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EXHIBIT 10.4
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FEDERAL NATIONAL MORTGAGE ASSOCIATION
DELEGATED UNDERWRITING AND SERVICING RESERVE AGREEMENT
AMONG
FEDERAL NATIONAL MORTGAGE ASSOCIATION,
STATE STREET BANK AND TRUST COMPANY
AND
WASHINGTON MORTGAGE FINANCIAL GROUP, LTD.
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THIS INSTRUMENT CONSTITUTES A SECURITY
AGREEMENT FOR PURPOSES OF ARTICLE 9 OF
THE UNIFORM COMMERCIAL CODE
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TABLE OF CONTENTS
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RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
STATEMENT OF AMENDMENT AND RESTATEMENT . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE I
DEFINITIONS
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
GRANT OF SECURITY INTEREST
Section 2.01. Grant of Security Interest . . . . . . . . . . . . . . . . . 13
ARTICLE III
DELIVERY AND ADMINISTRATION OF ACCEPTABLE COLLATERAL
Section 3.01. Delivery of Acceptable Collateral . . . . . . . . . . . . . 14
Section 3.02. Calculation of the Aggregate Reserve
Requirement . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 3.03. Monthly Valuation of Acceptable
Collateral; Reduction of Collateral . . . . . . . . . . . . 17
Section 3.04. Administration of Acceptable Collateral . . . . . . . . . . 19
Section 3.05. Substitution of Acceptable Collateral . . . . . . . . . . . 22
Section 3.06. Release of Acceptable Collateral . . . . . . . . . . . . . . 22
Section 3.07. Change in Aggregate Reserve Requirement . . . . . . . . . . 22
Section 3.08. Custodian Reliance on Xxxxxx Xxx Reports . . . . . . . . . . 23
Section 3.09. Servicing Fee Reserve . . . . . . . . . . . . . . . . . . . 23
Section 3.10. Qualifying Lender Determination;
Withdrawal by Xxxxxx Mae . . . . . . . . . . . . . . . . . . 23
Section 3.11. Application of PERQ Rates to Loans that
Become Mortgage Loans Pursuant to this
Agreement when Lender is a Qualifying
Lender . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 3.12. Investment Guidelines for Acceptable
Collateral . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF LENDER
Section 4.01. Consents to Transfer . . . . . . . . . . . . . . . . . . . . 28
Section 4.02. Existence and Power . . . . . . . . . . . . . . . . . . . . 28
Section 4.03. Authorization and Non-contravention . . . . . . . . . . . . 28
Section 4.04. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.05. Governmental Consents . . . . . . . . . . . . . . . . . . . 29
Section 4.06. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.07. Title to Acceptable Collateral . . . . . . . . . . . . . . . 29
Section 4.08. Relationship with Custodian . . . . . . . . . . . . . . . . 29
Section 4.09. Showings . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 4.10. Compliance with Laws . . . . . . . . . . . . . . . . . . . . 30
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ARTICLE V
REPRESENTATIONS OF CUSTODIAN
Section 5.01. Existence and Power . . . . . . . . . . . . . . . . . . . . 30
Section 5.02. Authorization and Non-contravention . . . . . . . . . . . . 30
Section 5.03. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . 30
Section 5.04. Relationship with Lender . . . . . . . . . . . . . . . . . . 30
Section 5.05. Financial Intermediary. . . . . . . . . . . . . . . . . . . . 30
ARTICLE VI
COVENANTS OF LENDER
Section 6.01. Performance of Obligations . . . . . . . . . . . . . . . . . 31
Section 6.02. Good Standing . . . . . . . . . . . . . . . . . . . . . . . 31
Section 6.03. Further Assurances . . . . . . . . . . . . . . . . . . . . . 31
Section 6.04. Compliance with Laws . . . . . . . . . . . . . . . . . . . . 31
Section 6.05. Aggregate Reserve Requirement . . . . . . . . . . . . . . . 31
Section 6.06. Information with Respect to Lender;
Lender's Counsel Opinion . . . . . . . . . . . . . . . . . . 32
Section 6.07. Compliance by Lender with Investment
Guidelines . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VII
COVENANTS AND DUTIES OF CUSTODIAN
Section 7.01. Safekeeping of Acceptable Collateral . . . . . . . . . . . . 32
Section 7.02. Maintenance of Records . . . . . . . . . . . . . . . . . . . 33
Section 7.03. Delivery of Opinions of Counsel . . . . . . . . . . . . . . 33
Section 7.04. Acceptance of Duties and Obligations . . . . . . . . . . . . 33
Section 7.05. Fees, Charges and Expenses of Custodian . . . . . . . . . . 36
Section 7.06. Notice to Xxxxxx Xxx if Default Occurs . . . . . . . . . . . 36
Section 7.07. Corporate Custodian Required;
Eligibility . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 7.08. Successor Custodian by Merger,
Consolidation, Etc. . . . . . . . . . . . . . . . . . . . . . 37
Section 7.09. Resignation of Custodian . . . . . . . . . . . . . . . . . . 37
Section 7.10. Removal of Custodian . . . . . . . . . . . . . . . . . . . . 37
Section 7.11. Appointment Successor Custodian . . . . . . . . . . . . . . 37
Section 7.12. Concerning Any Successor Custodian . . . . . . . . . . . . . 38
Section 7.13. Protection of Lien . . . . . . . . . . . . . . . . . . . . . 38
Section 7.14. Compliance by Custodian with Investment Guidelines . . . . . 39
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.01. Events of Default . . . . . . . . . . . . . . . . . . . . . 39
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ARTICLE IX
REMEDIES
Section 9.01. Remedies of Xxxxxx Mae . . . . . . . . . . . . . . . . . . . 40
Section 9.02. Remedies Not Exclusive . . . . . . . . . . . . . . . . . . . 42
Section 9.03. Delay or Omission Not Waiver . . . . . . . . . . . . . . . . 42
Section 9.04. Restoration of Rights and Remedies . . . . . . . . . . . . . 42
Section 9.05. Effect of Cure Periods on Remedies . . . . . . . . . . . . . 43
Section 9.06. Additional Security; Right to Set-Off . . . . . . . . . . . 43
Section 9.07. Liquidation of Collateral . . . . . . . . . . . . . . . . . 43
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.02. No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 10.03. Termination . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.04. Amendments and Waivers . . . . . . . . . . . . . . . . . . . 45
Section 10.05. Severability . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.06. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 10.07. Relationship to DUS Guide . . . . . . . . . . . . . . . . . 45
Section 10.08. Governing Law; Submission to
Jurisdiction; Waiver of Jury Trial . . . . . . . . . . . . . 45
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EXHIBITS
Exhibit A - Form of Certificate of Authorized Representatives
Exhibit B - Letter of Acceptable Collateral
Exhibit C - Letter of Confirmation
Exhibit D - Form of Opinion of Counsel for Lender (Upon
Execution of Reserve Agreement)
Exhibit E - Form of Irrevocable Letter of Credit (Evergreen)
Exhibit F - Form of Irrevocable Letter of Credit
Exhibit G - Form of Opinion of Counsel to Issuer of Letter of
Credit
Exhibit H - Form of Opinion of Counsel to Issuer of Letter of
Credit Regarding Amendment of Letter of Credit
Exhibit I - Assignment
Exhibit J - Form of Opinion of Counsel for Lender (Upon
Delivery and Pledge of an Existing Investment
Agreement, Permitted Investment or Funds with
Instructions to Invest in Permitted Investments)
Exhibit K - Form of Description of Collateral for Financing
Statements
Exhibit L - Form of Opinion of Counsel for Custodian
Exhibit M - Custodian's Schedule of Fees
Exhibit N - PERQ Credit
Exhibit 0 - Lender's General Partners
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This Delegated Underwriting and Servicing Reserve Agreement (the
"Agreement") is made by and among the FEDERAL NATIONAL MORTGAGE ASSOCIATION, a
corporation organized and existing under the laws of the United States of
America ("Xxxxxx Xxx"), WASHINGTON MORTGAGE FINANCIAL GROUP, LTD., a Delaware
corporation ("Lender") and STATE STREET BANK AND TRUST COMPANY, a Massachusetts
banking corporation having its principal place of business in Boston,
Massachusetts ("Custodian"). This Agreement is effective as of the date of
execution by Xxxxxx Mae.
RECITALS
A. Xxxxxx Xxx offers a multifamily product line called Delegated
Underwriting and Servicing, under which Xxxxxx Mae purchases multifamily
mortgage loans from, and provides credit enhancement for multifamily mortgage
loans underwritten by, approved multifamily mortgage lenders that underwrite,
originate, sell and service such mortgage loans.
B. In connection with Lender's approval by Xxxxxx Xxx for
Delegated Underwriting and Servicing, Xxxxxx Mae and Lender have entered or are
entering into the Contract (as defined below).
C. Lender and Xxxxxx Xxx agree to share in any losses on Mortgage
Loans that Xxxxxx Mae purchases from Lender or on Mortgage Loans for which
Xxxxxx Xxx provides credit enhancement based on Lender's underwriting of such
Mortgage Loans under Delegated Underwriting and Servicing, or on Mortgage Loans
as to which Lender assumes the loss sharing obligations under Delegated
Underwriting and Servicing, and to secure Lender's obligations under Delegated
Underwriting and Servicing, Lender is required to establish a reserve by
delivering Acceptable Collateral (as defined below) to Xxxxxx Mae under the
terms of this Agreement.
D. Xxxxxx Xxx and Lender have entered into or are entering into
the Loss Sharing Agreement (as defined below) to provide for the manner in
which Xxxxxx Mae and Lender, with respect to each Mortgage Loan purchased by
Xxxxxx Xxx from Lender under Delegated Underwriting and Servicing, each
Mortgage Loan for which Xxxxxx Mae provides credit enhancement based on
Lender's underwriting of such Mortgage Loan for Delegated Underwriting and
Servicing and any other Mortgage Loan with respect to which Lender assumes loss
sharing obligations under Delegated Underwriting and Servicing, will share in
any losses with respect to such Mortgage Loan and for certain remedies of
Xxxxxx Xxx.
E. Custodian, as Xxxxxx Mae's collateral agent and bailee, will
hold and administer Collateral delivered by Lender to Custodian under this
Agreement.
F. Xxxxxx Xxx, Custodian and Lender wish to set forth the terms
and conditions for the delivery and administration of such Collateral.
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NOW THEREFORE, in consideration of the mutual covenants and
undertakings set forth in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, Xxxxxx
Mae, Lender and Custodian agree as follows:
STATEMENT OF AMENDMENT AND RESTATEMENT
THIS AGREEMENT constitutes an amendment and restatement in its
entirety of a Delegated Underwriting and Servicing Reserve Agreement, as
amended and restated (the "Prior Agreement"), executed and delivered among
Xxxxxx Xxx, Custodian and Lender. This Agreement also amends and restates the
following agreements among Xxxxxx Mae, Lender and Custodian which supplemented
the Prior Agreement, but only to the extent that the Prior Agreement is
affected:
- Mews Loan Supplement to Delegated Underwriting and Servicing
Reserve Agreement
- Desert Shadows Loan Supplement to Delegated Underwriting
and Servicing Reserve Agreement
- Credit Enhancement Addendum
- Xxxxxx Loan Supplement to Delegated Underwriting and Servicing
Reserve Agreement
Lender and Xxxxxx Mae authorize and direct Custodian to hold under this
Agreement any Collateral delivered by Lender and held by Custodian under the
Prior Agreement, as though such Collateral were initially delivered under this
Agreement, but as of its original delivery under the Prior Agreement. All
representations, warranties and covenants made by Lender in the Prior Agreement
shall continue to bind Lender under this Agreement.
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. Capitalized terms in this Agreement
shall have the following meanings:
"ACCEPTABLE COLLATERAL" means one or more Letters of Credit, one or
more Existing Investment Agreements, one or more Permitted Investments held in
accordance with the Investment Guidelines, or any combination thereof.
"ACQUISITION DATE" means, with respect to a Permitted Investment,
the date of delivery by Lender to, or purchase by, Custodian pursuant to this
Agreement.
"AGGREGATE RESERVE REQUIREMENT" means, as of any date of
determination, the amount in U.S. Dollars equal to the greater of the
following:
(a) (i) $500,000 or (ii) if Lender has been determined at any time
to have been or to be a Qualifying Lender pursuant to this Agreement,
$1,500,000; or
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(b) the sum of the Base Reserve Amount and the Risk-Based Reserve
Amount (and, if applicable pursuant to Exhibit N of this Agreement, the
PERQ Credit, if any, as of such date of determination).
"AUTHORIZED REPRESENTATIVE" means each individual at the time
designated to act in such capacity under this Agreement in a written
certificate, substantially in the form of Exhibit A to this Agreement,
furnished to the Custodian and containing the specimen signature of such
individual and executed on behalf of Xxxxxx Xxx by its President or any Vice
President, on behalf of Custodian by its President or any Vice President or
duly authorized Assistant Vice President in its Corporate Trust Department or
on behalf of Lender by its President or any Vice President, its manager or
authorized member, or its managing general partner, as applicable; provided,
however, that if Lender is a depository institution, any Authorized
Representative for Lender must hold the office of Vice President or higher.
"BASE RESERVE AMOUNT" means, as of any date of determination, the
aggregate amount in U.S. Dollars determined in accordance with (a) through (c)
below:
(a) $500,000; plus
(b) $5.00 per each $1,000 (.50%) of that portion, if any, of the
aggregate unpaid principal balance of all Mortgage Loans that is equal to
or less than $50 million; plus
(c) $2.50 per each $1,000 (.25%) of that portion, if any, of the
aggregate unpaid principal balance of all Mortgage Loans that is greater
than $50 million but less than or equal to $150 million.
"BORROWER" means the Person or Persons obligated under a note,
security instruments and other documents executed and delivered with respect to
a Mortgage Loan.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or any
other day on which Xxxxxx Mae, Custodian or the Federal Reserve Bank of New
York is not open for business.
"COLLATERAL" means Acceptable Collateral, any funds, securities or
other assets on deposit in the Collateral Account and any other funds,
securities or other assets in which Lender has an interest delivered to or
otherwise held by Custodian under this Agreement or Xxxxxx Xxx (including any
amounts at any time credited or due to Lender from Xxxxxx Mae) other than, with
respect to any warehouse bank with which Xxxxxx Xxx has entered into a "bailee
letter" pursuant to the DUS Guide, any "Note" and "Additional Documents" so
long as such property is held by Xxxxxx Mae as bailee for the benefit for such
warehouse bank pursuant to such bailee letter.
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"COLLATERAL ACCOUNT" has the meaning set forth in Section 3.04(e)
of this Agreement.
"COLLATERAL DELIVERY DATE" means any date on which Lender delivers
Collateral to Custodian in accordance with Article III of this Agreement.
"COLLATERAL VALUE" means, with respect to:
(a) a Letter of Credit, the face amount of such Letter of Credit,
except that the Collateral Value of a Letter of Credit issued by a Person
that is not a Qualified Issuer shall be zero;
(b) an Existing Investment Agreement, the Invested Funds stated in
such Existing Investment Agreement without regard to any accrual of
interest, except that the Collateral Value of an Existing Investment
Agreement with respect to which Custodian has actual knowledge, or has
received notice from Xxxxxx Xxx, that Lender has defaulted in the
performance or observance of any representation, warranty or agreement in
Section 4.07 of this Agreement shall be zero; and
(c) any Permitted Investment, the following value of such
Permitted Investment at the Acquisition Date as determined by Custodian,
except that the Collateral Value of a Permitted Investment with respect
to which Custodian has actual knowledge, or has received notice from
Xxxxxx Mae, that Lender has defaulted in the performance or observance of
any representation, warranty or agreement in Section 4.07 of this
Agreement shall be zero:
(i) Government Obligations, the product of (A) the
outstanding principal balance of each such Government Obligation,
multiplied by (B) the lower of the bid or offered prices for such
Government Obligations being valued on the Acquisition Date, which
Custodian obtains either from at least two nationally recognized
dealers or, if the bid and offered prices for such Government
Obligations being valued are regularly published in The Wall Street
Journal by reference to such prices so published on or most
recently before the Acquisition Date;
(ii) Discount notes, discount commercial paper or other
short-term discount obligations described in clauses (b) and (d) of
the definition of Permitted Investments, the accreted value thereof
on the Acquisition Date (determined by taking into account the date
of issuance, date of maturity and amount payable at maturity
according to the terms of such investment, and assuming
straight-line accretion of such value over the term);
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(iii) Interest-bearing short-term obligations, other than
discount obligations, described in clauses (b), (d) or (e) of the
definition of Permitted Investments, the face amount thereof,
without regard to accrued interest, if any, on the Acquisition
Date;
(iv) Repurchase agreements, the bid prices of the securities
subject to repurchase as quoted by a recognized pricing service as
of the close of business on the Business Day immediately preceding
the Acquisition Date (the "Bid Price"), minus the applicable Margin
(as defined below). If such bid prices are not so available,
Custodian shall be authorized to use the most current price
information provided by any recognized pricing service. If no bid
prices are so available, Custodian shall be authorized to price the
repurchase agreement by contacting any dealer designated as a
"primary dealer" by the Federal Reserve Bank of New York and
relying upon any price quoted by such "primary dealer" as if it
were quoted by a recognized pricing service. As used herein,
"Margin" shall mean with respect to any repurchase agreement, the
product of (1) the Bid Price, multiplied times (2) the percentage
amount by which the applicable percentage set forth in Section
3.12(e)(iii) (as determined by the nature of securities subject to
repurchase) exceeds 100%;
(v) Investment agreements between Xxxxxx Xxx and Custodian,
the "invested funds" stated in such investment agreement (without
regard to any accrual of interest);
(vi) Any Permitted Investments, described in clause (g) of
the definition of Permitted Investments, the result of such
valuation method as determined by Xxxxxx Mae by notice to Custodian
on the Acquisition Date.
"CONTRACT" means the Mortgage Selling and Servicing Contract
between Lender and Xxxxxx Xxx, as amended by the Delegated Underwriting and
Servicing Addendum, and as such agreement may be further amended or
supplemented from time to time.
"CUSTODIAN" means State Street Bank and Trust Company, or any
successor thereto (including any successor appointed under this Agreement in
the event of the resignation or removal of State Street Bank and Trust Company
or a successor as Custodian).
"DUS GUIDE" means the Xxxxxx Mae Multifamily Delegated Underwriting
and Servicing Guide, as such guide may be amended or supplemented from time to
time by Xxxxxx Xxx including, by way of example and not limitation, any DUS
Lender Memos, announcements or guide updates, providing for certain terms and
conditions applicable to Lender's sale and assignment of Mortgage Loans to
Xxxxxx Mae, Mortgage Loans for which Xxxxxx Xxx provides credit enhancement and
Lender's servicing obligations with respect to such Mortgage Loans.
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"EVENT OF DEFAULT" means any of the events described in Article
VIII of this Agreement.
"EXISTING INVESTMENT AGREEMENT" means an investment agreement in
effect as of the date of execution by Xxxxxx Mae of this Agreement, including
any subsequent amendments, supplements or extensions, between Xxxxxx Xxx and
Lender in form satisfactory to Xxxxxx Mae pursuant to which Xxxxxx Xxx agrees
to pay interest on Invested Funds (as defined in such agreement) at the rate
and for the term set forth in such agreement.
"FEDERAL FUNDS" means an interest-bearing, overnight sale by
Custodian in its commercial banking capacity of Federal funds on deposit in
Custodian's reserve account with the Federal Reserve Bank District in which
Custodian's principal office is located, pursuant to which such funds, together
with interest payable thereon, shall be remitted to Custodian on the next
Business Day.
"FINAL SETTLEMENT OF LOSS" means the determination by Xxxxxx Mae,
pursuant to the Loss Sharing Agreement, of the final allocation of losses to be
borne by Xxxxxx Xxx and Lender in respect of a defaulted Mortgage Loan and the
payment of any amounts pursuant to such determination.
"GOVERNMENTAL BODY" means any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
"GOVERNMENT OBLIGATIONS" means direct obligations of, and
obligations on which the full and timely payment of principal and interest is
unconditionally guaranteed by, the United States of America, and any
certificates, receipts, securities or other obligations evidencing ownership
of, or the right to receive, a specified portion of one or more interest
payments or principal payments or any combination thereof, to be made on any
such obligation.
"XXXXX LOAN" means any Mortgage Loan Purchased by Xxxxxx Xxx after
December 1, 1992, that, at the time of its Purchase by Xxxxxx Mae, satisfied
the requirements for such designation under the DUS Guide, provided that if at
any time the Loss Level applicable to that Mortgage Loan is Level II or Level
III, that Mortgage Loan shall not be a XXXXX Loan for purposes of this
Agreement.
"INVESTED FUNDS" shall have the meaning set forth in the applicable
Existing Investment Agreement.
"INVESTMENT GUIDELINES" shall have the meaning set forth in Section
3.12 of this Agreement, as such investment guidelines may be amended or
supplemented from time to time by Xxxxxx Mae in its sole and absolute
discretion by notice to Lender and Custodian, as provided in Section 3.12 of
this Agreement.
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"LETTER OF ACCEPTABLE COLLATERAL" shall mean the letter in the form
of Exhibit B of Lender to Custodian required to be delivered on any Collateral
Delivery Date pursuant to Section 3.01(a)(i)(B) of this Agreement.
"LETTER OF CREDIT" means a clean, irrevocable letter of credit in
the form set forth as either Exhibit E-1 or F-1, completed and issued by a
Qualified Issuer or confirmed in the form set forth as Exhibit E-2 or Exhibit
F-2, as applicable, completed and issued by a Qualified Issuer, which letter of
credit and, if applicable, confirmation may be amended from time to time as
permitted or required under this Agreement. No Letter of Credit issued by the
Custodian or any affiliate of Lender shall constitute Acceptable Collateral,
provided that Custodian shall rely on the representation of Lender set forth on
Schedule A to the related Letter of Acceptable Collateral as to any such
affiliation with Lender. Any renewal, replacement or substitute Letter of
Credit issued under this Agreement shall conform to the preceding two
sentences.
"LEVEL I", "LEVEL II", and "LEVEL III" mean the three loss sharing
designations described as such in the DUS Guide.
"LIEN" means any lien, mortgage, pledge, security interest, charge
or encumbrance of any kind, including the lien created by this Reserve
Agreement.
"LOSS LEVEL" means, as applicable, Level I, Level II, or Level III.
"LOSS SHARING AGREEMENT" means the Delegated Underwriting and
Servicing Master Loss Sharing Agreement, between Lender and Xxxxxx Xxx, and as
such agreement may be amended or supplemented from time to time.
"MODIFIED RISK MORTGAGE LOAN" means a Mortgage Loan so designated
in the DUS Guide or other written notice from Xxxxxx Mae to the Custodian and
Lender, including by way of example and not limitation, a HUD risk-sharing
loan.
"MOODY'S" means Xxxxx'x Investors Service, Inc. or any successor
thereto that is a nationally recognized statistical rating agency approved by
Xxxxxx Xxx.
"MORTGAGE LOAN" means any mortgage loan purchased by Xxxxxx Mae
from Lender under Delegated Underwriting and Servicing, or for which Xxxxxx Xxx
provides credit enhancement based on Lender's underwriting of such mortgage
loan under Delegated Underwriting and Servicing, or with respect to which
Lender has assumed all or part of the loss sharing obligations under Delegated
Underwriting and Servicing, provided, however, that a loan shall cease to be a
Mortgage Loan for purposes of the Aggregate Reserve Requirement on the date
Lender repurchases such Mortgage Loan in accordance with the provisions of the
Contract or the Loss Sharing Agreement, the date that such Mortgage Loan is
fully paid in
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accordance with its terms, or the date that Lender's Payment Obligations with
respect to such Mortgage Loan are fully paid and Final Settlement of Loss has
occurred.
"PAYMENT DEFAULT" means a Borrower's failure to pay when due and in
full any payment(s) required with respect to a Mortgage Loan, including, by way
of example and not limitation, principal, interest, late charges, default
interest, prepayment premium, escrows or other collateral accounts for taxes,
insurance premiums and assessments, other collateral accounts and the
replacement reserve.
"PAYMENT OBLIGATIONS" means, as to any Mortgage Loan, the
obligations of Lender: (i) to make payments to Xxxxxx Mae in respect of such
Mortgage Loan and (ii) to pay Delinquency Advances, Servicing Advances and
Delinquency Resolution Costs and any other amount that Lender is obligated to
pay under the Loss Sharing Agreement, all in accordance with the terms of the
Contract and the Loss Sharing Agreement.
"PERFORMANCE DEFAULT" means the failure of a Borrower to perform
any promise or covenant under the related Mortgage Loan other than a failure
that constitutes a Payment Default.
"PERMITTED EXPENSES" means any item for which Custodian is entitled
to be reimbursed or otherwise paid provided by Section 7.05 of this Reserve
Agreement.
"PERMITTED INVESTMENTS" means one or more of the following:
(a) Government Obligations with a stated maturity date, provided
that the current maturity of such obligation may not exceed five (5)
years at the Acquisition Date; or
(b) Discount notes or other short-term interest-bearing debt
obligations of Xxxxxx Xxx, the Federal Home Loan Bank System or the
Federal Farm Credit Bank, provided that the current maturity of such
investment may not exceed ninety (90) days at the Acquisition Date; or
(c) Repurchase agreements pursuant to a written agreement having a
stated term not exceeding ninety (90) days with any Qualified Financial
Institution which, at the Acquisition Date, is rated A-1 by S&P or P-1 by
Xxxxx'x with respect to investments specified in clauses (a) or (b)
above, or Xxxxxx Xxx interest-bearing mortgage-backed securities
(excluding real estate mortgage investment conduits, REMICs and stripped
mortgage-backed securities), provided that the original maturity of such
investments described in clauses (a) or (b) above and so subject to
repurchase pursuant to such agreement may not exceed ten (10) years. For
the purpose of this Agreement, repurchase agreements are limited to
transactions in which a seller sells certain securities to Custodian,
subject to Custodian's agreement to resell such
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securities to seller at a future date at a stated price plus interest and
Custodian has taken actual or constructive delivery of such investments
on a repurchase basis. Custodian may not enter into repurchase
agreements in which investments acquired for the account are sold to
other entities on a repurchase basis; or
(d) Commercial paper or other short-term debt obligations,
including revolving trust master notes, issued or guaranteed by any
corporation organized or incorporated under the laws of the United States
or any state, district or territory therein which, on the date of the
acquisition by Custodian, is rated A-1 or better by S&P and P-1 or better
by Xxxxx'x. In the event that such obligation is rated by one rating
agency, but not both, Xxxxxx Xxx shall accept the rating of the sole
rating agency. The current maturity of such investment may not exceed 90
days at the Acquisition Date; or
(e) Overnight or term Federal Funds sold to, or certificates of
deposit of, federally insured depository institutions which, on the
Acquisition Date of these deposits, are rated C or better by Thomson
BankWatch, Inc., or demand or time deposits with Custodian (to the
extent Custodian meets such federal insurance and rating requirements),
provided that the remaining current maturity of such certificates of
deposit and other time deposits may not exceed 90 days at the Acquisition
Date; or
(f) With the written consent of Xxxxxx Xxx, investment agreements,
including any amendments, supplements or extensions, between Xxxxxx Mae
and Custodian in form satisfactory to Xxxxxx Xxx; or
(g) any other investment approved in writing by Xxxxxx Mae.
"PERQ COLLATERAL MARGIN" shall have the meaning set forth in
Exhibit N of this Agreement.
"PERQ CREDIT" shall have the meaning set forth in Exhibit N of this
Agreement.
"PERQ EFFECTIVE DATE" means the monthly Valuation Date as of which
Custodian initially calculates the Aggregate Reserve Requirement based on
Risk-Based Rates designated by Xxxxxx Xxx that reflect application of PERQ
Rates pursuant to Section 3.11 of this Agreement to any Mortgage Loan.
"PERQ RATE" means the percentage rate, if applicable to a
particular Mortgage Loan, as determined by Xxxxxx Mae pursuant to Section 3.11
of this Agreement when Lender is a Qualifying Lender, used in calculation of
the Risk-Based Reserve Amount (with reference to clause (e) through (j) and
subject to the provisos of
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the definition of "Risk-Based Reserve Amount") respecting a Mortgage Loan.
"PERQ RELEASE AMOUNT" shall have the meaning set forth in
Exhibit N.
"PERSON" means an individual, corporation, partnership,
association, trust, limited liability company or any other entity or
organization, including, by way of example and not limitation, a government or
political subdivision or an agency or instrumentality thereof.
"PRICING AND UNDERWRITING TIER" means, as applicable, Tier 1, Tier
2, Tier 3, or Tier 4, or such other pricing and underwriting tiers as Xxxxxx
Xxx shall establish from time to time in its sole and absolute discretion, as
set forth in the DUS Guide.
"PURCHASE" or "PURCHASED" "BY XXXXXX MAE" means, when used in
connection with a Mortgage Loan, (a) the purchase of a Mortgage Loan by Xxxxxx
Xxx or (b) the provision of credit enhancement with respect to a Mortgage Loan
by Xxxxxx Mae if Xxxxxx Xxx does not purchase a Mortgage Loan in connection
with the provision of such credit enhancement.
"QUALIFIED FINANCIAL INSTITUTION" means any (a) bank or trust
company organized under the laws of any state of the United States of America;
(b) national banking association; (c) savings bank, savings and loan
association or insurance company or association chartered or organized under
the laws of any state of the United States of America; (d) federal branch or
agency pursuant to the International Banking Act of 1978 or any successor
provisions of law, a domestic branch or agency of a foreign bank which branch
or agency is duly licensed or authorized to do business under the laws of any
state or territory of the United States of America; (e) government bond dealer
reporting to, trading with, and recognized as a primary dealer by, the Federal
Reserve Bank of New York; (f) Xxxxxx Mae; or (g) securities dealer approved in
writing by Xxxxxx Xxx, the liquidation of which is subject to the Securities
Investors Protection Corporation or other similar corporation.
"QUALIFIED ISSUER" means the bank that either issues or confirms a
Letter of Credit and that also satisfies at least the minimum rating
requirements applicable to acceptable issuers of letters of credit for purposes
of this Agreement under the DUS Guide.
"QUALIFYING LENDER" means Lender during any period (a) during which
the aggregate unpaid principal balance of all Mortgage Loans is equal to or
exceeds $500,000,000; and (b) with respect to such period, Xxxxxx Mae has
determined (and not withdrawn by notice to Lender, with a copy to Custodian,
such determination pursuant to Section 3.10(b) of this Agreement) that Lender
qualifies pursuant to Section 3.10(a) of this Agreement for the application of
PERQ Rates pursuant to Section 3.11 of this Agreement to certain
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Mortgage Loans for purposes of the calculation of the Risk-Based Reserve Amount
of the Aggregate Reserve Requirement.
"RATE REDUCTION PERCENTAGE" means the percentage as determined by
Xxxxxx Xxx by which the Standard Risk-Based Rate or the PERQ Rate is multiplied
in the calculation of the Risk-Based Reserve Amount respecting a particular
Modified Risk Mortgage Loan.
"REIMBURSEMENT BASE" means the dollar amount calculated with
respect to a particular Mortgage Loan, as provided under the Loss Sharing
Agreement.
"RISK-BASED RATE" shall mean, as applicable to a Mortgage Loan, the
Standard Risk-Based Rate or the PERQ Rate for purposes of calculation of the
Risk-Based Reserve Amount of the Aggregate Reserve Requirement.
"RISK-BASED RESERVE AMOUNT" means, as of any date of determination,
the aggregate amount in U.S. Dollars determined in accordance with the
applicable Standard Risk-Based Rate pursuant to (a) through (d) below:
(a) $5.00 per each $1,000 (.50%) of the aggregate unpaid principal
balance of all Mortgage Loans, if any, for which the Loss Level is Level
I and, as of the date of Purchase by Xxxxxx Mae, the Pricing and
Underwriting Tier is Tier 1 or Tier 2 or (other than respecting a XXXXX
Loan) as to which Xxxxxx Mae has not designated a Pricing and
Underwriting Tier; plus
(b) $3.75 per each $1,000 (.375%) of the aggregate unpaid
principal balance of all Mortgage Loans, if any, for which the Loss Level
is Level I and, as of the date of Purchase by Xxxxxx Xxx, the Pricing and
Underwriting Tier is Tier 3 or Tier 4 or Xxxxxx Mae has designated such
Mortgage Loan as a XXXXX Loan for purposes of and as defined in this
Agreement; plus
(c) $6.50 per each $1,000 (.65%) of the aggregate unpaid principal
balance of all Mortgage Loans, if any, for which the Loss Level is Level
II regardless of the Pricing and Underwriting Tier; plus
(d) $8.00 per each $1,000 (.80%) of the aggregate unpaid principal
balance of all Mortgage Loans, if any, for which the Loss Level is Level
III regardless of the Pricing and Underwriting Tier;
provided, however, that, if Lender is a Qualifying Lender as of the date a
particular loan becomes a Mortgage Loan pursuant to this Agreement (or Xxxxxx
Mae otherwise assigns to the Mortgage Loan a PERQ Rate pursuant to Section
3.11(a) of this Agreement) the following PERQ Rate schedule shall apply in the
calculation of the
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Risk-Based Reserve Amount respecting such Mortgage Loan in lieu of the Standard
Risk-Based Rate, as of any date of determination:
(e) $5.00 per each $1,000 (.50%) of the aggregate unpaid principal
balance of such Mortgage Loans, if any, for which the Loss Level is Level
I and, as of the date of Purchase by Xxxxxx Xxx, the Pricing and
Underwriting Tier is Tier 1 or (other than respecting a XXXXX Loan) as to
which Xxxxxx Xxx has not designated a Pricing and Underwriting Tier;
(f) $3.50 per each $1,000 (.35%) of the aggregate unpaid principal
balance of such Mortgage Loans, if any, for which the Loss Level is Level
I and, as of the date of Purchase by Xxxxxx Mae, the Pricing and
Underwriting Tier is Tier 2;
(g) $2.00 per each $1,000 (.20%) of the aggregate unpaid principal
balance of such Mortgage Loans, if any, for which the Loss Level is Level
I and, as of the date of Purchase by Xxxxxx Xxx, the Pricing and
Underwriting Tier is Tier 3 or Xxxxxx Mae has designated such Mortgage
Loan as a XXXXX Loan for purposes of and as defined in this Agreement;
(h) $0.50 per each $1,000 (.05%) of the aggregate unpaid principal
balance of such Mortgage Loans, if any, for which the Loss Level is Level
I and, as of the date of Purchase by Xxxxxx Mae, the Pricing and
Underwriting Tier is Tier 4;
(i) $6.50 per each $1,000 (.65%) of the aggregate unpaid principal
balance of such Mortgage Loans, if any, for which the Loss Level is Level
II regardless of the Pricing and Underwriting Tier;
(j) $8.00 per each $1,000 (.80%) of the aggregate unpaid principal
balance of such Mortgage Loans, if any, for which the Loss Level is Level
III regardless of the Pricing and Underwriting Tier; and
provided further, however, that (x) the above-mentioned Risk-Based Rate shall
be reduced in the case of a Modified Risk Mortgage Loan to the rate equal to
the product of the otherwise applicable Standard Risk-Based Rate or PERQ Rate,
as the case may be, multiplied by the applicable Rate Reduction Percentage (as
determined by Xxxxxx Xxx and reported by Xxxxxx Mae to Custodian) for such
Modified Risk Mortgage Loan; and that (y) without consent of Lender or
Custodian, Xxxxxx Xxx upon notice to Lender and Custodian may reduce the above
Risk-Based Rates respecting a Mortgage Loan pursuant to this Agreement,
effective at any time, or increase the above Risk-Based Rates respecting any
Mortgage Loan pursuant to this Agreement or may establish new Pricing and
Underwriting Tiers with specified Risk-Based Rates pursuant to this Agreement,
as any such reduction, increase or Pricing and Underwriting Tier may be set
forth from time to time in the DUS Guide. Any increase in the above Risk-Based
Rates shall apply only as to Mortgage Loans for which Xxxxxx Mae made a
commitment to Lender after the effective date of such increase.
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"S&P" means Standard & Poor's Rating Group, a division of The
XxXxxx-Xxxx Companies, Inc. or any successor thereto that is a nationally
recognized statistical rating agency approved by Xxxxxx Mae.
"SERVICING FEE RESERVE" means the reserve established pursuant to
Section 3.09 of this Agreement in the event Lender is required, pursuant to the
Loss Sharing Agreement, to deliver servicing income to Custodian.
"STANDARD RISK-BASED RATE" means the percentage rate used in
calculation of the Risk-Based Reserve Amount (with reference to clauses (a)
through (d), and subject to the provisos of the definition of "Risk Based
Reserve Amount") respecting a Mortgage Loan unless Xxxxxx Xxx otherwise
determines that a PERQ Rate is applicable to such Mortgage Loan pursuant to
this Agreement.
"SUPERSEDED RESERVE METHODOLOGY" shall have the meaning set forth
on Exhibit N of this Agreement.
"TIER 1", "TIER 2", "TIER 3", and "TIER 4" means the four pricing
and underwriting tier designations described as such in the DUS Guide.
"VALUATION DATE" means any Collateral Delivery Date and the
fifteenth (15th) day of each month (or if any such day is not a Business Day,
the next succeeding Business Day).
ARTICLE II
GRANT OF SECURITY INTEREST
Section 2.01. Grant of Security Interest. To secure the payment of
all amounts payable by Lender under its Payment Obligations and to secure the
performance of its covenants, representations, warranties and agreements
contained in this Agreement, the Contract, and the Loss Sharing Agreement,
Lender assigns, transfers, deposits, pledges and sets over to Xxxxxx Xxx, each
item of Collateral (including Acceptable Collateral) delivered to Xxxxxx Mae
directly or through its collateral agent and bailee, Custodian pursuant to this
Agreement and, respecting any Collateral including Acceptable Collateral (other
than an undrawn-upon Letter of Credit) and any funds, securities or other
assets on deposit in the Collateral Account, grants to Xxxxxx Xxx a valid
perfected first priority security interest in, Lien upon and right of set-off
against the following:
(i) ALL OF Lender's right, title and interest, whether now existing or
hereafter arising in each item of Collateral (including Acceptable
Collateral and any funds, securities or other assets on deposit in
the Collateral Account) delivered under this Agreement;
(ii) TOGETHER WITH all additions to and substitutions for the Collateral
(including Acceptable Collateral and any funds, securities or other
assets on deposit in the
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Collateral Account) as are required or permitted pursuant to the
terms of this Agreement;
(iii) TOGETHER WITH all proceeds, payments, distributions and collections
received or to be received, or derived or to be derived, now or any
subsequent time from or in connection with Collateral (including
Acceptable Collateral and any funds, securities or other assets on
deposit in the Collateral Account); and
(iv) TOGETHER WITH all powers and rights of Lender, whether presently
held or subsequently acquired, including rights of enforcement,
with respect to Collateral (including Acceptable Collateral and any
funds, securities or other assets on deposit in the Collateral
Account).
ARTICLE III
DELIVERY AND ADMINISTRATION OF ACCEPTABLE COLLATERAL
Section 3.01. Delivery of Acceptable Collateral.
(a) (i) The initial delivery of Acceptable Collateral shall be
made by Lender concurrently with or prior to the date of execution by Xxxxxx
Xxx of this Agreement. Subsequently, Acceptable Collateral may be delivered in
addition to or, in accordance with Section 3.05, in substitution for or
replacement of one or more previously delivered items of Acceptable Collateral.
On each Collateral Delivery Date, Lender:
(A) shall: (i) deliver to Custodian a Letter of Credit or an
amendment to an existing Letter of Credit increasing the amount of
such Letter of Credit; (ii) in the case of the initial delivery of
an Existing Investment Agreement, cause to be delivered to
Custodian the Existing Investment Agreement and an assignment duly
executed by Lender in the form of Exhibit I; (iii) deliver to
Custodian immediately available funds or Permitted Investments
(together with documentation evidencing the transfer of such
Permitted Investment to Custodian or, if applicable, Custodian's
financial intermediary), with written instructions for investment
of such funds and the proceeds of such Permitted Investments in
Permitted Investments in accordance with the Investment Guidelines,
subject to the provisions of Section 3.04(e) of this Agreement; or
(iv) if an Existing Investment Agreement has previously been
delivered to Custodian, deliver immediately available funds to
Xxxxxx Mae under such Existing Investment Agreement and Xxxxxx Xxx
shall deliver to Custodian the notice set forth in Section
3.01(a)(iv) of this Agreement;
(B) shall deliver to Custodian the Letter of Acceptable
Collateral in the form of Exhibit B; and
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(C) shall deliver to Custodian the opinion of counsel in the
form of Exhibit G, in the case of a Letter of Credit (or as
required by Section 3.01(a)(v), if applicable), or in the form
of Exhibit J, in the case of the initial Collateral Delivery Date
of Collateral other than a Letter of Credit.
(ii) Lender shall furnish the opinion of counsel in the form
of Exhibit D and a certificate substantially in the form of Exhibit A upon
delivery of this Agreement by Lender to Custodian.
(iii) At least five (5) Business Days prior to the anticipated
initial Collateral Delivery Date of Collateral other than a Letter of Credit,
Lender shall notify Custodian of Lender's intention to deliver Collateral other
than a Letter of Credit, and deliver to Xxxxxx Mae (at the address specified by
Xxxxxx Xxx pursuant to this subsection), for execution and filing by Xxxxxx
Mae, financing statements executed by Lender with the description of Collateral
set forth in Exhibit K sufficient for filing in, together with a letter from
Lender's counsel setting forth, the jurisdictions and offices (including
addresses) in which such financing statements should be filed (which
jurisdictions and offices shall be identical to the jurisdictions and offices
that will be set forth in such counsels opinion in the form of Exhibit J). In
addition, Lender shall deliver to Xxxxxx Xxx financing statements for Xxxxxx
Mae to file in the District of Columbia. Custodian shall deliver to Xxxxxx Xxx
and Lender's counsel, no later than the Business Day preceding the anticipated
initial Collateral Delivery Date of Collateral other than a Letter of Credit an
opinion of Custodian's counsel in the form of Exhibit L. For the purpose of
this subsection, (A) "initial Collateral Delivery Date of Collateral other than
a Letter of Credit" shall mean the first Collateral Delivery Date on which any
Collateral of any type or types other than (or in addition to) an undrawn
Letter of Credit is first delivered to Custodian pursuant to this Agreement,
and (B) the executed financing statements and Lender's counsel letter should be
delivered to counsel to Xxxxxx Mae at the address designated BY Xxxxxx Xxx.
Lender shall reimburse Xxxxxx Mae for costs and expenses incurred in connection
with the filing of any financing statements.
(iv) In the event that Lender delivers funds to Xxxxxx Xxx
pursuant to an Existing Investment Agreement, Xxxxxx Mae shall notify Custodian
by telephone or telecopy promptly of such delivery and the amount of such
funds, and Custodian shall be entitled to rely on such notification in
determining the Collateral Value of the Collateral under this Agreement.
(v) In the event that a Letter of Credit previously
delivered under this Agreement is amended to reflect an extension of the term
of, or an increase of the face amount of, such Letter of Credit, Lender shall
cause the delivery to Custodian, concurrent with such amendment, of an opinion
of counsel to the issuer of such Letter of Credit, in the form of Exhibit H, as
to the validity of
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such amendment and the enforceability of such Letter of Credit as amended
against the issuer.
(vi) No later than five (5) Business Days following the
delivery by Lender of Collateral and the related documents on any Collateral
Delivery Date, and receipt of any notice from Xxxxxx Xxx of delivery of funds
under an Existing Investment Agreement, Custodian shall determine:
(A) whether the Collateral delivered is Acceptable Collateral;
(B) the Collateral Value of such Collateral;
(C) whether the Letter of Acceptable Collateral and the opinion(s)
of counsel described above comply with the provisions of this Agreement;
(D) upon the initial delivery of an Existing Investment Agreement
or a Permitted Investment, that there is included with the Collateral an
assignment substantially in the form of Exhibit I; and
(E) whether the Collateral Value of such Collateral, when added to
the Collateral Value of any previously delivered and currently held
Collateral, is at least equal to the Aggregate Reserve Requirement.
(vii) After Custodian makes the determinations set forth in
Section 3.01(a)(vi), Custodian promptly shall deliver to Xxxxxx Mae and Lender
the Letter of Confirmation in the form of Exhibit C. If Custodian is unable to
make any of the determinations set forth in Section 3.01(a)(vi), Custodian
promptly shall notify Xxxxxx Xxx and Lender which determinations it was unable
to make and the reasons why it was unable to make such determinations.
(b) In the event Acceptable Collateral is a Letter of Credit, no
variation of the text of Exhibit E or F shall be made or accepted as Acceptable
Collateral by Custodian without Xxxxxx Mae Is prior written consent.
(c) Each item of Collateral shall be delivered to Custodian at
Custodian's offices in Boston, Massachusetts or such other address as the
Custodian shall designate by notice to Xxxxxx Xxx and Lender.
(d) Subject to Section 3.05, Acceptable Collateral delivered under
this Agreement and held from time to time by the Custodian may consist (i)
entirely of one or more Existing Investment Agreements, (ii) entirely of one or
more Letters of Credit, (iii) entirely of one or more Permitted Investments
held in accordance with the Investment Guidelines, or (iv) any combination of
the foregoing.
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Section 3.02. Calculation of the Aggregate Reserve Requirement.
As of each monthly Valuation Date, the PERQ Effective Date and such other dates
as Xxxxxx Mae shall reasonably require, Custodian shall calculate the Aggregate
Reserve Requirement.
Section 3.03. Monthly Valuation of Acceptable Collateral;
Reduction of Collateral.
(a) As of each monthly Valuation Date, Custodian shall (i)
determine the Collateral Value of each item of Collateral delivered to and held
by Custodian under this Agreement and whether such Collateral (taken as a
whole) constitutes Acceptable Collateral; (ii) if any Acceptable Collateral
consists of one or more Letter(s) of Credit, take the action required by
Section 3.04(c)(ii); and (iii) whether the investment of the Collateral is in
compliance with the Investment Guidelines, to the extent applicable. Within
five Business Days of each monthly Valuation Date, Custodian shall deliver to:
(x) Xxxxxx Xxx and Lender a monthly report setting forth Custodian's
determination of whether Collateral delivered to and held by Custodian
under this Agreement is Acceptable Collateral (taken as a whole), the
Collateral Value of each item of Acceptable Collateral, the Aggregate
Reserve Requirement as of such date of determination (including,
commencing as of the PERQ Effective Date, if applicable pursuant to
Exhibit N of this Agreement, the PERQ Credit), whether the Collateral
Value of Acceptable Collateral is equal to, exceeds or is less than the
Aggregate Reserve Requirement as of such date of determination, and, if
the Collateral Value of Acceptable Collateral is greater than or less
than the Aggregate Reserve Requirement as of such date of determination,
the amount of such excess or deficiency as the case may be; and
(y) Lender a monthly report of all transactions confirmed by Custodian
with respect to Acceptable Collateral since the preceding monthly
Valuation Date with respect to any Collateral delivered and then held
under this Agreement.
(b) If any report delivered to Xxxxxx Mae and Lender pursuant to
Section 3.03(a)(x) above indicates that the Aggregate Reserve Requirement
exceeds the Collateral value of Acceptable Collateral on the date of
determination to which such report pertains, or if any Collateral that has been
delivered by Lender pursuant to Section 3.01 is not Acceptable Collateral,
then, within fifteen (15) days after the date of such monthly report, Lender
shall deliver, or cause to be delivered, to Custodian additional Acceptable
Collateral (provided that, unless Lender otherwise provides written notice to
Custodian, Lender shall be deemed to have requested the application by
Custodian of the PERQ Credit, if applicable, pursuant to Exhibit N of this
Agreement, if Lender is then a Qualifying Lender pursuant to Section 3.10 of
this Agreement), in an aggregate amount equal to or greater than the amount
specified in such report from Custodian and any other items
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required under Section 3.01(a) or the notice of Xxxxxx Xxx pursuant to
Section 3.01(a)(iv), as applicable. Upon such delivery of such Acceptable
Collateral, Custodian shall take the actions specified in Section 3.01(a)
(vi) and (vii) (and, upon application, if any, of the PERQ Credit, Custodian
shall also take the actions specified in Exhibit N of this Agreement).
(c) If any monthly report delivered to Xxxxxx Mae and Lender
pursuant to Section 3.03(a)(x) above indicates that the Collateral Value on
the date of determination to which such report pertains exceeds the Aggregate
Reserve Requirement, Lender may request in writing to Custodian (with a copy to
Xxxxxx Xxx) that the amount of the Acceptable Collateral be reduced to an
amount not less than the Aggregate Reserve Requirement and in such request
specify which Acceptable Collateral Lender wishes to have reduced, liquidated
or released and whether in the form of cash or specified Permitted
Investment (s), as applicable; provided, however, that (i) during the initial
term of any Existing Investment Agreement or Permitted Investment described in
clause (f) of the definition of Permitted Investments, no reduction of Invested
Funds under such Existing Investment Agreement or Permitted Investment
described in clause (f) of the definition of Permitted Investments, shall be
permitted and (ii) no reduction of Invested Funds under any Existing Investment
Agreement or Permitted Investment described in clause (f) of the definition of
Permitted Investments, with a Reset Date (as defined in that Existing
Investment Agreement or Permitted Investment described in clause (f) of the
definition of Permitted Investments) shall be permitted until the next Reset
Date. Unless an Event of Default has occurred and is continuing, such
reduction may occur in the manner set forth in Section 3.03(d). If an Event of
Default has occurred and is continuing, Custodian shall not permit the
reduction or release of any Acceptable Collateral. Lender shall be responsible
for all costs and expenses, if any, incurred by Custodian and Xxxxxx Mae
associated with such requested reduction or release.
(d) If a Letter of Credit is to be amended in connection with a
report delivered under Section 3.03(c), Lender shall notify Custodian and shall
arrange for an amendment to be delivered to Custodian so reducing the amount of
such Letter of Credit. Unless Custodian has actual knowledge of or has
received notice from Xxxxxx Xxx concerning the occurrence of an Event of
Default, Custodian shall permit such reduction. If the amount of funds subject
to investment under an Existing Investment Agreement is to be reduced,
Custodian shall notify Xxxxxx Mae of the amount of such permitted reduction.
If no Event of Default has occurred and is continuing, subject to the terms of
the applicable Existing Investment Agreement and Section 3.03(c), Xxxxxx Xxx
shall deliver to Lender funds equal to the amount of such reduction of Invested
Funds promptly upon receipt of notice from Custodian and shall notify Custodian
of the delivery of such funds to Lender. If amounts on deposit in the
Collateral Account, including Permitted Investments are to be reduced,
Custodian shall take such actions, at the written direction of Lender, to
transfer one or more designated Permitted Investments or to liquidate specified
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Permitted Investments so as to provide funds to the Collateral Account pursuant
to Section 3.12(b) of this Agreement. Unless Custodian has actual knowledge of
or has received notice from Xxxxxx Mae concerning the occurrence of an Event of
Default, Custodian shall deliver such Permitted Investments, funds or
combination thereof equal in Collateral Value to the amount of such reduction
to Lender within fifteen (15) days after receipt of such written direction of
Lender, and shall notify Xxxxxx Xxx of such delivery to Lender.
Section 3.04. Administration of Acceptable Collateral.
(a) The Custodian shall hold and administer the Collateral
(including Acceptable Collateral) delivered to it under this Agreement in
accordance with the provisions of this Agreement.
(b) Any Existing Investment Agreement pledged under this Agreement
shall be held securely by Custodian. If either party to an Existing Investment
Agreement pledged under this Agreement furnishes notice to the other party of
its intention to terminate such Existing Investment Agreement, Lender, unless
Xxxxxx Mae in its sole and absolute discretion determines otherwise, shall
provide to Custodian substitute Acceptable Collateral meeting all the
applicable requirements of this Agreement together with any opinions or
documents that may be required by this Agreement with respect to such
Acceptable Collateral on or before the date that is thirty (30) days prior to
the expiration date of such Existing Investment Agreement. If substitute
Acceptable Collateral meeting all the applicable requirements of this Agreement
and any opinion and other documents required with respect to such Acceptable
Collateral under this Agreement are not received by Custodian at least five (5)
Business Days prior to termination of such Existing Investment Agreement
referred to in the preceding sentence, then Custodian shall advise Xxxxxx Xxx
that substitute Acceptable Collateral has not been received and, unless Xxxxxx
Mae otherwise directs pursuant to Section 3.04(d), that Xxxxxx Xxx should pay
to Custodian all Invested Funds under such Existing Investment Agreement
together with any accrued but unpaid interest pursuant to such Existing
Investment Agreement for deposit with the Custodian in the Collateral Account
on the termination date of such Existing Investment Agreement.
(c) Any Letter of Credit delivered under this Agreement shall be
held securely by Custodian. Notwithstanding any other provision of this
Agreement to the contrary, Custodian shall not permit an existing Letter of
Credit to terminate without drawing on it unless Custodian has in its
possession sufficient other Acceptable Collateral having a Collateral Value at
least equal to the Aggregate Reserve Requirement.
(i) If the Person that issued the Letter of Credit notifies
Custodian that it has determined not to renew or extend the Letter of
Credit as contemplated therein, Custodian shall notify Lender and Xxxxxx
Mae of Custodian's receipt of such notification. Upon receipt of such
notice or if the
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Letter of Credit by its terms is due to terminate, Lender shall provide
to Custodian substitute Acceptable Collateral meeting all the
requirements of this Agreement, together with any opinions or documents
that may be required by this Agreement with respect to such Acceptable
Collateral, on or before the date that is thirty (30) days prior to the
expiration date of such Letter of Credit. If substitute Acceptable
Collateral meeting all the requirements of this Agreement and any
opinions and other documents required with respect to such Acceptable
Collateral under this Agreement are not received by Custodian at least
five (5) Business Days prior to termination of the Letter of Credit in
Custodian's possession, then Custodian shall draw upon the full amount of
such Letter of Credit (or, if applicable, any confirmation) prior to
termination.
(ii) In the case of any Letter of Credit, on each Collateral
Delivery Date for such Letter of Credit and on each Valuation Date,
Custodian shall determine whether the bank issuing, or, if such Letter of
Credit is confirmed by another financial institution, the bank
confirming, such Letter of Credit constitutes a Qualified Issuer on the
Collateral Delivery Date or Valuation Date, as applicable. If the
Custodian determines that such issuer or confirming bank is not a
Qualified Issuer, then, Custodian shall notify Lender and Xxxxxx Xxx of
such determination and within fifteen (15) days after such notification,
but in any event not less than five (5) Business Days before termination
of the Letter of Credit, Lender shall provide to Custodian substitute
Acceptable Collateral meeting all the requirements of this Agreement and
any opinions and other documents required with respect to such Acceptable
Collateral under this Agreement. If substitute Acceptable Collateral and
any opinions and other documents required with respect to such Acceptable
Collateral under this Agreement are not received by Custodian within
fifteen (15) days after such notification, but in any event not less than
five (5) Business Days prior to the termination of the Letter of Credit
in Custodian's possession, then Custodian shall draw upon the full amount
of such Letter of Credit (or, if applicable, any confirmation) prior to
termination.
(d) If for any reason Custodian shall withdraw Invested Funds
under an Existing Investment Agreement under Section 3.04(b) of this Agreement
or draw on a Letter of Credit under Section 3.04(c) of this Agreement,
Custodian shall deposit the entire amount withdrawn under an Existing
Investment Agreement or drawn under a Letter of Credit in the Collateral
Account.
(e) Any funds or Permitted Investments delivered under this
Agreement shall be held securely by Custodian. Upon delivery to Custodian of
funds or Permitted Investments (including proceeds thereof) under this
Agreement (or if for any reason Custodian shall withdraw Invested Funds under
an Existing Investment Agreement under Section 3.04(b) or draw on a Letter of
Credit under Section
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3.04(c) of this Agreement), Custodian shall create and maintain with itself a
segregated non-interest-bearing custodial account (the "Collateral Account")
for the sole benefit of Xxxxxx Mae and deposit in such segregated custodial
account the entire amount of such funds and Permitted Investments (and the
proceeds of such withdrawal of Invested Funds or drawing on a Letter of
Credit). Amounts in the Collateral Account shall be invested (and reinvested,
as the case may be) in Permitted Investments selected by and pursuant to
written instructions of Xxxxxx Xxx or Lender, as provided below, in accordance
with the Investment Guidelines, unless, upon the occurrence of an Event of
Default, Xxxxxx Mae instructs the Custodian pursuant to Section 9.01 to deliver
funds or Permitted Investments to Xxxxxx Xxx or apply funds against Lender's
obligations to Xxxxxx Mae under the Contract, this Agreement and the Loss
Sharing Agreement as Xxxxxx Xxx, exercising its sole and absolute discretion,
shall direct. Custodian shall have no responsibility for the application of
any such proceeds or Permitted Investments transferred to Xxxxxx Mae. Except as
otherwise provided in Section 3.03(c) and (d) respecting a reduction or release
of Acceptable Collateral, no interest or earnings, if any, on Permitted
Investments held by Custodian in the Collateral Account shall be paid or be
payable currently to Lender. Lender and Xxxxxx Xxx agree that the Custodian
shall, after consultation with Xxxxxx Mae, invest monies in such account in
Permitted Investments as Xxxxxx Xxx shall direct in written instructions to
Custodian, provided that, unless Custodian has actual knowledge of, or has
received notice from Xxxxxx Mae concerning the occurrence of an Event of
Default, Custodian shall not be required to so consult with Xxxxxx Xxx and
Custodian, after consultation with Lender, shall invest (and reinvest, as the
case may be) monies in the Collateral Account in Permitted Investments as
Lender shall direct in written instructions to Custodian. In each instance,
Custodian's duty to invest shall be subject to the availability of the
designated Permitted Investments (including time-of-day requirements), and in
no instance shall the Custodian have any obligation to provide investment
advice or be liable for any loss suffered on any Permitted Investment, and the
right of Lender and Xxxxxx Mae, as the case may be, to direct investment shall
be subject to Section 3.12. If, by or before 4:00 p.m. on any Business Day
Custodian has not received written instructions from Xxxxxx Xxx or Lender, as
appropriate, as to the investment of uninvested funds in the Collateral Account
Custodian shall invest the uninvested balance, if any, of the Collateral
Account at the close of such Business Day in accordance with the Investment
Guidelines as from time to time in effect.
(f) Neither the Custodian nor Xxxxxx Mae shall incur liability for
any loss with respect to funds invested by Custodian in accordance with the
terms of this Agreement. Any such funds and investments held by Custodian or
Xxxxxx Xxx shall be applied to Lender's obligations to Xxxxxx Mae under the
Contract, this Agreement and the Loss Sharing Agreement at such time or times
as Xxxxxx Xxx, in its sole and absolute discretion, may determine.
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Section 3.05. Substitution of Acceptable Collateral. Unless an
Event of Default has occurred and is continuing, Lender shall have the right,
upon compliance with the provisions of Section 3.01, at any time and from time
to time to deposit with Custodian Acceptable Collateral in substitution for or
replacement of Acceptable Collateral previously delivered pursuant to the terms
of this Agreement; provided, however, that (a) Xxxxxx Mae, in its sole and
absolute discretion, may limit the number of Existing Investment Agreements
that it will accept under this Agreement, (b) that during the initial term of
any Existing Investment Agreement, no reduction of Invested Funds under such
Existing Investment Agreement shall be permitted and (c) no reduction of
Invested Funds under any Existing Investment Agreement with a Reset Date shall
be permitted until the next Reset Date under that Existing Investment
Agreement. In the event Lender substitutes Acceptable Collateral for other
Acceptable Collateral previously delivered pursuant to the terms of this
Agreement, Custodian promptly upon receipt of such substitute Acceptable
Collateral, together with the opinions and documents required pursuant to
Section 3.01, and Lender's written request shall release such previously
deposited Acceptable Collateral from the Lien of this Agreement but only after
Custodian has completed the actions set forth in Sections 3.01(a)(vi) and
(vii) with respect to such substitute Acceptable Collateral. If Lender is
substituting a Letter of Credit or Permitted Investments for an Existing
Investment Agreement, Xxxxxx Xxx shall remit or cause to be remitted Invested
Funds (as defined in the Existing Investment Agreement) to Lender promptly
after receipt of the Letter of Confirmation from Custodian.
Section 3.06. Release of Acceptable Collateral. Except as provided
in Sections 3.03(c) and (d) and 3.05 and Exhibit N of this Agreement,
Custodian, as collateral agent and bailee of Xxxxxx Mae, shall not release any
of the Collateral including Acceptable Collateral from the Lien of this
Agreement without Xxxxxx Mae's prior written approval.
Section 3.07. Change in Aggregate Reserve Requirement. Xxxxxx Mae
shall have the sole and exclusive right to determine the Loss Level, as
provided in the Loss Sharing Agreement, and the Pricing and Underwriting Tier,
as provided in the DUS Guide, of any Mortgage Loan used to calculate the
Aggregate Reserve Requirement or any Reimbursement Base. Lender acknowledges
that from time to time, as permitted by the DUS Guide and the Loss Sharing
Agreement, Xxxxxx Xxx, as to any Mortgage Loan, may increase (e.g., from Level
I to Level II or Level III) or decrease (e.g., from Level III or Level II to
Level II or Level I) the Loss Level. Xxxxxx Mae shall notify Custodian in
writing of any change in the Risk-Based Rate due to a change in the applicable
Loss Level. Within fifteen (15) days of receipt of the monthly valuation
report by Custodian pursuant to Section 3.03(a)(x) of this Agreement advising
Lender of a change in the Aggregate Reserve Requirement due to such change in
the applicable Loss Level, Lender, if the Collateral Value of all previously
delivered Acceptable Collateral is less than the then current Aggregate Reserve
Requirement, shall deliver, or cause to be delivered with Custodian additional
Acceptable Collateral (or
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unless Lender otherwise directs, Custodian shall apply the PERQ Credit, if
applicable, pursuant to Exhibit N of this Agreement, if Lender is then a
Qualifying Lender pursuant to Section 3.10 of this Agreement) in an aggregate
amount so that the Collateral Value of all Acceptable Collateral equals or
exceeds the then current Aggregate Reserve Requirement in accordance with the
provisions of Section 3.03(b) of this Agreement.
Section 3.08. Custodian Reliance on Xxxxxx Xxx Reports. For the
purpose of fulfilling its obligation under this Agreement, Custodian shall be
entitled to rely on the most-recently received monthly reports or other written
notice from Xxxxxx Mae delivered to Custodian not later than the Business Day
prior to the date of determination to which such information relates of (i) the
unpaid principal balance, the Risk-Based Rate, the Rate Reduction Percentage if
any, and any other material written information applicable to each Mortgage
Loan; and (ii) whether Xxxxxx Xxx has determined Lender to be a Qualifying
Lender pursuant to Section 3.10(a) of this Agreement, later withdrawn such
determination pursuant to Section 3.10(b) of this Agreement or reinstated
Lender as a Qualifying Lender pursuant to Section 3.10(c) of this Agreement.
Section 3.09. Servicing Fee Reserve. In the event Xxxxxx Mae
requires Lender to deliver servicing income to Custodian pursuant to the Loss
Sharing Agreement, Xxxxxx Xxx shall notify Custodian that Xxxxxx Mae has
imposed such requirement on Lender and Custodian shall establish a reserve for
such servicing income and deposit, upon receipt, into such reserve all
servicing income delivered by Lender. Custodian shall invest funds in the
Servicing Fee Reserve in Permitted Investments. Funds in the Servicing Fee
Reserve shall be applied to Lender's obligations to Xxxxxx Xxx under the
Contract, this Agreement and the Loss Sharing Agreement at such time or times
as Xxxxxx Mae, in its sole and absolute discretion, may determine. The
Servicing Fee Reserve shall not be included in determining whether the
Aggregate Reserve Requirement has been satisfied. Lender agrees that it will
take whatever reasonable action Xxxxxx Xxx or Custodian may request in order to
perfect Xxxxxx Mae's interest in the Servicing Fee Reserve.
Section 3.10. Qualifying Lender Determination; Withdrawal by Xxxxxx
Xxx.
(a) If the aggregate unpaid principal balance of Mortgage Loans is
equal to or exceeds $500,000,000 as of the first Business Day of any calendar
quarter on or after the date of execution by Xxxxxx Mae of this Agreement,
Xxxxxx Xxx shall determine in its sole and absolute discretion whether Lender,
subject to Lender's maintaining an aggregate unpaid principal balance of
Mortgage Loans equal to or in excess of $500,000,000, is a Qualifying Lender
for the period of such calendar quarter, based on such criteria as Xxxxxx Mae
in its sole and absolute discretion shall determine from time to time
including, by way of example and not limitation, Lender's financial condition,
the financial
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condition of properties the Liens on which secure Mortgage Loans, Lender's
demonstrated competence in underwriting Mortgage Loans and Lender's overall
standing with Xxxxxx Xxx under Delegated Underwriting and Servicing.
Respecting the initial such quarterly determination, Xxxxxx Mae shall promptly
notify Lender in writing (with a copy to Custodian) of such determination,
which determination shall be effective as of the PERQ Effective Date.
Custodian shall establish the PERQ Effective Date as a Valuation Date not more
than forty-five (45) days after the later of (i) the date of execution by
Xxxxxx Xxx of this Agreement or (ii) the date of such written notice by Xxxxxx
Mae of such determination that Lender is a Qualifying Lender.
(b) After the determination by Xxxxxx Xxx that Lender, subject to
Lender's maintaining an aggregate unpaid principal balance of Mortgage Loans
equal to or in excess of $500,000,000, is a Qualifying Lender, Xxxxxx Mae may,
but need not, reassess from time to time thereafter, whether Lender is a
Qualifying Lender, based on such criteria as Xxxxxx Xxx shall determine from
time to time. Respecting such reassessments, Xxxxxx Mae shall notify Lender in
writing (with a copy to Custodian) of a withdrawal, if any, by Xxxxxx Xxx in
its sole and absolute discretion of its determination that Lender is a
Qualifying Lender, which adverse determination shall be effective as of the
date such notice is given to Lender pursuant to Section 10.01 of this
Agreement. Custodian shall rely on such initial determination by Xxxxxx Mae
until Xxxxxx Xxx shall notify Custodian of such withdrawal by Xxxxxx Mae.
(c) If Xxxxxx Xxx withdraws its determination that Lender is a
Qualifying Lender pursuant to Section 3.10(b) of this Agreement, Xxxxxx Mae may
determine in its sole and absolute discretion to reinstate Lender as a
Qualifying Lender, effective on such date and for such period as determined by
Xxxxxx Xxx and, in such event, Xxxxxx Mae shall notify Lender (with a copy to
Custodian).
(d) Without notice by Xxxxxx Xxx to Lender, Lender shall not be a
Qualifying Lender at any time that the aggregate unpaid balance of Mortgage
Loans is less than $500,000,000.
Section 3.11. Application of PERQ Rates to Loans that Become
Mortgage Loans Pursuant to this Agreement when Lender is a Qualifying Lender.
(a) In connection with the initial determination by Xxxxxx Mae
that Lender is a Qualifying Lender, Xxxxxx Xxx shall list each Mortgage Loan,
in chronological order by date of Purchase by Xxxxxx Mae. Xxxxxx Xxx shall
assign a Standard Risk-Based Rate designation to each Mortgage Loan so listed
in order of date of Purchase by Xxxxxx Mae (beginning with the earliest such
date of Purchase by Xxxxxx Xxx) until the aggregate unpaid principal balance of
such Mortgage Loans equals at least $500,000,000. Xxxxxx Mae shall assign a
PERQ Rate designation to each Mortgage Loan subsequently Purchased by Xxxxxx
Xxx (without regard to
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whether the Purchase by Xxxxxx Mae occurred prior to the PERQ Effective Date).
Xxxxxx Xxx shall designate each Mortgage Loan on a "whole loan" basis with
either a Standard Risk-Based Rate or a PERQ Rate being applicable to the entire
unpaid principal balance of such Mortgage Loan.
(b) After the initial Risk-Based Rate assignments pursuant to
Section 3.11(a) of this Agreement, Xxxxxx Mae shall assign a PERQ Rate
designation to any loan that becomes a Mortgage Loan pursuant to this Agreement
when Lender is a Qualifying Lender (including any loan that is a refinancing of
a previously outstanding Mortgage Loan). Xxxxxx Xxx shall advise Custodian of
the PERQ Rate applicable to such Mortgage Loan pursuant to Section 3.08 of this
Agreement, and Custodian shall forward such report to Lender.
(c) Upon written notice from Xxxxxx Mae of the assignment of a
PERQ Rate to a Mortgage Loan, Custodian thereafter shall calculate the
Risk-Based Reserve Requirement component of the Aggregate Reserve Requirement
at the PERQ Rate respecting Mortgage Loans so assigned a PERQ Rate designation
without regard to whether Lender is a Qualifying Lender as of the date of such
calculation.
Section 3.12. Investment Guidelines for Acceptable Collateral. (a)
Pursuant to Section 3.04(e) of this Agreement, amounts held in the Collateral
Account shall be invested only in Permitted Investments in accordance with the
Investment Guidelines. Net income or gain received and collected from such
investments shall be credited and losses charged to the Collateral Account.
(b) Unless Custodian has actual knowledge of or has received
notice from Xxxxxx Xxx concerning the occurrence of an Event of Default,
Custodian, at and pursuant to the written direction of Lender, shall sell or
present for redemption or exchange, as specified in such direction any
Permitted Investment in which moneys in the Collateral Account shall have been
invested as directed by Lender to provide cash or facilitate the transfer of
money or securities in connection with a release of Collateral pursuant to
Section 3.03(c) or (d) or a substitution of Collateral pursuant to Section
3.05, which direction from Lender shall provide such specific direction as to
the investment or investments to be liquidated and the manner or method of
sale, redemption or exchange as Custodian may require. Custodian shall have no
liability for any loss suffered in connection with any such sale, redemption or
exchange (provided Custodian acts in accordance with such direction) . As soon
as practicable after any such sale, redemption or exchange, Custodian shall
give notice thereof (including a brief summary of the manner of such sale,
redemption or exchange) to Xxxxxx Mae and Lender. Upon the occurrence of an
Event of Default, Xxxxxx Xxx may instruct Custodian to sell or cause to be sold
one or more Permitted Investments in which moneys in the Collateral Account are
invested pursuant to Section 9.01. Custodian shall have no duty to preserve
rights of Lender (against prior parties or otherwise) in any Permitted
Investments.
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(c) Neither Xxxxxx Mae nor Custodian shall be liable for any loss
arising from, or any depreciation in the value of any obligations in which
funds in the Collateral Account shall be invested.
(d) Xxxxxx Xxx may, at any time, modify all or part of the
Investment Guidelines as Xxxxxx Xxx xxxxx necessary or convenient in its sole
and absolute discretion by written notice to Lender and Custodian. Custodian
and Lender shall be bound by any modification to the Investment Guidelines
immediately upon written notice from Xxxxxx Xxx or at such other time as may be
specified in such notice. Collateral that would no longer be Acceptable
Collateral solely pursuant to Investment Guidelines as so modified shall be
permitted to mature unless Xxxxxx Mae, in its sole and absolute discretion,
instructs Custodian to liquidate such Collateral prior to maturity.
(e) Investment Guidelines, as of the date of execution by Xxxxxx
Xxx of this Agreement, are:
(i) Not less than ten percent (10%) of the Collateral Value of
Acceptable Collateral shall be invested in (A) Permitted Investments that
have a current maturity of less than one year; (B) Letters of Credit; (C)
Existing Investment Agreements or Permitted Investments described in
clause (f) of the definition of Permitted Investments, in either case
that are payable in immediately available funds that have an original
maturity of one year or less; or (D) any combination of the foregoing.
(ii) With respect to Acceptable Collateral constituting investments
described in clauses (d), (e) and (g) of the definition of Permitted
Investments, not more than thirty percent (30%) of the Collateral Value
of all Acceptable Collateral shall be invested in any such obligations of
a particular obligor or its affiliates (including, by way of example and
not limitation, commercial paper of any one corporation or certificates
of deposit of any one depository institution).
(iii) With respect to Acceptable Collateral constituting
investments described in clause (c) of the definition of Permitted
Investments, the aggregate market value of the securities subject to
repurchase sold by the counterparty entity to Custodian pursuant to any
such repurchase agreement shall be maintained by the counterparty entity
selling the securities so subject to repurchase at not less than the
below-referenced percentage of the repurchase price (including, by way of
example and not limitation, accrued interest or price differential as of
the date of determination), based on the securities subject to repurchase
and original maturity of the repurchase agreement:
(A) for eligible Government Obligations that have a current
maturity of one year or less:
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(1) 101% respecting repurchase agreements with an
original maturity of 30 days or less;
(2) 102% respecting repurchase agreements with an
original maturity of 31 to 60 days; and
(3) 103% respecting repurchase agreements with an
original maturity of 61 to 90 days.
(B) for eligible securities other than Government
Obligations that have a current maturity of one year or less or for
eligible Government Obligations that have a current maturity of
more than one year:
(1) 102% respecting repurchase agreements with an
original maturity of 30 days or less;
(2) 103% respecting repurchase agreements with an
original maturity of 31 days to 60 days; and
(3) 104% respecting repurchase agreements with an
original maturity of 61 days to 90 days.
(C) for eligible Xxxxxx Mae mortgaged-backed securities that
have a current maturity of more than one year:
(1) 103% respecting repurchase agreements with
maturities of 30 days or less;
(2) 104% respecting repurchase agreements with
maturities of 31 days to 60 days; and
(3) 105% respecting repurchase agreements with
maturities of 61 days to 90 days.
(iv) With respect to Acceptable Collateral constituting investments
described in clause (c) of the definition of Permitted Investment, not
more than thirty-three and one-third percent (33.33%) of the Collateral
Value of all Acceptable Collateral shall be invested in any such
repurchase agreements pursuant to which the securities subject to
repurchase (other than Government Obligations) are obligations of a
particular obligor or its affiliates.
(v) No investments may be made in term obligations issued or
guaranteed by Custodian having an original maturity in excess of one
Business Day at the Acquisition Date.
(vi) In the event that Custodian does not receive directions from
Xxxxxx Xxx or Lender as to the investment of uninvested funds in the
Collateral Account, Custodian shall invest such amounts in the following
Permitted Investments: overnight Federal Funds; or if sale of overnight
Federal Funds
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is not reasonably available to Custodian, overnight time or demand
deposits of Custodian otherwise described in clause (e) of the definition
of Permitted Investments, if available.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF LENDER
Lender represents and warrants to Xxxxxx Mae and Custodian (a) on
the date of execution by Lender of this Agreement and (b) on each Collateral
Delivery Date under this Agreement that:
Section 4.01. Consents to Transfer. No consents or approvals of
any Persons are or will be required which have not or will not have been
obtained for: (i) the execution, delivery and performance of this Agreement;
(ii) the pledge of, and security interest in, Collateral, if Collateral other
than a Letter of Credit is being delivered by Lender, and the delivery of
Collateral to Custodian, as collateral agent and bailee for Xxxxxx Xxx, for the
purposes of and as contemplated by this Agreement; (iii) the delivery of any
funds to Xxxxxx Mae pursuant to an Existing Investment Agreement; (iv) the
investment and reinvestment of funds in the Collateral Account in Permitted
Investments in accordance with the Investment Guidelines; or (v) to the best
knowledge and belief of Lender, the subsequent transfer of the proceeds of any
Letter of Credit, Existing Investment Agreement or Permitted Investment by
Custodian, as collateral agent and bailee for Xxxxxx Xxx, pursuant to the terms
of this Agreement.
Section 4.02. Existence and Power. Lender is the type of entity
set forth in the first paragraph of this Agreement, duly organized, validly
existing and in good standing under the laws governing its creation and
existence has not been known or done business under any other name that has not
been disclosed to Xxxxxx Mae, and has all necessary corporate or partnership,
as applicable, powers and all material governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted and
to enter into this Agreement, and, if Lender is a partnership, all of the
general partners of Lender are set forth on Exhibit O.
Section 4.03. Authorization and Non-contravention. The execution,
delivery and performance by Lender of this Agreement are within Lender's lawful
corporate or partnership, as applicable, power and have been duly authorized by
all necessary corporate or partnership, as applicable, action on the part of
Lender and, if applicable, any Person with an ownership interest in Lender
whose action is required, and will not: (i) violate or contravene any law,
regulation, judgment, injunction, order, decree or other instrument currently
binding on Lender; or (ii) violate, contravene or constitute a default under
any provision of the governing documents of Lender or of any material
agreement, contract, mortgage or other instrument currently binding on Lender.
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Section 4.04. Binding Effect. This Agreement constitutes a valid
and binding agreement of Lender enforceable against Lender in accordance with
its terms.
Section 4.05. Governmental Consents. No consent, approval,
authorization or order of any Governmental Body is required, and no filing need
be made with any Governmental Body, in connection with the execution, delivery
and performance by Lender of this Agreement or the consummation by Lender of
the transactions contemplated by this Agreement.
Section 4.06. Litigation. There are no actions, suits, or
proceedings pending or to the best knowledge of Lender threatened against it
or, if applicable, any general partner of Lender, in any court or before any
Federal, state, municipal or other governmental department or commission,
board, bureau, agency or instrumentality which, if adversely determined, will
materially and adversely affect its business or financial condition or the
validity and enforceability of this Agreement or its ability to perform in
accordance with this Agreement.
Section 4.07. Title to Acceptable Collateral. Lender has good
title to any Collateral other than a Letter of Credit delivered to Custodian
under this Agreement, free of all liens (other than the Lien created by this
Agreement). In addition, any Acceptable Collateral or other Collateral
delivered to Custodian under this Agreement shall not be subject to any offset,
defense or counterclaim other than by Xxxxxx Xxx, if applicable. Upon delivery
to Custodian of any Existing Investment Agreement or Permitted Investment,
Xxxxxx Mae will obtain and have a valid perfected first priority lien in and
upon such Existing Investment Agreement or Permitted Investment subject to no
other Lien and the Existing Investment Agreement or Permitted Investment will
neither have been nor will be assigned, transferred or pledged by Lender as
Collateral for any other purpose.
Section 4.08. Relationship with Custodian. Neither Lender nor, if
applicable, any general partner of Lender is controlling, controlled by or
under common control with Custodian, and neither Lender nor, if applicable, any
general partner of Lender has any special relationship with Custodian,
including, by way of example and not limitation any agency relationship, that
has not been disclosed to Xxxxxx Xxx.
Section 4.09. Showings. Lender has delivered to Xxxxxx Mae and
Custodian: (a) an executed opinion of Lender's legal counsel, if required by
the terms of this Agreement; (b) Acceptable Collateral (or immediately
available funds with written instructions for investment of such funds in
Permitted Investments in accordance with the Investment Guidelines) and, if
required, an Assignment in the form of Exhibit I; (c) the Letter of Collateral
for each item of Collateral; and (d) other documents as may reasonably be
requested by Xxxxxx Mae or Custodian.
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Section 4.10. Compliance with Laws. Neither Lender nor, if
applicable, any general partner of Lender is in violation of any statute, rule
or regulation of any Governmental Body or any order of any court or arbitrator,
the violation of which, considered in the aggregate, could materially adversely
affect the business, operations or properties of the Lender or any general
partner of Lender. Lender, if Lender is a depository institution, has complied
with the requirements of 12 U.S.C. Section 1823(e), as amended from time to
time, in connection with the authorization, execution, delivery, and retention
of all documents under Delegated Underwriting and Servicing.
ARTICLE V
REPRESENTATIONS OF CUSTODIAN
Custodian represents and warrants to Xxxxxx Xxx and Lender that:
Section 5.01. Existence and Power. Custodian is the type of entity
set forth in the first paragraph of this Agreement, duly incorporated, validly
existing and in good standing under the laws governing its creation and
existence and has all corporate powers and all material governmental licenses,
authorizations, consents and approvals required to enter into and perform its
obligations under this Agreement.
Section 5.02. Authorization and Non-contravention. The execution,
delivery and performance by Custodian of this Agreement have been duly
authorized by all necessary corporate action on the part of Custodian (no
action by shareholders of Custodian being required) and do not and will not
contravene, or constitute a default under, any provision of applicable law or
regulation or of the articles of association or by-laws of Custodian or of any
material agreement, judgment, injunction, order, decree, or, to the best of
Custodian's knowledge, any other instrument, binding upon Custodian.
Section 5.03. Binding Effect. This Agreement constitutes a valid
and binding agreement of Custodian enforceable against Custodian in accordance
with its terms.
Section 5.04. Relationship with Lender. Custodian is not
controlling, controlled by or under common control with Lender, or, if
applicable, any general partner of Lender listed on Exhibit O, the issuer of a
Letter of Credit, any banking institution confirming a Letter of Credit or any
obligor of a term Permitted Investment, and Custodian does not have any special
relationships, including, by way of example and not limitation, agency
relationships, with Lender or, if applicable, any general partner of Lender
listed on Exhibit O, that have not been disclosed to Xxxxxx Xxx.
Section 5.05. Financial Intermediary. Custodian is a bank which in
the ordinary course of its business maintains custodial accounts for others.
The execution of this Agreement by
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Custodian has been approved either (a) by its Board of Directors and such
approval is reflected in the minutes of the meeting of such Board of Directors
or (b) approved by an officer of Custodian duly authorized by the Board of
Directors to enter into agreements such as this Agreement and such
authorization is reflected in the minutes of the Board of Directors' meetings.
ARTICLE VI
COVENANTS OF LENDER
Section 6.01. Performance of Obligations. Lender covenants to keep
and perform faithfully all of the covenants and undertakings contained in this
Agreement.
Section 6.02. Good Standing. Lender covenants to maintain its
current condition of good standing under all applicable laws and regulations.
Section 6.03. Further Assurances. Lender shall execute and deliver
or cause to be executed and delivered to Xxxxxx Mae or Custodian at any time or
times at the request of Xxxxxx Xxx or Custodian, all documents, instruments,
letters of direction, notices, reports, acceptances, receipts, consents,
financing statements, waivers, affidavits and certificates as Xxxxxx Mae or
Custodian may reasonably request, in form satisfactory to Xxxxxx Xxx or
Custodian as appropriate, in order to consummate fully all of the transactions
contemplated under this Agreement; and in connection therewith, Lender
irrevocably makes, constitutes and appoints each of Xxxxxx Mae and Custodian
and any of its officers, employees or agents as its true and lawful attorney
with power to sign the name of Lender to any such document, instrument, letter
of direction, notice, report, acceptance, receipt, consent, financing
statements, waiver, affidavit or certificate, provided Lender has not complied
with Xxxxxx Mae's or Custodian's request to execute such document within seven
(7) days from the date of written request.
Section 6.04. Compliance with Laws. Lender will not violate any
statute, rule or regulation of any governmental body or any order of any court
or arbitrator, the violation of which, considered in the aggregate, could
materially adversely affect the business, operations or properties of the
Lender or, if applicable, any general partner of Lender.
Section 6.05. Aggregate Reserve Requirement. Lender agrees that
(i) at all times under this Agreement, it shall maintain the Collateral Value
of Acceptable Collateral delivered under this Agreement to equal or exceed the
then applicable Aggregate Reserve Requirement and (ii) it shall cure any
shortfall in the Aggregate Reserve Requirement within fifteen (15) days after
notice from Custodian by delivering either Acceptable Collateral (or
immediately available funds with written instructions for investment of such
funds in Permitted Investments in accordance with the Investment Guidelines)
having an aggregate Collateral Value equal to or greater than such shortfall to
Custodian in
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accordance with the terms of this Agreement or funds in an amount equal to or
greater than such shortfall to Xxxxxx Mae in accordance with the terms of an
Existing Investment Agreement (or by application of the PERQ Credit, if
applicable, pursuant to Exhibit N of this Agreement, if Lender is a Qualifying
Lender).
Section 6.06. Information with Respect to Lender; Lender's Counsel
Opinion.
(a) Lender shall notify Custodian and Xxxxxx Xxx not less than ten
(10) Business Days before any proposed change in Lender's name, identity,
organizational structure, place of organization or principal place of business.
Upon receipt of any such notification, Xxxxxx Mae or Custodian, upon Xxxxxx
Mae's direction, may request an opinion of Lender's counsel setting forth the
actions with respect to financing or continuation statements that must be taken
to maintain the perfection of the Lien of this Agreement in any Collateral. In
addition, thirty (30) days prior to the date for the filing of continuation or
financing statements, as set forth in the Lender's counsel opinion delivered in
connection with the most recently delivered Collateral, Lender's counsel shall
provide an opinion to Custodian confirming that the information with respect to
such filings is unchanged. If Lender's counsel is unable to provide such
confirming opinion, Xxxxxx Mae or Custodian, at Xxxxxx Mae's direction, may
request an opinion of counsel setting forth the actions with respect to
financing or continuation statements that must be taken to maintain the
perfection of the Lien of this Agreement in any Collateral. Subject to the
obligations of the Custodian as set forth in Section 7.13(a), Lender shall
take such action as is necessary to maintain the perfection of the Lien of this
Agreement in any Collateral.
(b) On or after the initial Collateral Delivery Date of any
Collateral other than a Letter of Credit, Lender shall notify Custodian on the
first Valuation Date of each calendar quarter that the Lender's name, identity,
organizational structure, place of organization or principal place of business
have not changed since the most recently delivered such notice pursuant to this
Section 6.06(b), except as Lender has otherwise so notified Custodian pursuant
to Section 6.06(a) of this Agreement.
Section 6.07. Compliance by Lender with Investment Guidelines.
Lender shall provide instructions to Custodian respecting the investment of
Collateral only in accordance with the Investment Guidelines.
ARTICLE VII
COVENANTS AND DUTIES OF CUSTODIAN
Section 7.01. Safekeeping of Acceptable Collateral. Custodian
shall hold and keep all Collateral, including Acceptable Collateral, delivered
to it by Lender in certificated or physical form, along with all assignments
and each Letter of Credit, in secure fireproof storage facilities with adequate
controls on access to assure the safety and security of the documents.
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Custodian shall add all Collateral, including Acceptable Collateral, delivered
to it by Lender in book-entry form to the securities account of the Custodian
for the benefit of Xxxxxx Mae and identify such book-entry obligations on the
books and records of Custodian as being held as Collateral for the benefit of
Xxxxxx Xxx.
Section 7.02. Maintenance of Records. Custodian will at all times
maintain its books and records accurately to reflect Xxxxxx Mae's perfected
first priority security interest in any Collateral other than a Letter of
Credit held by Custodian under this Agreement. In addition Custodian, so long
as this Agreement remains in force and effect, shall maintain this Agreement as
an official record of Custodian.
Section 7.03. Delivery of Opinions of Counsel. Custodian shall
deliver to Xxxxxx Xxx and Lender an opinion of Custodian's counsel
substantially in the form of Exhibit L at each time delivery of such opinion is
required by Article III.
Section 7.04. Acceptance of Duties and Obligations. Custodian
accepts the duties and obligations imposed upon it under this Agreement and
represents and covenants that Custodian is fully empowered under the applicable
laws and regulations of the United States of America and, if applicable, state
law, to accept such duties and obligations, and agrees to perform said duties
and obligations, subject to the following express terms and conditions:
(a) Custodian may execute any of its powers and perform any of its
duties and obligations by or through attorneys, agents, receivers or employees
and shall not be responsible for the acts of any attorneys or agents appointed
by it with due care in good faith, and shall be entitled to advice of counsel
concerning the performance of its duties and obligations under this Agreement,
and may in all cases pay such reasonable compensation to all such attorneys,
agents, or receivers as may reasonably be employed in connection with the
performance of the duties and obligations set forth in this Agreement.
Custodian may conclusively rely upon the opinion or advice of counsel appointed
by Custodian in good faith. Custodian shall not be responsible for any loss or
damage resulting from any action or non-action in good faith in reliance upon
such opinion or advice. To the extent permitted by law, in no event shall
Custodian be liable for any indirect, punitive, special or consequential
damages.
(b) Custodian shall not be responsible for any factual matters set
forth in the recitals to this Agreement and shall not be responsible for the
recording or re-recording, filing or refiling of this Agreement, or for the
validity of the execution by Lender of this Agreement, or of any instruments of
further assurance (other than as expressly set forth in Section 7.13), or for
the sufficiency of the security intended to be delivered by Lender under this
Agreement. Custodian shall not be responsible or liable for any loss suffered
in connection with any investment of funds made by it in accordance with this
Agreement.
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(c) Custodian shall be protected in acting in good faith upon any
notice, request, resolution, consent, certificate, affidavit, letter, telegram
or other paper or document, or oral communication or direction, from Xxxxxx Xxx
or Lender and believed to be genuine and correct and to have been signed or
sent or given by the proper Person or Persons. Without limiting the generality
of the foregoing, Custodian shall have no responsibility for or obligation to
determine the genuineness or validity of any item of Acceptable Collateral
delivered to it, or the genuineness, validity or authorization of any signature
appearing thereon.
(d) As to the existence or non-existence of any fact or as to the
sufficiency or validity of any instrument, paper or proceeding, Custodian shall
be entitled to rely upon certificates of public officials or from an officer or
general partner, as applicable, or Authorized Representative of Lender or
Xxxxxx Mae (including notices from Xxxxxx Xxx) as sufficient evidence of the
facts therein contained, shall also be at liberty to accept a similar
certificate to the effect that any particular dealing, transaction or action is
necessary or expedient, but may at its discretion secure such further evidence
deemed necessary or advisable, but shall in no case be bound to secure the
same.
(e) The permissive right of Custodian to do things enumerated in
this Agreement shall not be construed as duty, and Custodian shall not be
liable in the performance of its obligations under this Agreement except for
its negligence or willful misconduct.
(f) Custodian shall not be required to take notice or be deemed to
have notice of any default under this Agreement except for a default under
Section 6.06(b) or Section 8.01(a) of this Agreement or unless Custodian shall
be specifically notified in writing of such default by Lender or Xxxxxx Mae.
(g) Custodian shall not be required to give any bonds or surety in
respect of the execution of the powers granted it under this Agreement.
(h) Custodian, prior to the occurrence of an Event of Default
under this Agreement and after the curing of all Events of Default which may
have occurred, undertakes to perform such duties and only such duties as are
specifically set forth in this Agreement and, in the absence of bad faith on
its part, Custodian may conclusively rely, as to the truth of the statements
and correctness of the opinions expressed therein, upon certificates or
opinions furnished to Custodian and conforming to the requirements of this
Agreement; but in the case of any such certificates or opinions which by any
provision of this Agreement are specifically required to be furnished to
Custodian, Custodian shall be under a duty to examine the same to determine
whether or not they conform to the requirements of this Agreement. After an
Event of Default, unless Custodian is acting upon the express written direction
of Xxxxxx Xxx, Custodian shall exercise its duties under this Agreement using
the same degree of care and skill in their
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exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(i) All moneys received by Custodian shall, until used or applied
or invested as provided in this Agreement, be held for the purposes for which
they were received and shall not be commingled with the general funds of
Custodian, but need not be segregated from other funds except to the extent
required by law. Custodian shall have no duty to remit funds from the
Collateral Account unless and until cleared and available.
(j) No provision of this Agreement shall be construed to relieve
Custodian from liability for its own negligent action, its own negligent
failure to act, or its own willful misconduct, except that:
(i) This subsection shall not be construed to limit the
effect of subsection (h) of this Section;
(ii) Custodian shall not be liable for any error of judgment
made in good faith by an officer of Custodian, unless it
shall be proved that Custodian was negligent in
ascertaining the pertinent facts;
(iii) Custodian shall not be liable with respect to any action
taken or omitted to be taken by it in good faith in
accordance with the direction of Xxxxxx Mae relating to
the time, method and place of conducting any proceeding
or any remedy available to Custodian, or exercising any
duty or power conferred upon Custodian under this
Agreement; and
(iv) No provision of this Agreement shall require Custodian
to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its
duties under this Agreement, or in the exercise of any
of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds is
not reasonably assured to it; it being understood that a
written commitment by Xxxxxx Xxx to repay such funds
shall constitute reasonable assurance.
(k) Anything in this Agreement to the contrary notwithstanding
(except for clause (iv) in subsection (j) above), Xxxxxx Mae shall have the
sole and exclusive right, at any time, by an instrument or instruments in
writing executed and delivered to Custodian, to instruct or direct Custodian
with regard to how it should proceed in order to enforce Xxxxxx Mae's rights
under this Agreement or comply with any or all of the terms and conditions of
this Agreement. In no instance shall Custodian be liable for any
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actions (or forbearance) undertaken by Custodian pursuant to the instruction of
Xxxxxx Mae in accordance with the terms of this Agreement or of Lender under
the circumstances in which this Agreement authorize Custodian to follow
Lender's instructions.
(l) The Custodian acts strictly as collateral agent and bailee for
Xxxxxx Xxx under this Agreement and as such has no duty or obligation to
undertake any action of enforcement or collection in respect of the Collateral
at the request or direction of Lender, including, by way of example and not
limitation in connection with any dispute that may arise between Xxxxxx Mae and
Lender in respect of any calculation of, the making by Xxxxxx Xxx of, or any
refusal by Xxxxxx Mae to make, any payment of interest or principal under any
Existing Investment Agreement.
Section 7.05. Fees, Charges and Expenses of Custodian. Xxxxxx Xxx
shall be responsible for the payment of all of Custodian's fees and reasonable
expenses arising under this Agreement in accordance with the schedule attached
as Exhibit M (such fees and expenses, "Permitted Expenses") , provided that
Lender for the benefit of Xxxxxx Mae, as an obligation of Lender secured under
this Agreement, shall pay directly to Custodian all such Permitted Expenses of
Custodian within thirty (30) days after invoicing by Custodian. From time to
time Custodian shall invoice Lender (with copy to Xxxxxx Xxx) for such
Permitted Expenses of Custodian; provided that Custodian shall not be entitled
to, nor shall it assert, a Lien on any portion of the Collateral with respect
to any sums owing to it pursuant to this Agreement. If Lender shall fail to
pay such Permitted Expenses of Custodian within thirty (30) days after
invoicing by Custodian, Custodian shall so notify Xxxxxx Mae (with a copy to
Lender). If such Permitted Expenses of Custodian remain unpaid thirty (30)
days after such notice by Custodian to Xxxxxx Xxx, Custodian shall xxxx Xxxxxx
Xxx directly for any Permitted Expenses of Custodian due and payable.
Section 7.06. Notice to Xxxxxx Mae if Default Occurs. If a default
occurs of which Custodian is by Section 7.04(f) required to take notice,
Custodian promptly shall give written notice of such default to Xxxxxx Xxx and
Lender by facsimile transmission followed by notice to Xxxxxx Mae by registered
or certified mail or national overnight delivery service pursuant to Section
10.01 of this Agreement.
Section 7.07. Corporate Custodian Required; Eligibility. There
shall at all times be a custodian under this Agreement and such custodian shall
be a corporation or association organized and doing business under the laws of
the United States of America or of any state, authorized to accept and exercise
the trusts in this Agreement and be subject to supervision or examination by
Federal or state authorities. Any successor as custodian shall have a combined
capital and surplus of at least $100,000,000, and shall be a member bank of a
Federal Reserve Bank qualified to maintain book entry accounts. If at any time
Custodian shall cease to be eligible in accordance with the provisions of this
Section, it
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shall resign immediately at the request of Xxxxxx Xxx. No resignation or
removal of Custodian and no appointment of a successor custodian shall become
effective until the successor custodian has been appointed as provided in this
Article VII and has accepted its appointment under Section 7.11 hereof.
Section 7.08. Successor Custodian by Merger, Consolidation, Etc.
Any corporation or association into which Custodian may be merged, or with
which it may be consolidated, or to which it may sell, lease or transfer its
corporate trust business and assets as a whole or substantially as a whole,
provided such corporation or association is otherwise eligible under Section
7.07 hereof, shall be and become successor custodian under this Agreement and
shall be vested with all the powers, rights, obligations, duties, remedies,
immunities and privileges under this Agreement as was its predecessor, without
the execution or filing of any instrument on the part of any of the parties to
this Agreement except as may be necessary to maintain the perfection of the
security interest created by this Agreement under which Xxxxxx Xxx is the
secured party in accordance with the Uniform Commercial Code.
Section 7.09. Resignation of Custodian. Custodian and any
successor custodian may at any time resign from the duties and obligations
created by this Agreement by giving sixty (60) days prior written notice by
registered or certified mail to Lender and Xxxxxx Mae. If no successor
custodian shall have been so appointed and have accepted appointment within
sixty (60) days of the giving of written notice by the resigning Custodian as
aforesaid, the resigning Custodian may petition any court of competent
jurisdiction for the appointment of a successor custodian.
Section 7.10. Removal of Custodian. Custodian or any successor
custodian may be removed at any time with or without cause, by an instrument or
concurrent instruments in writing delivered to Custodian and Lender by Xxxxxx
Xxx.
Section 7.11. Appointment of Successor Custodian. In case
Custodian shall:
(a) resign pursuant to Section 7.07 or 7.09;
(b) be removed pursuant to Section 7.10; or
(c) be dissolved, taken under the control of any public officer or
officers or of a receiver appointed by a court, or otherwise
become incapable of acting under this Agreement,
a successor shall be appointed by Xxxxxx Mae. Xxxxxx Xxx shall provide notice
to Lender of such appointment. Every such successor custodian appointed
pursuant to the provisions of this Section shall be eligible to serve as
Custodian under Section 7.07 and willing to accept the duties imposed under the
terms and conditions of this Agreement.
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In case at any time Custodian shall resign and no appointment of a
successor custodian shall have been made and accepted pursuant to the
provisions of this Article VII prior to the date specified in the notice of
resignation as the date when such resignation would otherwise take effect,
Xxxxxx Mae may require delivery of the Collateral to it to be held pursuant to
the provisions of this Agreement or apply to any court of competent
jurisdiction to appoint a successor custodian. Such court may thereupon, after
such notice, if any, as it may deem proper and prescribe, appoint a successor
custodian.
Section 7.12. Concerning Any Successor Custodian. Every successor
custodian appointed under this Agreement shall execute, acknowledge and deliver
to its predecessor and also to Lender and Xxxxxx Xxx, an instrument in writing
accepting such appointment, and upon sending such instrument such successor
shall become fully vested with all the powers, rights, obligations, duties,
remedies, immunities and privileges of its predecessor; but, nevertheless, (1)
such predecessor shall, on the written request of Lender or Xxxxxx Xxx, execute
and deliver an instrument transferring to such successor custodian all the
powers, rights, obligations, duties, remedies, immunities and privileges of
such predecessor under this Agreement, and (2) such predecessor shall deliver
all securities, moneys, books, records, documents and registers held by it as
Custodian under this Agreement to its successor. Immediately upon appointment
as a successor custodian, such successor custodian shall deliver to Lender and
Xxxxxx Xxx a Letter of Confirmation and shall fulfill all the obligations of a
Custodian under this Agreement. Should any instrument in writing from Lender
or Xxxxxx Mae be required by any successor custodian for more fully and
certainly vesting in such successor the powers, rights, obligations, duties,
remedies, immunities and privileges vested in the predecessor by this
Agreement, any and all such instruments in writing shall, on request, be
executed, acknowledged and delivered by Lender and/or Xxxxxx Xxx at the expense
of Xxxxxx Mae. The written notice of resignation of any Custodian and the
instrument or instruments removing any Custodian and appointing a successor
under this Agreement, together with all other instruments provided for in this
Article, shall be filed or recorded by the successor custodian in each
recording office, if any such instrument or this Agreement shall have been
filed or recorded.
Section 7.13. Protection of Lien.
(a) Custodian will from time to time execute and deliver all
financing statements, continuation statements, and such other instruments, and
will take such other action as may be necessary or advisable to maintain or
preserve the Lien of this Agreement in any Collateral (other than Letters of
Credit) delivered under this Agreement as a perfected first priority security
interest. Xxxxxx Xxx designates Custodian as its agent and attorney-in-fact to
execute such financing statements, continuation statements and such other
instruments referred to in the preceding sentence.
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(b) Without Xxxxxx Mae's prior approval, Custodian shall not
remove any Existing Investment Agreement or Permitted Investment from the
jurisdiction in which it was held on the date such Existing Investment
Agreement or Permitted Investment was delivered to Custodian unless Custodian
has delivered to Xxxxxx Xxx (and, unless an Event of Default has occurred and
is continuing, Lender) an opinion of counsel to the effect that such lien and
perfected security interest will continue to be maintained after giving effect
to such removal.
(c) If Custodian has not received quarterly notice by Lender
pursuant to Section 6.06(b) of this Agreement respecting any change in name,
identity, organizational structure, place of organization or principal place of
business of Lender within five (5) days after the initial Valuation Date of any
calendar quarter, Custodian shall so notify Lender of such required notice.
Custodian shall promptly notify Xxxxxx Mae if (i) Custodian receives such
notice from Lender affirmatively indicating any such change, or (ii) no notice
is received within seven (7) days after Custodian contacts Lender as provided
above.
Section 7.14. Compliance by Custodian with Investment Guidelines.
Custodian shall invest funds and hold Collateral in the Collateral Account only
in accordance with the Investment Guidelines.
ARTICLE VIII
EVENTS OF DEFAULT
Section 8.01. Events of Default. Any one or more of the following
acts or occurrences shall constitute an Event of Default under this Reserve
Agreement:
(a) Lender shall fail to deliver Acceptable Collateral or
otherwise shall fail to comply with any requirements of Article III within the
time specified in Article III, or shall fail to maintain sufficient Acceptable
Collateral so that the aggregate Collateral Value of all Acceptable Collateral
is equal to or greater than the Aggregate Reserve Requirement as required by
this Agreement;
(b) Lender shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those agreements contained in
Article III) for a period of thirty (30) days after written notice thereof has
been given to Lender by Xxxxxx Xxx, unless Xxxxxx Mae agrees in writing that
such failure cannot be cured or remedied within such 30-day period, and Lender
commences within such 30-day period, and thereafter diligently pursues to
completion, a course of action reasonably designed in Xxxxxx Mae's judgment to
cure or remedy such failure;
(c) any representation, warranty or statement made by Lender in
this Agreement, in the Contract or in any certificate delivered in connection
with or under this Agreement shall prove to have been incorrect in any material
respect when made; provided
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that if the incorrect matter as to which such representation or warranty
relates is capable of being cured, it shall not constitute an Event of Default
unless Lender fails to correct such matter within thirty (30) days after Lender
shall first acquire knowledge or receive notice of the matter;
(d) Lender's acts or omissions in the performance of any of its
obligations under this Agreement constitute (i) fraud or material
misrepresentation or (ii) negligence that has a material, adverse effect on
Xxxxxx Mae's rights or interests;
(e) The occurrence of a Lender insolvency, or, in the case of a
Lender that is a depository institution, the appointment of a conservator or
receiver;
(f) Lender shall repudiate or, within any applicable cure period,
fail to perform any of its obligations under the Contract;
(g) Lender shall repudiate or, within any applicable cure period,
fail to perform any of its obligations under the Loss Sharing Agreement; or
(h) Lender shall fail to make any Payment Obligation as and when
required by the Loss Sharing Agreement.
ARTICLE IX
REMEDIES
Section 9.01. Remedies of Xxxxxx Xxx. Upon the occurrence of any
Event of Default under this Agreement, unless such Event of Default has been
cured to Xxxxxx Mae's satisfaction, Xxxxxx Xxx may, at its sole option:
(a) notify and cause Custodian to draw, in whole or in part,
upon any Letter of Credit delivered to Custodian under this Agreement, hold the
proceeds from such a draw in accordance with Section 3.04(d), and upon notice
from Xxxxxx Mae, promptly deliver the proceeds thereof to Xxxxxx Xxx in
accordance with Xxxxxx Mae's instructions;
(b) retain, take title to and (subject to the limitation set
forth below) use for any purpose, either directly or through Custodian (acting
in accordance with the instructions of Xxxxxx Xxx), any Invested Funds (together
with any accrued interest thereon) under any Existing Investment Agreement
delivered under this Agreement, and/or, at Xxxxxx Mae's sole and absolute
discretion, terminate such Existing Investment Agreement;
(c) instruct Custodian to sell, liquidate or otherwise dispose
of or cause to be sold, liquidated or otherwise disposed of in a commercially
reasonable manner, the Collateral or any part thereof or interest therein by
public auction to the highest bidder or at private sale or auction with or
without demand, advertisement
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or notice of the date, time or place of sale or any adjournment thereof, upon
such terms and in such manner that Xxxxxx Xxx may approve. Nevertheless, if
notice of any public sale shall be required by law, Lender agrees that such
notice shall be sufficient if it describes the Collateral to be sold in general
terms, stating the nature thereof, and the location and nature of the
Collateral, and is published at least once in a newspaper of general
circulation which Xxxxxx Mae may elect in the city in which Custodian's
corporate trust office is located, not less than two (2) days prior to the
sale. All requirements of reasonable notice shall be met if such notice is
mailed, postage prepaid, to Lender at its address set forth herein or at such
other addresses as it may have in writing provided to Xxxxxx Xxx, at least two
(2) days before the time of such sale or disposition. Xxxxxx Mae may, if it
deems it reasonable, direct Custodian to adjourn any sale of any Collateral
from time to time by an announcement at the time and place of the sale to be so
postponed or adjourned without being required to give a new notice of sale.
Custodian is hereby irrevocably appointed the true and lawful attorney of
Lender, in its name and stead, to make all necessary transfers of property thus
sold; and for that purpose it may execute all necessary instruments of
transfer, and may substitute one or more Persons with like power, Lender hereby
ratifying and confirming all that its said attorney, or such substitute or
substitutes, shall lawfully do by virtue hereof. Nevertheless, if so requested
by Xxxxxx Xxx, Custodian or any purchaser of the Collateral or any part
thereof, Lender shall ratify and confirm any such sale or transfer by executing
and delivering to Custodian or such purchaser all proper instruments of
transfer and releases as may be designated in any such request. Xxxxxx Mae, or
Custodian acting on its behalf, may proceed at law or in equity to foreclose
the lien of this Agreement against all or any part of the Collateral and to
have the same sold under the judgment or decree of a court having jurisdiction
or as otherwise may be required or permitted by law. In connection with any
such action or proceeding, Lender hereby waives any right, to the extent
applicable law permits, to receive prior notice of or a judicial or other
hearing with respect thereto and also waives, to the extent permitted by law,
any bonds, security or sureties required by any statute, rule or otherwise by
law as an incident to any taking of possession by Xxxxxx Xxx, or Custodian
acting on its behalf, of the Collateral. Upon any sale, whether made under the
power of sale hereby given or by virtue of judicial proceedings, Xxxxxx Mae or
Custodian may bid for and purchase the Collateral or any part thereof and, upon
compliance with the terms of the sale, may hold, retain, possess or dispose of
such property in its or their own absolute right without accountability. Upon
any sale, whether made under the power of sale hereby given or by virtue of
judicial proceedings, the receipt of Custodian, or of the officer making a sale
under judicial proceedings, shall be a sufficient discharge to the purchaser or
purchasers at any sale for its or their purchase money, and such purchaser or
purchasers shall not be obliged to see to the application thereof. Any such
sale, whether under any power of sale hereby given or by virtue of judicial
proceedings, shall bind Lender and Custodian to the purchaser or purchasers,
shall operate
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to divest all right, title and interest whatsoever of each of them under or
pursuant to this Agreement in and to the property sold, and shall be a
perpetual bar, both at law and in equity, against each of them and their
successors and assigns, and against any and all persons claiming through or
under them to assert such right, title and interest. Lender agrees that the
other parties hereto shall have no obligation to xxxxxxxx any Collateral for
the benefit of Lender or any other Person; and
(d) take whatever other action at law or in equity may appear
necessary or desirable to enforce any monetary obligation, covenant or
agreement of Lender under this Agreement.
Proceeds of any Letter of Credit, Existing Investment Agreement, Permitted
Investment, or other Collateral held under this Agreement shall be applied by
Xxxxxx Mae against (i) Lender's obligation for the benefit of Xxxxxx Xxx to pay
Custodian's fees and reasonable expenses arising under this Agreement, (ii)
Lender's allocated share of the loss with respect to any Mortgage Loan after
Xxxxxx Mae calculates the loss on that Mortgage Loan as provided in the Loss
Sharing Agreement and (iii) in Xxxxxx Mae's sole and absolute discretion, any
other obligation owed by Lender to Xxxxxx Mae. No such funds or, if, in Xxxxxx
Mae's sole and absolute discretion, such funds are invested, earnings on such
funds shall be returned to Lender until all obligations for payment by Lender
under this Agreement, the Loss Sharing Agreement, the Contract, and any other
agreement with Xxxxxx Mae that requires Lender to deposit Collateral under this
Agreement have been determined and paid in full and all such agreements have
been terminated.
Section 9.02. Remedies Not Exclusive. Unless otherwise expressly
provided, no remedy conferred in this Agreement or reserved to Xxxxxx Xxx is
intended to be exclusive of any other available remedy or remedies, but each
and every such remedy shall be cumulative and shall be in addition to every
other remedy given under this Agreement or now or hereafter existing at law or
in equity. Xxxxxx Mae shall not be required to liquidate, or otherwise realize
against, Collateral held under this Agreement, prior to any demand and suit for
payment by Lender of any amounts then owing to Xxxxxx Xxx.
Section 9.03. Delay or Omission Not Waiver. No delay or omission
of Xxxxxx Mae to exercise any right or remedy provided under this Agreement
upon an Event of Default (except a delay or omission pursuant to a written
waiver) shall impair any such right or remedy or constitute a waiver of, or
acquiescence in, any such Event of Default. Every right and remedy given by
this Article IX or by law to Xxxxxx Xxx may be exercised from time to time, and
as often as may be deemed expedient by Xxxxxx Mae. In order to entitle Xxxxxx
Xxx to exercise any remedy reserved to Xxxxxx Mae in this Article IX, it shall
not be necessary to give any notice.
Section 9.04. Restoration of Rights and Remedies. If Xxxxxx Xxx
shall have instituted any proceeding to enforce any right or remedy under this
Agreement and such proceeding has been
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discontinued or abandoned for any reason, or has been determined adversely to
Xxxxxx Mae, then and in every such case, Xxxxxx Xxx, Custodian and Lender,
subject to any determination in such proceeding, shall be restored severally
and respectively to their former positions under this Agreement, and thereafter
all rights and remedies of Xxxxxx Mae shall continue as though no such
proceeding had been instituted.
Section 9.05. Effect of Cure Periods on Remedies. The rights of
Custodian or Xxxxxx Xxx otherwise provided in this Agreement to draw on any
Letter of Credit, to use any Invested Funds under an Existing Investment
Agreement or to liquidate any Permitted Investment shall not be limited or
affected in any way by any right of Lender to cure or remedy a default set
forth in Section 8.01(b) or (c) of this Agreement.
Section 9.06. Additional Security; Right to Set-Off. Any amounts
at any time credited or due to Lender from Xxxxxx Mae, securities or other
property of Lender in the possession of Xxxxxx Xxx (other than, with respect to
any warehouse bank with which Xxxxxx Mae has entered into a "bailee letter"
pursuant to the DUS Guide, any "Note" or "Additional Documents" so long as such
property is held by Xxxxxx Xxx as bailee for the benefit of such warehouse bank
pursuant to such bailee letter) may at all times be treated as Collateral for
the payment of any obligation under this Agreement, the Contract or the Loss
Sharing Agreement and Lender pledges to Xxxxxx Mae and grants Xxxxxx Xxx a
valid security interest in, Lien upon and right of set-off against all such
amounts, securities or other property. Regardless of the adequacy of any other
Collateral, Xxxxxx Mae may execute or realize on its security interest in any
such amounts credited by or due to Lender from Xxxxxx Xxx, securities or other
property and may apply any such amounts, securities or other property to or set
them off against Lender's obligations to Xxxxxx Mae under this Agreement, the
Contract or the Loss Sharing Agreement at any time after the occurrence and
during the continuance of any Event of Default.
Section 9.07. Liquidation of Collateral. If Custodian shall at any
time receive written notice from Xxxxxx Xxx stating that an Event of Default
has occurred and is continuing, and directing Custodian to sell or otherwise
liquidate the Collateral held by Custodian, or such portion or portions thereof
as are designated in such direction, Custodian shall outline and send to Xxxxxx
Mae a proposed manner of sale (including methodology, to the extent applicable)
for Xxxxxx Mae's approval. Upon receipt by Custodian of written approval from
Xxxxxx Mae of the manner (and methodology, as applicable) of sale or other
liquidation (and having received notice of an Event of Default and instruction
to sell or liquidate Collateral, as provided above), Custodian shall carry out
the sale or other liquidation of Collateral, or such portion or portions
thereof, as so directed and in accordance with such approved terms. In no
instance shall Custodian be obligated to commence (or defend) any legal,
proceedings, or to take any actions which in its reasonable judgment shall
require it to expend or risk its own funds or to incur or suffer liability for
which it
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has not been indemnified to its satisfaction, in connection with the sale or
liquidation of Collateral. If Custodian shall at any time receive written
notice from Xxxxxx Xxx stating that an Event of Default has occurred and is
continuing, and directing Custodian to transfer or deliver to Xxxxxx Mae (or as
it may direct) any Collateral, or portion or portions thereof, held by
Custodian (including by way of example, and not limitation, any cash or
Permitted Investments held in the Collateral Account), Custodian shall transfer
or deliver such Collateral to Xxxxxx Xxx (or as it may otherwise direct).
Custodian shall not be responsible for determining the requirements of
applicable law (including without limitation those imposed on secured parties
under the Uniform Commercial Code, to the extent applicable), if any, or for
compliance therewith, in connection with any such sale, liquidation or transfer
of Collateral. In no instance shall Custodian be liable for any loss or
deficiency incurred or resulting from or remaining after any such sale,
liquidation or transfer (provided the same is carried out in accordance with
the instruction and approval of Xxxxxx Mae, as provided for hereinabove).
ARTICLE X
MISCELLANEOUS
Section 10.01. Notices. Each notice, request, instruction demand,
consent, or other approval (collectively, "notices" and singly "notice") given
under this Agreement shall be in writing to the other party at its address set
forth on the signature page of this Agreement or at such other address as such
party may designate by notice to the other party and shall be deemed given (a)
three (3) Business Days after mailing, by certified or registered U.S. mail,
return receipt requested, postage prepaid, (b) one (1) Business Day after
delivery, fee prepaid, to a national overnight delivery service (such as
Federal Express, Purolator Courier, or U.P.S. Next Day Air), (c) when
delivered, if personally delivered with proof of delivery thereof, or (d) on
the date of transmission of notice sent by facsimile machine if sent on a
Business Day, otherwise on the next Business Day. If notice is sent by
telecopier or facsimile machine, a copy also must be sent by one of the methods
set forth in (a) - (c) above, but notice will be deemed given as provided in
clause (d) above.
Each party to this Agreement agrees that it will not refuse or
reject delivery of any notice given under this Agreement, that it will
acknowledge, in writing, the receipt of the same upon request by the other
party and that any notice rejected or refused by it shall be deemed for all
purposes of this Agreement to have been received by the rejecting party on the
date so refused or rejected, as conclusively established by the records of the
U.S. Postal Service or the delivery or courier service.
Section 10.02. No Waiver. No failure or delay by Xxxxxx Xxx in
exercising any right, power or privilege under any of the Contract, the Loss
Sharing Agreement, the DUS Guide or this Agreement shall operate as a waiver of
such right, power or
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50
privilege nor shall any single or partial exercise of such right, power or
privilege preclude any other or further exercise of that right, power or
privilege or the exercise of any other right, power or privilege. The rights
and remedies provided in this Agreement shall be cumulative and not exclusive
of any rights or remedies provided by law.
Section 10.03. Termination. This Agreement shall terminate on the
date that Custodian transfers any remaining Collateral to Lender or Xxxxxx Mae,
in accordance with the provisions of this Agreement, following receipt by
Custodian of written authorization from Xxxxxx Xxx to release the Collateral.
Xxxxxx Mae shall give such authorization to Custodian in the event that (a)
Lender has completely and fully satisfied all of its Payment Obligations to
Xxxxxx Xxx under the Contract, this Agreement and the Loss Sharing Agreement
and no Mortgage Loans remain outstanding, and (b) Lender ceases to be an
approved lender under Delegated Underwriting and Servicing and the Contract.
Section 10.04. Amendments and Waivers. Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing, is signed by Lender and Custodian and is consented to in writing by
Xxxxxx Mae.
Section 10.05. Severability. The invalidity, illegality, or
unenforceability of any provision of this Agreement pursuant to judicial decree
shall not affect the validity or enforceability of any other provision of this
Agreement, all of which shall remain in full force and effect.
Section 10.06. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original.
Section 10.07. Relationship to DUS Guide. In the event of an
inconsistency between the DUS Guide and this Agreement, the provisions of this
Agreement shall govern.
Section 10.08. Governing Law; Submission to Jurisdiction; Waiver
of Jury Trial. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE FEDERAL LAWS OF THE UNITED STATES, AND, TO THE EXTENT THERE IS NO
APPLICABLE FEDERAL LAW, THE LAWS OF THE DISTRICT OF COLUMBIA WITHOUT GIVING
EFFECT TO INTERNAL CHOICE OF LAW RULES, EXCEPT THAT WITH RESPECT TO THE
PERFECTION OF SECURITY INTERESTS IN ACCEPTABLE COLLATERAL, THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS SHALL APPLY. LENDER, CUSTODIAN AND XXXXXX XXX
SUBMIT TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF COLUMBIA AND OF ANY DISTRICT OF COLUMBIA COURT SITTING IN THAT
JURISDICTION FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING
TO, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. LENDER, CUSTODIAN AND
XXXXXX MAE IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW ANY
OBJECTION WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF
ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH
PROCEEDING HAS BEEN BROUGHT IN AN
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51
INCONVENIENT FORUM. LENDER, CUSTODIAN AND XXXXXX XXX IRREVOCABLY WAIVE ANY AND
ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR CONTEMPLATED BY THIS AGREEMENT.
IN WITNESS WHEREOF, Lender, Custodian and Xxxxxx Mae have executed
this Agreement effective as of the date of execution by Xxxxxx Xxx.
WASHINGTON MORTGAGE FINANCIAL GROUP,
LTD., a Delaware corporation
By: /s/ XXXXXX XXXXXXXXXX (seal)
-------------------------------
Name: Xxxxxx Xxxxxxxxxx
-----------------------------
Title: President/CEO
----------------------------
Address: 0000 Xxxxxx Xxxx Xxxx, #000
Xxxxxx XX 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Date: May 29, 1996
----------------------------
STATE STREET BANK AND TRUST COMPANY
By: /s/ XXXXXX X. XXXXX (seal)
-------------------------------
Name: Xxxxxx X. Xxxxx
-----------------------------
Title: Vice President
----------------------------
Mailing Address:
Corporate Trust Department X.X. Xxx 000
Xxxxxx, XX 00000
Attention: Corporate Trust Department
or
Delivery Address:
Corporate Trust Xxxxxxxxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Date: 5/31/96
-----------------------------
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52
FEDERAL NATIONAL MORTGAGE ASSOCIATION
By: /s/ XXXXXX X. XXXXX (seal)
--------------------------------
Name: Xxxxxx X. Xxxxx
------------------------------
Title: Senior Vice President for
Multifamily Activities
-----------------------------
Address:
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Attention: Multifamily Activities
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Date: As of June 4, 1996
------------------------------
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53
EXHIBIT A
CERTIFICATE OF AUTHORIZED REPRESENTATIVES
CERTIFICATE OF LENDER
I, Xxxxxxxxx Xxxxxxxx-Xxxxxx, certify that I am the duly elected Senior Vice
President of Washington Mortgage Financial Group, Ltd., a corporation, and
further certify as follows.
Pursuant to the requirements of the Delegated Underwriting and Servicing
Reserve Agreement by and among Lender, Federal National Mortgage Association
and State Street Bank and Trust Company, the following are the names of the
Authorized Representatives of Lender and a true specimen signature of each
individual.
NAME TITLE SPECIMEN SIGNATURE
---- ----- ------------------
Xxxxxx Xxxxxxxxxx President/CEO /s/ XXXXXX XXXXXXXXXX
-------------------------
Xxxxxx X. Xxxxxxx EVP/CFO/Treasurer /s/ XXXXXX X. XXXXXXX
-------------------------
Xxxxxxx Xxxxxx EVP Lending /s/ XXXXXXX XXXXXX
-------------------------
Xxxxxx B. Welbum EVP Credit Policy /s/ XXXXXX B. WELBUM
-------------------------
In witness whereof, I have signed my name.
Dated: May 29, 1996
/s/ XXXXXXXXX XXXXXXXX-XXXXXX
------------------------------------
Xxxxxxxxx Xxxxxxxx-Xxxxxx
Senior Vice President and Controller
(SEAL)
54
EXHIBIT B
LETTER OF ACCEPTABLE COLLATERAL
[On Lender's Letterhead]
FEDERAL NATIONAL MORTGAGE ASSOCIATION
x/x Xxxxx Xxxxxx Xxxx and Trust Company
Corporate Trust Department
Two International Place
Boston, MA 02110(1)
Ladies and Gentlemen:
Enclosed in connection with the Delegated Underwriting and Servicing Reserve
Agreement among ________________ ("Lender"), Federal National Mortgage
Association ("Xxxxxx Xxx"), and State Street Bank and Trust Company as
collateral agent and bailee for Xxxxxx Mae (in such capacity, "Custodian" or
"you"), as in effect on the date of this letter (the "Reserve Agreement"), is
the Schedule of Acceptable Collateral as set forth on Schedule A ("Acceptable
Collateral").
In connection with the delivery of the Acceptable Collateral described in
Schedule A to you, we represent that we have full [corporate/partnership]
right, power and authority to perform all of our obligations under the Reserve
Agreement, including, if applicable, the granting of a security interest in the
Acceptable Collateral other than a Letter of Credit (as defined in the Reserve
Agreement), and that the Acceptable Collateral described on Schedule A complies
with all applicable requirements of the Reserve Agreement and all other
agreements between Lender and Xxxxxx Xxx that may be applicable.
We further represent that neither the fulfillment of the terms of the Reserve
Agreement nor the delivery, assignment, pledge of and security interest in the
Acceptable Collateral granted to Xxxxxx Mae violates any provisions of our
organizational documents, or any law, regulations or court decree applicable to
us, and none of such actions will result in a breach of, or constitute a
default under, any agreement, indenture or other material instrument to which
we are a party or by which we are bound. We have obtained any and all required
authorizations or approvals of, or consents to, the delivery, pledge and
assignment of, and security interest in, such Acceptable Collateral to Xxxxxx
Xxx, delivered to Custodian as collateral agent and bailee of Xxxxxx Mae, by
federal, state or other regulatory bodies.
-----------------
(1) Insert Custodian's correct address, if changed.
B-1
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55
If Acceptable Collateral is being delivered in substitution of, or in addition
to, previously delivered Acceptable Collateral, we have checked the appropriate
box below:
[ ] Acceptable Collateral is being delivered concurrently as
substitute Acceptable Collateral.
[ ] Acceptable Collateral is being delivered concurrently as
additional Acceptable Collateral.
Please confirm the receipt of the Acceptable Collateral to us at the following
address:
Please also make the determinations called for by Section 3.01(a)(vi) of the
Reserve Agreement and indicate that you have made such determinations by
completing and returning to us at the above address your Letter of
Confirmation. Custodian may rely upon this letter as if it were addressed to
it.
Lender's name, identity, organizational structure, place of organization or
principal place of business have not changed since the most recently delivered
Letter of Acceptable Collateral. If any such information has changed, please so
state.
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
------------------------------------------------------------------
Sincerely,
[Lender's Name]
By: *
---
Name:
Title:
Date:
*Must be executed by an Authorized Representative of Lender. If Lender is not a
corporation, the signature block should show the name of any entity (such as a
general partner or manager) on behalf of which an individual is signing and the
relationship of that entity to Lender.
B-2
[4/96]
56
SCHEDULE A TO EXHIBIT B
Schedule of Acceptable Collateral Delivered to Custodian
Under the Reserve Agreement
[If a Letter of Credit or an amendment to a Letter of Credit
is being provided, list the following information:
Letter of Credit
Neither Letter of Credit Issuer nor Confirming Bank is an
affiliate of Lender as of the date hereof: [ ] (Check if so represented by
Lender.)
Letter of Credit Issuer:
Confirming Bank (if applicable):
Amount: (show previous amount and addition, if amendment)
Account Party:
Beneficiary:
Termination Date:
Letter of Credit Number:]
[If an Existing Investment Agreement or an increase to the
amount of Invested Funds under an Existing Investment Agreement is being
pledged, list the following information:
Existing Investment Agreement
Xxxxxx Xxx Reference Number: D____________
Issued by: Xxxxxx Mae
Amount: (show previous amount and addition, if increased)
Termination Date: ]
Permitted Investment
[Describe individually by issuer or counterparty, amount,
interest rate or yield, maturity and CUSIP or other identifying number if
Permitted Investments are to be transferred to Custodian.]
[If funds are to be delivered for acquisition by Custodian of
Permitted Investments, attach investment instructions as Schedule B to this
Exhibit B.]
B-3
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57
EXHIBIT C
LETTER OF CONFIRMATION
[On Custodian's Letterhead]
[Lender]
-----------------------------------------
-----------------------------------------
Ladies and Gentlemen:
We have received your Letter of Acceptable Collateral dated
__________________________, 19__, regarding Acceptable Collateral and other
materials, as required by the Reserve Agreement, as defined in your Letter of
Acceptable Collateral. We confirm that we have made the determinations called
for by Section 3.01(a)(vi) of the Reserve Agreement with respect to the
Acceptable Collateral and the other materials enclosed with your Letter of
Acceptable Collateral. We have determined that such Acceptable Collateral has
a Collateral Value of U.S. $_____________. We further confirm that we have
received the Collateral described on Schedule A to your letter.
[We confirm to you and to Xxxxxx Xxx that any such Acceptable Collateral
consisting of an Existing Investment Agreement (or, if an increase to an
Existing Investment Agreement, notification from Xxxxxx Mae of such increase)
is in our possession, is accompanied by an executed instrument of assignment
substantially in the form required by the Reserve Agreement, is being held by
us for the benefit of Xxxxxx Xxx and is accompanied by the opinions of counsel
in the forms required by the Reserve Agreement, which state, among other
things, that such action has been taken with respect to the Investment
Agreement to perfect a first-priority security interest therein in favor of
Xxxxxx Mae.]
[We confirm to you and to Xxxxxx Xxx that any such Acceptable Collateral
consisting of a Permitted Investment (or Collateral consisting of immediately
available funds with written instructions for investment of such funds in
Permitted Investments in accordance with the Investment Guidelines) is in our
actual or constructive possession, is accompanied by an executed instrument of
assignment or transfer substantially in the form required by the Reserve
Agreement, is being held by us for the benefit of Xxxxxx Mae and that initial
delivery of such Acceptable Collateral consisting of Permitted Investments (or
such immediately available funds) is or was accompanied by the opinions of
counsel in the forms required by the Reserve Agreement, which state, among
other things, action required with respect to the Permitted Investment to
perfect a first-priority security interest therein in favor of Xxxxxx Xxx.]
[We confirm to you and to Xxxxxx Mae that any of such Acceptable Collateral
consisting of a Letter of Credit that has been issued in the form and amount
required by the Reserve Agreement, has been issued or confirmed by a bank
meeting Xxxxxx Mae's applicable
C-1
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58
rating standards and has been delivered to us, together with an opinion of
counsel to the issuer of the Letter of Credit, in the form required by the
Reserve Agreement.]
[The Letter of Credit was issued by ________________________ on
___________________, 19__, in an amount of U.S. $___________________, final
expiration date of ______________________________________________. [If
applicable] The Letter of Credit was confirmed by __________________________
on _________________________, 19__.]
The statements made in this letter are subject to the terms of the Reserve
Agreement, and terms used but not otherwise defined shall have the same
meanings as ascribed to such terms in such Reserve Agreement.
Sincerely,
STATE STREET BANK AND TRUST COMPANY
By:
Name:
Title:
Date:
cc: Federal National Mortgage Association
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Multifamily Activities
C-2
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59
[KROOTH & XXXXXX LETTERHEAD]
May 30, 1996
Federal National Mortgage Association
ATTENTION: Multifamily Activities
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
State Street Bank and Trust Company
Corporate Trust Xxxxxxxxxx
Xxx Xxxxxxxxxxxxx Xxxxx
Xxxxxx, Xxxxxxxxxxxxx 00000
Re: Delegated Underwriting and Servicing Reserve Agreement
Ladies and Gentlemen:
We have acted as counsel to Washington Mortgage Financial
Group, Ltd. ("Lender") in connection with the Delegated Underwriting and
Servicing Reserve Agreement ("Reserve Agreement"), executed by Lender, and
submitted to Federal National Mortgage Association ("Xxxxxx Mae") and State
Street Bank and Trust Company (the "Custodian") for signature. This opinion is
being delivered at the direction of the Lender in partial satisfaction of the
requirements of Section 3.01(a)(ii) of the Reserve Agreement.
In such capacity as counsel for Lender, we have prepared,
reviewed or examined, and are familiar with, originals or copies, certified or
otherwise, identified to our satisfaction, of the following documents:
A. Mortgage Selling and Servicing Contract (the
"Contract");
B. Delegated Underwriting and Servicing Addendum to the
Mortgage Selling and Servicing Contract between
Lender and Xxxxxx Xxx (the "DUS Addendum");
C. Reserve Agreement;
60
Federal National Mortgage Association
State Street Bank and Trust Company
May 30, 1996
Page 2
D. Delegated Underwriting and Servicing Master Loss
Sharing Agreement between Lender and Xxxxxx Mae (the
"Loss Sharing Agreement");
E. The Certificate of Incorporation, as amended, and
Bylaws of the Lender (collectively, the
"Organizational Documents;
F. Certificate of good standing document respecting
Lender dated May 7, 1996, issued by the State of
Delaware; and
G. Such certificates and other representations of Lender
as we have deemed necessary to enable us to deliver
the opinions set forth below.
In connection with rendering the opinions set forth below, we
have examined pertinent statutes and regulations and copies, certified or
otherwise, identified to our satisfaction, of the records of the Lender and
have made such other investigation as we have considered necessary as a basis
for the opinions expressed below.
In the course of our examination and review and in connection
with the opinions expressed below, we have assumed the genuineness of all
signatures other than Lender's, the authenticity of all documents submitted to
us as copies, and the due authorization, execution and delivery of the Contact,
the DUS Addendum, the Reserve Agreement and the Loss Sharing Agreement by all
parties thereto other than Lender.
In basing the opinions set forth in this opinion on "our
knowledge" or "to the best of our knowledge", the words "our knowledge" and "to
the best of our knowledge" signify that, in the course of our representation of
Lender, no facts have come to our attention that would give us actual knowledge
or actual notice that any such opinions or other matters are not accurate and
complete. Except as otherwise stated in this opinion, we have undertaken no
investigation or verification of such matters. Further, the words "our
knowledge" and "to the best of our knowledge" as used in this opinion are
intended to be limited to the actual knowledge of the attorneys within our firm
who have been directly involved in the representation of Lender in connection
with the Contract, the DUS Addendum, the Reserve Agreement and the Loss Sharing
Agreement and the attorneys within our firm who we reasonably believe have
knowledge of the affairs of Lender (including, as to information relevant to a
particular opinion or confirmation regarding a particular factual matter, the
attorneys within our firm who are primarily responsible for providing the
response concerning that particular opinion or confirmation).
61
Federal National Mortgage Association
State Street Bank and Trust Company
May 30, 1996
Page 3
Based upon the foregoing, it is our opinion that:
1. Lender has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, has full corporate power and authority to conduct its business as it
is now being conducted.
2. Lender has full right, power and authority to
execute, deliver and perform its obligations under the Contract, the DUS
Addendum, the Reserve Agreement and the Loss Sharing Agreement, including
granting a security interest as contemplated in the Reserve Agreement in
certain collateral (the "Acceptable Collateral"); the Contract, the DUS
Addendum, the Reserve Agreement and the Loss Sharing Agreement have been duly
authorized, executed and delivered by Lender; and the Contract, the DUS
Addendum, the Reserve Agreement and the Loss Sharing Agreement constitute the
legal, valid and binding obligations of Lender, enforceable against Lender by
Xxxxxx Xxx and Custodian in accordance with their terms except to the extent
enforcement thereof may be limited or affected by any applicable bankruptcy,
insolvency, receivership, reorganization, moratorium or similar laws affecting
creditors' rights generally or by general principles of equity (whether
enforcement is sought in a proceeding in equity, an action at law, or
otherwise).
3. Neither the execution and delivery by Lender of the
Contract, the DUS Addendum, the Reserve Agreement and the Loss Sharing
Agreement, nor the performance by Lender of its obligations under, nor the
compliance by Lender with any of the provisions of, the Contract, the DUS
Addendum, the Reserve Agreement and the Loss Sharing Agreement violate any
provisions of the Organizational Documents of Lender, or any law or regulations
applicable to Lender or its assets or operations or court decree known to us to
be applicable to or binding upon Lender; and none of such actions will result
in a breach of, or constitute a default under, any material agreement,
indenture or other instrument (known to us, after reasonable inquiry) to which
Lender is a party or by which it or its assets or operations is bound, and any
and all authorizations or approvals of or consents to pledge and assignment of
such interest as Lender has in such Acceptable Collateral to Custodian as of
the date of this opinion by any federal, state or other governmental regulatory
agency at the time having Jurisdiction in the premises have been obtained.
4. There is not pending or, to the best of our
knowledge, threatened any action, suit, proceeding, inquiry or investigation
before any court, public board or regulatory agency, against or affecting
Lender or its assets or operations, wherein an unfavorable decision, ruling or
finding could adversely affect Lender's powers or
[4/96]
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Federal National Mortgage Association
State Street Bank and Trust Company
May 30, 1996
Page 4
existence or the validity or enforceability of, or Lender's ability to perform
its obligations under, the Contact, the DUS Addendum, the Reserve Agreement and
the Loss Sharing Agreement, or could result in any material adverse change in
the business, condition (financial or otherwise) or operation of Lender.
We are admitted to practice in the District of Columbia, and
in rendering this opinion letter, we do not express any opinion concerning any
law other than the federal law of the United States, and the laws of the
District of Columbia, and, although we are not admitted to practice in the
State of Delaware, the provisions of the General Corporation Law of the State
of Delaware applicable to the opinions expressed herein. We do not express any
opinion on any issue not expressly addressed above.
We are rendering the opinion to you at the request of our
client, the Lender, for your benefit in connection with the delivery of the
Contract, the DUS Addendum, the Reserve Agreement and the Loss Sharing
Agreement, and the opinion may not be relied upon by any party other than the
persons to whom it is addressed without our prior written approval.
Very truly yours,
KROOTH & XXXXXX
/s/ XXXXXXX X. XXXXXX
----------------------------
Xxxxxxx X. Xxxxxx
63
EXHIBIT E-1
FORM OF IRREVOCABLE LETTER OF CREDIT (EVERGREEN)
[bank's letterhead]
IRREVOCABLE LETTER OF CREDIT NO.___________
__________________________, 19__
Federal National Mortgage Association
x/x Xxxxx Xxxxxx Xxxx and Trust Company
Corporate Trust Department
Two International Place
Boston, MA 02110(1)
Dear Sir or Madam:
For the account of
_________________________________________________________,
[name of account party/customer]
we open in your favor our Irrevocable Letter of Credit No.___________
("Credit") for an amount not exceeding a total of U.S.$________ effective
immediately and expiring on _______________________, 19__ (the "Initial
Termination Date").
The Initial Termination Date shall be deemed automatically extended, without
amendments, for one year from the Initial Termination Date, and thereafter for
one year from each anniversary of the then applicable Termination Date through
_______________ (as to the Initial Termination Date or each extension of the
Initial Termination Date, a "Termination Date") , unless at least sixty days
prior to the then applicable Termination Date, we shall notify you in writing
at the above address, with a copy to your counsel at the address specified
below, by certified or registered mail, return receipt requested, that we, in
our sole discretion, do not wish to extend the then applicable Termination Date
for any such additional period:
General Counsel
Federal National Mortgage Association
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Re: Multifamily Matters
Unless the then applicable Termination Date occurs earlier in accordance with
this paragraph, the Final Termination Date shall be____________________ (the
"Final Termination Date").
---------------
(1) Insert Custodian's correct address, if changed.
E-1-1
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Funds under this Credit are available to you or to State Street Bank and Trust
Company, your collateral agent and bailee, against either one of your sight
draft(s) on us, completed in substantially the form attached as Schedule A, for
all or any part of this Credit. If, for any reason, we cannot determine the
order in which any draft is presented to us, payment will be made only to
Federal National Mortgage Association.
We will promptly honor all drafts drawn in compliance with the terms of this
Credit if received on or before the then applicable Termination Date
at
--------------------------------------------------------------------------
----------------------------------------------------------------------------
[bank's address]
.
----------------------------------------------------------------------------
Drafts presented at our office at the address set forth above no later than
10:00 a.m. shall be honored on the date of presentation, by payment in
accordance with your payment instructions that accompany each such draft. If
requested by you or State Street Bank and Trust Company, your collateral agent
and bailee, payment under this Credit may be made by wire transfer of
immediately available funds to your account as specified in your instructions,
or by deposit of same day funds in a designated account that you maintain with
us or at another financial institution located in the same (or a later) time
zone. All drawings under this Credit will be paid with our own funds.
This Credit shall be governed by and subject to the Uniform Customs and
Practice for Documentary Credits (1993 revision), International Chamber of
Commerce Publication No. 500 ("UCP"), and to the extent not inconsistent with
the UCP, the laws of the State of [state in which the LOC issuer has its
principal office].
Sincerely,
[name of bank]
By:
E-1-2
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65
SCHEDULE A TO EXHIBIT E-1
Form of Sight Draft (Evergreen)
IRREVOCABLE LETTER OF CREDIT NO.
______________
SIGHT DRAFT
[name & address of bank]
-----------------------------
[city, state]
, 19
----------------------- --
Pay on demand to Federal National Mortgage Association or to State Street Bank
and Trust Company, as collateral agent and bailee of Federal National Mortgage
Association, the sum of U.S. $ ________________. This draft is drawn under your
Irrevocable Letter of Credit No._______________________________.
Federal National Mortgage Association
By:
or
State Street Bank and Trust Company,
as collateral agent and bailee of
Federal National Mortgage
Association
By:
E-1-3
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66
EXHIBIT E-2
CONFIRMATION OF LETTER OF CREDIT (EVERGREEN)
[Date]
Federal National Mortgage Association
x/x Xxxxx Xxxxxx Xxxx and Trust Company
Corporate Trust Department
Two International Place
Boston, MA 02110(1)
Ladies and Gentlemen:
We have been requested by ____________________________________ ("Credit
Issuer"), to add our confirmation to their Irrevocable Letter of Credit No.
________________________ ("Letter of Credit"), which was issued in your favor
on ___________________________________________.
We enclose a photocopy of the Letter of Credit and engage with you that drafts
drawn under and in conformity with the terms and conditions of the Letter of
Credit will be honored on due presentation to the drawee.
This Confirmation is for the maximum amount Of U.S. $___________________.
Drawings under this Confirmation are available by your presentation to us at
____________________________ [bank's address] of the following:
1. The Sight Draft (substantially in the form of Schedule A of the Letter of
Credit).
2. A statement purportedly signed by an officer of you or State Street Bank
and Trust Company as your collateral agent and bailee certifying that you
have effected your drawing to the Credit Issuer in compliance with the
terms and conditions of the Letter of Credit and that the attached draft
remains unpaid one business day thereafter. If for any reason we cannot
determine the order any draft is presented to us or for any reason, in our
sole discretion, are unsure about whether payment should be made to the
beneficiary or State Street Bank and Trust Company, we shall be protected
in making payment to the beneficiary.
We will promptly honor all drafts drawn in compliance with the terms of this
Confirmation if received on or before the business, day next following
termination date of the Letter of Credit.
----------------
(1) Insert Custodian's correct address, if changed.
E-2-1
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Drafts accompanied by the statement required above presented at our office at
the address shown above no later than 10:00 a.m. shall be honored on the date
of presentation, by payment in accordance with your payment instructions that
accompany each such draft. If requested by you, payment under this Confirmation
may be made by wire transfer of immediately available funds to your account as
specified in your instructions or by depositing same day funds in a designated
account that you maintain with us or at another financial institution located
in the same (or a later) time zone. All drawings under this Confirmation will
be paid with our own funds. This Confirmation is subject to the Uniform
Customs and Practice for Documentary Credits (1993 revision), International
Chamber of Commerce Publication No. 500 ("NCP"), and to the extent nor
inconsistent with the UCP, the laws of the State of ___________________[state
in which confirming bank has its principal office].
Should you have any questions, please do not hesitate to contact us at________.
Sincerely,
[Authorized Signature]
Enclosure
E-2-2
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EXHIBIT F-1
FORM OF IRREVOCABLE LETTER OF CREDIT
[bank's letterhead]
IRREVOCABLE LETTER OF CREDIT NO.
________
, 19
----------------------- --
Federal National Mortgage Association
x/x Xxxxx Xxxxxx Xxxx and Trust Company
Corporate Trust Department
Two International Place
Boston, MA 02110(1)
Dear Sir or Madam:
For the account of_____________________________________________________________
[name of account party/customer]
we hereby open in your favor our Irrevocable Letter of Credit No. ___________
("Credit") for an amount not exceeding a total of U.S. $ ____________________
effective immediately and expiring on________, 19__ (the "Termination Date").
Funds under this Credit are available to you or to State Street Bank and Trust
Company, your collateral agent and bailee, against either one of your sight
draft(s) on us, completed in substantially the form attached as Schedule A, for
all or any part of this Credit. If, for any reason, we cannot determine the
order in which any draft is presented to us, payment will be made only to
Federal National Mortgage Association.
We will promptly honor all drafts drawn in compliance with the terms of this
Credit if received on or before the Termination Date at
[bank's address]
________________________________________________________________.
Drafts presented at our office at the address set forth above no later than
10:00 a.m. shall be honored on the date of presentation, by payment in
accordance with your payment instructions that accompany each such draft. If
requested by you, payment under this Credit may be made by wire transfer of
immediately available funds to your account as specified in your instructions,
or by deposit of same day funds in a designated account that you maintain with
us or at another financial institution located in the same (or a later)
----------------
(1) Insert Custodian's correct address, if changed.
F-1-1
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69
time zone. All drawings under this Credit will be paid with our own funds.
This Credit shall be governed by and subject to the Uniform Customs and
Practice for Documentary Credits (1993 revision), International Chamber of
Commerce Publication No. 500 ("UCP"), and to the extent not inconsistent with
the UCP, the laws of the State of [state in which the LOC issuer has its
principal office].
Sincerely,
[name of bank]
By:
F-1-2
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SCHEDULE A TO EXHIBIT F-1
Form of Sight Draft
IRREVOCABLE LETTER OF CREDIT NO._____
SIGHT DRAFT
[name & address of bank]
---------------------------------------
[city, state]
,19
------------------------------ ------
Pay on demand to Federal National Mortgage Association or to State Street Bank
and Trust Company, as collateral agent and bailee of Federal National Mortgage
Association, the sum of U.S. $ ____________________________. This draft is
drawn under your Irrevocable Letter of Credit No.___________________________.
Federal National Mortgage Association
By:
or
State Street Bank and Trust Company,
as collateral agent and bailee of
Federal National Mortgage Association
By:
F-1-3
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EXHIBIT F-2
CONFIRMATION OF LETTER OF CREDIT
[Date]
Federal National Mortgage Association
x/x Xxxxx Xxxxxx Xxxx and Trust Company
Corporate Trust Department
Two International Place
Boston, MA 02110(1)
Ladies and Gentlemen:
We have been requested by ____________________________________ ("Credit
Issuer"), to add our confirmation to their Irrevocable Letter of Credit
No._____________________ ("Letter of Credit"), which was issued in your favor
on _____________________.
We enclose a photocopy of the Letter of Credit and engage with you that drafts
drawn under and in conformity with the terms and conditions of the Letter of
Credit will be honored on due presentation to the drawee.
This Confirmation is for the maximum amount of U.S. $_______________________.
Drawings under this Confirmation are available by your presentation to us at
_______________________________________ (bank's address] of the following:
1. The Sight Draft (substantially in the form of Schedule A of
the Letter of Credit).
2. A statement purportedly signed by an officer of you or State
Street Bank and Trust Company as your collateral agent and
bailee certifying that you have effected your drawing to the
Credit Issuer in compliance with the terms and conditions of
the Letter of Credit and that the attached draft remains
unpaid one business day thereafter. If for any reason we
cannot determine the order any draft is presented to us or for
any reason, in our sole discretion, are unsure about whether
payment should be made to the beneficiary or State Street Bank
and Trust Company, we shall be protected in making payment to
the beneficiary.
We will promptly honor all drafts drawn in compliance with the terms of this
confirmation if received on or before the earlier of: (a) the business day next
following the termination date of the
--------------------
(1) Insert Custodian's correct address, if changed.
F-2-1
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72
Letter of Credit or (b)___________________ 19__. Drafts accompanied by the
statement required above presented at our office at the address shown above no
later than 10:00 a.m. shall be honored on the date of presentation, by payment
in accordance with your payment instructions that accompany each such draft.
If requested by you, payment under this confirmation may be made by wire
transfer of immediately available funds to your account as specified in your
instructions or by depositing same day funds in a designated account that you
maintain with us or at another financial institution located in the same (or a
later) time zone. All drawings under this Confirmation will be paid with our
own funds. This Confirmation is subject to the Uniform Customs and Practice
for Documentary Credits (1993 revision), International Chamber of Commerce
Publication No. 500 ("NCP"), and to the extent nor inconsistent with the UCP,
the laws of the State of________________________________________ [state in
which confirming bank has its principal office].
Should you have any questions, please do not hesitate to contact us at _______.
Sincerely,
[Authorized Signature]
Enclosure
F-2-2
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73
EXHIBIT G
FORM OF OPINION OF COUNSEL TO ISSUER OF LETTER OF CREDIT
(AND, IF APPLICABLE, CONFIRMATION OF LETTER OF CREDIT)
[DATE]
Federal National Mortgage Association
x/x Xxxxx Xxxxxx Xxxx and Trust Company
Corporate Trust Department
Two International Place
Boston, MA 02110(1)
Gentlemen:
This opinion is being furnished to you at the request of
____________________________ ("Lender"), with respect to the issuance by
____________________________ ("Bank") of its letter of credit [confirmation]
No. _________ ("Letter of Credit") in your favor.
We have acted as counsel to the Bank in connection with the
preparation, execution and delivery of the Letter of Credit. We have examined
a certificate of the [Comptroller of the Currency or other charterer] of recent
date as to the operating history of the Bank and as to the valid certification
of the Bank to do business as a [national banking association]. We have also
examined a certificate of a ___________________________ of the Bank as to the
authority of certain officers of the Bank to execute agreements on behalf of the
Bank and as to the incumbency of the officer(s) of the Bank who have executed
the Letter of Credit on behalf of the Bank. We have assumed the genuineness of
signatures and the authenticity of certificates and documents, other than those
of the Bank, submitted to us as originals and the conformity to original
documents of documents submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion
that the Letter of Credit has been duly executed and delivered by the Bank and
constitutes the legal, valid and binding obligation of the Bank, enforceable in
accordance with its terms, except that the enforcement of the rights and
remedies with respect to the Letter of Credit is subject to applicable
bankruptcy, insolvency, reorganization, liquidation, moratorium or similar laws
affecting the enforcement of creditors' rights generally as they may be applied
in the bankruptcy, insolvency, reorganization or liquidation of the Bank, and
that the availability of the remedies of specific performance, of injunctive
relief or other equitable
--------------------
(1) Insert Custodian's correct address, if changed.
G-1
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74
remedies is subject to the discretion of the court before which any such
proceeding may be brought.
We authorize State Street Bank and Trust Company, as your
collateral agent and bailee, and Lender to rely on this opinion to the extent
and as if it were addressed to them.
Very truly yours,
G-2
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EXHIBIT H
FORM OF OPINION OF COUNSEL TO ISSUER OF LETTER OF CREDIT
REGARDING AMENDMENT OF LETTER OF CREDIT (AND IF APPLICABLE,
CONFIRMATION OF LETTER OF CREDIT
[DATE]
Federal National Mortgage Association
x/x Xxxxx Xxxxxx Xxxx and Trust Company
Corporate Trust Department
Two International Place
Boston, MA 02110(1)
Gentlemen:
This opinion is being furnished to you at the request
of___________________________ ("Lender") with respect to the amendment dated
("Amendment") by _____________________________ ("Bank") of its letter of credit
[confirmation] No. __________ ("Letter of Credit") in your favor.
We have acted as counsel to the Bank in connection with the
preparation, execution and delivery of the Amendment to the Letter of Credit.
We have examined a certificate of the [Comptroller of the Currency or other
charterer] of recent date as to the operating history of the Bank and as to the
valid certification of the Bank to do business as a [national banking
association]. We have also examined a certificate of a _________________ of
the Bank as to the authority of certain officers of the Bank to execute
agreements on behalf of the Bank and as to the incumbency of the officer(s) of
the Bank who have executed the Amendment to the Letter of Credit on behalf of
the Bank. We have assumed the genuineness of signatures, and the authenticity
of certificates and documents, other than those of the Bank, submitted to us as
originals and the conformity to original documents of documents submitted to us
as copies.
Based upon and subject to the foregoing, we are of the opinion
that the Amendment to the Letter of Credit has been duly executed and delivered
by the Bank and the Letter of Credit, as amended, constitutes the legal, valid
and binding obligation of the Bank, enforceable in accordance with its terms,
except that the enforcement of the rights and remedies with respect to the
Letter of Credit, as amended, is subject to applicable bankruptcy, .insolvency,
reorganization, liquidation, moratorium or similar laws
-----------------
(1) Insert Custodian's correct address, if changed.
H-1
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76
affecting the enforcement of creditors' rights generally as they may be applied
in the bankruptcy, insolvency, reorganization or liquidation of the Bank, and
that the availability of the remedies of specific performance, of injunctive
relief or other equitable remedies is subject to the discretion of the court
before which any such proceeding may be brought.
We authorize State Street Bank and Trust Company, as your
collateral agent and bailee, and Lender to rely on this opinion to the extent
and as if it were addressed to them.
Very truly yours,
H-2
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77
EXHIBIT I
ASSIGNMENT
This ASSIGNMENT is made and entered into by_________________
("Lender") pursuant to the Delegated Underwriting and Servicing Reserve
Agreement (the "Reserve Agreement") among Lender, Federal National Mortgage
Association ("Xxxxxx Xxx") and State Street Bank and Trust Company (the
"Custodian"). Capitalized terms used in this Assignment and not otherwise
defined have the meanings given them in the Reserve Agreement.
For good and valuable consideration, the receipt and
sufficiency of which is acknowledged by Lender, Lender transfers, assigns, sets
over and otherwise conveys to Xxxxxx Mae to be held by Custodian as collateral
agent and bailee for Xxxxxx Xxx as provided in the Reserve Agreement, (i) all
additions to and substitutions for the [Investment Agreement], (ii) all
proceeds, payments, distributions and collections received or to be received,
or derived or to be derived, now or at any subsequent time from or in
connection with the [Investment Agreement] and (iii) all powers and rights of
Lender, whether presently held or subsequently acquired, including rights of
enforcement, under the [Investment Agreement].
IN WITNESS WHEREOF, Lender has caused this Assignment to be
executed this _________day of_________________________, __.
LENDER:
By:
Name:
Title:
*[Notice: The signature(s) to this assignment must correspond exactly
with the name(s) on the face of the [(Investment Agreement]
without alteration or any change whatsoever. The signature(s)
must be notarized.]
I-1
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______________________________)
______________________________) ss
)
This instrument was acknowledged before me on [date] by
[name(s) of Person(s)] as [type of authority, e.g., officer, trustee, general
partner, etc.] of [name of party on behalf of whom instrument was executed.](1)
(Signature of Notarial Officer)
(Seal, if any)
Title (and Rank)
(My commission expires:
------------------
(1) The form of the notarization may be varied to conform to the requirements
of local law.
I-2
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79
EXHIBIT J
FORM OF OPINION OF COUNSEL FOR LENDER
(UPON DELIVERY AND PLEDGE OF AN EXISTING
INVESTMENT AGREEMENT, PERMITTED INVESTMENT OR
FUNDS WITH INSTRUCTIONS TO INVEST IN PERMITTED INVESTMENTS)
__________________________, 19__
Federal National Mortgage Association
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Multifamily Activities
State Street Bank and Trust Company
Corporate Trust Department
Two International Place
Boston, MA 02110(1)
Re: Delivery and Pledge of Collateral other than
a Letter of Credit under Delegated
Underwriting and Servicing Reserve Agreement
Ladies and Gentlemen:
We have acted as counsel to ________________________________
("Lender") in connection with the delivery and pledge of collateral under the
Delegated Underwriting and Servicing Reserve Agreement ("Reserve Agreement"),
executed by Lender, the Federal National Mortgage Association ("Xxxxxx Xxx")
and State Street Bank and Trust Company ("Custodian"). This opinion is being
delivered at the direction of the Lender in satisfaction of certain of the
requirements of Section 3.01(a)(i)(C) of the Reserve Agreement with respect
to the initial delivery to Custodian of Collateral other than a Letter of
Credit.
In such capacity as counsel for Lender, we have prepared,
reviewed or examined, and are familiar with, originals or copies, certified or
otherwise, identified to our satisfaction, of the following documents:
A. Reserve Agreement;
B. [List all organization documents of Lender
and any general partner of Lender such as the
Partnership Agreement, the Articles of
Incorporation and Bylaws or the Limited
Liability Company Agreement] (collectively,
the "Organizational Documents") and
-----------------
(1) Insert Custodian's correct address, if changed.
J-1
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80
C. [Certificate of good standing or equivalent
document] respecting Lender dated
_____________, 19__ issued by the [designate
state authority].
In connection with rendering the opinions set forth below, we
have examined pertinent statutes and regulations and copies, certified or
otherwise, identified to our satisfaction, of the records of [the managing
general partner of Lender and the records of] Lender and have made such other
investigation as we have considered necessary as a basis for the opinions
expressed below.
In the course of our examination and review and in connection
with the opinions expressed below we have assumed (i) the genuineness of all
signatures other than Lender's; (ii) the authenticity of all documents
submitted to us as copies; (iii) the due authorization, execution and delivery
of the Reserve Agreement by all parties thereto other than Lender; (iv) that
Custodian, as collateral agent and bailee of Xxxxxx Mae, acquired its interest
in Collateral constituting an Existing Investment Agreement or Permitted
Investment (as such terms are defined in the Reserve Agreement) in good faith,
for value, and without notice or knowledge of any lien, mortgage, security
interest, encumbrance or other claim against such Collateral; (v) that the
Existing Investment Agreement or Permitted Investment is held in the continuous
actual or constructive possession of Custodian in the Commonwealth of
Massachusetts following delivery or transfer, as the case may be, to Custodian;
and (vi) the books and records of Custodian will identify such Collateral as
held by Custodian solely and exclusively as collateral agent and bailee for
Xxxxxx Xxx.
Based upon the foregoing, but subject to exceptions and
exclusions set forth herein, it is our opinion that, Lender has duly and
validly authorized the pledge of, and grant of a valid security interest in,
lien upon and right of set-off against Collateral other than a Letter of Credit
pursuant to the Reserve Agreement, and the Reserve Agreement creates the valid
pledge and security interest that it purports to create in the Collateral.
The [list all offices, such as the Secretary of State, City
Registrar, etc., in all jurisdictions, based on the jurisdiction of Lender's
organization, Lender's principal place of business and Lender's operations, in
which filing is advisable for perfection] are the only jurisdictions, and the
only offices within such jurisdictions, in which the filing of Uniform
Commercial Code financing statements with respect to an Existing Investment
Agreement or Permitted Investment are or would be necessary in order to perfect
a security interest in the Existing Investment Agreement or Permitted
Investment, to the extent it constitutes or may be construed to constitute a
contract right, account or general intangible under the Uniform Commercial
Code.
Based on the laws of the State(s) of [jurisdictions in which
UCC filings must be made] as of the date of this opinion, in order to continue
the effectiveness of the financing statements
J-2
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81
referred to in the preceding paragraph, appropriate continuation statements
must be filed at ______-year intervals after the original filing of such
financing statements. Other than the foregoing, no recording or filing of the
Reserve Agreement or any other documents is necessary to make effective the
lien and perfected security interest of Xxxxxx Xxx in an Existing Investment
Agreement or Permitted Investment to the extent it constitutes or may be
construed to constitute a contract right, account or general intangible under
the Uniform Commercial Code.
We express no opinion as to the priority of the security
interest in the Existing Investment Agreement or Permitted Investment in favor
of Xxxxxx Mae in: (i) any claim or lien in favor of the United States or any
state or agency or instrumentality thereof (including, by way of example and
not limitation, federal or state tax liens, liens under the Employee Retirement
Income Security Act of 1974, as amended, or claims under 31 U.S.C. Section
3713), or (ii) any liens, claims, interests or rights that arise by operation
of law and that may take priority over perfected security interests.
We express no opinion as to the laws of any Jurisdiction other
than the laws of__________________________ [insert jurisdiction(s) of Lender's
organization and principal place of business and any other jurisdiction in
which UCC filings must be made] and the laws of the United States of America.
In rendering the opinions set forth above, we have relied,
with your permission, solely upon the opinion of counsel for Custodian with
respect to the perfection of security interests in instruments and securities
under the laws of the Commonwealth of Massachusetts. A copy of that opinion is
attached as Exhibit A.
We are rendering the opinion to you and to Custodian at the
request of our client solely for your benefit in connection with the initial
delivery of Collateral other than a Letter of Credit pursuant to the Reserve
Agreement, and the opinion may not be relied upon by any party other than the
persons to whom it is addressed without our prior written approval.
Very truly yours,
J-3
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cc: State Street Bank and Trust Company
[copy of opinion to be delivered concurrently to:
Office of General Counsel
Federal National Mortgage Association
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000
Re: Multifamily Matters
J-4
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83
EXHIBIT K
FORM OF DESCRIPTION OF COLLATERAL FOR FINANCING STATEMENTS
All of Debtor's right, title and interest, whether now
existing or hereinafter arising, in and to "Collateral" held by the Federal
National Mortgage Association ("Xxxxxx Xxx") or State Street Bank and Trust
Company, as Custodian, pursuant to that certain Delegated Underwriting and
Servicing Reserve Agreement among Xxxxxx Mae, Custodian and Debtor, as
described on Schedule A.
K-1
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84
[LENDER]
SCHEDULE A
TO UCC-1 FINANCING STATEMENT
1. Debtor: [LENDER] (the "Company")
[Address]
Attention: ________________________________
2. Secured Party: State Street Bank and Trust Company, as Custodian (the
"Custodian") as collateral agent and bailee for the benefit of the Federal
National Mortgage Association ("Xxxxxx Xxx") pursuant to that certain Delegated
Underwriting and Servicing Reserve Agreement among Xxxxxx Mae, the Custodian
and the Company (as the same may be amended, supplemented or otherwise modified
from time to time, the "Reserve Agreement").
Address: [Custodian address]
3. This Financing Statement covers all of the Company's right, title and
interest, whether now existing or hereafter arising, in "Collateral," which is
defined in the Reserve Agreement as Acceptable Collateral, any funds,
securities, or other assets on deposit in the Collateral Account held by
Custodian pursuant to the Reserve Agreement and any other funds, securities or
other assets in which Lender has an interest delivered to or otherwise held by
Custodian under the Reserve Agreement or Xxxxxx Xxx (including any amounts at
any time credited or due to Lender from Fannie Mae) other than, with respect to
any warehouse bank with which Fannie Mae has entered into a "bailee letter"
pursuant to the DUS Guide (as defined in the Reserve Agreement), any "Note" and
"Additional Documents" so long as such property is held by Fannie Mae as bailee
for the benefit for such warehouse bank pursuant to such bailee letter,
together with (i) all additions to and substitutions for such Collateral, (ii)
all proceeds, payments, distributions and collections received or to be
received, or derived or to be derived, now or at any subsequent time from or in
connection with such Collateral and (iii) all powers and rights of Lender,
whether presently held or subsequently acquired, including rights of
enforcement, under such Collateral.
4. Capitalized terms used herein shall have the following meanings:
"ACCEPTABLE COLLATERAL" means one or more bank letters of
credit (or confirmations) payable to Fannie Mae or Custodian against
the account of the Company, one or more investment agreements between
Fannie Mae and the Company held by Custodian, one or more Permitted
Investments held by Custodian, or any combination thereof.
"PERMITTED INVESTMENTS" means one or more of the following:
K-2
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85
(a) certain U.S. Government obligations; or
(b) certain discount notes or other short-term interest-bearing
debt obligations of Fannie Mae, the Federal Home Loan Bank System or
the Federal Farm Credit Bank; or
(c) certain repurchase agreements with respect to investments
specified in clauses (a) or (b) above, or Fannie Mae interest-bearing
mortgage-backed securities; or
(d) certain commercial paper or other short-term debt
obligations, including revolving trust master notes, issued or
guaranteed by any corporation organized or incorporated under the
laws of the United States or any state, district or territory
therein; or
(e) overnight or term Federal Funds sold to, or certificates of
deposit of, certain federally insured depository institutions or
demand or time deposits with Custodian; or
(f) investment agreements, including any amendments,
supplements or extensions, between Fannie Mae and Custodian; or
(g) any other investment approved by Fannie Mae.
K-3
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EXHIBIT L
FORM OF OPINION OF COUNSEL FOR CUSTODIAN
[To be revised after discussion with Custodian counsel to
address permitted Investments under Massachusetts law.]
________________________, 19__
Federal National Mortgage Association
3900 Wisconsin Avenue, N.W.
Washington, D.C. 20016
Attention: Multifamily Activities
and
[Lender's Counsel]
Re: Perfection of Lien in Certain
Instruments under Massachusetts law
Ladies and Gentlemen:
We have acted as counsel to State Street Bank and Trust
Company, as Custodian acting as collateral agent and bailee (in such capacity,
the "Custodian") for Federal National Mortgage Association ("Fannie Mae") in
connection with the Delegated Underwriting and Servicing Reserve Agreement [,
as amended and restated,] effective as of __________________ , 199_ (the
"Agreement") among Fannie Mae, ______________________(the "Lender") and the
Custodian.
All references to the "Uniform Commercial Code" or the "UCC"
shall mean the Uniform Commercial Code in effect in The Commonwealth of
Massachusetts, as amended. Any capitalized terms appearing herein but not
otherwise expressly defined in this letter shall have the meanings assigned to
such terms in, or by reference in, the Agreement.
Pursuant to Section 3.01(a)(iii) of the Agreement, you have
asked us to render our opinion upon certain matters pertaining to the
perfection of a security interest under Massachusetts law in property in the
form of Instruments, Certificated Securities, Uncertified Securities, Clearing
Agency Securities, Federal Book-Entry Securities and certain Deposit Accounts,
as each of those terms is defined below, if and to the extent governed by
Massachusetts law. Any Instruments, Deposit Accounts or Securities (as defined
below) which are pledged as Acceptable Collateral to Fannie Mae and delivered
to Custodian as collateral agent of and
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bailee for Fannie Mae under the Agreement are sometimes collectively referred
to herein as "Collateral".
As used herein, "Money" means "money" as defined in Section
1201(24) of the UCC; "Instruments" means "instruments" as defined in Section
9-105(l)(i) of the UCC (excluding Certificated Securities, as defined below)
which are physically held in Massachusetts; "Clearing Agency Securities" means
Certificated Securities which are registered to and in the continuous
possession of a "clearing corporation" as defined in Section 8-102(3) of the
UCC which is located in Massachusetts or its Custodian Bank which is located in
Massachusetts; "Certificated Securities" means "certificated securities" as
defined in Section 8-102(i)(a) of the UCC which are physically held in
Massachusetts; "Federal Book-Entry Securities" means securities issued by the
United States Treasury, the Federal National Mortgage Association or by the
Federal Home Loan Mortgage Corporation which are maintained in book-entry form
on the records of the Federal Reserve Bank of Boston pursuant to 31 C.F.R.
Section 306.115-.122, 24 C.F.R. Section 81.41-49, or 1 C.F.R. Part 462;
"Financial Intermediary" means a "financial intermediary" as defined in Section
8-313(4) of the UCC acting on behalf of the Custodian with respect to
Securities; "Custodian Bank" means a "custodian bank" as defined in Section
8-102(4) of the UCC; "Depositary" means State Street Bank and Trust Company
acting in its capacity as a "depositary" as defined in 31 C.F.R. Section
306.118 or similar federal regulations governing the transfer of Federal
Book-Entry Securities with respect to the Federal Book-Entry Securities, and as
a Financial Intermediary on behalf of the Custodian; "Financial Intermediary
Securities Account" means the securities account maintained by the Financial
Intermediary in the name of the Custodian; "Uncertificated Securities" means
"uncertificated securities" as defined in Section 8-102(b) of the UCC, issued
by an issuer the jurisdiction of organization of which is Massachusetts;
"Securities" shall mean, collectively, Certificated Securities, Uncertificated
Securities, Clearing Agency Securities, and Federal Book-Entry Securities;
"Deposit Account" means a demand or time deposit account held at State Street
Bank and Trust Company in the name of and subject to the exclusive control of
the Custodian, which is not represented by (and as to which no person is
entitled to be issued) an "indispensable instrument" evidencing or entitling
the holder to rights of ownership in, transfer of or payment or withdrawal from
such account (such as a passbook or certificate of deposit or similar
instrument) unless such "indispensable instrument" is in the continuous and
exclusive possession and control of the Custodian, and as to which no person
other than the Custodian has any right of access to or power of withdrawal,
transfer or payment from, or power to make third-party payments from (whether
by check, draft, negotiable order of withdrawal or similar means) such account;
and "General Intangibles" and "Accounts" shall mean "general intangibles" and
"accounts," respectively, as each of those terms is defined in Section 9-106
of the UCC. Any of the foregoing defined terms appearing in the plural form
may also be used on singular form with the same meaning.
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In arriving at the opinions expressed below, we have examined
a photocopy of an executed copy of the Agreement and originals or copies
certified or otherwise identified to our satisfaction of such other documents,
if any, as we have deemed necessary as a basis for the opinions hereinafter
expressed.
In our examination, we have assumed the genuineness, due
authorization and legal authority of all signatures appearing in any documents
we have examined, and we have assumed the authenticity of all documents
submitted to us as originals, the conforming to originals of any documents
submitted to us as photostatic or certified copies, and the authenticity of the
originals of any such documents submitted to us as photostatic or certified
copies.
Without limiting the generality of the foregoing paragraph, we
have assumed (except in the case of our client, the Custodian) that the
Agreement has been duly executed and delivered by each of the parties thereto
by a duly authorized person, that each such party has sufficient and adequate
power and authority under its organizational documents and applicable law to
enter into the Agreement and to perform the obligations and agreements on its
part to be performed thereunder, that each such party has taken all necessary
corporate or other (as applicable) action to duly authorize it to enter into
and perform its obligations and agreements under, and has satisfied any legal
requirements that may be applicable to it to the extent necessary to permit it
to enter into and perform its obligations and agreements under, the Agreement,
and that the Agreement constitutes the legal, valid and binding obligation of
each such party, enforceable against each such party in accordance with its
terms. We have also assumed that the Agreement is sufficient under applicable
law to cause a valid security interest to be created in and to attach to the
Collateral as contemplated by the Agreement and we have assumed compliance with
the Agreement by the parties thereto in material respects.
We have undertaken no independent investigation or
determination of any factual matter or assumption pertinent or material to this
opinion. As to certain factual matters we have relied upon representations and
warranties contained in the documents we have examined, and otherwise have made
certain assumptions as set forth in this letter. Without limiting the
generality of the foregoing, we point out that we have not examined any item
pledged or delivered as, or representing, Collateral, for purposes of this
opinion.
The opinions stated in this letter are subject to and may be
affected by applicable bankruptcy, insolvency, receivership, reorganization,
and moratorium laws, and similar laws relating to or affecting the rights of
creditors generally, from time to time in effect, and to general principles of
equity (whether in a proceeding at law or in equity) and to the exercise of
judicial discretion in granting particular equitable remedies. Without
limiting the generality of the foregoing, we point out that Section 552 of the
Federal Bankruptcy Code limits the extent to which
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property acquired by a debtor after the commencement of a case under the
Federal Bankruptcy Code may be subject to a security interest arising from a
security agreement entered into by the debtor before the commencement of such
case.
We have assumed that (i) the Lender owns good and valid title
to each item of Collateral (constituting a sufficient interest therein to grant
a first priority security interest as contemplated by the Agreement), and that
the Lender's rights in each such item of Collateral are superior to the rights
of any other person or entity, immediately prior to the grant, attachment and
perfection of the security interest in favor of Fannie Mae described in the
opinions set forth below; (ii) each of the Lender, Custodian and Fannie Mae
acquires its interest in the Collateral in good faith, for value, and without
notice or knowledge of any lien, mortgage, security interest, encumbrance or
other adverse claim against any item of Collateral (including, by way of
example and not of limitation, notice that any Instrument is overdue, or has
been dishonored or is subject to a defense and notice of any of the matters
described in Section 8-304 of the UCC to the extent applicable to any
securities); (iii) following delivery to the Custodian, each Instrument and
Certificated Security is held in the continuous possession of the Custodian, as
collateral agent of and bailee for Fannie Mae, in The Commonwealth of
Massachusetts; (iv) any restrictions on transfer of any item of Collateral
imposed under the terms thereof or applicable law have been complied with in
connection with the pledge thereof to Fannie Mae and will be complied with at
all times relevant to the opinions set forth below; (v) the books and records
of the Custodian will identify the Collateral as held solely and exclusively as
collateral agent of and bailee for Fannie Mae; (vi) the Custodian has received
a copy of the Agreement executed by the parties thereto and, in connection with
the pledge of any particular item of Collateral, the Custodian has received the
documents relating thereto as contemplated by Section 3.01(a) of the Agreement;
(vii) value has been given by Fannie Mae, and a validly created security
interest in favor of Fannie Mae has attached to the Collateral under the laws
of such jurisdiction as may be applicable thereto; (viii) each Instrument and
Certificated Security (including by way of example and not limitation each
Certificated Security constituting a Clearing Agency Security) contains only an
endorsement thereon which is genuine and duly authorized including, by way of
example and not limitation, any endorsement appearing on any instrument of
transfer accompanying any such Instrument or Certificated Security (including
by way of example and not limitation each Certificated Security constituting a
Clearing Agency Security); and (ix) each Deposit Account contains exclusively
Money deposited by the Lender with the Custodian pursuant to Section 3.01(a) of
the Agreement and held in the Collateral Account or the proceeds of Collateral
pledged to the Custodian under the Agreement in which the Custodian has a
first priority perfected security interest.
To the extent our opinions set forth below address perfection
in proceeds of the Collateral, such opinions are qualified generally by the
applicable provisions and limitations of
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Section 9-306 of the UCC. We point out that proper and timely steps may be
necessary to establish and continue the perfection of Fannie Mae's security
interest in any proceeds of or distributions on the Collateral received,
invested or reinvested from time to time, and the priority of any such security
interest in proceeds and distributions may be subject to further considerations
under applicable provisions of the UCC beyond those stated in this opinion if
any such proceeds or distributions are in the form of property other than
identifiable cash proceeds in the continuous possession of Fannie Mae or the
Custodian, as agent of and bailee for Fannie Mae, (in the form of Money which
is not commingled with other money or is deposited in a separate deposit
account containing only proceeds of Collateral and under the exclusive control,
dominion and possession of Fannie Mae or the Custodian) or in the form of
property of the same type as the original Collateral from which such proceeds
are derived and with respect to which appropriate actions are taken to maintain
Fannie Mae's continuous security interest therein in accordance with Section
9-306 of the UCC and this opinion (subject to the provisions of Section 9-308
of the UCC). We express no opinion as to proceeds except to the extent that
Article 8 or Article 9 of the UCC is applicable thereto.
We express no opinion as to whether or to what extent any item
of Collateral pledged under or pursuant to the Agreement constitutes or may
constitute an Instrument, a Deposit Account or a Security (as those terms are
defined hereinabove), or a Permitted Investment (as defined in the Agreement)
or complies with the Investment Guidelines under the Agreement, to the extent
applicable.
We have assumed that (i) with respect to Collateral in the
form of Federal Book-Entry Securities, the entries on the books of the Federal
Reserve Bank of Boston reflecting the transfer of the Federal Book-Entry
Securities to the account of the Custodian will be the sole and exclusive entry
in the records of a Federal Reserve Bank reflecting ownership in such Federal
Book-Entry Securities, and that the entries made by the Federal Reserve Bank of
Boston will be complete and accurate and will not identify the Federal
Book-Entry Securities as belonging to anyone other than the Custodian; (ii)
each item of Collateral constituting an Instrument or Certificated Security is
represented by only one original document; (iii) in the case of Clearing Agency
Securities, the Certificated Securities representing the Clearing Agency
Securities will be continuously located in The Commonwealth of Massachusetts in
the custody of a "clearing corporation" as defined in Section 8-102(3) of the
UCC located in Massachusetts (a "Clearing Corporation") or of a Custodian Bank
(or a nominee of either) subject to the Clearing Corporation's exclusive
control, will be either in bearer form, or in registered form and registered to
the Clearing Corporation or its Custodian Bank (or nominee of either of them)
subject to the Clearing Corporation's exclusive control or indorsed in blank,
and such Clearing Agency Securities will be identified on the records of the
Clearing Corporation for the sole and exclusive account of the Custodian or a
Financial Intermediary acting on its behalf; (iv) that any Certificated
Securities, Clearing Agency
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Securities and Instruments will contain only endorsements (including without
limitation endorsements on any separate instrument of transfer or assignment)
thereon which are genuine and duly authorized, with all necessary intervening
endorsements (to create a complete chain to the endorsements described in this
opinion); (v) that in the case of Uncertificated Securities, such
Uncertificated Securities will be continuously maintained in the records of the
issuer thereof solely and exclusively in the name of the Custodian, that the
issuer of such Uncertificated Securities is organized under the laws of the
Commonwealth of Massachusetts, and that such issuer will not register the
interest of any other Person or send an initial transaction statement or any
other statement describing such Uncertificated Securities to any other Person;
(vi) that any restrictions on transfer imposed upon any Securities by their
terms or pursuant to the terms of the indenture or other operative instrument
under which it is issued are complied with; and (vii) that the books and
records of the Financial Intermediary will be accurate and complete and will
not identify any Collateral as belonging to anyone other than the Custodian,
and that the Financial Intermediary will not confirm the purchase of any
Collateral to any Person other than the Custodian or acknowledge that it holds
any of the Collateral for anyone other than the Custodian.
We express no opinion as to the priority of any security
interest or pledge in favor of Fannie Mae in or against: (i) any Collateral
that constitutes proceeds of property in which another person or entity claims
a perfected security interest; (ii) any purchase money security interest; (iii)
any security interest in favor of a third party that could be perfected without
possession or filing pursuant to Sections 8.313(i)(h) or 9-305 of the UCC, or
which could be perfected temporarily without perfection pursuant to Section
8.313(1)(i) or Section 9-304 of the UCC; (iv) any claim or lien in favor of
the United States or any state or agency or instrumentality thereof (including,
by way of example and not limitation, federal or state tax liens, liens under
the Employee Retirement Income Security Act of 1974, as amended, or claims
under 31 U.S.C. Section 3713), (v) any liens, claims, interests or rights
(including, by way of example but not limitation, rights of set-off) that arise
by operation of law and that may take priority over perfected security
interests; (vi) any lien creditor to the extent such security interest purports
to secure any advance or extension of credit made subsequent to the date which
is more than 45 days after the date such person or entity becomes a lien
creditor, other than an advance or extension of credit made without knowledge
of the lien of the lien creditor or pursuant to a commitment entered into
without knowledge of the lien of the lien creditor; (vii) any lien creditor who
executed on or attached or levied upon any portion of Collateral prior to the
perfection of the security interest in favor of Fannie Mae; (viii) to the
extent the Agreement purports to secure future advances, any other secured
party to the extent set forth in Section 9-312(7) of the UCC; (ix) any person
or entity who may have entered into a subordination or intercreditor agreement
with Fannie Mae with respect to any of the Collateral; (x) any security
interest perfected under the laws of another jurisdiction to the
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extent that the Collateral subject to such security interest was located in
such jurisdiction within the four months prior to perfection of the security
interest in favor of Fannie Mae; (xi) the rights of any Person in any Security
based upon a claim of "wrongful" transfer to Section 8-315 of the UCC; or (xii)
any lien or claim (including by way of example and not of limitation, rights of
set-off) of the Clearing Corporation, any Financial Intermediary or the Federal
Reserve Bank, or any issuer's lien pursuant to Section 8-103 of the UCC, with
respect to any Security.
We express no opinion as to the laws of any jurisdiction other
than the laws of The Commonwealth of Massachusetts, and, to the extent
expressly addressed herein, if any, the federal laws of the United States of
America, each as presently existing. Nothing in this letter shall be construed
to constitute an opinion as to any question of choice of law or conflicts of
laws affecting or relating to the matters addressed in this letter. In this
regard, we point out that although the Agreement states that it shall be
governed by and construed in accordance with the laws of Massachusetts as to
perfection of security interests in Acceptable Collateral, it states that it
shall otherwise be governed by and construed in accordance with the federal
laws of the United States and, to the extent there is no applicable federal
law, the laws of the District of Columbia.
We assume that you have filed or caused to be filed duly
executed and completed Uniform Commercial Code financing statements in proper
form in such filing offices within such jurisdiction or jurisdictions as may be
necessary to perfect the security interest of Fannie Mae in the Collateral
under applicable law if the Collateral or any portion thereof were determined
or construed to constitute "general intangibles" (within the meaning of that
term under the UCC) or other form of property requiring the filing of financing
statements for perfection; and, in connection with the foregoing, we assume
that there have not been filed in any such filing offices Uniform Commercial
Code financing statements describing such Collateral in favor of any other
person as secured party which would take priority over the financing statements
filed in favor of Fannie Mae as secured party. We understand that you are or
will be relying upon an opinion of Lender's counsel as to, among other things,
the proper filing of such financing statements (and any actions necessary to
continue the effectiveness thereof, such as the filing and refiling of
continuation statements) and the perfection and priority of the security
interest of Fannie Mae to the extent the Collateral constitutes or may be
construed to constitute property requiring the filing of financing statements
for perfection.
In the opinions set forth below, when we state that Collateral
is, shall be or must be, in the "Possession" of the Custodian, we mean that:
(i) as to Collateral in the form of Instruments,
such Instruments shall be held in the actual
possession
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of the Custodian and shall be duly endorsed to
the Custodian or in blank;
(ii) as to Collateral in the form of Federal
Book-Entry Securities, the Federal Reserve Bank
of Boston shall make an appropriate entry on its
books and records of the transfer of such
Federal Book-Entry Securities to the securities
account of the Depositary, and the Depositary
acting as Financial Intermediary for the
Custodian, shall send the Custodian confirmation
of the purchase by it for the Custodian of such
Federal Book-Entry Securities, and shall also by
book-entry to the Financial Intermediary
Securities Account identify such Federal
Book-Entry Securities as belonging to the
Custodian, and the Custodian shall duly identify
on its books and records that such Securities
are held by it as Custodian for the benefit of
Fannie Mae under the Agreement;
(iii) as to Collateral in the form of Certificated
Securities, such Certificated Securities (A)
shall be held in the possession of the Custodian
and shall be registered in the name of the
Custodian or duly endorsed (within the meaning
of Section 8-308 of the UCC) in blank or to the
Custodian, or (B) shall be held in the
possession of a Financial Intermediary for the
Custodian and registered in its name or duly
endorsed to it or in blank, and such Financial
Intermediary shall send the Custodian
confirmation of the purchase by the Financial
Intermediary for the Custodian of such
Certificated Securities and shall also by
book-entry to the Financial Intermediary
Securities Account identify such Certificated
Securities as belonging to the Custodian; and
the Custodian shall duly identify on its books
and records that such Securities are held by it
as Custodian for the benefit of Fannie Mae under
the Agreement;
(iv) as to Collateral in the form of Clearing Agency
Securities, the related Clearing Corporation
shall make appropriate entries on its books
reducing the appropriate securities account of
the transferor and increasing the appropriate
securities account of the Custodian, or a
Financial Intermediary acting for the Custodian,
by the amount of such Clearing Agency
Securities, and, in the case of a Financial
Intermediary, such Financial Intermediary shall
send a confirmation to the Custodian of the
purchase of such Clearing Agency Securities by
the Financial Intermediary for the Custodian and
shall by book-entry to the Financial
Intermediary Securities Account identify such
Clearing Agency Securities as belonging to the
Custodian; and the
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Custodian shall duly identify on its books and
records that such Securities are held by it as
Custodian for the benefit of Fannie Mae under
the Agreement;
(v) as to Collateral in the form of Uncertificated
Securities, (a) submission of an instruction
(within the meaning of Section 8-308(4) of the
UCC) to the issuer of such Uncertificated
Securities originated by the registered owner or
another appropriate person (within the meaning
of Section 8-308(7)(a) and (8) of the UCC, as
applicable), to transfer such Uncertificated
Securities to the Custodian, or a Financial
Intermediary acting for the Custodian, receipt
by the Custodian or such Financial Intermediary
of an initial transaction statement (within the
meaning of Section 8-408(4) of the UCC) signed
by such issuer and showing the Uncertificated
Securities as transferred to the Custodian or
such Financial Intermediary, as the case may be
(or, in either case, its nominee), free of any
registered pledge or other adverse interest, and
registration by such issuer on its books and
records of such transfer of such Uncertificated
Securities to the Custodian or such Financial
Intermediary, as the case may be, and (b) in the
case of the Financial Intermediary, such
Financial Intermediary shall send the Custodian
confirmation of the purchase by the Financial
Intermediary for the Custodian of such
Uncertificated Securities, and shall also by
book-entry to the Financial Intermediary
Securities Account identify such Uncertificated
Securities as belonging to the Custodian; and
the Custodian shall duly identify on its books
and records that such Uncertificated Securities
are held by it as Custodian for the benefit of
Fannie Mae under the Agreement.
(vi) as to Collateral in the form of Deposit
Accounts, each such Deposit Account shall be
appropriately identified as belonging to the
Custodian for the benefit of Fannie Mae under
the Agreement, and shall be at all times subject
to the exclusive possession, dominion and
control of the Custodian.
We also point out that to the extent any of the Collateral is
maintained by a Financial Intermediary as part of a fungible bulk (within the
meaning of Sections 8-313(1) and 8-321(2) of the UCC) the interest of the
secured party therein may be limited to a proportionate property interest in
such fungible bulk.
Based upon and subject to the foregoing, it is our opinion
that:
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1. The delivery into the Possession (as defined
hereinabove) of the Custodian of Collateral in the form of Instruments,
Certificated Securities, Uncertificated Securities, Clearing Agency Securities
or Federal Book-Entry Securities pursuant to the Agreement, will be sufficient
under Massachusetts law to perfect the security interest of Fannie Mae, in such
Collateral and such security interest will be a first priority perfected
security interest under Massachusetts law, provided such Collateral remains
continuously in the Possession of the Custodian as agent of and bailee for
Fannie Mae and such Agreement remains in effect.
2. The delivery into the Possession (as defined
hereinabove) of the Custodian of Collateral in the form of a Deposit Account
pursuant to the Agreement will be sufficient under Massachusetts law to perfect
the security interest of Fannie Mae under the Agreement in such Collateral, or
will be sufficient to cause such security interest to be recognized as a lien
which is effective as a perfected security interest under applicable
Massachusetts law, and such security interest (or lien which is effective as a
security interest) will be of first priority under Massachusetts law, provided
such Collateral remains continuously in the Possession of the Custodian as
agent of the bailee for Fannie Mae and such Agreement remains in effect.
To the extent our opinion set forth in paragraph 2 above
addresses the perfection of a security interest in a Deposit Account which does
not contain exclusively the proceeds of other Collateral in which the Trustee
has a perfected, first priority security interest under the Agreement (referred
to for this purpose as a "Non-Article 9 deposit account"), such opinion is
subject to the following explanation and caveats.
Section 9-104 of the UCC excludes from its coverage transfers
of interests in "deposit accounts", except to the extent such deposit accounts
constitute proceeds of other collateral within the meaning of Section 9-306 of
the UCC. A "deposit account" is defined in Section 9-105 of the UCC as any
"demand, time, savings, passbook or like account maintained with a bank,
savings and loan association, credit union or like organization, other than an
account evidenced by a certificate of deposit." Therefore, the creation of an
enforceable security interest (or a lien comparable to a security interest) in
such a deposit account (which does not contain exclusively the proceeds of
other collateral) will be governed by the common law.
Massachusetts common law pertaining to the creation of an
enforceable security interest in or pledge of a Non-Article 9 deposit account,
although not undeveloped in all respects, is unclear and undeveloped on certain
points. In analyzing the issue, we have examined, in addition to cases decided
under the law of The Commonwealth of Massachusetts, cases decided under the law
of other states which, in our view, may provide guidance on the issue, although
they do not constitute controlling precedent in the examination of these
questions by a Massachusetts court. Reported
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Massachusetts case law governing common law pledges is, for the most part,
limited to cases addressing pledges of passbook accounts. Thus, where an
"indispensable instrument", such as a passbook, does not exist, Massachusetts
common law is uncertain and undeveloped (as it is concerning the question of
what may or may not constitute an "indispensable instrument" other than a
passbook). Although we do not address choice of law in this opinion, we also
bring to your attention that the question of the creation or perfection of an
effective security interest in a deposit account may further be complicated by
uncertainty as to which jurisdiction's law should apply, such as in a situation
in which the debtor (in this case the Lender) and the deposit account being
pledged (in this case, a deposit account held in Massachusetts) are located in
different jurisdictions.
Assuming that Massachusetts law would be applied, it is our
opinion, although the matter is not free from doubt, that a Massachusetts court
applying Massachusetts law would hold that a properly granted security interest
in and lien upon a Non-Article 9 deposit account which is established and
maintained so that the secured party has sole dominion, control and possession
of the account and over the disposition of amounts credited thereto, and which
is maintained in the name of the secured party in a manner consistent with the
Agreement and the applicable assumptions stated hereinabove, will create a lien
thereon in favor of the secured party which will not be subject to any lien
(subject to the qualifications appearing elsewhere in this opinion) or security
interest that would be recognized to be superior to the interest of such
secured party.
We undertake no obligation to advise you as to matters that
may occur or come to our attention in the future, whether of a legal or factual
nature. Although this opinion assumes that applicable law in effect on the
date hereof remains unchanged, we draw to your attention that in 1994 there was
adopted by the American Law Institute and the National Conference of
Commissioners on Uniform State Laws a substantial revision of Article 8 (and
certain companion revisions to Article 9) of the Uniform Commercial Code,
including revisions to the provisions thereof governing transfers of interests
in investment securities, and that proposed legislation adopting such revisions
(in whole or in part, or in modified form) is currently under consideration by
the Massachusetts legislature. We also point out that on March 4, 1996 the
Department of the Treasury published proposed regulations that take into
account the proposed revisions to UCC Articles 8 and 9 and would revise the
regulations governing certain Federal Book-Entry Securities.
We are furnishing this opinion to you at the request of our
client solely for your benefit in connection with the Custodian's compliance
with the requirements of Section 3.01(a) (i) of the Agreement and the opinion
may not be relied upon by any
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person other than the persons to whom it is addressed without our prior written
approval.
Very truly yours,
cc: State Street Bank and Trust Company
(copy of opinion to be delivered concurrently to:
Office of General Counsel
Federal National Mortgage Association
3900 Wisconsin Avenue, N.W.
Washington, DC 20016
Re: Multifamily Matters]
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EXHIBIT M
CUSTODIAN'S SCHEDULE OF FEES
Annual Administration Fee: $160.00 per month.
This fee would cover the monthly processing requirements as covered under this
Agreement.
Collateral Transactions:
1. Delivery of Letter of Credit or amendment: $50 per Letter of
Credit or amendment delivered
2. Draw on Letter of Credit: $150 per draw
3. Delivery of Investment Agreement or amendment: $50 per Agreement
or amendment
4. Sale of a Permitted Investment: $50 per sale
5. Out-of-pocket expenses, including, by way of example and not
limitation, transfer charges, wire transfer charges, costs
associated with the purchase or change of a Permitted
Investment, postage, legal fees, etc. billed at cost
This Schedule of Fees shall remain in effect for two years from the effective
date of this Agreement. Custodian may make reasonable adjustments to these
fees thereafter by giving Fannie Mae and Lender 60 days' prior notice of the
adjustment.
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EXHIBIT N
PERQ CREDIT
It Fannie Mae determines that Lender is a Qualifying Lender on
or prior to September 30, 1997 and the aggregate unpaid balance of Mortgage
Loans equals or exceeds $500 million as of the date of execution by Fannie Mae
of this Agreement, the following provisions shall apply:
1. Definitions
"PERQ Collateral Margin" means, as of the PERQ Effective Date,
the amount equal to the excess, if any, of the Collateral Value of Acceptable
Collateral over the sum of the Base Reserve Amount and the Risk-Based Reserve
Amount (as calculated with applicable PERQ Rates).
"PERQ Credit" means, as of any date of determination, the
aggregate amount in U.S. Dollars determined in accordance with (i) through (iv)
below:
(i) the Superseded Reserve Amount, as of the PERQ Effective
Date, minus
(ii) the sum of the Base Reserve Amount and the Risk-Based Reserve
Amount (as calculated with applicable PERQ Rates), as of the PERQ
Effective Date; minus
(iii) the excess, if any, of the PERQ Release Amount, if any, over
the amount equal to clause (i) of the definition of "PERQ Release Amount,"
as of the PERQ Effective Date; minus
(iv) reductions, if any, of the PERQ Credit applied by Custodian
from time to time (at the direction of Lender when Lender is a Qualifying
Lender) due to an increase to the Risk-Based Reserve Amount (A) when a
loan becomes a Mortgage Loan pursuant to this Agreement, or (B) upon a
change in Loss Level respecting a Mortgage Loan.
"PERQ Release Amount" means, as of the PERQ Effective Date,
the aggregate amount in U.S. Dollars determined in accordance with (i) through
(iii) below.
(i) the excess, if any, of the Collateral Value of Acceptable
Collateral over the Superseded Reserve Amount; plus
(ii) the Collateral Value of Acceptable Collateral previously
delivered to Custodian by Lender respecting loans that became Mortgage
Loans on or after November 1, 1995 through the last day of the month
covered by the most recent unpaid principal balance report supplied by
Fannie Mae to Custodian pursuant to Section 3.08 of this Agreement; minus
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(iii) the excess, if any, of the Superseded Reserve Amount over the
Collateral Value of Acceptable Collateral;
provided that, in no event shall the PERQ Release Amount exceed the PERQ
Collateral Margin.
"Superseded Reserve Amount" means, as of the PERQ Effective
Date, the amount in U.S. Dollars determined in accordance with (i) through
(vii) below:
(i) $500,000; plus
(ii) $10.00 per each $1,000 (1.0%) of that portion, if any, of the
aggregate unpaid principal balance of all Mortgage Loans that is equal to or
less than $50 million;-plus
(iii) $7.50 per each $1,000 (.75%) of that portion, if any, of
the aggregate unpaid principal balance of all Mortgage Loans that is greater
than $50 million but less than or equal to $150 million; plus
(iv) $5.00 per each $1,000 (.50%) of that portion, if any, of the
aggregate unpaid principal balance of all Mortgage Loans that is greater than
$150 million; plus
(v) $1.50 per each $1,000 (.15%) of the aggregate unpaid principal
balance of all Mortgage Loans, if any, for which the Loss Level is Level II;
plus
(vi) $3.00 per each $1,000 (.30%) of the aggregate unpaid principal
balance of all Mortgage Loans, if any, for which the Loss Level is Level III;
minus
(vii) $1.25 per each $1,000 (.125%) of the aggregate unpaid
principal balance of all Mortgage Loans, if any, that are designated by Fannie
Mae as HERRO Loans for purposes of and as defined in this Agreement.
2. Release of PERQ Release Amount. As of the PERQ Effective
Date, if the Collateral Value of Acceptable Collateral is equal to or exceeds
the sum of the Base Reserve Amount and the Risk-Based Reserve Amount (as
calculated with applicable PERQ Rates), then Custodian may release Acceptable
Collateral to Lender pursuant to Section 3.03(c) and (d) of this Agreement in
the amount of the PERQ Release Amount, if any.
3. Calculation of PERQ Credit. As of the PERQ Effective Date,
Custodian shall calculate Lender's PERQ Credit. Custodian shall notify Fannie
Mae and Lender of the amount of the PERQ Credit as of the PERQ Effective Date.
Custodian shall include ,the PERQ Credit, as from time to time reduced, as a
component of the Aggregate Reserve Requirement, whether or not Lender is
thereafter a Qualifying Lender as of any date of determination. Custodian
shall report, in the monthly report to Fannie Mae and Lender, pursuant to
Section 3.03 (a) (x) of this Agreement, the
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amount of the PERQ Credit, if any, as of the monthly Valuation Date. The PERQ
Credit shall be subject to reduction, from time to time, solely by application
of the PERQ Credit by the Custodian as provided in subsection 4 of this Exhibit
N.
4. Application of PERQ Credit. In lieu of delivery of additional
Acceptable Collateral when that Lender is a Qualifying Lender, unless Lender
otherwise directs in writing to Custodian, Custodian shall apply all or a
specified portion of the PERQ Credit in connection with the requirements of
Section 3.03(b) of this Agreement due to an increase in the Risk-Based Reserve
Amount upon (A) when a loan becomes a Mortgage Loan pursuant to this Agreement,
or (B) upon a change in Loss Level respecting a Mortgage Loan. Custodian shall
so apply the PERQ Credit only when the Lender is a Qualifying Lender pursuant
to Section 3.10 of this Agreement. Upon any such application of the PERQ
Credit, Custodian shall reduce the PERQ Credit in the amount so applied.
Application by Custodian of the PERQ Credit pursuant to this subsection 3 of
Exhibit N shall permanently reduce the PERQ Credit.
5. For the purpose of fulfilling its obligations under Exhibit N
to this Agreement, Custodian shall rely on the most recent monthly reports or
other written notice from Fannie Mae pursuant to Section 3.08 of this
Agreement.
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EXHIBIT O
LENDER'S GENERAL PARTNERS
Set forth below is the name, address and telecopy number of each of
Lender's general partners:
Washington Mortgage Financial Group, Ltd. is not a partnership
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