failure to comply with
any Year 2000 compliance issue shall not be deemed to be an act of God. In the
event that a party's performance hereunder is affected by an event of force
majeure such party shall promptly notify the other party of the same, giving
reasonable full particulars thereof, and insofar as known, the probable extent
to which it will be unable to perform, or will be delayed in performing, its
obligations hereunder and shall use its best efforts to remove such force
majeure as quickly as possible.
5.6. TERM.
The term of this Operating Agreement shall be five (5) years from the Effective
Date.
This Operating Agreement may be extended for two (2) years if the extension
negotiations are completed at least six (6) months prior to the original
expiration date. After any such two (2) year extension, this Operating Agreement
is cancelable upon one hundred eighty (180) days' prior written notice which may
be given as early as one hundred eighty (180) days before the extended
expiration date.
The expiration of this Operating Agreement shall not cause the Servicing
Agreement or HomeSide Lending's right to service the Existing Mortgage Loans or
the New Mortgage Loans serviced (at the date of such expiration) under the
Servicing Agreement to terminate or otherwise expire.
5.7. TERMINATION.
This Operating Agreement may be terminated for any one of the following reasons:
5.7.1. HomeSide Lending's Financial Impairment. Banc One may terminate this
Operating Agreement immediately if HomeSide Lending becomes bankrupt or has its
status as an approved seller/servicer/mortgagee rescinded by an Agency.
5.7.2. HomeSide Lending's Failure to Perform. Banc One may terminate this
Operating Agreement immediately if:
(a) HomeSide Lending fails to satisfy specific written standards established by
the advisory/monitoring committee established under Section 4.4(b), as agreed
upon by the executive management of Banc One and HomeSide Lending, and HomeSide
Lending fails to cure such failure within one hundred twenty (120) days after
receiving formal written notice of such failure; or
(b) HomeSide Lending sells more than 35% (by number of Mortgage Loans) of the
Existing Servicing Rights. The following sales of Existing Servicing Rights
shall not be counted when calculating the sale percentage: (i) sales of Existing
Servicing Rights which HomeSide Lending considers to be substandard or costly to
service; (ii) sales of Existing Servicing Rights which are required to be sold
by a state or local housing authority which sales are not due to HomeSide
Lending's failure to properly service; and (iii) sales of Existing Servicing
Rights if Banc One's marketing rights pursuant to the Marketing Agreement are
expressly preserved.
5.7.3. Banc One's Failure to Perform. HomeSide Lending may, but shall not be
required to, terminate this Operating Agreement immediately if Banc One fails to
deliver at least one billion dollars ($1,000,000,000) of Servicing Rights during
each full calendar year of the Operating Agreement and interest rates on average
are less than twelve percent (12%) during such year, unless origination levels
increase to one billion dollars ($1,000,000,000) on an annualized basis after a
ninety (90)-day cure period following formal written notice of intent to
terminate.
5.7.4. Termination of Servicing Agreement. Notwithstanding the foregoing, Banc
One may terminate HomeSide Lending's right to service the Existing Portfolio
Mortgage Loans or the New Portfolio Mortgage Loans under the HomeSide Lending
Servicing Agreement only if:
(a) HomeSide Lending files for protection under any bankruptcy or similar law.
(b) The FHA suspends any of HomeSide Lending's approvals as an FHA approved
mortgagee; provided, however, that HomeSide Lending may cure any such suspension
within ninety (90) days after the business day on which HomeSide Lending
receives written notice of any such suspension.
(c) HomeSide Lending commits a material breach of its obligations under the
Servicing Agreement; provided, however, that Banc One must first give HomeSide
Lending written notice that Banc One has discovered such a material breach.
HomeSide Lending may cure any such breach within one hundred and twenty (120)
days after the business day on which HomeSide Lending receives such written
notice.
HomeSide Lending may terminate the Servicing Agreement for any reason upon one
hundred eighty (180) days' prior written notice, but only after termination of
this Operating Agreement.
Subject to the rights of any secured party relating to HomeSide Lending's line
of credit, which rights HomeSide Lending and Banc One acknowledge, HomeSide
Lending shall, upon notice that the Servicing Agreement is being terminated: (a)
sell to Banc One the Servicing Rights to the Existing Portfolio Mortgage Loans
and New Portfolio Mortgage Loans for the then current fair market value of such
Servicing Rights as determined by an independent appraiser mutually acceptable
to the HomeSide Lending and Banc One, or (b) if Banc One declines to purchase
such Servicing Rights, then HomeSide Lending shall negotiate the sale and
transfer of such Servicing Rights to a third party servicer selected by HomeSide
Lending and approved by Banc One which approval shall not be unreasonably
withheld. The "fair market value" of the Servicing Rights shall be determined by
an independent appraiser mutually acceptable to HomeSide Lending and Banc One
with respect to the Servicing Rights sold pursuant to this Section 5.7.4.
HomeSide Lending shall be entitled to the related purchase price, less any costs
or expenses incurred by Banc One in relation to such transfer.
5.7.5. Effect of Termination. Termination of this Operating Agreement or any of
the other Ancillary Agreements shall not affect any of the parties' covenants,
obligations or representations relating to actions or inactions before the
termination date. Without limiting the above, the parties' rights and
obligations relating to any indemnification or repurchase shall survive the
termination of this Operating Agreement or the other Ancillary Agreements in
accordance with the terms thereof.
5.8. NOTICES.
All notices, requests, demands and all other notices and other communications
required or permitted to be given under this Operating Agreement shall be in
writing and shall be deemed given if delivered personally, transmitted by
facsimile (and telephonically confirmed), mailed by registered or certified mail
with postage prepaid and return receipt requested, or sent by commercial
overnight courier, courier fees prepaid, to the parties at the following
addresses:
If to HomeSide Lending to:
Xxxx X. Xxxxxx
President
HomeSide Lending, Inc.
0000 Xxxxxxxxxx Xxx
Xxxxxxxxxxxx, XX 00000
With a copy to:
Xxxxxx X. Xxxxxx
General Counsel
HomeSide Lending, Inc.
0000 Xxxxxxxxxx Xxx
Xxxxxxxxxxxx, XX 00000
If to Banc One, to:
Xxxxxx X. Xxxxxx
President and CEO
Banc One Mortgage Corporation
IN1-0144
Bank One Center/Tower
000 Xxxxxxxx Xxxxxx 00xx Xxxxx
Xxxxxxxxxxxx, XX 00000-0000
With a copy to:
Xxxxxx X. Xxxxxxx
Senior Vice President and General Counsel
Banc One Corporation
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxx, Xxxx 00000-0000
or to such other address as HomeSide Lending or Banc One shall have specified in
writing to the other.
5.9. AMENDMENT.
No amendment or modification to this Operating Agreement shall be valid unless
executed in writing by HomeSide Lending and Banc One.
5.10. WAIVER.
No waiver of any right or obligation under this Operating Agreement by any party
on any occasion shall be deemed to operate as a waiver on any subsequent
occasion.
5.11. PROVISIONS SEVERABLE.
If any provision of this Operating Agreement shall be held to be void or
unenforceable by any court of competent jurisdiction or any governmental
regulatory agency, such provision shall be considered by all parties to be
severed from this Operating Agreement. All remaining provisions of this
Operating Agreement shall be considered by the parties to remain in full force
and effect.
5.12. GOVERNING LAW.
This Operating Agreement is entered into in the state of Florida. Its
construction and rights, remedies and obligations arising by, under, through, or
on account of it shall be governed by the laws of the State of Florida excluding
its conflict of laws rules and shall be deemed performable in the State of
Florida.
5.13. NO AGENCY OR JOINT VENTURE CREATED.
This Operating Agreement shall not be deemed to constitute HomeSide Lending and
Banc One as partners or joint venturers, nor shall HomeSide Lending or Banc One
be deemed to constitute the other as its agent.
5.14. SECTION HEADINGS.
Section headings are intended only to assist in the organization of this
Operating Agreement and do not in any way limit or otherwise define the rights
and liabilities of the parties.
5.15. ENTIRE AGREEMENT.
This Operating Agreement constitutes the entire agreement among the parties and
supersede all other prior communications and understandings, written or oral,
among the parties with respect to the subject matter of this Operating
Agreement. There are no contemporaneous oral agreements.
5.16. COUNTERPARTS.
This Operating Agreement may be executed in multiple counterparts each of which
shall be deemed an original. Regardless of the number of counterparts, the total
shall constitute only one agreement.
5.17. PLURALS AND GENDER.
In construing the words of this Operating Agreement, plural constructions shall
include the singular, and singular constructions shall include plural. No
significance shall be attached to whether a pronoun is masculine, feminine, or
neuter.
5.18. INVESTOR ACKNOWLEDGMENT AGREEMENTS.
Upon HomeSide Lending's request, Banc One and its Affiliates shall execute one
or more investor acknowledgment agreements in which Banc One acknowledges the
security interest and certain other related rights in the Existing Portfolio
Servicing Rights and New Portfolio Servicing Rights held by creditors of
HomeSide Lending and/or HomeSide, Inc. Each such investor acknowledgment
agreement shall be in such form as shall be satisfactory to such creditors.
IN WITNESS WHEREOF, HomeSide Lending and Banc One, as of the day first set forth
above, have caused this instrument to be signed on their behalf by their duly
authorized officers.
HOMESIDE LENDING, INC.
By:/s/ Xxxx X. Xxxxxx
------------------
Xxxx X. Xxxxxx
--------------
(Print Name)
Title: President
---------
BANC ONE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------
Xxxxxxx X. Xxxxxxxx
-------------------
(Print Name)
Title:Senior Executive Vice President
-------------------------------
BANC ONE MORTGAGE CORPORATION
By: Xxxx X. Xxxxxx
--------------
Xxxx X. Xxxxxx
--------------
(Print Name)
Title: Executive Vice President
------------------------
EXHIBIT A
Correspondent Loan Purchase Agreement
EXHIBIT B
PMSR Flow Agreement
EXHIBIT C
Servicing Agreement
EXHIBIT D
Secondary Marketing Buy Price Policy
EXHIBIT E
Operating Plan
EXHIBIT F
Correspondent Operations Manual
EXHIBIT G
Correspondent Lender Delegated Underwriting Agreement
