EXECUTION COPY
NOVASTAR MORTGAGE, INC.
as Seller,
NOVASTAR MORTGAGE FUNDING CORPORATION
as Company,
WACHOVIA BANK, NATIONAL ASSOCIATION
as Certificate Administrator
and
JPMORGAN CHASE BANK
as Trustee
MORTGAGE LOAN PURCHASE AGREEMENT
Dated as of June 1, 2002
Fixed and Adjustable Rate Mortgage Loans
NovaStar Mortgage Funding Trust, Series 2002-2
NovaStar Home Equity Loan Asset-Backed Certificate, Series 2002-2
TABLE OF CONTENTS
Page(s)
ARTICLE I DEFINITIONS.............................................1
Section 1.01 Definitions.............................................1
ARTICLE II SALE OF MORTGAGE LOANS AND RELATED PROVISIONS...........2
Section 2.01 Sale of Closing Date Mortgage Loans and MI Policies.....2
ARTICLE III REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH.....5
Section 3.01 Seller Representations and Warranties...................5
Section 3.02 Company Representations and Warranties.................18
Section 3.03 [Reserved].............................................19
ARTICLE IV SELLER'S COVENANTS.....................................19
Section 4.01 Covenants of the Seller................................19
Section 4.02 Payment of Expenses....................................19
ARTICLE V CONDITIONS TO CLOSING DATE MORTGAGE LOAN PURCHASE......20
Section 5.01 Conditions of Company's Obligations....................20
ARTICLE VI INDEMNIFICATION BY THE SELLER WITH RESPECT TO THE
MORTGAGE LOANS.......................................21
Section 6.01 Indemnification With Respect to the Mortgage Loans.....21
Section 6.02 Limitation on Liability of the Seller..................21
ARTICLE VII TERMINATION............................................21
Section 7.01 Termination............................................21
ARTICLE VIII MISCELLANEOUS PROVISIONS...............................23
Section 8.01 Amendment..............................................23
Section 8.02 Governing Law..........................................23
Section 8.03 Notices................................................23
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Section 8.04 Severability of Provisions.............................24
Section 8.05 Relationship of Parties................................24
Section 8.06 Counterparts...........................................24
Section 8.07 Further Agreements.....................................24
Section 8.08 Intention of the Parties...............................25
Section 8.09 Successors and Assigns; Assignment of Purchase
Agreement............................................25
Section 8.10 Survival...............................................25
Section 8.11 Liability of the Trustee...............................25
EXHIBIT 1......... Closing Date Mortgage Loan Schedule
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THIS MORTGAGE LOAN PURCHASE AGREEMENT (this "Purchase
Agreement"), dated as of June 1, 2002, is made among NovaStar Mortgage, Inc.
(the "Seller"), NovaStar Mortgage Funding Corporation (the "Company"), Wachovia
Bank, National Association (the "Certificate Administrator") and JPMorgan Chase
Bank (the "Trustee").
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the terms of this Purchase Agreement, the
Seller will sell the Initial Mortgage Loans and the related MI Policies to the
Company on the Closing Date;
WHEREAS, pursuant to the terms of the Pooling and Servicing
Agreement, the Company will transfer the Initial Mortgage Loans and the related
MI Policies, and assign all of its rights under the Purchase Agreement, to the
Trustee, without recourse, on the Closing Date;
WHEREAS, pursuant to the terms of the Pooling and Servicing
Agreement, the Trustee will issue the Certificates;
WHEREAS, pursuant to the terms of the Pooling and Servicing
Agreement, the Trustee will transfer to the Company the Certificates;
WHEREAS, pursuant to the terms of the Underwriting Agreement,
the Company will sell the Underwritten Certificates to the Underwriter;
WHEREAS, pursuant to the terms of the REMIC Interests Sale
Agreement, the Company will sell the Retained Certificates to NRFC;
WHEREAS, pursuant to the terms of the Pooling and Servicing
Agreement, the Servicer will service the Mortgage Loans; and
WHEREAS, pursuant to the terms of the Converted Loan Purchase
Agreement, the Converted Loan Purchaser will purchase the Converted Mortgage
Loans from the Trustee.
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
For all purposes of this Purchase Agreement, except as
otherwise expressly provided herein or unless the context otherwise requires,
capitalized terms not otherwise defined herein shall have the meanings assigned
to such terms in the Definitions contained in Section 1.01 of the Pooling and
Servicing Agreement, dated as of June 1, 2002, among the Certificate
Administrator, the Trustee, the Company and NovaStar Mortgage, Inc. as seller
and servicer (the "Servicer") which is incorporated by reference herein. All
other capitalized terms used herein shall have the meanings specified herein.
ARTICLE II
SALE OF MORTGAGE LOANS AND RELATED PROVISIONS
Section 2.01 Sale of Closing Date Mortgage Loans and MI Policies.
(a) The Seller hereby sells, and the Company hereby purchases
on the Closing Date the Closing Date Mortgage Loans identified (and the related
MI Policies) on the Mortgage Loan Schedule annexed hereto as Exhibit 1, the
proceeds thereof and all rights under the Related Documents (including the
related Mortgage Files). The Closing Date Mortgage Loans consist of two groups
of conventional, residential first or second lien mortgage loans with fixed and
adjustable interest rates, the Group I Mortgage Loans and the Group II Mortgage
Loans. The Closing Date Mortgage Loans will have a Principal Balance as of the
close of business on the Cut-off Date, after giving effect to any payments due
on or before such date whether or not received, of approximately $310,000,100.
The sale of the Closing Date Mortgage Loans will take place on the Closing Date,
subject to and simultaneously with the deposit of the Closing Date Mortgage
Loans into the Trust Fund, the issuance of the Securities by the Trustee and the
sale of the Underwritten Certificates pursuant to the Underwriting Agreement.
The purchase price (the "Purchase Price") for the Closing Date Mortgage Loans to
be paid by the Company to the Seller on the Closing Date shall consist of the
following:
(i) a payment in an amount equal to $301,475,000 representing
the net proceeds of the sale of the Underwritten Certificates, which payment
shall be paid to the Seller by wire transfer in immediately available funds on
the Closing Date by or on behalf of the Company, or as otherwise agreed by the
Company; and
(ii) a payment in an amount equal to $8,525,100 representing
the proceeds of the sale of the Retained Certificates by the Company to NRFC
pursuant to the REMIC Interests Sale Agreement, which payment shall be paid to
the Seller by wire transfer in immediately available funds on the Closing Date
by or on behalf of the Company, or as otherwise agreed by the Company.
(b) [Reserved]
(c) In connection with such conveyances by the Seller, the Seller
shall on behalf of and at the direction of the Company deliver to, and deposit
with the Certificate Administrator on behalf of the Trustee, on or before the
Closing Date in the case of an Closing Date Mortgage Loan, the following
documents or instruments with respect to each Mortgage Loan (the "Mortgage
File"):
(i) the original Mortgage Note endorsed to "JPMorgan Chase
Bank, as Trustee of the NovaStar Mortgage Funding Trust, Series 2002-2, relating
to the NovaStar Home Equity Loan Asset-Backed Certificates, Series 2002-2";
(ii) the original Mortgage with evidence of recording thereon,
or, if the original Mortgage has not yet been returned from the public recording
office, a copy of the original Mortgage certified by the Seller or the public
recording office in which such original Mortgage has been recorded and if the
Mortgage Loan is registered on the MERS System, such
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Mortgage shall include thereon a statement that it is a MOM Loan and shall
include the MIN for such Mortgage Loan;
(iii) unless the Mortgage Loan is registered on the MERS
System, an original assignment (which may be included in one or more blanket
assignments if permitted by applicable law) of the Mortgage endorsed to
"JPMorgan Chase Bank, as Trustee of the NovaStar Mortgage Funding Trust, Series
2002-2, relating to the NovaStar Home Equity Loan Asset-Backed Certificates,
Series 2002-2", and otherwise in recordable form;
(iv) originals of any intervening assignments of the Mortgage
showing an unbroken chain of title from the originator thereof to the Person
assigning it to the Trustee (or to MERS, if the Mortgage Loan is registered on
the MERS System, and noting the presence of a MIN, if the Mortgage Loan is
registered on the MERS System), with evidence of recording thereon, or, if the
original of any such intervening assignment has not yet been returned from the
public recording office, a copy of such original intervening assignment
certified by the Seller or the public recording office in which such original
intervening assignment has been recorded;
(v) the original policy of title insurance (or a commitment
for title insurance, if the policy is being held by the title insurance company
pending recordation of the Mortgage);
(vi) true and correct copy of each assumption, modification,
consolidation or substitution agreement, if any, relating to the Mortgage Loan;
and
(vii) an executed copy of the notice of assignment and
acknowledgement of assignment with respect to the Mortgage Loans covered by the
MI Policies.
If a material defect in any Mortgage File is discovered which may
materially and adversely affect the value of the related Mortgage Loan, or the
interests of the Trustee (as pledgee of the Mortgage Loans), or the
Certificateholders in such Mortgage Loan, including if any document required to
be delivered to the Certificate Administrator has not been delivered (provided
that a Mortgage File will not be deemed to contain a defect for an unrecorded
assignment under clause (i) above for 180 days following submission of the
assignment if the Seller has submitted such assignment for recording pursuant to
the terms of the following paragraph), the Seller shall cure such defect,
repurchase the related Mortgage Loan at the Repurchase Price or substitute an
Eligible Substitute Mortgage Loan for the related Mortgage Loan upon the same
terms and conditions set forth in Section 3.01 hereof as to the Closing Date
Mortgage Loans for breaches of representations and warranties.
Promptly after the Closing Date in the case of an Closing Date
Mortgage Loan (or after the date of transfer of any Eligible Substitute Mortgage
Loan), the Seller at its own expense shall complete and submit for recording in
the appropriate public office for real property records each of the assignments
referred to in clause (i) above, with such assignment completed in favor of the
Trustee, excluding any Mortgage Loan that is registered on the MERS System if
MERS is identified on the Mortgage or on a properly recorded assignment of
Mortgage as the mortgagee of record. While such assignment to be recorded is
being recorded, the Certificate Administrator shall retain a photocopy of such
assignment. If any assignment is lost or returned unrecorded to
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the Certificate Administrator because of any defect therein, the Seller is
required to prepare a substitute assignment or cure such defect, as the case may
be, and the Seller shall cause such substitute assignment to be recorded in
accordance with this paragraph.
In instances where an original Mortgage or any original intervening
assignment of Mortgage is not, in accordance with clause (ii) or (iv) above,
delivered by the Seller to the Certificate Administrator, on behalf of the
Trustee, prior to or on the Closing Date in the case of a Closing Date Mortgage
Loan, the Seller will deliver or cause to be delivered the originals of such
documents to the Certificate Administrator, on behalf of the Trustee, promptly
upon receipt thereof.
In connection with the assignment of any Closing Date Mortgage Loan
registered on the MERS System, promptly after the Closing Date, the Seller
further agrees that it will cause, at the Seller's own expense, the MERS System
to indicate that such Closing Date Mortgage Loan has been assigned by the Seller
to the Trustee in accordance with this Agreement for the benefit of the
Certificateholders by including in such computer files (a) the applicable
Trustee code in the field "Trustee" which identifies the Trustee and (b) the
code "NovaStar 2002-2" (or its equivalent) in the field "Pool Field" which
identifies the series of the Certificates issued in connection with such
Mortgage Loans.
Effective on the Closing Date, the Company hereby acknowledges its
acceptance of all right, title and interest to the Closing Date Mortgage Loans
and other property, existing on the Closing Date and thereafter created and
conveyed to it pursuant to this Section 2.01.
The Trustee, as assignee or transferee of the Company, shall be
entitled to all scheduled principal payments due after the Cut-off Date, all
other payments of principal due and collected after the Cut-off Date, and all
payments of interest on the Closing Date Mortgage Loans. No scheduled payments
of principal due on or before the Cut-off Date and collected after the Cut-off
Date shall belong to the Company pursuant to the terms of this Purchase
Agreement. The Pooling and Servicing Agreement shall provide that any late
payment charges collected in connection with a Mortgage Loan shall be paid to
the Servicer as provided therein.
(d) The parties hereto intend that the transactions set forth
herein constitute a sale by the Seller to the Company on the Closing Date of all
the Seller's right, title and interest in and to the Closing Date Mortgage Loans
and other property as and to the extent described above. In the event the
transactions set forth herein shall be deemed not to be a sale, the Seller
hereby grants to the Company as of the Closing Date a security interest in all
of the Seller's right, title and interest in, to and under the Closing Date
Mortgage Loans and such other property, to secure all of the Seller's
obligations hereunder and this Purchase Agreement shall constitute a security
agreement under applicable law and in such event, the parties hereto acknowledge
that the Certificate Administrator, in addition to holding the Closing Mortgage
Loans on behalf of the Trustee for the benefit of the Certificateholders, holds
the Closing Date Mortgage Loans as designee of the Company. The Seller agrees to
take or cause to be taken such actions and to execute such documents, including
without limitation the filing of all necessary UCC-1 financing statements filed
in the Commonwealth of Virginia (which shall have been submitted for filing as
of the Closing Date), any continuation statements with respect thereto and any
amendments thereto required to reflect a change in the name or corporate
structure of the Seller, as are
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necessary to perfect and protect the interests of the Company and their
respective assignees in each Closing Date Mortgage Loan and the proceeds
thereof. The Company agrees to take or cause to be taken such actions and to
execute such documents, including without limitation the filing of all necessary
UCC-1 financing statements, and continuation statements with respect thereto and
any amendments thereto as are necessary to perfect and protect the interests of
the Trustee and its assignees in each Closing Date Mortgage Loan.
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.01 Seller Representations and Warranties.
The Seller hereby represents and warrants to the Company and the
Trustee as of the date hereof, as of the Closing Date (or if otherwise specified
below, as of the date so specified):
(a) As to the Seller:
(i) The Seller (i) is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia and
(ii) is qualified and in good standing as a foreign corporation to do business
in each jurisdiction where such qualification is necessary, except where the
failure so to qualify would not have a material adverse effect on the Seller's
ability to enter into this Purchase Agreement and to consummate the transactions
contemplated hereby and thereby;
(ii) The Seller has the power and authority to make, execute,
deliver and perform its obligations under this Purchase Agreement and all of the
transactions contemplated under this Purchase Agreement, and has taken all
necessary corporate action to authorize the execution, delivery and performance
of this Purchase Agreement;
(iii) The Seller is not required to obtain the consent of any
other Person or any consent, approval or authorization from, or registration or
declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Purchase Agreement, except for such consents, approvals or authorization, or
registration or declaration, as shall have been obtained or filed, as the case
may be;
(iv) The execution and delivery of this Purchase Agreement and
the performance of the transactions contemplated hereby by the Seller will not
violate any provision of any existing law or regulation or any order or decree
of any court applicable to the Seller or any provision of the certificate of
incorporation or bylaws of the Seller, or constitute a material breach of any
mortgage, indenture, contract or other agreement to which the Seller is a party
or by which the Seller may be bound;
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(v) No litigation or administrative proceeding of or before
any court, tribunal or governmental body is currently pending, or to the
knowledge of the Seller threatened, against the Seller or any of its properties
or with respect to this Purchase Agreement, the Certificates which in the
opinion of the Seller has a reasonable likelihood of resulting in a material
adverse effect on the transactions contemplated by this Purchase Agreement;
(vi) This Purchase Agreement constitutes the legal, valid and
binding obligations of the Seller, enforceable against the Seller in accordance
with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect affecting the enforcement of creditors' rights in general
and except as such enforceability may be limited by general principles of equity
(whether considered in a proceeding at law or in equity);
(vii) This Purchase Agreement constitutes a valid transfer and
assignment to the Company of all right, title and interest of the Seller in and
to the Cut-off Date Principal Balance of the Closing Date Mortgage Loans, all
monies due or to become due with respect thereto, and all proceeds of such
Cut-off Date Principal Balance of the Closing Date Mortgage Loans, and this
Purchase Agreement;
(viii) The Seller is not in default with respect to any order
or decree of any court or any order or regulation of any federal, state or
governmental agency, which default might have consequences that would materially
and adversely affect the condition (financial or other) or operations of the
Seller or its properties or might have consequences that would materially
adversely affect its performance hereunder; and
(ix) The Servicer or any Subservicer who will be servicing any
Mortgage Loan pursuant to the Pooling and Servicing Agreement or a Subservicing
Agreement is qualified to do business in all jurisdictions in which its
activities as Servicer or Subservicer of the Mortgage Loans serviced by it
require such qualifications except where failure to be so qualified will not
have a material adverse effect on such servicing activities.
(b) As to each Closing Date Mortgage Loan as of the Closing Date,
except as otherwise expressly stated:
(i) The information set forth on the Mortgage Loan Schedule
with respect to each Closing Date Mortgage Loan is true and correct in all
material respects as of the Closing Date, and the information regarding the
Closing Date Mortgage Loans on the computer diskette or tape delivered to the
Trustee prior to the Closing Date, as applicable, is true and accurate in all
material respects and describes the same Mortgage Loans as the Mortgage Loans on
the Mortgage Loan Schedule;
(ii) The Mortgage Loans are not being transferred with any
intent to hinder, delay or defraud any creditors;
(iii) No more than 6.00% and 6.00% of the Group I Mortgage
Loans and Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) were secured by condominium units; and no more than 12.00%
and 21.00% of the Group I
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Mortgage Loans and the Group II Initial Mortgage Loans, respectively, (by
Cut-off Date Principal Balance) were secured by properties in planned unit
developments;
(iv) As of the Cut-off Date, the remaining term of each Group
I Mortgage Loan is not more than 360 months and not less than 119 months and the
remaining term of each Group II Initial Mortgage Loan is not more than 360
months and not less than 119 months;
(v) No more than 55.00% and 58.00% of the Group I Mortgage
Loans and Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) have been the subject of cash-out refinances;
(vi) No more than 11.00% and 10.00% of the Group I Mortgage
Loans and Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) respectively, have been the subject of rate and term (no
cash-out) refinances;
(vii) No fewer than 34.00% and 32.00% of the Group I Mortgage
Loans and Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) are purchase money loans;
(viii) No more than 13.06% and 12.28% of the Group I Mortgage
Loans and the Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) are secured by Mortgaged Properties located in the State of
Florida; no more than 21.00% and 24.34% of the Group I Mortgage Loans and the
Group II Initial Mortgage Loans, respectively, (by Cut-off Date Principal
Balance) are secured by Mortgaged Properties located in the State of California;
and no more than 7.00% and 6.00% of the Group I Mortgage Loans and the Group II
Initial Mortgage Loans, respectively, (by Cut-off Date Principal Balance) are
located in any other state;
(ix) The outstanding Principal Balances of the Group I
Mortgage Loans (by Cut-off Date Principal Balance) ranged from $8,000 to
$347,000, respectively; the average outstanding Principal Balance of the Group I
Mortgage Loans is approximately $134,788; the original Principal Balances of the
Group II Initial Mortgage Loans (by Cut-off Date Principal Balance) ranged from
$10,000 to $600,000, respectively; the average outstanding Principal Balance of
the Group II Initial Mortgage Loans is approximately $135,072;
(x) At least 77.00% and 73.00% of the Group I Mortgage Loans
and the Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) were secured by a first lien on a parcel of real property
improved by a detached single family residence; no more than 6.00% and 2.00% of
the Group I Mortgage Loans and the Group II Initial Mortgage Loans,
respectively, (by Cut-off Date Principal Balance) were secured by a first lien
on a parcel of real estate improved by a two-to four-unit single family
residence;
(xi) All points and fees related to each Mortgage Loan were
disclosed in writing to the borrower in accordance with applicable state and
federal law. Except in the case of a Mortgage Loan in an original principal
amount of less than $60,000 which would have resulted in an unprofitable
origination, no borrower was charged "points and fees" (whether or not financed)
in an amount greater than 5% of the principal amount of such loan, such 5%
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limitation calculated in accordance with the Lender Letter. All fees and charges
(including finance charges) and whether or not financed, assessed, collected or
to be collected with the origination and servicing of each Mortgage Loan has
been disclosed in writing to the borrower in accordance with applicable state
and federal law and regulation;
(xii) The Mortgage Rates borne by the adjustable rate Group I
Mortgage Loans as of the Cut-off Date range from 6.500% and per annum to 12.875%
per annum, and the weighted average Mortgage Rate (by Cut-off Date Principal
Balance) of the adjustable rate Group I Mortgage Loans was 8.855%, per annum;
the Mortgage Rates borne by fixed rate Group I Mortgage Loans as of the Cut-off
Date range from 6.375% per annum to 12.125% per annum, and the weighted average
Mortgage Rate (by Cut-off Date Principal Balance) of the Group I Mortgage Loans
was 9.028% per annum; the Mortgage Rates borne by adjustable rate Group II
Initial Mortgage Loans as of the Cut-off Date range from 6.500% per annum to
11.500% per annum, and the weighted average Mortgage Rate (by Cut-off Date
Principal Balance) of the adjustable rate Group II Initial Mortgage Loans was
8.664%, per annum; the Mortgage Rates borne by fixed rate Group II Initial
Mortgage Loans as of the Cut-off Date range from 6.750% per annum to 14.500% per
annum, and the weighted average Mortgage Rate (by Cut-off Date Principal
Balance) of the Group II Initial Mortgage Loans was 9.323% per annum;
(xiii) Approximately 44.66% and 48.32% of the Group I Mortgage
Loans and the Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) have a Loan-to-Value Ratio in excess of 80.00%; no Group I
Mortgage Loan or Group II Initial Mortgage Loan in the Mortgage Pool had a
Loan-to-Value Ratio at origination in excess of 100%; and the weighted average
Loan-to-Value Ratio (by Cut-off Date Principal Balance) of the Group I Mortgage
Loans and the Group II Mortgage Initial Mortgage Loans was equal to or less than
80.64% and 80.57%, respectively;
(xiv) All of the Initial Mortgage Loans are secured by first
or second liens on the related Mortgaged Property;
(xv) [Reserved]
(xvi) There is no valid offset, right of rescission, defense,
claim or counterclaim of any obligor under any Mortgage Note or Mortgage,
including the obligation of the Mortgagor to pay the unpaid principal of or
interest on such Mortgage Note, and any applicable right of rescission has
expired, nor will the operation of any of the terms of such Mortgage Note or
Mortgage, or the exercise of any right thereunder, render either the Mortgage
Note or the Mortgage unenforceable, in whole or in part, or subject to any right
of rescission, set-off, recoupment, counterclaim or defense, including, without
limitation, the defense of usury, and no such right of rescission, set-off,
recoupment, counterclaim or defense has been asserted with respect thereto, and,
to the best of Seller's knowledge, no Mortgagor of the applicable Mortgage was a
debtor in any state or federal bankruptcy or insolvency proceeding;
(xvii) There are no mechanics' liens or claims for work, labor
or material affecting any Mortgaged Property which are or may be a lien prior
to, or equal with, the
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lien of such Mortgage, except those which are insured against by the title
insurance policy referred to in clause (xix) below;
(xviii) As of the Cut-off Date in the case of an Initial
Mortgage Loan, each Mortgaged Property is free of material damage and is in good
repair and there is no proceeding pending or threatened for the total or partial
condemnation of any Mortgage Property;
(xix) Each Mortgage is a valid and enforceable first or second
lien on the Mortgaged Property securing the related Mortgage Note and each
Mortgaged Property is owned by the Mortgagor in fee simple (except with respect
to common areas in the case of condominiums, PUDs and de minimis PUTDs) subject
only to (1) the lien of nondelinquent current real property taxes and
assessments, (2) covenants, conditions and restrictions, rights of way,
easements and other matters of public record as of the date of recording of such
Mortgage, such exceptions appearing of record being acceptable to mortgage
lending institutions generally or specifically reflected in the appraisal made
in connection with the origination of the related Mortgage Loan or referred to
in the lender's title insurance policy delivered to the originator of the
related Mortgage Loan and (3) other matters to which like properties are
commonly subject that do not materially interfere with the benefits of the
security intended to be provided by such Mortgage. Immediately prior to the sale
of such Mortgage Loan to the Company in the case of a Closing Date Mortgage
Loan, the Seller had full right to sell and assign the same to the Company or
the Trustee, as the case may be. Immediately following the sale of such Mortgage
Loan to the Company and the Company's assignment and sale thereof of such
Mortgage Loan to the Trustee in the case of a Closing Date Mortgage Loan, the
Trustee will have good title thereto subject to no claims or liens, including
delinquent tax or assessment liens including delinquent tax or assessment liens.
Immediately following the sale of such Mortgage Loan to the Company, the Trustee
will have good title thereto subject to no claims or liens;
(xx) Each Mortgage Loan at origination complied in all
material respects with applicable state and federal laws, including, without
limitation, usury, equal credit opportunity, real estate settlement procedures,
the Truth In Lending Act of 1968, as amended, and disclosure laws and
consummation of the transactions contemplated hereby, including without
limitation, the receipt of interest by the owner of such Mortgage Loan or the
Holders of Certificates secured thereby, will not violate any such laws. Each
Mortgage Loan is being serviced in all material respects in accordance with
applicable state and federal laws, including, without limitation, the Truth In
Lending Act of 1968, as amended, and other consumer protection laws, real estate
settlement procedures, usury, equal credit opportunity and disclosure laws;
(xxi) Neither the Seller nor any prior holder of any Mortgage
has impaired, waived, altered or modified the Mortgage or Mortgage Notes in any
material respect (except that a Mortgage Loan may have been modified by a
written instrument which has been recorded, if necessary to protect the
interests of the owner of such Mortgage Loan or the Certificates, and which has
been delivered to the Trustee); satisfied, canceled or subordinated such
Mortgage in whole or in part; released the applicable Mortgaged Property in
whole or in part from the lien of such Mortgage; or executed any instrument of
release, cancellation or satisfaction with respect thereto;
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(xxii) A lender's policy of title insurance (on an ALTA or
CLTA form) or binder, or other assurance of title customary in the relevant
jurisdiction insuring the first lien priority of the Mortgage Loan in an amount
at least equal to the original Principal Balance of each such Mortgage Loan or a
commitment binder or commitment to issue the same was effective on the date of
the origination of each Mortgage Loan, each such policy is valid and remains in
full force and effect, and each such policy was issued by a title insurer
qualified to do business in the jurisdiction where the Mortgaged Property is
located, which policy insures the Seller and successor owners of indebtedness
secured by the insured Mortgage as to the first or second priority lien of the
Mortgage as applicable. The Seller is, and such successor owners will be, the
sole insured under such lender's title insurance policy; no claims have been
made under such mortgage title insurance policy; no prior holder of the
applicable Mortgage, including the Seller, has done, by act or omission,
anything which would impair the coverage of such mortgage title insurance
policy; and each such policy, binder or assurance contains all applicable
endorsements;
(xxiii) All of the improvements which were included for the
purpose of determining the Appraised Value of the Mortgaged Property lie wholly
within the boundaries and building restriction lines of such property and no
improvements on adjoining properties encroach upon the Mortgaged Property;
(xxiv) No improvement located on or being part of the
Mortgaged Property is in violation of any applicable zoning law or regulation,
subdivision law or ordinance, except where the failure to comply would not have
a material adverse effect on the market value of the Mortgaged Property. 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 and fire underwriting certificates, have been made or
obtained from the appropriate authorities and the Mortgaged Property is lawfully
occupied under applicable law except where the failure to comply would not have
a material adverse effect on the market value of the Mortgaged Property;
(xxv) Each Mortgage Note and the applicable Mortgage are
genuine, and each is the legal, valid and binding obligation of the maker
thereof, enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium, receivership and other
similar laws relating to creditors' rights generally or by equitable principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law). All parties to the Mortgage Note and the Mortgage had legal capacity
to execute the Mortgage Note and the Mortgage and each Mortgage Note and
Mortgage has been duly and properly executed by such parties;
(xxvi) The proceeds of the Mortgage Loans have been fully
disbursed, there is no requirement for future advances thereunder and any and
all requirements as to completion of any on-site or off-site improvements and as
to disbursement of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making, closing or recording the Mortgage Loans
were paid and the Mortgagor is not entitled to any refund of amounts paid or due
under the Mortgage Note;
10
(xxvii) Each Mortgage contains customary and enforceable
provisions that render the rights and remedies of the holder thereof adequate
for the realization against the Mortgaged Property of the benefits of the
security, including (i) in the case of a Mortgage designated as a deed of trust,
by trustee's sale, and (ii) otherwise by judicial foreclosure or if applicable,
non-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 property, subject to any applicable rights of
redemption;
(xxviii) With respect to each Mortgage constituting a deed of
trust, either a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is named in such
Mortgage or if no duly qualified trustee has been properly designated and so
serves, the Mortgage contains satisfactory provisions for the appointment of
such trustee by the holder of the Mortgage at no cost or expense to such holder,
and no fees or expenses are or will become payable by the Certificateholders to
the trustee under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor;
(xxix) There exist no deficiencies with respect to escrow
deposits and payments, if such are required, for which customary arrangements
for repayment thereof cannot be made, and no escrow deficits or payments of
other charges or payments due the Seller have been capitalized under the
Mortgage or the applicable Mortgage Note;
(xxx) The Mortgage Note is not and has not been secured by any
collateral, pledged account or other security other than real estate securing
the Mortgagor's obligations and no Mortgage Loan is secured by more than one
Mortgaged Property;
(xxxi) As of the Closing Date in the case of a Closing Date
Mortgage Loan, the improvements upon each Mortgaged Property are covered by a
valid and existing hazard insurance policy substantially acceptable to FNMA and
acceptable to the Seller which policy provides for fire extended coverage and
such other hazards as are customary in the area where the Mortgaged Property is
located representing coverage in an amount not less than the lesser of (A) the
maximum insurable value of the improvements securing such Mortgage Loan and (B)
the outstanding Principal Balance of the related Mortgage Loan; if the
improvement on the Mortgaged Property is a condominium unit, it is included
under the coverage afforded by a blanket policy for the condominium project. All
individual insurance policies contain a standard mortgagee clause naming the
Seller or the original holder of the Mortgage, and its successors in interest,
as mortgagee, and the Seller has received no notice that any premiums due and
payable thereon have not been paid; the Mortgage obligates the Mortgagor
thereunder to maintain all such insurance at the Mortgagor's cost and expense,
and upon the Mortgagor's failure to do so, authorizes the holder of the Mortgage
to obtain and maintain such insurance at the Mortgagor's cost and expense and to
seek reimbursement therefor from the Mortgagor. There has been no 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;
(xxxii) If the Mortgaged Property is in an area identified in
the Federal Register by the Federal Emergency Management Agency as having
special flood
11
hazards, a flood insurance policy in a form meeting the requirements of the
current guidelines of the Flood Insurance Administration is in effect with
respect to such Mortgaged Property with a generally acceptable carrier in an
amount representing coverage not less than the least of (A) the outstanding
Principal Balance of the Mortgage Loan, (B) the minimum amount required to
compensate for damage or loss on a replacement cost basis and (C) the maximum
amount of flood coverage that is available under federal law;
(xxxiii) Except for the Mortgage Loan referred to in clause
(xii) as being delinquent, there is no material monetary default, breach,
violation or event of acceleration existing under the Mortgage or the applicable
Mortgage Note; and no material event which, with the passage of time or with
notice and the expiration of any grace or cure period, would constitute a
material default, breach, violation or event of acceleration, and neither the
Seller, any of its affiliates nor any servicer or subservicer of any related
Mortgage Loan has waived any default, breach, violation or event of
acceleration; no foreclosure action is threatened or has been commenced with
respect to the Mortgage Loan;
(xxxiv) Each Mortgage Loan is being serviced by the Servicer;
(xxxv) There is no obligation on the part of the Seller or any
other party to make any payments with respect to the related Mortgage Loan in
addition to the Monthly Payments required to be made by the applicable
Mortgagor;
(xxxvi) Any future advances made prior to the Cut-off Date in
the case of a Closing Date Mortgage Loan, with respect to any Mortgage Loan have
been consolidated with the outstanding principal amount secured by such
Mortgage, and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term reflected on the Mortgage Loan Schedule.
Except with respect to the Negative Amortization Loans, the consolidated
principal amount does not exceed the original principal amount of the Mortgage
Loan. The Mortgage Note with respect to any Mortgage Loan does not permit or
obligate the Servicer to make future advances to the Mortgagor at the option of
the Mortgagor;
(xxxvii) The Seller has caused or will cause to be performed
any and all acts required to preserve the rights and remedies of the Company and
the Trustee evidencing an interest in the Mortgage Loans in any insurance
policies applicable to the Mortgage Loans including, without limitation, any
necessary notifications of insurers, assignments of policies or interests
therein, and establishments of coinsured, joint loss payee and mortgagee rights
in favor of Trustee;
(xxxviii) Except as set forth in clause (xlii), there are no
defaults by the Mortgagor in complying with the terms of any Mortgage, and all
taxes, governmental assessments, insurance premiums, water, sewer and municipal
charges which previously became due and owing have been paid, or, if required by
the terms of the Mortgage Loan, 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. Except for (A) payments in the
nature of escrow payments and (B) interest accruing from the date of the
Mortgage Note or date of disbursement of the Mortgage proceeds to the day which
precedes by one month the Due Date of the first installment of principal and
interest, including, without limitation, taxes and
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insurance payments, the Servicer 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 by the Mortgage;
(xxxix) At the time of origination, each Mortgaged Property
was the subject of an appraisal which conforms to the underwriting requirements
of the related originator; and the Mortgage File contains an appraisal of the
applicable Mortgaged Property;
(xl) None of the Mortgage Loans are graduated payment Mortgage
Loans or growth equity Mortgage Loans;
(xli) 90.52% and 89.73% of the adjustable rate Group I Initial
ARM Mortgage Loans and the adjustable rate Group II Initial ARM Mortgage Loans,
respectively, (by Cut-off Date Principal Balance) are Convertible Mortgage
Loans;
(xlii) Except with respect to no more than 1% of the Initial
Mortgage Loans (by Cut-off Date Principal Balance), none of the payments of
principal of or interest on or in respect of any Initial Mortgage Loans shall be
30 days or more but less than 60 days past due as of the Cut-off Date; except
with respect to no more than 0.5% of the Initial Mortgage Loans (by Cut-off Date
Principal Balance), none of the payments of principal or interest on or in
respect of any Initial Mortgage Loans shall be 60 days or more but less than 90
days past due as of the Cut-off Date; and no Initial Mortgage Loan was 90 days
or more past due as of the Cut-off Date (except that one Initial Mortgage Loan
was past 90 days due as of the Cut-off Date, such loan having been repurchased
by the Seller); (b) except as set forth in clause (a) above, no Initial Mortgage
Loan has been contractually delinquent for more than one monthly installment
period during the twelve months preceding the Cut-off Date; (c) except as set
forth in clause (a) above, all payments required to be made by the Mortgagor
under the terms of the Mortgage Note have been made and credited; and (d) to the
Seller's knowledge, there was no delinquent recording, tax or assessment lien
against the property subject to any Mortgage, except where such lien was being
contested in good faith and a stay had been granted against levying on the
property;
(xliii) Upon payment of the Purchase Price for the Mortgage
Loans by the Company or the Trustee, as applicable, pursuant to this Purchase
Agreement, the Seller has transferred to the Company in the case of a Closing
Date Mortgage Loan, good and marketable title to each Mortgage Note and Mortgage
free and clear of any and all liens, claims, encumbrances, participation
interests, equities, pledges, charges or security interests of any nature and
has or had full right and authority, subject to no participation of or agreement
with any other person, to sell and assign the same, and following the sale of
each Closing Date Mortgage Loan, the Company or the Trustee, as applicable, will
own such Mortgage Loan free and clear of any encumbrance, equity interest,
participation interest, lien, pledge, charge, claim or security interest;
(xliv) The Seller acquired any right, title and interest in
and to the Mortgage Loans in good faith and without notice of any adverse claim;
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(xlv) The Mortgage Note, the Mortgage, the related Assignment
of Mortgage and any other documents required to be delivered by the Seller have
been delivered to the Certificate Administrator. The Certificate Administrator
is in possession of a complete, true and accurate Mortgage File in accordance
with Section 2.01 hereof. Substantially all Mortgage Loans have monthly payments
due on the first day of each month and each Mortgage Loan had an original term
to maturity of no greater than 30 years;
(xlvi) Each Mortgage Loan contains a due-on-sale provision,
although each Mortgage Loan may be assumable if permitted by the Servicer under
certain circumstances;
(xlvii) Each of the Mortgage and the Assignment of Mortgage is
in recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located;
(xlviii) 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;
(xlix) To the best of the Seller's knowledge, there exists no
violation of any local, state, or federal environmental law, rule or regulation
in respect of the Mortgaged Property which violation has or could have a
material adverse effect on the market value of such Mortgaged Property. The
Seller has no knowledge of any pending action or proceeding directly involving
the related Mortgaged Property in which compliance with any environmental law,
rule or regulation is in issue; and, to the best of the Seller's knowledge,
nothing further remains to be done to satisfy in full all requirements of each
such law, rule or regulation constituting a prerequisite to the use and
employment of such Mortgaged Property;
(l) Each Mortgage Loan conforms, and all such Mortgage Loans
in the aggregate conform, to the description thereof set forth in the Prospectus
and Prospectus Supplement in all material respects;
(li) Immediately prior to the transfer to the Company or the
Trustee, as applicable, the Seller had good and marketable title thereto, and
the Seller is the sole owner of beneficial title to and holder of the Mortgage
Loan. The Seller is conveying the same to the Company or the Trustee, as
applicable, free and clear of any and all liens, claims, encumbrances,
participation interests, equities, pledges, charges or security interests of any
nature and has full right and authority to sell and assign the same pursuant to
this Purchase Agreement, except for liens which will be released simultaneously
with such conveyance;
(lii) For each Mortgage Loan, the related Mortgage File
contains a true, accurate and correct copy of each of the documents and
instruments required to be included therein;
(liii) The Servicer meets all applicable requirements under
the Pooling and Servicing Agreement, is properly qualified to service each
Mortgage Loan and has been servicing each Mortgage Loan prior to the Cut-off
Date;
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(liv) No instrument of release or waiver has been executed in
connection with the Mortgage Loans, and no Mortgagor has been released, in whole
or in part from its obligations in connection with a Mortgage Loan except in
connection with an assumption agreement which has been delivered to the Trustee;
(lv) On the basis of a representation by the Mortgagor at the
time of origination of the Mortgage Loans, at least 93.19% and 94.90% of the
Group I Mortgage Loans and Group II Initial Mortgage Loans, respectively, (by
Cut-off Date Principal Balance) will be secured by Mortgages on owner-occupied
primary residence properties;
(lvi) 12.25% and 11.86% of the Group I Mortgage Loans and the
Group II Initial Mortgage Loans, respectively, (by Cut-off Date Principal
Balance) provide for a balloon payment and each Mortgage Note with respect to
each such Mortgage Loan requires monthly payments of principal based on 30 year
amortization schedules and have scheduled maturity dates of 15 years from the
due date of the first monthly payment;
(lvii) No Mortgage Loan was originated based on an appraisal
of the related Mortgaged Property made prior to completion of construction of
the improvements thereon;
(lviii) None of the Mortgage Loans is a "buy down" mortgage
loan;
(lix) None of the Group I Mortgage Loans are subject to the
Home Ownership and Equity Protection Act of 1994, as amended, or any comparable
state law; no proceeds from any Group I Mortgage Loan were used to finance any
single premium credit insurance policies; none of the Group I Mortgage Loans (by
Cut-off Date Principal Balance) require a mortgagor to pay a Prepayment Charge
if the mortgagor prepays a Mortgage Loan more than five years after the date the
Mortgage Loan was originated.
(lx) No selection procedure reasonably believed by the Seller
to be adverse to the interests of the Certificateholders was utilized in
selecting the Mortgage Loans;
(lxi) The terms of the Mortgage Note related to each
Adjustable Rate Mortgage Loan provide that, following an initial period of two
or three years following the month in which such Mortgage Loan was originated
and semiannually or annually thereafter (each such date, an "Adjustment Date"),
the Mortgage Rate on such Mortgage Loan will be adjusted to equal the sum of (a)
the related Index and (b) a fixed percentage amount specified in the related
Mortgage Note (each, a "Gross Margin"); provided, however, that the Mortgage
Rate generally will not increase or decrease by the related Periodic Rate Cap,
and will not increase above a specified maximum Mortgage Rate over the life of
the Adjustable Rate Mortgage Loan (the "Maximum Mortgage Rate") or decrease
below a specified minimum Mortgage Rate over the life of the Adjustable Rate
Mortgage Loan (the "Minimum Mortgage Rate");
(lxii) None of the Initial Mortgage Loans (by Cut-off Date
Principal Balance) are negative amortization loans;
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(lxiii) No material misrepresentation, fraud or similar
occurrence with respect to a Mortgage Loan has taken place on the part of the
Seller, its affiliates or employees or any other person involved in the
origination of the Mortgage Loan or in the application for any insurance,
including, but not limited to the MI Policy, in relation to such Mortgage Loan;
(lxiv) Each 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;
(lxv) With respect to each Mortgage Loan secured by
manufactured housing, such manufactured housing is permanently affixed to a
foundation and constitutes real estate under applicable state law;
(lxvi) No Mortgage Loans are date of payment or simple
interest loans;
(lxvii) The sale, transfer, assignment and conveyance of
Mortgage Loans by the Seller pursuant to this Purchase Agreement is not subject
to and will not result in any tax, fee or governmental charge payable by the
Company, the Trustee, the Certificate Administrator or the Trustee to any
federal, state or local government ("Transfer Taxes") other than Transfer Taxes
which have or will be paid by the Seller as due; and
(lxviii) [Reserved]
(lxix) Approximately 90.02% of the Initial Mortgage Loans (by
Cut-Off Date Principal Balance) with a Loan-to-Value Ratio greater than 60% are
covered by an MI Policy issued by an MI Insurer;
(lxx) Each of the Initial Mortgage Loans that is identified on
Schedule 1 hereto is covered by a MI Policy issued by the MI Insurer;
(lxxi) All requirements for the valid transfer of each MI
Policy, including any assignments or notices required in each MI Policy, have
been satisfied; and
(lxxii) As of the Closing Date with respect to each Closing
Date Mortgage Loan that is subject to a MI Policy, the Seller is unaware of any
existing circumstances which would cause the MI Insurer to deny a claim with
respect to such Mortgage Loan.
Upon discovery by the Seller or upon notice from the Company,
the Trustee, or the Certificate Administrator, as applicable, of a breach of any
representation or warranty in subsection (a) of this Section which materially
and adversely affects the interests of the Certificateholders the Seller shall,
within 45 days of its discovery or its receipt of notice of such breach, either
(i) cure such breach in all material respects or (ii) to the extent that such
breach is with respect to a Mortgage Loan or a Related Document, either (A)
repurchase such Mortgage Loan from the Trustee at the Repurchase Price, or (B)
substitute one or more Eligible Substitute
16
Mortgage Loans for such Mortgage Loan, in each case in the manner and subject to
the conditions and limitations set forth below.
Upon discovery by the Seller or upon notice from the Company, the
Trustee, or the Certificate Administrator, as applicable, of a breach of any
representation or warranty in this subsection (b) with respect to any Mortgage
Loan or upon the occurrence of a Repurchase Event, which materially and
adversely affects the value of the related Mortgage Loan or the interests of any
Certificateholders or of the Company or the Trustee in such Mortgage Loan
(notice of which shall be given to the Company and the Trustee by the Seller, if
it discovers the same) the Seller shall, within 90 days after the earlier of its
discovery or receipt of notice thereof, either cure such breach or Repurchase
Event in all material respects or either (i) repurchase such Mortgage Loan from
the Trustee at the Repurchase Price, or (ii) substitute one or more Eligible
Substitute Mortgage Loans for such Mortgage Loan, in each case in the manner and
subject to the conditions set forth below. The Repurchase Price for any such
Mortgage Loan repurchased by the Seller shall be deposited or caused to be
deposited by the Servicer in the Collection Account maintained by it pursuant to
Section 3.06 of the Pooling and Servicing Agreement.
In the event that the Seller elects to substitute an Eligible
Substitute Mortgage Loan or Loans for a Deleted Mortgage Loan pursuant to this
Section 3.01, the Seller shall deliver to the Certificate Administrator on
behalf of the Trustee, with respect to such Eligible Substitute Mortgage Loan or
Loans, the original Mortgage Note and all other documents and agreements as are
required by Section 2.01 hereof, with the Mortgage Note endorsed as required by
such Section 2.01 hereof. No substitution will be made in any calendar month
after the Determination Date for such month. Monthly Payments due with respect
to Eligible Substitute Mortgage Loans in the month of substitution shall not be
part of the Trust Fund and will be retained by the Servicer and remitted by the
Servicer to the Seller on the next succeeding Payment Date. For the month of
substitution, distributions to the Payment Account pursuant to the Pooling and
Servicing Agreement will include the Monthly Payment due on a Deleted Mortgage
Loan for such month and thereafter the Seller shall be entitled to retain all
amounts received in respect of such Deleted Mortgage Loan. The Servicer shall
amend or cause to be amended the Mortgage Loan Schedule to reflect the removal
of such Deleted Mortgage Loan and the substitution of the Eligible Substitute
Mortgage Loan or Loans and the Servicer shall deliver the amended Mortgage Loan
Schedule to the Certificate Administrator and the Trustee. Upon such
substitution, the Eligible Substitute Mortgage Loan or Loans shall be subject to
the terms of this Purchase Agreement and the Pooling and Servicing Agreement in
all respects, the Seller shall be deemed to have made the representations and
warranties with respect to the Eligible Substitute Mortgage Loan contained
herein set forth in this Section 3.01(b), to the extent set forth in the
definition of "Eligible Substitute Mortgage Loan", as of the date of
substitution, and the Seller shall be obligated to repurchase or substitute for
any Eligible Substitute Mortgage Loan as to which a Repurchase Event has
occurred as provided herein. In connection with the substitution of one or more
Eligible Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Servicer will determine the amount (such amount, a "Substitution Adjustment
Amount"), if any, by which the aggregate principal balance of all such Eligible
Substitute Mortgage Loans as of the date of substitution is less than the
aggregate principal balance of all such Deleted Mortgage Loans (after
application of the principal portion of the Monthly Payments due in the month of
substitution that are to be distributed to the Payment Account in the month of
substitution). The
17
Seller shall pay the amount of such shortfall to the Servicer for deposit into
the Collection Account on the day of substitution, without any reimbursement
therefor.
Upon receipt by the Trustee of written notification, signed by a
Servicing Officer, of the deposit of such Repurchase Price or of such
substitution of an Eligible Substitute Mortgage Loan and deposit of any
applicable Substitution Adjustment Amount as provided above, the Certificate
Administrator shall, on behalf of the Trustee, cause to be released to the
Seller the related Mortgage File for the Mortgage Loan being repurchased or
substituted for and the Trustee shall execute and deliver such instruments of
transfer or assignment prepared by the Servicer, in each case without recourse,
as shall be necessary to vest in the Seller or its designee such Mortgage Loan
released pursuant hereto and thereafter such Mortgage Loan shall not be an asset
of the Trustee.
It is understood and agreed that the obligation of the Seller to
cure any breach with respect to or to repurchase or substitute for, any Mortgage
Loan as to which such a breach has occurred and is continuing shall, except to
the extent provided in Section 6.01 of this Purchase Agreement, constitute the
sole remedy respecting such breach available to the Company, the Trustee, the
Certificateholders (or the Certificate Administrator on behalf of the Trustee
for the benefit of Certificateholders) against the Seller.
It is understood and agreed that the representations and warranties
set forth in this Section 3.01 shall survive delivery of the respective Mortgage
Files to the Certificate Administrator.
Section 3.02 Company Representations and Warranties.
The Company hereby represents and warrants to the Seller and the
Trustee as of the date hereof and as of the Closing Date that:
(a) The Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted.
(b) The Company is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its property
or the conduct of its business shall require such qualifications and in which
the failure to so qualify would have a material adverse effect on the business,
properties, assets or condition (financial or other) of the Company and the
ability of the Company to perform under this Purchase Agreement.
(c) The Company has the power and authority to execute and deliver
this Purchase Agreement and to carry out its terms; the Company has full power
and authority to purchase the property to be purchased from the Seller and the
Company has duly authorized such purchase by all necessary corporate action; and
the execution, delivery and performance of this Purchase Agreement have been
duly authorized by the Company by all necessary corporate action.
18
(d) The consummation of the transactions contemplated by this
Purchase Agreement and the fulfillment of the terms hereof do not conflict with,
result in any breach of any of the terms and provisions of, or constitute (with
or without notice or lapse of time) a default under, the articles of
incorporation or bylaws of the Company, or any indenture, agreement or other
instrument to which the Company is a party or by which it is bound; nor result
in the creation or imposition of any Lien upon any of its properties pursuant to
the terms of any such indenture, agreement or other instrument (other than
pursuant to the Basic Documents); nor violate any law or, to the best of the
Company's knowledge, any order, rule or regulation applicable to the Company of
any court or of any federal or state regulatory body, administrative agency or
other governmental instrumentality having jurisdiction over the Company or its
properties.
(e) The Company (A) is a solvent entity and is paying its debts as
they become due and (B) after giving effect to the transfer of the Mortgage
Loans, will be a solvent entity and will have sufficient resources to pay its
debts as they become due.
Section 3.03 [Reserved]
ARTICLE IV
SELLER'S COVENANTS
Section 4.01 Covenants of the Seller.
The Seller hereby covenants as of the date hereof and as of the
Closing Date that, except for the transfer hereunder, on and after the Closing
Date, the Seller will not sell, pledge, assign or transfer to any other Person,
or grant, create, incur or assume any Lien on, any Mortgage Loan, whether now
existing or hereafter created, or any interest therein; the Seller will notify
the Certificate Administrator and the Trustee of the existence of any such Lien
on any Mortgage Loan immediately upon discovery thereof; and the Seller will
defend the right, title and interest of the Trustee, on its own behalf and as
assignee of the Company, in, to and under the Mortgage Loans, whether now
existing or hereafter created, against all claims of third parties claiming
through or under the Seller.
In the event that the Certificate Administrator or the Trustee
receives actual notice of any Transfer Taxes arising out of the transfer,
assignment and conveyance of the Mortgage Loans, on written demand by the
Certificate Administrator, or upon the Seller's otherwise being given notice
thereof by the Certificate Administrator, the Seller shall pay any and all such
Transfer Taxes (it being understood that the Holders of the Certificates, the
Company, the Certificate Administrator and the Trustee shall have no obligation
to pay such Transfer Taxes).
Section 4.02 Payment of Expenses.
(a) The Seller will pay on the Closing Date all expenses incident to
the performance of its obligations under this Purchase Agreement and the
Underwriting Agreement, including (i) the preparation, printing and any filing
of the preliminary prospectus, Prospectus Supplement and Prospectus (including
any schedules or exhibits and any document incorporated therein by reference)
originally filed and of each amendment or supplement thereto, (ii) the
19
preparation, printing and delivery to the Underwriter of this Purchase Agreement
and the Underwriting Agreement, the Pooling and Servicing Agreement and such
other documents as may be required in connection with the offering, purchase,
sale and delivery of the Certificates, (iii) the preparation, issuance and
delivery of the certificates for the Class A Certificates to the Underwriter,
including any charges of DTC, CEDEL, S.A. and the Euroclear System in connection
therewith; (iv) the qualification of the Class A Certificates and Mezzanine
Certificates under securities laws in accordance with the provisions of Section
3(f) of the Underwriting Agreement, including filing fees and the reasonable
fees and disbursements of counsel for the Underwriter in connection therewith
and in connection with the preparation of the Blue Sky Survey and any supplement
thereto for delivery to potential investors, (v) in addition to the initial
printing and filing costs under (i) above, the printing and delivery to the
Underwriter of copies of each preliminary prospectus and of the Prospectus and
any amendments or supplements thereto for delivery to potential investors, (vi)
the fees and expenses of the Trustee and the Certificate Administrator,
including the fees and disbursements of counsel for the Trustee and the
Certificate Administrator in connection with the Pooling and Servicing
Agreement, the Purchase Agreement and the Certificates and (vii) any fees
payable in connection with the rating of the Certificates.
(b) If the Underwriting Agreement is terminated by the Underwriter in accordance
with the provisions of Section 5 or Section 9(a)(i) thereof, the Seller shall
reimburse the Underwriter for all of their out-of-pocket expenses, including the
reasonable fees and disbursements of counsel for the Underwriter.
ARTICLE V
CONDITIONS TO CLOSING DATE MORTGAGE LOAN PURCHASE
Section 5.01 Conditions of Company's Obligations.
The Company's obligations to purchase the Closing Date Mortgage
Loans which each accepts for purchase hereunder shall be subject to each of the
following conditions:
(i) the Mortgage File for each Closing Date Mortgage Loan
shall have been delivered in accordance with this Purchase Agreement;
(ii) the representations and warranties set forth in Section
3.01(b) hereof with respect to each Closing Date Mortgage Loan shall be true as
of the Closing Date;
(iii) the Underwriter or its affiliates shall have had an
opportunity to perform a due diligence review of each Mortgage Loan; and
(iv) the Seller shall have provided to the Underwriter or its
affiliates such other documents which are then required to have been delivered
under this Purchase Agreement or which are reasonably requested by the
Underwriter or its affiliates, which other documents may include UCC financing
statements, a favorable opinion or opinions of counsel with respect to matters
which are reasonably requested by the Underwriter, and/or an Officers'
Certificate.
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ARTICLE VI
INDEMNIFICATION BY THE SELLER
WITH RESPECT TO THE MORTGAGE LOANS
Section 6.01 Indemnification With Respect to the Mortgage Loans.
The Seller shall indemnify and hold harmless the Company, Trustee
and the Certificate Administrator from and against any loss, liability or
expense arising from the breach by the Seller of its representations and
warranties in Section 3.01 of this Purchase Agreement which materially and
adversely affects the value of any Mortgage Loan or the Company's assignees'
interest in any Mortgage Loan or from the failure by the Seller to perform its
obligations under this Purchase Agreement in any material respect.
Section 6.02 Limitation on Liability of the Seller.
None of the directors, officers, employees or agents of the Seller
shall be under any liability to the Company, it being expressly understood that
all such liability is expressly waived and released as a condition of, and as
consideration for, the execution of this Purchase Agreement. Except as and to
the extent expressly provided in the Basic Documents, the Seller shall not be
under any liability to the Trustee, the Certificate Administrator or the
Certificateholders. The Seller and any director, officer, employee or agent of
the Seller may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder.
ARTICLE VII
TERMINATION
Section 7.01 Termination.
(a) Except as provided in Section 7.01(b) hereof, the respective
obligations and responsibilities of the Seller, the Company, the Trustee and the
Certificate Administrator created hereby shall terminate, except for the
Seller's indemnity obligations as provided herein, upon the termination of the
Trust Fund pursuant to the terms of the Pooling and Servicing Agreement.
(b) The Company may terminate this Purchase Agreement, by notice to
the Seller, at any time at or prior to the Closing Date:
(i) if the Underwriting Agreement is terminated by the
Underwriter pursuant to the terms of the Underwriting Agreement or if there has
been, since the time of execution of this Purchase Agreement or since the
respective dates as of which information is given in the Prospectus, any
material adverse change in the financial condition, earnings, business affairs
or business prospects of the Seller, whether or not arising in the ordinary
course of business, or
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(ii) if there has occurred any material adverse change in the
financial markets in the United States, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Underwriter, impracticable to market the Class A
Certificates and Mezzanine Certificates or to enforce contracts for the sale of
the Class A Certificates and Mezzanine Certificates, or
(iii) if trading in any securities of the Seller has been
suspended or limited by the Commission or the New York Stock Exchange, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the NASDAQ National Market System has been suspended or limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority,
(iv) if a banking moratorium has been declared by either
Federal or New York authorities,
(v) either (A) a change in control of the Seller shall have
occurred other than in connection with and as a result of the issuance and sale
by the Seller or registered, publicly offered common stock; or (B) the
Underwriter determines in its sole discretion that any material adverse change
has occurred in the management of the Seller,
(vi) there is (A) a material breach by the Seller of any
representation and warranty contained in this Purchase Agreement or the
Underwriting Agreement other than a representation or warranty relating to
particular Mortgage Loans, and the Underwriter has reason to believe in good
faith either that such breach is not curable within two (2) days or that such
breach may not have been cured in all material respects at the expiration of two
(2) days following discovery thereof by the Seller or (B) a failure by the
Seller to make any payment payable by it under this Purchase Agreement or (C)
any other failure by the Seller to observe and perform in any material respect
its material covenants, agreements and obligations with the Company, including
without limitation those contained in this Purchase Agreement, and the Company
has reason to believe in good faith that such failure may not have been cured in
all material respects at the expiration of two (2) days following discovery
thereof by the Seller, or
(vii) the Seller fails to provide written notification to the
Underwriter of any change in its loan origination, acquisition or appraisal
guidelines or practices, or the Seller, without the prior consent of the
Underwriter (which shall not be unreasonably withheld), amends in any material
respect its loan origination, acquisition or appraisal guidelines or practices.
If this Purchase Agreement is terminated pursuant to this Section
7.01(b), such termination shall be without liability of any party to any other
party except as provided in Section 4.02 hereof.
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ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01 Amendment.
This Purchase Agreement may be amended from time to time by the
Seller, the Company by written agreement signed by the Seller and the Company.
Section 8.02 Governing Law.
This Purchase Agreement shall be governed by and construed in
accordance with the laws of the State of New York and the obligations, rights
and remedies of the parties hereunder shall be determined in accordance with
such laws.
Section 8.03 Notices.
All demands, notices and communications hereunder shall be in
writing and shall be deemed to have been duly given if personally delivered at
or mailed by registered mail, postage prepaid, addressed as follows:
(i) if to the Seller:
NovaStar Mortgage, Inc.
0000 Xxxx 00xx Xxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
or, such other address as may hereafter be furnished to the Company in writing
by the Seller.
(ii) if to the Company:
NovaStar Mortgage Funding Corporation
0000 X. 00xx Xxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxx Xxxxxxxxxxxx
or such other address as may hereafter be furnished to the Seller in writing by
the Company.
(iii) if to the Certificate Administrator:
Wachovia Bank, National Association
12th Floor, 000 X. Xxxxx Xxxxxx, XX 1179
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Structured Finance Trust Services (NovaStar
Mortgage Funding Trust, Series 2002-2)
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or such other address as may hereafter be furnished to the Seller in writing by
the Certificate Administrator.
(iv) if to the Trustee:
JPMorgan Chase Bank
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attention: Institutional Trust Services (NovaStar
Mortgage Funding Trust, Series 2002-2)
or such other address as may hereafter be furnished to the Seller in writing by
the Trustee.
Section 8.04 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms
of this Purchase Agreement shall be held invalid for any reason whatsoever, then
such covenants, agreements, provisions or terns shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Purchase
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Purchase Agreement.
Section 8.05 Relationship of Parties.
Nothing herein contained shall be deemed or construed to create a
partnership or joint venture between the parties hereto, and the services of the
Seller shall be rendered as an independent contractor and not as agent for the
Company.
Section 8.06 Counterparts.
This Purchase Agreement may be executed in two or more counterparts
and by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed to be an original and such counterparts
together shall constitute one and the same agreement.
Section 8.07 Further Agreements.
The Company and the Seller each agree to execute and deliver to the
other such additional documents, instruments or agreements as may be necessary
or appropriate to effectuate the purposes of this Purchase Agreement. Each of
the Company and the Seller agrees to use its best reasonable efforts to take all
actions necessary to be taken by it to cause the Class A-1 Certificates to be
rated "Aaa" by Xxxxx'x and "AAA" by S&P, the Class A-2 Certificates to be rated
"Aaa" by Xxxxx'x and "AAA" by S&P, the Class AIO Certificates to be rated "Aaa"
by Xxxxx'x and "AAA" by S&P, the Class M-1 Certificates to be rated "Aa2" by
Xxxxx'x and "AA" by S&P, the Class M-2 Certificates to be rated "A2" by Xxxxx'x
and "A" by S&P, the Class M-3 Certificates to be rated "Baa2" by Xxxxx'x and
"BBB" by S&P, the Class B Certificates to be rated "Ba2" by Xxxxx'x and "BB" by
S&P and the class P Certificates to be rated "AAA" by S&P, and each party will
cooperate with the other in connection therewith.
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Section 8.08 Intention of the Parties.
It is the intention of the parties that (i) the Company is
purchasing on the Closing Date, and the Seller is selling on the Closing Date,
the Closing Date Mortgage Loans, rather than the Company providing to the Seller
a loan secured by the Closing Date Mortgage Loans on the Closing Date, and (ii)
the Trustee is purchasing on the Closing Date, and the Company is selling on the
Closing Date, the Closing Date Mortgage Loans, rather than the Trustee providing
to the Company a loan secured by the Closing Date Mortgage Loans. Accordingly,
the parties hereto each intend to treat these transactions as (i) a sale by the
Seller, and a purchase by the Company, of the Closing Date Mortgage Loans on the
Closing Date, and (ii) a sale by the Company, and a purchase by the Trustee, of
the Closing Date Mortgage Loans on the Closing Date.
Section 8.09 Successors and Assigns; Assignment of Purchase
Agreement.
This Purchase Agreement shall bind and inure to the benefit of and
be enforceable by the Seller, the Company, the Trustee, the Certificate
Administrator, and their respective successors and assigns. The obligations of
the Seller under this Purchase Agreement cannot be assigned or delegated to a
third party without the consent of the Company, which consent shall be at the
Company's discretion. The parties hereto acknowledge that the Company is
acquiring the Closing Date Mortgage Loans for the purpose of selling them to the
Trustee, who will in turn pledge the Closing Date Mortgage Loans to the Trustee
for the benefit of the Certificateholders. As an inducement to the Company and
the Trustee to purchase the Mortgage Loans, the Seller acknowledges and consents
to (i) the assignment by the Company to the Trustee of all of the Company's
rights or remedies against the Seller pursuant to this Purchase Agreement and to
(ii) the enforcement or exercise of any rights against the Seller pursuant to
this Purchase Agreement by the Company, the Certificate Administrator and the
Trustee. Such enforcement of a right or remedy by the Company, the Trustee or
the Certificate Administrator, as applicable, shall have the same force and
effect as if the right or remedy had been enforced or exercised by the Company
directly.
Section 8.10 Survival.
The representations and warranties made herein by the Seller and the
provisions of Article V hereof shall survive the purchase of the Mortgage Loans
hereunder.
Section 8.11 Liability of the Trustee.
The Trustee is entering into the Basic Documents to which it is a
party solely as Trustee, hereunder and thereunder, and not in its individual
capacity, and all persons having any claim against the Trustee by reason of the
transactions contemplated by this Agreement or any other Basic Document shall
look only to the Trust Fund for payment or satisfaction thereof.
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IN WITNESS WHEREOF, the Seller, the Company, the Certificate
Administrator and the Trustee have caused their names to be signed to this
Mortgage Loan Purchase Agreement by their respective officers thereunto duly
authorized as of the day and year first above written.
NOVASTAR MORTGAGE, INC.
as Seller
By: /s/ Xxxxx Xxxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxxx
Title: Vice President
NOVASTAR MORTGAGE FUNDING
CORPORATION
as Company
By: /s/ Xxxxx Xxxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxxx
Title: Vice President
WACHOVIA BANK, NATIONAL ASSOCIATION
as Certificate Administrator
By: /s/ Xxxxxx Xxxxxxxx
--------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Vice President
JPMORGAN CHASE BANK,
not in its individual capacity,
but solely as Trustee
By: /s/ Xxxx Xxxxx
--------------------------------
Name: Xxxx Xxxxx
Title: Trust Officer
[Signature Page to Mortgage Loan Purchase Agreement]
EXHIBIT 1
CLOSING DATE MORTGAGE LOAN SCHEDULE
[SEE ATTACHED]
