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MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT
CALIFORNIA FEDERAL PREFERRED CAPITAL CORPORATION
Purchaser
CALIFORNIA FEDERAL BANK, A FEDERAL SAVINGS BANK
Seller
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Dated as of January __, 1997
Residential Mortgage Loans
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TABLE OF CONTENTS
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SECTION 1. Definitions................................................... 1
SECTION 2. Agreement to Purchase Initial Portfolio....................... 14
SECTION 3. Subsequent Purchases.......................................... 14
Section 4. Payment of Purchase Price..................................... 15
SECTION 5. Examination of Servicing Files................................ 16
SECTION 6. Conveyance from Seller to Purchaser........................... 16
Subsection 6.1 Possession of Servicing Files........................ 16
Subsection 6.2 Books and Records.................................... 17
Subsection 6.3 Delivery of Mortgage Loan Documents.................. 17
SECTION 7. Servicing of the Mortgage Loans............................... 19
SECTION 8. Representations, Warranties and Covenants
of the Seller; Remedies for Breach......................... 19
Subsection 8.1 Representations and Warranties
Regarding the Seller........................... 19
Subsection 8.2 Representations and Warranties
Regarding Individual Mortgage Loans............ 22
Subsection 8.3 Remedies for Breach of Representations
and Warranties................................. 34
SECTION 9. Closing...................................................... 37
SECTION 10. Closing Documents............................................ 38
SECTION 11. Costs........................................................ 39
SECTION 12. Merger or Consolidation of the Seller........................ 39
SECTION 13. Mandatory Delivery; Grant of Security Interest............... 40
SECTION 14. Notices...................................................... 40
SECTION 15. Severability Clause.......................................... 41
SECTION 16. Counterparts................................................. 41
SECTION 17. Governing Law................................................ 41
SECTION 18. Intention of the Parties..................................... 42
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SECTION 19. Successors and Assigns; Assignment of
Purchase Agreement......................................... 42
SECTION 20. Waivers...................................................... 42
SECTION 21. Entire Agreement; Amendment.................................. 42
SECTION 22. General Interpretive Principles.............................. 43
SECTION 23. Reproduction of Documents.................................... 43
SECTION 24. Further Agreements........................................... 44
SECTION 25. Recordation of Assignments of Mortgage....................... 44
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EXHIBITS
EXHIBIT A CONTENTS OF MORTGAGE FILES
EXHIBIT B FORM OF SERVICING AGREEMENT
EXHIBIT C FORM OF SELLER'S OFFICER'S CERTIFICATE
[EXHIBIT D FORM OF OPINION OF COUNSEL TO THE SELLER]
EXHIBIT E FORM OF SERVICER'S OFFICER'S CERTIFICATE
[EXHIBIT F FORM OF OPINION OF COUNSEL TO THE SERVICER]
EXHIBIT G FORM OF SECURITY RELEASE CERTIFICATION
EXHIBIT H FORM OF SECURITY RELEASE CERTIFICATION
EXHIBIT I FORM OF ASSIGNMENT AND ASSUMPTION AGREEMENT
EXHIBIT J INITIAL PORTFOLIO MORTGAGE LOAN SCHEDULE
EXHIBIT K FORM OF COMMITMENT LETTER
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MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT
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This MORTGAGE LOAN PURCHASE AND WARRANTIES AGREEMENT (the
"Agreement"), dated as of _______, 1997, by and between California Federal
Preferred Capital Corporation, a Maryland corporation, having an office at 000
Xxxxxxxx Xxxxx, Xxxxx 0000, Xxxxxx, Xxxxx 00000 (the "Purchaser"), and
California Federal Bank, A Federal Savings Bank, a stock savings bank organized
under the laws of the United States of America, having an office at 000 Xxxx
Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx 00000 (the "Seller").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Seller desires to sell to the Purchaser, and the
Purchaser desires to purchase from the Seller, from time to time, certain
Mortgage Loans (as defined herein) on a servicing released basis as described
herein, and which shall be delivered as whole loans; and
WHEREAS, each Mortgage Loan, at the time it is sold by Seller to
Purchaser pursuant to this Agreement, will be secured by a mortgage, deed of
trust or other security instrument creating a first lien on a residential
dwelling located in the jurisdiction indicated on the related Mortgage Loan
Schedule; and
WHEREAS, the Purchaser and the Seller wish to prescribe the manner of
the conveyance, servicing and control of the Mortgage Loans.
NOW, THEREFORE, in consideration of the premises and mutual agreements
set forth herein, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the Purchaser and the Seller
agree as follows:
SECTION 1. Definitions.
For purposes of this Agreement and any Commitment Letter (as defined
herein), the following capitalized terms shall have the respective meanings set
forth below. Other capitalized terms used in this Agreement and not defined
herein shall have the respective meanings set forth in the Servicing Agreement
attached as Exhibit B hereto.
"Accepted Servicing Practices" means, with respect to any Mortgage
Loan, those mortgage servicing practices of prudent mortgage lending
institutions which service mortgage loans of the same type as such Mortgage
Loan in the jurisdiction where the related Mortgaged Property is located.
"Act" means The National Housing Act, as amended from time to time.
"Adjustable Rate Mortgage Loan" means any individual Mortgage Loan
(including a Convertible Mortgage Loan prior to the conversion date) purchased
pursuant to this Agreement the Mortgage Interest Rate of which adjusts
periodically.
"Affiliate" means, with respect to any specified Person, any other
Person controlling or controlled by or under common control with such specified
Person. For the purposes of this definition, "control" when used with respect
to any specified Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agreement" means this Mortgage Loan Purchase and Warranties
Agreement, all amendments hereof and supplements hereto and each Commitment
Letter hereunder.
"ALTA" means The American Land Title Association or any successor
thereto.
"Ancillary Income" means all late charges, assumption fees, escrow
account benefits, reinstatement fees, prepayment penalties, ARM conversion
fees, optional insurance commissions and similar types of fees arising from or
in connection with any Mortgage and collected from the related Mortgagor, to
the extent not otherwise payable to the Mortgagor under applicable law or
pursuant to the terms of the related Mortgage Note.
"Appraised Value" means the value set forth in an appraisal made in
connection with the origination of the related Mortgage Loan as the value of
the Mortgaged Property.
"Assignment and Assumption Agreement" has the meaning set forth in
Section 19.
"Assignment of Mortgage" means an assignment of the Mortgage delivered
in blank, notice of transfer or equivalent instrument in recordable form,
sufficient under the laws of the jurisdiction wherein the related Mortgaged
Property is located to reflect the sale of the Mortgage Loan to the Purchaser.
"Business Day" means any day other than (i) a Saturday or Sunday, or
(ii) a day on which banking and savings and loan institutions in the State of
California or the State of Maryland are authorized or obligated by law or
executive order to be closed.
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"Classified" is used herein generally to describe a Mortgage Loan
which is troubled or deemed substandard or doubtful with respect to
collectability.
"Closing Date" means the Initial Closing Date and any other date on
which the parties hereto shall agree to close a sale of Mortgage Loans
hereunder as set forth in a duly executed Commitment Letter.
"Code" means Internal Revenue Code of 1986, as amended.
"Commitment Letter" means a letter agreement executed by the Purchaser
and the Seller providing for the purchase and sale of Mortgage Loans and
substantially in the form of Exhibit K hereto.
"Condemnation Proceeds" means all awards or settlements in respect of
a Mortgaged Property, whether permanent or temporary, partial or entire, by
exercise of the power of eminent domain or condemnation, to the extent not
required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan documents.
"Conventional Loan" means a conventional residential first lien
mortgage loan which is a Mortgage Loan.
"Convertible Mortgage Loan" means any individual Mortgage Loan
purchased pursuant to this Agreement which contains a provision whereby the
Mortgagor is permitted to convert the Mortgage Loan to a fixed rate Mortgage
Loan in accordance with the terms of the related Mortgage Note.
"Co-op Lease" means, with respect to a Co-op Loan, the lease with
respect to the dwelling unit occupied by the Mortgagor and relating to the
stock allocated to the related dwelling unit.
"Co-op Loan" means a Mortgage Loan secured by the pledge of stock
allocated to a dwelling unit in a residential cooperative housing corporation
and a collateral assignment of the related Co-op Lease.
"Co-op Project" means the real property owned by the residential
cooperative housing association upon which the cooperative unit which is the
subject of the Co-op Lease is situated, including the common areas associated
therewith,
"Custodial Account" means the separate trust account created and
maintained pursuant to Section 2.4 of the Servicing Agreement.
"Custodian's File" means, with respect to each Mortgage Loan, the
documents pertaining to such Mortgage Loan set forth in
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Section I of Exhibit A hereto and any additional documents required to be
included or added to the Custodian's File pursuant to this Agreement.
"Cut-off Date" means the Initial Cut-off Date and any other date as of
which the principal balance of Mortgage Loans will be determined for purposes
of calculating the Purchase Price for the purchase and sale of Mortgage Loans,
which date shall be set forth in the related Commitment Letter.
"Deleted Mortgage Loan" means a Mortgage Loan that is repurchased or
replaced with a Qualified Substitute Mortgage Loan by the Seller in accordance
with the terms of this Agreement.
"Due Date" means the day of the month on which the Monthly Payment is
due on a Mortgage Loan, exclusive of any days of grace.
"Escrow Account" means the separate account created and maintained
pursuant to Section 2.6 of the Servicing Agreement with respect to each
Mortgage Loan, as specified in the Servicing Agreement.
"Escrow Payments" means, with respect to any Mortgage Loan, the
amounts constituting ground rents, taxes, assessments, water rates, sewer
rents, municipal charges, mortgage insurance premiums, fire and hazard
insurance premiums, flood insurance premiums, earthquake insurance premiums,
condominium charges, and, to the extent that such items can become a lien on
the Mortgaged Property superior to the Mortgage, if unpaid, and are reportable
by the Servicer's tax lien reporting service, any other payments required to be
escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or any
other document.
"FHA" means the Federal Housing Administration, an agency within the
United States Department of Housing and Urban Development, or any successor
thereto and including the Federal Housing Commissioner and the Secretary of
Housing and Urban Development where appropriate under the FHA Regulations.
"FHLMC" means the Federal Home Loan Mortgage Corporation, or any
successor thereto.
"FNMA" means the Federal National Mortgage Association, or any
successor thereto.
"FNMC" means First Nationwide Mortgage Corporation, a Delaware
corporation and a wholly owned subsidiary of the Seller.
"Gross Margin" means, with respect to each Adjustable Rate Mortgage
Loan, the applicable fixed percentage which, when added to the applicable
Index, calculates to the current Mortgage
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Interest Rate paid by the related Mortgagor (without taking into account any
Lifetime Rate Caps, Periodic Rate Caps, minimum
interest rates or Payment Adjustment Caps).
"HUD" means the Department of Housing and Urban Development, or any
federal agency or official thereof which may from time to time succeed to the
functions thereof with regard to FHA mortgage insurance. The term "HUD," for
purposes of this Agreement, is also deemed to include subdivisions thereof such
as the FHA and Government National Mortgage Association.
"Independent Directors" means the members of the Board of Directors of
the Purchaser who are not current employees or officers of the Purchaser or
current employees, officers or directors of the Seller or any affiliate of the
Seller. In addition, any members of the Board of Directors of the Purchaser
elected by holders of the preferred stock of the Purchaser, including the
Series A Preferred Shares, will be deemed to be "Independent Directors" for
purposes of approving actions requiring the approval of a majority of the
Independent Directors.
"Index" means, with respect to each Interest Rate Adjustment Date of a
Six-Month Treasury Rate Adjustable Rate Mortgage Loan, the weekly average
investment yield of auction rates on six-month Treasury securities as made
available by the Federal Reserve Board; with respect to each Interest Rate
Adjustment Date of a One-Year Treasury Rate Adjustable Rate Mortgage Loan, the
weekly average yield on United States Treasury securities adjusted to a
constant maturity of one year, as made available by the Federal Reserve Board;
and, with respect to each Interest Rate Adjustment Date of an Eleventh District
Cost of Funds Adjustable Rate Mortgage Loan, the then-current monthly weighted
average cost of funds for savings institutions in Arizona, California and
Nevada that are members of the Eleventh Federal Home Loan Bank District.
"Initial Closing Date" means ___________, 1997, or such other date as
the parties hereto may mutually agree.
"Initial Cut-off Date" means ____________, 1997.
"Initial Portfolio Mortgage Loan Schedule" means the schedule of
Mortgage Loans to be purchased by the Purchaser on the Initial Closing Date,
attached hereto as Exhibit J.
"Initial Portfolio Purchase Price" means the amount set forth in
Section 2 of this Agreement.
"Insurance Proceeds" means, with respect to each Mortgage Loan,
proceeds of insurance policies insuring the Mortgage Loan or the related
Mortgaged Property, to the extent
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not required to be released to a Mortgagor in accordance with the terms of the
related Mortgage Loan documents.
"Interest Rate Adjustment Date" means, with respect to each Adjustable
Rate Mortgage Loan, the date, specified in the related Mortgage Note and
Mortgage Loan Schedule, on which the Mortgage Interest Rate is adjusted.
"Lifetime Rate Cap" means the provision of each Mortgage Note related
to an Adjustable Rate Mortgage Loan which provides for an absolute maximum
Mortgage Interest Rate thereunder as set forth on the related Mortgage Loan
Schedule.
"Liquidation Proceeds" means cash received in connection with the
liquidation of a defaulted Mortgage Loan, whether through the sale or
assignment of such Mortgage Loan, trustee's sale, foreclosure sale or
otherwise, or the sale of the related Mortgaged Property if the Mortgaged
Property is acquired in satisfaction of such Mortgage Loan.
"Loan-to-Value Ratio" or "LTV" means, with respect to any Mortgage
Loan, the ratio (expressed as a percentage) of the original principal amount of
the Mortgage Loan to the lesser of (a) the Appraised Value of the related
Mortgaged Property at origination and (b) if the Mortgage Loan was made to
finance the acquisition of the related Mortgaged Property, the purchase price
of the Mortgaged Property.
"Monthly Payment" means the scheduled monthly payment of principal and
interest on a Mortgage Loan.
"Mortgage" means (i) with respect to a Mortgage Loan that is not a
Co-op Loan, the mortgage, deed of trust or other instrument securing a Mortgage
Note, which creates a first lien on an unsubordinated estate in fee simple in
real property securing the Mortgage Note; except that with respect to real
property located in jurisdictions in which the use of leasehold estates for
residential properties is a widely accepted practice, the mortgage, deed of
trust or other instrument securing the Mortgage Note may secure and create a
first lien upon a leasehold estate of the Mortgagor and (ii) with respect to a
Co-op Loan, the security agreement creating a security interest in the stock
allocated to a dwelling unit in a residential cooperative housing corporation
that was pledged to secure such Co-op Loan and the related Co-op Lease.
"Mortgage File" means, with respect to each Mortgage Loan, the
Custodian's File and the Servicing File.
"Mortgage Interest Rate" means the annual rate of interest borne on a
Mortgage Note, which, in the case of an Adjustable Rate Mortgage Loan, shall be
adjusted from time to
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time, with respect to each Mortgage Loan.
"Mortgage Interest Rate Cap" means, with respect to each Adjustable
Rate Mortgage Loan, the limit on each Mortgage Interest Rate adjustment as set
forth in the related Mortgage Note.
"Mortgage Loan" means an individual residential first mortgage loan
which is the subject of this Agreement, each Mortgage Loan originally sold
pursuant to this Agreement being identified on Exhibit J attached hereto, and
each Mortgage Loan sold pursuant to a Commitment Letter being identified on the
applicable Mortgage Loan Schedule, and each of which Mortgage Loans includes or
shall include, without limitation, the Mortgage File, the Monthly Payments,
Principal Prepayments, Liquidation Proceeds, Condemnation Proceeds, Insurance
Proceeds, and all other rights, benefits, proceeds and obligations arising from
or in connection with such Mortgage Loan, excluding replaced or repurchased
mortgage loans.
"Mortgage Loan Schedule" means (a)the Initial Portfolio Mortgage Loan
Schedule attached hereto as Exhibit J and (b) any schedule of Mortgage Loans in
similar form attached to and constituting part of a duly executed Commitment
Letter, in each case setting forth at least the following information with
respect to each Mortgage Loan set forth thereon: (1) the Seller's Mortgage Loan
identifying number; (2) the Mortgagor's name; (3) the street address of the
Mortgaged Property including the city, state and zip code; (4) a code
indicating whether the Mortgaged Property is owner-occupied, second home or
investor owned; (5) the property type, i.e., the type of residential units
constituting the Mortgaged Property; (6) the original months to maturity; (7)
the remaining months to maturity from the applicable Cut-off Date, based on the
original amortization schedule, and, if different, the maturity expressed in
the same manner but based on the actual amortization schedule; (8) the
Loan-to-Value Ratio at origination; (9) the Mortgage Interest Rate as of the
applicable Cut-off Date; (10) the stated maturity date; (11) the amount of the
Monthly Payment as of the applicable Cut-off Date; (12) the original principal
amount of the Mortgage Loan; (13) the principal balance of the Mortgage Loan as
of the close of business on the applicable Cut-off Date, after deduction of
payments of principal due on or before such Cut-off Date whether or not
collected; (14) a code indicating the purpose of the loan (i.e., purchase, rate
and term refinance, equity take-out refinance); (15) a code indicating the
documentation style (i.e. full, alternative or reduced); (16) a code indicating
whether the Mortgage Loan is a Convertible Mortgage Loan; (17) the number of
times during the 12 month period preceding the applicable Closing Date that any
Monthly Payment has been received thirty or more days after its Due Date; (18)
the type of Mortgage Loan product, if any; (19) the first payment Due Date;
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(19) the initial Mortgage Interest Rate; (20) the amount of the first Monthly
Payment; (21) the name of any Qualified Insurer with respect to a PMI Policy;
and (22) the Servicing Fee Rate. With respect to any Adjustable Rate Mortgage
Loan, such schedule shall also set forth (1) the Interest Rate Adjustment
Dates; (2) the Gross Margin; (3) the Lifetime Rate Cap; (4) any Periodic Rate
Caps; (5) any minimum interest rate, if other than the Gross Margin; (6) the
first Interest Rate Adjustment Date after the applicable Cut-off Date; (7) any
Payment Adjustment Cap; (8) the first Payment Adjustment Date after the related
Cut-off Date; (9) whether such Mortgage Loan has the potential to negatively
amortize; and (10) the name of the applicable Index, in each case, under the
terms of the Mortgage Note. With respect to the Mortgage Loans in the aggregate
set forth thereon, each Mortgage Loan Schedule shall set forth the following
information, as of the applicable Cut-off Date: (1) the number of Mortgage
Loans; (2) the current aggregate outstanding principal balance of the Mortgage
Loans; (3) the weighted average Mortgage Interest Rate of the Mortgage Loans;
and (4) the weighted average maturity of the Mortgage Loans.
"Mortgage Note" means the note or other evidence of the indebtedness
of a Mortgagor secured by a Mortgage.
"Mortgaged Property" means (i) with respect to a Mortgage Loan that is
not a Co-op Loan, the real property (or leasehold estate, if applicable)
securing repayment of the debt evidenced by a Mortgage Note and (ii) with
respect to a Co-op Loan, the dwelling unit that is the subject of the Co-op
Lease.
"Mortgagor" means the obligor on a Mortgage Note.
"Non-accrual Status" refers to Mortgage Loans that generally are 90
days or more past due in the payment of principal or interest.
"Officer's Certificate" means a certificate signed by the Chairman of
the Board or the Vice Chairman of the Board or a President or a Vice President
and by the Treasurer or the Secretary or one of the Assistant Treasurers or
Assistant Secretaries of the Seller or FNMC, as the case may be, and delivered
to the Purchaser as required by this Agreement.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Seller, reasonably acceptable to the Purchaser.
"Payment Adjustment Cap" means, with respect to an Ajdustable Rate
Mortgage Loan, the maximum amount of the related Monthly Payment as adjusted on
a given Payment Adjustment Date in accordance with the terms of the related
Mortgage Note.
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"Payment Adjustment Date" means, with respect to each Adjustable Rate
Mortgage Loan, the date set forth in the related Mortgage Note on which the
Monthly Payment is adjusted in accordance with the terms of the Mortgage Note.
"Periodic Rate Cap" means the provision of each Mortgage Note related
to each Adjustable Rate Mortgage Loan which provides for an absolute maximum
amount by which the Mortgage Interest Rate therein may increase or decrease on
an Interest Rate Adjustment Date above or below the Mortgage Interest Rate
previously in effect as set forth on the applicable Mortgage Loan Schedule.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, limited liability company,
unincorporated organization, government or any agency or political subdivision
thereof.
"PMI Policy" or "Primary Insurance Policy" means a policy of primary
mortgage guaranty insurance issued by a Qualified Insurer.
"Prime Rate" means the prime rate announced to be in effect from time
to time, as published as the average rate in The Wall Street Journal (Northeast
edition).
"Principal Prepayment" means any payment or other recovery of
principal on a Mortgage Loan which is received in advance of its scheduled Due
Date, including any prepayment penalty or premium thereon and which is not
accompanied by an amount of interest representing scheduled interest due on any
date or dates in any month or months subsequent to the month of prepayment.
"Purchase Price" means the price to be paid on the applicable Closing
Date by the Purchaser to the Seller in consideration for the Mortgage Loans to
be purchased by the Purchaser on such Closing Date (including, without
limitation, the Initial Portfolio Purchase Price to be paid by Purchaser at the
Initial Closing) as set forth in this Agreement or a duly executed Commitment
Letter, as the case may be.
"Purchaser" means California Federal Preferred Capital Corporation or
its successor in interest or assigns or any successor to the Purchaser under
this Agreement as herein provided.
"Qualified Appraiser" means, with respect to a Mortgaged Property, an
appraiser who had no interest, direct or indirect in such Mortgaged Property or
in any loan made on the security thereof, and whose compensation is not
affected by the approval or disapproval of the Mortgage Loan, and such
appraiser
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and the appraisal made by such 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.
"Qualified Insurer" means an insurance company duly qualified as such
under the laws of the states in which the Mortgaged Properties are located,
duly authorized and licensed in such states to transact the applicable
insurance business and to write the insurance provided and approved as an
insurer by FNMA with respect to primary mortgage insurance.
"Qualified Substitute Mortgage Loan" means a mortgage loan eligible to
be substituted by the Seller for a Deleted Mortgage Loan which must, on the
date of such substitution, (i) have an outstanding principal balance, after
deduction of all scheduled payments due in the month of substitution (or in the
case of a substitution of more than one mortgage loan for a Deleted Mortgage
Loan, an aggregate principal balance), not in excess of the outstanding
principal balance of the Deleted Mortgage Loan (the amount of any shortfall
will be deposited in the Custodial Account by the Seller in the month of
substitution); (ii) have a Mortgage Interest Rate not less than and not more
than 1.00% greater than the Mortgage Interest Rate of the Deleted Mortgage
Loan; (iii) have a remaining term to maturity not greater than and not more
than one year less than that of the Deleted Mortgage Loan; (iv) be of the same
type as the Deleted Mortgage Loan (i.e., Mortgage Loan with the same Mortgage
Interest Rate Caps or fixed rate); and (v) comply with each representation and
warranty (respecting individual Mortgage Loans) set forth in Section 8.2
hereof.
"Remittance Date" means the date specified in the Servicing Agreement
(with respect to each Mortgage Loan, as specified therein).
"Repurchase Price" means, with respect to any Mortgage Loan, a price
equal to (i) the unpaid principal balance of such Mortgage Loan plus (ii)
interest, net of Servicing Fees, on such unpaid principal balance of such
Mortgage Loan at the Mortgage Interest Rate from the last date through which
interest has been paid or advanced to the Purchaser to the date of repurchase,
less, in the case of any Mortgage Loan repurchased by the Servicer, any
unreimbursed advances in respect of such repurchased Mortgage Loan.
"RESPA" means Real Estate Settlement Procedures Act, as amended from
time to time.
"Security Instruments" means, with respect to a Co-op Loan, the
Mortgage, the stock certificates representing the stock
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allocated to the cooperative unit that is the subject of the Co-op Lease, the
stock power associated with such stock certificates, the Co-op Lease, the
collateral assignment of the Co-op Lease and the recognition agreement.
"Seller" means California Federal Bank, A Federal Savings Bank, and
its successors in interest and assigns.
"Series A Preferred Shares" means the __% Noncumulative Preferred
Stock, Series A, par value $.01 per share, of the Purchaser.
"Servicer" means FNMC.
"Servicing Agreement" means the agreement, attached as Exhibit B
hereto, to be entered into by the Purchaser and FNMC, as servicer, providing
for FNMC to service the Mortgage Loans as specified by the Servicing Agreement.
"Servicing Fee" means, with respect to each Mortgage Loan, the amount
of the annual fee the Purchaser shall pay to FNMC, which shall for a period of
one full month be equal to one-twelfth of the product of (a) the Servicing Fee
Rate and (b) the Stated Principal Balance of such Mortgage Loan. Such fee shall
be payable monthly, computed on the basis of the same principal amount and
period in respect of which any related interest payment on a Mortgage Loan is
computed, and shall be pro rated for any portion of a month during which the
Mortgage Loan is serviced by FNMC under the Servicing Agreement. The obligation
of the Purchaser to pay the Servicing Fee with respect to any Mortgage Loan is
limited to, and the Servicing Fee is payable solely from, the interest portion
(including recoveries with respect to interest from Liquidation Proceeds, to
the extent permitted by the Servicing Agreement) of the related Monthly Payment
collected by FNMC, or as otherwise provided under the Servicing Agreement. In
addition to the Servicing Fee, FNMC shall be entitled to retain all Ancillary
Income.
"Servicing Fee Rate" means, with respect to each Mortgage Loan, the
rate specified in the applicable Mortgage Loan Schedule with respect to such
Mortgage Loan.
"Servicing File" means, with respect to each Mortgage Loan, the files
retained by FNMC during the period in which FNMC is acting as servicer pursuant
to the Servicing Agreement, consisting of the documents set forth in Section II
of Exhibit A hereto pertaining to such Mortgage Loan and such other documents
held by the Servicer as is consistent with Accepted Servicing Practices.
"Stated Principal Balance" means as to each Mortgage Loan and any date
of determination, (i) the principal balance of
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the Mortgage Loan as of the applicable Cut-off Date after giving effect to
payments of principal due on or before such date, whether or not received,
minus (ii) all amounts previously received by the Purchaser with respect to the
related Mortgage Loan representing payments or recoveries of principal or
advances in lieu thereof.
SECTION 2. Agreement to Purchase Initial Portfolio.
The Seller hereby agrees to sell, transfer, assign, set over and
convey to the Purchaser on the Initial Closing Date, without recourse, but
subject to the terms of this Agreement, all right, title and interest of the
Seller in and to the Mortgage Loans set forth on the Initial Portfolio Mortgage
Loan Schedule and the related Mortgage Files and all rights and obligations
arising under the documents contained therein. Mortgage Loans on the Initial
Portfolio Mortgage Loan Schedule shall have an aggregate principal balance on
the Initial Cut-off Date in an amount equal to $__________, or in such other
amount as agreed by the Purchaser and the Seller as evidenced by the actual
aggregate principal balance of the Mortgage Loans accepted by the Purchaser on
the Initial Closing Date.
The Initial Portfolio Purchase Price payable by the Purchaser in
consideration for the Mortgage Loans listed on the Initial Portfolio Mortgage
Loan Schedule shall be $__________, or such other amount as agreed by the
Purchaser and the Seller as evidenced by the actual aggregate principal balance
of the Mortgage Loans accepted by the Purchaser on the Initial Closing Date.
The initial principal amount of the Mortgage Loans shall be the aggregate
principal balance of the Mortgage Loans, so computed as of the Initial Cut-off
Date, after application of payments of principal due on or before the Initial
Cut-off Date whether or not received.
SECTION 3. Subsequent Purchases.
From time to time, by executing a Commitment Letter substantially in
the form of Exhibit K hereto, the Seller shall sell, transfer, assign, set over
and convey to the Purchaser, without recourse, but subject to the terms of this
Agreement, and the Purchaser will purchase, all the right, title and interest
of the Seller, as of the applicable Closing Date, in and to the Mortgage Loans
set forth in the Mortgage Loan Schedule attached to such Commitment Letter, and
the Purchaser shall pay to Seller the Purchase Price set forth in such
Commitment Letter on such Closing Date.
Section 4. Payment of Purchase Price.
In addition to the applicable Purchase Price payable by Purchaser on
any Closing Date as described above, the Purchaser
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shall pay to the Seller, at each Closing, accrued interest on the initial
principal amount of the related Mortgage Loans at the weighted average Mortgage
Interest Rate of such Mortgage Loans, minus any amounts attributable to
Servicing Fees as provided in the Servicing Agreement from the applicable
Cut-off Date through the day prior to the applicable Closing Date, inclusive.
The Purchase Price plus accrued interest as set forth in the preceding
paragraph shall be paid by Purchaser on the applicable Closing Date by wire
transfer of immediately available funds.
The Purchaser shall, with respect to any Mortgage Loan purchased
hereunder or pursuant to a duly executed Commitment Letter, be entitled to (1)
all scheduled principal due after the applicable Cut-off Date, (2) all other
recoveries of principal collected on or after the applicable Cut-off Date
(other than scheduled payments of principal due on or before such Cut-off
Date), and (3) all payments of interest on the Mortgage Loans (net of
applicable Servicing Fees as provided in the Servicing Agreement) collected on
or after such Cut-off Date (other than that portion of any such payment which
is allocable to the period prior to such Cut-off Date). The outstanding
principal balance of each Mortgage Loan as of the applicable Cut-off Date is
determined after application of payments of principal due on or before such
Cut-off Date whether or not received, together with any unscheduled principal
prepayments received prior to such Cutoff Date; provided, however, that
payments of scheduled principal and interest prepaid for a Due Date beyond such
Cut-off Date shall not be applied to the principal balance as of such Cut-off
Date. Such prepaid amounts shall be the property of the Purchaser. Any such
prepaid amounts shall be deposited into the Custodial Account, which account is
established pursuant to the Servicing Agreement for the benefit of the
Purchaser for subsequent remittance to the Purchaser.
SECTION 5. Examination of Mortgage Files.
Prior to the date hereof or the date of any duly executed Commitment
Letter, as the case may be, the Seller has or shall have (a) delivered to the
Purchaser or its designee in escrow, for examination with respect to each
Mortgage Loan to be purchased, the related Mortgage File pertaining to each
Mortgage Loan, or (b) made the related Mortgage File available to the Purchaser
for examination at the Seller's offices or such other location as shall
otherwise be agreed upon by the Purchaser and the Seller. The fact that the
Purchaser or its designee has conducted or has failed to conduct any partial or
complete examination of any Mortgage Files shall not affect the Purchaser's (or
any of its successor's) rights to demand repurchase, substitution or other
relief as provided herein.
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SECTION 6. Conveyance from Seller to Purchaser.
Subsection 6.1 Possession of Servicing Files.
The Servicing Files relating to any Mortgage Loans purchased by
Purchaser hereunder or pursuant to a duly executed Commitment Letter shall be
retained by FNMC in accordance with the terms of the Servicing Agreement and,
as provided therein, shall be appropriately identified in the computer system
and/or books and records of FNMC, as appropriate, to clearly reflect the sale
of the related Mortgage Loan to the Purchaser.
Subsection 6.2 Books and Records.
Record title to each Mortgage Loan as of the applicable Closing Date
shall be in the name of the Seller, FNMC or one of their affiliates, or the
Purchaser or one or more of its designees, as the Purchaser shall select.
Notwithstanding the foregoing, each Mortgage and related Mortgage Note shall be
possessed solely by the Purchaser or the appropriate designee of the Purchaser,
as the case may be. All rights arising out of the Mortgage Loans including, but
not limited to, all amounts received by the Seller or FNMC after the applicable
Cut-off Date on or in connection with a Mortgage Loan (other than amounts due
prior to the applicable Cut-off Date) shall be vested in the Purchaser or one
or more of its designees; provided, however, that all amounts received on or in
connection with a Mortgage Loan (other than amounts due prior to the applicable
Cut-off Date) shall be received and held by the Seller or FNMC in trust for the
benefit of the Purchaser or its designee, as the case may be, as the owner of
the Mortgage Loans pursuant to the terms of this Agreement.
The sale of each Mortgage Loan shall be reflected on the Seller's
balance sheet and other financial statements as a sale of assets by the Seller.
Subsection 6.3 Delivery of Custodian's File.
On or prior to each Closing Date, the Seller shall deliver and release
to the Purchaser or its designee the Custodian's File with respect to each
Mortgage Loan sold to the Purchaser on such Closing Date.
The Seller shall forward, or shall cause FNMC to forward, to the
Purchaser or its designee all original documents evidencing an assumption,
modification, consolidation, conversion or extension of any Mortgage Loan
entered into on or prior to the date hereof within 30 days of their execution,
provided, however, that the Seller shall provide, or shall cause FMNC to
provide, the Purchaser or its designee with a certified true copy of any such
document submitted for recordation within 30 days of its
14
execution, and shall promptly provide the original of any document submitted
for recordation or a copy of such document certified by the appropriate public
recording office to be a true and complete copy of the original within ninety
(90) days of its submission for recordation (provided, that with respect to
assignments of the Mortgages reflecting the assignment from the Seller to the
Purchaser, one final assignment shall be executed by Seller in blanket
non-recordable form, and no other forms of assignment of such Mortgages shall
be executed or recorded unless and until the Purchaser shall request execution
of individual Assignments of Mortgages pursuant to and in accordance with
Section 25 hereof).
In the event that such original or copy of any document submitted for
recordation to the appropriate public recording office is not so delivered to
the Purchaser or its designee within 90 days following the Closing Date and in
the event that the Seller does not cure such failure within 30 days of
discovery or receipt of written notification of such failure from the
Purchaser, the related Mortgage Loan shall, upon the request of the Purchaser,
be repurchased by the Seller at the price and in the manner specified in
Subsection 8.3. The foregoing repurchase obligation shall not apply in the
event that the Seller cannot deliver, or cause to be delivered, such original
or copy of any document submitted for recordation to the appropriate public
recording office within the specified period due to a delay caused by the
recording office in the applicable jurisdiction; provided that the Seller shall
instead deliver, or cause to be delivered, a recording receipt of such
recording office or, if such recording receipt is not available, an officer's
certificate of a servicing officer of the Seller or FNMC, confirming that such
documents have been accepted for recording.
SECTION 7. Servicing of the Mortgage Loans.
All Mortgage Loans will be sold by the Seller to the Purchaser on a
servicing released basis.
The Purchaser shall retain FNMC as independent contract servicer of
the Mortgage Loans pursuant to and in accordance with the terms and conditions
contained in the Servicing Agreement. The Purchaser and FNMC shall execute the
Servicing Agreement on the Initial Closing Date in the form attached hereto as
Exhibit B.
Pursuant to the Servicing Agreement, FNMC shall service the Mortgage
Loans on behalf of the Purchaser and shall be entitled to the Servicing Fee and
any Ancillary Income with respect to each Mortgage Loan from the Closing Date
with respect to the sale and purchase thereof until the termination of the
Servicing Agreement with respect to such Mortgage Loan as set forth in the
Servicing Agreement. FNMC shall conduct such
15
servicing in accordance with the terms of the Servicing Agreement.
SECTION 8. Representations, Warranties and Covenants of the Seller;
Remedies for Breach.
Subsection 8.1 Representations and Warranties Regarding the Seller.
The Seller represents, warrants and covenants to the Purchaser that as
of the date hereof and as of each Closing Date:
(a) Due Organization and Authority; Enforceability. The Seller is
a stock savings bank duly organized, validly existing and in good standing
under the laws of the United States of America and has all licenses necessary
to carry on its business as now being conducted and is licensed, qualified and
in good standing in each state wherein it owns or leases any material
properties or where a 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, and in any event the Seller is in compliance with the
laws of any such state to the extent necessary to ensure the enforceability of
the related Mortgage Loan in accordance with the terms of this Agreement; the
Seller has the full corporate power, authority and legal right to hold,
transfer and convey the Mortgage Loans and to execute and deliver this
Agreement and to perform its obligations hereunder; the execution, delivery and
performance of this Agreement (including all instruments of transfer to be
delivered pursuant to this Agreement) by the Seller and the consummation of the
transactions contemplated hereby have been duly and validly authorized; this
Agreement and all agreements contemplated hereby have been duly executed and
delivered and constitute the valid, legal, binding and enforceable obligations
of the Seller subject to bankruptcy laws and other similar laws of general
application affecting rights of creditors and subject to the application of the
rules of equity, including those respecting the availability of specific
performance, none of which will materially interfere with the realization of
the benefits provided thereunder, regardless of whether such enforcement is
sought in a proceeding in equity or at law; and all requisite corporate action
has been taken by the Seller to make this Agreement and all agreements
contemplated hereby valid and binding upon the Seller in accordance with their
terms;
(b) Ordinary Course of Business. The consummation of the
transactions contemplated by this Agreement are in the ordinary course of
business of the Seller, and the transfer, assignment and conveyance of the
Mortgage Notes and the Mortgages by the Seller pursuant to this Agreement are
not subject to the bulk transfer or any similar statutory provisions in effect
in
16
any applicable jurisdiction;
(c) No Conflicts. Neither the execution and delivery of this
Agreement, the sale of the Mortgage Loans to the Purchaser, the consummation of
the transactions contemplated hereby, nor the fulfillment of or compliance with
the terms and conditions of this Agreement, will conflict with or result in a
breach of any of the terms, conditions or provisions of the Seller's charter or
by-laws or any legal restriction or any agreement or instrument to which the
Seller is now a party or by which it is bound, or constitute a default or
result in an acceleration under any of the foregoing, or result in the
violation of any law, rule, regulation, order, judgment or decree to which the
Seller or its property is subject, or result in the creation or imposition of
any lien, charge or encumbrance that would have an adverse effect upon any of
its properties pursuant to the terms of any mortgage, contract, deed of trust
or other instrument or impair the ability of the Purchaser to realize on the
Mortgage Loans, impair the value of the Mortgage Loans, or impair the ability
of the Purchaser to realize the full amount of any mortgage insurance benefits
accruing pursuant to this Agreement;
(d) Ability to Perform; Solvency. The Seller does not believe,
nor does it have any reason or cause to believe, that it cannot perform each
and every covenant contained in this Agreement. The Seller is solvent and the
sale of the Mortgage Loans will not cause the Seller to become insolvent. The
sale of the Mortgage Loans is not undertaken with the intent to hinder, delay
or defraud any of the Seller's creditors;
(e) No Litigation Pending. There is no action, suit, proceeding
or investigation pending or threatened against the Seller, before any court,
administrative agency or other tribunal asserting the invalidity of this
Agreement, seeking to prevent the consummation of any of the transactions
contemplated by this Agreement or which, either in any one instance or in the
aggregate, could result in any material adverse change in the business,
operations, financial condition, properties or assets of the Seller, or in any
material impairment of the right or ability of the Seller to carry on its
business substantially as now conducted, or which would draw into question the
validity of this Agreement or the Mortgage Loans or of any action taken or to
be taken in connection with the obligations of the Seller contemplated herein,
or which would be likely to impair materially the ability of the Seller to
perform under the terms of this Agreement;
(f) No Consent Required. No consent, approval, authorization or
order of, or registration or filing with, or notice to any court or
governmental agency or body including HUD is required for the execution,
delivery and performance by the
17
Seller of or compliance by the Seller with this Agreement or the Mortgage
Loans, the delivery of a portion of the Mortgage Files to the Purchaser or its
designee or the sale of the Mortgage Loans or the consummation of the
transactions contemplated by this Agreement, or if required, such approval has
been obtained prior to the applicable Closing Date;
(g) Selection Process. The Mortgage Loans were selected from
among the outstanding one-to four-family residential and co-op mortgage loans
in the Seller's portfolio as of the applicable Closing Date as to which the
representations and warranties set forth in Subsection 8.2 could be made and
such selection was not made in a manner so as to affect adversely the interests
of the Purchaser;
(h) Initial Portfolio. The aggregate characteristics of the
Mortgage Loans set forth on the Initial Portfolio Mortgage Loan Schedule are as
set forth under the heading "Business and Strategy--Description of Initial
Portfolio" in the Prospectus relating to the Series A Preferred Shares of the
Purchaser, dated January __, 1997;
(i) No Untrue Information. Neither this Agreement nor any
information, statement, tape, diskette, report, form, or other document
furnished or to be furnished pursuant to this Agreement or in connection with
the transactions contemplated hereby contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary to make the statements contained herein or therein not misleading;
and
(j) No Brokers. The Seller has not dealt with any broker,
investment banker, agent or other person that may be entitled to any commission
or compensation in connection with the sale of the Mortgage Loans.
Subsection 8.2 Representations and Warranties Regarding
Individual Mortgage Loans.
The Seller hereby represents and warrants to the Purchaser, as to
each Mortgage Loan and as of the applicable Closing Date for such Mortgage Loan
(or as of such other date as may be specified below), that:
(a) Mortgage Loans as Described. The information set forth in the
applicable Mortgage Loan Schedule is complete, true and correct in all material
respects;
(b) Payments Current; Status. All payments required to be made up
to, but not including, the applicable Cut-off Date for the Mortgage Loan under
the terms of the Mortgage Note have been made and credited. No payment required
under the Mortgage
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Loan is delinquent nor has any payment under the Mortgage Loan been 30 days or
more delinquent more than once within the period falling twelve (12) months
prior to the applicable Cut-off Date. The Mortgage Loan is not, and has not
been at any time in the twelve months immediately preceding the applicable
Cut-off Date, (i) Classified, (ii) in Nonaccrual Status or (iii) renegotiated
due to the financial deterioration of the Mortgagor;
(c) No Outstanding Charges. There are no defaults in complying
with the terms of the Mortgage, and all taxes, governmental assessments,
insurance premiums, water, sewer and municipal charges, leasehold payments or
ground rents which previously became due and owing have been paid, or an escrow
of funds has been established in an amount sufficient to pay for every such
item which remains unpaid and which has been assessed but is not yet due and
payable. The 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 earlier, to the day
which precedes by one month the Due Date of the first installment of principal
and interest;
(d) Original Terms Unmodified. The terms of the Mortgage Note and
Mortgage have not been impaired, waived, altered or modified in any respect,
from the date of origination except by a written instrument which has been
recorded, if necessary to protect the interests of the Purchaser, and which has
been delivered to the Purchaser or its designee and the terms of which are
reflected in the related Mortgage Loan Schedule, if applicable. The terms of
any such waiver, alteration or modification are reflected on the related
Mortgage Loan Schedule, if applicable, and either (i) the substance of such
terms has been approved by the title insurer, if any, to the extent required by
the policy, or (ii) such waiver, alteration or modification has not and will
not affect the priority of the related Mortgage. No Mortgagor has been
released, in whole or in part, except in connection with an assumption
agreement, which assumption agreement is part of the Custodian's File delivered
to the Purchaser or its designee and the terms of which are reflected in the
related Mortgage Loan Schedule;
(e) No Defenses. The Mortgage Loan is not subject to any right of
rescission, set-off, counterclaim or defense, including without limitation the
defense of usury, nor will the operation of any of the terms of the Mortgage
Note or the Mortgage, or the exercise of any right thereunder, render either
the Mortgage Note or the Mortgage unenforceable, in whole or in part and no
such right of rescission, set-off, counterclaim or defense has been asserted
with respect thereto, and no Mortgagor
19
is now or was, at the time of origination of the related Mortgage Loan, a
debtor in any state or Federal bankruptcy or insolvency proceeding;
(f) Hazard Insurance. As to Mortgage Loans that are not Co-op
Loans, pursuant to the terms of the Mortgage, all buildings or other
improvements upon the Mortgaged Property are, and as to Co-op Loans, the Co-op
Project is, insured by a generally acceptable insurer against loss by fire,
hazards of extended coverage and such other hazards as are set forth in Section
2.10 of the Servicing Agreement attached hereto as Exhibit B. If required by
the Flood Disaster Protection Act of 1973, as amended, the Mortgage Loan is
covered by a flood insurance policy meeting the requirements of the current
guidelines of the Federal Insurance Administration, which policy conforms to
FNMA, as well as all additional requirements set forth in Section 2.10 of the
Servicing Agreement attached hereto as Exhibit B. With respect to Mortgage
Loans that are not Co-op Loans, all individual insurance policies contain a
standard mortgagee clause naming the Seller and its successors and assigns as
mortgagee, and all premiums thereon have been paid. The Mortgage for each
Mortgage Loan that is not a Co-op Loan obligates the Mortgagor thereunder to
maintain the hazard insurance policy at the Mortgagor's cost and expense, and
on the Mortgagor's failure to do so, authorizes the holder of the Mortgage to
obtain and maintain such insurance at such Mortgagor's cost and expense, and to
seek reimbursement therefor from the Mortgagor. Where required by state law or
regulation, the Mortgagor has been given an opportunity to choose the carrier
of the required hazard insurance, provided the policy is not a "master" or
"blanket" hazard insurance policy covering a condominium, or any hazard
insurance policy covering the common facilities of a planned unit development.
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 the Purchaser upon the consummation of the transactions
contemplated by this Agreement. The Seller has not engaged in, and has no
knowledge of the Mortgagor'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 including,
without limitation, no unlawful fee, commission, kickback or other unlawful
compensation or value of any kind has been or will be received, retained or
realized by any attorney, firm or other person or entity, and no such unlawful
items have been received, retained or realized by the Seller;
(g) Compliance with Applicable Laws. Any and all requirements of
any federal, state or local law including, without limitation, usury,
truth-in-lending, real estate settlement procedures, consumer credit
protection, fair housing, equal credit opportunity and disclosure laws
applicable to the
20
Mortgage Loan have been complied with, the consummation of the transactions
contemplated hereby will not involve the violation of any such laws or
regulations, and the Seller shall maintain in its possession, available for the
Purchaser's inspection, and shall deliver to the Purchaser upon demand,
evidence of compliance with all such requirements;
(h) No Satisfaction of Mortgage. The Mortgage has not been
satisfied, canceled, subordinated or rescinded, in whole or in part, and the
Mortgaged Property has not been released from the lien of the Mortgage, in
whole or in part, nor has any instrument been executed that would effect any
such release, cancellation, subordination or rescission. The Seller has not
waived the performance by the Mortgagor of any action, if the Mortgagor's
failure to perform such action would cause the Mortgage Loan to be in default,
nor has the Seller waived any default resulting from any action or inaction by
the Mortgagor;
(i) Location and Type of Mortgaged Property. With respect to each
Mortgage Loan that is not a Co-op Loan the Mortgaged Property is located in the
state identified in the related Mortgage Loan Schedule and consists of a single
parcel of real property with a detached single family residence erected
thereon, or a townhouse, or a two-to four-family dwelling, or an individual
condominium unit in a condominium project, or an individual unit in a planned
unit development, provided, however, that [any condominium unit or planned unit
development shall conform with requirements acceptable to FNMA regarding such
dwellings and that] no residence or dwelling is a single parcel of real
property with a cooperative housing corporation erected thereon, a mobile home
or a manufactured dwelling. As of the date of origination, no portion of the
Mortgaged Property is used for commercial purposes, and since the date of
origination no portion of the Mortgaged Property is used for commercial
purposes;
(j) Valid First Lien. With respect to each Mortgage Loan that is
not a Co-op Loan, the Mortgage is a valid, subsisting, enforceable and
perfected first lien on the Mortgaged Property, including all buildings and
improvements 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 prudent mortgage lending
21
institutions generally and specifically referred to in the lender's
title insurance policy delivered to the originator of the Mortgage
Loan and (a) specifically referred to or otherwise considered in the
appraisal made for the originator of the Mortgage Loan or (b) 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.
With respect to Co-op Loans, the Mortgage is a valid, subsisting enforceable
and perfected first security interest in the stock of the residential
cooperative housing corporation and the Co-op Lease pledged to secure the Co-op
Loan, subject only to (a) the lien of the related residential cooperative
housing corporation for unpaid assessments representing the Mortgagor's pro
rata share of the corporation's payments for its blanket mortgage, current and
future real property taxes, insurance premiums, maintenance fees and other
assessments to which like collateral is commonly subject; and (b) other matters
to which like collateral is commonly subject which do not materially interfere
with the benefits of the security intended to be provided by the Mortgage. Also
with respect to a Co-op Loan, a cooperative lien search has been made by a
company competent to make same, which company is acceptable to FNMA and is
qualified to do business in the jurisdiction where the Co-op Project is
located.
Any security agreement, chattel mortgage or equivalent document related to and
delivered in connection with the Mortgage Loan establishes and creates a valid,
subsisting, enforceable and perfected first lien and first priority security
interest on the property described therein and the Seller has full right to
sell and assign the same to the Purchaser. The Mortgaged Property was not, as
of the date of origination of the Mortgage Loan, subject to a mortgage, deed of
trust, deed to secure debt or other security instrument creating a lien
subordinate to the lien of the Mortgage (except any such subordinate loan which
was created in connection with the origination of the related Mortgage Loan
details of which are contained in the related Mortgage File);
(k) Validity of Mortgage Documents. The Mortgage Note and the
Mortgage and any other agreement executed and delivered by a Mortgagor in
connection with a Mortgage Loan are genuine, and each is the legal, valid and
binding obligation of the maker thereof enforceable in accordance with its
terms. All parties to the Mortgage Note, the Mortgage and any other such
related agreement had legal capacity to enter into the Mortgage Loan and to
execute and deliver the Mortgage Note, the Mortgage and any
22
such agreement, and the Mortgage Note, the Mortgage and any other such related
agreement have been duly and properly executed by such parties. No fraud,
error, omission, misrepresentation, negligence or similar occurrence with
respect to a Mortgage Loan has taken place on the part of any Person, including
without limitation, the Mortgagor, any appraiser, any builder or developer, or
any other party involved in the origination of the Mortgage Loan;
(l) Full Disbursement of Proceeds. The Mortgage Loan has been
closed and the proceeds of the Mortgage Loan have been fully disbursed and
there is no requirement for future advances thereunder, and any and all
requirements as to completion of any on-site or off-site improvement and as to
disbursements of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making or closing the Mortgage Loan and the
recording of the Mortgage were paid, and the Mortgagor is not entitled to any
refund of any amounts paid or due under the Mortgage Note or Mortgage;
(m) Ownership. The Seller is the sole owner of record and holder
of the Mortgage Loan and the indebtedness evidenced by each Mortgage Note,
except for the assignments of mortgage which have been sent for recording, and
upon recordation the Seller will be the owner of record of each Mortgage and
the indebtedness evidenced by each Mortgage Note, and upon the sale of the
Mortgage Loans to the Purchaser, the Seller will retain the Mortgage Files or
any part thereof not delivered to the Purchaser or its designee in trust only
for the purpose of servicing and supervising the servicing of each Mortgage
Loan. The Mortgage Loan is not assigned or pledged, and the Seller has good and
indefeasible title thereto, and has full right to transfer and sell the
Mortgage Loan to the Purchaser 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 and following the sale of each Mortgage Loan, the Purchaser
will own such Mortgage Loan free and clear of any encumbrance, equity,
participation interest, lien, pledge, charge, claim or security interest. The
Seller intends to relinquish all rights to possess, control and monitor the
Mortgage Loan, except indirectly for purposes of servicing the Mortgage Loan as
set forth in the Servicing Agreement. After the applicable Closing Date, the
Seller will have no right to modify or alter the terms of the sale of any
Mortgage Loan and the Seller will have no obligation or right to repurchase
such Mortgage Loan or substitute another Mortgage Loan therefor, except as
provided in this Agreement;
(n) Doing Business. All parties which have had any interest in
the Mortgage Loan, whether as mortgagee, assignee,
23
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 (i) organized under the laws of such state, or (ii)
qualified to do business in such state, or (iii) a federal savings and loan
association, a savings bank or a national bank having a principal office in
such state, or (3) not doing business in such state;
(o) PMI Policy. Each Mortgage Loan which at the time of its
origination was required to be insured as to payment defaults by a PMI Policy
in accordance with the underwriting policies customarily employed by the Seller
or one of its predecessors in interest during the period of such origination
was so insured. All provisions of each PMI Policy have been and are being
complied with, each such policy is valid and remains in full force and effect,
and all premiums due thereunder have been paid. No action, inaction, or event
has occurred and no state of facts exists that has, or will result in the
exclusion from, denial of, or defense to coverage by the PMI Policy. Any
Conventional 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. The Mortgage Interest Rate for each Conventional Loan as set forth
on the related Mortgage Loan Schedule is net of any such insurance premium;
(p) Title Insurance. The Mortgage Loan is covered by an ALTA
lender's title insurance policy or other generally acceptable form of policy or
insurance acceptable to FNMA and each such title insurance policy is issued by
a title insurer acceptable to FNMA and qualified to do business in the
jurisdiction where the Mortgaged Property is located, insuring the 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) of this Subsection 8.2,
and against any loss by reason of the invalidity or unenforce-ability of the
lien resulting from the provisions of the Mortgage providing for adjustment to
the Mortgage Interest Rate and Monthly Payment. Where required by state law or
regulation, the Mortgagor has been given the opportunity to choose the carrier
of the required mortgage title insurance. Additionally, such lender's title
insurance policy affirmatively insures ingress and egress, and against
encroachments by or upon the Mortgaged Property or any interest therein. The
Seller, its successor and assigns, are the sole insureds of such lender's title
insurance policy, and such lender's title insurance policy is valid and remains
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 related
Mortgage, including the Seller, has done, by act or omission, anything
24
which would impair the coverage of such lender's title insurance policy,
including without limitation, no unlawful fee, commission, kickback or other
unlawful compensation or value of any kind has been or will be received,
retained or realized by any attorney, firm or other person or entity, and no
such unlawful items have been received, retained or realized by the Seller;
(q) No Defaults. There is no default, breach, violation or event
which would permit acceleration existing under the Mortgage or the Mortgage
Note and no event which, with the passage of time or with notice and the
expiration of any grace or cure period, would constitute a default, breach,
violation or event which would permit acceleration, and neither the Seller nor
its predecessors have waived any default, breach, violation or event which
would permit acceleration;
(r) No Mechanics' Liens. With respect to each Mortgage Loan, as
of its date of origination, there was, and to the best knowledge of Seller
there is, no mechanics' or similar liens or claims filed for work, labor or
material (and no rights are outstanding that under law could give rise to such
liens) affecting the related Mortgaged Property which are or may be liens prior
to, or equal or coordinate with, the lien of the related Mortgage;
(s) Location of Improvements; No Encroachments. With respect to
each Mortgage Loan, to the best knowledge of Seller, all improvements which
were considered in determining the Appraised Value of the Mortgaged Property
lay wholly within the boundaries and building restriction lines of the
Mortgaged Property, and no improvements on adjoining properties encroach upon
the Mortgaged Property. No improvement located on or being part of the
Mortgaged Property is in violation of any applicable zoning law or regulation;
(t) Origination: Payment Terms. The Mortgage Loan was originated
by a mortgagee approved by the Secretary of Housing and Urban Development
pursuant to Sections 203 and 211 of the Act, a savings and loan association, a
savings bank, a commercial bank, credit union, insurance company or similar
institution which is supervised and examined by a federal or state authority.
The documents, instruments and agreements submitted for loan underwriting were
not falsified and contain no untrue statement of material fact or omit to state
a material fact required to be stated therein or necessary to make the
information and statements therein not misleading. Principal payments on the
Mortgage Loan commenced no more than sixty (60) days after funds were disbursed
in connection with the Mortgage Loan. The Mortgage Interest Rate, as well as
the Lifetime Rate Cap and the Periodic Rate Cap if the Mortgage Loan is an
Adjustable Rate Mortgage Loan, are as set forth on the applicable Mortgage Loan
25
Schedule. The Mortgage Note is payable on the first day of each month in equal
monthly installments of principal and interest, which installments of interest
are subject to change if the Mortgage Loan is an Adjustable Rate Mortgage Loan
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. Each
Convertible Mortgage Loan contains a provision allowing the Mortgagor to
convert the Mortgage Note from an adjustable interest rate Mortgage Note to a
fixed interest rate Mortgage Note in accordance with the terms of the Mortgage
Note or a rider to the related Mortgage Note;
(u) Customary Provisions. The Mortgage contains customary and
enforceable provisions such as to render the rights and remedies of the holder
thereof adequate for the realization against the Mortgaged Property of the
benefits of the security provided thereby, including, (i) in the case of a
Mortgage designated as a deed of trust, by trustee's sale, and (ii) otherwise
by judicial foreclosure. Upon default by a Mortgagor on a Mortgage Loan and
foreclosure on, or trustee's sale of, the Mortgaged Property pursuant to the
proper procedures, the holder of the Mortgage Loan will be able to deliver good
and merchantable title to the Mortgaged Property. 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, subject to applicable federal and state laws and judicial
precedent with respect to bankruptcy and right of redemption or similar law.
The Mortgage contains due-on-sale provisions providing for the acceleration of
the payment of the unpaid principal balance of such Mortgage Loan in the event
that all or any part of the Mortgaged Property is sold or transferred without
the prior written consent of the Mortgagee. With respect to a Co-op Loan, (i)
there is no provision in any Co-op Lease which requires that Mortgagor, before
the shares owned by such Mortgagor are offered to a third party, to offer for
sale such shares to the residential cooperative housing corporation at a price
that is below the fair market price for such shares, as such fair market price
is determined at time of such offer, and (ii) there is no prohibition in any
Co-op Lease against pledging the shares or assigning the Co-op Lease;
(v) Conformance with Agency and Underwriting Standards. The
Mortgage Loan was underwritten in accordance with the underwriting standards of
the Seller or one of its predecessors in interest, as applicable, or FNMA's
underwriting standards (except that the principal balance of certain Mortgage
Loans may have exceeded the limits of FNMA), in each case in effect at the time
the Mortgage Loan was originated. The
26
Mortgage Note and Mortgage are on forms acceptable to the Purchaser, in its
sole discretion, as evidenced by the Purchaser's purchase of the related
Mortgage Loans, and the Seller has not made any representations to a Mortgagor
that are inconsistent with the mortgage instruments used;
(w) Occupancy of the Mortgaged Property. As of the date of
origination of each Mortgage Loan, the related Mortgaged Property was, and to
the best knowledge of Seller, is, lawfully occupied under applicable law. To
the best knowledge of Seller, 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 clause (j) above;
(y) Deeds of Trust. In the event the Mortgage constitutes a deed
of trust, a trustee, authorized and 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
the Purchaser to the trustee under the deed of trust, except in connection with
a trustee's sale after default by the Mortgagor;
(z) Value and Marketability. The Seller has no actual knowledge
of any circumstances or conditions with respect to the Mortgage, the Mortgaged
Property, the Mortgagor, the Mortgage File or the Mortgagor's credit standing
that can reasonably be expected to cause the Mortgage Loan to become
delinquent, or adversely affect the value or marketability of the Mortgage
Loan;
(aa) Delivery of Mortgage Documents. The Mortgage Note, the
Mortgage, the Assignment of Mortgage and any other documents in the Custodian's
File for each Mortgage Loan have been delivered to the Purchaser or its
designee. The Seller (or FNMC) is in possession of a complete, true and
accurate Mortgage File in compliance with Exhibit A hereto, except for such
documents the originals of which have been delivered to the Purchaser or its
designee;
(bb) [reserved]
(cc) [reserved]
(dd) Assumability. Either (i) the documents in the
27
Custodian's File provide that a related Mortgage Loan may only be assumed if
the party assuming such Mortgage Loan meets certain credit requirements stated
in such documents, or (ii) the Mortgage Note with respect to such Mortgage Loan
contains a "due-on-sale" provision which prevents the assumption of the
Mortgage Loan by a proposed transferee and accelerates the payment of the
outstanding principal balance of such Mortgage Loan;
(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 the 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 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) [reserved]
(gg) Mortgaged Property Undamaged; No Condemnation Proceedings.
To the best knowledge of Seller, there is no proceeding pending or threatened
for the total or partial condemnation of the Mortgaged Property. To the best
knowledge of Seller, 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 and each
Mortgaged Property is in good repair. There have not been any condemnation
proceedings with respect to the Mortgaged Property and the Seller has no
knowledge of any such proceedings in the future;
(hh) Collection Practices; Escrow Deposits; Interest Rate
Adjustments. The origination and collection practices used by the Seller with
respect to the Mortgage Loan have been in all respects in compliance with
Accepted Servicing Practices, applicable laws and regulations, 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, or under the control of,
the Seller or FNMC 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 and the provisions of the related Mortgage Note and Mortgage. An escrow of
funds 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 the Seller have been capitalized under the Mortgage or
the Mortgage Note. All Mortgage Interest
28
Rate adjustments and adjustments to the Monthly Payment, if the Mortgage Loan
is an Adjustable Rate Mortgage Loan, have been made in strict compliance with
state and federal law and the terms of the related Mortgage and Mortgage Note
on the related Interest Rate Adjustment Date. With respect to each Adjustable
Rate Mortgage Loan, the Mortgage Interest Rate adjusts annually, semiannually
or monthly as set forth herein. If, pursuant to the terms of the Mortgage Note,
another index was selected for determining the Mortgage Interest Rate, the same
index was used with respect to each Mortgage Note which required a new index to
be selected, and such selection did not conflict with the terms of the related
Mortgage Note. The Seller executed and delivered any and all notices required
under applicable law and the terms of the related Mortgage Note and Mortgage
regarding the Mortgage Interest Rate and the Monthly Payment adjustments. Any
interest required to be paid pursuant to state, federal and local law has been
properly paid and credited;
(ii) Other Insurance Policies. No action, inaction or event has
occurred and no state of facts exists or has existed that has resulted or could
result in the exclusion from, denial of, or defense to coverage under any
hazard insurance policy or PMI Policy. In connection with the placement of any
such insurance, no commission, fee, or other compensation has been or will be
received by the Seller or by any officer, director, or employee of the Seller
or any designee of the Seller or any corporation in which the Seller or any
officer, director, or employee had a financial interest at the time of
placement of such insurance;
(jj) No Violation of Environmental Laws. To the knowledge of
Seller, there is no pending action or proceeding directly involving the
Mortgaged Property in which compliance with any environmental law, rule or
regulation is an issue; there is no violation of any environmental law, rule or
regulation with respect to the Mortgaged Property; and nothing further remains
to be done to satisfy in full all requirements of each such law, rule or
regulation constituting a prerequisite to use and enjoyment of said property;
(kk) Soldiers' and Sailors' Civil Relief Act. The Mortgagor has
not notified the Seller and the Seller has no knowledge of any relief requested
or allowed to the Mortgagor under the Soldiers' and Sailors' Civil Relief Act
of 1940;
(ll) Appraisal. 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 who had no interest, direct or indirect in
the Mortgaged Property or in any loan made on the security thereof, and whose
compensation is not affected by the approval or disapproval of the Mortgage
Loan, and the appraisal and appraiser
29
both satisfy the requirements of FNMA and 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;
(mm) Disclosure Materials. The Mortgagor has received all
disclosure materials required by and the Seller complied with all applicable
law with respect to the making of the Mortgage Loans, and the Servicing File
contains a signed statement of the Mortgagor to that effect;
(nn) Construction or Rehabilitation of Mortgaged Property. No
Mortgage Loan was made in connection with the construction or rehabilitation of
a Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged
Property;
(oo) No Defense to Insurance Coverage. No action has been taken
or failed to be taken, no event has occurred and no state of facts exists or
has existed on or prior to the applicable Closing Date (whether or not known to
the Seller on or prior to such date) which has resulted or will result in an
exclusion from, denial of, or defense to coverage under any primary mortgage
insurance (including, without limitation, any exclusions, denials or defenses
which would limit or reduce the availability of the timely payment of the full
amount of the loss otherwise due thereunder to the insured) whether arising out
of actions, representations, errors, omissions, negligence, or fraud of the
Seller, the related Mortgagor or any party involved in the application for such
coverage, including the appraisal, plans and specifications and other exhibits
or documents submitted therewith to the insurer under such insurance policy, or
for any other reason under such coverage, but not including the failure of such
insurer to pay by reason of such insurer's breach of such insurance policy or
such insurer's financial inability to pay;
(pp) Escrow Analysis. With respect to each Mortgage, Seller has
within the last twelve months (unless such Mortgage was originated within such
twelve month period) analyzed the required Escrow Payments for each Mortgage
and adjusted the amount of such payments so that, assuming all required
payments are timely made, any deficiency will be eliminated on or before the
first anniversary of such analysis, or any overage will be refunded to the
Mortgagor, in accordance with RESPA and any other applicable law; and
(qq) Prior Servicing. Each Mortgage Loan has been serviced in all
material respects in compliance with Accepted Servicing Practices; provided
that, in the event of any breach of the representation and warranty set forth
in this Subsection (qq), the Seller shall not be required to repurchase any
such Mortgage Loan unless such breach had, and continues to have, a
30
material and adverse effect on the value of the related Mortgage Loan or the
interest of the Purchaser therein.
Subsection 8.3 Remedies for Breach of Representations and Warranties.
It is understood and agreed that the representations and warranties
set forth in Subsections 8.1 and 8.2 shall survive the sale of the Mortgage
Loans to the Purchaser and shall inure to the benefit of the Purchaser,
notwithstanding any restrictive or qualified endorsement on any Mortgage Note
or Assignment of Mortgage or the examination or failure to examine any Mortgage
File. Upon discovery by either the Seller or the Purchaser of a breach of any
of the foregoing representations and warranties which materially and adversely
affects the interests of the Purchaser in the related Mortgage Loan, the party
discovering such breach shall give prompt written notice to the other.
The Seller, promptly after discovery of a breach of any representation
or warranty, shall notify the Purchaser of such breach and the details thereof.
Within ninety (90) days of the earlier of (i) notice by the Seller pursuant to
the immediately preceding sentence or (ii) notice by the Purchaser to the
Seller of any breach of a representation or warranty with respect to a Mortgage
Loan, the Seller shall use its best efforts promptly to cure such breach in all
material respects. If such breach can ultimately be cured but is not reasonably
expected to be cured within the 90 day period, Seller shall have such
additional time as is reasonably determined by Purchaser (not to exceed 180
days) to cure or correct such breach provided Seller has commenced curing or
correcting such breach and is diligently pursuing same. If such breach cannot
be or has not been cured, the Seller shall, upon the expiration of the cure
period described above, at the Purchaser's option and subject to the provisions
of this Subsection 8.3, repurchase such Mortgage Loan at the Repurchase Price,
unless the Seller elects to substitute a Qualified Substitute Mortgage Loan for
such Mortgage Loan pursuant to this Subsection 8.3. In the event that a breach
shall involve any representation or warranty set forth in Subsection 8.1, and
such breach cannot be cured within ninety (90) days of the earlier of either
discovery by or notice to the Seller of such breach, all of the Mortgage Loans
shall, at the Purchaser's option and subject to the provisions of this
Subsection 8.3, be repurchased by the Seller at the Repurchase Price. However,
if the breach shall involve a representation or warranty set forth in
Subsection 8.2, the Seller may, at the Seller's option and provided that the
Seller has a Qualified Substitute Mortgage Loan, rather than repurchase the
Mortgage Loan as provided above, remove such Mortgage Loan (a "Deleted Mortgage
Loan") and substitute in its place a Qualified Substitute Mortgage Loan or
Loans. If the Seller has no Qualified Substitute Mortgage Loan,
31
it shall repurchase the deficient Mortgage Loan. Any repurchase of a Mortgage
Loan or Mortgage Loans pursuant to the foregoing provisions of this Subsection
8.3 shall be accomplished by either (a) if the Servicing Agreement is in
effect, deposit in the Custodial Account of the amount of the Repurchase Price
for payment to the Purchaser on the next scheduled Remittance Date, after
deducting therefrom any amount received in respect of such repurchased Mortgage
Loan or Loans and being held in the Custodial Account for future distribution
or (b) if the Servicing Agreement is no longer in effect, by direct remittance
of the Repurchase Price to the Purchaser or its designee in accordance with the
Purchaser's instructions.
At the time of repurchase or substitution, the Purchaser and the
Seller shall arrange for the reassignment of the Deleted Mortgage Loan to the
Seller and the delivery to the Seller of any documents held by the Purchaser or
its designee relating to the Deleted Mortgage Loan. In addition, upon any such
repurchase, all funds maintained in the Escrow Account with respect to such
Deleted Mortgage Loan shall be transferred to the Seller. In the event of a
repurchase or substitution, the Seller shall, simultaneously with such
reassignment, give written notice to the Purchaser that such repurchase or
substitution has taken place, amend the related Mortgage Loan Schedule to
reflect the withdrawal of the Deleted Mortgage Loan from this Agreement, and,
in the case of substitution, identify a Qualified Substitute Mortgage Loan and
amend the related Mortgage Loan Schedule to reflect the addition of such
Qualified Substitute Mortgage Loan to this Agreement. In connection with any
such substitution, the Seller shall be deemed to have made as to such Qualified
Substitute Mortgage Loan the representations and warranties set forth in this
Agreement except that all such representations and warranties set forth in this
Agreement shall be deemed made as of the date of such substitution. The Seller
shall effect such substitution by delivering to the Purchaser or its designee
for such Qualified Substitute Mortgage Loan the documents required by
Subsection 6.3, with the Mortgage Note endorsed as required by Subsection 6.3.
No substitution will be made in any calendar month after the Investor Cut-off
Date for such month. The Seller shall deposit in the Custodial Account the
Monthly Payment, or in the event that the Servicing Agreement is no longer in
effect remit directly to the Purchaser or its designee in accordance with the
Purchaser's instructions the Monthly Payment less the Servicing Fee due, if
any, on such Qualified Substitute Mortgage Loan or Loans in the month following
the date of such substitution. Monthly Payments due with respect to Qualified
Substitute Mortgage Loans in the month of substitution shall be retained by the
Seller. For the month of substitution, payments to the Purchaser shall include
the Monthly Payment due on any Deleted Mortgage Loan in the month of
substitution, and the Seller shall thereafter be entitled to retain all amounts
subsequently received by the Seller in respect of such Deleted
32
Mortgage Loan.
For any month in which the Seller substitutes a Qualified Substitute
Mortgage Loan for a Deleted Mortgage Loan, the Seller shall determine the
amount (if any) by which the aggregate principal balance of all Qualified
Substitute Mortgage Loans as of the date of substitution is less than the
aggregate Stated Principal Balance of all Deleted Mortgage Loans (after
application of scheduled principal payments due in the month of substitution).
The amount of such shortfall shall be distributed by the Seller directly to the
Purchaser or its designee in accordance with the Purchaser's instructions
within two (2) Business Days of such substitution.
In addition to such repurchase or substitution obligation, the Seller
shall indemnify the Purchaser and hold it harmless against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments, and other costs and expenses resulting from any claim,
demand, defense or assertion based on or grounded upon, or resulting from, a
breach of the Seller representations and warranties contained in this
Agreement. It is understood and agreed that the obligations of the Seller set
forth in this Subsection 8.3 to cure, substitute for or repurchase a defective
Mortgage Loan and to indemnify the Purchaser as provided in this Subsection 8.3
constitute the sole remedies of the Purchaser respecting a breach of the
foregoing representations and warranties.
Any cause of action against the Seller relating to or arising out of
the breach of any representations and warranties made in Subsections 8.1 and
8.2 shall accrue as to any Mortgage Loan upon (i) discovery of such breach by
the Purchaser or notice thereof by the Seller to the Purchaser, (ii) failure by
the Seller to cure such breach or repurchase such Mortgage Loan as specified
above, and (iii) demand upon the Seller by the Purchaser for compliance with
this Agreement.
SECTION 9. Closing.
The closing for the purchase and sale of any Mortgage Loans shall take
place on (i) the Initial Closing Date with respect to the purchase and sale of
the Mortgage Loans set forth on the Initial Portfolio Mortgage Loan Schedule
and (ii) on the Closing Date set forth in a duly executed Commitment Letter
with respect to the purchase and sale of Mortgage Loans pursuant thereto. At
the Purchaser's option, any closing shall be either: by telephone, confirmed by
letter or wire as the parties shall agree, or conducted in person, at such
place as the parties shall agree.
The closing for the purchase and sale of Mortgage Loans
33
to be purchased on any Closing Date shall be subject to each of the following
conditions:
(a) all of the representations and warranties of the Seller under this
Agreement and of FNMC under the Servicing Agreement (with respect to
each Mortgage Loan, as specified therein) shall be true and correct as
of such Closing Date, and no event shall have occurred which, with
notice or the passage of time, would constitute a default under this
Agreement or an Event of Default under the Servicing Agreement;
(b) the Purchaser shall have received, or the Purchaser's attorneys shall
have received in escrow, all closing documents as specified in Section
10 of this Agreement, in such forms as are agreed upon and acceptable
to the Purchaser, duly executed by all signatories other than the
Purchaser as required pursuant to the terms hereof;
(c) the Seller shall have delivered and released to the Purchaser or its
designee all Mortgage Loan documents in the Custodian's File with
respect to each Mortgage Loan; and
(d) all other terms and conditions of this Agreement shall have been
complied with.
Subject to the foregoing conditions, the Purchaser shall pay to the
Seller on the applicable Closing Date the applicable Purchase Price, plus
accrued interest pursuant to Section 4 of this Agreement, by wire transfer of
immediately available funds to the account designated by the Seller.
SECTION 10. Closing Documents.
The closing documents for the Mortgage Loans to be purchased on any
Closing Date shall consist of fully executed originals of the following
documents:
1. on the Initial Closing Date only, this Agreement (and on all
subsequent Closing Dates, a Commitment Letter in the form of
Exhibit K hereto);
2. on the Initial Closing Date only, the Servicing Agreement, dated
as of the Initial Cut-off Date, in the form of Exhibit B hereto;
3. on the Initial Closing Date only, a Custodial Account Letter
Agreement or a Custodial Account Certification, as applicable, as
required under the Servicing Agreement;
34
4. on the Initial Closing Date only, an Escrow Account Letter
Agreement or an Escrow Account Certification, as applicable, as
required under the Servicing Agreement;
5. an Officer's Certificate, in the form of Exhibit C hereto,
including all attachments thereto;
[6. an Opinion of Counsel of the Seller (who may be an employee of
the Seller), in the form of Exhibit D hereto;]
7. a Security Release Certification, in the form of Exhibit G or
Exhibit H, if applicable, hereto executed by any person, as
requested by the Purchaser, if any of the Mortgage Loans have at
any time been subject to any security interest, pledge or
hypothecation for the benefit of such person; and
8. a certificate or other evidence of merger or acquisition, if any
of the Mortgage Loans being purchased were acquired by Seller by
merger or acquisiton.
The Seller shall bear the risk of loss of any closing documents and
Mortgage Loan documents until such time as they are received by the Purchaser
or its attorneys or designees, as applicable.
SECTION 11. Costs.
The Purchaser shall pay any commissions due its salesmen and the legal
fees and expenses of its attorneys. All other costs and expenses incurred in
connection with the transfer and delivery of the Mortgage Loans including
recording fees, fees for recording Assignments of Mortgages, fees for title
policy endorsements and continuations and, if applicable, the Seller's
attorney's fees, shall be paid by the Seller.
SECTION 12. Merger or Consolidation of the Seller.
The Seller will keep in full effect its existence, rights and
franchises as a corporation under the laws of the state of its incorporation
except as permitted herein, and will obtain and preserve its qualification to
do business as a foreign corporation in each jurisdiction in which such
qualification is or shall be necessary to protect the validity and
enforceability of this Agreement, or any of the Mortgage Loans and to perform
its duties under this Agreement.
Any Person into which the Seller may be merged or
35
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Seller shall be a party, or any Person succeeding to
the business of the Seller, shall be the successor of the Seller hereunder,
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, anything herein to the contrary notwithstanding;
provided, however, that the successor or surviving Person shall have a tangible
net worth of at least $30,000,000.
SECTION 13. Mandatory Delivery; Grant of Security Interest.
The sale and delivery on any Closing Date of the Mortgage Loans
described on the applicable Mortgage Loan Schedule is mandatory from and after
the date of the execution of this Agreement or a Commitment Letter, as the case
may be, it being specifically understood and agreed that each Mortgage Loan is
unique and identifiable and that an award of money damages would be
insufficient to compensate the Purchaser for the losses and damages incurred by
the Purchaser (including damages to prospective purchasers of the Mortgage
Loans) in the event of the Seller's failure to deliver (i) each of the Mortgage
Loans or (ii) one or more Qualified Substitute Mortgage Loans or (iii) one or
more Mortgage Loans otherwise acceptable to the Purchaser on or before such
Closing Date. The Seller hereby grants to the Purchaser a lien on and a
continuing security interest in each Mortgage Loan set forth on the Initial
Portfolio Mortgage Loan Schedule and each document and instrument evidencing
each such Mortgage Loan to secure the performance by the Seller of its
obligations under this Agreement, and the Seller agrees that it shall hold such
Mortgage Loans in custody for the Purchaser subject to the Purchaser's (i)
right to reject any Mortgage Loan (or Qualified Substitute Mortgage Loan) under
the terms of this Agreement and to require another Mortgage Loan (or Qualified
Substitute Mortgage Loan) to be substituted therefor, and (ii) obligation to
pay the Initial Purchase Price plus accrued interest as set forth in Section 4
hereof for the Mortgage Loans. All rights and remedies of the Purchaser under
this Agreement are distinct from, and cumulative with, any other rights or
remedies under this Agreement or afforded by law or equity and all such rights
and remedies may be exercised concurrently, independently or successively.
SECTION 14. Notices.
All demands, notices and communications hereunder shall be in writing
and shall be deemed to have been duly given if mailed, by registered or
certified mail, return receipt requested, or, if by other means, when received
by the other party at the address as follows:
36
(i) if to the Seller:
California Federal Bank,
A Federal Savings Bank
000 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention:
(ii) if to the Purchaser:
California Federal Preferred Capital Corporation
000 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention:
or such other address as may hereafter be furnished to the other party by like
notice. Any such demand, notice or communication hereunder shall be deemed to
have been received on the date delivered to or received at the premises of the
addressee (as evidenced, in the case of registered or certified mail, by the
date noted on the return receipt).
SECTION 15. Severability Clause.
Any part, provision, representation or warranty of this Agreement
which is prohibited or unenforceable or is held to be void or unenforceable in
any jurisdiction shall be ineffective, as to such jurisdiction, to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which
prohibits or renders void or unenforceable any provision hereof. If the
invalidity of any part, provision, representation or warranty of this Agreement
shall deprive any party of the economic benefit intended to be conferred by
this Agreement, the parties shall negotiate, in good faith, to develop a
structure the economic effect of which is nearly as possible the same as the
economic effect of this Agreement without regard to such invalidity.
SECTION 16. Counterparts.
This Agreement may be executed simultaneously in any number of
counterparts. Each counterpart shall be deemed to be an original, and all such
counterparts shall constitute one and the same instrument.
37
SECTION 17. Governing Law.
This Agreement shall be deemed to have been made in the State of
California. The Agreement shall be construed in accordance with the laws of the
State of California and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with the substantive laws of the
State of California (without regard to conflicts of laws principles), except to
the extent preempted by Federal law.
SECTION 18. Intention of the Parties.
It is the intention of the parties that the Purchaser is purchasing,
and the Seller is selling the Mortgage Loans and not a debt instrument of the
Seller or another security. Accordingly, the parties hereto each intend to
treat the transaction for Federal income tax purposes as a sale by the Seller,
and a purchase by the Purchaser, of the Mortgage Loans.
SECTION 19. Successors and Assigns; Assignment of Purchase Agreement.
This Agreement shall bind and inure to the benefit of and be
enforceable by the Seller and the Purchaser and the respective permitted
successors and assigns of the Seller and the successors and assigns of the
Purchaser. This Agreement shall not be assigned, pledged or hypothecated by the
Seller to a third party without the consent of the Purchaser. This Agreement
may be assigned, pledged or hypothecated by the Purchaser without the prior
consent of the Seller. If the Purchaser assigns all or any of its rights as
Purchaser hereunder, the assignee of the Purchaser will become the "Purchaser"
hereunder to the extent of such assignment, provided that at no time shall
there be more than fifteen (15) persons having the status of "Purchaser"
hereunder. Any assignment by the Purchaser shall be accompanied by the delivery
and execution of an Assignment and Assumption Agreement (the "Assignment and
Assumption Agreement") substantially in the form attached hereto as Exhibit I.
The Servicer shall be required to remit all amounts required to be remitted to
the Purchaser hereunder to said assignee commencing with the first Remittance
Date falling after receipt of said copy of the related Assignment and
Assumption Agreement provided that the Seller receives said copy no later than
three (3) Business Days immediately prior to the first day of the month of the
related Remittance Date.
SECTION 20. Waivers.
No term or provision of this Agreement may be waived or modified
unless such waiver or modification is in writing and signed by the party
against whom such waiver or modification is sought to be enforced.
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SECTION 21. Entire Agreement; Amendment.
This Agreement (including the Schedules and Exhibits annexed hereto or
referred to herein) and any Commitment Letter duly executed by the parties
hereto contain the entire agreement between the parties with respect to the
transactions contemplated hereby and supersede all prior agreements, written or
oral, with respect thereto. No amendment, modification or alteration of the
terms or provisions of this Agreement shall be binding unless the same shall be
in writing and duly executed by the authorized representatives of the parties
hereto, provided, however, that as long as any Series A Preferred Shares remain
outstanding, no material amendment to or modification or alteration of this
Agreement may be entered into or approved by the Purchaser without the approval
of a majority of the Independent Directors.
SECTION 22. General Interpretive Principles.
For purposes of this Agreement, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Agreement have the meanings assigned to
them in this Agreement and include the plural as well as the singular, and the
use of any gender herein shall be deemed to include the other gender;
(b) accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with generally accepted accounting principles;
(c) references herein to "Articles," "Sections," "Subsections,"
"Paragraphs," and other subdivisions without reference to a document are to
designated Articles, Sections, Subsections, Paragraphs and other subdivisions
of this Agreement;
(d) reference to a Subsection without further reference to a Section
is a reference to such Subsection as contained in the same Section in which the
reference appears, and this rule shall also apply to Paragraphs and other
subdivisions;
(e) the words "herein," "hereof," "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
provision; and
(f) the term "include" or "including" shall mean without limitation by
reason of enumeration.
SECTION 23. Reproduction of Documents.
This Agreement and all documents relating thereto, including, without
limitation, (a) consents, waivers and modifications which may hereafter be
executed, (b) documents
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received by any party at any closing, and (c) financial statements,
certificates and other information previously or hereafter furnished, may be
reproduced by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process. The parties agree that any such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a party in the
regular course of business, and that any enlargement, facsimile or further
reproduction of such reproduction shall likewise be admissible in evidence.
SECTION 24. Further Agreements.
The Seller and the Purchaser each agree to execute and deliver to the
other such reasonable and appropriate additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of
this Agreement.
SECTION 25. Recordation of Assignments of Mortgage.
The Seller and the Purchaser shall execute a blanket assignment of the
Mortgages underlying each Mortgage Loan (other than Co-op Loans) sold to the
Purchaser pursuant to this Agreement or a duly executed Commitment Letter. Upon
the written request of Purchaser (whether due to the proposed sale of any
Mortgage Loan by Purchaser or otherwise), or to the extent deemed necessary by
FNMC in connection with servicing a Mortgage Loan pursuant to the terms of the
Servicing Agreement, the Seller shall promptly prepare and execute individual
Assignments of Mortgage (except those for Co-op Loans) to be recorded in all
appropriate public offices for real property records in all the counties or
other comparable jurisdictions in which any or all of the Mortgaged Properties
are situated, and in any other appropriate public recording office or
elsewhere, such recordation to be effected by the Purchaser or Purchaser's
designee, but in any event, at the Seller's expense for a single recordation
with respect to each Assignment of Mortgage.
[Signatures Commence on Following Page]
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IN WITNESS WHEREOF, the parties have executed this Agreement under
seal as of the date and year first above written.
CALIFORNIA FEDERAL PREFERRED CAPITAL
CORPORATION
(the Purchaser)
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
CALIFORNIA FEDERAL BANK,
A FEDERAL SAVINGS BANK
(the Seller)
By:
------------------------------------
Name:
----------------------------------
Title:
---------------------------------
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