Exhibit 10.1
NOVASTAR MORTGAGE, INC.
as Seller,
NOVASTAR MORTGAGE FUNDING CORPORATION
as Company,
XXXXX FARGO BANK MINNESOTA, N.A.
as Trustee and Certificate Administrator,
and
FIRST UNION NATIONAL BANK
as Custodian
MORTGAGE LOAN PURCHASE AGREEMENT
Dated as of March 1, 2001
Fixed and Adjustable Rate Mortgage Loans
NovaStar Mortgage Funding Trust, Series 2001-1
NovaStar Home Equity Loan Asset-Backed Certificate, Series 2001-1
TABLE OF CONTENTS
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Page
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ARTICLE I DEFINITIONS......................................................... 1
Section 1.01 Definitions................................................... 1
ARTICLE II SALE OF MORTGAGE LOANS AND RELATED PROVISIONS...................... 2
Section 2.01 Sale of Initial Mortgage Loans and MI Policies................ 2
Section 2.02 Conveyance of the Subsequent Mortgage Loans................... 5
Section 2.03 Pre-Funding Account........................................... 9
Section 2.04 Interest Coverage Account..................................... 9
ARTICLE III REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH............... 9
Section 3.01 Seller Representations and Warranties......................... 9
Section 3.02 Company Representations and Warranties........................ 22
Section 3.03 [reserved].................................................... 23
ARTICLE IV SELLER'S COVENANTS................................................. 23
Section 4.01 Covenants of the Seller....................................... 23
Section 4.02 Payment of Expenses........................................... 24
ARTICLE V CONDITIONS TO INITIAL MORTGAGE LOAN PURCHASE........................ 24
Section 5.01 Conditions of Company's Obligations........................... 24
ARTICLE VI INDEMNIFICATION BY THE SELLER WITH RESPECT TO THE MORTGAGE LOANS.. 25
Section 6.01 Indemnification With Respect to the Mortgage Loans............ 25
Section 6.02 Limitation on Liability of the Seller......................... 25
ARTICLE VII TERMINATION....................................................... 25
Section 7.01 Termination................................................... 25
ARTICLE VIII MISCELLANEOUS PROVISIONS......................................... 27
Section 8.01 Amendment..................................................... 27
Section 8.02 Governing Law................................................. 27
Section 8.03 Notices....................................................... 27
Section 8.04 Severability of Provisions.................................... 28
Section 8.05 Relationship of Parties....................................... 28
Section 8.06 Counterparts.................................................. 28
Section 8.07 Further Agreements............................................ 28
Section 8.08 Intention of the Parties...................................... 29
Section 8.09 Successors and Assigns; Assignment of Purchase Agreement...... 29
Section 8.10 Survival. 29
Section 8.11 Liability of the Trustee...................................... 29
Exhibits
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Exhibit 1 Mortgage Loan Schedule for Initial Mortgage Loans
Exhibit 2 Subsequent Transfer Instrument
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THIS MORTGAGE LOAN PURCHASE AGREEMENT (this "Purchase Agreement"),
dated as of March 1, 2001, is made among NovaStar Mortgage, Inc. (the "Seller"),
NovaStar Mortgage Funding Corporation (the "Company"), Xxxxx Fargo Bank
Minnesota, N.A. (the "Trustee" and the "Certificate Administrator"), and First
Union National Bank (the "Custodian").
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,
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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 March 1, 2001, among the Trustee,
the Certificate Administrator, the Custodian, 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 Initial Mortgage Loans and MI Policies.
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(a) The Seller hereby sells, and the Company hereby purchases on the
Closing Date the Initial 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 Initial Mortgage Loans consist of conventional, residential first
lien mortgage loans with fixed and adjustable interest rates. The Initial
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 $211,419,715.44. The sale of the
Initial Mortgage Loans will take place on the Closing Date, subject to and
simultaneously with the deposit of the Initial Mortgage Loans and the Original
Pre-Funded Amount and the Interest Coverage Amount 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 Initial 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 $407,753,070.80 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 $20,000 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 Custodian on behalf of the Trustee, on or before the Closing Date in
the case of an Initial Mortgage Loan, and two Business Days prior to the related
Subsequent Transfer Date in the case of a Subsequent Mortgage Loan, the
following documents or instruments with respect to each Mortgage Loan (the
"Mortgage File"):
(i) the original Mortgage Note endorsed to "Xxxxx Fargo Bank
Minnesota, N.A., as Trustee of the NovaStar Mortgage Funding Trust, Series
2001-1, relating to the NovaStar Home Equity Loan Asset-Backed Certificates,
Series 2001-1";
(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
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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 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 "Xxxxx Fargo Bank
Minnesota, N.A, as Trustee of the NovaStar Mortgage Funding Trust, Series 2001-
1, relating to the NovaStar Home Equity Loan Asset-Backed Certificates, Series
2001-1", 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) a 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, and the MI Policy number for each Mortgage Loan insured by a MI
Policy.
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 Custodian 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 Initial Mortgage Loans and the
Subsequent Mortgage Loans and Section 2.02(c) hereof as to the Subsequent
Mortgage Loans for breaches of representations and warranties.
Promptly after the Closing Date in the case of an Initial Mortgage
Loan or, in the case of a Subsequent Mortgage Loan, promptly after the
Subsequent Transfer Date (or after the date of transfer of any Eligible
Substitute Mortgage Loan), the Seller at its own expense shall
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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 Custodian shall retain a
photocopy of such assignment. If any assignment is lost or returned unrecorded
to the Custodian 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 Custodian, on behalf of the Trustee, prior to or
on the Closing Date in the case of an Initial Mortgage Loan or, in the case of a
Subsequent Mortgage Loan, prior to or on the Subsequent Transfer Date, the
Seller will deliver or cause to be delivered the originals of such documents to
the Custodian, on behalf of the Trustee, promptly upon receipt thereof.
In connection with the assignment of any Initial 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 Initial 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 "[IDENTIFY THE FIELD NAME FOR TRUSTEE]" which
identifies the Trustee and (b) the code "NovaStar 2001-1" (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 Initial 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 Initial 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) [RESERVED]
(e) 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 Initial 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 Initial Mortgage
Loans and such other property, to secure all of the Seller's
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obligations hereunder and this Purchase Agreement shall constitute a security
agreement under applicable law and in such event, the parties hereto acknowledge
that the Custodian, in addition to holding the Initial Mortgage Loans on behalf
of the Trustee for the benefit of the Certificateholders, holds the Initial
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
State of Virginia and the State of Kansas (which shall have been submitted for
filing as of the Closing Date and each Subsequent Transfer Date, as applicable),
any continuation statements with respect thereto and any amendments thereto
required to reflect a change in the name or corporate structure of the Seller or
the filing of any additional UCC-1 financing statements due to the change in the
principal office of the Seller, as are necessary to perfect and protect the
interests of the Company and its respective assignees in each Initial Mortgage
Loan and the proceeds thereof and the interests of the Trustee and its assignees
in each Subsequent 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 Initial Mortgage Loan.
Section 2.02 Conveyance of the Subsequent Mortgage Loans.
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(a) Subject to the conditions set forth in paragraph (b) below in
consideration of the Trustee's delivery on the related Subsequent Transfer Dates
of all or a portion of the balance of funds in the Pre-Funding Account, the
Seller shall on any Subsequent Transfer Date sell, transfer, assign, set over
and convey, without recourse, to the Company, who shall then sell, transfer,
assign, set over and convey, without recourse, to the Trustee, but subject to
the other terms and provisions of this Purchase Agreement, all of the right,
title and interest of the Seller in and to (i) the Subsequent Mortgage Loans
(and the related MI Policies) identified on the related Mortgage Loan Schedule
attached to the related Subsequent Transfer Instrument delivered by the Seller
on such Subsequent Transfer Date, (ii) principal due and interest accruing on
the Subsequent Mortgage Loans after the related Subsequent Cut-off Date and
(iii) with respect to such Subsequent Mortgage Loans all items to be delivered
pursuant to Section 2.01(c) above and the other items in the related Mortgage
Files; provided, however, that the Seller reserves and retains all right, title
and interest in and to principal received and interest accruing on the
Subsequent Mortgage Loans prior to the related Subsequent Cut-off Date. The
transfer by the Seller to the Company, and by the Company to the Trustee, of the
Subsequent Mortgage Loans identified on each Mortgage Loan Schedule attached to
the related Subsequent Transfer Instrument shall be absolute and is intended by
the Trustee, the Company and the Seller to constitute and to be treated as a
sale of the Subsequent Mortgage Loans by the Seller to the Company, and a sale
of the Subsequent Mortgage Loans by the Company to the Trustee.
In the event such transactions shall be deemed not to be a sale, the
Seller hereby grants to the Company as of each Subsequent Transfer Date a
security interest in all of the Seller's right, title and interest in, to and
under the related Subsequent 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
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acknowledge that the Custodian, in addition to holding the Subsequent Mortgage
Loans and the related MI Policies on behalf of the Trustee for the benefit of
the Certificateholders, holds the Subsequent Mortgage Loans and the related MI
Policies 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 State of
Virginia and the State of Kansas (which shall be submitted for filing as of the
related Subsequent Transfer 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 or the filing of any additional UCC-1
financing statements due to the change in the principal office of the Seller as
are necessary to perfect and protect the interests of the Company and its
assignees in the Subsequent Mortgage Loans.
In the event such transactions shall be deemed not to be a sale, the
Company hereby grants to the Trustee as of each Subsequent Transfer Date a
security interest in all of the Company's right, title and interest in, to and
under the related Subsequent Mortgage Loans and such other property, to secure
all of the Company'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 Custodian, in addition to holding the
Subsequent Mortgage Loans and the related MI Policies on behalf of the Trustee
for the benefit of the Certificateholders, holds the Subsequent Mortgage Loans
and the related MI Policies as designee of the Trustee. 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 filed
in the State of Delaware and the State of Kansas (which shall be submitted for
filing as of the related Subsequent Transfer Date), any continuation statements
with respect thereto and any amendments thereto required to reflect a change in
the name or corporate structure of the Company or the filing of any additional
UCC-1 financing statements due to the change in the principal office of the
Company, as are necessary to perfect and protect the interests of the Trustee
and its assignees the Subsequent Mortgage Loans.
The related Mortgage File for each Subsequent Mortgage Loan shall be
delivered to the Custodian, on behalf of the Trustee, two Business Days prior to
the related Subsequent Transfer Date.
The Trustee on each Subsequent Transfer Date shall acknowledge its
acceptance of all right, title and interest to the related Subsequent Mortgage
Loans and other property, existing on the Subsequent Transfer Date and
thereafter created, conveyed to it pursuant to this Section 2.02.
The Trustee, as trustee of the Trust Fund, shall be entitled to all
scheduled principal payments due after each Subsequent Cut-off Date, all other
payments of principal due and collected after each related Subsequent Cut-off
Date, and all payments of interest on the Subsequent Mortgage Loans, minus that
portion of any such payment which is allocable to the period prior to the
related Subsequent Cut-off Date. No scheduled payments of principal due on or
before the related Subsequent Cut-off Date and collected after the related
Subsequent Cut-off Date shall belong to the Trust Fund pursuant to the terms of
this Purchase Agreement.
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The purchase price paid by the Certificate Administrator, at the
direction of the Trustee, from amounts released from the Pre-Funding Account
shall be one-hundred percent (100%) of the aggregate Principal Balances of the
Subsequent Mortgage Loans so transferred (as identified on the Mortgage Loan
Schedule attached to the related Subsequent Transfer Instrument provided by the
Seller).
(b) The Seller shall transfer to the Company, who shall transfer to
the Trustee, the Subsequent Mortgage Loans and the other property and rights
related thereto described in Section 2.02(a) above, and the Certificate
Administrator shall cause to be released funds from the related Pre-Funding
Account, only upon the satisfaction of each of the following conditions on or
prior to the related Subsequent Transfer Date:
(i) the Seller shall have provided the Company, who shall have
provided the Trustee, with a timely Addition Notice, which notice shall be given
no fewer than four (4) Business Days prior to the related Subsequent Transfer
Date and shall designate the Subsequent Mortgage Loans to be sold to the Company
and then to the Trustee and the aggregate Principal Balances of such Subsequent
Mortgage Loans as of the related Subsequent Cut-off Date and any other
information reasonably requested by the Trustee with respect to the Subsequent
Mortgage Loans;
(ii) the Seller shall have delivered to the Company, who shall
have delivered to the Trustee, a duly executed Subsequent Transfer Instrument
substantially in the form of Exhibit 2(A) or 2(B), as applicable, (A) confirming
the satisfaction of each condition precedent and representations specified in
this Section 2.02(b), Section 2.02(c) and in the related Subsequent Transfer
Instrument and (B) including a Mortgage Loan Schedule attached thereto listing
the Subsequent Mortgage Loans;
(iii) as of each Subsequent Transfer Date, as evidenced by
delivery of the Seller's Subsequent Transfer Instrument in the form of Exhibit
2(A) and the Company's Subsequent Transfer Instrument is the form of Exhibit
2(B), neither the Seller nor the Company shall be insolvent or have been made
insolvent by such transfers, nor shall they be aware of any pending insolvency;
(iv) such sale and transfer shall not result in a material adverse tax
consequence to the Certificateholders;
(v) the Funding Period shall not have terminated; and
(vi) the Seller shall have delivered to the Certificate
Administrator, the Trustee, and the Rating Agencies Opinions of Counsel
addressed to the Rating Agencies, the Trustee and the Certificate Administrator
with respect to the transfers of the Subsequent Mortgage Loans substantially in
the form of the Opinion of Counsel delivered to the Certificate Administrator,
the Trustee and the Rating Agencies on the Closing Date (1) regarding certain
corporate matters and (2) confirming the existence of a true sale.
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(c) The obligation of the Trustee to purchase a Subsequent Mortgage
Loan on any Subsequent Transfer Date is subject to the following conditions: (1)
each such Subsequent Mortgage Loan shall satisfy the representations and
warranties specified in the related Subsequent Transfer Instrument and this
Purchase Agreement; (2) the Seller shall not select such Subsequent Mortgage
Loans in a manner that it reasonably believes is adverse to the interests of the
Majority Certificateholders; (3) the Seller shall have delivered certain
Opinions of Counsel required pursuant to Section 2.02(b)(vi) hereof; (4) as of
the related Subsequent Cut-off Date, the Subsequent Mortgage Loans shall satisfy
the following criteria: (i) each Subsequent Mortgage Loan shall not be 30 or
more days contractually delinquent as of the related Subsequent Cut-off Date;
(ii) the remaining stated term to maturity of each Subsequent Mortgage Loan
shall not exceed 360 months; (iii) the lien securing each Subsequent Mortgage
Loan shall be first priority; (iv) each Subsequent Mortgage Loan shall have an
outstanding Principal Balance of at least $10,000; (v) each Subsequent Mortgage
Loan shall be underwritten in accordance with the Underwriting Guidelines; (vi)
each Subsequent Mortgage Loan shall have a Loan-to-Value Ratio of no more than
100%; (vii) each Subsequent Mortgage Loan shall have a stated maturity of no
later than July 25, 2031; (viii) no Subsequent Mortgage Loan shall permit
negative amortization; (ix) each Subsequent Mortgage Loan shall either have a
fixed Mortgage Rate of at least 7% or, if an adjustable loan, a Gross Margin of
at least 3%; (x) a minimum of 70% of the Subsequent Mortgage Loans (by
Subsequent Cut-off Date Principal Balance) shall have an adjustable Mortgage
Rate; (xi) the weighted average Loan-to-Value Ratio of the Subsequent Mortgage
Loans (by Subsequent Cut-off Date Principal Balance) shall be no more than 87%;
(xii) approximately 98% of the Subsequent Mortgage Loans shall either (A) have a
Loan-to-Value Ratio of no more than 55% or (B) have a Loan-to-Value Ratio of
greater than 55% and be covered by an MI Policy; (xiii) the Subsequent Mortgage
Loans (by Subsequent Cut-off Date Principal Balance) shall have a weighted
average coupon of at least 9.80%; (xiv) pursuant to the Underwriting Guidelines,
no fewer than 35% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date
Principal Balance) shall be AAA and AA credit risks, no fewer than 20% of the
Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall
be A and A- credit risks, and no more than 15% of the Subsequent Mortgage Loans
(by Subsequent Cut-off Date Principal Balance) shall be B, C, and C- credit
risks; (xv) no greater than 20% of such Subsequent Mortgage Loans (by Subsequent
Cut-off Date Principal Balance) shall be FICO Enhanced loans pursuant to the
Underwriting Guidelines; (xvi) the Subsequent Mortgage Loans (by Subsequent
Cut-off Date Principal Balance) shall have a weighted average FICO score issued
by a consumer credit rating agency of at least 600; (xvii) at least 85% of such
Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall
be loans for primary residences; (xviii) no more than 35% of the Subsequent
Mortgage Loans (by Subsequent Cut-off Date Principal Balance) shall have stated
loan documentation; (xix) at least 70% of the Subsequent Mortgage Loans (by
Subsequent Cut-off Date Principal Balance) shall be loans for single family
residences; (xx) no more than 55% of the Subsequent Mortgage Loans (by
Subsequent Cut-off Date Principal Balance) shall be loans that are the subject
of cash-out refinances.
The acceptance of the Subsequent Mortgage Loans by the Trustee is
subject to the Seller receiving a written consent from each of the Rating
Agencies that states that the addition
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of such Subsequent Mortgage Loans will not cause the Rating Agencies to
downgrade any of their ratings on the Underwritten Certificates.
Notwithstanding the foregoing, Subsequent Mortgage Loans with
characteristics varying from those set forth above may be purchased by the
Trustee and included in the Trust Fund, if (i) the aggregate credit risk of such
Subsequent Mortgage Loans is similar to that of the Initial Mortgage Loans and
(ii) the Seller receives a written consent from each of the Rating Agencies that
states that the addition of such Subsequent Mortgage Loans will not cause the
Rating Agencies to downgrade any of their ratings of the Underwritten
Certificates.
(d) Within five Business Days after the end of the Funding Period, the
Seller shall deliver to the Rating Agencies, the Trustee, the Certificate
Administrator and the Custodian a copy of the updated Mortgage Loan Schedule
including the Subsequent Mortgage Loans in electronic format.
Section 2.03 Pre-Funding Account. No later than the Closing Date, the
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Certificate Administrator will establish and maintain, on behalf of the Trustee,
pursuant to the Pooling and Servicing Agreement, the Pre-Funding Account. On the
Closing Date, the Trustee will deposit in the Pre-Funding Account the Original
Pre-Funded Amount from the net proceeds of the sale of the Underwritten
Certificates.
Section 2.04 Interest Coverage Account. No later than the Closing
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Date, the Certificate Administrator will establish and maintain, on behalf of
the Trustee, pursuant to the Pooling and Servicing Agreement the Interest
Coverage Account. On the Closing Date, the Trustee will deposit in the Interest
Coverage Account the Interest Coverage Amount from the net proceeds of the sale
of the Underwritten Certificates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.01 Seller Representations and Warranties. The Seller hereby
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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) and as of each Subsequent Transfer Date:
(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 State 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 each Seller's Subsequent
Transfer Instrument and to consummate the transactions contemplated hereby and
thereby;
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(ii) The Seller has the power and authority to make, execute,
deliver and perform its obligations under this Purchase Agreement and each
Seller's Subsequent Transfer Instrument and all of the transactions contemplated
under this Purchase Agreement and each Seller's Subsequent Transfer Instrument,
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Purchase Agreement and each Seller's Subsequent
Transfer Instrument;
(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 or any Seller's Subsequent Transfer Instrument, 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
each Seller's Subsequent Transfer Instrument 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;
(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 or any Seller's Subsequent Transfer
Instrument, 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 or any Seller's Subsequent Transfer
Instrument;
(vi) This Purchase Agreement and each Seller's Subsequent Transfer
Instrument constitute 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 Initial Mortgage Loans, all monies
due or to become due with respect thereto, and all proceeds of such Cut-off Date
Principal Balance of the Initial Mortgage Loans, and this Purchase Agreement and
the related Seller's Subsequent Transfer Instrument constitutes a valid transfer
and assignment to the Trustee of all right, title and interest of the Seller in
and to the Subsequent Cut-off Date Principal Balance of the Subsequent Mortgage
Loans, all monies due or to become due with respect thereto, and all proceeds of
such Subsequent Cut-off Date Principal Balance of the Subsequent Mortgage Loans;
10
(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 Initial Mortgage Loan as of the Closing Date, and with
respect to each Subsequent Mortgage Loan as of the Subsequent Transfer Date,
except as otherwise expressly stated:
(i) The information set forth on the Mortgage Loan Schedule with
respect to each Initial Mortgage Loan is true and correct in all material
respects as of the Closing Date, and with respect to each Subsequent Mortgage
Loan is true and correct in all material respects as of the related Subsequent
Transfer Date, and the information regarding the Initial Mortgage Loans and the
Subsequent Mortgage Loans on the computer diskette or tape delivered to the
Trustee prior to the Closing Date or Subsequent Transfer 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 4.47% of the Initial Mortgage Loans (by Cut-off
Date Principal Balance) were secured by condominium units; and no more than
12.55% of the Initial Mortgage Loans (by Cut-off Date Principal Balance) were
secured by properties in planned unit developments;
(iv) As of the Cut-off Date, (a) the remaining term of each
Mortgage Loan is not more than 360 months and not less than 119;
(v) No more than 44.74% of the Initial Mortgage Loans (by Cut-off
Date Principal Balance) have been the subject of cash-out refinances;
(vi) No more than 15.15% of the Initial Mortgage Loans (by Cut-off
Date Principal Balance) have been the subject of rate and term (no cash-out)
refinances;
(vii) No fewer than 40.04% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) are purchase money loans;
(viii) No more than 11.09% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) are secured by Mortgaged Properties located in
the State of Florida, no
11
more than 16.07% of the Initial Mortgage Loans (by Cut-off Date Principal
Balance) are secured by Mortgaged Properties located in the State of California
and no more than 10% of the Initial Mortgage Loans (by Cut-off Date Principal
Balance) are located in any other state;
(ix) The original Principal Balances of the Initial Mortgage Loans
ranged from $28,700 to 576,000; the average outstanding Principal Balance of the
Initial Mortgage Loans is approximately $122,570.13;
(x) At least 77.64% of the Initial Mortgage Loans (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 4.01% of
the Initial Mortgage Loans (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; and no more than 1.33% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) were secured by a first lien on a parcel of real
estate improved by manufactured housing;
(xi) [RESERVED];
(xii) The Mortgage Rates of the Initial Mortgage Loans as of the
Cut-off Date range from 6.99% per annum to 13.99% per annum, and the weighted
average Mortgage Rate (by Cut-off Date Principal Balance) of the Initial
Mortgage Loans was 10.55%, per annum;
(xiii) Approximately 57.09% of the Initial Mortgage Loans (by
Cut-off Date Principal Balance) have a Loan-to-Value Ratio in excess of 80%. No
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 Initial Mortgage Loans was equal to or
less than 82.436%;
(xiv) All of the Initial Mortgage Loans are secured by first 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
12
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 or as of the related Subsequent Cut-off Date in the case of a Subsequent
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 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 PUDs) 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 an Initial Mortgage Loan and to the Trustee in the case
of a Subsequent Mortgage Loan pursuant to this Purchase Agreement, 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 an Initial Mortgage Loan, the Trustee will have good
title thereto subject to no claims or liens. Immediately following the sale of
such Mortgage Loan to the Company and the Company's assignment and sale thereof
to the Trustee in the case of a Subsequent Mortgage Loan, 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
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part from the lien of such Mortgage; or executed any instrument of release,
cancellation or satisfaction with respect thereto;
(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
14
recording the Mortgage Loans were paid and the Mortgagor is not entitled to any
refund of amounts paid or due under the Mortgage Note;
(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 an Initial Mortgage
Loan and as of the related Subsequent Transfer Date in the case of a Subsequent
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
15
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 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 Loans 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 an Initial Mortgage Loan and as of the related Subsequent Transfer Date
in the case of a Subsequent 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
16
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 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) 69.57% of the Initial ARM Mortgage Loans are Convertible
Mortgage Loans;
(xlii) 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 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 0.25% 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 an Initial
Mortgage Loan and to the Trustee in the case of a Subsequent 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 Initial Mortgage Loan,
the Company or the Trustee, as applicable, will
17
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;
(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 Custodian 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, as amended;
(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;
18
(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 or the
related Subsequent Cut-Off Date, as the case may be;
(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 90% of the Initial Mortgage
Loans, respectively, (by Cut-off Date Principal Balance) will be secured by
Mortgages on owner-occupied primary residence properties;
(lvi) 13.26%, of the Initial Mortgage Loans, (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) [reserved];
(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 years or
three years following the month in which such Mortgage Loan was originated and
semiannually 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");
19
(lxii) None of the Initial Mortgage Loans (by Cut-off Date
Principal Balance) are negative amortization loans, and none of the Subsequent
Mortgage Loans shall be negative amortization loans;
(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 or the Certificate Administrator to any federal, state or local
government ("Transfer Taxes") other than Transfer Taxes which have or will be
paid by the Seller as due;
(lxviii) [Reserved];
(lxix) Approximately 99.96% of the Initial Mortgage Loans (by
Cut-Off Date Principal Balance) with a Loan-to-Value Ratio greater than 55% are
covered by a MI Policy issued by an MI Insurers;
(lxx) Each of the Initial Mortgage Loans that is identified on
Schedule 1 hereto is covered by a MI Policy issued by the MI Insurers; (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 Initial
Mortgage Loan that is subject to a MI Policy and as of each Subsequent Transfer
Date with respect to each Subsequent Mortgage Loan that is subject to a MI
Policy, the Seller is unaware of any existing circumstances which would cause
the MI Insurers 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
20
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 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,
the Certificate Administrator or the Custodian, 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 Custodian 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
21
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
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 Custodian 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 5.01 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.
(c) [reserved]
Section 3.02 Company Representations and Warranties. The Company hereby
--------------------------------------
represents and warrants to the Seller 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.
22
(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.
(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 Custodian, 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).
23
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
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-1 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-1 Certificates, Mezzanine
Certificates and Class AIO 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, the Certificate
Administrator and the Custodian, including the fees and disbursements of counsel
for the Trustee, the Certificate Administrator and the Custodian in connection
with the Pooling and Servicing 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 INITIAL MORTGAGE LOAN PURCHASE
Section 5.01 Conditions of Company's Obligations. The Company's obligations
-----------------------------------
to purchase the Initial Mortgage Loans which it accepts for purchase hereunder
shall be subject to each of the following conditions:
(a) the Mortgage File for each Initial Mortgage Loan shall have been
delivered in accordance with this Purchase Agreement;
(b) the representations and warranties set forth in Section 3.01(b) hereof
with respect to each Initial Mortgage Loan shall be true as of the Closing Date;
(c) the Underwriter or its affiliates shall have had an opportunity to
perform a due diligence review of each Mortgage Loan; and
24
(d) 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.
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 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, the Custodian 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, the
Certificate Administrator and the Custodian 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
25
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
(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-1
Certificates and the Mezzanine Certificates, or to enforce contracts for the
sale of the Class A-1 Certificates and the 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.
26
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.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01 Amendment. This Purchase Agreement may be amended from time
---------
to time by the Seller and the Company by written agreement signed by the Seller
and the Company, and if such amendment relates to the rights or obligations of
the Custodian, by the Custodian.
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:
(a) 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.
(b) if to the Company:
NovaStar Mortgage Funding Corporation
0000 X. 00xx Xxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxx Xxxxxxxx
or such other address as may hereafter be furnished to the Seller in writing by
the Company.
27
(c) if to the Certificate Administrator or the Trustee:
Xxxxx Fargo Bank Minnesota, N.A.
0000 Xxxxxx Xxxx Xxxxxxx
Xxxxxxxx, Xxxxxxxx 00000
Attention: NovaStar 2001-1
or such other address as may hereafter be furnished to the Seller in writing by
the Certificate Administrator.
(d) if to the Custodian:
First Union National Bank
0000 Xxxxxxxxxxxx Xxxxx, Xxxxx X
Xxxxxxxxx, XX 00000
Attention: Xxxxx Xxxxxxxx, NovaStar 2001-1
or such other address as may hereafter be furnished to the Seller in writing by
the Custodian.
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 terms 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 Seller and the Company 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 Seller and the Company 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
AIO Certificates to be rated "Aaa" by Xxxxx'x and "AAAr" 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 P
Certificates to be rated "AAA" by Xxxxx'x, and each party will cooperate with
the other in connection therewith.
28
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 Initial Mortgage Loans, rather than the Company
providing to the Seller a loan secured by the Initial Mortgage Loans on the
Closing Date, (ii) the Trustee is purchasing on the Closing Date, and the
Company is selling on the Closing Date, the Initial Mortgage Loans, rather than
the Trustee providing to the Company a loan secured by the Initial Mortgage
Loans, (iii) the Company will be purchasing on each Subsequent Transfer Date,
and the Seller will be selling on each Subsequent Transfer Date, the related
Subsequent Mortgage Loans, rather than the Company providing to the Seller a
loan secured by the related Subsequent Mortgage Loans on each Subsequent
Transfer Date, and (iv) the Trustee will be purchasing on each Subsequent
Transfer Date, and the Company will be selling on each Subsequent Transfer Date,
the related Subsequent Mortgage Loans, rather than the Trustee providing to the
Company a loan secured by the related Subsequent Mortgage Loans on each
Subsequent Transfer Date. 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 Initial Mortgage Loans on the Closing Date, (ii) a sale by the Company,
and a purchase by the Trustee, of the Initial Mortgage Loans on the Closing
Date, (iii) a sale by the Seller, and a purchase by the Company, of the related
Subsequent Mortgage Loans on each Subsequent Transfer Date, and (iv) a sale by
the Company, and a purchase by the Trustee, of the related Subsequent Mortgage
Loans on each Subsequent Transfer 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, the Custodian 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 (i)
the Company is acquiring the Initial Mortgage Loans for the purpose of selling
them to the Trustee, who will hold the Initial Mortgage Loans for the benefit of
the Certificateholders and (ii) the Company is acquiring the Subsequent Mortgage
Loans for the purpose of selling them to the Trustee, who will hold the
Subsequent Mortgage Loans 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 the assignment by the Company to the Trustee
of all of Company's rights or remedies against the Seller pursuant to this
Purchase Agreement and to the enforcement or exercise of any rights against the
Seller pursuant to this Purchase Agreement by the Company and the Trustee. Such
enforcement of a right or remedy by the Company, or the Trustee, 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 and the Custodian. Each of the
------------------------------------------
Trustee and the Custodian is entering into the Basic Documents to which it is a
party solely as Trustee or the Custodian, hereunder and thereunder, and not in
its individual capacity, and all persons having any claim against the Trustee
and Custodian, respectively, by reason of the transactions
29
contemplated by this Agreement or any other Basic Document shall look only to
the Trust Fund for payment or satisfaction thereof.
30
IN WITNESS WHEREOF, the Seller, the Company, the Certificate
Administrator, the Trustee and the Custodian 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
XXXXX FARGO BANK MINNESOTA, N.A.
as Trustee and Certificate Administrator
By: /s/ Xxx Xxxxx
------------------------------
Name: Xxx Xxxxx
Title: Assistant Vice President
FIRST UNION NATIONAL BANK,
as Custodian
By: /s/ Xxxxxx X Xxxxxx
------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Vice President
[Mortgage Loan Purchase Agreement Signature Page]
EXHIBIT 1
INITIAL MORTGAGE LOAN SCHEDULE
EXHIBIT 2(A)
SELLER'S SUBSEQUENT TRANSFER INSTRUMENT
Pursuant to this Seller's Subsequent Transfer Instrument (the
"Seller's Instrument"), dated as of March 1, 2001, between NovaStar Mortgage,
Inc. as seller (the "Seller"), and NovaStar Mortgage Funding Corporation, as
company (the "Company"), and pursuant to the Mortgage Loan Purchase Agreement,
dated as of March 1, 2001 (the "Purchase Agreement"), among the Seller, the
Company, Xxxxx Fargo Bank Minnesota, N.A., as Certificate Administrator (the
"Certificate Administrator") and as Trustee (the "Trustee"), and First Union
National Bank, as custodian (the "Custodian"), the Seller and the Company agree
to the sale by the Seller and the purchase by the Company of the Subsequent
Mortgage Loans listed on the attached Mortgage Loan Schedule (the "Subsequent
Mortgage Loans") and the related MI Policies.
Capitalized terms used and not defined herein have their respective
meanings as set forth in the definitions contained in the Pooling and Servicing
Agreement, dated as of March 1, 2001 (the "Pooling and Servicing Agreement"),
between the Trustee, the Certificate Administrator, the Custodian, the Company,
and the Seller/Servicer which definitions are incorporated by reference herein.
All other capitalized terms used herein shall have the meanings specified
herein.
Section 1. Conveyance of Subsequent Mortgage Loans.
---------------------------------------
(a) The Seller does hereby sell, transfer, assign, set over and convey
to the Company, without recourse, all of its right, title and interest in and to
the Subsequent Mortgage Loans and the related MI Policies, all scheduled
payments of principal and interest on the Subsequent Mortgage Loans due after
the Subsequent Cut-off Date, and all other payments of principal and interest on
the Subsequent Mortgage Loans collected after the Subsequent Cut-off Date (minus
that portion of any such payment which is allocable to the period prior to the
Subsequent Cut-off Date); provided, however, that no scheduled payments of
principal and interest due on or before the Subsequent Cut-off Date and
collected after the Subsequent Cut-off Date shall belong to the Company pursuant
to the terms of this Seller's Instrument. The Seller, contemporaneously with the
delivery of this Seller's Instrument, has delivered or caused to be delivered to
the Custodian, at the direction of the Company, each item set forth in Section
2.02(b) of the Purchase Agreement with respect to such Subsequent Mortgage Loans
and the related MI Policies. The transfer to the Company by the Seller of the
Subsequent Mortgage Loans identified on the attached Mortgage Loan Schedule
shall be absolute and is intended by the Seller, the Company, the Certificate
Administrator, the Trustee and the Certificateholders to constitute and to be
treated as a sale by the Seller.
The parties hereto intend that the transactions set forth herein
constitute a sale by the Seller to the Company on the Subsequent Transfer Date
of all the Seller's right, title and interest in and to the Subsequent Mortgage
Loans and the related MI Policies, 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 Subsequent
Transfer
Date a security interest in all of the Seller's right, title and interest in, to
and under the Subsequent 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 Custodian, in addition to holding the
Subsequent Mortgage Loans and the related MI Policies on behalf of the Trustee
for the benefit of the Certificateholders, holds the Subsequent Mortgage Loans
and the related MI Policies as designee and agent 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 State of Maryland and the State of Kansas (which shall
be submitted for filing as of the Subsequent Transfer 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 or the filing of any
additional UCC-1 financing statements due to the change in the principal office
of the Seller, as are necessary to perfect and protect the interests of the
Company and its assignees in each Subsequent Mortgage Loan, the related MI
Policies and the proceeds thereof.
(b) The expenses and costs relating to the delivery of the Subsequent
Mortgage Loans, this Seller's Instrument and such other items required under the
Purchase Agreement shall be borne by the Seller.
(c) Additional terms of the sale are set forth on Attachment A hereto.
Section 2. Representations and Warranties; Conditions Precedent.
----------------------------------------------------
(a) The Seller hereby affirms the representations and warranties set
forth in Section 3.01 of the Purchase Agreement that relate to the Seller and
the Subsequent Mortgage Loans as of the date hereof. The Seller hereby confirms
that each of the conditions set forth in Section 2.02(b) of the Purchase
Agreement are satisfied as of the date hereof and further represents and
warrants that each Subsequent Mortgage Loan complies with the requirements of
this Seller's Instrument and Section 2.02(c) of the Purchase Agreement.
(b) The Seller is solvent, is able to pay its debts as they become due
and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by the execution and delivery of
this Seller's Instrument or by the performance of its obligations hereunder nor
is it aware of any pending insolvency; no petition of bankruptcy (or similar
insolvency proceeding) has been filed by or against the Seller prior to the date
hereof;
(c) All terms and conditions of the Purchase Agreement are hereby
ratified and confirmed; provided, however, that in the event of any conflict the
provisions of this Seller's Instrument shall control over the conflicting
provisions of the Purchase Agreement.
Section 3. Recordation of the Seller's Instrument. To the extent
--------------------------------------
permitted by applicable law, this Seller's Instrument, or a memorandum thereof
if permitted under applicable law, is subject to recordation in all appropriate
public offices for real property records in all of the counties or other
comparable jurisdictions in which any or all of the properties subject to the
Mortgages are situated, and in any other appropriate public recording office or
elsewhere, such
2
recordation to be effected by the Servicer, but only when accompanied by an
Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of the Certificateholders or is necessary for
the administration or servicing of the Mortgage Loans.
Section 4. Governing Law. This Seller's Instrument shall be
-------------
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, without giving effect to principles of conflicts of
law.
Section 5. Counterparts. This Seller's Instrument may be executed in
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one 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; such counterparts, together, shall constitute one and the same
instrument.
Section 6. Successors and Assigns. This Seller's Instrument shall
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inure to the benefit of and be binding upon the Seller and the Company and their
respective successors and assigns. The Certificate Administrator and the Trustee
shall be express third party beneficiaries hereto.
3
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Seller's Instrument as of the day and year first written above.
NOVASTAR MORTGAGE, INC.,
as Seller
By: _____________________________
Name: Xxxxx Xxxxxxxx
Title: Vice President
NOVASTAR MORTGAGE FUNDING CORPORATION,
as Company
By: _____________________________
Name: Xxxxx Xxxxxxxx
Title: Vice President
(Signature Page to Mortgage Loan Purchase Agreement)
4
NOVASTAR HOME EQUITY LOAN ASSET-BACKED CERTIFICATES, SERIES 2001-1
ATTACHMENT A TO SELLER'S SUBSEQUENT TRANSFER INSTRUMENT
_________ __, 2001
A. Profile of Subsequent Mortgage Loans:
1. Subsequent Cut-off Date: ____ __, 2001
2. Subsequent Transfer Date: ____ __, 2001
3. Aggregate Principal Balance of the Subsequent Mortgage
Loans as of the Subsequent Cut-off Date: $____
4. Purchase Price: 100.00%
B. As to all the Subsequent Mortgage Loans the subject of this Instrument:
I. Longest stated term to maturity: 360 months
II. Minimum Mortgage Rate: ____%
III. Maximum Mortgage Rate: ____%
IV. WAC of all Mortgage Loans: ____%
V. WAM of all Mortgage Loans: ____%
VI. Largest Principal Balance: $ ____
VII. Non-owner occupied Mortgaged Properties: ____%
VIII. California zip code concentration: ____%
IX. Condominiums: ____%
X. Single-family: ____%
XI. Weighted average term since origination: ____ months
XII. Mortgage Loans Covered by MI Policies ____%
EXHIBIT 2(B)
COMPANY'S SUBSEQUENT TRANSFER INSTRUMENT
Pursuant to this Company's Subsequent Transfer Instrument (the "
Company's Instrument"), dated as of _______ __, 2001, between NovaStar Mortgage
Funding Corporation, as company (the "Company"), and Xxxxx Fargo Bank Minnesota,
N.A., as trustee (the "Trustee"), and pursuant to the Mortgage Loan Purchase
Agreement, dated as of March 1, 2001 (the "Purchase Agreement"), among NovaStar
Mortgage, Inc., as seller (the "Seller"), the Company, Xxxxx Fargo Bank
Minnesota, N.A., as Trustee and as Certificate Administrator (the "Certificate
Administrator"), and First Union National Bank, as custodian (the "Custodian"),
the Company and the Trustee agree to the sale by the Company and the purchase by
the Trustee of the subsequent Mortgage Loans listed on the attached Mortgage
Loan Schedule (the "Subsequent Mortgage Loans") and the related MI Policies, and
the pledge of the Subsequent Mortgage Loans by the Trustee.
Capitalized terms used and not defined herein have their respective
meanings as set forth in the definitions contained in the Pooling and Servicing
Agreement, dated as of March 1, 2001 (the "Pooling and Servicing Agreement"),
between the Certificate Administrator, the Trustee, the Custodian, the Company
and the Servicer which definitions are incorporated by reference herein. All
other capitalized terms used herein shall have the meanings specified herein.
Section 1. Conveyance of Subsequent Mortgage Loans.
---------------------------------------
(a) The Company does hereby sell, transfer, assign, set over and
convey to the Trustee, without recourse, (i) all of its right, title and
interest in and to the Subsequent Mortgage Loans and the related MI Policies,
all scheduled payments of principal and interest on the Subsequent Mortgage
Loans due after the Subsequent Cut-off Date, and all other payments of principal
and interest on the Subsequent Mortgage Loans collected after the Subsequent
Cut-off Date (minus that portion of any such payment which is allocable to the
period prior to the Subsequent Cut-off Date); provided, however, that no
scheduled payments of principal and interest due on or before the Subsequent
Cut-off Date and collected after the Subsequent Cut-off Date shall belong to the
Trustee pursuant to the terms of this Company's Instrument and (ii) all of its
right, title and interest in and to the Seller's Subsequent Transfer Instrument,
dated as of ______ __, 2001 (the "Seller's Instrument"), between the Seller and
the Company. The Company, contemporaneously with the delivery of this Company's
Instrument, has delivered or caused to be delivered to the Custodian each item
set forth in Section 2.02(b) of the Purchase Agreement with respect to such
Subsequent Mortgage Loans. The transfer to the Trustee by the Company of the
Subsequent Mortgage Loans identified on the attached Mortgage Loan Schedule and
the related MI Policies shall be absolute and is intended by the Company, the
Trustee, the Certificate Administrator and the Certificateholders to constitute
and to be treated as a sale by the Company.
The parties hereto intend that the transactions set forth herein
constitute a sale by the Company to the Trustee on the Subsequent Transfer Date
of all the Company's right, title and
interest in and to the Subsequent Mortgage Loans and the related MI Policies,
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 Company
hereby grants to the Trustee as of the Subsequent Transfer Date a security
interest in all of the Company's right, title and interest in, to and under the
Subsequent Mortgage Loans, and such other property, to secure all of the
Company's obligations hereunder, and this Company's Instrument shall constitute
a security agreement under applicable law, and in such event, the parties hereto
acknowledge that the Custodian on behalf of the Trustee, in addition to holding
the Subsequent Mortgage Loans and the related MI Policies for the benefit of the
Certificateholders, holds the Subsequent Mortgage Loans and the related MI
Policies as designee and agent of the Trustee. 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 filed in the
State of Delaware and the State of Kansas (which shall be submitted for filing
as of the Subsequent Transfer Date), any continuation statements with respect
thereto and any amendments thereto required to reflect a change in the name or
corporate structure of the Company or the filing of any additional UCC-1
financing statements due to the change in the principal office of the Company,
as are necessary to perfect and protect the interests of the Trustee and its
assignees in each Subsequent Mortgage Loan, the related MI Policies and the
proceeds thereof.
(b) The expenses and costs relating to the delivery of the Subsequent
Mortgage Loans, this Company's Instrument and such other items required under
the Purchase Agreement shall be borne by the Company.
Section 2. Representations and Warranties; Conditions Precedent.
----------------------------------------------------
(a) The Company hereby affirms the representations and warranties set
forth in Section 3.02 of the Purchase Agreement that relate to the Company as of
the date hereof.
(b) The Company is solvent, is able to pay its debts as they become
due and has capital sufficient to carry on its business and its obligations
hereunder; it will not be rendered insolvent by the execution and delivery of
this Company's Instrument or by the performance of its obligations hereunder nor
is it aware of any pending insolvency; no petition of bankruptcy (or similar
insolvency proceeding) has been filed by or against the Company prior to the
date hereof;
(c) All terms and conditions of the Purchase Agreement are hereby
ratified and confirmed; provided, however, that in the event of any conflict the
provisions of this Company's Instrument shall control over the conflicting
provisions of the Mortgage Loan Purchase Agreement.
Section 3. Grant from Trustee to Certificate Administrator. The
-----------------------------------------------
Trustee, as trustee for the benefit of the Certificateholders, hereby grants as
of the Subsequent Transfer Date to the Certificate Administrator, to secure all
of the Trustee's obligations under the Pooling and Servicing Agreement, all of
the Trustee's right, title and interest in and to, whether now existing or
hereafter created, (a) the Subsequent
2
Mortgage Loans, the related MI Policies and the proceeds thereof and all rights
under the Related Documents (including the related Mortgage Files); (b) all
funds on deposit from time to time in the Collection Account allocable to the
Subsequent Mortgage Loans, excluding any investment income from such funds; (c)
all its rights under the Seller's Instrument and this Company's Instrument; and
(d) all present and future claims, demands, causes and choses in action in
respect of any or all of the foregoing and all payments on or under, and all
proceeds of every kind and nature whatsoever in respect of, any or all of the
foregoing and all payments on or under, and all proceeds of every kind and
nature whatsoever in the conversion thereof, voluntary or involuntary, into cash
or other liquid property, all cash proceeds, accounts, accounts receivable,
notes, drafts acceptances, checks, deposit accounts, rights to payment of any
and every kind, and other forms of obligations and receivables, instruments and
other property which at any time constitute all or part of or are included in
the proceeds of any of the foregoing.
Section 4. Recordation of Instrument. To the extent permitted by
-------------------------
applicable law, this Company's Instrument, or a memorandum thereof if permitted
under applicable law, is subject to recordation in all appropriate public
offices for real property records in all of the counties or other comparable
jurisdictions in which any or all of the properties subject to the Mortgages are
situated, and in any other appropriate public recording office or elsewhere,
such recordation to be effected by the Servicer, but only when accompanied by an
Opinion of Counsel to the effect that such recordation materially and
beneficially affects the interests of the Certificateholders or is necessary for
the administration or servicing of the Mortgage Loans.
Section 5. Governing Law. This Company's Instrument shall be
-------------
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, without giving effect to principles of conflicts of
law.
Section 6. Counterparts. This Company's Instrument may be executed
------------
in one 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; such counterparts, together, shall constitute one and the same
instrument.
Section 7. Successors and Assigns. This Company's Instrument shall
----------------------
inure to the benefit of and be binding upon the Company and the Trustee and
their respective successors and assigns. The Certificate Administrator shall be
an express third party beneficiary hereto.
3
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Company's Instrument as of the day and year first written above.
NOVASTAR MORTGAGE FUNDING CORPORATION,
as Company
By: _______________________________
Name: Xxxxx Xxxxxxxx
Title: Vice President
XXXXX FARGO BANK MINNESOTA, N.A.
as Trustee and Certificate Administrator
By: _______________________________
Name: _____________________________
Title: ____________________________
