Exhibit 99.2
JOINT AGREEMENT
American Business Financial Services, Inc., along with its subsidiaries
American Business Credit, Inc., American Business Mortgage Services, Inc.,
HomeAmerican Credit, Inc. dba-Upland Mortgage, Processing Service Center, Inc.,
and Tiger Relocation Company (collectively "ABFS") and the United States
Attorney's Office for the Eastern District of Pennsylvania ("U.S. Attorney's
Office"), hereby jointly agree to the following provisions in connection with
ABFS's forbearance policy and standard form forbearance agreement, which policy
and agreement are attached hereto and incorporated by reference herein.
WHEREAS, among other things, ABFS services mortgage loans. Servicing
mortgage loans encompasses a broad range of business practices meant to ensure
that borrowers repay their loans on time. Servicing also includes practices
meant to ensure that, should a borrower fall behind in repaying the loan or
fail to repay the loan altogether, the servicer can take the steps necessary to
recoup as much of the amount owed on the loan as possible.
WHEREAS, servicers are often confronted with borrowers who have
difficulty repaying their loans. It is common for servicers to make some attempt
at working with such borrowers to find a way to ease that difficulty. Servicers
employ a number of practices meant to do just that, such as recommending credit
counseling assistance and offering loan modification and deferred payment plans.
WHEREAS, forbearance is a practice servers use to assist borrowers. As
a general matter, forbearance is a practice in which a servicer forbears from
foreclosing on a delinquent loan for a limited period during which time the
borrower must make timely loan payments and repay any amount the servicer has
advanced on his or her behalf.
WHEREAS, ABFS uses forbearance. ABFS had a forbearance policy in which,
among other things, ABFS required a delinquent borrower (1) to sign a
forbearance agreement in which the borrower promised to repay delinquent loan
amounts and (2) to execute a deed in lieu of foreclosure for the mortgaged
property. (A deed in lieu of foreclosure is a document by which a borrower gives
the mortgaged property to the lender to satisfy the loan. The lender does not
then need to foreclose on the property.) As part of the forbearance agreement,
ABFS would hold the executed deed-in-lieu, but would not record it. If the
borrower again fell behind on the loan, ABFS, after giving the borrower notice
and an opportunity to cure the default, could record the deed-in-lieu, thereby
taking ownership of the property.
WHEREAS, the U.S. Attorney's Office began an inquiry into ABFS's
forbearance policy. The primary focus of the inquiry was ABFS's practice of
requiring a borrower who entered a forbearance agreement to execute a deed in
lieu of foreclosure.
WHEREAS, in response to the U.S. Attorney's Office inquiry, ABFS began
a review of its forbearance policy. The review led ABFS to revise its
forbearance policy. (The revised
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policy, along with the associated standard form forbearance agreement, is
attached hereto and incorporated by reference.) Under the revised forbearance
policy, which became effective November 19, 2003, ABFS will no longer require a
borrower to execute a deed in lieu of foreclosure as part of a forbearance
agreement where the real estate securing the loan is the borrowers primary
residence. ABFS will also return to its existing borrowers any executed but
unrecorded deeds-in-lieu obtained under ABFS's former forbearance policy. ABFS
will return such deeds-in-lieu to approximately 675 such borrowers.
WHEREAS, there are currently eight instances in which borrowers occupy
properties on which ABFS has recorded a deed-in-lieu but has not yet sold the
property. For the six of those eight instances in which the property is not
subject to litigation, ABFS will, within 15 days of this Joint Agreement, offer
to deed the property back to the borrower, reinstate the prior mortgage, and
pursue its normal default procedures. With respect to borrowers who respond
within 30 days that their wish is to have the property deeded back to them, ABFS
will, within 15 days of receiving the borrower's consent and reaffirmation of
the validity of the mortgage, send a quitclaim deed to the appropriate recorder
of deeds. ABFS will pay all recording fees and transfer taxes. In any instance
in which a borrower refuses ABFS's offer or fails to respond to said offer
within 30 days, ABFS shall proceed with its customary property sale process.
WHEREAS, the U.S. Attorney's Office has made no finding as to whether
ABFS violated any law or regulation. Nonetheless, the inquiry has led ABFS to
make changes to its forbearance policy. Further, ABFS shall send to borrowers,
along with its standard form forbearance agreement, a letter that (1) encourages
borrowers to read the forbearance agreement, (2) encourages borrowers to obtain
advice from an attorney or other advisor prior to signing the agreement (and
shall list a United States Department of Housing and Urban Development ("HUD")
toll free number and a HUD web site from which borrowers can obtain the names of
HUD-approved housing counseling organizations), and (3) encourages borrowers to
contact ABFS's Customer Advocate (a vice president of ABFS) at a toll free
number should the borrower have any questions about any amounts owed on the
subject loan. Said letter is attached hereto and incorporated by reference. ABFS
represents that its Customer Advocate has at his/her disposal adequate staff to
respond to any such inquiries expeditiously and in writing.
WHEREAS, as soon after the execution of this Joint Agreement as
feasible, ABFS shall inform all of its Collections Department employees of its
new forbearance policy. ABFS shall implement a formal training session for all
Collections Department employees regarding the new forbearance policy, to be
held within ninety (90) days of the execution of this Joint Agreement. As part
of this training, Collections Department employees will be directed to inform
borrowers that they may be able to obtain assistance from housing or credit
counseling organizations in their areas. The Collections Department employees
will also be given instructions as to how borrowers might find a housing or
credit counseling organization in their areas. ABFS will monitor compliance with
its forbearance policies, and will take appropriate disciplinary action against
any employee who fails to comply with those policies.
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Accordingly, and based on the foregoing, it is hereby STIPULATED AND
AGREED by and between ABFS and the U.S. Attorney's Office that:
(i) ABFS shall provide to the U.S. Attorney's Office two (2)
reports, to be prepared by an independent firm or consultant,
confirming ABFS's compliance with the forbearance policy
(including the standard form forbearance agreement and
accompanying cover letter) attached hereto and incorporated by
reference and with the internal company training described
herein. The first such report shall be provided at nine (9)
months from the date of the execution of this Joint Agreement
and the second shall be provided at eighteen (18) months from
the date of the execution of this Joint Agreement.
(ii) For a period of eighteen (18) months from the date of the
execution of this Joint Agreement, ABFS shall notify the U.S.
Attorney's Office of any material changes ABFS proposes to
make to its forbearance policy and/or its standard form
forbearance agreement (and accompanying cover letter), which
are attached hereto and incorporated by reference. No such
proposed changes shall become effective until at least thirty
(30) days have passed from the date of the notification given
to the U.S. Attorney's Office.
(iii) ABFS shall provide a total of $80,000 to housing counseling
organizations designated by the United States Department of
Housing and Urban Development as approved housing counseling
agencies. ABFS shall choose the recipient organzation(s). The
total $80,000 may be provided, to one or more than one such
organization, but any such recipient organization must provide
counseling in states in which ABFS originates mortgage loans.
The total $80,000 is to be provided within thirteen (13)
months of the date of the execution of this Joint Agreement.
The total $80,000 must be in addition to any ABFS commitments
or pledges existing at the time of this Joint Agreement. ABFS
shall provide the U.S. Attorney's Office with the name(s) of
the recipient organization(s) and the amounts provided to each
such organization.
(iv) Effective as of the date of this Joint Agreement, the U.S.
Attorney's Office shall end its inquiry into ABFS's
forbearance policy. (Pursuant to said inquiry, the U.S.
Attorney's Office had served a May 14, 2003, subpoena on ABFS
and had served related subpoenas on third parties.) The U.S.
Attorney's Office reserves its right to re-institute its
inquiry should ABFS fail to comply with its revised
forbearance policy and/or make material changes to its revised
forbearance policy and/or its standard form forbearance
agreement (and accompanying cover letter), which are attached
hereto and incorporated by reference, without providing the
U.S. Attorney's Office with 30 days notice, as provided for in
sub-paragraph (ii), above or in the event of such notice,
disregard the concerns of the U.S. Attorney's Office.
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(v) The required reports and/or notification described in
sub-paragraphs (i), (ii), and (iii) above shall be provided,
by certified mail, to United States Attorney's Office,
Attention: Chief, Civil Division (American Business Financial
Services, Inc.), ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇.
SIGNATURES APPEAR ON FOLLOWING PAGE
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Attorney
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Date: 12/23/03
-------------------------------- --------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Associate United States Attorney
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ Date: 12/23/03
-------------------------------- --------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Associate United States Attorney
ON BEHALF OF AMERICAN BUSINESS FINANCIAL SERVICES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Date: 12/22/03
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
Skadden, Arps, Slate, ▇▇▇▇▇▇▇
& ▇▇▇▇ LLP
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AMERICAN BUSINESS FINANCIAL SERVICES, INC.
STATEMENT OF FORBEARANCE POLICY
OVERVIEW:
It is the policy of ABFS, consistent with the responsible servicing of
loans, to assist customers who have experienced a temporary hardship which has
prevented them from making their loan payments in a timely manner. Where
customers represent in writing that the temporary hardship has either passed or
no longer prevents them from meeting their obligations under their Note and ABFS
can verify that they have the financial capacity to resume making payments on
their loan and repay any past due amounts, ABFS may enter into a forbearance
agreement with them.
A forbearance agreement is a legally binding contract between a
customer and ABFS. The customer agrees to make future payments on a timely
basis and to repay the past due amounts over a stated period of time, not to
exceed the remaining term of the loan. In return, ABFS advances, on the
customer's behalf, the past due principal and interest and any accrued fees, in
order to bring the customer's account current.
Effective immediately, ABFS will no longer require consumer loan
customers to provide a deed-in-lieu of foreclosure as consideration for ABFS
entering into a forbearance agreement. ABFS has had a policy, since June, 2003,
of not recording any such deeds. All deeds previously obtained in connection
with consumer loan customers' forbearance agreements will be returned to the
customers, with a letter explaining the change in policy, no later than
January 31, 2004.
GUIDELINES FOR FORBEARANCE:
o A forbearance agreement is available to customers who have first and/or
second mortgages with ABFS.
o ABFS will consider a forbearance agreement if the customer's account
was originated at least six months prior to the request for
forbearance.
o The customer's account must be at least three payments delinquent to
qualify for a forbearance agreement.
o There is no maximum number of payments that may be advanced under a
forbearance agreement.
o The customer must submit a written request for forbearance containing
an explanation for his or her previous delinquency and setting forth
the reasons that the customer now believes he or she is able to meet
his or her loan obligations.
o ABFS will verify the customer's monthly income and evaluate the
customer's financial capacity to perform under the terms of the
forbearance agreement.
o ABFS will enter into a forbearance agreement only if it concludes,
based on its evaluation of income and financial capacity to perform,
that there is a reasonable likelihood that the customer will be able to
resume making regular monthly payments and repay over a fixed period of
time (not to exceed the remaining team of the loan) the amounts
advanced by ABFS.
o Customers must make a down payment of at least one month's past due
payments of principal and interest in order to enter into a forbearance
agreement. Customers who are six or more payments delinquent must make
a down payment of at least two past due payments.
o No request for forbearance may be denied without review by ABFS's
Senior Vice President for Collections or his designee.
o With respect to customers who are not interested in a forbearance
agreement, or for whom such an agreement is not appropriate, ABFS may
pursue available state law remedies, including foreclosure, but will
also explore other voluntary loss mitigation programs, such as cash for
keys, short sales or straight deeds-in-lieu of foreclosure.
o These policies will be fully implemented on January 1, 2004.
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LETTERHEAD
[Name of Customer]
[Address of Customer]
[Date]
Dear [Customer]:
As you recently discussed on the phone with a Company representative,
we are enclosing for your review and signature a forbearance agreement with
respect to your account number _______________.
Under this agreement, the Company agrees to bring your account current
by advancing on your behalf the total amount of $_____, which represents $_____
in unpaid principal and interest, $_____ in unpaid late fees and $_____ in other
unpaid fees, as more fully detailed within the attached forbearance agreement.
You agree to immediately resume making monthly payments on your loan and to
repay this advance over the next _____ months. Under the agreement, you will
therefore make ___ payments of $_____, and then resume making your regular
monthly payments of $_____.
As part of this agreement, you have agreed to make a down payment of
$_____. This payment must be made no later than _____, and must be made via
certified check, money order, wire transfer or other certified funds. If you
have any questions relating to your account or about how to make your down
payment, please call the Company's toll-free customer service number:
1-800-xxx-xxxx.
Please read the forbearance agreement carefully prior to signing it. We
encourage you to consult with an attorney or other advisor prior to signing the
agreement. The Company also wants you to know that housing counseling may be
available in your area. For a list of counseling agencies approved by the U.S.
Department of Housing and Urban Development ("HUD"), you can call HUD toll-free
at ▇-▇▇▇-▇▇▇-▇▇▇▇, or visit their web site at
▇▇▇▇://▇▇▇.▇▇▇.▇▇▇/▇▇▇▇▇▇▇/▇▇▇/▇▇▇/▇▇▇/▇▇▇▇▇▇▇▇▇.▇▇▇.
Please note that according to the Company's records, your current
outstanding balance, including all unpaid fees and monies we have paid on your
behalf is $_____. If you have any questions about this calculation or our
computation of the amounts of past due principal, interest or fees stated in
this letter or the forbearance agreement, please immediately call ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ABFS's Customer Advocate, at ▇-▇▇▇-▇▇▇-▇▇▇▇, ext. 4579.
This letter is intended to provide you with a general description of
the forbearance agreement, but is not part of a legally binding contract between
you and the Company. The Company's offer to enter into a forbearance agreement
will expire automatically if you do not return a signed copy of the forbearance
agreement such that it arrives at the Company's above-listed address no later
than _____.
Sincerely,
VP for Collections
DRAFT
FORBEARANCE AGREEMENT
THIS FORBEARANCE AGREEMENT is made this __ day of _______________,
200_, by, between and among HomeAmerican Credit, Inc. d/b/a Upland Mortgage
("HAC"), a Pennsylvania corporation with an office at The ▇▇▇▇▇▇▇▇▇▇ Building,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ______________________,
an individual with an address of __________________________, and
________________________, an individual with an address of
_____________________________________ (collectively, the "Borrowers")
BACKGROUND
A. On _______________, __________, HAC made a certain loan, advance and
extension of credit to or for the benefit of Borrowers in the original principal
amount of $_______________ (the "Loan") pursuant to the terms and subject to the
conditions of that certain promissory note dated _______________,
_______________ in the original principal amount of $_______________ (the
"Note") executed and delivered by the Borrowers to HAC.
B. In consideration of the Loan and as collateral security for the
debts, liabilities and obligations of the Borrowers to HAC as set forth in the
Note (the "Obligations"), the Borrowers granted, mortgaged and pledged to HAC a
continuing lien on and security interest in that certain parcel of real property
and the improvements thereon located at _______________, City of
_______________, County of _______________ State of _______________ (the
"Property"), pursuant to the terms and subject to the conditions of that certain
mortgage dated _______________, _______________, (the "Mortgage") executed and
delivered by _______________ and _______________ to HAC.
C. Note and the Mortgage, together with all other instruments,
agreements and documents delivered in connection therewith are sometimes
hereinafter collectively referred to as the "Loan Documents".
D. The Borrowers are in default under the Obligations to HAC by reason,
among other things, of their failure to make timely payments as required under
the Loan Documents. Borrowers acknowledge their present inability to cure the
past due Obligations (the "Existing Defaults").
E. The Borrowers' Existing Defaults under the Obligations constitute an
event of default under the Note and the Loan Documents. As a result of the
Existing Defaults, HAC is permitted to exercise various rights and remedies
arising under the Loan Documents.
F. Under and subject to the terms and conditions set forth herein, HAC
agrees to forbear from executing against the Property of the Borrowers provided
that the
Borrowers are in compliance with their obligations under the Loan Documents and
terms of this Forbearance Agreement.
G. The Parties wish to enter into a Forbearance Agreement pursuant to
which the Borrowers will cure the Existing Defaults and reinstate the Loan to a
current status.
H. In order to induce HAC to enter into this Forbearance Agreement,
Borrowers agree to make a down payment of $_____________, as set forth in
Section VI, below.
NOW, THEREFORE, in consideration of these premises, the mutual
covenants and promises contained herein, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound hereby, the parties hereto covenant and agree as
follows:
I. Recitals.
The recitals contained in the foregoing Background are incorporated
into and made a substantive part of this Forbearance Agreement.
II. Terms.
All terms not otherwise defined in this Forbearance Agreement shall
have the meanings ascribed to them in the Loan Documents.
III. Ratification of Loan Documents.
Except to the extent that the Loan Documents are expressly modified by
this Forbearance Agreement, each of the Borrowers hereby ratifies and confirms,
and reaffirms in all respects, and without condition, all the terms, covenants,
representations, warranties and conditions set forth in the Loan Documents, the
terms and provisions of which are incorporated herein by reference, and hereby
agrees that each of the Borrowers remains unconditionally liable to HAC in
accordance with the respective terms, covenants and conditions of each of the
Loan Documents and each of the Borrowers further ratifies and confirms, and
reaffirms, without condition, that all collateral security described in the Loan
Documents, and all liens and security interests, created pursuant thereto,
continue unimpaired and in full force and effect, and secure and shall continue
to secure any of the Obligations.
IV. Ratification of Obligations.
Each of the Borrowers hereby ratifies and confirms that, as of the date
of this Forbearance Agreement, the outstanding sum of the Obligations of the
Borrowers under the Loan Documents and this Forbearance Agreement is
$_____________, comprising $_____________ in principal, $_____________ in
accrued interest to the
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date of this Agreement, $_____________ in unpaid late charges and $_____________
in unpaid fees as follows:_____________ (fees to be itemized).
Each of the Borrowers hereby affirms that all of their Obligations
existing under the Loan Documents, including but not limited to their obligation
to maintain insurance on the Property, and pay real estate and school taxes and
property maintenance related to the Property remain in full force and effect
under this Forbearance Agreement and will remain in full force and effect during
any period following a judgment in mortgage foreclosure against the Borrowers
and in favor of HAC. Each of the Borrowers hereby acknowledges and affirms the
default in repayment of their respective Obligations to HAC by virtue of the
Existing Defaults. It is further agreed that the existing default will not be
cured until receipt of all funds required herein. Borrowers hereby acknowledge
that all payments received by HAC will be applied to the loan at the discretion
of HAC and in conformity with the Loan Documents.
V. Payments Subject to Forbearance.
Under this Agreement, the borrower shall repay the following amounts:
Past due principal and interest in the total amount of $_____________
Late charges in the amount of $_____________
Unpaid fees in the amount of $_____________
VI. Forbearance Payments by Borrowers.
a. Borrowers shall make a down payment of $_____________ upon
the execution of this Forbearance Agreement. This payment must be made via
certified check, money order, wire transfer or other certified funds.
b. On or before _____________, 200__, Borrowers shall recommence
making regular monthly payments under the Loan Documents in the amount of
$_____________ per month.
c. In addition to the regular monthly payment of $_____________,
the Borrowers shall make __ additional monthly payments of $_____________. The
obligation to pay the additional payment of $_____________ shall commence with
the regular payment due on _____________, 200__ and, provided that all payments
are received in a timely manner, shall conclude with the regular payment due on
_____________, 20___.
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VII. Terminating Events.
For the purposes of this Forbearance Agreement, a "Terminating Event"
shall mean any one of the following:
a. The failure of any of the Borrowers to comply with any
warranty, covenant, condition, requirement, provision or agreement with which
such Borrowers are required to comply under the terms of this Forbearance
Agreement, the Loan Documents and all related instruments, agreements and
documents referenced herein or therein.
b. Any representation, warranty or statement made by any of the
Borrowers in any financial statement or other document furnished or to be
furnished to HAC in connection with this Forbearance Agreement or the Loan
Documents that is false or misleading in any respect.
c. The occurrence of any other event of default as defined in
any of the Loan Documents.
d. The failure of the Borrowers to remit any payment when due,
whether under this Agreement or any Loan Document.
VIII. Survival of Rights after Termination of Forbearance Agreement.
In case of any Terminating Event, as provided above, HAC shall be
entitled to keep all funds received pursuant to this Agreement and the Borrowers
shall not be entitled to any refund. In addition, HAC shall be entitled to
pursue all of its remedies allowed under the Loan Documents and applicable law.
IX. HAC Rights.
HAC may exercise any rights and remedies available to HAC under the
terms of the Loan Documents and/or this Forbearance Agreement, at law or in
equity upon or subsequent to a Terminating Event. It is further acknowledged and
agreed that the rights and remedies available to HAC after a Terminating Event
shall include, and not be limited to, commencing or continuing the prosecution
of any and all pending civil actions, which may be or have been commenced by HAC
against the Borrowers through judgment and foreclosure sale.
X. No Waiver.
Except as stated herein, this Forbearance Agreement is not and shall
not be deemed to be a waiver of the Existing Defaults, or any other defaults
which may now exist or hereafter occur under any of the Loan Documents nor a
modification of any provision of the Loan Documents. Further, the waiver of any
event of default or the failure of HAC to exercise any right or remedy to which
it may be entitled shall not be
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deemed to be a waiver of any subsequent event of default nor of HAC's right to
exercise that or any other right or remedy to which HAC is entitled.
XI. Binding Effect and Assignment.
This Forbearance Agreement inures to the benefit of, and shall be
binding upon the parties hereto and their respective heirs, successors, assigns,
executors, administrators, and legal representatives.
XII. Joint and Several Liability of Borrowers
The obligations of the Borrowers under this Forbearance Agreement are
joint and several.
XIII. Headings.
The headings contained in this Forbearance Agreement are intended for
convenience only and shall not be used or deemed to limit or diminish any of the
provisions of this Agreement.
XIV. Construction and Enforcement.
This Forbearance Agreement shall be construed and enforced in
accordance with and under the laws of the Commonwealth of Pennsylvania.
XV. Counterparts.
This Forbearance Agreement may be executed in counterparts, each of
which shall be an original and all of which taken together shall constitute a
single agreement, with the same effect as if the signatures thereto and hereto
were upon the same instrument.
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have caused this Forbearance Agreement to be duly executed and delivered
the day and year first written above.
HOMEAMERICAN CREDIT, INC.
d/b/a UPLAND MORTGAGE
By:___________________________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Executive Vice President
Date:_________________________________________
Borrower:_____________________________________
Date:_________________________________________
Borrower:_____________________________________
Date:_________________________________________
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