EXECUTION COPY
RESIDENTIAL FUNDING MORTGAGE SECURITIES II, INC.
as Purchaser,
and
RESIDENTIAL FUNDING CORPORATION
as Seller
REVOLVING CREDIT LOAN PURCHASE AGREEMENT
Dated as of March 27, 1997
Revolving Credit Loans
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
Section 1.1. Definitions............................................... 1
ARTICLE II
SALE OF REVOLVING CREDIT LOANS AND RELATED PROVISIONS
Section 2.1. Sale of Revolving Credit Loans............................ 2
Section 2.2. Payment of Purchase Price................................. 4
Section 2.3. Reserved.................................................. 5
Section 2.4. Variable Funding Notes on or after the Closing Date....... 5
Section 2.5. Draws After an Amortization Event......................... 6
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.1. Seller Representations and Warranties................ 6
ARTICLE IV
SELLER'S COVENANTS
Section 4.1. Covenants of the Seller.............................. 14
ARTICLE V
SERVICING
Section 5.1. Servicing............................................ 14
-i-
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
ARTICLE VI
INDEMNIFICATION BY THE SELLER
WITH RESPECT TO THE REVOLVING CREDIT
Section 6.1. Indemnification With Respect to the Revolving Credit
Loans.................. 15
Section 6.2. Limitation on Liability of the Seller......... 15
ARTICLE VII
TERMINATION
Section 7.1. Termination.....................................15
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. Amendment.................................................... 16
Section 8.2. GOVERNING LAW................................................ 16
Section 8.3. Notices...................................................... 16
Section 8.4. Severability of Provisions................................... 16
Section 8.5. Relationship of Parties...................................... 17
Section 8.6. Counterparts................................................. 17
Section 8.7. Further Agreements........................................... 17
Section 8.8. Intention of the Parties..................................... 17
Section 8.9. Successors and Assigns; Assignment of This Agreement......... 17
Section 8.10 Survival..................................................... 18
-ii-
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
Page
Exhibits
Exhibit 1 Revolving Credit Loan Schedule
-iii-
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
This REVOLVING CREDIT LOAN PURCHASE AGREEMENT (this
"Agreement"), dated as of March 27, 1997, is made between Residential Funding
Corporation (the "Seller") and Residential Funding Mortgage Securities II, Inc.
(the "Purchaser").
W I T N E S S E T H :
WHEREAS, the Seller owns Cut-off Date Loan Balances and the
Related Documents for the home equity lines of credit indicated on the Revolving
Credit Loan Schedule attached as Exhibit 1 hereto (collectively, the "Revolving
Credit Loans"), including rights to (a) any property acquired by foreclosure or
deed in lieu of foreclosure or otherwise, and (b) the proceeds of any insurance
policies covering the Revolving Credit Loans;
WHEREAS, the parties hereto desire that the Seller sell the
Cut-off Date Loan Balances of the Revolving Credit Loans to the Purchaser
pursuant to the terms of this Agreement together with the Related Documents on
the Closing Date, and thereafter all Additional Balances created on or after the
Cut-off Date;
WHEREAS, pursuant to the terms of the Servicing Agreement, the
Master Servicer will service the Revolving Credit Loans directly or through one
or more Subservicers;
WHEREAS, pursuant to the terms of the Trust Agreement, the
Purchaser will sell the Revolving Credit Loans to the Issuer in exchange for the
cash proceeds of the Securities;
WHEREAS, pursuant to the terms of the Trust Agreement, the
Issuer will issue and transfer to or at the direction of the Purchaser, the
Certificates;
WHEREAS, pursuant to the terms of the Indenture, the Issuer
will issue and transfer to or at the direction of the Purchaser, the Notes,
secured by the Revolving Credit Loans;
NOW, THEREFORE, in consideration of the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. For all purposes of this Revolving
Credit Loan Purchase Agreement, except as otherwise expressly provided herein or
unless the context otherwise requires, capitalized terms not otherwise defined
herein shall have the meanings assigned to such terms in the Definitions
contained in Appendix A to the Indenture dated March 27, 1997 (the "Indenture"),
between Home Equity Loan Trust 1997-HS2, as issuer and The Chase Manhattan Bank,
as indenture trustee, which is incorporated by reference herein. All other
capitalized terms used herein shall have the meanings specified herein.
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-2-
ARTICLE II
SALE OF REVOLVING CREDIT LOANS AND RELATED PROVISIONS
Section 2.1. Sale of Revolving Credit Loans.
(a) The Seller, by the execution and delivery of this
Agreement, does hereby sell, assign, set over, and otherwise convey to the
Purchaser, without recourse, all of its right, title and interest in, to and
under the following, and wherever located: (i) the Revolving Credit Loans
(including without limitation the Cut-off Date Loan Balances and all Additional
Balances; provided, however, that following the occurrence of an Amortization
Event, any subsequent loan balance represented by each Draw and interest thereon
will not be deemed transferred to the Issuer, and the Seller (in such event)
shall retain ownership of each loan balance represented by each such Draw made
thereafter and interest thereon), all interest accruing thereon and all
collections in respect thereof received on or after the Cut-off Date; (ii)
property which secured a Revolving Credit Loan and which has been acquired by
foreclosure or deed in lieu of foreclosure; (iii) the interest of the Seller in
any insurance policies in respect of the Revolving Credit Loans; and (iv) all
proceeds of the foregoing; provided, however, that the Purchaser does not assume
the obligation under each Loan Agreement to fund Draws to the Mortgagor
thereunder, and the Purchaser shall not be obligated or permitted to fund any
such Draws, it being agreed that the Seller will retain the obligation to fund
future Draws. Such conveyance shall be deemed to be made: (1) with respect to
the Cut-off Date Loan Balances, as of the Closing Date; and (2) with respect to
the amount of each Additional Balance created on or after the Cut-off Date, as
of the later of the Closing Date and the date that the corresponding Draw was
made pursuant to the related Loan Agreement, subject to the receipt by the
Seller of consideration therefor as provided herein under clause (b) of Section
2.2.
(b) In connection with such conveyance, the Seller further
agrees, at its own expense, on or prior to the Closing Date with respect to the
Loan Balance of the Revolving Credit Loans to indicate in its books and records
that the Revolving Credit Loans have been sold to the Purchaser pursuant to this
Agreement and to deliver to the Purchaser true and complete lists of all of the
Revolving Credit Loans specifying for each Revolving Credit Loan (i) its account
number and (ii) its Cut-off Date Loan Balance. Such lists, which form part of
the Revolving Credit Loan Schedule, shall be marked as Exhibit 1 to this
Agreement and are hereby incorporated into and made a part of this Agreement.
(c) In connection with such conveyance by the Seller, the
Seller shall on behalf of the Purchaser deliver to, and deposit with the
respective Custodian, on or before the Closing Date, the following documents or
instruments with respect to each Revolving Credit Loan:
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-3-
(i) the original Mortgage Note endorsed without
recourse in blank or, with respect to any Revolving Credit Loan as to
which the original Mortgage Note has been permanently lost or destroyed
and has not been replaced, a Lost Note Affidavit;
(ii) the original Mortgage with evidence of recording
thereon, or, if the original Mortgage has not yet been returned from
the public recording office, a copy of the original Mortgage certified
by the public recording office in which such original Mortgage has been
recorded;
(iii) assignments (which may be included in one or more
blanket assignments if permitted by applicable law) of the Mortgage in
recordable form to "The Chase Manhattan Bank as trustee" c/o the Seller
at an address specified by the Seller;
(iv) originals of any intervening assignments of the
Mortgage, with evidence of recording thereon, or, if the original of
any such intervening assignment has not yet been returned from the
public recording office, a copy of such original intervening assignment
certified by the public recording office in which such original
intervening assignment has been recorded; and
(v) a true and correct copy of each assumption,
modification, consolidation or substitution agreement, if any, relating
to the Revolving Credit Loan.
Within the time period for the review of each Mortgage File
set forth in Section 2.3 of the Custodial Agreement, if a material defect in any
Mortgage File is discovered which may materially and adversely affect the value
of the related Revolving Credit Loan, or the interests of the Indenture Trustee
(as pledgee of the Revolving Credit Loans), the Noteholders, the
Certificateholders or the Credit Enhancer in such Revolving Credit Loan,
including the Seller's failure to deliver any document required to be delivered
to the Custodian on behalf of the Indenture Trustee (provided that a Mortgage
File will not be deemed to contain a defect for an unrecorded assignment under
clause (iii) above if the Seller has submitted such assignment for recording
pursuant to the terms of the following paragraph), the Seller shall cure such
defect, repurchase the related Revolving Credit Loan at the Repurchase Price or
substitute an Eligible Substitute Loan for the related Revolving Credit Loan
upon the same terms and conditions set forth in Section 3.1 hereof for breaches
of representations and warranties as to the Revolving Credit Loans. With respect
to any missing Mortgage Notes referred to in Subsection 3.1(b)(xxxiv), the
Seller shall have 60 days from the Closing Date to deliver the documents
referred to in this Subsection 2.1(c). If such documents have not been delivered
within 60 days, the Seller shall repurchase the related Revolving Credit Loan or
substitute an Eligible Substitute Loan for the related Revolving Credit Loan
upon the same terms and conditions set forth in Section 3.1 hereof for breaches
of representations and warranties as to the Revolving Credit Loans.
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-4-
Within 60 days after the receipt by the Master Servicer of the
recording information, the Seller at its own expense shall complete and submit
for recording in the appropriate public office for real property records each of
the assignments referred to in clause (iii) above. While such assignment to be
recorded is being recorded, the Custodian shall retain a photocopy of such
assignment. If any assignment is lost or returned unrecorded to the Custodian
because of any defect therein, the Seller is required to prepare a substitute
assignment or cure such defect, as the case may be, and the Seller shall cause
such assignment to be recorded in accordance with this paragraph.
In instances where an original Mortgage or any original
intervening assignment of Mortgage was not, in accordance with clause (ii) or
(iv) above, delivered by the Seller to the respective Custodian prior to or
concurrently with the execution and delivery of this Agreement, the Seller will
deliver or cause to be delivered the originals of such documents to such
Custodian promptly upon receipt thereof.
The Purchaser hereby acknowledges its acceptance of all right,
title and interest to the property, conveyed to it pursuant to this Section 2.1.
(d) The parties hereto intend that the transactions set forth
herein constitute a sale by the Seller to the Purchaser of all the Seller's
right, title and interest in and to the Revolving Credit Loans and other
property as and to the extent described above. In the event the transactions set
forth herein are deemed not to be a sale, the Seller hereby grants to the
Purchaser a security interest in all of the Seller's right, title and interest
in, to and under the Revolving Credit Loans and such other property, to secure
all of the Seller's obligations hereunder, and this Agreement shall constitute a
security agreement under applicable law. The Seller agrees to take or cause to
be taken such actions and to execute such documents, including without
limitation the filing of all necessary UCC-1 financing statements filed in the
State of Minnesota (which shall have been submitted for filing as of the Closing
Date), any continuation statements with respect thereto and any amendments
thereto required to reflect a change in the name or corporate structure of the
Seller or the filing of any additional UCC-1 financing statements due to the
change in the principal office of the Seller, as are necessary to perfect and
protect the Purchaser's interests in each Revolving Credit Loan and the proceeds
thereof.
Section 2.2. Payment of Purchase Price.
(a) The "Purchase Price" for the Revolving Credit Loans
(including the Additional Balances) shall be (1) an amount equal to $300,402,933
in immediately available funds, together with the Certificates, in respect of
the Cut-off Date Loan Balances thereof and (2) in the case of each Additional
Balance transferred hereunder created on or after the Cut-off Date, the
principal amount of the related Draw under the Loan Agreement on the later of
the Closing Date and the date of the creation of such Additional Balance.
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-5-
(b) In consideration of the sale of the Revolving Credit Loans
from the Seller to the Purchaser on the Closing Date, the Purchaser shall pay to
the Seller on the Closing Date by wire transfer of immediately available funds
to a bank account designated by the Seller, the amount specified above in clause
(a)(1) for each Revolving Credit Loan; provided, that such payment may be on a
net funding basis if agreed by the Seller and the Purchaser. With respect to
each Additional Balance transferred hereunder with respect to any Revolving
Credit Loan, the Issuer as assignee of the Purchaser shall pay or cause to be
paid to the Seller or its designee the portion of the Purchase Price specified
above in clause (a)(2) for such Additional Balance in one of the following ways,
as applicable: (i) for any Collection Period during the Revolving Period, so
long as an Amortization Event has not occurred, (a) a cash payment pursuant to
Section 3.03(ii) of the Servicing Agreement and Section 2.2(a)(2) hereof in an
amount equal to the related Draw, if then available from Principal Collections
during the related Collection Period on the Revolving Credit Loans, and (b) to
the extent aggregate Draws exceed Principal Collections for such Collection
Period, an increase in the aggregate principal amount of the Variable Funding
Notes or an issuance of new Variable Funding Notes as of the Payment Date
corresponding to the Collection Period in which such Additional Balances were
created, equal to the amount by which Additional Balances exceeded Principal
Collections for such Collection Period, and (ii) for any Collection Period after
the end of the Revolving Period, so long as an Amortization Event has not
occurred, an increase in the aggregate principal amount of Variable Funding
Notes or an issuance of new Variable Funding Notes as of each Payment Date in an
aggregate amount equal to the total of the related Draws for the corresponding
Collection Period.
Section 2.3. Reserved.
Section 2.4. Variable Funding Notes on or after the Closing Date.
Subject to Section 4.02 of the Indenture, if at any time, the
Seller holds Variable Funding Notes that have reached their Maximum Individual
Variable Funding Note Balance, and to the extent that the same are exchanged for
Capped Funding Notes in accordance with Section 4.02 of the Indenture, the
Purchaser agrees that, upon written request made by the Seller at any time, the
Purchaser shall use its best reasonable efforts to cause such Capped Funding
Notes held by the Seller to be registered for resale by the Seller pursuant to
an effective registration statement filed by the Purchaser in accordance with,
and meeting all requirements of, the Securities Act of 1933, as amended. The
Purchaser shall use its best reasonable efforts to cause such registration
statement to become effective with respect to such Capped Funding Notes as soon
as practicable within a mutually agreed reasonable time period after the
Seller's request. It is contemplated that such registration statement will be
the shelf registration statement pursuant to which the Term Notes issued on the
Closing Date are to be offered, or one substantially similar thereto. In
connection with such registration statement and offering, the Seller shall
reimburse the Purchaser for costs related thereto including registration fees,
printing fees, rating fees, legal fees, accountant's fees, blue sky registration
fees and expenses (if any), related expenses of the Credit Enhancer and other
out-of-pocket costs, if any. In connection with such
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-6-
registration statement and related prospectus, the Seller shall provide the
Purchaser with an updated Revolving Credit Loan Schedule and all other
information reasonably necessary to assure that the statements in the prospectus
with respect to the Revolving Credit Loans and the Seller (including in its
capacity as servicer of the Revolving Credit Loans) are complete and correct in
all material respects as of the date of sale of such Capped Funding Notes by the
Seller. The registration statement shall not include any information with
respect to the Credit Enhancer, except for information approved by the Credit
Enhancer for use therein.
Section 2.5. Draws After an Amortization Event.
In the event that an Amortization Event occurs, any Draws made
on the Revolving Credit Loans thereafter shall not be deemed to be "Additional
Balances" hereunder, and the ownership of the related balances shall be retained
by the Seller. Following an Amortization Event, on any Payment Date, with
respect to the related Collection Period, all Interest Collections and Principal
Collections in respect of each individual Revolving Credit Loan shall be
allocated on a pro rata basis as between the Issuer and the Seller, based on the
relative proportions of the Loan Balance and the Excluded Amount, respectively,
as of the end of the calendar month immediately prior to such Collection Period.
Any losses incurred with respect to any individual Revolving Credit Loan
following an Amortization Event shall be allocated on a pro rata basis between
the Issuer and the Seller, based on the Loan Balance and the Excluded Amount
thereof as of the date of liquidation of such Revolving Credit Loan.
Notwithstanding any other provision hereof or of the Servicing Agreement, the
payments and collections allocable to the Excluded Amount need not be deposited
in the Custodial Account and shall not be deposited in the Distribution Account
or the Payment Account, and shall be distributed by the Master Servicer to the
Seller not less frequently than monthly in accordance with reasonable
instructions provided by the Seller.
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.1. Seller Representations and Warranties. The Seller represents
and warrants to the Purchaser, as of the Closing Date (or if otherwise specified
below, as of the date so specified):
(a) As to the Seller:
(i) The Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and has the corporate power to own its assets and to transact the
business in which it is currently engaged. The Seller is duly qualified
to do business as a foreign corporation and is in good standing in each
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-7-
jurisdiction in which the character of the business transacted by it or
properties owned or leased by it requires such qualification and in
which the failure to so qualify would have a material adverse effect on
the business, properties, assets or condition (financial or other) of
the Seller;
(ii) The Seller has the power and authority to make,
execute, deliver and perform its obligations under this Agreement and
all of the transactions contemplated under this Agreement, and has
taken all necessary corporate action to authorize the execution,
delivery and performance of this Agreement. When executed and
delivered, this Agreement will constitute the legal, valid and binding
obligation of the Seller enforceable in accordance with its terms,
except as enforcement of such terms may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors'
rights generally and by the availability of equitable remedies;
(iii) The Seller is not required to obtain the consent of
any other Person or any consent, license, approval or authorization
from, or registration or declaration with, any governmental authority,
bureau or agency in connection with the execution, delivery,
performance, validity or enforceability of this Agreement, except for
such consents, license, approvals or authorization, or registration or
declaration, as shall have been obtained or filed, as the case may be;
(iv) The execution and delivery of this Agreement and
the performance of the transactions contemplated hereby by the Seller
will not violate any provision of any existing law or regulation or any
order or decree of any court applicable to the Seller or any provision
of the Certificate of Incorporation or Bylaws of the Seller, or
constitute a material breach of any mortgage, indenture, contract or
other agreement to which the Seller is a party or by which the Seller
may be bound; and
(v) No litigation or administrative proceeding of or
before any court, tribunal or governmental body is currently pending,
or to the knowledge of the Seller threatened, against the Seller or any
of its properties or with respect to this Agreement or the Certificates
which in the opinion of the Seller has a reasonable likelihood of
resulting in a material adverse effect on the transactions contemplated
by this Agreement.
(vi) This Agreement constitutes a legal, valid and
binding obligation of the Seller, enforceable against the Seller in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights in general and except as such enforceability may be
limited by general principles of equity (whether considered in a
proceeding at law or in equity);
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-8-
(vii) This Agreement constitutes a valid transfer and
assignment to the Purchaser of all right, title and interest of the
Seller in and to the Cut-off Date Loan Balances with respect to the
Revolving Credit Loans, all monies due or to become due with respect
thereto, and all proceeds of such Cut-off Date Loan Balances with
respect to the Revolving Credit Loans and such funds as are from time
to time deposited in the Custodial Account (excluding any investment
earnings thereon) as assets of the Trust and all other property
specified in the definition of "Trust" as being part of the corpus of
the Trust conveyed to the Purchaser by the Seller, and upon payment for
the Additional Balances, will constitute a valid transfer and
assignment to the Purchaser of all right, title and interest of the
Seller in and to the Additional Balances, all monies due or to become
due with respect thereto, and all proceeds of such Additional Balances
and all other property specified in the definition of "Trust" relating
to the Additional Balances; and
(viii) The Seller is not in default with respect to any
order or decree of any court or any order, regulation or demand or any
federal, state, municipal or governmental agency, which default might
have consequences that would materially and adversely affect the
condition (financial or other) or operations of the Master Servicer or
its properties or might have consequences that would materially
adversely affect its performance hereunder.
(b) As to the Revolving Credit Loans:
(i) The information set forth in the Revolving Credit
Loan Schedule for such Revolving Credit Loans is true and correct in
all material respects as of the date or dates respecting which such
information is furnished;
(ii) The Cut-off Date Loan Balances have not been
assigned or pledged, the Seller has good and marketable title thereto
and the Seller is the sole owner and holder of such Cut-off Date Loan
Balances free and clear of any and all liens, claims, encumbrances,
participation interests, equities, pledges, charges of security
interests of any nature and has full right and authority, under all
governmental and regulatory bodies having jurisdiction over the
ownership of the applicable Revolving Credit Loans to sell and assign
the same pursuant to this Agreement;
(iii) The related Mortgage Note and the Mortgage have not
been assigned or pledged, the Seller has good and marketable title
thereto and the Seller is the sole owner and holder of the Revolving
Credit Loan free and clear of any and all liens, claims, encumbrances,
participation interests, equities, pledges, charges of security
interests of any nature and has full right and authority, under all
governmental and regulatory bodies having jurisdiction over the
ownership of the applicable Revolving Credit Loans to sell and assign
the same pursuant to this Agreement;
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-9-
(iv) To the best of Seller's knowledge, there is no valid offset, defense
or counterclaim of any obligor under any Loan Agreement or Mortgage;
(v) To the best of Seller's knowledge, there is no delinquent recording or
other tax or fee or assessment lien against any related Mortgaged Property;
(vi) To the best of Seller's knowledge, there is no proceeding pending or
threatened for the total or partial condemnation of the related Mortgaged
Property;
(vii) To the best of Seller's knowledge, there are no
mechanics' or similar liens or claims which have been filed for work,
labor or material affecting the related Mortgaged Property which are,
or may be liens prior or equal to, or subordinate with, the lien of the
related Mortgage, except liens which are fully insured against by the
title insurance policy referred to in clause (xi);
(viii) As of the Cut-off Date, no Revolving Credit Loan was 30 days or more
delinquent;
(ix) For each Revolving Credit Loan, the related Mortgage File contains
each of the documents and instruments specified to be included therein;
(x) The related Mortgage Note and the related Mortgage
at the time it was made complied in all material respects with
applicable local, state and federal laws;
(xi) A policy of title insurance in the form and amount
required by the related Seller's Agreement was effective as of the
closing of each Revolving Credit Loan and each such policy is valid and
remains in full force and effect, and with respect to each Revolving
Credit Loan with a Cut-off Date Loan Balance greater than or equal to
$50,000 a title search or other assurance of title customary in the
relevant jurisdiction was obtained as to which no title insurance
policy or binder was issued and with respect to the remainder of the
Revolving Credit Loans as to which no title insurance policy or binder
was issued or title search obtained there are no intervening liens
affecting the Mortgaged Property;
(xii) None of the Mortgaged Properties is a mobile home or a manufactured
housing unit that is not permanently attached to its foundation;
(xiii) No more than 62.1% of the Revolving Credit Loans,
by Cut-off Date Loan Balance, are secured by Mortgaged Properties
located in California;
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-10-
(xiv) As of the Cut-off Date the Combined Loan-to-Value Ratio for each
Revolving Credit Loan was not in excess of 100%;
(xv) [Reserved];
(xvi) The Seller has not transferred the Revolving Credit Loans to the
Purchaser with any intent to hinder, delay or defraud any of its creditors;
(xvii) The minimum monthly payment with respect to any
Revolving Credit Loan is not less than the interest accrued at the
applicable Loan Rate on the average daily Loan Balance during the
interest period relating to the date on which such minimum monthly
payment is due;
(xviii) The Seller will submit for filing or cause to be
submitted for filing UCC-1 financing statements in accordance with the
terms of this Agreement;
(xix) Each Loan Agreement and each Mortgage is substantially similar one to
the other and is an enforceable obligation of the related Mortgagor;
(xx) To the best of Seller's knowledge, the physical property subject to
each Mortgage is free of material damage and is in good repair;
(xxi) The Seller has not received a notice of default of
any senior mortgage loan related to a Mortgaged Property which has not
been cured by a party other than the related Subservicer;
(xxii) Each of the Mortgage Notes has a substantially similar definition of
Prime as the Index applicable to the Loan Rate;
(xxiii) None of the Revolving Credit Loans are reverse mortgage loans;
(xxiv) (A) No Revolving Credit Loan has an original term
to maturity in excess of 311 months. On each date that the Loan Rates
have been adjusted prior to the Cut-off Date interest rate adjustments
on the Revolving Credit Loans were made in compliance with the related
Mortgage and Mortgage Note and applicable law. Over the term of any
Revolving Credit Loan, the Loan Rate may not exceed the related Maximum
Loan Rate, if any. (B) The Revolving Credit Loans have Maximum Loan
Rates which range between 5.99% and 16.50%. The Gross Margins for the
Revolving Credit Loans range between 0.00% and 8.25%, and the weighted
average Gross Margin for the Revolving Credit Loans is approximately
2.60% as of the Cut-off Date. As of the Cutoff Date, the Loan Rates on
the Revolving Credit Loans range between 5.99% and 16.50% and the
weighted average Loan Rate is approximately 9.30%. The weighted
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-11-
average remaining term to scheduled maturity of the Revolving Credit
Loans on a contractual basis as of the Cut-off Date Loan is
approximately 235 months;
(xxv) (A) Each Mortgaged Property with respect to the
Revolving Credit Loans consists of a single parcel of real property
with a single family residence erected thereon, or an individual
condominium unit, planned unit development unit or townhouse. (B) With
respect to the Revolving Credit Loans (i) approximately 17.70% (by
Cut-off Date Loan Balance are secured by real property improved by
individual condominium units, planned development units or townhouses,
and (ii) approximately 82.30% (by Cutoff Date Loan Balance) are secured
by real property with a single family residence erected thereon;
(xxvi) As of the Cut-off Date, the Credit Limits on the
Revolving Credit Loans range between approximately $7,000 and $500,000
with an average of $42,199. As of the Cut-off Date, no Revolving Credit
Loan had a principal balance in excess of $495,149 and the weighted
average Credit Limit Utilization Rate, based on the Credit Limits of
the Revolving Credit Loans is equal to approximately 82.20%;
(xxvii) Approximately 0.23% and 99.77% of the Revolving Credit Loans, by
aggregate principal balance as of the Cut-off Date are first and second liens,
respectively;
(xxviii) Each Subservicer meets all applicable requirements
under the Servicing Agreement, is properly qualified to service the
Revolving Credit Loans and has been servicing the Revolving Credit
Loans prior to the Cut-off Date in accordance with the terms of the
respective Subservicing Agreement;
(xxix) For each Revolving Credit Loan, hazard insurance
and flood insurance has been obtained which meets all applicable
requirements of Section 3.04 of the Servicing Agreement;
(xxx) There is no material default, breach, violation or
event of acceleration existing under the terms of any Mortgage Note or
Mortgage and no event which, with notice and expiration of any grace or
cure period, would constitute a material default, breach, violation or
event of acceleration under the terms of any Mortgage Note or Mortgage,
and no such material default, breach, violation or event of
acceleration has been waived by the Seller or by any other entity
involved in originating or servicing a Revolving Credit Loan;
(xxxi) No instrument of release or waiver has been
executed in connection with the Revolving Credit Loans, and no
Mortgagor has been released, in whole or in part from its obligations
in connection with a Revolving Credit Loan;
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-12-
(xxxii) With respect to each Revolving Credit Loan that is
a second lien, either (i) no consent for the Revolving Credit Loan was
required by the holder of the related prior lien or (ii) such consent
has been obtained and is contained in the mortgage file;
(xxxiii) The Mortgage contains a customary provision for the
acceleration of the payment of the unpaid principal balance of the
Revolving Credit Loan in the event the related Mortgaged Property is
sold without the prior consent of the mortgagee thereunder; and
(xxxiv) The Mortgage Notes for not more than 0.01% of the
Revolving Credit Loans, by Cut-off Date Loan Balance, are missing from
the Mortgage File.
Upon discovery by Seller or upon notice from the Purchaser,
the Credit Enhancer, the Issuer, the Owner Trustee, the Indenture Trustee or any
Custodian, as applicable, of a breach of any representation or warranty in
clause (a) above which materially and adversely affects the interests of the
Securityholders or the Credit Enhancer, as applicable, in any Revolving Credit
Loan, the Seller shall, within 45 days of its discovery or its receipt of notice
of such breach, either (i) cure such breach in all material respects or (ii) to
the extent that such breach is with respect to a Revolving Credit Loan or a
Related Document, either (A) repurchase such Revolving Credit Loan from the
Issuer at the Repurchase Price, or (B) substitute one or more Eligible
Substitute Loans for such Revolving Credit Loan, in each case in the manner and
subject to the conditions and limitations set forth below.
Upon discovery by the Seller or upon notice from the
Purchaser, the Credit Enhancer, the Issuer, the Owner Trustee, the Indenture
Trustee or any Custodian, as applicable, of a breach of any representation or
warranty in this clause (b) above with respect to any Revolving Credit Loan, or
upon the occurrence of a Repurchase Event, which materially and adversely
affects the interests of any Securityholders or the Credit Enhancer, as
applicable, or of the Purchaser in such Revolving Credit Loan (notice of which
shall be given to the Purchaser by the Seller, if it discovers the same),
notwithstanding the Seller's lack of knowledge with respect to the substance of
such representation and warranty, the Seller shall, within 90 days after the
earlier of its discovery or receipt of notice thereof, either cure such breach
or Repurchase Event in all material respects or either (i) repurchase such
Revolving Credit Loan from the Issuer at the Repurchase Price, or (ii)
substitute one or more Eligible Substitute Loans for such Revolving Credit Loan,
in each case in the manner and subject to the conditions set forth below. The
Repurchase Price for any such Revolving Credit Loan repurchased by the Seller
shall be deposited or caused to be deposited by the Master Servicer in the
Custodial Account maintained by it pursuant to Section 3.02 of the Servicing
Agreement.
In the event that the Seller elects to substitute an Eligible
Substitute Loan or Loans for a Deleted Loan pursuant to this Section 3.1, the
Seller shall deliver to the Custodian on
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-13-
behalf of the Issuer, with respect to such Eligible Substitute Loan or Loans,
the original Mortgage Note and all other documents and agreements as are
required by Section 2.1(c), with the Mortgage Note endorsed as required by
Section 2.1(c). No substitution will be made in any calendar month after the
Determination Date for such month. Monthly Payments due with respect to Eligible
Substitute Loans in the month of substitution shall not be part of the Owner
Trust and will be retained by the Master Servicer and remitted by the Master
Servicer to the Seller on the next succeeding Payment Date, provided that a
payment at least equal to the applicable Minimum Monthly Payment has been
received by the Owner Trust, for such month in respect of the Deleted Loan. For
the month of substitution, distributions to the Distribution Account pursuant to
the Servicing Agreement will include the Monthly Payment due on a Deleted Loan
for such month and thereafter the Seller shall be entitled to retain all amounts
received in respect of such Deleted Loan. The Master Servicer shall amend or
cause to be amended the Revolving Credit Loan Schedule to reflect the removal of
such Deleted Loan and the substitution of the Eligible Substitute Loan or Loans
and the Master Servicer shall deliver the amended Revolving Credit Loan Schedule
to the Owner Trustee. Upon such substitution, the Eligible Substitute Loan or
Loans shall be subject to the terms of this Agreement and the Servicing
Agreement in all respects, the Seller shall be deemed to have made the
representations and warranties with respect to the Eligible Substitute Loan
contained herein set forth in Section 3.1(b) (other than clauses (viii), (xiii),
(xiv) (xxiv)(B), (xxv)(B), (xxvi), and (xxvii) thereof) as of the date of
substitution, and the Seller shall be obligated to repurchase or substitute for
any Eligible Substitute Loan as to which a Repurchase Event has occurred as
provided herein. In connection with the substitution of one or more Eligible
Substitute Loans for one or more Deleted Loans, the Master Servicer will
determine the amount (such amount, a "Substitution Adjustment Amount"), if any,
by which the aggregate principal balance of all such Eligible Substitute Loans
as of the date of substitution is less than the aggregate principal balance of
all such Deleted Loans (after application of the principal portion of the
Monthly Payments due in the month of substitution that are to be distributed to
the Payment Account in the month of substitution). The Seller shall deposit the
amount of such shortfall into the Custodial Account on the day of substitution,
without any reimbursement therefor.
Upon receipt by the Indenture Trustee on behalf of the Issuer
and the Custodian of written notification, signed by a Servicing Officer, of the
deposit of such Repurchase Price or of such substitution of an Eligible
Substitute Loan (together with the complete related Mortgage File) and deposit
of any applicable Substitution Adjustment Amount as provided above, the
Custodian, on behalf of the Indenture Trustee shall release to the Seller the
related Mortgage File for the Revolving Credit Loan being repurchased or
substituted for and the Indenture Trustee on behalf of the Issuer shall execute
and deliver such instruments of transfer or assignment prepared by the Master
Servicer, in each case without recourse, as shall be necessary to vest in the
Seller or its designee such Revolving Credit Loan released pursuant hereto and
thereafter such Revolving Credit Loan shall not be an asset of the Issuer.
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-14-
It is understood and agreed that the obligation of the Seller
to cure any breach, or to repurchase or substitute for, any Revolving Credit
Loan as to which such a breach has occurred and is continuing shall, except to
the extent provided in Section 6.1 of this Agreement, constitute the sole remedy
respecting such breach available to the Purchaser, the Issuer, the
Certificateholders (or the Owner Trustee on behalf of the Certificateholders)
and the Noteholders (or the Indenture Trustee on behalf of the Noteholders)
against the Seller.
It is understood and agreed that the representations and
warranties set forth in this Section 3.1 shall survive delivery of the
respective Mortgage Files to the Issuer, or the Custodian.
ARTICLE IV
SELLER'S COVENANTS
Section 4.1. Covenants of the Seller. The Seller hereby
covenants that, except for the transfer hereunder, the Seller will not sell,
pledge, assign or transfer to any other Person, or grant, create, incur or
assume any Lien on any Revolving Credit Loan, or any interest therein, except
with respect to any Excluded Amount; the Seller will notify the Issuer, as
assignee of the Purchaser, of the existence of any Lien (other than as provided
above) on any Revolving Credit Loan immediately upon discovery thereof; and the
Seller will defend the right, title and interest of the Issuer, as assignee of
the Purchaser, in, to and under the Revolving Credit Loans against all claims of
third parties claiming through or under the Seller; provided, however, that
nothing in this Section 4.1 shall be deemed to apply to any Liens for municipal
or other local taxes and other governmental charges if such taxes or
governmental charges shall not at the time be due and payable or if the Seller
shall currently be contesting the validity thereof in good faith by appropriate
proceedings.
ARTICLE V
SERVICING
Section 5.1. Servicing. The Seller will service the Revolving
Credit Loans pursuant to the terms and conditions of the Servicing Agreement and
will service the Revolving Credit Loans directly or through one or more
sub-servicers in accordance therewith.
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-15-
ARTICLE VI
INDEMNIFICATION BY THE SELLER
WITH RESPECT TO THE REVOLVING CREDIT LOANS
Section 6.1. Indemnification With Respect to the Revolving
Credit Loans. The Seller shall indemnify and hold harmless the Purchaser from
and against any loss, liability or expense arising from the breach by the Seller
of its representations and warranties in Section 3.1 of this Agreement which
materially and adversely affects the Purchaser's interest in any Revolving
Credit Loan or from the failure by the Seller to perform its obligations under
this Agreement in any material respect, provided that the Seller shall have no
obligation to indemnify the Purchaser in respect of any loss, liability or
expense that arises as a result of the Purchaser's willful malfeasance, bad
faith or negligence or as a result of the breach by the Purchaser of its
obligations hereunder.
Section 6.2. Limitation on Liability of the Seller. None of
the directors, officers, employees or agents of the Seller shall be under any
liability to the Purchaser, it being expressly understood that all such
liability is expressly waived and released as a condition of, and as
consideration for, the execution of this Agreement. Except as and to the extent
expressly provided in the Servicing Agreement, the Seller shall not be under any
liability to the Owner Trust, the Owner Trustee, the Indenture Trustee or the
Securityholders. The Seller and any director, officer, employee or agent of the
Seller may rely in good faith on any document of any kind prima facie properly
executed and submitted by any Person respecting any matters arising hereunder.
ARTICLE VII
TERMINATION
Section 7.1. Termination. The respective obligations and
responsibilities of the Seller and the Purchaser created hereby shall terminate,
except for the Seller's indemnity obligations as provided herein, upon the
termination of the Owner Trust pursuant to the terms of the Trust Agreement.
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-16-
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.1. Amendment. This Agreement may be amended from
time to time by the Seller and the Purchaser by written agreement signed by the
Seller and the Purchaser, with the consent of the Credit Enhancer (which consent
shall not be unreasonably withheld).
Section 8.2. GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE
DETERMINED IN ACCORDANCE WITH SUCH LAWS.
Section 8.3. Notices. All demands, notices and communications
hereunder shall be in writing and shall be deemed to have been duly given if
personally delivered at or mailed by registered mail, postage prepaid, addressed
as follows:
(i) if to the Seller:
Residential Funding Corporation
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Home Equity Loan Trust 1997-HS2
or, such other address as may hereafter be furnished to the Purchaser in
writing by the Seller.
(ii) if to the Purchaser:
Residential Funding Mortgage Securities II, Inc.
0000 Xxxxxxxxxx Xxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention:
Home Equity Loan Trust 1997-HS2
or such other address as may hereafter be furnished to the Seller in writing
by the Purchaser.
Section 8.4. Severability of Provisions. If any one or more of the
covenants, agreements, provisions of terms of this Agreement shall be held
invalid for any reason whatsoever, then such covenants, agreements, provisions
or terms shall be deemed severable
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-17-
from the remaining covenants, agreements, provisions or terms of this Agreement
and shall in no way affect the validity of enforceability of the other
provisions of this Agreement.
Section 8.5. Relationship of Parties. Nothing herein contained
shall be deemed or construed to create a partnership or joint venture between
the parties hereto, and the services of the Seller shall be rendered as an
independent contractor and not as agent for the Purchaser.
Section 8.6. Counterparts. This Agreement may be executed in
one or more counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed, shall be deemed to be an original
and such counterparts, together, shall constitute one and the same agreement.
Section 8.7. Further Agreements. The Purchaser and the Seller each agree to
execute and deliver to the other such additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of this
Agreement.
Section 8.8. Intention of the Parties. It is the intention of
the parties that the Purchaser is purchasing, and the Seller is selling, the
Revolving Credit Loans, rather than a loan by the Purchaser to the Seller
secured by the Revolving Credit Loans. Accordingly, the parties hereto each
intend to treat the transaction for Federal income tax purposes as a sale by the
Seller, and a purchase by the Purchaser, of the Revolving Credit Loans. The
Purchaser will have the right to review the Revolving Credit Loans and the
Related Documents to determine the characteristics of the Revolving Credit Loans
which will affect the Federal income tax consequences of owning the Revolving
Credit Loans and the Seller will cooperate with all reasonable requests made by
the Purchaser in the course of such review.
Section 8.9. Successors and Assigns; Assignment of This
Agreement. This Agreement shall bind and inure to the benefit of and be
enforceable by the Seller, Purchaser and their respective successors and
assigns. The obligations of the Seller under this Agreement cannot be assigned
or delegated to a third party without the consent of the Credit Enhancer and the
Purchaser, which consent shall be at the Credit Enhancer's and the Purchaser's
sole discretion, except that the Purchaser and the Credit Enhancer acknowledge
and agree that the Seller may assign its obligations hereunder to any Affiliate
of the Seller, to any Person succeeding to the business of the Seller, to any
Person into which the Seller is merged and to any Person resulting from any
merger, conversion or consolidation to which the Seller is a party. The parties
hereto acknowledge that the Purchaser is acquiring the Revolving Credit Loans
for the purpose of transferring them to the Issuer, which will issue
Certificates representing interests in and Notes secured by such Revolving
Credit Loans. As an inducement to the Purchaser to purchase the Revolving Credit
Loans, the Seller acknowledges and consents to (i) the assignment by the
Purchaser to the Issuer of all of the Purchaser's rights against the Seller
pursuant to this Agreement insofar as such rights relate to Revolving Credit
Loans transferred to the Issuer and to the enforcement or exercise of any right
or remedy against the Seller pursuant to this
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-18-
Agreement by the Issuer, (ii) the enforcement or exercise of any right or remedy
against the Seller pursuant to this Agreement by or on behalf of the Issuer and
(iii) the Issuer's pledge of its interest in this Agreement to the Indenture
Trustee and the enforcement by the Indenture Trustee of any such right or remedy
against the Seller following an Event of Default under the Indenture. Such
enforcement of a right or remedy by the Issuer or the Indenture Trustee, as
applicable, shall have the same force and effect as if the right or remedy had
been enforced or exercised by the Purchaser directly.
Section 8.10. Survival. The representations and warranties made herein by
the Seller and the provisions of Article VI hereof shall survive the purchase of
the Revolving Credit Loans hereunder.
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
-19-
IN WITNESS WHEREOF, the Seller and the Purchaser have caused
their names to be signed to this Revolving Credit Loan Purchase Agreement by
their respective officers thereunto duly authorized as of the day and year first
above written.
RESIDENTIAL FUNDING MORTGAGE
SECURITIES II, INC.
as Purchaser
By:
Name: Xxxxx Xxxx
Title: Vice President
RESIDENTIAL FUNDING CORPORATION
as Seller
By:
Name:
Title:
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm
Exhibit 1
REVOLVING CREDIT LOAN SCHEDULE
TO BE PROVIDED UPON REQUEST
[NY01B:316133.4] 16069-00394 03/26/97 9:01pm