1
EXHIBIT 10.9
MASTER REPURCHASE AGREEMENT GOVERNING
PURCHASES AND SALES OF MORTGAGE LOANS
Dated as of October 15, 1997
Between:
NOMURA ASSET CAPITAL CORPORATION, as Buyer
and
CMG FUNDING CORP., as Seller
1. APPLICABILITY
From time to time the parties hereto may enter into transactions in
which CMG Funding Corp. ("Seller") agrees to transfer to Nomura Asset
Capital Corporation ("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 not later than thirty days
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.
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 commenced by another; (ii) 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 in writing by such party or an Affiliate
of such party's or such Affiliate's inability to pay its debts or
discharge its obligations as they become due or mature; or (vi) any
governmental authority or agency or any person, agency or entity acting
or purporting to act under governmental authority shall have taken any
action to condemn, seize or appropriate, or to assume custody or control
of, all or any substantial part of the property of such party or
2
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, as amended from time to time.
"Assignment of Takeout" means a collateral assignment of a Takeout
Commitment executed by the Seller for the benefit of the Buyer in the
form of Exhibit VI.
"B/C Mortgage Loan" means a residential mortgage loan which conforms to
the representations and warranties set forth in Exhibit V.
"Business Day" means a day other than (i) a Saturday or Sunday, or (ii)
a day in which the New York Stock Exchange or Federal Reserve 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 Collateral Amount Percentage to the
Market Value of the Purchased Mortgage Loans for such Transaction.
"Collateral Amount Percentage" means 98%.
"Collateral Deficit" has the meaning specified in Section 4(a).
"Committed Amount" has the meaning specified in Section 3(e).
"Commitment Fee" has the meaning specified in Section 3(e).
"Confirmation" has the meaning specified in Section 3(a).
"Custodial Agreement" means that custodial agreement, dated as of the
date hereof by and among, Buyer, Seller and Custodian.
"Custodial Delivery" means the form executed by the Seller in order to
deliver the
2
3
Mortgage File to Buyer or its designee (including the Custodian)
pursuant to Section 7(c), a form of which is attached hereto as Exhibit
II.
"Custodian" means LaSalle National Bank, as custodian under the
Custodial Agreement.
"Defaulted Mortgage Loan" means a mortgage loan that is in foreclosure
or bankruptcy, and which otherwise conforms to the representations and
warranties set forth in Exhibit V.
"Event of Default" has the meaning specified in Section 13.
"Hospital Loans" means a mortgage loan with respect to which one or more
of the documents constituting the Mortgage File, other than the
documents required by Sections 7(c)(i), 7(c)(v) and 7(c)(xiii) relating
to such Mortgage Loan, may be missing or defective, and which otherwise
conforms to the representations and warranties set forth in Exhibit V.
"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 or other distributions
payable thereon less any related servicing fee(s) charged by the
Servicer.
"Maximum Purchased Amount" has the meaning specified in Section 3.
"Market Value" means as of any date with respect to any Mortgage Loans,
the price at which such Mortgage Loans could readily be sold as
reasonably determined in good faith by Nomura; provided, however, that
in making such determination, Nomura may, in its sole discretion, not
take into account (i) any B/C Mortgage Loan which becomes sixty (60) or
more days delinquent for which all delinquent payments shall not have
been advanced by the related Servicer, and which has not become subject
to a Transaction hereunder as a Non-Securitizable Mortgage Loan pursuant
to Section 3(g), below, or (ii) any Mortgage Loan with respect to which
there is a breach of a representation, warranty or covenant made by
Seller in this Agreement or the Custodial Agreement that materially
adversely affects Buyer's interest in such Mortgage Loan and which
breach has not been cured.
"Mortgage" means a mortgage, deed of trust, deed to secure debt or other
instrument, creating a valid and enforceable first lien on or first
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(c), together with any additional documents and information
required to be delivered to Buyer
3
4
or its designee (including the Custodian) pursuant to this Agreement.
"Mortgage Loan" means non-securitized whole loans, namely: (i) B/C
Mortgage Loans; (ii) Non-Securitizable Mortgage Loans; and (iii) such
other types of non-securitized whole loans as may be agreed upon 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 which includes
the information set forth in Exhibit II.
"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.
"Nomura" means Nomura Asset Capital Corporation, a corporation organized
under the laws of the State of Delaware.
"Non-Performing Mortgage Loan" means a mortgage loan on which the
principal of and/or interest is past due and unpaid for sixty (60) days
or more, and which otherwise conforms to the representations and
warranties set forth in Exhibit V.
"Non-Securitizable Mortgage Loan" means B/C Mortgage Loans which are:
(i) Non-Performing Mortgage Loans; (ii) Defaulted Mortgage Loans; and
(iii) Hospital Loans.
"Periodic Payment" has the meaning specified in Section 5(b).
"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: (i) with respect to B/C Mortgage Loans, 30 day
LIBOR plus 110 basis points, and (ii) with respect to Non-Securitizable
Mortgage Loans, 30 day LIBOR plus 325 basis points. 30 day LIBOR shall
be the rate set forth as such on page 12 of
4
5
telerate at 10:00 a.m. (New York time) two Business Days prior to each
Purchase Date.
"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 the Buyer or its designee (including the
Custodian) as specified in the Confirmation.
"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); provided however, that the Purchase
Price of any Mortgage Loan previously sold to the Seller by Nomura in
transactions unrelated to Transactions under this Agreement shall not
exceed 103% of the outstanding principal balance of such Mortgage Loan,
and the Purchase Price of any other Mortgage Loan shall not exceed 102%
of the outstanding principal balance of such Mortgage Loan.
"Purchased Mortgage Loans" means the Mortgage Loans sold by Seller to
Buyer in a Transaction, any Additional Loans and any Substituted
Mortgage Loans.
"Replacement Assets" has the meaning specified in Section 14(b).
"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 14, as specified in the
Confirmation.
"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.
"Seller" means CMG Funding Corp., a corporation organized under the laws
of the State of Delaware.
"Servicer" has the meaning specified in Section 25.
"Seller Release" means, if there is no Warehouse Lender with respect to
a Mortgage Loan, a letter from the Seller to Buyer, substantially in the
form of an exhibit to the Custodial Agreement, confirming such fact and
releasing any and all right, title and interest of the Seller in such
Mortgage Loan.
5
6
"Servicing Agreement" has the meaning specified in Section 25.
"Servicing Records" has the meaning specified in Section 25.
"Substituted Mortgage Loans" means any Mortgage Loans substituted for
Purchased Mortgage Loans in accordance with Section 9 hereof.
"Takeout Commitment" means an agreement by an investor or financial
institution to purchase Mortgage Loans on a forward delivery basis.
"Takeout Investor" means the investor or financial institution which
agrees to purchase Mortgage Loans pursuant to a Takeout Commitment.
"Termination Date" has the meaning specified in Section 19.
"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.
"Underwriting Guidelines" means the underwriting guidelines of the
Seller, dated August 15, 1997, as may be amended from time to time with
the approval of Buyer, or such other guidelines as approved by Buyer.
"Warehouse Lender" means any lender providing financing to the Seller
for the purpose of originating Mortgage Loans and having a security
interest in or lien on the Mortgage Loans as collateral for the
obligations of the Seller to such lender with respect to the financing.
"Warehouse Lender Release" means a letter from each Warehouse Lender, or
the collateral or credit agent on behalf of each Warehouse Lender, as
applicable, having a security interest in or lien on a Mortgage Loan,
substantially in the form of an exhibit to the Custodial Agreement,
addressed to Buyer, releasing any and all right, title and interest of
the Warehouse Lender in such Mortgage Loan.
3. INITIATION; CONFIRMATION; TERMINATION
(a) An agreement to enter into a Transaction may be entered into orally
or in writing at the initiation of either Buyer or Seller; provided,
however, that Buyer shall have no obligation to enter into any
Transaction hereunder, except as provided in subsection (e), below. If
the parties agree to enter into a Transaction at either Buyer's or
Seller's initiation, then in any event, Buyer shall confirm the terms of
each Transaction by issuing a written confirmation to the Seller
promptly after the parties enter into such Transaction
6
7
containing the terms set forth on 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, (iv) the Pricing
Rate applicable to the Transaction, and (v) may contain additional terms
or conditions not inconsistent with this Agreement. After receipt of the
Confirmation, the Seller shall, subject to the provisions of subsection
(c) below, sign the Confirmation and promptly return it to Buyer.
(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 the Seller no more than one (1) Business Day
after the date the Confirmation was received by the Seller or unless a
corrected Confirmation is sent by Buyer. An objection sent by the Seller
must state specifically that the writing is an objection, must specify
the provision(s) being objected to by the 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 one (1) Business Day
after the Confirmation was received by the Seller.
(d) On the Repurchase Date, Buyer will terminate the Transaction and
will effect 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 (including the Custodian)
at Seller's expense on the Repurchase Date.
(e) In consideration of a fee paid by Seller to Buyer in the amount
equal to 20 basis points multiplied by the Committed Amount (the
"Commitment Fee"), Buyer shall, for the term of this Agreement, commit
to purchase Mortgage Loans from the Seller so long as: (i) the aggregate
Purchase Price for Non-Securitizable Mortgage Loans purchased by Buyer
at any time under this Agreement does not exceed 10% of the aggregate
Purchase Price for all Mortgage Loans purchased by Buyer at any time
under this Agreement; (ii) the aggregate Purchase Price for all Mortgage
Loans purchased by Buyer at any time under this Agreement (the "Maximum
Purchased Amount") does not exceed $ 100,000,000 (the "Committed
Amount"); (iii) the Mortgage Loans comply with the representations and
warranties set forth herein; (iv) no Event of Default has occurred or is
continuing; and (v) Seller gives Buyer two Business Day notice prior to
entering a Transaction. Buyer may purchase, in its sole discretion,
additional Mortgage Loans which causes the Maximum Purchased Amount to
exceed the Committed Amount.
(f) At the end of each three-month period (commencing on the date three
months after
7
8
the date of this Agreement). Seller shall pay to Buyer a non-utilization
fee in an amount equal to one-quarter of 25 basis points multiplied by
the positive difference, if any, between the Committed Amount and the
average daily balance of the aggregate Purchase Price of all Purchased
Mortgage Loans purchased by Buyer hereunder for such three month period.
(g) Any Mortgage Loan purchased by the Buyer hereunder as a B/C Mortgage
Loan that becomes sixty (60) or more days delinquent subsequent to the
Purchase Date of the related Transaction hereunder, shall be subject to
such Transaction as a Non-Performing Mortgage Loan, provided, however,
that the aggregate Purchase Price for all Non-Securitizable Mortgage
Loans purchased by Buyer at any time under this Agreement shall not
exceed IO% of the aggregate Purchase Price for all Purchased Mortgage
Loans.
4. COLLATERAL AMOUNT MAINTENANCE
(a) If at any time the Repurchase Price of Purchased Mortgage Loans
subject to a Transaction is greater than the Collateral Amount for such
Transaction (a "Collateral Deficit"), then Buyer may by notice to Seller
require Seller, to transfer to Buyer or its designee (including the
Custodian) (at the Buyer's option) Mortgage Loans or cash ("Additional
Loans"), so that the Repurchase Price shall be no greater than the
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
10:00 a.m. (New York time) on a Business Day must be met not later than
4:00 p.m. (New York time) on the Business Day on which the notice was
given. Any notice given on a Business Day after 10:00 a.m. (New York
time) shall be met not later than twenty-four hours following such
notice, unless such day is not a Business Day, in which case such notice
shall be met no later than 10:00 a.m. (New York time) on the next
Business Day. The failure of Buyer, on any one or more occasions, to
exercise its rights under subsection (a) of this Section shall not
change or alter the terms and conditions to which this Agreement is
subject or limit the right of the Buyer to do so at a later date. Buyer
agrees that a failure or delay to exercise its rights under subsection
(a) of this Section shall not limit its rights under this Agreement or
otherwise existing by law or in any way create additional rights for
the Seller.
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,
Buyer agrees that (i) if a Servicer is in place for the Purchased
Mortgage Loans, Servicer shall continue to remit Income to Seller, or
(ii) if Seller is the servicer of the Purchased Mortgage Loans, Seller
is permitted
8
9
to retain the Income, until and unless Buyer directs Servicer or Seller,
as the case may be, to hold such Income in a segregated account for and
on behalf of Buyer and/or to remit such Income directly to Buyer.
(b) Notwithstanding that Buyer and Seller intend that the Transactions
hereunder be sales to Buyer of the Purchased Mortgage Loans, Seller
shall pay to Buyer the accreted value of the Price Differential (less
any amount of such Price Differential previously paid by Seller to
Buyer) (each such payment, a "Periodic Payment") on the first Business
Day of each month.
(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
The Buyer and the Seller intend that the Transactions hereunder be sales
to the Buyer of the Purchased Mortgage Loans and not loans from the
Buyer to the Seller secured by the Purchased Mortgage Loans. However, in
order to preserve the 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
Agreements, Servicing Records, insurance relating to the Mortgage Loans,
Income, custodial accounts and escrow accounts relating to the Mortgage
Loans and any other contract rights (including the right to receive
principal and interest payments with respect to the Mortgage Loans and
the right to enforce such payments), general intangibles and other
assets relating to the Mortgage Loans or any interest in the Mortgage
Loans, the servicing of the Mortgage Loans (including and the right to
contract for servicing), securities backed by or representing an
interest in such Mortgage Loans, Takeout Commitments and any other
property of Seller held from time to time by Buyer or its Affiliates
(collectively, the "Collateral").
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 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 the Buyer or
its designee (including the Custodian) of the Purchased Mortgage Loans
relating to each Transaction
9
10
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. Upon transfer
of the Mortgage Loans to Buyer as set forth in Paragraph 3(a) of this
Agreement and until termination of any Transactions as set forth in this
Agreement, record title in the name of Seller to each Mortgage Loan
shall be retained by Seller in trust, for the benefit of Buyer, for the
sole purpose of facilitating the servicing and the supervision of the
servicing of the Mortgage Loans by Seller in accordance with Section 25
hereof.
(c) In connection with such sale, transfer, conveyance and assignment,
on or prior to each Purchase Date, the Seller shall deliver or cause to
be delivered and released to Buyer or its designee (including the
Custodian), prior to Buyer's purchase therefor, the following original
documents (the "Mortgage File"), pertaining to each of the Purchased
Mortgage Loans identified in the Custodial Delivery delivered therewith:
(i) the original Mortgage Note bearing all intervening
endorsements, endorsed "Pay to the order of _________, without
recourse" and signed in the name of the Seller by an authorized
officer (in the event that the Mortgage Loan was acquired in a
merger, the signature must be in the following form: "[owner],
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: "[owner], formerly known as [previous name]";
(ii) the original of any guarantee executed in connection with
the Mortgage Note (if any);
(iii) the original Mortgage with evidence of recording thereon
or copies certified by Seller to have been sent for recording;
(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 Seller; in the event that the
Mortgage Loan was acquired in a merger, the signature must be in
the following form: "[owner], 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: "[owner], formerly
known as [previous name]";
(vi) the originals of all intervening assignments of mortgage
that complete the
10
11
chain of ownership from the original owner to the Seller, with
evidence of recording thereon or copies certified by Seller to
have been sent for recording;
(vii) the original fire and casualty insurance policy covering
the mortgaged property which is an amount at least equal to the
outstanding principal balance of the Mortgage Loan, as well as
the original insurance against flood hazards if the Mortgaged
Property is an area identified by the Federal Emergency
Management Agency as having special flood hazards;
(viii) with respect to any Mortgage Loan that has been
outstanding for five (5) years or less, 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;
(ix) a copy of the UCC-1 Financing Statement, certified as true
and correct by the Seller or recording agent, stating Seller as
Secured Party, together with an assignment of UCC-1 executed by
Seller with the secured party in blank, but if the UCC-1 does
not name "Seller" as the secured party, the Mortgage File shall
contain all intervening assignments that complete the chain of
assignment from the original secured party to the Seller, and,
if provided, a UCC-3 Continuation Statement;
(x) the original PMI Policy or certificate, if any;
(xi) attorney's opinion of title and abstract of title or the
original mortgagee title insurance policy, or if the original
mortgagee title insurance policy has not been issued, the
preliminary title report, binder or commitment to insure;
(xii) the original of any security agreement, chattel mortgage
or equivalent document executed in connection with the Mortgage;
(xiii) either a Seller Release or a Warehouse Lender Release
from any Warehouse Lender having a security interest in a
Mortgage Loan, as appropriate; and
(xiv) any other item which may constitute part of the Mortgage
File.
(d) With respect to Hospital Loans, on or prior to each Purchase Date,
the Seller shall deliver or cause to be delivered and released to Buyer
or its designee (including the Custodian), prior to Buyer's purchase
therefor, at a minimum, the documents listed in Sections 7(c) (i),
7(c)(v) and 7(c)(xiii), above.
(e) Prior to the first Transaction, Seller shall deliver to Buyer the
following which shall
11
12
be held in escrow by the Buyer until the termination of this Agreement
or the occurrence of an Event of Default:
(i) a fully executed 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;
(ii) a fully executed irrevocable letters of instructions to
Servicers or Master Servicers, substantially in the form of
Exhibit IV attached hereto, directing such Servicers or Master
Servicer to make all payments of Income directly to Buyer; and
(iii) a fully executed Assignment of Takeout, substantially in
the form of Exhibit VI attached hereto, directing such Takeout
Investor (i) to accept delivery of the Mortgage Loans subject
thereto from Buyer and (ii) to pay Buyer the purchase price for
the Mortgage Loans set forth in the Takeout Commitment.
(e) Buyer may deposit the Mortgage Files representing the Purchased
Mortgage Loans, or direct that the Mortgage Files be deposited directly,
with a designee acting in the capacity of bailee for the Buyer. If the
Mortgage Files are delivered to Buyer or its designee, Buyer or its
designee shall during the term of this Agreement exercise reasonable and
prudent care in the maintenance thereof. If the Mortgage Loan documents
are delivered to Custodian, the Mortgage Files shall be maintained in
accordance with the Custodial Agreement. The Seller understands and
agrees that the Custodian shall have no responsibility to the Seller,
including without limitation any responsibility to keep the Seller
informed of any changes in the status of such Mortgage Files or in the
Buyer's instructions with respect thereto, except as explicitly set
forth in the Custodial Agreement.
(f) Any Mortgage Files not delivered to Buyer or its designee (including
the Custodian) are and shall be held in trust by the Seller or its
designee for the benefit of the Buyer as the owner thereof. The 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
(including the Custodian). The possession of the Mortgage File by the
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. Each Mortgage File retained or held by the Seller or its designee
shall be segregated on the Seller's books and records from the other
assets of the Seller or its designee and the books and records of the
Seller or its designee shall be marked appropriately to reflect clearly
the sale of the related Purchased Mortgage Loan to the
12
13
Buyer. The Seller or its designee shall release its custody of the
Mortgage File only in accordance with written instructions from the
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. HYPOTHECATION OR PLEDGE OF PURCHASED MORTGAGE LOANS
Title to all Purchased Mortgage Loans shall pass to Buyer and Buyer
shall have free and unrestricted use of all Purchased Mortgage Loans.
Nothing in this Agreement shall preclude Buyer from engaging in
repurchase transactions with the Purchased Mortgage Loans or otherwise
pledging, repledging, hypothecating, or rehypothecating the Purchased
Mortgage Loans, but no such transaction shall relieve Buyer of its
obligations to transfer Purchased Mortgage Loans to Seller pursuant to
Section 3. Nothing contained in this Agreement shall obligate Buyer to
segregate any Purchased Mortgage Loans delivered to Buyer by Seller.
9. SUBSTITUTION
(a) Subject to Section 9(b), Seller may, upon one (1) Business Day's
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.
(b) Notwithstanding anything to the contrary in this Agreement, Seller
may not substitute other Mortgage Loans for any Purchased Mortgage Loans
if (i) after taking into account such substitution, a Collateral Deficit
were to occur, or (ii) Buyer does not consent to such substitution.
10. REPRESENTATIONS
(a) As of each Purchase Date, 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 (or, if agreed in
writing in advance of any Transaction by the other party hereto, as
agent for a disclosed principal); (iii) the person signing this
Agreement on its behalf is duly authorized to do so on its behalf (or on
behalf of any such disclosed principal); (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
13
14
authorization has been or will, prior to the 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) The Seller represents and warrants to the Buyer that as of the
Purchase Date for the purchase of any Purchased Mortgage Loans by the
Buyer from the Seller and as of the date of this Agreement and any
Transaction hereunder and at all times while this Agreement and any
Transaction thereunder is in full force and effect:
(i) ORGANIZATION. The Seller is duly organized, validly existing
and in good standing under the laws and regulations of the state
of Seller's organization and is duly licensed, qualified, and in
good standing in every state where Seller transacts business and
in any state where any Mortgaged Property is located if the laws
of such state require licensing or qualification in order to
conduct business of the type conducted by the Seller.
(ii) NO LITIGATION. There is no action, suit, proceeding,
investigation, or in arbitration pending or threatened against
the Seller which may result in any material adverse change in
the business, operations, financial condition, properties, or
assets of the Seller, or which may have an adverse effect on the
validity of this Agreement or the Purchased Mortgage Loans
Assets or any action taken or to be taken in connection with the
obligations of the Seller contemplated herein.
(iii) NO BROKER. The Seller has not dealt with any broker,
investment banker, agent, or other person, except for the Buyer,
who may be entitled to any commission or compensation in
connection with the sale of Purchased Mortgage Loans pursuant to
this Agreement; provided, that if Seller has dealt with any
broker, investment banker, agent, or other person, except for
the Buyer, who may be entitled to any commission or compensation
in connection with the sale of Purchased Mortgage Loans pursuant
to this Agreement, such commission or compensation shall have
been paid in full by Seller.
(iv) GOOD TITLE TO COLLATERAL. Purchased Mortgage Loans shall be
free and clear of any lien, encumbrance or impediment to
transfer, and the Seller represents
14
15
and warrants the foregoing to the Buyer and represents and
warrants that it has good, valid and marketable title or right
to sell and transfer such Purchased Mortgage Loans to the Buyer.
(v) DELIVERY OF MORTGAGE FILE. The Mortgage Note, the Mortgage,
the Assignment of Mortgage and any other documents required to
be delivered under this Agreement or the Custodial Agreement for
the Mortgage Loans have been delivered to the Custodian. The
Seller or its designee is in possession of a complete, true and
accurate Mortgage File, except for such documents the originals
of which have been delivered to the Custodian, and except for
such documents relating to Hospital Loans that are defective or
missing, as permitted under Section 7 of this Agreement.
(vi) SELECTION PROCESS. The Purchased Mortgage Loans were
selected from among the outstanding mortgage loans in the
Seller's portfolio as to which the representations and
warranties set forth in this Agreement could be made and such
selection was not made in a manner so as to affect adversely the
interests of the Buyer.
(vii) ADDITIONAL REPRESENTATIONS AND WARRANTIES BY INSURED
DEPOSITORY INSTITUTIONS. If Seller is an "insured depository
institution" as that term is defined in Section 1813(a) of Title
12 of the United States Code, as amended, Seller makes the
following additional representations and warranties:
(A) This Agreement between Buyer and Seller conforms to all
applicable statutory requirements. This Agreement is (1)
executed contemporaneously with the agreement reached by Buyer
and Seller, (2) approved by a specific corporate or banking
association resolution by the Seller's board of directors, which
approval shall be reflected in the minutes of said board, and
(3) continuously, from the time of its execution, an official
record of the Seller. A copy of such resolution, certified by a
vice president or higher officer of Seller has been provided to
Buyer.
(B) Seller will maintain a copy of this Agreement and each
Confirmation in its official books and records and shall make
same available for Buyer's inspection and copying on one
Business Day's notice.
(C) The aggregate amount of the Transactions outstanding as of
any date between Buyer and Seller shall not exceed any
restrictions or limitations imposed by the board of directors of
Seller.
(c) The Seller represents and warrants to the Buyer that each Mortgage
Loan sold
15
16
hereunder and each pool of Mortgage Loans sold in a Transaction
hereunder: (i) was underwritten in accordance with the Underwriting
Guidelines, and (ii) conforms to the representations and warranties set
forth in Exhibit V attached hereto and such additional representations
and warranties provided in the Confirmation, if any; and that each
Mortgage Loan delivered hereunder as Additional Loans or Substituted
Mortgage Loans: (i) was underwritten in accordance with the Underwriting
Guidelines, and (ii) conforms to the representations and warranties set
forth in Exhibit V hereto and the Confirmation, if any. Buyer may in its
sole discretion waive any of the representations and warranties set
forth in Exhibit V attached hereto; provided, that such waiver must be
set forth in the related Confirmation. It is understood and agreed that
the representations and warranties set forth in Exhibit V hereto and the
Confirmation, if any, shall survive delivery of the respective Mortgage
File to Buyer or its designee (including the Custodian).
(d) On the Purchase Date for any Transaction, Buyer and Seller shall
each be deemed to have made all the foregoing representations with
respect to itself as of such Purchase Date.
11. NEGATIVE COVENANTS OF THE SELLER
On and as of the date of this Agreement and each Purchase Date and until
this Agreement is no longer in force with respect to any Transaction,
the Seller covenants that it will not:
(a) take any action which would directly or indirectly impair or
adversely affect the 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;
(c) without Buyer's prior consent, Seller and those acting on behalf of
Seller shall not amend or modify, or waive any term or condition of, or
settle or compromise any claim in respect of, any item of the Purchased
Mortgage Loans or any related rights.
12. AFFIRMATIVE COVENANTS OF THE SELLER
(a) Seller covenants that it will promptly notify Buyer of any material
adverse change in its business operations and/or financial condition,
provided, however, that nothing in this Section 12 shall relieve Seller
of its obligations pursuant to any other Section of this Agreement.
(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
16
17
10.
(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, using its best
efforts to obtain the Servicer's signature (if the Servicer's signature
is necessary) and file such UCC 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.
(e) Seller shall notify Buyer immediately 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 warrants and will defend the right, title and interest of
Buyer in and to all Collateral against all adverse claims and demands.
(g) Seller shall repurchase or cause the repurchase of any Mortgage Loan
within 180 days of the initial Purchase Date of such Mortgage Loan.
(h) Seller shall maintain tangible net worth (defined as net worth plus
subordinated debt) in an amount not less than $1.25 million.
(i) Seller shall maintain, during the term of this Agreement, a
financing line with ContiFinancial Corporation for an amount not less
than $10,000,000, secured by residual classes of securities backed by
mortgage loans sold by Seller into securitization pools subsequent to
the date hereof
(j) Seller shall certify in writing to Buyer on a quarterly basis,
commencing ninety (90) days from the date hereof, that Seller is in
compliance with all of the financial covenants contained in this
Agreement and any other agreement or instrument evidencing indebtedness
of the Seller for borrowed money in excess of $1,000,000.
13. EVENTS OF DEFAULT
(a) If any of the following events (each an "Event of Default") occur,
the Seller and Buyer shall have the rights set forth in Section 14, as
applicable:
(i) Seller fails to pay the Repurchase Price in full when due or
Buyer fails to deliver the Mortgage Loans against full payment
therefor;
17
18
(ii) Seller or Buyer fails to satisfy or perform any material
obligation or covenant under this Agreement (including any
breach of the obligations set forth in Section 4);
(iii) an Act of Insolvency occurs with respect to Seller or
Buyer;
(iv) any representation made by Seller or Buyer shall have been
incorrect or untrue in any material respect when made or
repeated or deemed to have been made or repeated;
(v) Seller or Buyer shall admit its inability to, or its
intention not to, perform any of its obligations hereunder;
(vi) 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;
(vii) There exists a change in the majority of the board of
directors of the Seller or other change which results in a
change in control with respect to the Seller, or Seller
dissolves, merges or consolidates with another entity unless it
is the surviving party, or sells, transfers, or otherwise
disposes of a material portion of its business or assets;
(viii) Buyer, in its respective good faith judgment, has
reasonable cause to believe that there has been a material
adverse change in the business, operations, organizational
structure or financial condition of the Seller or that the
Seller will not meet any of its obligations under any
Transaction pursuant to this Agreement or any other agreement
between the parties, and the Seller fails to provide the Buyer
with adequate assurances (including without limitation
performance guarantees), within 24 hours of a request therefor,
of its ability to perform its obligations;
(ix) Seller shall fail to pay any of its indebtedness for
borrowed money or pay interest or premium thereon when due
(whether by scheduled maturity, required payment, acceleration,
demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or
instrument relating to such indebtedness; or any other default
under any agreement or instrument relating to any such
indebtedness shall occur and continue after the applicable grace
period, if any, specified in such agreement or instrument; or
shall fail to perform any of its obligations with respect to
repurchase transactions;
18
19
(x) An Affiliate of Seller is in default under any agreement
with Buyer or its Affiliates;
(xi) A judgment by any competent court in the United States of
America for the payment of money in an amount of at least
$250,000 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;
(xii) 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; or
(xiii) Seller fails to provide quarterly unaudited and annual
audited financial statements within 50 and 95 days,
respectively, after the date on which such period ends, or fails
to deliver in a timely manner such financial or other
information as Buyer may from time to time reasonably request.
(b) In making a determination as to whether an Event of Default has
occurred, the Buyer shall be entitled to rely on reports published or
broadcast by media sources believed by the Buyer to be generally
reliable and on information provided to it by any other sources believed
by it to be generally reliable, provided that the Buyer reasonably and
in good faith believes such information to be accurate and has taken
such steps as may be reasonable in the circumstances to attempt to
verify such information.
14. REMEDIES
(a) If an Event of Default occurs with respect to the Seller, the
following rights and remedies are available to the Buyer:
(i) At the option of the Buyer, exercised by written notice to
the 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. Notwithstanding
that the Repurchase Date shall be deemed immediately to have
occurred upon the exercise or deemed exercise of such option by
the Buyer, for purposes of determining the Repurchase Price, the
Repurchase Date shall be the date specified in the Confirmation
for such Transaction.
(ii) If the Buyer exercises or is deemed to have exercised the
option referred to in subsection (a)(i) of this Section,
(A) the Seller's obligations hereunder to repurchase all
Purchased Mortgage Loans in such Transactions shall
thereupon become immediately
19
20
due and payable,
(B) to the extent permitted by applicable law, the
Pricing Rate shall be the Prime Rate plus 2.50%, and
(C) all Income actually received by the Buyer pursuant
to Section 5 shall be applied to the aggregate unpaid
Repurchase Price owed by the Seller.
(iii) After one Business Day's notice to the 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), the Buyer may (A) immediately sell,
without notice or demand of any kind, at a public or private
sale and at such price or prices as the 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 the Seller credit for such Purchased Mortgage
Loans in an amount equal to the Market Value of the Purchased
Mortgage Loans against the aggregate unpaid Repurchase Price and
any other amounts owing by the Seller hereunder. The proceeds of
any disposition of Purchased Mortgage Loans shall be applied
first to the costs and expenses incurred by the Buyer in
connection with the Seller's default; second to consequential
damages, including but not limited to costs of cover and/or
related hedging transactions; third to the Repurchase Price; and
fourth to any other outstanding obligation of the Seller to the
Buyer or its Affiliates.
(iv) Buyer or an Affiliate may deliver the Purchased Mortgage
Loans which are subject to a Takeout Commitment, or a purchase
commitment by another purchaser, to the Takeout Investor or such
other purchaser, as the case may be, in exchange for securities
or cash, which securities or cash shall then be treated as
Purchased Mortgage Loans, and the Seller hereby irrevocably
appoints the Buyer to act as its attorney-in-fact and agent to
take such action upon the occurrence of an Event of Default as
may be necessary to obtain such securities or cash.
(v) 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
20
21
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.
(vi) Buyer shall, without regard to the adequacy of the security
for the Seller's obligations under this Agreement, be entitled
to the appointment of a receiver by any court having
jurisdiction, without notice, to take possession of and protect,
collect, manage, liquidate, and sell the Collateral or any
portion thereof, and collect the payments due with respect to
the Collateral or any portion thereof. Seller shall pay all
costs and expenses incurred by Buyer in connection with the
appointment and activities of such receiver.
(vii) 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.
(viii) Seller shall be liable to Buyer for (A) the amount of all
expenses, including reasonable legal or other expenses incurred
by Buyer in connection with or as a consequence of an Event of
Default, and (B) actual damages, including, without limitation,
all costs incurred in connection with hedging or covering
transactions.
(ix) 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.
(x) 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) or
(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.
21
22
(xi) 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, its Affiliates or their designee
(including the Custodian), including the right to liquidate such
assets and to set off the proceeds against monies owed by Seller
to Buyer pursuant to this Agreement. Buyer may set off cash, the
proceeds of the liquidation of the Purchased Mortgage Loans, any
Collateral or its proceeds, and all other sums or obligations
owed by Buyer or its Affiliates to Seller against all of
Seller's obligations to Buyer, whether under this Agreement,
under a Transaction, or under any other agreement between the
parties, or otherwise, whether or not such obligations are then
due, without prejudice to Buyer's right to recover any
deficiency. Any cash, proceeds, or property in excess of any
amounts due, or which Buyer reasonably believes may become due,
to it from Seller shall be returned to Seller after satisfaction
of all obligations of Seller to Buyer.
(xii) 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.
(b) If an Event of Default occurs with respect to Buyer, the following
rights and remedies are available to the Seller:
(i) Upon tender by the Seller of payment of the aggregate
Repurchase Price for all such Transactions, the Buyer's right,
title and interest in all Purchased Mortgage Loans subject to
such Transactions shall be deemed transferred to the Seller, and
the Buyer shall deliver or cause to be transferred all such
Purchased Mortgage Loans to the Seller or its designee at
Buyer's expense.
(ii) If the Seller exercises the option referred to in
subsection (b)(i) of this Section and the Buyer fails to deliver
or cause to be delivered the Purchased Mortgage Loans to the
Seller or its designee, after one Business Day's notice to the
Buyer, the Seller may (A) purchase Mortgage Loans or securities
("Replacement Assets") 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 the Buyer to the Seller or its
designee as required hereunder or (B) in its sole discretion
elect, in lieu of purchasing Replacement Assets, to be deemed to
have purchased Replacement Assets at a price therefor on such
date, equal to the Market Value of the Purchased Mortgage Loans.
22
23
(iii) The 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 the Seller for
Replacement Assets therefor over the Repurchase Price for such
Purchased Mortgage Loans, (B) with respect to Additional Loans,
for the price paid (or deemed paid) by the Seller for the
Replacement Assets therefor. In addition, the Buyer shall be
liable to the Seller for interest on such remaining liability
with respect to each such purchase (or deemed purchase) of
Replacement Assets from 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, and (C) for
actual damages, including, without limitation, all costs
incurred in connection with hedging or covering transactions.
15. SINGLE AGREEMENT
Buyer and Seller acknowledge that, and have entered hereunto and will
enter into each Transaction hereunder in consideration of and in
reliance upon the fact that, all Transactions hereunder constitute a
single business and contractual relationship and that each has been
entered into in consideration of the other Transactions. Accordingly,
each of Buyer and Seller agrees (i) to perform all of its obligations in
respect of each Transaction hereunder, and that a default in the
performance of any such obligations shall constitute a default by it in
respect of all Transactions hereunder, (ii) that each of them shall be
entitled to set off claims and apply property held by them in respect of
any Transaction against obligations owing to them in respect of any
other Transactions hereunder and (iii) that payments, deliveries, and
other transfers made by either of them in respect of any Transaction
shall be deemed to have been made in consideration of payments,
deliveries, and other transfers in respect of any other Transactions
hereunder, and the obligations to make any such payments, deliveries,
and other transfers may be applied against each other and netted.
16. NOTICES AND OTHER COMMUNICATIONS
Unless another address is specified in writing by the respective party
to whom any written notice or other communication is to be given
hereunder, all such notices or communications shall be in writing or
confirmed in writing and delivered at the respective addresses set forth
in the Confirmation. Any notices or other communications permitted or
required hereunder shall be in writing and shall be deemed conclusively
to have been given if (a) personally delivered, (b) mailed by registered
or certified mail, postage prepaid, and return receipt requested, (c)
sent by express courier delivery service and received by the party to
whom it is sent or (d) transmitted by telex or facsimile transmission
(or any other type of electronic transmission agreed upon by the
parties) and confirmed by a writing given by means of (a), (b) or (c).
23
24
17. 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.
18. NON-ASSIGNABILITY
The rights and obligations of the parties under this Agreement and under
any Transaction shall not be assigned by either party without the prior
written consent of the other party; provided, however, that Nomura may
assign its rights and obligations under this Agreement and/or under any
Transaction to an Affiliate without the prior written consent of the
other party. 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.
19. TERMINABILITY
This Agreement shall be terminated three hundred and sixty four (364)
days following the date hereof (the "Termination Date"), and any
outstanding Transactions shall become due on such date. This Agreement
may be extended beyond the Termination Date, solely at the discretion of
Buyer, for an additional period of 364 days, provided however, that
Seller provide to Buyer a written request for such extension not later
than ninety (90) days prior to the Termination Date. Notwithstanding any
such termination or the occurrence of an Event of Default, all of the
representations, warranties and covenants hereunder shall continue and
survive.
20. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES
THEREOF.
21. CONSENT TO JURISDICTION AND ARBITRATION
24
25
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 and waive all
rights to a trial by jury. 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 and waive all rights to a trial by jury.
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.
22. 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 here from 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.
23. INTENT
The parties understand and intend that this Agreement and each
Transaction hereunder constitute a "securities contract" as that term is
defined in Section 741 of Title II of the United States Code, as
amended; provided, however, that if the Seller is an "insured depository
institution" as that term is defined in Section 1813(a) of Title 12 of
the United States Code, as amended, the parties understand and intend
that this Agreement and each Transaction hereunder constitute a
"qualified financial contract" as that term is defined in Section 1821
of Title 12 of the United States Code, as amended.
24. SERVICING
(a) Seller covenants to maintain or cause the servicing of the Mortgage
Loans to be maintained in conformity with accepted servicing practices
in the industry and in a
25
26
manner at least equal in quality to the servicing Seller provides to
mortgage loans which it owns. The Servicer (or Seller if acting as
Servicer) may retain legal title of the Purchased Mortgage Loans solely
for the purpose of servicing or supervising the servicing of such
Purchased Mortgage Loans. Any equitable interest in Purchased Mortgage
Loans shall remain in the Buyer. All servicing fees and compensation
with respect to the servicing of the Mortgage Loans shall be customary,
reasonable and consistent with industry practice.
(b) If the Mortgage Loans are serviced by the Seller, (i) 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"), and
(ii) Seller grants the 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.
(c) If the Mortgage Loans are serviced by a third party servicer (such
third party servicer, the "Servicer"), the Seller (i) shall provide a
copy of the servicing agreement to Buyer (the "Servicing Agreement");
and (ii) hereby irrevocably assigns to the Buyer and Buyer's successors
and assigns all right, title, interest and the benefits of the Servicing
Agreements with respect to the Mortgage Loans.
(d) The Servicer (or Seller if acting as Servicer) shall use of one or
more of the following types of accounts, in each case maintained at an
institution that is independent of and unaffiliated with Seller, into
which all sums collected in respect of Mortgage Loans shall be deposited
and maintained: (i) a trust account or accounts maintained for the
benefit of Buyer with the trust department of a federally chartered
depository institution or trust company acting in its fiduciary capacity
or (ii) a trust account or accounts maintained for the benefit of Buyer
with the trust department of a state chartered depository institution or
trust company acting in its fiduciary capacity and subject to
regulations regarding fiduciary funds on deposit therein substantially
similar to 12 CFR Section 9.10(b), or (iii) an account or accounts (a)
maintained with a depository institution the debt obligations of which
are rated by Standard & Poor's Ratings Group in one of its two highest
rating categories at the time of any deposit therein or (b) the deposits
of which are insured by the FDIC, to the limits established by the FDIC,
and the uninsured deposits in which are otherwise secured such that, as
evidenced by an opinion of counsel, Buyer has a claim with respect to
the funds in such account or a perfected first security interest against
any collateral securing such funds that is superior to claims of any
other depositor or creditors
26
27
of the depository institution WITH which such account is maintained.
(e) Seller shall provide, or shall cause the Servicer to provide, to
Buyer each month a monthly remittance report prepared and distributed by
Seller if acting as Servicer, or by the Servicer pursuant to the
Servicing Agreement, with respect to all Mortgage Loans subject to any
Transaction hereunder.
(f) Seller shall provide to Buyer a letter from the Servicer to the
effect that upon the occurrence of an Event of Default, Buyer may
terminate the Servicing Agreement and transfer such servicing to its
designee, at no cost or expense to Buyer, it being agreed that Seller
will pay any and all fees required to terminate the Servicing Agreement
and to effectuate the transfer of Servicing to Buyer.
25. 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.
26. 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.
27
28
27. CONDITIONS PRECEDENT TO INITIAL TRANSACTION
As conditions precedent to the initial Transaction hereunder, Buyer
shall have received on or before the day of such Transaction: (i) the
Commitment Fee, and (ii) the following, in form and substance
satisfactory to the Buyer and duly executed by Seller:
(a) This Agreement and the Custodial Agreement.
(b) Evidence that all other actions necessary or, in the sole discretion
of Buyer, desirable to perfect and protect the security interests and
liens created by Section 6 hereof have been taken, including without
limitation duly executed Uniform Commercial Code financing statements on
Form UCC-1 with respect to the Collateral.
(c) A certified copy of the Seller's corporate resolutions approving
this Agreement and the Custodial Agreement and transactions contemplated
thereunder, and all documents evidencing other necessary corporate
action or governmental approvals as may be required in connection with
this Agreement and the Custodial Agreement.
(d) A certificate of the Seller's Corporate Secretary or Assistant
Secretary certifying the names, true signatures and titles of the
Seller's officers duly authorized to initiate Transactions and to sign
this Agreement and the Custodial Agreement and the other documents to be
delivered thereunder.
(e) A favorable opinion of the Seller's outside counsel as to such
matters as the Buyer may reasonably request.
(f) The documents set forth in Exhibit III, Exhibit IV and Exhibit VI
hereto.
28. CONFIDENTIALITY
This Agreement and its terms and contents are proprietary to Buyer and
shall be held by Seller in strict confidence and shall not be disclosed
to any third party without the consent of Buyer except for (i)
disclosure to your attorneys or accountants, provided that such
attorneys and accountants likewise agree to be bound by this covenant of
confidentiality or (ii) disclosure required by law, rule, regulation or
order of a court or other regulatory body.
29. 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.
28
29
(b) Buyer shall be authorized to accept orders and take any other action
affecting any accounts of the Seller in response to instructions given
in writing or orally by telephone or otherwise by any person with
apparent authority to act on behalf of the Seller, and the Seller shall
indemnify Buyer, defend, and hold Buyer harmless from and against any
and all liabilities, losses, damages, costs, and expenses of any nature
arising out of or in connection with any action taken by Buyer in
response to such instructions received or reasonably believed to have
been received from the Seller.
(c) If there is any conflict between the terms of this Agreement or any
Transaction entered into hereunder and the Custodial Agreement, this
Agreement shall prevail.
(d) If there is any conflict between the terms of a Confirmation or a
corrected Confirmation issued by the Buyer and this Agreement, the
Confirmation shall prevail.
(e) This Agreement may be executed in counterparts, each of which so
executed shall be deemed to be an original, but all of such counterparts
shall together constitute but one and the same instrument.
(f) The headings in this Agreement are for convenience of reference only
and shall not affect the interpretation or construction of this
Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
29
30
IN WITNESS WHEREOF, the parties have entered into this agreement as of the date
set forth above.
BUYER
NOMURA ASSET CAPITAL
CORPORATION
BY: /s/ XXXXX X. XXXXXXXX
Title: XXXXX X. XXXXXXXX
DIRECTOR
Date: 10/15/97
SELLER
CMG FUNDING CORP.
By: /s/ XXXXXX X. XXXXXXXX
Title: SENIOR VICE PRESIDENT
Date: 10-14-97
31
EXHIBITS
EXHIBIT I Confirmation
EXHIBIT II Form of Custodial Delivery including the form of Mortgage
Loan Schedule
EXHIBIT III Form of Power of Attorney
EXHIBIT IV Letter of Instruction to Master Servicer and Servicers
EXHIBIT V Representations and Warranties for Mortgage Loans
EXHIBIT VI Assignment of Takeout
1
32
EXHIBIT I
Form of Confirmation
CMG Funding Corp.
00000 Xxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
Attention:
Confirmation No.:________________________
Purchase Date:
Description of the Mortgage Loans to be Purchased:
Aggregate Principal Amount of Purchased Mortgage Loans:
Purchase Price:
Pricing Rate:
Repurchase Date:
Repurchase Price:
Names and addresses for communications:
Buyer: Xxxxxx Xxxxxxxxx
Nomura Asset Capital Corporation
2 World Financial Xxxxxx
Xxxxxxxx X
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Seller: CMG Funding Corp.
00000 Xxxxxxx Xxxxxxxxx, 0xx Xxxxx
Xxxxxxxx Xxxxx, Xxxxxxxxxx 00000
2
33
EXHIBIT II
Form of Custodial Delivery
On this day of 19 , CMG Funding Corp. (the "Seller"), as the Seller
under that certain Master Repurchase Agreement Governing Purchases and Sales of
Mortgage Loans, dated as of October 15, 1997 (the "Repurchase Agreement")
between the Seller and Nomura Asset Capital Corporation (the "Buyer"), does
hereby deliver to ("Custodian"), as custodian under that certain
Custodial Agreement, dated as of 199_, among Buyer, Seller and
Custodian, the Mortgage Files with respect to the Mortgage Loans to be purchased
by the Buyer on pursuant to the Repurchase Agreement, which
Mortgage Loans are listed on the Mortgage Loan Schedule attached hereto and
which Mortgage Loans shall be subject to the terms of the Custodial Agreement on
the date hereof.
With respect to the Mortgage Files delivered hereby, for the purposes of issuing
the Trust Receipt, the Custodian shall review the Mortgage Files to ascertain
delivery of the documents listed in Annex A attached to the Custodial Agreement.
Please review the Mortgage Files in accordance with the standards set forth in
the Custodial Agreement and deliver to Buyer a Trust Receipt promptly upon
completion of your review.
Capitalized terms used herein and not otherwise defined shall have the meanings
set forth in the Custodial Agreement.
IN WITNESS WHEREOF, the Seller has caused its name to be signed hereto by its
officer thereunto duly authorized as of the day and year first above written.
CMG FUNDING CORP.
By:
Title:
Name:
3
34
Mortgage Loan Schedule
Outstanding
Loan No, Mortgagor Note Rate Note Date Face Amount Principal Amount Maturity
-------- --------- --------- --------- ----------- ---------------- --------
# of Days Last Payment
ARM/Fixed ARM/Type Loan Type Takeout Price Takeout Investor On Facility Date
--------- -------- --------- ------------- ---------------- ----------- ----
4
35
EXHIBIT III
Form of Power of Attorney
"Notice: The powers granted by this document are broad and sweeping. They are
defined in New York General Obligations Law, Article 5, Title 15, sections
5-1502A through 51503, which expressly permits the use of any other different
form of power of attorney desired by the parties concerned.
"Know All Men by These Presents, which are intended to constitute a GENERAL
POWER OF ATTORNEY pursuant to Article 5, Title 15 of the New York General
Obligations Law: That CMG Funding Corp. ("Seller"), does hereby appoint Nomura
Asset Capital Corporation ("Nomura"), its attorney-in-fact to act in Seller's
name, place and stead in any way which Seller could do with respect to recording
the Mortgages (or Assignments of Mortgage) purchased by Nomura pursuant to a
Master Repurchase Agreement Governing Purchases and Sales of Mortgage Loans
dated as of October 15, 1997 between Seller and Nomura and to take such other
steps as may be necessary or desirable to enforce Nomura'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 LEGAL REPRESENTATIVES AND 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.
IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed and
the Seller's seal to be affixed this day of 199_.
CMG FUNDING CORP.
(Seal)
By:
Name:
Title:
5
36
EXHIBIT IV
Letter of Instructions to Master Servicer and Servicers
[Servicer]
Ladies/Gentlemen:
On 199_, CMG Funding Corp. ("Seller"), sold to Nomura Asset
Capital Corporation ("Buyer") all of Seller's right, title and interest in and
to the mortgage loans identified on Appendix A attached to this letter and made
a part hereof (the "Mortgage Loans"). Accordingly, Seller hereby unconditionally
and irrevocably instructs you to pay to Buyer, pursuant to the terms of our
existing servicing arrangements, any and all monies received by you on or after
199_ which would have been payable from time to time by you to
Seller on account of or otherwise in connection with the Mortgage Loans,
including without limitation any and all principal, interest, partial
prepayments, prepayments in full, penalties, advance payments, or expenses;
provided, however, that any such monies representing scheduled payments of
principal of or interest on such Mortgage Loans due prior to , 199_
shall be paid to Seller.
All such monies should be paid by you to the order of Buyer in the
manner and on the date such monies would have been payable to Seller, as
follows:
Mellon Bank, Pittsburgh
ABA #000000000 for the account of Nomura Asset Capital Corporation
Acct: #1092525
Attn: Xxxxxx Xxxxxxxxx/re: CMG Funding Corp.
Seller further instructs you that all rights and powers of Seller under
the existing servicing arrangements with respect to the Mortgage Loans have been
transferred to Buyer and that Buyer has the sole right as the owner of the
Mortgage Loans to direct your actions under such servicing arrangements with
respect to the Mortgage Loans and to exercise such rights and powers.
Very truly yours,
CMG FUNDING CORP.
By:
Name:
Title:
6
37
EXHIBIT V
Representations and Warranties
Regarding Mortgage Loans
The Seller represents and warrants to the Buyer that, with respect to
each Mortgage Loan sold 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; and Seller acknowledges
that Buyer has not verified the accuracy of such information;
(b) No Fraud. There was no fraud in the origination of the Mortgage
Loan.
(c) Payments Current. Except with respect to Non-Performing Mortgage
Loans and Defaulted Mortgage Loans, all payments required to be made up to the
Purchase Date for each Mortgage Loan under the terms of the mortgage note have
been made and credited, and no payment required under the Mortgage Loan has been
delinquent at any time since the mortgage was originated;
(d) No Outstanding Charges. Except with respect to Non-Performing
Mortgage Loans and Defaulted Mortgage Loans, 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;
(e) Original Terms Unmodified. The terms of the mortgage note and
mortgage have not been impaired, waived, altered or modified in any respect,
except by a written instrument which has been recorded, if necessary to protect
the interests of Buyer and which has been delivered to Buyer or its designee
(including the Custodian). The substance of any such waiver, alteration or
modification has been approved by the issuer of any related PMI Policy (as
defined below) and the title insurer, to the extent required by the policy, and
its terms are reflected on the Mortgage Loan Schedule. No mortgagor has been
released, in whole or in part, except in connection with an assumption agreement
approved by the issuer of any related PMI Policy (as defined below) and the
title insurer, to the extent required by the policy, and which assumption
agreement is included in the
7
38
Mortgage File delivered to Buyer or its designee (including the Custodian) and
the terms of which are reflected in the Mortgage Loan Schedule;
(f) 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;
(g) 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. The mortgage obligates the mortgagor
thereunder to maintain the hazard insurance policy at the mortgagor's cost and
expense, and to seek reimbursement therefor from the mortgagor. The hazard
insurance policy is the valid and binding obligation of the insurer, is in full
force and effect, and will be in full force and effect and inure to the benefit
of Buyer upon consummation of the transactions contemplated by the Agreement.
Seller has not engaged in, and has no knowledge of the mortgagor's or any other
party's having engaged in, any act or omission which would impair the coverage
of any such policy, the benefits of the endorsement provided for herein, or the
validity and binding effect of either;
(h) 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 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;
(i) No Satisfaction of Mortgage. The mortgage has not been satisfied,
cancelled, 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;
8
39
(j) 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 four-family dwelling, or an individual condominium unit in a
low-rise condominium project, or an individual unit in a planned unit
development and no residence or dwelling is a mobile home or a manufactured
dwelling, except as permitted under the Underwriting Guidelines. No portion of
the mortgaged property is used for commercial purposes;
(k) Valid First Lien. The mortgage is a valid, subsisting and
enforceable first 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 assessments not
yet due and payable;
(2) covenants, conditions and restrictions, rights of way,
easements and other matters of the public record as of the date
of recording acceptable to mortgage lending institutions
generally and specifically referred to in the lender's title
insurance policy delivered to the originator of the Mortgage
Loan and (i) referred to or to otherwise considered in the
appraisal made for the originator of the Mortgage Loan or (ii)
which do not adversely affect the appraised value of the
mortgaged property set forth in such appraisal; and
(3) 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 lien and first priority security interest on
the property described therein and Seller has full right to pledge, sell,
transfer, and assign the same to Buyer or its designee (including the
Custodian). The mortgaged property was not, as of the date of origination of the
Mortgage Loan, subject to a mortgage, deed of trust, deed to secured debt or
other security instrument creating a lien subordinate to the lien of the
mortgage;
(1) 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
9
40
enforceable in accordance with its terms. All parties to the mortgage note and
the mortgage 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;
(m) 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 mortgage
is not entitled to any refund of any amounts or due under the mortgage note or
mortgage;
(n) 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, sell, transfer, 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;
(o) 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) either (a) organized
under the laws of such state, or (b) qualified to do business in such state, or
(c) federal savings and loan associations or national banks having principal
offices in such state, or (d) not doing business in such state;
(p) LTV, PMI Policy. Unless otherwise agreed in writing by Buyer and
Seller, no Mortgage Loan has a LTV of more than 90%. The original LTV of the
Mortgage Loan either was not more than 80% or the excess over 75% is and will be
insured as to payment defaults by a policy of primary mortgage guaranty
insurance issued by a generally accepted insurance carrier (a "PMI Policy")
until the LTV of such Mortgage Loan is reduced to 80%. All provisions of such
PMI Policy have been and are being complied with, such policy is in full force
and effect, and all premiums due thereunder have been paid. Any Mortgage Loan
subject to a PMI Policy obligates the mortgagor thereunder to maintain the PMI
Policy and to pay all premiums and charges in connection therewith;
(q) Title Insurance. The Mortgage Loan is covered by either (i) an
attorney's opinion of title and abstract of title the form and substance of
which is acceptable to mortgage lending institutions making mortgage loans in
the area where the mortgaged
10
41
property is located or (ii) an ALTA lender's title insurance policy or other
generally acceptable form of insurance policy, issued by a title insurer
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 original principal amount of the Mortgage Loan,
subject only to the exceptions contained in clauses (1), (2) and (3) of
paragraph (j) above and, with respect to adjustable rate Mortgage Loans, against
any loss by reason of the invalidity or unenforceability of the lien resulting
from the provisions of the mortgage providing for adjustment to the mortgage
interest rate and monthly payment. Seller is the sole insured of such lender's
title insurance policy, and such lender's title insurance policy is in full
force and effect and will be in force and effect upon the consummation of the
transactions contemplated by this Agreement. No claims have been made under such
lender's title insurance policy, and no prior holder of the mortgage, including
Seller, has done, by act or omission, anything which would impair the coverage
of such lender's title insurance policy;
(r) No Defaults. Except with respect to Non-Performing Mortgage Loans
and Defaulted Mortgage Loans, there is no default, breach, violation or event of
acceleration existing under the mortgage or the mortgage note and no event
which, with the passage of time or with notice and the expiration of any grace
or cure period, other than the failure to make, prior to expiration of the
applicable grace period, the monthly payment due immediately prior to the
related Purchase Date if such Purchase Date occurs prior to the expiration of
such grace period, would constitute a default, breach, violation or event of
acceleration, and neither Seller nor its predecessors have waived any default,
breach, violation or event of acceleration;
(s) 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;
(t) 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;
(u) Origination; Payment Terms. The Mortgage Loan was originated by
Seller, a HUD-approved mortgagee, or a savings and loan association, a savings
bank, a commercial bank or similar banking institution which is supervised and
examined by a Federal or State authority, in accordance with the originator's
underwriting standards in effect at the time the Mortgage Loan was originated.
The principal balance at origination was no more than $500,000 and no less than
$100,000. The documents, instruments and
11
42
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. With respect to adjustable rate Mortgage Loans, the mortgage
interest rate is adjusted 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;
(v) 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;
(w) Occupancy of the Mortgaged Property. As of the related Purchase Date
the mortgaged property is lawfully occupied under applicable law. All
inspections, licenses and certificates required to be made or issued with
respect to all occupied portions of the mortgaged property and, with respect to
the use and occupancy of the same, including but not limited to certificates of
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities;
(x) 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;
(y) 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;
(z) Acceptable Investment. Seller has no knowledge of any circumstances
or conditions with respect to the mortgage, the mortgaged property, the
mortgagor or the mortgagor's credit standing that can reasonably be expected to
cause private institutional investors to regard the Mortgage Loan as an
unacceptable investment, cause the Mortgage Loan to become delinquent, or
adversely affect the value or marketability of the Mortgage
12
43
Loan;
(aa) Purchase of Mortgage Documents. The Mortgage File and any other
documents required by Buyer to be delivered for the Mortgage Loan by Seller
under this Agreement have been delivered to the Custodian. Seller is in
possession of a complete, true and accurate mortgage file except for such
documents the originals of which have been delivered to the Buyer or its
designee (including the Custodian), and except for such documents relating to
Hospital Loans that are defective or missing, as permitted under Section 7 of
this Agreement;
(bb) Condominiums/Planned Unit Developments. If the mortgaged property
is a condominium unit or a planned unit development (other than a de minimis
planned unit development) such condominium or planned unit development project
meets FNMA eligibility requirements for sale to FNMA or is located in a
condominium or planned unit development project which has received FNMA project
approval and the representations and warranties required by FNMA with respect to
such condominium or planned unit development have been made and remain true and
correct in all respects;
(cc) 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;
(dd) 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 that the mortgaged property is sold or transferred without the
prior written consent of the mortgagee thereunder;
(ee) 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;
(ff) 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
lien priority by a title insurance policy or an endorsement to the policy
insuring the mortgagee's consolidated interest or by other title evidence
generally acceptable. The consolidated principal amount does not exceed
13
44
the original principal amount of the Mortgage Loan,
(gg) Mortgaged Property Undamaged. There is no proceeding pending or
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;
(hh) 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;
(ii) Appraisal. With respect to any Mortgage Loan that has been
outstanding for five (5) years or less, the mortgage file 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; and
(kk) Environmental Matters. 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.
14
45
(ll) Compliance with Underwriting Guidelines. The Mortgage Loan was
underwritten in accordance with the Underwriting Guidelines.
15
46
EXHIBIT VI
ASSIGNMENT OF TAKEOUT
Whereas, CMG Funding Corp. ("Seller") has entered into that Master
Repurchase Agreement Governing the Purchases and Sales of Mortgage Loans (the
"Agreement") dated as of October 15, 1997 by and between Seller and Nomura Asset
Capital Corporation ("Buyer"); and
Whereas, Seller has granted Buyer a security interest in, among other
things, all of Seller's rights, proceeds and income with respect to Takeout
Commitments; and
Whereas, Seller, in order to induce Buyer to purchase Mortgage Loans
from Seller pursuant to the Agreement, has agreed to assign all of its rights,
proceeds and income as security for its obligations to Buyer under the
Agreement;
Now, Therefore, the parties hereto agree as follows:
1. All terms not otherwise defined herein shall have the meanings set forth
in the Agreement.
2. As security for Seller's obligations to Buyer pursuant to the Agreement,
Seller assigns all of its right, title and interest in and to all
Takeout Commitments set forth on Annex I attached hereto. Seller grants
Buyer the right to deliver the Mortgage Loans subject to the Takeout
Commitment to the purchaser thereof in exchange for the purchase price
set forth in the Takeout Commitment.
3. In order for Buyer to fulfill the delivery requirements pursuant to the
Takeout Commitment, any equitable interest which Seller may have in the
Mortgage Loans shall transfer to Buyer.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be
executed by their duly authorized representatives.
NOMURA ASSET CAPITAL CORPORATION CMG FUNDING CORP.
------------------------------- -------------------------------
By: By:
16
