Crusader Bank
Since 1943
November 7, 1997
Xx. Xxxxxxxx Xxxx, Ph.D.
President
National Chinese Service Corporation
0000 Xxxxxxxxx Xxx, X.X.
Suite 440
Washington, DC 20015-2034
Dear Haiching:
This letter will set forth our agreement with respect to the establishment and
operation of National Chinese Mortgage Corporation ("NCM").
1. NCM will operate as a retail originator, processor and
underwriter of conforming and non-conforming residential
mortgages, utilizing FNMA Desktop Underwriting Software in
connection with such loans where it is applicable. You or,
at your option subject to the provisions of the Subscription
and Shareholders' Agreement, NCS will own 49% of the stock
of NCM and Crusader, or its affiliate assignee, will own 51%
of the stock of NCM.
2. In accordance with the development and application of
mutually agreeable underwriting standards, Crusader will
originate and fund all loans underwritten by NCM (the
"Loans"). It is contemplated that NCM will primarily market
to the membership base of National Chinese Service
Corporation ("NCS"), and that FNMA will incorporate certain
underwriting variances into its Desktop Underwriting
Software that are necessary to effectively market
residential mortgages to NCS' membership. Until July 1,
1998, the financial arrangements among NCM, NCS and Crusader
with respect to any Loans originated will be as follows:
a. For all conforming credit loans (i.e. conforming loans
sold to FNMA and jumbo loans sold to FNMA conduits),
NCM will be responsible for and bear all costs of
origination and processing of the Loans. In connection
with the funding of each Loan, Crusader will retain a
funding fee equal to .25% of the principal balance of
the Loan, plus an underwriting review fee of $375.
Crusader will pay NCM the balance of its proceeds from
the sale of any Loans, plus the service premiums
available based on the volume delivered.
b. For all nonconforming credit loans, Xxxxxxxx will be
responsible for the underwriting of the Loans, and will
provide NCS with necessary assistance in the processing of the
Loans. Crusader will pass along to NCM 1% of the principal
balance of any nonconforming credit Loans it generates that
are referred by NCS.
c. NCM will contract with NCS for the processing and marketing of
Loans, and will compensate NCS with a fee equal to 1% of the
principal balance of any Loans it generates, but not to exceed
the actual proceeds realized by NCM in connection with the
sale of the Loans. Such calculation shall be made on a monthly
basis.
3. Effective July 1, 1998, the parties will review the foregoing financial
arrangements and, if appropriate, modify them going forward to comply
with the underlying intention that the parties will share in the
profits generated from NCM's activities in proportion to our capital
stock interests.
4. Crusader will provide NCM with a daily rate sheet that
reflects a par rate equal to the then current FNMA window
gross yield, for FNMA eligible loans, and prevailing rates
for other programs offered. The parties will mutually agree
on a methodology and procedures for the development of a
retail rate sheet that incorporates such yields. Customers
will have the ability to buy down rates in accordance with
established guidelines. Crusader will structure with NCM a
mutually agreeable procedure with respect to the locking of
rates by customers and in the secondary market. NCM will be
responsible to Crusader for any losses incurred in
connection with its Loans, whether due to default or
otherwise, and will be required to repurchase any Loans sold
by Crusader that Crusader is required to repurchase.
5. As an inducement for Crusader to undertake this venture, you
will purchase and maintain FNMA's Desktop Underwriter
Software at the necessary locations on Crusader's behalf.
Also, you will maintain a processor on your staff who will
be responsible for the processing and documentation of NCM's
loans, and you will purchase and maintain at the necessary
locations the Genesis Software and an electronic link with
our origination and accounting systems for the origination
of NCM's loans. Alternatively, to the extent we mutually
agree to have Crusader perform any of these functions, we
will pass along the actual cost associated therewith.
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6. We will initially capitalize NCM in the amount of $5,000, such amount
to be funded by us in proportion to our respective capital stock
interests. We will also enter into a Shareholders Agreement which,
among other things, will set forth our ongoing responsibility to fund
further capital and operating shortfalls of NCM.
Haiching, I believe this properly sets forth the details we discussed regarding
the formation and operation of NCM. We are excited about the opportunity to work
with you to build a successful mortgage origination operation.
Please indicate your acceptance of this agreement by signing in the space
provided below.
Very truly yours,
/s/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
President
Accepted and Agreed to:
/s/ Xxxxxxxx Xxxx 11/12/97
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Xx. Xxxxxxxx Xxxx Date
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