Exhibit 10.49
SALOMON BROTHERS REALTY CORP.
SEVEN XXXXX XXXXX XXXXXX
XXX XXXX, XXX XXXX 00000
December 11, 1998
NC Capital Corporation
00000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxxxxx Xxxxxxxx
President
New Century Mortgage Corporation
00000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xx. Xxxx Xxxxxxx
Chief Executive Officer
Ladies and Gentlemen:
This letter agreement (the "Letter Agreement") confirms the understanding
and agreements among NC Capital Corporation ("NCCC"), New Century Mortgage
Corporation ("New Century"), Salomon Brothers Realty Corp. ("SBRC") and Xxxxxxx
Xxxxx Xxxxxx Inc. ("Xxxxxxx Xxxxx Barney"), under the terms set forth herein,
regarding (i) NCCC's agreement to securitize certain fixed and adjustable rate,
one-to-four family, first and second lien mortgages (the "Mortgage Loans")
either (a) using Salomon Brothers Mortgage Securities VII Inc. ("SBMSVII") or
(b) pursuant to a shelf registration filing of NCCC or its affiliate in
connection with pass-through transfers with respect to which Xxxxxxx Xxxxx
Xxxxxx or one of its affiliates is the sole underwriter and (ii) SBRC's
agreement to provide an aggregation line to NCCC in connection with certain
mortgage loans that are originated by New Century.
1. Mortgage Loans.
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(a) In General. NCCC hereby agrees to securitize Mortgage Loans with an
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unpaid principal balance, as of the date of securitization, of not less than
$1,000,000,000 between December 1, 1998 and November 30, 1999 securitized
through a program of securitizations (the "Securitizations") of AAA and Aaa-
rated mortgage-backed securities (the "Securities") either (i) using SBMSVII or
(ii) pursuant to a shelf registration filing of NCCC or its affiliate in
connection with pass-through transfers with respect to which Xxxxxxx Xxxxx
Barney or one of its affiliates is the sole underwriter.
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 2.
(b) Servicing of the Mortgage Loans. The purchase by SBRC of a Mortgage
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Loan pursuant to the Aggregation Line (as defined in Section 3(a)) shall include
the purchase of the related servicing rights for such Mortgage Loan. Unless
otherwise agreed to between SBRC and NCCC, SBRC hereby covenants and agrees to
hire New Century to service; and New Century hereby covenants and agrees to
service the Mortgage Loans for a term beginning on the related Settlement Date
and ending on the related repurchase date as provided for in the Purchase and
Sale Agreement (as defined in Section 3(a)); provided that if a Termination
Event (as defined in Section 5(b)) has occurred, New Century shall immediately
be terminated as servicer. In connection with its servicing duties, New Century
can service the Mortgage Loans itself or through such other sub-servicer which
SBRC has accepted in writing, as the sub-servicer (the "Sub-Servicer") provided
that, SBRC shall have the right to perform due diligence on any entity appointed
as servicer or sub-servicer of the Mortgage Loans and may require New Century to
select another servicer or sub-servicer to the extent that SBRC is not satisfied
with the results of such due diligence. The Mortgage Loans shall be serviced in
accordance with the servicing provisions specified in the Pooling and Servicing
Agreement, Series 1998-NC6 dated as of September 1, 1998 among U.S. Bank
National Association, SBMSVII and New Century. New Century or the Sub-Servicer
shall remit payments of principal and interest to SBRC on a date prior to the
25th day of each month beginning with the month after the Settlement Date (as
defined in Section 3(a)) to permit remittances to certificateholders on the
25/th/ day of each month in connection with a securitization, shall enforce
"due-on-sale" provisions to the extent permitted by law, shall administer all
escrow/impound deposits, shall pay compensating interest on principal
prepayments in any month up to the amount of its servicing compensation in such
month and shall make all servicing advances on any Mortgage Loan (including
advances of delinquent principal and interest payments). New Century or the Sub-
Servicer shall be required to make advances in respect of delinquent payments of
principal and interest on the Mortgage Loans through foreclosure and in
connection with any properties acquired by the related trustee in any
securitization transaction through liquidation of such properties, subject to
New Century's or the Sub-Servicer's determination regarding recoverability. The
Mortgage Loans shall be serviced for a servicing fee equal to 0.50% per annum
payable monthly on the then-outstanding principal balance of each Mortgage Loan
(the "Servicing Fee"). Any fee payable to the Sub-Servicer shall be paid by New
Century without any right of reimbursement by SBRC. Any Sub-Servicer shall
execute a letter agreement recognizing SBRC's interest in the Mortgage Loans in
the form of Exhibit A. Notwithstanding the foregoing, in the event NCCC fails to
repurchase a Mortgage Loan on the related repurchase date or if a Termination
Event occurs, New Century and any related Sub-Servicer will no longer be
servicer with respect to such Mortgage Loan or Mortgage Loans, unless the term
of servicing is extended by SBRC in its sole discretion. In such event, SBRC
shall have the right to transfer such servicing to another servicer without
payment of any fee to New Century. New Century will cooperate in good faith to
effect such servicing transfer and shall pay all costs associated with such
servicing transfer.
(c) Conditions Precedent to Mortgage Loan Purchases. SBRC's obligation to
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purchase any Mortgage Loans and related servicing rights which it accepts for
its Aggregation Line shall be subject to each of the following conditions:
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 3.
(i) there shall have been delivered to SBRC a Trust Receipt
issued by U.S. Bank National Association ("U.S. Bank")
with a mortgage loan schedule attached thereto and an
exception report which is acceptable to SBRC in its sole
discretion;
(ii) SBRC shall have had an opportunity to perform a due
diligence review of each Mortgage Loan and shall have
arranged for reappraisals of value with respect to each
Mortgage Loan if desired by SBRC;
(iii) NCCC shall have provided to SBRC such other documents
which are then required to have been delivered under the
Purchase and Sale Agreement or which are reasonably
requested by SBRC, which other documents may include UCC
financing statements, a favorable opinion or opinions of
counsel with respect to matters which are reasonably
requested by SBRC, and/or an officer's or secretary's
certificate; and
(iv) there shall have been delivered to SBRC a limited guaranty
of New Century, in the form of Exhibit B hereto, by which
New Century guarantees the obligations of NCCC under this
Letter Agreement and the Purchase and Sale Agreement.
2. Securitizations.
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(a) In General. As noted above, NCCC shall meet its commitment to
SBRC with respect to not less than $1,000,000,000 in Mortgage Loans between
December 1, 1998 and November 30, 1999 by using a shelf registration statement
of SBMSVII or NCCC (or its affiliate) pursuant to transactions in which Xxxxxxx
Xxxxx Xxxxxx or an affiliate of Xxxxxxx Xxxxx Barney shall act as the sole
underwriter. NCCC and SBRC agree, however, that any securitizations scheduled to
close in December 1998 shall not be counted toward the $1,000,000,000
commitment. Additionally, sales of whole Mortgage Loans by New Century and/or
NCCC to SBRC shall not be counted toward the $1,000,000,000 commitment. NCCC
will pay to Xxxxxxx Xxxxx Xxxxxx promptly upon the closing of each
Securitization an underwriting discount equal to the product of (i) the
applicable Underwriting Fee Percentage (as defined herein) multiplied by (ii)
the aggregate unpaid principal balance of the Mortgage Loans subject to such
Securitization (the "Underwriting Fee"). The "Underwriting Fee Percentage" with
respect to each Securitization shall be one-half of one percent (0.50%). If in
any six-month period commencing with the period from December 1, 1998 through
May 30, 1999, and thereafter on a semiannual basis, NCCC fails to pay Xxxxxxx
Xxxxx Barney a cumulative Underwriting Fee of at least $2,500,000, NCCC shall
pay to Xxxxxxx Xxxxx Xxxxxx on the last business day of such period an amount
equal to (i) $2,500,000 less (ii) the cumulative Underwriting Fee for such
period; provided, however, that any Underwriting Fees paid by NCCC in such
period in excess of $2,500,000 shall be carried forward and applied toward
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 4.
NCCC's Underwriting Fee commitment hereunder; provided, further, that the
minimum semiannual Underwriting Fee commitment shall not apply in any such
period in which NCCC utilizes Xxxxxxx Xxxxx Barney as the exclusive underwriter
for all securitizations completed by NCCC during such period. In addition, if on
November 30, 1999, NCCC has not paid to Xxxxxxx Xxxxx Xxxxxx a cumulative
Underwriting Fee of at least $5,000,000, NCCC shall pay to Xxxxxxx Xxxxx Barney
on the last business day of such period an amount equal to (i) $5,000,000 less
(ii) the cumulative Underwriting Fee.
In addition to those fees described above, in the event Xxxxxxx Xxxxx
Xxxxxx xxxxx on behalf of NCCC a XX Xxxx (as defined below), Xxxxxxx Xxxxx
Xxxxxx shall receive a fee equal to 1.0% of the proceeds of the XX Xxxx, and, if
Xxxxxxx Xxxxx Xxxxxx xxxxx on behalf of NCCC an Excess Cash Flow Class D Xxxx,
Xxxxxxx Xxxxx Xxxxxx shall receive a fee equal to 1.0% of the stated principal
balance of such bond; provided however, that in the event that the XX Xxxx is
liquidated by Xxxxxxx Xxxxx Xxxxxx as the result of an event of default, Xxxxxxx
Xxxxx Barney shall not receive such fee. In connection with the creation of the
Excess Cash Flow D Bond, the related equity certificates (the "Equity
Certificates") created by such securitization (the "ECF Securitization") will be
delivered to NCCC on the related closing date.
(b) Expenses. NCCC shall pay all reasonable costs and expenses
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arising from the preparation for and execution of the Securitizations, including
but not limited to, the fees and disbursements of legal counsel (including
investor's counsel in any private placement, if retained), rating agency fees
(including those fees associated with the annual monitoring of previously closed
Securitizations), credit enhancement fees, SEC registration fees (or equivalent
ratable fees of a SBRC affiliate in lieu thereof if such affiliate's shelf
registration is utilized), auditors' fees, due diligence expenses (other than
Xxxxxxx Xxxxx Xxxxxx'x), costs of preparing and printing any offering documents
and trustee fees, etc. Xxxxxxx Xxxxx Barney shall be responsible for the fees
and disbursements of its own legal counsel and any due diligence expenses
incurred by Xxxxxxx Xxxxx Xxxxxx. It is understood and agreed that NCCC may
require that the parties incurring or charging such costs and expenses agree in
advance that they are payable or reimbursable by NCCC only to a specified
reasonable extent or cap.
(c) Information. NCCC and New Century will furnish Xxxxxxx Xxxxx
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Barney with all financial and other information concerning NCCC and New Century
as Xxxxxxx Xxxxx Xxxxxx xxxxx reasonably appropriate in connection with the
performance of the services contemplated by this letter, including (without
limitation) "Monthly Cash Flow Projections and Sensitivity Analyses", and will
provide Xxxxxxx Xxxxx Barney with reasonable access during normal business hours
to NCCC's and New Century's officers, directors, employees, accountants, and
other representatives. NCCC and New Century acknowledge and confirm that Xxxxxxx
Xxxxx Xxxxxx (i) will rely on such information in the performance of the
services contemplated by this letter without independently investigating or
verifying any of it, (ii) assumes no responsibility for the accuracy or
completeness of such information and (iii) will not disclose such information to
any third party without the prior written consent of NCCC or New Century, as
applicable.
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 5.
(d) Offering Documents. In connection with each Securitization, NCCC will
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be solely responsible (and New Century will be responsible to the extent of any
servicer information) for the contents of any private placement memorandum,
prospectus supplement or other offering document used in connection with the
placement of the Securities (as such documents may be amended or supplemented
and including any information incorporated therein by reference, the "Offering
Document") and any and all other written communications provided by, or
authorized to be provided on behalf of, NCCC to any actual or prospective
purchaser of the Securities except to the extent such contents of the Offering
Document are provided by Xxxxxxx Xxxxx Barney in writing expressly for use in
the Offering Document and provided that any statistical, tabular or similar
information, including computer runs, initially prepared by or on behalf of
Xxxxxxx Xxxxx Xxxxxx (but as to which Xxxxxxx Xxxxx Barney is not taking
responsibility in the Offering Document) shall have been verified by NCCC's
independent public accountants. NCCC shall represent and warrant (and New
Century shall represent and warrant to the extent of any servicer information)
that the Offering Document and such other written communications will not, as of
the date of the offer or sale of the Securities or the closing date of any such
sale, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Such representation and warranty will not cover information
provided in writing by Xxxxxxx Xxxxx Xxxxxx for use specifically in such
Offering Document. NCCC shall authorize Xxxxxxx Xxxxx Barney to provide the
Offering Document to prospective purchasers of the Securities. If at any time
prior to the completion of the offer and sale of the Securities an event occurs
as a result of which the Offering Document (as then supplemented or amended)
would include any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, NCCC or New Century,
as applicable, will promptly notify Xxxxxxx Xxxxx Xxxxxx of such event and
Xxxxxxx Xxxxx Barney will suspend solicitations of prospective purchasers of the
Securities until such time as NCCC or New Century, as applicable, shall prepare
(and NCCC or New Century, as applicable, agrees that, if it shall have notified
Xxxxxxx Xxxxx Xxxxxx to suspend solicitations after orders have been accepted
from prospective purchasers, it will promptly prepare) a supplement or amendment
to the Offering Document which corrects such statement or omission.
(e) Indemnification. New Century and NCCC agree, jointly and severally, to
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indemnify and hold harmless (i) Xxxxxxx Xxxxx Barney, (ii) SBMSVII and (iii)
each person who controls either Xxxxxxx Xxxxx Xxxxxx or SBMSVII within the
meaning of either the Securities Act of 1933, as amended (the "Act") or the
Securities Exchange Act of 1934, as amended (the "Exchange Act") ((i) through
(iii) collectively, the "Indemnified Party") against any and all losses, claims,
damages or liabilities, joint or several, suffered or incurred which arise out
of or are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Offering Document or in any revision or amendment
thereof or supplement thereof or arise out of or are based upon the omission or
alleged omission to state in the Offering Document or in any revision or
amendment thereof or supplement thereto a material fact required to be stated
therein or the omission or alleged omission to state a material fact in any
Offering Document or in any revision or amendment thereof or supplement thereto
necessary to make the statements therein, in light of the circumstances under
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 6.
which they were made, not misleading, and agrees to reimburse each such
Indemnified Party for any legal or other expenses reasonably incurred by it or
him in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however that NCCC and New Century shall not be
liable to any Indemnified Party to the extent that any misstatement or alleged
misstatement or omission or alleged omission was made in reliance upon and in
conformity with the information provided in writing to NCCC or New Century by
Xxxxxxx Xxxxx Barney specifically for inclusion in the Offering Document. This
indemnity agreement will be in addition to any liability which NCCC and New
Century may otherwise have.
In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in this Section 2(e) is due in accordance
with its terms but is for any reason held by a court to be unavailable on
grounds of policy or otherwise, the parties entitled to indemnification
thereunder shall be entitled to contribution for the aggregate losses, claims,
damages and liabilities (including legal and other expenses reasonably incurred
in connection with investigating or defending same) to which it or they may be
subject, except that no person guilty of fraudulent misrepresentation shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. In determining the amount of contribution to which the
respective parties are entitled, consideration shall be given to the relative
benefits and also the relative fault of the party in connection with the
statements or omissions that resulted in losses, the parties' relative knowledge
and access to information concerning the matter with respect to which the claim
was asserted, the opportunity to correct and/or prevent the breach, and any
other equitable considerations appropriate under the circumstances. For purposes
of this Section 2(e), each person who controls either Xxxxxxx Xxxxx Xxxxxx or
SBMSVII within the meaning of either the Act or the Exchange Act shall have the
same rights to contribution as Xxxxxxx Xxxxx Barney or SBMSVII, respectively.
Any party entitled to contribution will, promptly after receipt of notice of
commencement of any action, suit or proceeding against such party in respect of
which a claim for contribution may be made against NCCC and/or New Century under
this Section 2(e), notify NCCC and/or New Century, but the omission to so notify
NCCC and/or New Century shall not relieve NCCC and/or New Century from any other
obligation it may have hereunder or otherwise than under this Section 2(e).
(f) All financial data and other documentation prepared by Xxxxxxx Xxxxx
Xxxxxx in connection with the transactions contemplated hereby (including,
without limitation, any computer models, cash flow analyses, and any
documentation prepared by counsel for Xxxxxxx Xxxxx Barney) shall be proprietary
to Xxxxxxx Xxxxx Xxxxxx. Except as otherwise required by law, none of NCCC, New
Century, any of their affiliates, nor any person acting on behalf of any of them
(including, without limitation, counsel and the independent accountants to NCCC
and New Century) shall disseminate, distribute, or otherwise make available such
data or documentation without Xxxxxxx Xxxxx Barney's prior written consent
(other than NCCC or New Century making such data available to any NCCC or New
Century affiliate, its counsel or its independent accountants, in each case on a
need-to-know basis).
This Section 2 shall survive the termination of this Letter Agreement.
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 7.
3. Aggregation Line.
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(a) In General. In addition to the rights provided to Xxxxxxx Xxxxx Xxxxxx
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and SBRC pursuant to Sections 1 and 2 of this Letter Agreement, SBRC shall make
available to NCCC an aggregation line (the "Aggregation Line") pursuant to which
SBRC shall simultaneously purchase from, and sign a forward commitment to resell
to, NCCC Mortgage Loans and the related servicing rights that are deemed
acceptable for such Aggregation Line as set forth below. The Aggregation Line
shall be more fully documented pursuant to the Mortgage Loan Purchase and Sale
Agreement (the "Purchase and Sale Agreement") to be entered into among NCCC, New
Century and SBRC, which shall be substantially similar in form to the Mortgage
Loan Purchase and Sale Agreement dated April 1, 1998 between New Century and
SBRC but shall provide for servicing provisions similar to those set forth in
Section 1(b) of this Letter Agreement. Under the Purchase and Sale Agreement,
NCCC will make standard secondary market corporate representations and
warranties as of the date such Purchase and Sale Agreement is executed and as of
any settlement date for the purchase and sale of any Mortgage Loans pursuant to
such Purchase and Sale Agreement (each such date, a "Settlement Date") and NCCC
shall make standard secondary market representations and warranties with respect
to each Mortgage Loan as of the Settlement Date on which such Mortgage Loan is
sold to SBRC. In the event that NCCC satisfies its obligations under the terms
of this Letter Agreement, the Aggregation Line shall terminate on the last day
of the calendar quarter in which NCCC satisfies its obligations to SBRC pursuant
to Section 1(a) of this Letter Agreement.
The "Purchase Price" with respect to each Mortgage Loan and related
servicing rights which conforms to the Underwriting Standards of New Century
which were most recently reviewed and approved by SBRC and which is not a
Problem Mortgage Loan (as defined in Section 3(b)) or a Non-Standard Mortgage
Loan (as defined in Section 3(c)) (a "Standard Mortgage Loan") shall be equal to
the market value of such Mortgage Loan, as determined by SBRC acting in good
faith. The "Purchase Price" for each Non-Standard Mortgage Loan and related
servicing rights shall be equal to the lesser of (i) the market value of such
Mortgage Loan as determined by SBRC acting in good faith or (ii) the amount
determined in accordance with the provisions of Section 3(c)(iii) of this Letter
Agreement. The "Purchase Price" for each Problem Mortgage Loan and related
servicing rights shall be equal to the lesser of (i) the market value of such
Mortgage Loan as determined by SBRC acting in good faith or (ii) the amount
determined in accordance with the provisions of Section 3(b) of this Letter
Agreement. Unless SBRC provides notice to NCCC and U.S. Bank pursuant to this
section, the Purchase Price for each Standard Mortgage Loan shall be equal to at
least 103% of the unpaid principal balance of such Standard Mortgage Loan, and
the Purchase Price for each Non-Standard Mortgage Loan shall be equal to at
least the market value of such Non-Standard Mortgage Loan as determined by SBRC
acting in good faith less 1%. In order for SBRC to determine when notice is
required to be delivered to U.S. Bank pursuant to this section, NCCC shall
forward to SBRC copies of the financing agreements between NCCC and U.S. Bank.
The repurchase price shall reflect the agreed upon return to SBRC for
providing the Aggregation Line (the "Aggregation Cost"). With respect to any
Standard Mortgage Loan, the Aggregation Cost shall equal One Month LIBOR (as
defined herein) plus 1.25%. With respect to
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 8.
any Problem Mortgage Loan or Non-Standard Mortgage Loan, or in the event that
NCCC sells any Mortgage Loan which is subject to the Aggregation Line to a party
other than SBRC, the Aggregation Cost shall equal One Month LIBOR plus 2.00%;
provided, however, with respect to any second lien Mortgage Loans with a
combined loan-to-value ratio greater than 95% (to a maximum of 100%) the
Aggregation Cost shall equal One Month LIBOR plus 2.50%. In the event that a
Mortgage Loan is sold to a party other than SBRC, the Mortgage Loan shall be
subject to the foregoing increased rate from the day such Mortgage Loan became
subject to the Aggregation Line until the date of the sale to such third party.
A copy of the letter with the terms to the sale to such third party shall be
delivered to SBRC. NCCC shall retain principal and interest on any Mortgage
Loans subject to the Aggregation Line.
"One Month LIBOR" means as of the related Settlement Date, the 30 day
London Interbank Offered Rate as of 11:00 a.m. (London time) on such date, as
indicated on page number 3750 of the Telerate Service. If One Month LIBOR cannot
be so determined, then One Month LIBOR shall mean the rate determined by SBRC in
its sole discretion.
The Aggregation Line, inclusive of any Problem Mortgage Loans, Non-
Standard Mortgage Loans and Mortgage Loans described in Sections 3(c)(ii) and
4(b), at any one time shall be limited to $600 million in amount of Mortgage
Loans and shall have a term of one month. The maximum amount of Problem Mortgage
Loans and Non-Standard Mortgage Loans in the Aggregation Line shall not exceed
$120 million at any one time.
NCCC shall have the right to add Mortgage Loans to the Aggregation
Line up to four times each month. Standard Loans may be removed from the
Aggregation Line twice a month (one of which shall be on the roll date). Problem
Mortgage Loans and Non-Standard Mortgage Loans may be removed from the
Aggregation Line with one week prior written notice by NCCC to SBRC.
SBRC shall provide not less than twenty eight days' prior notice to
NCCC and U.S. Bank (or such other warehouse lender as directed by NCCC) in the
event that SBRC elects to not renew the Aggregation Line for any month.
(b) Problem Mortgage Loans. A "Problem Mortgage Loan" is defined as
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any Mortgage Loan (w) which is in SBRC's sole discretion of insufficient quality
to be financed as a Standard Mortgage Loan or a Non-Standard Mortgage Loan or
purchased, provided, however, that if SBRC agrees, it can finance any Mortgage
Loan rejected from a securitization or whole loan purchase as a Non-Standard
Mortgage Loan, (x) which is missing documentation or other information and such
problem is not cured by NCCC in sixty days, (y) which is delinquent at the time
of financing by SBRC, which becomes delinquent during such financing by SBRC or
(z) was more than thirty days but less than sixty days delinquent on more than
one occasion in the prior twelve months and is now current. Problem Mortgage
Loans shall be subject to the following qualifications with respect to the
Aggregation Line:
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 9.
(i) the maximum Aggregation Line with respect to Problem
Mortgage Loans shall equal $42 million as of any trade
date on which there was formal notification of a trade by
a confirmation letter or trade ticket;
(ii) if a Mortgage Loan is a Problem Mortgage Loan based on
clause (w) or clause (x) above, then the "Purchase Price"
shall be equal to (A) for the first ninety-day period
after purchase, 90% of the unpaid principal balance of the
Problem Mortgage Loan as of the date of purchase and (B)
thereafter, 90% of the unpaid principal balance of the
Problem Mortgage Loan, minus an additional 10% of the
unpaid principal balance of such Problem Mortgage Loan for
each additional month after the initial ninety-day period;
(iii) if a Mortgage Loan is a Problem Mortgage Loan based on
clause (y) above, then the "Purchase Price" shall be equal
to (A) 90% of the unpaid principal balance of the Problem
Mortgage Loan as of the date of purchase if such Mortgage
Loan is delinquent one, two or three payments, (B) 90% of
the unpaid principal balance of the Problem Mortgage Loan,
minus an additional 10% of the unpaid principal balance of
such Problem Mortgage Loan for each of the fourth, fifth
and sixth delinquent payments and (C) 65% of the Broker
Price Opinion obtained by SBRC, at the expense of NCCC,
regarding the real property subject to the Mortgage Loan
if such Mortgage Loan is delinquent more than six
payments; and
(iv) if a Mortgage Loan is a Problem Loan based on clause (z)
above, then the "Purchase Price" shall be equal to (A) 95%
of the unpaid principal balance of the Problem Mortgage
Loan as of the date of purchase if such Mortgage Loan has
been more than thirty days delinquent but less than sixty
days delinquent on two occasions in the prior twelve
months; (B) 90% of the unpaid principal balance of the
Problem Mortgage Loan as of the date of purchase if such
Mortgage Loan has been sixty days delinquent on one
occasion in the prior twelve months and (C) 85% of the
unpaid principal balance of the Problem Mortgage Loan, if
such Mortgage Loan does not meet the requirements set
forth in (A) or (B) above.
With respect to any Mortgage Loan that is a Problem Mortgage Loan based on
clause (x) or clause (y) above, in the event that SBRC determines in its sole
discretion that such Problem Mortgage Loan has ceased to be a Problem Mortgage
Loan, such Mortgage Loan shall be treated as a Standard Mortgage Loan or a Non-
Standard Mortgage Loan, as the case may be, as of the first day of the month
following such determination.
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 10.
(c) Non-Standard Mortgage Loans. A "Non-Standard Mortgage Loan" is defined
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as any Mortgage Loan (x) with an unpaid principal balance in excess of
$1,000,000; or (y) that has a loan-to-value ratio in excess of 85.00% (up to a
maximum of 95.00%); provided, however, at its option, SBRC may deem a Mortgage
Loan with an unpaid principal balance of no more than $1,500,000 to be a
Standard Mortgage Loan. In addition, if (i) Mortgage Loans with a loan-to-value
ratios greater than 80% (but not more than 85%) have an aggregate unpaid
principal balance in excess of $120 million and (ii) Mortgage Loans with unpaid
principal balances greater than $500,000 and less than or equal to $1,500,000
have an aggregate unpaid principal balance in excess of $42 million, such excess
amounts shall be deemed "Non-Standard Mortgage Loans". No Mortgage Loan shall be
subject to the terms of the Aggregation Line if: (i) the unpaid principal
balance of such Mortgage Loan exceeds $1,500,000 or (ii) such Mortgage Loan has
a loan-to-value ratio greater than 95%, if it is a first lien, or a combined
loan-to-value ratio greater than 100%, if it is a second lien. Non-Standard
Mortgage Loans shall be subject to the following qualifications with respect to
the Aggregation Line:
(i) the maximum Aggregation Line with respect to Non-Standard
Mortgage Loans shall equal $78 million (of which no more than
$30 million shall have unpaid principal balances greater than
$1,000,000 (including any Problem Loans with unpaid principal
balances greater than $500,000) and no more than $42 million
shall be Mortgage Loans with a loan-to-value ratio in excess of
85.00% (up to a maximum of 95.00%)), as of any trade date on
which there was formal notification of a trade by a
confirmation letter or trade ticket;
(ii) the maximum Aggregation Line with respect to second lien
Mortgage Loans shall equal $25 million for second lien Mortgage
Loans with a combined loan-to-value ratio in excess of 95.00%
(up to a maximum of 100.00%), as of any trade date on which
there was formal notification of a trade by a confirmation
letter or trade ticket, and Mortgage Loans provided for in this
clause (ii) shall not be applied to the $42 million limit in
the preceding clause (i); and
(iii) with respect to the Mortgage Loans, the Purchase Price for the
first sixty days shall be the market value of such Mortgage
Loans as determined by SBRC acting in good faith, and
thereafter, the Purchase Price shall decrease by 10% of such
market value and by an additional 10% thereof for each
succeeding month.
(d) Mortgage Loan Schedule. No Mortgage Loan shall be included in the
----------------------
Aggregation Line unless NCCC shall have delivered to SBRC at least 72 hours
prior to such inclusion, a magnetic tape, in a format acceptable to SBRC,
consisting of the loan characteristics agreed upon by SBRC and NCCC with respect
to each Mortgage Loan.
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 11.
(e) Marketing of Mortgage Loans. SBRC may (subject to NCCC's consent
---------------------------
unless a Termination Event has occurred) market the Problem Mortgage Loans and
Non-Standard Mortgage Loans on NCCC's behalf for a purchase price acceptable to
NCCC and shall provide NCCC with a copy of a trade ticket or letter of intent
with respect to any commitment to sell such Mortgage Loans. NCCC must advise
SBRC within sixty days after inclusion of each Mortgage Loan in the Aggregation
Line of the course of action it intends to take with respect to such Mortgage
Loan (i.e., securitization, whole loan sale, etc.).
(f) Hedging. NCCC will have the option to establish one or more securities
-------
or commodities accounts at Xxxxxxx Xxxxx Xxxxxx and to enter into transactions
in such accounts (and only in such accounts) that are intended to hedge the
interest rate risk on Mortgage Loans included in the Aggregation Line.
4. (a) Financing of XX Xxxxx and Equity Certificates. SBRC or an
---------------------------------------------
affiliate shall provide a financing facility for the XX xxxxx (the "XX Xxxxx")
created by any NCCC securitizations on which Xxxxxxx Xxxxx Barney has acted as
the sole underwriter pursuant to this Letter Agreement. Such facility shall
provide for financing at a rate equal to 75% of the present value of the XX
Xxxxx, as determined by SBRC. The XX Xxxxx shall be financed by SBRC or an
affiliate at a financing fee equal to One Month LIBOR plus 1.50% and will be
subject to standard provisions of the PSA global master repurchase agreement.
SBRC or an affiliate shall provide a financing facility for the Equity
Certificates created by any ECF Securitization on which Xxxxxxx Xxxxx Xxxxxx has
acted as the sole underwriter. Such facility shall provide for financing by SBRC
or its affiliate at a financing fee equal to One Month LIBOR plus 2.50% and will
be subject to standard provisions of the PSA global master repurchase agreement.
In addition, SBRC hereby acknowledges that New Century has terminated its
relationship with Greenwich Capital Financial Products, Inc. ("Greenwich"). In
connection with such termination, SBRC agrees to refund the remaining $290,000
of the "termination fee" New Century has paid to Greenwich by reducing by one-
eighth (0.125%) of one percent the interest rate on the fixed rate loans
included in the Aggregation Line over the term of this Aggregation Line to the
extent necessary to refund such "termination fee" (and to the extent any amounts
remain after the termination of the line, SBRC shall pay such shortfall).
(b) Financing of Trigger Buybacks. SBRC shall purchase under the
-----------------------------
Aggregation Line mortgage loans which are repurchased by New Century and sold or
contributed to NCCC based upon trigger buybacks in effect pursuant to the
pooling and servicing agreements for SBMSVII 1997-NC1, 1997-NC2, 1997-NC3 and
New Century Home Equity Loan Trust Series 1997-NC5. The maximum aggregate
outstanding Purchase Price will be $10,000,000. Such mortgage loans will be
deemed Problem Mortgage Loans in the Aggregation Line and will be financed by
SBRC in the same manner as Problem Mortgage Loans financed pursuant to Section
3(b)(iii) above based on the degree of delinquency.
(c) Financing of REO Properties. In the event there is a foreclosure sale
---------------------------
for any Problem Mortgage Loan, simultaneously with the occurrence of such
foreclosure, NCCC will repurchase such Mortgage Loan from SBRC on such date and
title of the REO Property to be taken
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 12.
in the name of New Century R.E.O. Corp. Liquidation Proceeds, Inc. ("LPI"),
SBRC's affiliate, will provide financing for such REO Property pursuant to the
letter agreement, dated November 18, 1998, between New Century and LPI, the loan
and security agreement, dated November 18, 1998, between the New Century and
LPI, the related Secured Promissory Note, dated November 18, 1998 by New Century
to LPI and the REO Subsidiary Pledge Agreement, dated as of November 18, 1998,
made by New Century, in favor of LPI (collectively, the "REO Financing
Facility").
5. Termination.
-----------
(a) NCCC shall have the right to terminate its obligations hereunder upon
(i) any material default by SBRC of its obligations under this Letter Agreement
which is not cured within 30 days following written notice of such default to
SBRC by NCCC or (ii) the payment by NCCC to SBRC of a termination fee equal to
0.25% times the unfulfilled volume commitment hereunder.
(b) SBRC shall have the right to terminate this Letter Agreement upon the
occurrence of any of the following events (each, a "Termination Event"):
(i) the judgment by SBRC in good faith that a material adverse
change has occurred with respect to the business, properties,
assets or condition (financial or otherwise) of NCCC;
(ii) SBRC shall reasonably request, specifying the reasons for such
request, information, and/or written responses to such
requests, regarding the financial well-being of NCCC and such
information and/or responses shall not have been provided
within three business days of such request;
(iii) Either (A) a change in control of NCCC shall have occurred
without the consent of SBRC, other than in connection with and
as a result of the issuance and sale by NCCC of registered,
publicly offered common stock; or (B) SBRC determines in its
sole discretion that any material adverse change has occurred
in the management of NCCC;
(iv) There is (A) a material breach by NCCC of any representation
and warranty contained in the Purchase and Sale Agreement,
other than a representation or warranty relating to particular
Mortgage Loans, and SBRC has reason to believe in good faith
either that such breach is not curable within 30 days or that
such breach may not have been cured in all material respects at
the expiration of 30 days following discovery thereof by NCCC
or (B) a failure by NCCC to make any payment payable by it
--
under the Purchase and Sale Agreement or (C) any other failure
--
by NCCC to observe and perform in any material respect its
material covenants, agreements and obligations with SBRC,
including
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 13.
without limitation those contained in the Purchase and Sale
Agreement, and SBRC has reason to believe in good faith that
such failure may not have been cured in all material
respects at the expiration of 30 days following discovery
thereof by NCCC;
(v) There shall have occurred any outbreak or material
escalation of hostilities, declaration by the United States
of a national emergency or war or other calamity or crisis,
the effect of which on the financial markets is such as to
make it, in the judgment of SBRC, impracticable to continue
the commitment; or
(vi) NCCC fails to provide written notification to SBRC of any
material change in its loan origination, acquisition or
appraisal guidelines or practices, or NCCC, without the
prior consent of SBRC (which shall not be unreasonably
withheld), amends in any material respect its loan
origination, acquisition or appraisal guidelines or
practices;
provided, that SBRC shall have the right to dispose of any collateral held by
SBRC pursuant to this Letter Agreement. In connection with a Termination Event
under this Xxxxxxxxx 0, XXXX shall have the right to transfer servicing as
provided in Section 1(b).
(c) Subject to the provisions of Paragraph 3 of this Letter Agreement,
this Letter Agreement shall terminate upon the earlier of (i) satisfaction of
the $1,000,000,000 commitment and (ii) November 30, 1999; provided that the CE
"repo" and equity certificate "repo" facility provided for in Section 4(a) and
the REO Financing Facility provided for in Section 4(c) shall continue under its
terms; provided, further, that SBRC may, in its sole discretion, extend the
terms of this Letter Agreement until such time that NCCC has been able to
fulfill its commitment without payment of a termination fee.
Notwithstanding any other provision of this Section 5, any grace or
notice period provided herein in respect of a notice to be given or action to be
taken by SBRC may be shortened or eliminated by SBRC if, in its sole good faith
discretion, it is unreasonable to do so under the circumstances, taking into
consideration, among other things, the volatility of the market for the Mortgage
Loans or other Securities involved, the extent and nature of any Termination
Event (or events which with the giving of such notice and passage of time would
constitute Termination Events) and the risks inherent in deferring the exercise
of remedies for the otherwise applicable grace or notice period.
6. General Provisions.
------------------
(a) Xxxxxxx Xxxxx Xxxxxx'x Discretion. It is understood that Salomon
---------------------------------
Xxxxx Xxxxxx shall have absolute discretion in determining whether to accept or
reject any proposed offer or proposal to securitize any Mortgage Loan.
Notwithstanding the foregoing, however, subject to
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 14.
NCCC's representations, warranties and covenants as set forth herein and in any
related agreements, all Standard Mortgage Loans, Non-Standard Mortgage Loans and
Problem Mortgage Loans originated by New Century in accordance with the
underwriting standards of New Century which were most recently approved by SBRC
shall be eligible for financing under the Aggregation Line in accordance with
the terms hereof. It is further understood that SBRC shall have absolute
discretion in determining whether any Mortgage Loan is a Standard Mortgage Loan,
Non-Standard Mortgage Loan or Problem Mortgage Loan and SBRC shall have the
right to approve or disapprove any Mortgage Loan with an unpaid principal
balance in excess of $1,000,000 (for which such Mortgage Loans, NCCC shall have
obtained two appraisals).
(b) Governing Law. This Letter Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York (without regard
to its conflicts of laws principles).
(c) Amendment or Waiver. This Letter Agreement may not be amended or
-------------------
modified except in writing signed by each of the parties hereto.
(d) Counterparts. This Letter Agreement may be executed simultaneously in
------------
any number of counterparts. Each counterpart shall be deemed to be an original,
and all such counterparts shall constitute one and the same instrument.
(e) Severability Clause. Any part, provision, representation or warranty
-------------------
of this Letter Agreement which is prohibited or which is held to be void or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any part,
provision, representation or warranty of this Letter Agreement which is
prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall be ineffective, as to such jurisdiction, to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof. To the extent permitted by applicable law, the parties hereto
waive any provision of law which prohibits or renders void or unenforceable any
provision hereof. If the invalidity of any part, provision, representation or
warranty of this Letter Agreement shall deprive any party of the economic
benefit intended to be conferred by this Letter Agreement, the parties shall
negotiate, in good-faith, to develop a structure the economic effect of which is
nearly as possible the same as the economic effect of this Letter Agreement
without regard to such invalidity.
(f) No Partnership. Nothing herein contained shall be deemed or construed
--------------
to create a co-partnership or joint venture between the parties hereto.
(g) Further Agreements. NCCC and SBRC each agree to execute and deliver to
------------------
the other such reasonable and appropriate additional documents, instruments or
agreements as may be necessary or appropriate to effectuate the purposes of this
Letter Agreement.
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 15.
(h) Termination. Other than those sections intended to survive in the
-----------
letter agreement dated March 31, 1998 among New Century, Xxxxxxx Xxxxx Xxxxxx
and SBRC (including those sections related to indemnification), such letter
agreement is hereby terminated.
(i) Expenses. In addition to those expenses set forth in Section 2(a)
--------
above, NCCC shall pay subject to prenegotiated caps, all costs and expenses
related to any amendment of this Letter Agreement.
Please confirm that the foregoing is in accordance with your understanding
by signing this letter of agreement and two enclosed copies and returning to us
the enclosed copies. The letter signed by you shall constitute a binding
agreement between us as of the date first above written.
Yours sincerely,
SALOMON BROTHERS REALTY CORP.
By: /s/ Xxxxxx X. Bolo
----------------------------
Name: Xxxxxx X. Bolo
Title: Authorized Agent
XXXXXXX XXXXX XXXXXX INC.
By: /s/ Xxxxxx X. Bolo
----------------------------
Name: Xxxxxx X. Bolo
Title: Vice President
ACCEPTED AND AGREED TO
AS OF THE DATE FIRST ABOVE WRITTEN:
NEW CENTURY MORTGAGE CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Executive Vice President
NC CAPITAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President
EXHIBIT A
FORM OF RECOGNITION LETTER
Salomon Brothers Realty Corp.
Seven Xxxxx Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xx. Xxxxxxx Xxxxx
Facsimile No. (000) 000-0000
Re: [Name and Date of ] Servicing Agreement ("Agreement") between
[Name of Sub-Servicer] and New Century Mortgage Corporation
Ladies and Gentlemen:
The undersigned, _______________ ("Sub-Servicer"), having an address at
_________________, _________ Attention: _______________, has been informed by
New Century Mortgage Corporation ("New Century") that NC Capital Corporation
("NCCC") from time to time enters into transactions with you ("SBRC") in which
SBRC purchases mortgage loans (including the related servicing rights) serviced
by Sub-Servicer for New Century pursuant to the captioned Agreement, and NCCC
agrees to repurchase such mortgage loans (and related servicing rights) on
specified future dates (the agreement that provides for such purchases and
repurchases, the "Purchase and Sale Agreement"). New Century has requested that
Sub-Servicer provide this letter agreement to SBRC in order to, and Sub-Servicer
hereby agrees to, acknowledge that SBRC owns the servicing rights and, upon a
written notice to Sub-Servicer from SBRC that NCCC failed to repurchase a
Mortgage Loan on the related repurchase date or if NCCC defaults under the
Purchase and Sale Agreement and upon written notice to Sub-Servicer from U.S.
Bank National Association ("Custodian") that Custodian holds specified mortgage
loans (the "Salomon Loans") for SBRC, that Sub-Servicer will no longer be sub-
servicer with respect to the Salomon Loans, unless the term of sub-servicing is
extended by SBRC in its sole discretion. NCCC and New Century hereby agree to
indemnify Sub-Servicer for any loss, liability, damage, judgment, cost or
expense in any way related to the exercise of such termination by SBRC with
respect to the Salomon Loans. Any fee payable to the Sub-Servicer shall be paid
by New Century without any right of reimbursement by SBRC.
NC Capital Corporation
New Century Mortgage Corporation
December 11, 1998 Page 2.
Yours sincerely,
SALOMON BROTHERS REALTY CORP.
By:_______________________________
Name:
Title:
NC CAPITAL CORPORATION
By:_______________________________
Name:
Title:
NEW CENTURY MORTGAGE CORPORATION
By:_______________________________
Name:
Title:
[SUB-SERVICER]
By:_______________________________
Name:
Title:
EXHIBIT B
FORM OF LIMITED GUARANTY
