EXECUTION COPY
EXHIBIT 10.1
NOVASTAR MORTGAGE, INC.
as Seller,
NOVASTAR MORTGAGE FUNDING CORPORATION
as Company,
WACHOVIA BANK, NATIONAL ASSOCIATION
as Certificate Administrator
and
JPMORGAN CHASE BANK
as Trustee
MORTGAGE LOAN PURCHASE AGREEMENT
Dated as of September 1, 2002
Fixed and Adjustable Rate Mortgage Loans
NovaStar Mortgage Funding Trust, Series 2002-3
NovaStar Home Equity Loan Asset-Backed Certificate, Series 2002-3
TABLE OF CONTENTS
Page(s)
ARTICLE I DEFINITIONS .................................................................. 1
Section 1.01 Definitions. ................................................................. 1
ARTICLE II SALE OF MORTGAGE LOANS AND RELATED PROVISIONS ................................ 2
Section 2.01 Sale of Initial Mortgage Loans and MI Policies. .............................. 2
Section 2.02 Conveyance of the Subsequent Mortgage Loans
Section 2.03 Pre-Funding Account
Section 2.04 Interest Coverage Account
ARTICLE III REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH ......................... 9
Section 3.01 Seller Representations and Warranties. ....................................... 9
Section 3.02 Company Representations and Warranties. ...................................... 23
Section 3.03 [Reserved] ................................................................... 24
ARTICLE IV SELLER'S COVENANTS ........................................................... 24
Section 4.01 Covenants of the Seller. ..................................................... 24
Section 4.02 Payment of Expenses. ......................................................... 24
ARTICLE V CONDITIONS TO INITIAL MORTGAGE LOAN PURCHASE ................................. 25
Section 5.01 Conditions of Company's Obligations. ......................................... 25
ARTICLE VI INDEMNIFICATION BY THE SELLER WITH RESPECT TO THE MORTGAGE LOANS ........... 26
Section 6.01 Indemnification With Respect to the Mortgage Loans. .......................... 26
Section 6.02 Limitation on Liability of the Seller. ....................................... 26
ARTICLE VII TERMINATION .................................................................. 26
Section 7.01 Termination. ................................................................. 26
ARTICLE VIII MISCELLANEOUS PROVISIONS ..................................................... 28
Section 8.01 Amendment. ................................................................... 28
Section 8.02 Governing Law. ............................................................... 28
Section 8.03 Notices. ..................................................................... 28
Section 8.04 Severability of Provisions. .................................................. 29
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Section 8.05 Relationship of Parties. .................................... 29
Section 8.06 Counterparts. ............................................... 29
Section 8.07 Further Agreements. ......................................... 29
Section 8.08 Intention of the Parties. ................................... 30
Section 8.09 Successors and Assigns; Assignment of Purchase Agreement .... 30
Section 8.10 Survival. ................................................... 30
Section 8.11 Liability of the Trustee. ................................... 31
EXHIBIT 1 Initial Mortgage Loan Schedule
EXHIBIT 2(A) Seller's Subsequent Transfer Instrument
EXHIBIT 2(B) Company's Subsequent Transfer Instrument
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THIS MORTGAGE LOAN PURCHASE AGREEMENT (this "Purchase Agreement"), dated as
of September 1, 2002, is made among NovaStar Mortgage, Inc. (the "Seller"),
NovaStar Mortgage Funding Corporation (the "Company"), Wachovia Bank, National
Association (the "Certificate Administrator") and JPMorgan Chase Bank (the
"Trustee").
W I T N E S S E T H T H A T:
WHEREAS, pursuant to the terms of this Purchase Agreement, the Seller will
sell the Initial Mortgage Loans and the related MI Policies to the Company on
the Closing Date;
WHEREAS, pursuant to the terms of the Pooling and Servicing Agreement, the
Company will transfer the Initial Mortgage Loans and the related MI Policies,
and assign all of its rights under the Purchase Agreement, to the Trustee,
without recourse, on the Closing Date;
WHEREAS, pursuant to the terms of the Pooling and Servicing Agreement, the
Trustee will issue the Certificates;
WHEREAS, pursuant to the terms of the Pooling and Servicing Agreement, the
Trustee will transfer to the Company the Certificates;
WHEREAS, pursuant to the terms of the Underwriting Agreement, the Company
will sell the Underwritten Certificates to the Underwriter;
WHEREAS, pursuant to the terms of the REMIC Interests Sale Agreement, the
Company will sell the Retained Certificates to NovaStar REMIC Financing
Corporation ("NRFC"), and NRFC will then transfer the Class O Certificates to
NovaStar Certificates Financing Corporation;
WHEREAS, pursuant to the terms of the Pooling and Servicing Agreement, the
Servicer will service the Mortgage Loans; and
WHEREAS, pursuant to the terms of the Converted Loan Purchase Agreement,
the Converted Loan Purchaser will purchase the Converted Mortgage Loans from the
Trustee.
ARTICLE I
DEFINITIONS
Section 1.01 Definitions.
For all purposes of this Purchase Agreement, 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 Pooling and Servicing Agreement,
dated as of September 1, 2002, among the Certificate Administrator, the Trustee,
the Company and NovaStar Mortgage, Inc. as seller and servicer (the "Servicer")
which is incorporated by reference herein. All other capitalized terms used
herein shall have the meanings specified herein.
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ARTICLE II
SALE OF MORTGAGE LOANS AND RELATED PROVISIONS
Section 2.01 Sale of Initial Mortgage Loans and MI Policies.
(a) The Seller hereby sells, and the Company hereby purchases on the
Closing Date the Initial Mortgage Loans identified (and the related MI Policies)
on the Mortgage Loan Schedule annexed hereto as Exhibit 1, the proceeds thereof
and all rights under the Related Documents (including the related Mortgage
Files). The Initial Mortgage Loans consist of two groups of conventional,
residential first lien mortgage loans with fixed and adjustable interest rates,
the Group I Mortgage Loans and the Group II Mortgage Loans. The Initial Mortgage
Loans will have a Principal Balance as of the close of business on the Cut-off
Date, after giving effect to any payments due on or before such date whether or
not received, of approximately $403,959,621.37. The sale of the Initial Mortgage
Loans will take place on the Closing Date, subject to and simultaneously with
the deposit of the Initial Mortgage Loans and the Original Pre-Funded Amount and
the Interest Coverage Account into the Trust Fund, the issuance of the
Securities by the Trustee and the sale of the Underwritten Certificates pursuant
to the Underwriting Agreement. The purchase price (the "Purchase Price") for the
Initial Mortgage Loans to be paid by the Company to the Seller on the Closing
Date shall consist of the following:
(i) a payment in an amount equal to $735,032,813 representing the net
proceeds of the sale of the Underwritten Certificates, which payment shall be
paid to the Seller by wire transfer in immediately available funds on the
Closing Date by or on behalf of the Company, or as otherwise agreed by the
Company; and
(ii) a payment in an amount equal to $20,000 representing the proceeds
of the sale of the Retained Certificates by the Company to NRFC pursuant to the
REMIC Interests Sale Agreement, which payment shall be paid to the Seller by
wire transfer in immediately available funds on the Closing Date by or on behalf
of the Company, or as otherwise agreed by the Company.
(b) [Reserved]
(c) In connection with such conveyances by the Seller, the Seller shall on
behalf of and at the direction of the Company deliver to, and deposit with the
Certificate Administrator on behalf of the Trustee, on or before the Closing
Date in the case of an Initial Mortgage Loan and two Business Days prior to the
related Subsequent Transfer Date in the case of a Subsequent Mortgage Loan, the
following documents or instruments with respect to each Mortgage Loan (the
"Mortgage File"):
(i) the original Mortgage Note endorsed to "JPMorgan Chase Bank, as
Trustee of the NovaStar Mortgage Funding Trust, Series 2002-3, relating to the
NovaStar Home Equity Loan Asset-Backed Certificates, Series 2002-3";
(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 Seller or the public
recording office in which such original
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Mortgage has been recorded and if the Mortgage Loan is registered on the MERS
System, such Mortgage shall include thereon a statement that it is a MOM Loan
and shall include the MIN for such Mortgage Loan;
(iii) unless the Mortgage Loan is registered on the MERS System, an
original assignment (which may be included in one or more blanket assignments if
permitted by applicable law) of the Mortgage endorsed to "JPMorgan Chase Bank,
as Trustee of the NovaStar Mortgage Funding Trust, Series 2002-3, relating to
the NovaStar Home Equity Loan Asset-Backed Certificates, Series 2002-3", and
otherwise in recordable form;
(iv) originals of any intervening assignments of the Mortgage showing
an unbroken chain of title from the originator thereof to the Person assigning
it to the Trustee (or to MERS, if the Mortgage Loan is registered on the MERS
System, and noting the presence of a MIN, if the Mortgage Loan is registered on
the MERS System), with evidence of recording thereon, or, if the original of any
such intervening assignment has not yet been returned from the public recording
office, a copy of such original intervening assignment certified by the Seller
or the public recording office in which such original intervening assignment has
been recorded;
(v) the original policy of title insurance (or a commitment for title
insurance, if the policy is being held by the title insurance company pending
recordation of the Mortgage);
(vi) true and correct copy of each assumption, modification,
consolidation or substitution agreement, if any, relating to the Mortgage Loan;
and
(vii) an executed copy of the notice of assignment and acknowledgement
of assignment with respect to the Mortgage Loans covered by the MI Policies.
If a material defect in any Mortgage File is discovered which may
materially and adversely affect the value of the related Mortgage Loan, or the
interests of the Trustee (as pledgee of the Mortgage Loans), or the
Certificateholders in such Mortgage Loan, including if any document required to
be delivered to the Certificate Administrator has not been delivered (provided
that a Mortgage File will not be deemed to contain a defect for an unrecorded
assignment under clause (i) above for 180 days following submission of the
assignment if the Seller has submitted such assignment for recording pursuant to
the terms of the following paragraph), the Seller shall cure such defect,
repurchase the related Mortgage Loan at the Repurchase Price or substitute an
Eligible Substitute Mortgage Loan for the related Mortgage Loan upon the same
terms and conditions set forth in Section 3.01 hereof as to the Initial Mortgage
Loans and the Subsequent Mortgage Loans and Section 2.02(c) hereof as to the
Subsequent Mortgage Loans for breaches of representations and warranties.
Promptly after the Closing Date in the case of an Initial Mortgage Loan or,
in the case of a Subsequent Mortgage Loan, promptly after the Subsequent
Transfer Date (or after the date of transfer of any Eligible Substitute Mortgage
Loan), the Seller at its own expense shall complete and submit for recording in
the appropriate public office for real property records each of the assignments
referred to in clause (i) above, with such assignment completed in favor of the
Trustee, excluding any Mortgage Loan that is registered on the MERS System if
MERS is
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identified on the Mortgage or on a properly recorded assignment of Mortgage as
the mortgagee of record. While such assignment to be recorded is being recorded,
the Certificate Administrator shall retain a photocopy of such assignment. If
any assignment is lost or returned unrecorded to the Certificate Administrator
because of any defect therein, the Seller is required to prepare a substitute
assignment or cure such defect, as the case may be, and the Seller shall cause
such substitute assignment to be recorded in accordance with this paragraph.
In instances where an original Mortgage or any original intervening
assignment of Mortgage is not, in accordance with clause (ii) or (iv) above,
delivered by the Seller to the Certificate Administrator, on behalf of the
Trustee, prior to or on the Closing Date in the case of an Initial Mortgage Loan
or, in the case of a Subsequent Mortgage Loan, prior to or on the Subsequent
Transfer Date, the Seller will deliver or cause to be delivered the originals of
such documents to the Certificate Administrator, on behalf of the Trustee,
promptly upon receipt thereof.
In connection with the assignment of any Initial Mortgage Loan registered
on the MERS System, promptly after the Closing Date, the Seller further agrees
that it will cause, at the Seller's own expense, the MERS System to indicate
that such Initial Mortgage Loan has been assigned by the Seller to the Trustee
in accordance with this Agreement for the benefit of the Certificateholders by
including in such computer files (a) the applicable Trustee code in the field
"Trustee" which identifies the Trustee and (b) the code "NovaStar 2002-3" (or
its equivalent) in the field "Pool Field" which identifies the series of the
Certificates issued in connection with such Mortgage Loans.
Effective on the Closing Date, the Company hereby acknowledges its
acceptance of all right, title and interest to the Initial Mortgage Loans and
other property, existing on the Closing Date and thereafter created and conveyed
to it pursuant to this Section 2.01.
The Trustee, as assignee or transferee of the Company, shall be entitled to
all scheduled principal payments due after the Cut-off Date, all other payments
of principal due and collected after the Cut-off Date, and all payments of
interest on the Initial Mortgage Loans. No scheduled payments of principal due
on or before the Cut-off Date and collected after the Cut-off Date shall belong
to the Company pursuant to the terms of this Purchase Agreement. The Pooling and
Servicing Agreement shall provide that any late payment charges collected in
connection with a Mortgage Loan shall be paid to the Servicer as provided
therein.
(d) The parties hereto intend that the transactions set forth herein
constitute a sale by the Seller to the Company on the Closing Date of all the
Seller's right, title and interest in and to the Initial Mortgage Loans and
other property as and to the extent described above. In the event the
transactions set forth herein shall be deemed not to be a sale, the Seller
hereby grants to the Company as of the Closing Date a security interest in all
of the Seller's right, title and interest in, to and under the Initial Mortgage
Loans and such other property, to secure all of the Seller's obligations
hereunder and this Purchase Agreement shall constitute a security agreement
under applicable law and in such event, the parties hereto acknowledge that the
Certificate Administrator, in addition to holding the Closing Mortgage Loans on
behalf of the Trustee for the benefit of the Certificateholders, holds the
Initial Mortgage Loans as designee of the Company. The Seller agrees to take or
cause to be taken such actions and to execute such
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documents, including without limitation the filing of all necessary UCC-1
financing statements filed in the Commonwealth of Virginia (which shall have
been submitted for filing as of the Closing Date and each Subsequent Transfer
Date, as applicable), any continuation statements with respect thereto and any
amendments thereto required to reflect a change in the name or corporate
structure of the Seller, as are necessary to perfect and protect the interests
of the Company and their respective assignees in each Initial Mortgage Loan and
the proceeds thereof and the interests of the Trustee and its assignees in each
Subsequent Mortgage Loan and the proceeds thereof. The Company agrees to take or
cause to be taken such actions and to execute such documents, including without
limitation the filing of all necessary UCC-1 financing statements, and
continuation statements with respect thereto and any amendments thereto as are
necessary to perfect and protect the interests of the Trustee and its assignees
in each Initial Mortgage Loan.
Section 2.02 Conveyance of the Subsequent Mortgage Loans.
(a) Subject to the conditions set forth in paragraph (b) below in
consideration of the Trustee's delivery on the related Subsequent Transfer Dates
of all or a portion of the balance of funds in the Pre-Funding Account, the
Seller shall on any Subsequent Transfer Date sell, transfer, assign, set over
and convey, without recourse, to the Company, who shall then sell, transfer,
assign, set over and convey, without recourse, to the Trustee, but subject to
the other terms and provisions of this Purchase Agreement, all of the right,
title and interest of the Seller in and to (i) the Subsequent Mortgage Loans
(and the related MI Policies) identified on the related Mortgage Loan Schedule
attached to the related Subsequent Transfer Instrument delivered by the Seller
on such Subsequent Transfer Date, (ii) principal due and interest accruing on
the Subsequent Mortgage Loans after the related Subsequent Cut-off Date and (i)
with respect to such Subsequent Mortgage Loans all items to be delivered
pursuant to Section 2.01(c) above and the other items in the related Mortgage
Files; provided, however, that the Seller reserves and retains all right, title
and interest in and to principal received and interest accruing on the
Subsequent Mortgage Loans prior to the related Subsequent Cut-off Date. The
transfer by the Seller to the Company, and by the Company to the Trustee, of the
Subsequent Mortgage Loans identified on each Mortgage Loan Schedule attached to
the related Subsequent Transfer instrument shall be absolute and is intended by
the Trustee, the Company and the Seller to constitute and to be treated as a
sale of the Subsequent Mortgage Loans by the Seller to the Company, and a sale
of the Subsequent Mortgage Loans by the Company to the Trustee.
In the event such transactions shall be deemed not to be a sale, the
Seller hereby grants to the Company as of each Subsequent Transfer Date a
security interest in all of the Seller's right, title and interest in, to and
under the related Subsequent Mortgage Loans and such other property, to secure
all of the Seller's obligations hereunder, and this Purchase Agreement shall
constitute a security agreement under applicable law, and in such event, the
parties hereto acknowledge that the Certificate Administrator, in addition to
holding the Subsequent Mortgage Loans and the related MI Policies on behalf of
the Trustee for the benefit of the Certificateholders, holds the Subsequent
Mortgage Loans and the related MI Policies as designee of the Company. The
Seller agrees to take or cause to be taken such actions and to execute such
documents, including without limitation the filing of all necessary UCC-1
financing statements filed in the Commonwealth of Virginia (which shall be
submitted for filing as of the related Subsequent Transfer Date), any
continuation statements with respect thereto and any
5
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 a change in the state of incorporation of the Seller as are
necessary to perfect and protect the interests of the Company and its assignees
in the Subsequent Mortgage Loans.
In the event such transactions shall be deemed not to be a sale, the
Company hereby grants to the Trustee as of each Subsequent Transfer Date a
security interest in all of the Company's right, title and interest in, to and
under the related Subsequent Mortgage Loans and such other property, to secure
all of the Company's obligations hereunder, and this Purchase Agreement shall
constitute a security agreement under applicable law, and in such event, the
parties hereto acknowledge that the Certificate Administrator, in addition to
holding the Subsequent Mortgage Loans and the related MI Policies on behalf of
the Trustee for the benefit of the Certificateholders, holds the Subsequent
Mortgage Loans and the related MI Policies as designee of the Trustee. The
Company agrees to take or cause to be taken such actions and to execute such
documents, including without limitation, the filing of all necessary UCC-1
financing statements filed in the State of Delaware (which shall be submitted
for filing as of the related Subsequent Transfer Date), any continuation
statements with respect thereto and any amendments thereto required to reflect a
change in the name or corporate structure of the Company or the filing of any
additional UCC-1 financing statements due to a change in the state of
incorporation of the Company as are necessary to perfect and protect the
interests of the Trustee and its assignees in Subsequent Mortgage Loans.
The related Mortgage File for each Subsequent Mortgage Loan shall be
delivered to the Certificate Administrator, on behalf of the Trustee, prior to
the related Subsequent Transfer Date.
The Trustee on each Subsequent Transfer Date shall acknowledge by
signing receipt thereof its acceptance of all right, title and interest to the
related Subsequent Mortgage Loans and other property, existing on the Subsequent
Transfer Date and thereafter created, conveyed to it pursuant to this Section
2.02.
The Trustee, as trustee of the Trust Fund, shall be entitled to all
scheduled principal payments due after each Subsequent Cut-off Date, all other
payments of principal due and collected after each related Subsequent Cut-off
Date, and all payments of interest on the Subsequent Mortgage Loans, minus that
portion of any such payment which is allocable to the period prior to the
related Subsequent Cut-off Date. No scheduled payments of principal due on or
before the related Subsequent Cut-off Date and collected after the related
Subsequent Cut-off Date shall belong to the Trust Fund pursuant to the terms of
this Purchase Agreement.
The purchase price paid by the Certificate Administrator, at the
direction of the Servicer and on behalf of the Trustee, from amounts released
from the Pre-Funding Account shall be one-hundred percent (100%) of the
aggregate Principal Balances of the Subsequent Mortgage Loans so transferred (as
identified on the Mortgage Loan Schedule attached to the related Subsequent
Transfer Instrument provided by the Seller).
(b) The Seller shall transfer to the Company, who shall transfer to
the Trustee, the Subsequent Mortgage Loans and the other property and rights
related thereto described in
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Section 2.02(a) above, and the Certificate Administrator shall cause to be
released funds from the related Pre-Funding Account, only upon the satisfaction
of each of the following conditions on or prior to the related Subsequent
Transfer Date:
(i) the Seller shall have provided the Company, who shall have
provided the Certificate Administrator, and the Certificate Administrator shall
have provided the Trustee, with a timely Addition Notice, which notice shall be
given no fewer than four Business Days prior to the related Subsequent Transfer
Date and shall designate the Subsequent Mortgage Loans to be sold to the Company
and then to the Trustee and the aggregate Principal Balances of such Subsequent
Mortgage Loans as of the related Subsequent Cut-off Date and any other
information reasonably requested by the Certificate Administrator with respect
to the Subsequent Mortgage Loans;
(ii) the Seller shall have delivered to the Company, who shall
have delivered to the Trustee, who shall have delivered to the Certificate
Administrator, a duly executed Subsequent Transfer Instrument substantially in
the form of Exhibit 2(A) or 2(B), as applicable, (A) confirming the satisfaction
of each condition precedent and representations specified in this Section
2.02(b), Section 2.02(c) and in the related Subsequent Transfer Instrument and
(B) including a Mortgage Loan Schedule attached thereto listing the Subsequent
Mortgage Loans;
(iii) as of each Subsequent Transfer Date, as evidenced by
delivery of the Seller's Subsequent Transfer Instrument in the form of Exhibit
2(A) and the Company's Subsequent Transfer Instrument is the form of Exhibit
2(B), neither the Seller nor the Company shall be insolvent or have been made
insolvent by such transfers, nor shall they be aware of any pending insolvency;
(iv) such sale and transfer (i) does not cause the REMIC to
fail to qualify as a REMIC and (ii) is not a prohibited transaction within the
meaning of Section 860F(a)(2) of the Code, as evidenced by an Opinion of Counsel
provided for the Trustee at the expense of the Seller;
(v) the Funding Period shall not have terminated; and
(vi) the Seller shall have delivered to the Certificate
Administrator, the Trustee, and the Rating Agencies Opinions of Counsel
addressed to the Rating Agencies, the Trustee and the Certificate Administrator
with respect to the transfers of the Subsequent Mortgage Loans substantially in
the form of the Opinion of Counsel delivered to the Certificate Administrator,
the Trustee and the Rating Agencies on the Closing Date (1) regarding certain
corporate matters and (2) confirming the existence of a true sale.
(c) The obligation of the Trustee to purchase a Subsequent Mortgage
Loan on any Subsequent Transfer Date is subject to the following conditions: (1)
each such Subsequent Mortgage Loan shall satisfy the representations and
warranties specified in the related Subsequent Transfer Instrument and this
Purchase Agreement; (2) the Seller shall not select such Subsequent Mortgage
Loans in a manner that it reasonably believes is adverse to the interests of the
Majority Certificateholders; (3) the Seller shall have delivered certain
Opinions of Counsel
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required pursuant to Section 2.02(b)(iv) and (vi) hereof; (4) as of the related
Subsequent Cut-off Date, the Subsequent Mortgage Loans shall satisfy the
following criteria: (i) each Subsequent Mortgage Loan shall not be 30 or more
days contractually delinquent as of the related Subsequent Cut-off Date; (ii)
the remaining stated term to maturity of each Subsequent Mortgage Loan shall not
exceed 360 months; (iii) the lien securing each Subsequent Mortgage Loan shall
be first priority; (iv) each Subsequent Mortgage Loan shall have an outstanding
Principal Balance of at least $10,000; (v) each Subsequent Mortgage Loan shall
be underwritten in accordance with the Underwriting Guidelines; (vi) each
Subsequent Mortgage Loan shall have a Loan-to-Value Ratio of no more than 100%;
(vii) each Subsequent Mortgage Loan shall have a stated maturity of no later
than January 1, 2033; (viii) no Subsequent Mortgage Loan shall permit negative
amortization; (ix) each Subsequent Mortgage Loan shall either have a fixed
Mortgage Rate of at least 5.00% or, if an adjustable loan, a Gross Margin of at
least 2.75%; (x) a minimum of 60% of the Subsequent Mortgage Loans (by
Subsequent Cut-off Date Principal Balance) shall have an adjustable Mortgage
Rate; (xi) the weighted average Loan-to-Value Ratio of the Subsequent Mortgage
Loans (by Subsequent Cut-off Date Principal Balance) shall be no more than 87%;
(xii) substantially all of the Subsequent Mortgage Loans shall either (A) have a
Loan-to Value Ratio of no more than 60% or (B) have a Loan-to-Value Ratio of
greater than 60% and be covered by an MI Policy which will insure losses to the
extent that the uninsured exposure of the related Subsequent Mortgage Loan is
reduced to an amount equal to 51%, 55% or 50% of the lesser of the appraised
value or purchase price, as the case may be, of the related Mortgaged Property,
in each case, at the time of the applicable effective date of the MI Policy;
(xiii) the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal
Balance) shall have a weighted average coupon of at least 7.0%; (xiv) pursuant
to the Underwriting Guidelines, no fewer than 40% of the Subsequent Mortgage
Loans (by Subsequent Cut-off Date Principal Balance) shall be AAA, A+, ALT-A and
AA credit risks, no fewer than 10% of the Subsequent Mortgage Loans (by
Subsequent Cut-off Date Principal Balance) shall be A and A- credit risks, and
no more than 15% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date
Principal Balance) shall be B, B-, C, and C- credit risks; (xv) no greater than
20% of such Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal
Balance) shall be FICO Enhanced loans pursuant to the Underwriting Guidelines;
(xvi) no more than 15% of such Subsequent Mortgage Loans (by Subsequent Cut-off
Date Principal Balance) shall be FICO only loans; (xvii) the Subsequent Mortgage
Loans (by Subsequent Cut-off Date Principal Balance) shall have a weighted
average FICO score issued by a consumer credit rating agency of at least 600;
(xviii) at least 85% of such Subsequent Mortgage Loans (by Subsequent Cut-off
Date Principal Balance) shall be loans for primary residences; (xix) no more
than 50% of the Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal
Balance) shall have stated loan documentation, and no more than 15% of the
Subsequent Mortgage Loans (by Subsequent Cut-off Date Principal Balance shall
have no loan documentation; (xx) at least 70% of the Subsequent Mortgage Loans
(by Subsequent Cut-off Date Principal Balance) shall be loans for single family
residences; (xxi) no more than 75% of the Subsequent Mortgage Loans (by
Subsequent Cut-off Date Principal Balance) shall be loans that are the subject
of cash-out refinances; and (xxii) the ratings agencies shall have consented in
writing to the transfer of the Subsequent Mortgage Loans.
The acceptance of the Subsequent Mortgage Loans by the Trustee is
subject to the Seller receiving and providing to the Trustee a written consent
from each of the Rating Agencies that states that the addition of such
Subsequent Mortgage Loans will not cause the Rating Agencies to downgrade any of
their ratings on the Underwritten Certificates.
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Notwithstanding the foregoing, Subsequent Mortgage Loans with
characteristics varying from those set forth above may be purchased by the
Trustee and included in the Trust Fund, if (i) the Trustee is provided with
written confirmation that the aggregate credit risk of such Subsequent Mortgage
Loans is similar to that of the Initial Mortgage Loans and (ii) the Seller
receives and provides to the Trustee a written consent from each of the Rating
Agencies that states that the addition of such Subsequent Mortgage Loans will
not cause the Rating Agencies to downgrade any of their ratings of the
Underwritten Certificates.
(d) Within five Business Days after the end of the Funding Period, the
Seller shall deliver to the Rating Agencies, the Trustee and the Certificate
Administrator a copy of the updated Mortgage Loan Schedule including the
Subsequent Mortgage Loans in electronic format.
Section 2.03 Pre-Funding Account.
(a) No later than the Closing Date, the Certificate Administrator will
establish and maintain, on behalf of the Trustee, pursuant to the Pooling and
Servicing Agreement the Pre-Funding Account. On the Closing Date, the Seller
will deposit in the Pre-Funding Account the Original Pre-Funding Amount from the
net proceeds of the sale of the Underwritten Certificates.
Section 2.04 Interest Coverage Account.
(a) No later than the Closing Date, the Certificate Administrator will
establish and maintain, on behalf of the Trustee, pursuant to the Pooling and
Servicing Agreement the Interest Coverage Account. On the Closing Date, the
Seller will deposit in the Interest Coverage Account the Interest Coverage
Amount from the net proceeds of the sale of the Underwritten Certificates.
ARTICLE III
REPRESENTATIONS AND WARRANTIES;
REMEDIES FOR BREACH
Section 3.01 Seller Representations and Warranties.
The Seller hereby represents and warrants to the Company and the
Trustee as of the date hereof, as of the Closing Date (or if otherwise specified
below, as of the date so specified) and as of each Subsequent Transfer Date:
(a) As to the Seller:
(i) The Seller (i) is a corporation duly organized, validly
existing and in good standing under the laws of the Commonwealth of Virginia and
(ii) is qualified and in good standing as a foreign corporation to do business
in each jurisdiction where such qualification is necessary, except where the
failure so to qualify would not have a material adverse effect on the Seller's
ability to enter into this Purchase Agreement and each Seller's
9
Subsequent Transfer Instrument and to consummate the transactions contemplated
hereby and thereby;
(ii) The Seller has the power and authority to make, execute,
deliver and perform its obligations under this Purchase Agreement and each
Seller's Subsequent Transfer Instrument and all of the transactions contemplated
under this Purchase Agreement and each Seller's Subsequent Transfer Instrument,
and has taken all necessary corporate action to authorize the execution,
delivery and performance of this Purchase Agreement each Seller's Subsequent
Transfer Instrument;
(iii) The Seller is not required to obtain the consent of any
other Person or any consent, approval or authorization from, or registration or
declaration with, any governmental authority, bureau or agency in connection
with the execution, delivery, performance, validity or enforceability of this
Purchase Agreement or any Seller's Subsequent Transfer Instrument, except for
such consents, approvals or authorization, or registration or declaration, as
shall have been obtained or filed, as the case may be;
(iv) The execution and delivery of this Purchase Agreement and
each Seller's Subsequent Transfer Instrument and the performance of the
transactions contemplated hereby by the Seller will not violate any provision of
any existing law or regulation or any order or decree of any court applicable to
the Seller or any provision of the certificate of incorporation or bylaws of the
Seller, or constitute a material breach of any mortgage, indenture, contract or
other agreement to which the Seller is a party or by which the Seller may be
bound;
(v) No litigation or administrative proceeding of or before any
court, tribunal or governmental body is currently pending, or to the knowledge
of the Seller threatened, against the Seller or any of its properties or with
respect to this Purchase Agreement or any Seller's Subsequent Transfer
Instrument, the Certificates which in the opinion of the Seller has a reasonable
likelihood of resulting in a material adverse effect on the transactions
contemplated by this Purchase Agreement or any Seller's Subsequent Transfer
Instrument;
(vi) This Purchase Agreement and each Seller's Subsequent
Transfer Instrument constitute the legal, valid and binding obligations of the
Seller, enforceable against the Seller in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
affecting the enforcement of creditors' rights in general and except as such
enforceability may be limited by general principles of equity (whether
considered in a proceeding at law or in equity);
(vii) This Purchase Agreement constitutes a valid transfer and
assignment to the Company of all right, title and interest of the Seller in and
to the Cut-off Date Principal Balance of the Initial Mortgage Loans, all monies
due or to become due with respect thereto, and all proceeds of such Cut-off Date
Principal Balance of the Initial Mortgage Loans, and this Purchase Agreement and
the related Seller's Subsequent Transfer Instrument constitutes a valid transfer
and assignment to the Trustee of all right, title and interest of the Seller in
and to the Subsequent Cut-off Date Principal Balance of the Subsequent Mortgage
Loans, all monies
10
due or to become due with respect thereto, and all proceeds of such Subsequent
Cut-off Date Principal Balance of the Subsequent Mortgage Loans;
(viii) The Seller is not in default with respect to any order or
decree of any court or any order or regulation of any federal, state or
governmental agency, which default might have consequences that would materially
and adversely affect the condition (financial or other) or operations of the
Seller or its properties or might have consequences that would materially
adversely affect its performance hereunder; and
(ix) The Servicer or any Subservicer who will be servicing any
Mortgage Loan pursuant to the Pooling and Servicing Agreement or a Subservicing
Agreement is qualified to do business in all jurisdictions in which its
activities as Servicer or Subservicer of the Mortgage Loans serviced by it
require such qualifications except where failure to be so qualified will not
have a material adverse effect on such servicing activities.
(b) As to each Initial Mortgage Loan as of the Closing Date and with
respect to each Subsequent Mortgage Loan as of the Subsequent Transfer Date,
except as otherwise expressly stated:
(i) The information set forth on the Mortgage Loan Schedule
with respect to each Initial Mortgage Loan is true and correct in all material
respects as of the Closing Date, and with respect to each Subsequent Mortgage
Loan is true and correct in all material respects as of the related Subsequent
Transfer Date, and the information regarding the Initial Mortgage Loans and the
Subsequent Mortgage Loans on the computer diskette or tape delivered to the
Trustee prior to the Closing Date or Subsequent Transfer Date, as applicable, is
true and accurate in all material respects and describes the same Mortgage Loans
as the Mortgage Loans on the Mortgage Loan Schedule;
(ii) The Mortgage Loans are not being transferred with any
intent to hinder, delay or defraud any creditors;
(iii) No more than 4.99% and 5.14% of the Group I Mortgage Loans
and Group II Initial Mortgage Loans, respectively, (by Cut-off Date Principal
Balance) were secured by condominium units; and no more than 15.40% and 19.10%
of the Group I Mortgage Loans and the Group II Initial Mortgage Loans,
respectively, (by Cut-off Date Principal Balance) were secured by properties in
planned unit developments;
(iv) As of the Cut-off Date, the remaining term of each Group I
Mortgage Loan is not more than 360 months and not less than 118 months and the
remaining term of each Group II Initial Mortgage Loan is not more than 360
months and not less than 178 months;
(v) No more than 49.90% and 50.98% of the Group I Mortgage
Loans and Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) have been the subject of cash-out refinances;
11
(vi) No more than 9.31% and 11.16% of the Group I Mortgage
Loans and Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) respectively, have been the subject of rate and term (no
cash-out) refinances;
(vii) No fewer than 40.79% and 37.86% of the Group I Mortgage
Loans and Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) are purchase money loans;
(viii) No more than 12.94% and 14.88% of the Group I Mortgage
Loans and the Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) are secured by Mortgaged Properties located in the State of
Florida; no more than 19.98% and 24.72% of the Group I Mortgage Loans and the
Group II Initial Mortgage Loans, respectively, (by Cut-off Date Principal
Balance) are secured by Mortgaged Properties located in the State of California;
no more than 5.57% and 5.28% of the Group II Initial Mortgage Loans are secured
in the State of Texas and the State of Colorado, respectively; and no more than
4.44% and 3.09% of the Group I Mortgage Loans and the Group II Initial Mortgage
Loans, respectively, (by Cut-off Date Principal Balance) are located in any
other state;
(ix) The outstanding Principal Balances of the Group I Mortgage
Loans (by Cut-off Date Principal Balance) ranged from $33,750.00 to $347,735.20,
respectively; the average outstanding Principal Balance of the Group I Mortgage
Loans is approximately $131,224.87; the original Principal Balances of the Group
II Initial Mortgage Loans (by Cut-off Date Principal Balance) ranged from
$42,347.77 to $799,489.87, respectively; the average outstanding Principal
Balance of the Group II Initial Mortgage Loans is approximately $202,953.69;
(x) All of the Group I Mortgage Loans and the Group II Initial
Mortgage Loans (by Cut-off Date Principal Balance) were secured by a first lien
on a parcel of real property improved by a detached single family residence; no
more than 5.80% and 2.99% of the Group I Mortgage Loans and the Group II Initial
Mortgage Loans, respectively, (by Cut-off Date Principal Balance) were secured
by a first lien on a parcel of real estate improved by a multi-unit single
family residence;
(xi) All points and fees related to each Mortgage Loan were
disclosed in writing to the borrower in accordance with applicable state and
federal law. Except in the case of a Mortgage Loan in an original principal
amount of less than $60,000 which would have resulted in an unprofitable
origination, no borrower was charged "points and fees" (whether or not financed)
in an amount greater than 5% of the principal amount of such loan, such 5%
limitation calculated in accordance with the Lender Letter. All fees and charges
(including finance charges) and whether or not financed, assessed, collected or
to be collected with the origination and servicing of each Mortgage Loan has
been disclosed in writing to the borrower in accordance with applicable state
and federal law and regulation;
(xii) The Mortgage Rates borne by the adjustable rate Group I
Mortgage Loans as of the Cut-off Date range from 4.990% and per annum to 11.750%
per annum, and the weighted average Mortgage Rate (by Cut-off Date Principal
Balance) of the adjustable rate Group I Mortgage Loans was 8.346%, per annum;
the Mortgage Rates borne by
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fixed rate Group I Mortgage Loans as of the Cut-off Date range from 5.990% per
annum to 12.250% per annum, and the weighted average Mortgage Rate (by Cut-off
Date Principal Balance) of the Group I Mortgage Loans was 8.616% per annum; the
Mortgage Rates borne by adjustable rate Group II Initial Mortgage Loans as of
the Cut-off Date range from 6.250% per annum to 11.750% per annum, and the
weighted average Mortgage Rate (by Cut-off Date Principal Balance) of the
adjustable rate Group II Initial Mortgage Loans was 7.978%, per annum; the
Mortgage Rates borne by fixed rate Group II Initial Mortgage Loans as of the
Cut-off Date range from 6.250% per annum to 12.125% per annum, and the weighted
average Mortgage Rate (by Cut-off Date Principal Balance) of the Group II
Initial Mortgage Loans was 7.940% per annum;
(xiii) Approximately 45.31% and 43.32% of the Group I Mortgage
Loans and the Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) have a Loan-to-Value Ratio in excess of 80.00%; no Group I
Mortgage Loan or Group II Initial Mortgage Loan in the Mortgage Pool had a
Loan-to-Value Ratio at origination in excess of 100%; and the weighted average
Loan-to-Value Ratio (by Cut-off Date Principal Balance) of the Group I Mortgage
Loans and the Group II Mortgage Initial Mortgage Loans was equal to or less than
81.18% and 79.84%, respectively;
(xiv) All of the Initial Mortgage Loans are secured by first
liens on the related Mortgaged Property;
(xv) [Reserved]
(xvi) There is no valid offset, right of rescission, defense,
claim or counterclaim of any obligor under any Mortgage Note or Mortgage,
including the obligation of the Mortgagor to pay the unpaid principal of or
interest on such Mortgage Note, and any applicable right of rescission has
expired, nor will the operation of any of the terms of such Mortgage Note or
Mortgage, or the exercise of any right thereunder, render either the Mortgage
Note or the Mortgage unenforceable, in whole or in part, or subject to any right
of rescission, set-off, recoupment, counterclaim or defense, including, without
limitation, the defense of usury, and no such right of rescission, set-off,
recoupment, counterclaim or defense has been asserted with respect thereto, and,
to the best of Seller's knowledge, no Mortgagor of the applicable Mortgage was a
debtor in any state or federal bankruptcy or insolvency proceeding;
(xvii) There are no mechanics' liens or claims for work, labor
or material affecting any Mortgaged Property which are or may be a lien prior
to, or equal with, the lien of such Mortgage, except those which are insured
against by the title insurance policy referred to in clause (xix) below;
(xviii) As of the Cut-off Date in the case of an Initial Mortgage
Loan or as of the related Subsequent Cut-off Date in the case of a Subsequent
Mortgage Loan, each Mortgaged Property is free of material damage and is in good
repair and there is no proceeding pending or threatened for the total or partial
condemnation of any Mortgage Property;
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(xix) Each Mortgage is a valid and enforceable first lien on the
Mortgaged Property securing the related Mortgage Note and each Mortgaged
Property is owned by the Mortgagor in fee simple (except with respect to common
areas in the case of condominiums, PUDs and de minimis PUTDs) subject only to
(1) the lien of nondelinquent current real property taxes and assessments, (2)
covenants, conditions and restrictions, rights of way, easements and other
matters of public record as of the date of recording of such Mortgage, such
exceptions appearing of record being acceptable to mortgage lending institutions
generally or specifically reflected in the appraisal made in connection with the
origination of the related Mortgage Loan or referred to in the lender's title
insurance policy delivered to the originator of the related Mortgage Loan and
(3) other matters to which like properties are commonly subject that do not
materially interfere with the benefits of the security intended to be provided
by such Mortgage. Immediately prior to the sale of such Mortgage Loan to the
Company in the case of an Initial Mortgage Loan and to the Trustee in the case
of a Subsequent Mortgage Loan pursuant to this Purchase Agreement, the Seller
had full right to sell and assign the same to the Company or the Trustee, as the
case may be. Immediately following the sale of such Mortgage Loan to the Company
and the Company's assignment and sale thereof of such Mortgage Loan to the
Trustee in the case of an Initial Mortgage Loan, the Trustee will have good
title thereto subject to no claims or liens, including delinquent tax or
assessment liens. Immediately following the sale of such Mortgage Loan to the
Company and the Company's assignment and sale thereof to the Trustee in the case
of a Subsequent Mortgage Loan, the Trustee will have good title thereto subject
to no claims or liens;
(xx) Each Mortgage Loan at origination complied in all material
respects with applicable state and federal laws, including, without limitation,
usury, equal credit opportunity, real estate settlement procedures, the Truth In
Lending Act of 1968, as amended, and disclosure laws and consummation of the
transactions contemplated hereby, including without limitation, the receipt of
interest by the owner of such Mortgage Loan or the Holders of Certificates
secured thereby, will not violate any such laws. Each Mortgage Loan is being
serviced in all material respects in accordance with applicable state and
federal laws, including, without limitation, the Truth In Lending Act of 1968,
as amended, and other consumer protection laws, real estate settlement
procedures, usury, equal credit opportunity and disclosure laws;
(xxi) Neither the Seller nor any prior holder of any Mortgage
has impaired, waived, altered or modified the Mortgage or Mortgage Notes in any
material respect (except that a Mortgage Loan may have been modified by a
written instrument which has been recorded, if necessary to protect the
interests of the owner of such Mortgage Loan or the Certificates, and which has
been delivered to the Trustee); satisfied, canceled or subordinated such
Mortgage in whole or in part; released the applicable Mortgaged Property in
whole or in part from the lien of such Mortgage; or executed any instrument of
release, cancellation or satisfaction with respect thereto;
(xxii) A lender's policy of title insurance (on an ALTA or CLTA
form) or binder, or other assurance of title customary in the relevant
jurisdiction insuring the first lien priority of the Mortgage Loan in an amount
at least equal to the original Principal Balance of each such Mortgage Loan or a
commitment binder or commitment to issue the same was effective on the date of
the origination of each Mortgage Loan, each such policy is valid and remains in
full force and effect, and each such policy was issued by a title insurer
qualified to do
14
business in the jurisdiction where the Mortgaged Property is located, which
policy insures the Seller and successor owners of indebtedness secured by the
insured Mortgage as to the first priority lien of the Mortgage as applicable.
The Seller is, and such successor owners will be, the sole insured under such
lender's title insurance policy; no claims have been made under such mortgage
title insurance policy; no prior holder of the applicable Mortgage, including
the Seller, has done, by act or omission, anything which would impair the
coverage of such mortgage title insurance policy; and each such policy, binder
or assurance contains all applicable endorsements;
(xxiii) All of the improvements which were included for the
purpose of determining the Appraised Value of the Mortgaged Property lie wholly
within the boundaries and building restriction lines of such property and no
improvements on adjoining properties encroach upon the Mortgaged Property;
(xxiv) No improvement located on or being part of the Mortgaged
Property is in violation of any applicable zoning law or regulation, subdivision
law or ordinance, except where the failure to comply would not have a material
adverse effect on the market value of the Mortgaged Property. All inspections,
licenses and certificates required to be made or issued with respect to all
occupied portions of the Mortgaged Property and, with respect to the use and
occupancy and fire underwriting certificates, have been made or obtained from
the appropriate authorities and the Mortgaged Property is lawfully occupied
under applicable law except where the failure to comply would not have a
material adverse effect on the market value of the Mortgaged Property;
(xxv) Each Mortgage Note and the applicable Mortgage are
genuine, and each is the legal, valid and binding obligation of the maker
thereof, enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency, reorganization, moratorium, receivership and other
similar laws relating to creditors' rights generally or by equitable principles
(regardless of whether such enforcement is considered in a proceeding in equity
or at law). All parties to the Mortgage Note and the Mortgage had legal capacity
to execute the Mortgage Note and the Mortgage and each Mortgage Note and
Mortgage has been duly and properly executed by such parties;
(xxvi) The proceeds of the Mortgage Loans have been fully
disbursed, there is no requirement for future advances thereunder and any and
all requirements as to completion of any on-site or off-site improvements and as
to disbursement of any escrow funds therefor have been complied with. All costs,
fees and expenses incurred in making, closing or recording the Mortgage Loans
were paid and the Mortgagor is not entitled to any refund of amounts paid or due
under the Mortgage Note;
(xxvii) Each Mortgage contains customary and enforceable
provisions that render the rights and remedies of the holder thereof adequate
for the realization against the Mortgaged Property of the benefits of the
security, including (i) in the case of a Mortgage designated as a deed of trust,
by trustee's sale, and (ii) otherwise by judicial foreclosure or if applicable,
non-judicial foreclosure. Upon default by a Mortgagor on a Mortgage Loan and
foreclosure on, or trustee's sale of, the Mortgaged Property pursuant to the
proper procedures, the holder of the Mortgage Loan will be able to deliver good
and merchantable title to the property, subject to any applicable rights of
redemption;
15
(xxviii) With respect to each Mortgage constituting a deed of
trust, either a trustee, duly qualified under applicable law to serve as such,
has been properly designated and currently so serves and is named in such
Mortgage or if no duly qualified trustee has been properly designated and so
serves, the Mortgage contains satisfactory provisions for the appointment of
such trustee by the holder of the Mortgage at no cost or expense to such holder,
and no fees or expenses are or will become payable by the Certificateholders to
the trustee under the deed of trust, except in connection with a trustee's sale
after default by the Mortgagor;
(xxix) There exist no deficiencies with respect to escrow
deposits and payments, if such are required, for which customary arrangements
for repayment thereof cannot be made, and no escrow deficits or payments of
other charges or payments due the Seller have been capitalized under the
Mortgage or the applicable Mortgage Note;
(xxx) The Mortgage Note is not and has not been secured by any
collateral, pledged account or other security other than real estate securing
the Mortgagor's obligations and no Mortgage Loan is secured by more than one
Mortgaged Property;
(xxxi) As of the Closing Date in the case of an Initial
Mortgage Loan and as of the related Subsequent Transfer Date in the case of a
Subsequent Mortgage Loan, the improvements upon each Mortgaged Property are
covered by a valid and existing hazard insurance policy substantially acceptable
to FNMA and acceptable to the Seller which policy provides for fire extended
coverage and such other hazards as are customary in the area where the Mortgaged
Property is located representing coverage in an amount not less than the lesser
of (A) the maximum insurable value of the improvements securing such Mortgage
Loan and (B) the outstanding Principal Balance of the related Mortgage Loan; if
the improvement on the Mortgaged Property is a condominium unit, it is included
under the coverage afforded by a blanket policy for the condominium project. All
individual insurance policies contain a standard mortgagee clause naming the
Seller or the original holder of the Mortgage, and its successors in interest,
as mortgagee, and the Seller has received no notice that any premiums due and
payable thereon have not been paid; the Mortgage obligates the Mortgagor
thereunder to maintain all such insurance at the Mortgagor's cost and expense,
and upon the Mortgagor's failure to do so, authorizes the holder of the Mortgage
to obtain and maintain such insurance at the Mortgagor's cost and expense and to
seek reimbursement therefor from the Mortgagor. There has been no act or
omission which would impair the coverage of any such policy, the benefits of the
endorsement provided for herein, or the validity and binding effect of either;
(xxxii) If the Mortgaged Property is in an area identified in
the Federal Register by the Federal Emergency Management Agency as having
special flood hazards, a flood insurance policy in a form meeting the
requirements of the current guidelines of the Flood Insurance Administration is
in effect with respect to such Mortgaged Property with a generally acceptable
carrier in an amount representing coverage not less than the least of (A) the
outstanding Principal Balance of the Mortgage Loan, (B) the minimum amount
required to compensate for damage or loss on a replacement cost basis and (C)
the maximum amount of flood coverage that is available under federal law;
(xxxiii) Except for the Mortgage Loan referred to in clause (xii)
as being delinquent, there is no material monetary default, breach, violation or
event of acceleration
16
existing under the Mortgage or the applicable Mortgage Note; and no material
event which, with the passage of time or with notice and the expiration of any
grace or cure period, would constitute a material default, breach, violation or
event of acceleration, and neither the Seller, any of its affiliates nor any
servicer or subservicer of any related Mortgage Loan has waived any default,
breach, violation or event of acceleration; no foreclosure action is threatened
or has been commenced with respect to the Mortgage Loan;
(xxxiv) Each Mortgage Loan is being serviced by the Servicer;
(xxxv) There is no obligation on the part of the Seller or any
other party to make any payments with respect to the related Mortgage Loan in
addition to the Monthly Payments required to be made by the applicable
Mortgagor;
(xxxvi) Any future advances made prior to the Cut-off Date in
the case of an Initial Mortgage Loan and as of the related Subsequent Transfer
Date in the case of a Subsequent Mortgage Loan, with respect to any Mortgage
Loan have been consolidated with the outstanding principal amount secured by
such Mortgage, and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term reflected on the Mortgage Loan Schedule.
The consolidated principal amount does not exceed the original principal amount
of the Mortgage Loan. The Mortgage Note with respect to any Mortgage Loan does
not permit or obligate the Servicer to make future advances to the Mortgagor at
the option of the Mortgagor;
(xxxvii) The Seller has caused or will cause to be performed any
and all acts required to preserve the rights and remedies of the Company and the
Trustee evidencing an interest in the Mortgage Loans in any insurance policies
applicable to the Mortgage Loans including, without limitation, any necessary
notifications of insurers, assignments of policies or interests therein, and
establishments of coinsured, joint loss payee and mortgagee rights in favor of
Trustee;
(xxxviii) Except as set forth in clause (xlii), there are no
defaults by the Mortgagor in complying with the terms of any Mortgage, and all
taxes, governmental assessments, insurance premiums, water, sewer and municipal
charges which previously became due and owing have been paid, or, if required by
the terms of the Mortgage Loan, an escrow of funds has been established in an
amount sufficient to pay for every such item which remains unpaid and which has
been assessed, but is not yet due and payable. Except for (A) payments in the
nature of escrow payments and (B) interest accruing from the date of the
Mortgage Note or date of disbursement of the Mortgage proceeds to the day which
precedes by one month the Due Date of the first installment of principal and
interest, including, without limitation, taxes and insurance payments, the
Servicer has not advanced funds, or induced, solicited or knowingly received any
advance of funds by a party other than the Mortgagor, directly or indirectly,
for the payment of any amount required by the Mortgage;
(xxxix) At the time of origination, each Mortgaged Property was
the subject of an appraisal which conforms to the underwriting requirements of
the related originator; and the Mortgage File contains an appraisal of the
applicable Mortgaged Property;
17
(xl) None of the Mortgage Loans are graduated payment Mortgage
Loans or growth equity Mortgage Loans;
(xli) 66.71% and 63.21% of the adjustable rate Group I Initial
ARM Mortgage Loans and the adjustable rate Group II Initial ARM Mortgage Loans,
respectively, (by Cut-off Date Principal Balance) are Convertible Mortgage
Loans;
(xlii) Except with respect to no more than 0.19% of the Initial
Mortgage Loans (by Cut-off Date Principal Balance), none of the payments of
principal of or interest on or in respect of any Initial Mortgage Loans shall be
30 days or more but less than 60 days past due as of the Cut-off Date; none of
the payments of principal or interest on or in respect of any Initial Mortgage
Loans shall be 60 days or more but less than 90 days past due as of the Cut-off
Date; and no Initial Mortgage Loan was 90 days or more past due as of the
Cut-off Date (except that one Initial Mortgage Loan was past 90 days due as of
the Cut-off Date, such loan having been repurchased by the Seller); (b) except
as set forth in clause (a) above, no Initial Mortgage Loan has been
contractually delinquent for more than one monthly installment period during the
twelve months preceding the Cut-off Date; (c) except as set forth in clause (a)
above, all payments required to be made by the Mortgagor under the terms of the
Mortgage Note have been made and credited; and (d) to the Seller's knowledge,
there was no delinquent recording, tax or assessment lien against the property
subject to any Mortgage, except where such lien was being contested in good
faith and a stay had been granted against levying on the property;
(xliii) Upon payment of the Purchase Price for the Mortgage Loans
by the Company or the Trustee, as applicable, pursuant to this Purchase
Agreement, the Seller has transferred to the Company in the case of an Initial
Mortgage Loan and to the Trustee in the case of a Subsequent Mortgage Loan, good
and marketable title to each Mortgage Note and Mortgage free and clear of any
and all liens, claims, encumbrances, participation interests, equities, pledges,
charges or security interests of any nature and has or had full right and
authority, subject to no participation of or agreement with any other person, to
sell and assign the same, and following the sale of each Initial Mortgage Loan,
the Company or the Trustee, as applicable, will own such Mortgage Loan free and
clear of any encumbrance, equity interest, participation interest, lien, pledge,
charge, claim or security interest;
(xliv) The Seller acquired any right, title and interest in and
to the Mortgage Loans in good faith and without notice of any adverse claim;
(xlv) The Mortgage Note, the Mortgage, the related Assignment
of Mortgage and any other documents required to be delivered by the Seller have
been delivered to the Certificate Administrator. The Certificate Administrator
is in possession of a complete, true and accurate Mortgage File in accordance
with Section 2.01 hereof. Substantially all Mortgage Loans have monthly payments
due on the first day of each month and each Mortgage Loan had an original term
to maturity of no greater than 30 years;
(xlvi) Each Mortgage Loan contains a due-on-sale provision,
although each Mortgage Loan may be assumable if permitted by the Servicer under
certain circumstances;
18
(xlvii) Each of the Mortgage and the Assignment of Mortgage is
in recordable form and is acceptable for recording under the laws of the
jurisdiction in which the Mortgaged Property is located;
(xlviii) The Mortgagor has not notified the Seller, and the
Seller has no knowledge of any relief requested or allowed to the Mortgagor
under the Soldiers' and Sailors' Civil Relief Act of 1940;
(xlix) To the best of the Seller's knowledge, there exists no
violation of any local, state, or federal environmental law, rule or regulation
in respect of the Mortgaged Property which violation has or could have a
material adverse effect on the market value of such Mortgaged Property. The
Seller has no knowledge of any pending action or proceeding directly involving
the related Mortgaged Property in which compliance with any environmental law,
rule or regulation is in issue; and, to the best of the Seller's knowledge,
nothing further remains to be done to satisfy in full all requirements of each
such law, rule or regulation constituting a prerequisite to the use and
employment of such Mortgaged Property;
(l) Each Mortgage Loan conforms, and all such Mortgage Loans
in the aggregate conform, to the description thereof set forth in the Prospectus
and Prospectus Supplement in all material respects;
(li) Immediately prior to the transfer to the Company or the
Trustee, as applicable, the Seller had good and marketable title thereto, and
the Seller is the sole owner of beneficial title to and holder of the Mortgage
Loan. The Seller is conveying the same to the Company or the Trustee, as
applicable, free and clear of any and all liens, claims, encumbrances,
participation interests, equities, pledges, charges or security interests of any
nature and has full right and authority to sell and assign the same pursuant to
this Purchase Agreement, except for liens which will be released simultaneously
with such conveyance;
(lii) For each Mortgage Loan, the related Mortgage File
contains a true, accurate and correct copy of each of the documents and
instruments required to be included therein;
(liii) The Servicer meets all applicable requirements under the
Pooling and Servicing Agreement, is properly qualified to service each Mortgage
Loan and has been servicing each Mortgage Loan prior to the Cut-off Date or the
related Subsequent Cut-off Date, as the case may be;
(liv) No instrument of release or waiver has been executed in
connection with the Mortgage Loans, and no Mortgagor has been released, in whole
or in part from its obligations in connection with a Mortgage Loan except in
connection with an assumption agreement which has been delivered to the Trustee;
(lv) On the basis of a representation by the Mortgagor at the
time of origination of the Mortgage Loans, at least 92.71% and 98.14% of the
Group I Mortgage Loans and Group II Initial Mortgage Loans, respectively, (by
Cut-off Date Principal Balance) will be secured by Mortgages on owner-occupied
primary residence properties;
19
(lvi) 11.27% and 7.89% of the Group I Initial Mortgage Loans
and the Group II Initial Mortgage Loans, respectively, (by Cut-off Date
Principal Balance) provide for a balloon payment and each Mortgage Note with
respect to each such Mortgage Loan requires monthly payments of principal based
on 30 year amortization schedules and have scheduled maturity dates of 15 years
from the due date of the first monthly payment;
(lvii) No Mortgage Loan was originated based on an appraisal of
the related Mortgaged Property made prior to completion of construction of the
improvements thereon;
(lviii) None of the Mortgage Loans is a "buy down" mortgage loan;
(lix) None of the Group I Mortgage Loans are subject to the
Home Ownership and Equity Protection Act of 1994, as amended, or any comparable
state law; no proceeds from any Group I Mortgage Loan were used to finance any
single premium credit insurance policies; none of the Group I Mortgage Loans (by
Cut-off Date Principal Balance) require a mortgagor to pay a Prepayment Charge
if the mortgagor prepays a Mortgage Loan more than five years after the date the
Mortgage Loan was originated.
(lx) No selection procedure reasonably believed by the Seller
to be adverse to the interests of the Certificateholders was utilized in
selecting the Mortgage Loans;
(lxi) The terms of the Mortgage Note related to each Adjustable
Rate Mortgage Loan provide that, following an initial period of two or three
years following the month in which such Mortgage Loan was originated and
semiannually or annually thereafter (each such date, an "Adjustment Date"), the
Mortgage Rate on such Mortgage Loan will be adjusted to equal the sum of (a) the
related Index and (b) a fixed percentage amount specified in the related
Mortgage Note (each, a "Gross Margin"); provided, however, that the Mortgage
Rate generally will not increase or decrease by the related Periodic Rate Cap,
and will not increase above a specified maximum Mortgage Rate over the life of
the Adjustable Rate Mortgage Loan (the "Maximum Mortgage Rate") or decrease
below a specified minimum Mortgage Rate over the life of the Adjustable Rate
Mortgage Loan (the "Minimum Mortgage Rate");
(lxii) None of the Initial Mortgage Loans (by Cut-off Date
Principal Balance) are negative amortization loans, and none of the Subsequent
Mortgage Loans shall be negative amortization loans;
(lxiii) No material misrepresentation, fraud or similar
occurrence with respect to a Mortgage Loan has taken place on the part of the
Seller, its affiliates or employees or any other person involved in the
origination of the Mortgage Loan or in the application for any insurance,
including, but not limited to the MI Policy, in relation to such Mortgage Loan;
(lxiv) Each Mortgage Loan was originated by a mortgagee approved
by the Secretary of Housing and Urban Development pursuant to Sections 203 and
211 of the Act, a savings and loan association, a savings bank, a commercial
bank, credit union,
20
insurance company or similar institution which is supervised and examined by a
federal or state authority;
(lxv) With respect to each Mortgage Loan secured by
manufactured housing, such manufactured housing is permanently affixed to a
foundation and constitutes real estate under applicable state law;
(lxvi) No Mortgage Loans are date of payment or simple interest
loans;
(lxvii) The sale, transfer, assignment and conveyance of
Mortgage Loans by the Seller pursuant to this Purchase Agreement is not subject
to and will not result in any tax, fee or governmental charge payable by the
Company, the Trustee, the Certificate Administrator or the Trustee to any
federal, state or local government ("Transfer Taxes") other than Transfer Taxes
which have or will be paid by the Seller as due; and
(lxviii) [Reserved]
(lxix) Approximately 99.74% of the Initial Mortgage Loans (by
Cut-Off Date Principal Balance) with a Loan-to-Value Ratio greater than 60% are
covered by an MI Policy issued by an MI Insurer;
(lxx) Approximately 93.57% of the Initial Mortgage Loans that
is identified on Schedule 1 hereto is covered by a MI Policy issued by the MI
Insurer;
(lxxi) All requirements for the valid transfer of each MI
Policy, including any assignments or notices required in each MI Policy, have
been satisfied; and
(lxxii) As of the Closing Date with respect to each Initial
Mortgage Loan that is subject to a MI Policy and as of each Subsequent Transfer
Date with respect to each Subsequent Mortgage Loan that is subject to a MI
Policy, the Seller is unaware of any existing circumstances which would cause
the MI Insurer to deny a claim with respect to such Mortgage Loan.
Upon discovery by the Seller or upon notice from the Company, the
Trustee, or the Certificate Administrator, as applicable, of a breach of any
representation or warranty in subsection (a) of this Section which materially
and adversely affects the interests of the Certificateholders the Seller shall,
within 45 days of its discovery or its receipt of notice of such breach, either
(i) cure such breach in all material respects or (ii) to the extent that such
breach is with respect to a Mortgage Loan or a Related Document, either (A)
repurchase such Mortgage Loan from the Trustee at the Repurchase Price, or (B)
substitute one or more Eligible Substitute Mortgage Loans for such Mortgage
Loan, in each case in the manner and subject to the conditions and limitations
set forth below.
Upon discovery by the Seller or upon notice from the Company, the
Trustee, or the Certificate Administrator, as applicable, of a breach of any
representation or warranty in this subsection (b) with respect to any Mortgage
Loan or upon the occurrence of a Repurchase Event, which materially and
adversely affects the value of the related Mortgage Loan or the interests of
21
any Certificateholders or of the Company or the Trustee in such Mortgage Loan
(notice of which shall be given to the Company and the Trustee by the Seller, if
it discovers the same) the Seller shall, within 90 days after the earlier of its
discovery or receipt of notice thereof, either cure such breach or Repurchase
Event in all material respects or either (i) repurchase such Mortgage Loan from
the Trustee at the Repurchase Price, or (ii) substitute one or more Eligible
Substitute Mortgage Loans for such Mortgage Loan, in each case in the manner and
subject to the conditions set forth below. The Repurchase Price for any such
Mortgage Loan repurchased by the Seller shall be deposited or caused to be
deposited by the Servicer in the Collection Account maintained by it pursuant to
Section 3.06 of the Pooling and Servicing Agreement.
In the event that the Seller elects to substitute an Eligible
Substitute Mortgage Loan or Loans for a Deleted Mortgage Loan pursuant to this
Section 3.01, the Seller shall deliver to the Certificate Administrator on
behalf of the Trustee, with respect to such Eligible Substitute Mortgage Loan or
Loans, the original Mortgage Note and all other documents and agreements as are
required by Section 2.01 hereof, with the Mortgage Note endorsed as required by
such Section 2.01 hereof. No substitution will be made in any calendar month
after the Determination Date for such month. Monthly Payments due with respect
to Eligible Substitute Mortgage Loans in the month of substitution shall not be
part of the Trust Fund and will be retained by the Servicer and remitted by the
Servicer to the Seller on the next succeeding Payment Date. For the month of
substitution, distributions to the Payment Account pursuant to the Pooling and
Servicing Agreement will include the Monthly Payment due on a Deleted Mortgage
Loan for such month and thereafter the Seller shall be entitled to retain all
amounts received in respect of such Deleted Mortgage Loan. The Servicer shall
amend or cause to be amended the Mortgage Loan Schedule to reflect the removal
of such Deleted Mortgage Loan and the substitution of the Eligible Substitute
Mortgage Loan or Loans and the Servicer shall deliver the amended Mortgage Loan
Schedule to the Certificate Administrator and the Trustee. Upon such
substitution, the Eligible Substitute Mortgage Loan or Loans shall be subject to
the terms of this Purchase Agreement and the Pooling and Servicing Agreement in
all respects, the Seller shall be deemed to have made the representations and
warranties with respect to the Eligible Substitute Mortgage Loan contained
herein set forth in this Section 3.01(b), to the extent set forth in the
definition of "Eligible Substitute Mortgage Loan", as of the date of
substitution, and the Seller shall be obligated to repurchase or substitute for
any Eligible Substitute Mortgage Loan as to which a Repurchase Event has
occurred as provided herein. In connection with the substitution of one or more
Eligible Substitute Mortgage Loans for one or more Deleted Mortgage Loans, the
Servicer will determine the amount (such amount, a "Substitution Adjustment
Amount"), if any, by which the aggregate principal balance of all such Eligible
Substitute Mortgage Loans as of the date of substitution is less than the
aggregate principal balance of all such Deleted Mortgage Loans (after
application of the principal portion of the Monthly Payments due in the month of
substitution that are to be distributed to the Payment Account in the month of
substitution). The Seller shall pay the amount of such shortfall to the Servicer
for deposit into the Collection Account on the day of substitution, without any
reimbursement therefor.
Upon receipt by the Trustee of written notification, signed by a
Servicing Officer, of the deposit of such Repurchase Price or of such
substitution of an Eligible Substitute Mortgage Loan and deposit of any
applicable Substitution Adjustment Amount as provided above, the Certificate
Administrator shall, on behalf of the Trustee, cause to be released to the
Seller the related Mortgage File for the Mortgage Loan being repurchased or
substituted for and
22
the Trustee shall execute and deliver such instruments of transfer or assignment
prepared by the Servicer, in each case without recourse, as shall be necessary
to vest in the Seller or its designee such Mortgage Loan released pursuant
hereto and thereafter such Mortgage Loan shall not be an asset of the Trustee.
It is understood and agreed that the obligation of the Seller to cure
any breach with respect to or to repurchase or substitute for, any Mortgage Loan
as to which such a breach has occurred and is continuing shall, except to the
extent provided in Section 6.01 of this Purchase Agreement, constitute the sole
remedy respecting such breach available to the Company, the Trustee, the
Certificateholders (or the Certificate Administrator on behalf of the Trustee
for the benefit of Certificateholders) against the Seller.
It is understood and agreed that the representations and warranties
set forth in this Section 3.01 shall survive delivery of the respective Mortgage
Files to the Certificate Administrator.
Section 3.02 Company Representations and Warranties.
The Company hereby represents and warrants to the Seller and the
Trustee as of the date hereof and as of the Closing Date that:
(a) The Company is duly organized and validly existing as a
corporation in good standing under the laws of the State of Delaware, with power
and authority to own its properties and to conduct its business as such
properties are currently owned and such business is presently conducted.
(b) The Company is duly qualified to do business as a foreign
corporation in good standing and has obtained all necessary licenses and
approvals in all jurisdictions in which the ownership or lease of its property
or the conduct of its business shall require such qualifications and in which
the failure to so qualify would have a material adverse effect on the business,
properties, assets or condition (financial or other) of the Company and the
ability of the Company to perform under this Purchase Agreement.
(c) The Company has the power and authority to execute and deliver
this Purchase Agreement and to carry out its terms; the Company has full power
and authority to purchase the property to be purchased from the Seller and the
Company has duly authorized such purchase by all necessary corporate action; and
the execution, delivery and performance of this Purchase Agreement have been
duly authorized by the Company by all necessary corporate action.
(d) The consummation of the transactions contemplated by this Purchase
Agreement and the fulfillment of the terms hereof do not conflict with, result
in any breach of any of the terms and provisions of, or constitute (with or
without notice or lapse of time) a default under, the articles of incorporation
or bylaws of the Company, or any indenture, agreement or other instrument to
which the Company is a party or by which it is bound; nor result in the creation
or imposition of any Lien upon any of its properties pursuant to the terms of
any such indenture, agreement or other instrument (other than pursuant to the
Basic Documents); nor violate any law or, to the best of the Company's
knowledge, any order, rule or regulation
23
applicable to the Company of any court or of any federal or state regulatory
body, administrative agency or other governmental instrumentality having
jurisdiction over the Company or its properties.
(e) The Company (A) is a solvent entity and is paying its debts as
they become due and (B) after giving effect to the transfer of the Mortgage
Loans, will be a solvent entity and will have sufficient resources to pay its
debts as they become due.
Section 3.03 [Reserved]
ARTICLE IV
SELLER'S COVENANTS
Section 4.01 Covenants of the Seller.
The Seller hereby covenants as of the date hereof and as of the
Closing Date that, except for the transfer hereunder, on and after the Closing
Date, the Seller will not sell, pledge, assign or transfer to any other Person,
or grant, create, incur or assume any Lien on, any Mortgage Loan, whether now
existing or hereafter created, or any interest therein; the Seller will notify
the Certificate Administrator and the Trustee of the existence of any such Lien
on any Mortgage Loan immediately upon discovery thereof; and the Seller will
defend the right, title and interest of the Trustee, on its own behalf and as
assignee of the Company, in, to and under the Mortgage Loans, whether now
existing or hereafter created, against all claims of third parties claiming
through or under the Seller.
In the event that the Certificate Administrator or the Trustee
receives actual notice of any Transfer Taxes arising out of the transfer,
assignment and conveyance of the Mortgage Loans, on written demand by the
Certificate Administrator, or upon the Seller's otherwise being given notice
thereof by the Certificate Administrator, the Seller shall pay any and all such
Transfer Taxes (it being understood that the Holders of the Certificates, the
Company, the Certificate Administrator and the Trustee shall have no obligation
to pay such Transfer Taxes).
Section 4.02 Payment of Expenses.
(a) The Seller will pay on the Closing Date all expenses incident to
the performance of its obligations under this Purchase Agreement and the
Underwriting Agreement, including (i) the preparation, printing and any filing
of the preliminary prospectus, Prospectus Supplement and Prospectus (including
any schedules or exhibits and any document incorporated therein by reference)
originally filed and of each amendment or supplement thereto, (ii) the
preparation, printing and delivery to the Underwriter of this Purchase Agreement
and the Underwriting Agreement, the Pooling and Servicing Agreement and such
other documents as may be required in connection with the offering, purchase,
sale and delivery of the Certificates, (iii) the preparation, issuance and
delivery of the certificates for the Class A Certificates to the Underwriter,
including any charges of DTC, CEDEL, S.A. and the Euroclear System in connection
therewith; (iv) the qualification of the Class A Certificates and Mezzanine
Certificates under securities laws in accordance with the provisions of Section
3(f) of the Underwriting Agreement, including filing fees and the reasonable
fees and disbursements of
24
counsel for the Underwriter in connection therewith and in connection with the
preparation of the Blue Sky Survey and any supplement thereto for delivery to
potential investors, (v) in addition to the initial printing and filing costs
under (i) above, the printing and delivery to the Underwriter of copies of each
preliminary prospectus and of the Prospectus and any amendments or supplements
thereto for delivery to potential investors, (vi) the fees and expenses of the
Trustee and the Certificate Administrator, including the fees and disbursements
of counsel for the Trustee and the Certificate Administrator in connection with
the Pooling and Servicing Agreement, the Purchase Agreement and the Certificates
and (vii) any fees payable in connection with the rating of the Certificates.
(b) If the Underwriting Agreement is terminated by the Underwriter in
accordance with the provisions of Section 5 or Section 9(a)(i) thereof, the
Seller shall reimburse the Underwriter for all of their out-of-pocket expenses,
including the reasonable fees and disbursements of counsel for the Underwriter.
ARTICLE V
CONDITIONS TO INITIAL MORTGAGE LOAN PURCHASE
Section 5.01 Conditions of Company's Obligations.
The Company's obligations to purchase the Initial Mortgage Loans which each
accepts for purchase hereunder shall be subject to each of the following
conditions:
(i) the Mortgage File for each Initial Mortgage Loan shall have been
delivered in accordance with this Purchase Agreement;
(ii) the representations and warranties set forth in Section 3.01(b)
hereof with respect to each Initial Mortgage Loan shall be true as of the
Closing Date;
(iii) the Underwriter or its affiliates shall have had an opportunity
to perform a due diligence review of each Mortgage Loan; and
(iv) the Seller shall have provided to the Underwriter or its
affiliates such other documents which are then required to have been delivered
under this Purchase Agreement or which are reasonably requested by the
Underwriter or its affiliates, which other documents may include UCC financing
statements, a favorable opinion or opinions of counsel with respect to matters
which are reasonably requested by the Underwriter, and/or an Officers'
Certificate.
25
ARTICLE VI
INDEMNIFICATION BY THE SELLER
WITH RESPECT TO THE MORTGAGE LOANS
Section 6.01 Indemnification With Respect to the Mortgage Loans.
The Seller shall indemnify and hold harmless the Company, Trustee and the
Certificate Administrator from and against any loss, liability or expense
arising from the breach by the Seller of its representations and warranties in
Section 3.01 of this Purchase Agreement which materially and adversely affects
the value of any Mortgage Loan or the Company's assignees' interest in any
Mortgage Loan or from the failure by the Seller to perform its obligations under
this Purchase Agreement in any material respect.
Section 6.02 Limitation on Liability of the Seller.
None of the directors, officers, employees or agents of the Seller shall be
under any liability to the Company, it being expressly understood that all such
liability is expressly waived and released as a condition of, and as
consideration for, the execution of this Purchase Agreement. Except as and to
the extent expressly provided in the Basic Documents, the Seller shall not be
under any liability to the Trustee, the Certificate Administrator or the
Certificateholders. The Seller and any director, officer, employee or agent of
the Seller may rely in good faith on any document of any kind prima facie
properly executed and submitted by any Person respecting any matters arising
hereunder.
ARTICLE VII
TERMINATION
Section 7.01 Termination.
(a) Except as provided in Section 7.01(b) hereof, the respective
obligations and responsibilities of the Seller, the Company, the Trustee and the
Certificate Administrator created hereby shall terminate, except for the
Seller's indemnity obligations as provided herein, upon the termination of the
Trust Fund pursuant to the terms of the Pooling and Servicing Agreement.
(b) The Company may terminate this Purchase Agreement, by notice to the
Seller, at any time at or prior to the Closing Date:
(i) if the Underwriting Agreement is terminated by the Underwriter
pursuant to the terms of the Underwriting Agreement or if there has been, since
the time of execution of this Purchase Agreement or since the respective dates
as of which information is given in the Prospectus, any material adverse change
in the financial condition, earnings, business affairs or business prospects of
the Seller, whether or not arising in the ordinary course of business, or
26
(ii) if there has occurred any material adverse change in the
financial markets in the United States, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or development
involving a prospective change in national or international political, financial
or economic conditions, in each case the effect of which is such as to make it,
in the judgment of the Underwriter, impracticable to market the Class A
Certificates and Mezzanine Certificates or to enforce contracts for the sale of
the Class A Certificates and Mezzanine Certificates, or
(iii) if trading in any securities of the Seller has been suspended or
limited by the Commission or the New York Stock Exchange, or if trading
generally on the American Stock Exchange or the New York Stock Exchange or in
the NASDAQ National Market System has been suspended or limited, or minimum or
maximum prices for trading have been fixed, or maximum ranges for prices have
been required, by any of said exchanges or by such system or by order of the
Commission, the National Association of Securities Dealers, Inc. or any other
governmental authority,
(iv) if a banking moratorium has been declared by either federal or
New York authorities,
(v) either (A) a change in control of the Seller shall have occurred
other than in connection with and as a result of the issuance and sale by the
Seller or registered, publicly offered common stock; or (B) the Underwriter
determines in its sole discretion that any material adverse change has occurred
in the management of the Seller,
(vi) there is (A) a material breach by the Seller of any
representation and warranty contained in this Purchase Agreement or the
Underwriting Agreement other than a representation or warranty relating to
particular Mortgage Loans, and the Underwriter has reason to believe in good
faith either that such breach is not curable within two (2) days or that such
breach may not have been cured in all material respects at the expiration of two
(2) days following discovery thereof by the Seller or (B) a failure by the
Seller to make any payment payable by it under this Purchase Agreement or (C)
any other failure by the Seller to observe and perform in any material respect
its material covenants, agreements and obligations with the Company, including
without limitation those contained in this Purchase Agreement, and the Company
has reason to believe in good faith that such failure may not have been cured in
all material respects at the expiration of two (2) days following discovery
thereof by the Seller, or
(vii) the Seller fails to provide written notification to the
Underwriter of any change in its loan origination, acquisition or appraisal
guidelines or practices, or the Seller, without the prior consent of the
Underwriter (which shall not be unreasonably withheld), amends in any material
respect its loan origination, acquisition or appraisal guidelines or practices.
If this Purchase Agreement is terminated pursuant to this Section 7.01(b),
such termination shall be without liability of any party to any other party
except as provided in Section 4.02 hereof.
27
ARTICLE VIII
MISCELLANEOUS PROVISIONS
Section 8.01 Amendment.
This Purchase Agreement may be amended from time to time by the Seller, the
Company by written agreement signed by the Seller and the Company.
Section 8.02 Governing Law.
This Purchase Agreement shall be governed by and construed in accordance
with the laws of the State of New York and the obligations, rights and remedies
of the parties hereunder shall be determined in accordance with such laws.
Section 8.03 Notices.
All demands, notices and communications hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered at or mailed by
registered mail, postage prepaid, addressed as follows:
(i) if to the Seller:
NovaStar Mortgage, Inc.
0000 Xxxx 00/xx/ Xxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxx X. Xxxxxxx
or, such other address as may hereafter be furnished to the Company in writing
by the Seller.
(ii) if to the Company:
NovaStar Mortgage Funding Corporation
0000 X. 00/xx/ Xxxxx
Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxx Xxxxxxxxxxxx
or such other address as may hereafter be furnished to the Seller in writing by
the Company.
(iii) if to the Certificate Administrator:
Wachovia Bank, National Association
12th Floor, 000 X. Xxxxx Xxxxxx, XX 1179
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Structured Finance Trust Services (NovaStar Mortgage
Funding Trust, Series 2002-3)
28
or such other address as may hereafter be furnished to the Seller in writing by
the Certificate Administrator.
(iv) if to the Trustee:
JPMorgan Chase Bank
000 Xxxx 00/xx/ Xxxxxx, 00/xx/ Xxxxx
Xxx Xxxx, XX 00000
Attention: Institutional Trust Services (NovaStar Mortgage
Funding Trust, Series 2002-3)
or such other address as may hereafter be furnished to the Seller in writing by
the Trustee.
Section 8.04 Severability of Provisions.
If any one or more of the covenants, agreements, provisions or terms of
this Purchase Agreement shall be held invalid for any reason whatsoever, then
such covenants, agreements, provisions or terns shall be deemed severable from
the remaining covenants, agreements, provisions or terms of this Purchase
Agreement and shall in no way affect the validity or enforceability of the other
provisions of this Purchase Agreement.
Section 8.05 Relationship of Parties.
Nothing herein contained shall be deemed or construed to create a
partnership or joint venture between the parties hereto, and the services of the
Seller shall be rendered as an independent contractor and not as agent for the
Company.
Section 8.06 Counterparts.
This Purchase Agreement may be executed in two or more counterparts and by
the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original and such counterparts together shall
constitute one and the same agreement.
Section 8.07 Further Agreements.
The Company 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 Purchase Agreement. Each of the
Company and the Seller agrees to use its best reasonable efforts to take all
actions necessary to be taken by it to cause the Class A-1 Certificates to be
rated "Aaa" by Xxxxx'x and "AAA" by S&P, the Class A-2 Certificates to be rated
"Aaa" by Xxxxx'x and "AAA" by S&P, the Class AIO Certificates to be rated "Aaa"
by Xxxxx'x and "AAA" by S&P, the Class M-1 Certificates to be rated "Aa2" by
Xxxxx'x and "AA" by S&P, the Class M-2 Certificates to be rated "A2" by Xxxxx'x
and "A" by S&P, the Class M-3 Certificates to be rated "Baa2" by Xxxxx'x and
"BBB" by S&P, the Class B Certificates to be rated "Ba2" by Xxxxx'x and "BB" by
S&P and the class P Certificates to be rated "AAA" by S&P, and each party will
cooperate with the other in connection therewith.
29
Section 8.08 Intention of the Parties.
It is the intention of the parties that (i) the Company is purchasing
on the Closing Date, and the Seller is selling on the Closing Date, the Initial
Mortgage Loans, rather than the Company providing to the Seller a loan secured
by the Initial Mortgage Loans on the Closing Date, and (ii) the Trustee is
purchasing on the Closing Date, and the Company is selling on the Closing Date,
the Initial Mortgage Loans, rather than the Trustee providing to the Company a
loan secured by the Initial Mortgage Loans, (iii) the Company will be purchasing
on each Subsequent Transfer Date, and the Seller will be selling on each
Subsequent Transfer Date, the related Subsequent Mortgage Loans, rather than the
Company providing to the Seller a loan secured by the related Subsequent
Mortgage Loans on each Subsequent Transfer Date, and (iv) the Trustee will be
purchasing on each Subsequent Transfer Date, and the Company will be selling on
each Subsequent Transfer Date, the related Subsequent Mortgage Loans, rather
than the Trustee providing to the Company a loan secured by the related
Subsequent Mortgage Loans on each Subsequent Transfer Date. Accordingly, the
parties hereto each intend to treat these transactions as (i) a sale by the
Seller, and a purchase by the Company, of the Initial Mortgage Loans on the
Closing Date, and (ii) a sale by the Company, and a purchase by the Trustee, of
the Initial Mortgage Loans on the Closing Date, (iii) a sale by the Seller, and
a purchase by the Company, of the related Subsequent Mortgage Loans on each
Subsequent Transfer Date, and (iv) a sale by the Company, and a purchase by the
Trustee, of the related Subsequent Mortgage Loans on each Subsequent Transfer
Date.
Section 8.09 Successors and Assigns; Assignment of Purchase Agreement.
This Purchase Agreement shall bind and inure to the benefit of and be
enforceable by the Seller, the Company, the Trustee, the Certificate
Administrator, and their respective successors and assigns. The obligations of
the Seller under this Purchase Agreement cannot be assigned or delegated to a
third party without the consent of the Company, which consent shall be at the
Company's discretion. The parties hereto acknowledge that (i) the Company is
acquiring the Initial Mortgage Loans for the purpose of selling them to the
Trustee, who will in turn pledge the Initial Mortgage Loans to the Trustee for
the benefit of the Certificateholders and (ii) the Company is acquiring the
Subsequent Mortgage Loans for the purpose of selling them to the Trustee, who
will hold the Subsequent Mortgage Loans for the benefit of the
Certificateholders. As an inducement to the Company and the Trustee to purchase
the Mortgage Loans, the Seller acknowledges and consents to (i) the assignment
by the Company to the Trustee of all of the Company's rights or remedies against
the Seller pursuant to this Purchase Agreement and to (ii) the enforcement or
exercise of any rights against the Seller pursuant to this Purchase Agreement by
the Company, the Certificate Administrator and the Trustee. Such enforcement of
a right or remedy by the Company, the Trustee or the Certificate Administrator,
as applicable, shall have the same force and effect as if the right or remedy
had been enforced or exercised by the Company directly.
Section 8.10 Survival.
The representations and warranties made herein by the Seller and the
provisions of Article V hereof shall survive the purchase of the Mortgage Loans
hereunder.
30
Section 8.11 Liability of the Trustee.
The Trustee is entering into the Basic Documents to which it is a
party solely as Trustee, hereunder and thereunder, and not in its individual
capacity, and all persons having any claim against the Trustee by reason of the
transactions contemplated by this Agreement or any other Basic Document shall
look only to the Trust Fund for payment or satisfaction thereof.
31
IN WITNESS WHEREOF, the Seller, the Company, the Certificate
Administrator and the Trustee have caused their names to be signed to this
Mortgage Loan Purchase Agreement by their respective officers thereunto duly
authorized as of the day and year first above written.
NOVASTAR MORTGAGE, INC.
as Seller
By: /s/ Xxxx Xxxxxxxxxxxx
---------------------------------
Name: Xxxx Xxxxxxxxxxxx
Title: Vice President
NOVASTAR MORTGAGE FUNDING
CORPORATION
as Company
By: /s/ Xxxx Xxxxxxxxxxxx
---------------------------------
Name: Xxxx Xxxxxxxxxxxx
Title: Vice President
WACHOVIA BANK, NATIONAL ASSOCIATION
as Certificate Administrator
By: /s/ Xxxxxx Xxxxxxxx
---------------------------------
Name: Xxxxxx Xxxxxxxx
Title: Vice President
JPMORGAN CHASE BANK,
not in its individual capacity,
but solely as Trustee
By: /s/ Xxxx Xxxxx
---------------------------------
Name: Xxxx Xxxxx
Title: Trust Officer
[Signature Page to Mortgage Loan Purchase Agreement]
EXHIBIT 1
INITIAL MORTGAGE LOAN SCHEDULE
[On File with Xxxxx Xxxxxxxxxx LLP]
2
EXHIBIT 2(A)
SELLER'S SUBSEQUENT TRANSFER INSTRUMENT
Pursuant to this Seller's Subsequent Transfer Instrument (the
"Seller's Instrument"), dated as of September 1, 2002, between NovaStar
Mortgage, Inc. as seller (the "Seller"), and NovaStar Mortgage Funding
Corporation, as company (the "Company"), and pursuant to the Mortgage Loan
Purchase Agreement, dated as of September 1, 2002 (the "Purchase Agreement"),
among the Seller, the Company, Wachovia Bank, National Association, as
Certificate Administrator (the "Certificate Administrator") and JPMorgan Chase
Bank, as Trustee (the "Trustee"), the Seller and the Company agree to the sale
by the Seller and the purchase by the Company of the subsequent Mortgage Loans
listed on the attached Mortgage Loan Schedule (the "Subsequent Mortgage Loans")
and the related MI Policies.
Capitalized terms used and not defined herein have their respective
meanings as set forth in the definitions contained in the Pooling and Servicing
Agreement, dated as of September 1, 2002 (the "Pooling and Servicing
Agreement"), between the Trustee, the Certificate Administrator, the Company and
the Seller/Servicer which definitions are incorporated by reference herein. All
other capitalized terms used herein shall have the meanings specified herein.
Section 1. Conveyance of Subsequent Mortgage Loans.
(a) The Seller does hereby sell, transfer, assign, set over and convey
to the Company, without recourse, all of its right, title and interest in and to
the Subsequent Mortgage Loans and the related MI Policies, all scheduled
payments of principal and interest on the Subsequent Mortgage Loans due after
the Subsequent Cut-off Date, and all other payments of principal and interest on
the Subsequent Mortgage Loans collected after the Subsequent Cut-off Date (minus
that portion of any such payment which is allocable to the period prior to the
Subsequent Cut-off Date); provided, however, that no scheduled payments of
principal and interest due on or before the Subsequent Cut-off Date and
collected after the Subsequent Cut-off Date shall belong to the Company pursuant
to the terms of this Seller's Instrument. The Seller, contemporaneously with the
delivery of this Seller's Instrument, has delivered or caused to be delivered to
the Certificate Administrator, at the direction of the Company, each item set
forth in Section 2.02(b) of the Purchase Agreement with respect to such
Subsequent Mortgage Loans and the related MI Policies. The transfer to the
Company by the Seller of the Subsequent Mortgage Loans identified on the
attached Mortgage Loan Schedule shall be absolute and is intended by the Seller,
the Company, the Certificate Administrator, the Trustee and the
Certificateholders to constitute and to be treated as a sale by the Seller.
The parties hereto intend that the transactions set forth herein
constitute a sale by the Seller to the Company on the Subsequent Transfer Date
of all the Seller's right, title and interest in and to the Subsequent Mortgage
Loans and the related MI Policies, and other property as and to the extent
described above. In the event the transactions set forth herein shall be deemed
not to be a sale, the Seller hereby grants to the Company as of the Subsequent
Transfer Date a security interest in all of the Seller's right, title and
interest in, to and under the Subsequent Mortgage Loans, and such other
property, to secure all of the Seller's obligations
hereunder, and this Purchase Agreement shall constitute a security agreement
under applicable law, and in such event, the parties hereto acknowledge that the
Certificate Administrator, in addition to holding the Subsequent Mortgage Loans
and the related MI Policies on behalf of the Trustee for the benefit of the
Certificateholders, holds the Subsequent Mortgage Loans and the related MI
Policies as designee and agent of the Company. The Seller agrees to take or
cause to be taken such actions and to execute such documents, including without
limitation the filing of all necessary UCC-1 financing statements filed in the
State of Maryland (which shall be submitted for filing as of the Subsequent
Transfer Date), any continuation statements with respect thereto and any
amendments thereto required to reflect a change in the name or corporate
structure of the Seller or the filing of any additional UCC-1 financing
statements due to the change in the state of incorporation of the Seller as are
necessary to perfect and protect the interests of the Company and its assignees
in each Subsequent Mortgage Loan, the related MI Policies and the proceeds
thereof.
(b) The expenses and costs relating to the delivery of the Subsequent
Mortgage Loans, this Seller's Instrument and such other items required under the
Mortgage Loan Purchase Agreement shall be borne by the Seller.
(c) Additional terms of the sale are set forth on Attachment A hereto.
Section 2. Representations and Warranties; Conditions Precedent.
(a) The Seller hereby affirms the representations and warranties set forth
in Section 3.01 of the Purchase Agreement that relate to the Seller and the
Subsequent Mortgage Loans as of the date hereof. The Seller hereby confirms that
each of the conditions set forth in Section 2.02(b) of the Purchase Agreement
are satisfied as of the date hereof and further represents and warrants that
each Subsequent Mortgage Loan complies with the requirements of this Seller's
Instrument and Section 2.02(c) of the Purchase Agreement.
(b) The Seller is solvent, is able to pay its debts as they become due and
has capital sufficient to carry on its business and its obligations hereunder;
it will not be rendered insolvent by the execution and delivery of this Seller's
Instrument or by the performance of its obligations hereunder nor is it aware of
any pending insolvency; no petition of bankruptcy (or similar insolvency
proceeding) has been filed by or against the Seller prior to the date hereof;
(c) All terms and conditions of the Purchase Agreement are hereby ratified
and confirmed; provided, however, that in the event of any conflict the
provisions of this Seller's Instrument shall control over the conflicting
provisions of the Purchase Agreement.
Section 3. Recordation of the Seller's Instrument.
To the extent permitted by applicable law, this Seller's Instrument, or a
memorandum thereof if permitted under applicable law, is subject to recordation
in all appropriate public offices for real property records in all of the
counties or other comparable jurisdictions in which any or all of the properties
subject to the Mortgages are situated, and in any other appropriate public
recording office or elsewhere, such recordation to be effected by the Servicer,
but only when accompanied by an Opinion of Counsel to the effect that such
2
recordation materially and beneficially affects the interests of the
Certificateholders or is necessary for the administration or servicing of the
Mortgage Loans.
Section 4. Governing Law.
This Seller's Instrument shall be construed in accordance with the laws of
the State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with such laws, without giving
effect to principles of conflicts of law.
Section 5. Counterparts.
This Seller's Instrument may be executed in one or more counterparts and by
the different parties hereto on separate counterparts, each of which, when so
executed, shall be deemed to be an original; such counterparts, together, shall
constitute one and the same instrument.
Section 6. Successors and Assigns.
This Seller's Instrument shall inure to the benefit of and be binding upon
the Seller and the Company and their respective successors and assigns. The
Certificate Administrator and the Trustee shall be express third party
beneficiaries hereto.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Seller's Instrument as of the day and year first written above.
NOVASTAR MORTGAGE, INC.,
as Seller
By:_________________________________
Name:
Title:
NOVASTAR MORTGAGE FUNDING
CORPORATION,
as Company
By:_________________________________
Name:
Title:
3
NOVASTAR HOME EQUITY LOAN ASSET-BACKED CERTIFICATES, SERIES 2002-3
ATTACHMENT A TO SELLER'S SUBSEQUENT TRANSFER INSTRUMENT
__________ __, 2002
A. Profile of Subsequent Mortgage Loans:
1. Subsequent Cut-off Date: _________ __, 2002
2. Subsequent Transfer Date: ________ __, 2002
3. Aggregate Principal Balance of the Subsequent Mortgage
Loans as of the Subsequent Cut-off Date:$346,040,478.63
4. Purchase Price: 100.00%
B. As to all the Subsequent Mortgage Loans the subject of this Instrument:
I. Longest stated term to maturity: 360 months
II. Minimum Mortgage Rate: ____%
III. Maximum Mortgage Rate: ____%
IV. WAC of all Mortgage Loans: ____%
V. WAM of all Mortgage Loans: ____%
VI. Largest Principal Balance: $______
VII. Non-owner occupied Mortgaged Properties: ____%
VIII. California zip code concentration: ____%
IX. Condominiums: ____%
X. Single-family: ____%
XI. Weighted average term since origination: ___ months
XII. Mortgage Loans Covered by MI Policies: ____%
EXHIBIT 2(B)
COMPANY'S SUBSEQUENT TRANSFER INSTRUMENT
Pursuant to this Company's Subsequent Transfer Instrument (the "Company's
Instrument"), dated as of _________ __, 2002, between NovaStar Mortgage Funding
Corporation, as company (the "Company"), and JPMorgan Chase Bank, as trustee
(the "Trustee"), and pursuant to the Mortgage Loan Purchase Agreement, dated as
of September 1, 2002 (the "Purchase Agreement"), among NovaStar Mortgage, Inc.,
as seller (the "Seller"), the Company, Wachovia Bank, National Association, as
Certificate Administrator ("Certificate Administrator"), and JPMorgan Chase
Bank, as Trustee (the "Trustee"), the Company and the Trustee agree to the sale
by the Company and the purchase by the Trustee of the subsequent Mortgage Loans
listed on the attached Mortgage Loan Schedule (the "Subsequent Mortgage Loans")
and the related MI Policies, and the pledge of the Subsequent Mortgage Loans by
the Trustee.
Capitalized terms used and not defined herein have their respective
meanings as set forth in the definitions contained in the Pooling and Servicing
Agreement, dated as of September 1, 2002 (the "Pooling and Servicing
Agreement"), between the Certificate Administrator, the Trustee, the Company and
the Servicer which definitions are incorporated by reference herein. All other
capitalized terms used herein shall have the meanings specified herein.
Section 1. Conveyance of Subsequent Mortgage Loans.
(a) The Company does hereby sell, transfer, assign, set over and convey to
the Trustee, without recourse, (i) all of its right, title and interest in and
to the Subsequent Mortgage Loans and the related MI Policies, all scheduled
payments of principal and interest on the Subsequent Mortgage Loans due after
the Subsequent Cut-off Date, and all other payments of principal and interest on
the Subsequent Mortgage Loans collected after the Subsequent Cut-off Date (minus
that portion of any such payment which is allocable to the period prior to the
Subsequent Cut-off Date); provided, however, that no scheduled payments of
principal and interest due on or before the Subsequent Cut-off Date and
collected after the Subsequent Cut-off Date shall belong to the Trustee pursuant
to the terms of this Company's Instrument and (ii) all of its right, title and
interest in and to the Seller's Subsequent Transfer Instrument, dated as of
______ __, 2002 (the "Seller's Instrument"), between the Seller and the Company.
The Company, contemporaneously with the delivery of this Company's Instrument,
has delivered or caused to be delivered to the Certificate Administrator each
item set forth in Section 2.02(b) of the Purchase Agreement with respect to such
Subsequent Mortgage Loans. The transfer to the Trustee by the Company of the
Subsequent Mortgage Loans identified on the attached Mortgage Loan Schedule and
the related MI Policies shall be absolute and is intended by the Company, the
Trustee, the Certificate Administrator and the Certificateholders to constitute
and to be treated as a sale by the Company.
The parties hereto intend that the transactions set forth herein constitute
a sale by the Company to the Trustee on the Subsequent Transfer Date of all the
Company's right, title and interest in and to the Subsequent Mortgage Loans and
the related MI Policies, and other property
as and to the extent described above. In the event the transactions set forth
herein shall be deemed not to be a sale, the Company hereby grants to the
Trustee as of the Subsequent Transfer Date a security interest in all of the
Company's right, title and interest in, to and under the Subsequent Mortgage
Loans, and such other property, to secure all of the Company's obligations
hereunder, and this Company's Instrument shall constitute a security agreement
under applicable law, and in such event, the parties hereto acknowledge that the
Certificate Administrator on behalf of the Trustee, in addition to holding the
Subsequent Mortgage Loans and the related MI Policies for the benefit of the
Certificateholders, holds the Subsequent Mortgage Loans and the related MI
Policies as designee and agent of the Trustee. The Company agrees to take or
cause to be taken such actions and to execute such documents, including without
limitation the filing of all necessary UCC-1 financing statements filed in the
State of Delaware (which shall be submitted for filing as of the Subsequent
Transfer Date), any continuation statements with respect thereto and any
amendments thereto required to reflect a change in the name or corporate
structure of the Company or the filing of any additional UCC-1 financing
statements due to the change in the state of incorporation of the Company as are
necessary to perfect and protect the interests of the Trustee and its assignees
in each Subsequent Mortgage Loan, the related MI Policies and the proceeds
thereof.
(b) The expenses and costs relating to the delivery of the Subsequent
Mortgage Loans, this Company's Instrument and such other items required under
the Purchase Agreement shall be borne by the Company.
Section 2. Representations and Warranties; Conditions Precedent.
(a) The Company hereby affirms the representations and warranties set forth
in Section 3.02 of the Purchase Agreement that relate to the Company as of the
date hereof.
(b) The Company is solvent, is able to pay its debts as they become due and
has capital sufficient to carry on its business and its obligations hereunder;
it will not be rendered insolvent by the execution and delivery of this
Company's Instrument or by the performance of its obligations hereunder nor is
it aware of any pending insolvency; no petition of bankruptcy (or similar
insolvency proceeding) has been filed by or against the Company prior to the
date hereof;
(c) All terms and conditions of the Purchase Agreement are hereby ratified
and confirmed; provided, however, that in the event of any conflict the
provisions of this Company's Instrument shall control over the conflicting
provisions of the Mortgage Loan Purchase Agreement.
Section 3. Grant from Trustee to Certificate Administrator.
The Trustee, as trustee for the benefit of the Certificateholders, hereby
grants as of the Subsequent Transfer Date to the Certificate Administrator, to
secure all of the Trustee's obligations under the Pooling and Servicing
Agreement, all of the Trustee's right, title and interest in and to, whether now
existing or hereafter created, (a) the Subsequent Mortgage Loans, the related MI
Policies and the proceeds thereof and all rights under the Related Documents
(including the related Mortgage Files); (b) all funds on deposit from time to
time in the Collection Account allocable to the Subsequent Mortgage Loans,
excluding any investment
income from such funds; (c) all its rights under the Seller's Instrument and
this Company's instrument; and (d) all present and future claims, demands,
causes of action and choses in action in respect of any or all of the foregoing
and all payments on or under, and all proceeds of every kind and nature
whatsoever in respect of, any or all of the foregoing and all payments on or
under, and all proceeds of every kind and nature whatsoever in the conversion
thereof, voluntary or involuntary, into cash or other liquid property, all cash
proceeds, accounts, accounts receivable, notes, drafts acceptances, checks,
deposit accounts, rights to payment of any and every kind, and other forms of
obligations and receivables, instruments and other property which at any time
constitute all or part of or are included in the proceeds of any of the
foregoing.
Section 4. Recordation of Instrument.
To the extent permitted by applicable law, this Company's Instrument,
or a memorandum thereof if permitted under applicable law, is subject to
recordation in all appropriate public offices for real property records in all
of the counties or other comparable jurisdictions in which any or all of the
properties subject to the Mortgages are situated, and in any other appropriate
public recording office or elsewhere, such recordation to be effected by the
Servicer, but only when accompanied by an Opinion of Counsel to the effect that
such recordation materially and beneficially affects the interests of the
Certificateholders or is necessary for the administration or servicing of the
Mortgage Loans.
Section 5. Governing Law.
This Company's Instrument shall be construed in accordance with the
laws of the State of New York and the obligations, rights and remedies of the
parties hereunder shall be determined in accordance with such laws, without
giving effect to principles of conflicts of law.
Section 6. Counterparts.
This Company's Instrument may be executed in one or more counterparts
and by the different parties hereto on separate counterparts, each of which,
when so executed, shall be deemed to be an original; such counterparts,
together, shall constitute one and the same instrument.
Section 7. Successors and Assigns.
This Company's instrument shall inure to the benefit of and be binding
upon the Company, the Certificate Administrator and the Trustee and their
respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Company's Instrument as of the day and year first written above.
NOVASTAR MORTGAGE FUNDING
CORPORATION,
as Company
By:_________________________________
Name:
Title:
JPMORGAN CHASE BANK,
as Trustee
By:_________________________________
Name:
Title:
WACHOVIA BANK, NATIONAL ASSOCIATION,
as Certificate Administrator
By:_________________________________
Name:
Title:
