MORTGAGE LOAN PURCHASE AGREEMENT
between
PREMIER MORTGAGE CORPORATION
Seller
and
PNC MORTGAGE SECURITIES CORP.
Purchaser
TABLE OF CONTENTS
Page
Section 1. Definitions.......................................................... 1
Section 2. Procedures for Purchases of Mortgage Loans........................... 8
Section 3. Sale of Mortgage Loans to Takeout Investor........................... 9
Section 4. Payment of Accrued Interest.......................................... 12
Section 5. Servicing of the Mortgage Loans...................................... 12
Section 6. Trade Assignments.................................................... 14
Section 7. Transfers of Beneficial Interest in Mortgage Loans by
Purchaser......................................................... 14
Section 8. Record Title to Mortgage Loans; Intent of parties; Security
Interest.......................................................... 15
Section 9. Representations and Warranties....................................... 16
Section 10. Covenants of Seller.................................................. 24
Section 11. Indemnification...................................................... 27
Section 12. Term................................................................. 27
Section 13. Exclusive Benefit of Parties; Assignment............................. 27
Section 14. Amendments; Waivers, Cumulative Rights............................... 27
Section 15. Execution in Counterparts............................................ 27
Section 16. Effect of Invalidity of Provisions................................... 27
Section 17. Governing Law........................................................ 27
Section 18. Notices.............................................................. 28
Section 19. Entire Agreement..................................................... 28
Section 20. Costs of Enforcement................................................. 28
Section 21. Consent to Service................................................... 28
Section 22. Construction......................................................... 28
MORTGAGE LOAN PURCHASE AGREEMENT
This Mortgage Loan Purchase Agreement ("Agreement"), dated
as of _______________, 1996, is by and between PNC Mortgage Securities Corp.
("Purchaser") and Premier Mortgage Corporation ("Seller").
PRELIMINARY STATEMENT
Seller may, in its sole discretion, offer to sell to
Purchaser from time to time certain Mortgage Loans, and Purchaser, in its sole
discretion, may agree to purchase such Mortgage Loans from Seller in
accordance with the terms and conditions set forth in this Agreement. Seller,
subject to the terms hereof, will cause each Mortgage Loan to be purchased by
a Takeout Investor. During the period from the Purchaser's purchase of a
Mortgage Loan to the sale of the Mortgage Loan to a Takeout Investor, Seller
shall service such Mortgage Loan on behalf of Purchaser.
The parties hereto hereby agree as follows:
Section 1. Definitions.
Capitalized terms used but not defined herein shall have the
meanings set forth in the Custodial Agreement. As used in this Agreement, the
following terms shall have the following meanings:
"Act of Insolvency": With respect to Seller, (a)
the commencement by Seller as debtor of any case or
proceeding under any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar law, or Seller's seeking
the appointment of a receiver, trustee, custodian or similar
official for Seller or any substantial part of Seller's
property, or (b) the commencement of any such case or
proceeding against Seller, or another's seeking such
appointment, or the filing against Seller of an application
for a protective decree which (1) is consented to or not
timely contested by Seller, (2) results in the entry of an
order for relief, such an appointment, the issuance of such
a protective decree or the entry of an order having a
similar effect, or (3) is not dismissed within thirty (30)
days, (c) the making by Seller of a general assignment for
the benefit of creditors or (d) the admission in writing by
Seller that Seller is unable to pay its debts as they become
due or the nonpayment generally by Seller of its debts as
they become due.
"Agency": FNMA or FHLMC or GNMA, as applicable.
"Agency Transaction": A transaction initiated by
Purchaser's delivery of a Request for Certification which
identifies a Conduit as the Takeout Investor.
"Assignee": As defined in Section 7.
"Business Day": Any day other than (a) a Saturday,
Sunday or other day on which banks located in New York, New
York or Chicago, Illinois are authorized or obligated by law
or executive order to be closed or (b) any day on which
Purchaser or Custodian is closed for business, provided that
notice thereof shall have been given to Seller not less than
seven (7) calendar days prior to such day, and provided
further that such closing does not conflict with any
business between Seller and Purchaser scheduled for such
date prior to the giving of such notice.
"Cash Window Transaction": A transaction initiated
by Purchaser's delivery of a Request for Certification to
the Custodian which identifies FNMA or FHLMC as the Takeout
Investor.
"Collateral": As defined in Section 8(c).
"Commitment Amount": The aggregate outstanding
principal amount of Mortgage Loans to be purchased pursuant
to a Takeout Commitment. If the applicable Takeout
Confirmation expresses the Commitment Amount as a fixed
amount plus or minus a percentage of such fixed amount, then
the amount required to be delivered by Seller shall be the
minimum amount within such range and the amount required to
be purchased by Takeout Investor shall be the maximum amount
within such range.
"Commitment Date": The date set forth in a Takeout
Confirmation as the commitment date.
"Commitment Guidelines": The guidelines, if any,
issued by Takeout Investor regarding the issuance of Takeout
Commitments, as amended from time to time by Takeout
Investor.
"Commitment Number": With respect to a Takeout
Commitment, the number identified on the Takeout
Confirmation as the commitment number.
"Completion Fee": With respect to each Mortgage
Pool, an amount equal to the sum of (i) the Discount and
(ii) the Net Carry Adjustment, less any reduction negotiated
by Seller and Purchaser pursuant to the last sentence of
Section 3(b), which amount shall be payable to Seller by
Purchaser as compensation to Seller for servicing the
Mortgage Pool on behalf of Purchaser during the period
commencing on the Purchase Date and ending on the day prior
to the Settlement Date.
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"Conduit Transaction": A transaction initiated by
Purchaser's delivery of a Request for Certification which
identifies a Conduit as the Takeout Investor.
"Confirmation": Purchaser's written confirmation of
its intent to purchase a Mortgage Pool, which written
confirmation shall be substantially in the form attached
hereto as Exhibit F.
"Conduit": Any of the entities listed on Schedule A
hereto, as supplemented or amended from time to time.
"Credit File": With respect to each Mortgage Loan,
all papers and documents required to be maintained pursuant
to the applicable Sale Agreement, and all other papers and
records of whatever kind or description whether developed or
originated by Seller or others, required to document or
service the Mortgage Loan provided, however, that such
Mortgage Loan papers, documents and records shall not
include any Mortgage Loan papers, documents or records which
are contained in the Custodial File.
"Custodial File": With respect to each Mortgage
Loan, all papers and documents (i) required to be maintained
pursuant to the applicable Sale Agreement with the Takeout
Investor's document custodian or (ii) in the event that
Takeout Investor does not employ a document custodian, such
papers and documents required to be delivered to Takeout
Investor on the Settlement Date.
"Cure Date": With respect to a Mortgage Loan, the
date occurring twenty (20) Business Days after the
applicable Purchase Date.
"Custodial Account for P&I": As defined in Section
5(b).
"Custodial Account for Reserves": As defined in
Section 5(b).
"Custodial Agreement": The Custodial Agreement,
dated as of the date of this Agreement, among Purchaser,
Seller and Custodian.
"Custodian": The entity which is identified as the
Custodian in the Custodial Agreement and its permitted
successors thereunder.
"Defective Mortgage Loan": With respect to any
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Mortgage Loan, either (i) the Document File does not contain
a document required to be contained therein, (ii) any
document within a Document File is, in the judgment of
Takeout Investor, defective or inaccurate in any material
respect, when evaluated with respect to requirements of the
applicable Sale Agreement, (iii) any document in the
Document File is not legal, valid and binding, (iv) the
Mortgage Loan breaches any representation or warranty made
with respect to it in this Agreement or the applicable Sale
Agreement or (v) the Custodian File does not contain a
document required to be contained therein.
"Discount": With respect to any Mortgage Pool sold
by Seller to Purchaser, the product of (i) the percentage
identified in the related Confirmation as the discount and
(ii) the applicable Trade Principal.
"Document File": The Credit File and the Custodial
File.
"Due Date": The day of the month on which the
Monthly Payment is due on a Mortgage Loan.
"Exhibit B-1 Letter": As defined in Section 2(a).
"Exhibit C-1 Letter": As defined in Section 2(a).
"Expiration Date": With respect to any Takeout
Commitment, the expiration date thereof.
"FDIC": Federal Deposit Insurance Corporation or
any successor thereto.
"FHLMC": Federal Home Loan Mortgage Corporation or
any successor thereto.
"FNMA": Federal National Mortgage Association or
any successor thereto.
"Losses": Any and all losses, claims, damages,
liabilities or expenses (including reasonable attorneys'
fees) incurred by any person specified; provided, however,
that "Losses" shall not include any losses, claims, damages,
liabilities or expenses which would have been avoided had
such person taken reasonable actions to mitigate such
losses, claims, damages, liabilities or expenses.
"Monthly Payment": The scheduled monthly payment of
principal and interest on a Mortgage Loan.
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"Mortgage": The mortgage, deed of trust or other
instrument creating a first lien on an estate in fee simple
in real property securing a Mortgage Note.
"Mortgage Interest Rate": The annual rate of
interest borne on a Mortgage Note.
"Mortgage Loan": A conventional single family
residential mortgage loan which is subject to this
Agreement, and which satisfies the requirements of the
applicable Sale Agreement as the same may be modified from
time to time.
"Mortgage Pool": A group of Mortgage Loans
purchased by Purchaser hereunder and subject to a single
Confirmation.
"Mortgage Note": The note or other evidence of the
indebtedness of a Mortgagor secured by a Mortgage.
"Mortgaged Property": The property subject to the
lien of the Mortgage securing a Mortgage Note.
"Mortgagor": The obligor on a Mortgage Note.
"NCUA": National Credit Union Administration or any
successor thereto.
"Net Carry Adjustment": An amount (which may be a
negative number) equal to the product of (A) the quotient of
(1) the number of days in the period beginning on the
Purchase Date and ending on the day prior to the Settlement
Date, inclusive, divided by (2) 360 and (B) the difference
between (1) the product of (x) the weighted average (by
principal balance) of the mortgage interest rates borne by
the Mortgage Loans in the applicable Mortgage Pool and (y)
the aggregate principal balance of such Mortgage Loans and
(2) the product of (x) the weighted average (by principal
balance) of the Pass-Through Rates of the Mortgage Loans in
the applicable Mortgage Pool and (y) the Purchase Price for
such Mortgage Pool.
"Notice of Rejection of Trade Assignment:" With
respect to any Mortgage Pool that Purchaser elects not to
purchase, a notification by Purchaser to Takeout Investor in
the form of Exhibit G.
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"OTS": Office of Thrift Supervision or any
successor thereto.
"Parent Company": A corporation or other entity
owning at least 50% of the outstanding shares of voting
stock of Seller.
"Pass-Through Rate": With respect to each Mortgage
Loan, the rate at which interest on the Mortgage Loan is
passed through to Purchaser which shall be the rate of
interest specified in the related Confirmation as the
Pass-Through Rate.
"Payment Shift Date": With respect to a Mortgage
Loan, the last day of the month in which the Settlement Date
can occur if accrued interest for such month is to be paid
by Takeout Investor.
"Price Adjustment": With respect to a Takeout
Commitment, the percentage by which the Trade Price is
adjusted which percentage is determined by application of
the applicable formula set forth in the Price Adjustment
Summary Sheet.
"Price Adjustment Summary Sheet": A document
prepared by Purchaser, in its sole and absolute discretion,
setting forth the formula by which the Price Adjustment is
to be determined. The Price Adjustment Summary Sheet may be
amended from time to time, in Purchaser's sole and absolute
discretion, and such amendments shall become effective two
(2) Business Days following Seller's receipt thereof,
provided that no such amendment shall apply to any Mortgage
Pool purchased by Purchaser prior to the effective date of
such amendment.
"Purchase Date": With respect to any Mortgage Pool
purchased by Purchaser hereunder, the date on which the
applicable Purchase Price is paid by Purchaser to Seller.
"Purchase Price": With respect to each Mortgage
Pool purchased by Purchaser hereunder, an amount equal to
the excess of (A) the Trade Principal for such Mortgage Pool
over (B) the Discount.
"Purchaser": PNC Mortgage Securities Corp. and its
successors in interest, including, but not limited to, a
party to whom a Trust Receipt is assigned as provided
hereunder and in the Custodial Agreement.
"Purchaser's Wire Instructions": The wire
instructions set forth in a letter in the form of Exhibit E.
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"Request for Certification": A report detailing
loan identification data supplied by Seller to Purchaser,
transmitted by Purchaser to Custodian either via facsimile
in the form of Exhibit C to the Custodial Agreement or
transmitted electronically in an appropriate data layout,
regarding all Mortgage Loans being offered for sale by
Seller to Purchaser on a Purchase Date.
"Sale Agreement": The agreement providing for the
purchase by Takeout Investor of Mortgage Loans from Seller.
"Seller": Premier Mortgage Corporation and its
permitted successors hereunder.
"Seller's Wire Instructions": The wire instructions
set forth in a letter in the form of Exhibit C-2.
"Settlement Date": With respect to any Mortgage
Loan, the date on which the Takeout Proceeds for such
Mortgage Loan are remitted by Takeout Investor to Purchaser.
"Settlement Modification Letter": A letter in the
form of Exhibit H.
"Successor Servicer": An entity designated by
Purchaser, in conformity with Section 3(c)(2), to replace
Seller as issuer and servicer, mortgagee or seller/servicer
of the Mortgage Loans evidenced by a Trust Receipt.
"Takeout Commitment": A commitment of Seller to
sell one or more Mortgage Loans to Takeout Investor and of
Takeout Investor to purchase one or more Mortgage Loans from
Seller.
"Takeout Confirmation": The written notification to
Seller from Takeout Investor confirming the terms of a
Takeout Commitment, including but not limited to, the
information set forth in Exhibit I, which notification may
take the form of a trade confirmation.
"Takeout Investor": An Agency or a Conduit, as
applicable.
"Takeout Proceeds": With respect to any Mortgage
Pool, the related Trade Principal plus accrued interest as
calculated in accordance with Section 3(a)(2), adjusted
pursuant to any related Settlement Modification Letter
accepted by Purchaser.
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"Third Party Underwriter": Any third party,
including but not limited to a mortgage loan pool insurer,
who underwrites the Mortgage Loans(s) prior to the purchase
by Purchaser of such Mortgage Loans.
"Third Party Underwriter's Certificate": A
certificate issued by a Third Party Underwriter with respect
to a Mortgage Loan, certifying that such Mortgage Loan
complies with its underwriting requirements.
"Trade Assignment": The assignment by Seller to
Purchaser of Seller's rights under a specific Takeout
Commitment, in the form of Exhibit D-1.
"Trade Price": The trade price set forth on a
Takeout Commitment less any applicable Price Adjustment.
"Trade Principal": With respect to any Mortgage
Pool, the aggregate outstanding principal balance of the
related Mortgage Loans multiplied by a percentage equal to
the Trade Price.
"Trust Receipt": A receipt issued by Custodian,
substantially in the form of Exhibit D to the Custodial
Agreement which provides, among other things, that Custodian
is holding the Mortgage Loans described therein as the
bailee and custodian of Purchaser.
"Warehouse Lender": Any lender providing financing
to Seller for the purpose of originating or purchasing
Mortgage Loans which lender has a security interest in such
Mortgage Loans as collateral for the obligations of Seller
to such lender.
"Warehouse Lender's Wire Instructions": The wire
instructions set forth in a letter in the form of Exhibit
B-2.
Section 2. Procedures for Purchases of Mortgage Loans.
(a) Purchaser may, in its sole discretion, from time to
time, purchase one or more Mortgage Pools from Seller. Prior to Purchaser's
election to purchase any Mortgage Pool, Purchaser shall have received (i) an
original, fully completed and authenticated Trust Receipt from Custodian
covering the Mortgage Pools being purchased for each of all Cash Window
Transactions and all Conduit Transactions and (ii) copies of the Takeout
Confirmations related to such Mortgage Pools, together with Trade Assignments
in the form of Exhibit D hereto, executed by Seller and Takeout Investor and
(iii) an original letter in the form of Exhibit B-1 (an "Exhibit B-1 Letter")
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in the event that there is no Warehouse Lender. Simultaneously with the
payment by Purchaser of the Purchase Price, in accordance with the Warehouse
Lender's Wire Instructions or Seller's Wire Instructions, as applicable, with
respect to the Mortgage Pools, Seller hereby conveys to Purchaser all of
Seller's right, title and interest in and to the related Mortgage Loan(s) free
and clear of any lien, claim or encumbrance. Notwithstanding the satisfaction
by Seller of the conditions specified in this Section 2(a), Purchaser is not
obligated to purchase any Mortgage Loans offered to it hereunder.
(b) If Purchaser elects to purchase any Mortgage Pool,
Purchaser shall pay the amount of the Purchase Price for such Mortgage Pool by
wire transfer of immediately available funds in accordance with the Warehouse
Lender's Wire Instructions or if there is no Warehouse Lender, Seller's Wire
Instructions. Upon such payment and not otherwise, Purchaser shall be deemed
to have accepted the related Trade Assignment. In the event that Purchaser
rejects a Mortgage Pool for purchase for any reason and/or does not transmit
the applicable Purchase Price, (i) the Trust Receipt delivered by Custodian to
Purchaser in anticipation of such purchase shall automatically be null and
void and the previously existing Trust Receipt for that type of transaction
shall be in full force and effect, (ii) Purchaser shall not consummate the
transactions contemplated in the applicable Takeout Confirmation and shall
deliver to Takeout Investor (with a copy to Seller and Custodian) a Notice of
Rejection of Trade Assignment, provided, however, that failure of Purchaser to
give such notice shall not affect the rejection by Purchaser of the Trade
Assignment, (iii) if Purchaser shall nevertheless receive any portion of the
related Takeout Proceeds, Purchaser shall promptly pay such Takeout Proceeds
to Seller in accordance with Seller's Wire Instructions and (iv) if Purchaser
shall have remitted any or all of the Purchase Price for the Mortgage Pool to
Seller, Seller shall immediately return such Purchase Price to Purchaser by
wire transfer of immediately available funds.
(c) The terms and conditions of the purchase of each
Mortgage Pool shall be as set forth in this Agreement.
Section 3. Sale of Mortgage Loans to Takeout Investor.
(a) With respect to Mortgage Loan(s) that Purchaser has
elected to purchase, Purchaser may, at its option, either (i) instruct
Custodian to deliver to Takeout Investor, pursuant to Takeout Investor's
instructions, the Custodial File in respect of such Mortgage Loans, in the
manner and at the time set forth in the Custodial Agreement or (ii) provide
for the delivery of the Custodial File to Takeout Investor through an escrow
arrangement satisfactory to Purchaser and Takeout Investor. Seller shall
deliver to Takeout Investor the related Credit File and any and all additional
documents requested by Takeout Investor to enable Takeout Investor to purchase
such Mortgage Loan(s) on or before the related Expiration Date.
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(b) With respect to each Mortgage Pool that Purchaser elects
to purchase hereunder, Purchaser shall pay to Seller a Completion Fee. Except
when Purchaser has accepted a Settlement Modification Letter as described
below, the Completion Fee relating to a Mortgage Pool shall not be payable
until the earlier to occur of (1) the date of receipt by Purchaser of the
applicable Takeout Proceeds and (2) the satisfaction by Seller of all of its
obligations pursuant to this Agreement. Notwithstanding the foregoing,
Purchaser shall not be obligated to remit any Completion Fee to Seller while
Seller is under default hereunder. Upon receipt by Purchaser, prior to the
Cure Date, of a Settlement Modification Letter, duly executed by Takeout
Investor and Seller, Purchaser may, at its election, agree to the postponement
of the Settlement Date and such other matters as are set forth in the
Settlement Modification Letter. If Purchaser elects to accept a Settlement
Modification Letter, Purchaser shall, not later than two (2) Business Days
after receipt of such Settlement Modification Letter execute the Settlement
Modification Letter and send, via facsimile, copies of such fully executed
Settlement Modification Letter to Seller and Takeout Investor. Upon execution
by Purchaser of a Settlement Modification Letter, Purchaser shall recalculate
the amount of the Completion Fee, if any, due to Seller using the new terms
included in the Settlement Modification Letter and shall pay to Seller, not
later than two (2) Business Days after Purchaser's receipt of such Settlement
Modification Letter, the amount of such recalculated Completion Fee.
In the event that Seller requests, and Purchaser agrees, that the Completion
Fee be paid prior to the date established above, the Completion Fee shall be
reduced by an amount mutually agreed upon by Seller and Purchaser.
(c) (1) Upon Purchaser's discovery that any Mortgage Loan is
a Defective Mortgage Loan at the time of the delivery of the related Trust
Receipt to Purchaser and in Purchaser's sole judgment the defects in such
Mortgage Loan will not be cured (or in fact are not cured) by Seller prior to
the Cure Date, Purchaser, at its election, may require that Seller, upon
receipt of notice from Purchaser of its exercise of such right, either (i)
immediately repurchase Purchaser's ownership interest in such Defective
Mortgage Loan by remitting to Purchaser (in immediately available funds in
accordance with Purchaser Wire Instructions) the amount paid by Purchaser for
such Defective Mortgage Loan plus interest at the Pass-Through Rate on the
principal amount thereof from the date of Purchaser's purchase of the related
Mortgage Pool to the date of such repurchase or (ii) deliver to Custodian a
Mortgage Loan in exchange for such Defective Mortgage Loan, which newly
delivered Mortgage Loan shall be in all respects acceptable to Purchaser in
Purchaser's reasonable discretion. If the aggregate principal balance of all
Mortgage Loan(s) that are accepted by Purchaser pursuant to clause (ii) of the
immediately preceding sentence is less than the aggregate principal balance of
all Defective Mortgage Loan(s) that are being replaced by such Mortgage
Loan(s), Seller shall remit with such Mortgage Loan(s) to Purchaser an amount
equal to the difference between the aggregate principal balance of the new
Mortgage Loan(s) accepted by Purchaser and the aggregate principal balance of
the Defective Mortgage Loan(s) being replaced thereby.
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(c) (2) If Seller fails to comply with its obligations under
Section 3(c)(1), not later than the third day after receipt by Seller of
notice from Purchaser, Seller's rights and obligations to service Mortgage
Loan(s), as provided in this Agreement, shall terminate. If an Act of
Insolvency occurs at any time, Seller's rights and obligations to service the
Mortgage Loan(s), as provided in this Agreement, shall terminate immediately,
without any notice or action by Purchaser. Upon any such termination,
Purchaser is hereby authorized and empowered as the exclusive agent for Seller
to sell and transfer such rights to service the Mortgage Loan(s) for such
price and on such terms and conditions as Purchaser shall reasonably
determine, and Seller shall not otherwise attempt to sell or transfer such
rights to service without the prior consent of Purchaser. Seller shall perform
all acts and take all action so that the Mortgage Loan(s) and all files and
documents relating to such Mortgage Loan(s) held by Seller, together with all
escrow amounts relating to such Mortgage Loan(s), are delivered to Successor
Servicer. To the extent that the approval of any Third Party Underwriter or
any other insurer or guarantor is required for any such sale or transfer,
Seller shall fully cooperate with Purchaser to obtain such approval. Upon
exercise by Purchaser of its remedies under this Section 3(c)(2), Seller
hereby authorizes Purchaser to receive all amounts paid by any purchaser of
such rights to service the Mortgage Loan(s) and to remit such amounts to
Seller subject to Purchaser's rights of set-off under this Agreement. Upon
exercise by Purchaser of its remedies under this Section 3(c)(2), Purchaser's
obligation to pay and Seller's right to receive any portion of the Completion
Fee relating to such Mortgage Loan(s) shall automatically be cancelled and
become null and void, provided that such cancellation shall in no way relieve
Seller or otherwise affect the obligation of Seller to indemnify and hold
Purchaser harmless as specified in Section 3(e).
(d) Each Mortgage Loan required to be delivered to Successor
Servicer by Section 3(c)(2) shall be delivered free of any servicing rights in
favor of Seller and free of any title, interest, lien, encumbrance or claim of
any kind of Seller. Seller shall deliver or cause to be delivered all files
and documents relating to each Mortgage Loan held by Seller to Successor
Servicer. Seller shall promptly take such actions and furnish to Purchaser
such documents that Purchaser deems necessary or appropriate to enable
Purchaser to cure any defect in each such Mortgage Loan or to enforce such
Mortgage Loans, as appropriate.
(e) Seller agrees to indemnify and hold Purchaser and its
assigns harmless from and against all Losses resulting from or relating to any
breach or of any representation, warranty or covenant made, or to be
performed, by Seller under this Agreement.
(f) No exercise by Purchaser of its rights under this
Section 3 shall relieve Seller of responsibility or liability for any breach
of this Agreement.
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(g) Seller hereby grants Purchaser a right of set-off
against the payment of any amounts that may be due and payable to Purchaser
from Seller, such offset to be applied against any and all monies or other
property of Seller held or received by Purchaser or due and owing from
Purchaser to Seller.
Section 4. Payment of Accrued Interest.
If a Mortgage Pool is purchased by Purchaser in the month
prior to the month in which the related Settlement Date occurs (A) Seller
shall pay Purchaser, on the applicable Settlement Date, accrued interest on
the aggregate principal balance of the Mortgage Loans, from Purchase Date
through the last day of the month prior to the month in which the Settlement
Date occurs and (B) Purchaser shall be entitled to all amounts paid by Takeout
Investor with respect to the Mortgage Loans including the portion thereof
representing the payment of interest accrued on the Mortgage Loans from the
first day of the month in which the Settlement Date occurs through the day
prior to the Settlement Date, provided that if the Settlement Date occurs
after the Payment Shift Date for such month, Seller shall pay the interest
amount described in this clause (B) to Purchaser in addition to the amount
payable by Seller to Purchaser pursuant to clause (A) of this sentence. If a
Mortgage Pool is purchased in the same month in which the related Settlement
Date occurs (A) Purchaser shall pay Seller, on the applicable Settlement Date,
accrued interest, if any, on the aggregate principal balance of the Mortgage
Loans from the first day of such month through the day prior to the Purchase
Date and (B) Purchaser shall be entitled to receive all amounts paid by
Takeout Investor with respect to the Mortgage Loans including the portion
thereof representing the payment of interest accrued on the Mortgage Loans
from the first day of such month to, but not including, the Settlement Date,
provided that if the Settlement Date occurs after the Payment Shift Date for
such month, or if interest has been prepaid by the applicable Mortgagors,
Seller shall pay to Purchaser the interest amount described in this clause
(B). For purposes of this paragraph all interest payments shall be deemed to
accrue at the applicable rate set forth in the related Takeout Commitment.
Section 5. Servicing of the Mortgage Loans.
(a) Seller shall service and administer the Mortgage Loan(s)
on behalf of Purchaser in accordance with prudent mortgage loan servicing
standards and procedures generally accepted in the mortgage banking industry
and in accordance with the requirements of Takeout Investor, provided that
Seller shall at all times comply with applicable law, and the requirements of
any applicable insurer or guarantor including, without limitation, any Third
Party Underwriter, so that the coverage provided by the insurance in respect
of any Mortgage Loan is not materially and adversely affected. Seller shall at
all times maintain accurate and complete records relating to the servicing of
each Mortgage Loan, and Purchaser may, at any time during Seller's business
hours on reasonable notice, examine and make copies of such records. In
addition, if a Mortgage Loan is not purchased by Takeout Investor on or before
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the Cure Date, Seller shall at Purchaser's request deliver to Purchaser
monthly reports regarding the status of such Mortgage Loan, which reports
shall include, but shall not be limited to, a description of each Mortgage
Loan in default for more than thirty (30) days, and such other matters with
respect to any Mortgage Loan (whether or not such Mortgage Loan is included in
the foregoing list) that could materially adversely affect any such Mortgage
Loan, Purchaser's ownership of any such Mortgage Loan or the collateral
securing any such Mortgage Loan. Seller shall deliver such a report to
Purchaser every thirty (30) days until (i) the purchase by Takeout Investor of
such Mortgage Loan pursuant to the related Takeout Commitment or (ii) the
exercise by Purchaser of any remedy pursuant to Section 3.
(b) Within five (5) business days of notice from Purchaser,
Seller shall establish and maintain separate custodial accounts for (i)
principal and interest (the "Custodial Account for P&I") entitled "[Name of
Seller], as agent, trustee and/or bailee of principal and interest custodial
account for PNC Mortgage Securities Corp. and its assignees under the Mortgage
Loan Purchase Agreement dated [the date of this Agreement]" and (ii) taxes,
insurance and other reserves (the "Custodial Account for Reserves") entitled
"[Name of Seller], as agent, trustee and/or bailee of taxes and insurance
account for PNC Mortgage Securities Corp., its assignees under the Mortgage
Loan Purchase Agreement dated [the date of this Agreement] and for various
mortgagors. The Custodial Account for P&I and the Custodial Account for
Reserves shall be established and maintained (i) with a corporate trust
department of a financial institution approved by Purchaser such that the
rights thereto of Purchaser shall be fully protected against the claims of any
creditors of Seller and any creditors or depositors of the institution in
which such account is maintained and (ii) with FDIC insured accounts. Seller
shall promptly deposit into such accounts, as applicable, in the form received
with any necessary endorsements, all collections received in respect of each
Mortgage Loan.
(c) Amounts deposited in the Custodial Account for P&I and
the Custodial Account for Reserves with respect to any Mortgage Loan shall be
held in trust for Purchaser as the owner of such Mortgage Loan and shall be
released only as follows:
(1) Except as otherwise provided in Section
5(c)(2), following receipt by Purchaser or its designee of
the Takeout Proceeds for such Mortgage Loan from Takeout
Investor or Seller, amounts deposited in the Custodial
Account for P&I (and if the Mortgage Loans were sold by
Seller on a servicing-released basis, the amounts deposited
in the Custodial Account for Reserves) shall be released to
Takeout Investor in accordance with Purchaser's
instructions.
(2) If Successor Servicer undertakes the servicing
of Mortgage Loans (either under the circumstances set forth
in Section 3 or otherwise), all amounts deposited in the
Custodial Account for P&I and the Custodial Account for
Reserves shall be promptly forwarded to Successor Servicer
for the benefit of Purchaser.
13
(3) If a Mortgage Loan is not purchased by Takeout
Investor on or before the Cure Date, during the period
thereafter that Seller remains as servicer, all amounts
deposited in the Custodial Account for P&I shall be released
only in accordance with Purchaser's written instructions.
Amounts deposited in the Custodial Account for Reserves
shall be remitted to the applicable insurers and taxing
authorities in accordance with prudent mortgage servicing
practices and the terms of the applicable Sale Agreement.
Section 6. Trade Assignments. Seller hereby assigns to
Purchaser, Seller's rights, under each Takeout Commitment relating to each
Mortgage Pool purchased by Purchaser hereunder and to the Takeout Proceeds
related thereto. With respect to each Trade Assignment, Seller represents and
warrants to Purchaser that:
(a) the rights and obligations under the related
Takeout Commitment are (1) valid and binding obligations of
the parties thereto enforceable in accordance with their
terms, (2) in full force and effect and (3) not subject to
any pledge, lien, assignment or other encumbrance, or to any
right of any party other than Seller to deliver the Mortgage
Pool or against payment therefore;
(b) the applicable Takeout Investor has consented
to the Trade Assignment; and
(c) all written and oral information regarding the
related Takeout Commitment provided by Seller to Purchaser
is true and correct in all material respects.
Purchaser shall not be deemed to have accepted any Trade Assignment unless and
until it purchases the related Mortgage Loans, and nothing set forth herein
shall be deemed to impair Purchaser's right to reject any Mortgage Loan for
any reason, in its sole and absolute discretion.
Section 7. Transfers of Beneficial Interest in Mortgage
Loans by Purchaser. Purchaser may, in its sole and absolute discretion, assign
all of its right, title and interest in or grant a security interest in any
Mortgage Loan sold by Seller hereunder and all rights of Purchaser under this
Agreement and the Custodial Agreement, in respect of such Mortgage Loan to a
tri-party custody and clearing agent ("Assignee"), subject only to an
obligation on the part of assignee to deliver each such Mortgage Loan to
Takeout Investor pursuant to Section 6 or to permit Purchaser or its designee
14
to make delivery thereof to a Takeout Investor pursuant to Section 6. If such
an assignment is made to an Assignee by Purchaser, Seller shall be deemed to
have irrevocably consented to such assignment. No notice of such assignment
shall be given by Purchaser to Seller or Takeout Investor. Assignment by
Purchaser of the Mortgage Loans as provided in this Section 7 shall not
release Purchaser from its obligations otherwise under this Agreement.
Without limitation of the foregoing, an assignment of the
Mortgage Loans to an Assignee, as described in this Section 7, shall be
effective upon delivery to the Assignee of a duly executed and authenticated
Trust Receipt.
Section 8. Record Title to Mortgage Loans; Intent of parties;
Security Interest.
(a) From and after the issuance and delivery of the related
Trust Receipt, and subject to the remedies of Purchaser in Section 3, Seller
shall remain the last named payee or endorsee of each Mortgage Note and the
mortgagee or assignee of record of each Mortgage in trust for the benefit of
Purchaser, for the sole purpose of facilitating the servicing of such Mortgage
Loan.
(b) Seller shall maintain a complete set of books and
records for each Mortgage Loan which shall be clearly marked to reflect the
ownership interest in each Mortgage Loan of the holder of the related Trust
Receipt.
(c) Purchaser and Seller confirm that the transactions
contemplated herein are intended to be sales of the Mortgage Loans by Seller
to Purchaser rather than borrrowings secured by the Mortgage Loans. In the
event, for any reason, any transaction is construed by any court or regulatory
authority as a borrowing rather than as a sale, Seller and Purchaser intend
that Purchaser or its Assignee, as the case may be, shall have a perfected
first priority security interest in the Mortgage Loans, the Custodial Account
for P&I, the Custodial Account for Reserves, the Takeout Commitments and the
proceeds of any and all of the foregoing (collectively, the "Collateral"),
free and clear of adverse claims. In such case, Seller shall be deemed to have
hereby granted to Purchaser or Assignee, as the case may be, a first priority
security interest in and lien upon the Collateral, free and clear of adverse
claims. In such event, this Agreement shall constitute a security agreement,
the Custodian shall be deemed to be an independent custodian for purposes of
perfection of the security interest granted to Purchaser or Assignee, as the
case may be, and Purchaser or Assignee, as the case may be, shall have all of
the rights of a secured party under applicable law.
(d) With respect to each Mortgage Pool purchased by
Purchaser from Seller pursuant to this Agreement, it is the express intention
of the parties hereto that upon Purchaser's delivery of such Mortgage Pool to
the applicable Takeout Investor, Seller shall make all representations,
15
warranties and covenants to Takeout Investor with respect to the Mortgage Pool
pursuant to the terms and conditions of the applicable Sale Agreement between
Seller and Takeout Investor. It is the express understanding of the parties
hereto that Purchaser's sole obligation to Takeout Investor with respect to
the Mortgage Pool shall be the delivery thereof to Takeout Investor and that
Purchaser shall make no representations, warranties or covenants to Takeout
Investor in connection therewith. Seller shall hold Purchaser harmless, and
indemnify Purchaser, for any Losses arising out of Takeout Investor's attempt
to enforce any remedy available to it under the Sale Agreement or otherwise
with respect to any Mortgage Loan in the Mortgage Pool.
Section 9. Representations and Warranties.
(a) Seller hereby represents and warrants to Purchaser as of
the date hereof and as of the date of each issuance and delivery of a Trust
Receipt to Purchaser that:
(i) Seller is duly organized, validly existing and
in good standing under the laws of the state of its
organization and has all licenses necessary to carry on its
business as now being conducted and is licensed, qualified
and in good standing in the state where each Mortgaged
Property is located if the laws of such state require
licensing or qualification in order to conduct business of
the type conducted by Seller. Seller has all requisite power
and authority (including, if applicable, corporate power) to
execute and deliver this Agreement and to perform in
accordance herewith; the execution, delivery and performance
of this Agreement (including all instruments of transfer to
be delivered pursuant to this Agreement) by Seller and the
consummation of the transactions contemplated hereby have
been duly and validly authorized; this Agreement evidences
the valid, binding and enforceable obligation of Seller; and
all requisite action (including, if applicable, corporate
action) has been taken by Seller to make this Agreement
valid and binding upon Seller in accordance with its terms;
(ii) No approval of the transactions contemplated
by this Agreement by the OTS, the NCUA, the FDIC or any
similar federal or state regulatory authority having
jurisdiction over Seller is required, or if required, such
approval has been obtained. There are no actions or
proceedings pending or affecting Seller which would
adversely affect its ability to perform hereunder. The
transfers, assignments and conveyances provided for herein
are not subject to the bulk transfer or any similar
statutory provisions in effect in any applicable
jurisdiction;
(iii) The consummation of the transactions
contemplated by this Agreement are in the ordinary course of
the business of Seller and will not result in the breach of
any term or provision of the charter or by-laws of Seller or
16
result in the breach of any term or provision of, or
conflict with or constitute a default under or result in the
acceleration of any obligation under, any agreement,
indenture or loan or credit agreement or other instrument to
which Seller or its property is subject, or result in the
violation of any law, rule, regulation, order, judgment or
decree to which Seller or its property is subject;
(iv) This Agreement, the Custodial Agreement and
every document to be executed by Seller pursuant to is
Agreement this and will be the valid, binding and subsisting
obligations of Seller, enforceable in accordance with their
respective terms. No consents or approvals are required to
be obtained by Seller or its Parent Company for the
execution, delivery and performance of this Agreement or the
Custodial Agreement by Seller;
(v) All information relating to Seller that Seller
has delivered or caused to be delivered to Purchaser,
including, but not limited to, all documents related to this
Agreement, the Custodial Agreement or Seller's financial
statements, does not contain any untrue statement of a
material fact or omit to state a material fact necessary to
make the statements made therein or herein in light of the
circumstances under which they were made, not misleading.
(b) Seller hereby represents, warrants and covenants to
Purchaser with respect to each Mortgage Loan as of the Purchase Date of such
Mortgage Loan that:
(i) The Mortgage Loan conforms in all respects to
the requirements of this Agreement, the applicable Sale
Agreement (including the representations and warranties
stated therein), the Commitment Guidelines and the
requirement of the related Third Party Underwriter's
Certificate, if any;
(ii) Seller is the sole owner and holder of the
Mortgage Loan free and clear of any and all liens, pledges,
charges or security interests of any nature and has full
right and authority, subject no interest or participation
of, or agreement with, any other party, to sell and assign
the same pursuant to this Agreement and upon delivery of the
related Trust Receipt to Purchaser, Purchaser will be the
sole owner thereof, free and clear of any lien, claim or
encumbrance;
(iii) No servicing agreement has been entered into
with respect to the Mortgage Loan, or if a servicing
agreement has been entered into with respect to the Mortgage
17
Loan, any such servicing agreement has been terminated and
there are no restrictions, contractual or governmental,
which would impair the ability of Purchaser or Purchaser's
designees from servicing the Mortgage Loan;
(iv) The Mortgage is a valid and subsisting first
lien on the property therein described and the Mortgaged
Property is free and clear of all encumbrances and liens
except for liens for real estate taxes and special
assessments not yet due and payable. Any pledge account,
security agreement, chattel mortgage or equivalent document
related to, and delivered to Purchaser with the Mortgage,
establishes in Seller a valid and subsisting first lien on
the property described therein, and Seller has full right to
sell and assign the same to Purchaser;
(v) Neither Seller nor any prior holder of the
Mortgage has modified the Mortgage in any material respect;
satisfied, canceled or subordinated the Mortgage in whole or
in part; released the Mortgaged Property in whole or in part
from the lien of the Mortgage; or executed any instrument of
release, cancellation, modification or satisfaction unless
such release, cancellation, modification or satisfaction
does not adversely affect the value of the Mortgage Loan and
is evidenced by a written instrument which has been
recorded, if necessary, to protect the interests of the
Purchaser and which is contained in the related Document
File. The substance of any such waiver, alteration or
modification has been approved by the issuer of any related
primary insurance policy and title insurer, to the extent
required by the policies;
(vi) The Mortgage Loan is not in default, and all
Monthly Payments due prior to the Purchase Date and all
taxes, governmental assessments, insurance premiums, water,
sewer and municipal charges, leasehold payments or ground
rents have ben paid. Seller has not advanced funds, or
induced or solicited any advance of funds by a party other
than the Mortgagor, directly or indirectly, for the payment
of any amount required by the Mortgage Loan. The collection
practices used by each entity which has serviced the
Mortgage Loan have been in all respects legal, proper,
prudent, and customary in the mortgage servicing business.
With respect to escrow deposits and payments in those
instances where such were required, there exist no
deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made and no
escrow deposits or payments or other charges or payments
have been capitalized under any Mortgage or the related
Mortgage Note;
(vii) There is no default, breach, violation or
event of acceleration existing under the Mortgage or the
related Mortgage Note and no event which, with the passage
18
of time or with notice and the expiration of any grace or
cure period, would constitute a default, breach, violation
or event of acceleration; and neither Seller nor its
predecessors has waived any default, breach, violation or
event of acceleration;
(viii) The Mortgage Loan is not subject to any
right of rescission, set-off, counterclaim or defense,
including the defense of usury, nor will the operation of
any of the terms of the Mortgage Note or the 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,
counterclaim or defense, including the defense of usury, and
no such right of rescission, set-off, counterclaim or
defense has been asserted with respect thereto;
(ix) The Mortgage Note and the related Mortgage are
genuine and each is the legal, valid and binding obligation
of the maker thereof, enforceable in accordance with its
terms. 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 have been duly and
properly executed by the Mortgagor;
(x) The Mortgage Loan meets, or is exempt from,
applicable state or federal laws, regulations and other
requirements pertaining to usury, and the Mortgage Loan is
not usurious;
(xi) Any and all requirements of any federal, state
or local law including, without limitation,
truth-in-lending, real estate settlement procedures,
consumer credit protection, equal credit opportunity or
disclosure laws applicable to the Mortgage Loan have been
complied with, and Seller shall deliver to Purchaser upon
demand, evidence of compliance with all such requirements;
(xii) All parties which have had any interest in
the Mortgage Loan, whether as mortgagee, assignee, pledgee
or otherwise, are (or, during the period in which they held
and disposed of such interest, were) (1) in compliance with
any and all applicable licensing requirements of the laws of
the state wherein the Mortgaged Property is located and (2)
(i) organized under the laws of such state, (ii) qualified
to do business in such state, (iii) a federal savings and
loan association or national bank having principal offices
in such state or (iv) not doing business in such state.
(xiii) The proceeds of the Mortgage Loan have been
fully disbursed, there is no requirement for future advances
19
thereunder and any and all requirements as to completion of
any on site or off-site improvements and as to disbursements
of any escrow funds, therefore, 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 any amounts paid or due under
the Mortgage Note or Mortgage;
(xiv) The related Mortgage contains customary and
enforceable provisions such as to 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. There is no homestead or
other exemption available to the Mortgagor which would
interfere with the right to sell the Mortgaged Property at a
trustee's sale or the right to foreclose the Mortgage;
(xv) The Mortgage Loan was originated free of any
"original issue discount" with respect to which the owner of
the Mortgage Loan could be deemed to have income pursuant to
Sections 1271 et seq. of the Internal Revenue Code;
(xvi) Each Mortgage Loan was originated by an
institution described in Section 3(a)(41)(A)(ii) of the
Securities Exchange Act of 1934, as amended;
(xvii) The Mortgaged Property is free and clear of
all mechanics' and materialmen's liens or liens in the
nature thereof which are or could be prior to the Mortgage
lien, and no rights are outstanding that under law could
give rise to any such lien;
(xviii) All of the improvements which are 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;
(xix) At origination, no improvement located on or
being part of the Mortgaged Property was in violation of any
applicable zoning law or regulation and 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 of the same,
including but not limited to certificates of occupancy and
fire underwriting certificates, had been made or obtained
from the appropriate authorities and the Mortgaged Property
20
was lawfully occupied under the applicable law. No
improvement located on or being part of the Mortgaged
Property is in violation of any applicable zoning law or
regulation and all inspections, licenses and certificates
required to be made or issued with respect to the Mortgaged
Property, and with respect to the use and occupancy of the
same, including but not limited to certificates of occupancy
and fire underwriting certificates, have been made or
obtained from the appropriate authorities and the Mortgaged
Property is lawfully occupied under applicable law;
(xx) There is no proceeding pending for the total
or partial condemnation of the Mortgaged Property and said
property is undamaged by waste, fire, earthquake or earth
movement, windstorm, flood, tornado or other casualty;
(xxi) The Custodial File contains and the Credit
File contains or shall contain prior to the Cure Date each
of the documents and instruments specified to be included
therein duly executed and in due and proper form and each
such document or instrument is either in form acceptable to
FNMA or is a FNMA/FHLMC uniform instrument; Seller is
currently in possession of the Custodial File and is in
possession or shall be prior to the Expiration Date of the
Credit File and there are no custodial agreements in effect
adversely affecting the rights of Seller to make the
deliveries required within the required time. Seller shall
not deliver a Credit File to Takeout Investor prior to the
related Commitment Date;
(xxii) The Mortgage Loan is covered by a mortgage
title insurance policy acceptable to FNMA, issued by, and
the valid and binding obligation of, a title insurer
acceptable to FNMA and qualified to do business in the
jurisdiction where the Mortgaged Property is located,
insuring Seller, its successors and assigns, as to the first
priority lien of the Mortgage in the original principal
amount of the Mortgage Loan, Seller is the named insured and
the sole insured of such mortgage title insurance policy,
the assignment to Purchaser of Seller's interest in such
mortgage title insurance policy does not require the consent
of or notification to the insurer, such mortgage title
insurance policy is in full force and effect and will be in
full force and effect and inure to the benefit of Purchaser
upon the consummation of the transactions contemplated by
this Agreement and no claims have been made under such
mortgage title insurance policy and no prior holder of the
related Mortgage, including Seller, has done, by act or
omission, anything which would impair the coverage of such
mortgage title insurance policy;
(xxiii) All buildings upon the Mortgaged Property
21
are insured against loss by fire, hazards of extended
coverage and such other hazards as are customary in the area
where the Mortgaged Property is located, pursuant to fire
and hazard insurance policies with extended coverage or
other insurance required by the Sale Agreement, in an amount
at least equal to the lesser of (i) the outstanding
principal balance of the Mortgage Loan or (ii) the maximum
insurable value (replacement cost without deduction for
depreciation) of the improvements constituting the Mortgaged
Property. If applicable laws limit the amount of such
insurance to the replacement cost of the improvements
constituting the Mortgaged Property or to some other amount,
then such insurance is in an amount equal to the maximum
allowed by such laws. Such insurance amount is sufficient to
prevent the Mortgagor or the loss payee under the policy
from becoming a co-insurer. The insurer issuing such
insurance is acceptable pursuant to the Sale Agreement. All
individual insurance policies contain a standard mortgagee
clause naming Seller, its successors and assigns, as
mortgagee and all premiums thereon have been paid. Each
Mortgage obligates the Mortgagor thereunder to maintain all
such insurance at 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
Mortgagor's cost and expense and to seek reimbursement
therefor from the Mortgagor. Any flood insurance required by
applicable law has been obtained. The hazard insurance
policy is the valid and binding obligation of the insurer,
is in full force and effect, and inures to the benefit of
the Purchaser upon the consummation of the transactions
contemplated by this Agreement. Seller has not engaged in,
and has no knowledge of the Mortgagor having engaged in, any
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, including,
without limitation, no unlawful fee, commission, kickback or
other unlawful compensation or value of any kind has been or
will be received, retained or realized by any attorney, firm
or other person or entity, and no such unlawful items have
been received, retained or realized by Seller;
(xxiv) The original principal amount of the related
Mortgage Note either (a) was not more than 80% of the lesser
of (i) the purchase price of the Mortgaged property paid by
the Mortgagor at the origination of the Mortgage Loan and
(ii) the appraised value of the Mortgaged Property, such
appraised value being, for the purposes hereof, the amount
set forth in an appraisal made in connection with the
origination of such mortgage Loan, or (b) is and will be
insured as to payment defaults by a policy of primary
mortgage guaranty insurance in accordance with the Sale
Agreement and all provisions of such primary mortgage
guaranty insurance policy have been and are being complied
with, such policy is in full force and effect, and all
22
premiums due thereunder have been paid. Any Mortgage Loan
subject to any such policy of primary mortgage guaranty
insurance obligates the Mortgagor thereunder to maintain
such insurance and pay all premiums and charges in
connection therewith. The original principal amount of each
Mortgage Note was not more than 95% of the purchase price of
the related Mortgaged Property paid by the Mortgagor at the
origination of the Mortgage Loan. No action, event or state
of facts exists or has existed which, because involving or
arising from any dishonest, fraudulent, criminal, negligent
or knowingly wrongful act, error or omission by the
Mortgagor or the originator or servicer of the Mortgage
Loan, would result in the exclusion from, denial of, or
defense to coverage which otherwise would be provided by
such insurance;
(xxv) At the time that the related Mortgage Loan
was made the Mortgagor represented that the Mortgagor would
occupy such Mortgaged Property as Mortgagor's primary
residence;
(xxvi) The Mortgaged property consists of a single
parcel of real property;
(xxvii) There are no circumstances or conditions
with respect to the Mortgage, the Mortgaged Property, the
Mortgagor or the Mortgagor's credit standing that can be
reasonably expected to cause private institutional investors
to regard the Mortgage Loan as an unacceptable investment,
cause the Mortgage Loan to become delinquent or adversely
affect the value or marketability of the Mortgage Loan;
(xxviii) The Mortgaged Property is free from any and
all toxic or hazardous substances and there exists no
violation of any local, state or federal environmental law,
rule or regulation;
(xxix) Prior to origination, an appraisal of the
Mortgaged Property was made by an appraiser acceptable to
FNMA and FHLMC on a form satisfactory to FNMA and FHLMC and
included an estimate of value based upon sales of comparable
properties;
(xxx) The Mortgage Loan was underwritten in
accordance with the underwriting guidelines of the
applicable Takeout Investor;
(xxxi) In the event the Mortgage constitutes a deed
of trust, a trustee, duly qualified under applicable law to
serve as such, has been properly designated and currently so
serves and is named in the Mortgage, and no fees or expenses
are or will become payable by Purchaser to the trustee under
23
the deed of trust, except in connection with a trustee's
sale after default by the Mortgagor; and
(xxxii) The Mortgage contains an enforceable
provision for the acceleration of the payment of the unpaid
principal balance of the Mortgage Loan in the event that the
Mortgaged Property is sold or transferred without the prior
written consent of the mortgagee thereunder; by the terms of
the Mortgage Note, however, the provision for acceleration
may not be exercised at the time of a transfer if prohibited
by federal law or, in the event that the mortgage interest
rate for the Mortgage Loan is adjustable, if the prospective
purchaser is transferee of the original Mortgagor who meets
the applicable creditworthiness standards and pays an agreed
upon fee.
The representations and warranties of Seller in this Section 9 are unaffected
by and supersede any provision in any endorsement of any Mortgage Loan or in
any assignment with respect to such Mortgage Loan to the effect that such
endorsement or assignment is without recourse or without representation or
warranty.
It is understood and agreed that the representations and warranties set forth
in this Section 9 shall survive delivery of the respective Custodial Files to
the Custodian or Takeout Investor and shall continue notwithstanding any
termination of this Agreement. Upon discovery by Purchaser of a breach of any
of the foregoing representations and warranties which materially and adversely
affects the interests of Purchaser in the related Mortgage Loans, Purchaser
shall give prompt written notice to Seller. Within ninety (90) days of its
receipt of notice of breach, Seller shall repurchase such Mortgage Loans for
an amount equal to the portion of the applicable Purchase Price related
thereto plus accrued and unpaid interest at the weighted average (by principal
balance) of the rate set forth in the applicable Takeout Commitment for such
Mortgage Loans to the day prior to the date of repurchase.
Section 10. Covenants of Seller. Seller hereby
covenants and agrees with Purchaser as --------------------follows:
(a) Seller shall deliver to Purchaser:
(i) Within one hundred twenty (120) days after the
end of each fiscal year of Seller, consolidated balance
sheets of Seller and its consolidated subsidiaries and the
related consolidated statements of income showing the
financial condition of Seller and its consolidated
subsidiaries as of the close of such fiscal year and the
results of operations during such year, and a consolidated
statement of cash flows, as of the close of such fiscal
year, setting forth, in each case, in comparative form the
corresponding figures for the preceding year, all the
24
foregoing consolidated financial statements to be reported
on by, and to carry the report (acceptable in form and
content to Purchaser) of, an independent public accountant
of national standing acceptable to Purchaser;
(ii) Within sixty (60) days after the end of each
of the first three fiscal quarters of each fiscal year of
Seller, unaudited consolidated balance sheets and
consolidated statements of income, all to be in a form
acceptable to Purchaser, showing the financial condition and
results of operations of Seller and its consolidated
subsidiaries on a consolidated basis as of the end of each
such quarter and for the then elapsed portion of the fiscal
year, setting forth, in each case, in comparative form the
corresponding figures for the corresponding periods of the
preceding fiscal year, certified by a financial officer of
Seller (acceptable to Purchaser) as presenting fairly the
financial position and results of operations of Seller and
its consolidated subsidiaries and as having been prepared in
accordance with generally accepted accounting principles
consistently applied, in each case, subject to normal
year-end audit adjustments;
(iii) Promptly upon receipt thereof, a copy of each
other report submitted to Seller by its independent public
accountants in connection with any annual, interim or
special audit of Seller;
(iv) Promptly upon becoming aware thereof, notice
of (1) the commencement of, or any determination in, any
legal, judicial or regulatory proceedings, (2) any dispute
between Seller or its Parent Company and any governmental or
regulatory body, (3) any event or condition, which, in any
case of (1) or (2) if adversely determined, would have a
material adverse effect on (A) the validity or
enforceability of this Agreement, (B) the financial
condition or business operations of Seller, or (C) the
ability of Seller to fulfill its obligations under this
Agreement or (4) any material adverse change in the
business, operations, prospects or financial condition of
Seller, including, without limitation, the insolvency of the
Seller or its Parent Company;
(v) Promptly upon becoming available, copies of all
financial statements, reports, notices and proxy statements
sent by its Parent Company, Seller or any of Seller's
consolidated subsidiaries in a general mailing to their
respective stockholders and of all reports and other
material (including copies of all registration statements
under the Securities Act of 1933, as amended) filed by any
of them with any securities exchange or with the Securities
and Exchange Commission or any governmental authority
succeeding to any or all of the functions of said
Commission;
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(vi) Promptly upon becoming available, copies of
any press releases issued by its Parent Company or Seller
and copies of any annual and quarterly financial reports and
any reports on Form H-(b)12 which its Parent Company or
Seller may be required to file with the OTS or the RTC or
comparable reports which a Parent Company or Seller may be
required to file with the FDIC or any other federal banking
agency containing such financial statements and other
information concerning such parent Company's or Seller's
business and affairs as is required to be included in such
reports in accordance with the rules and regulations of the
OTS, the RTC, the FDIC or such other banking agency, as may
be promulgated from time to time;
(vii) Such supplements to the aforementioned
documents and such other information regarding the
operations, business, affairs and financial condition of its
Parent Company, Seller or any of Seller's consolidated
subsidiaries as Purchaser may request;
(viii) A copy of (1) the articles of incorporation
of Seller and any amendments thereto, certified by the
Secretary of State of Seller's state of incorporation, (2) a
copy of Seller's by-laws, together with any amendments
thereto, (3) a copy of the resolutions adopted by Seller's
Board of Directors authorizing Seller to enter into this
Agreement and the Custodial Agreement and authorizing one or
more of Seller's officers to execute the documents related
to this Agreement and the Custodial Agreement, and (4) a
certificate of incumbency and signature of each officer of
Seller executing any document in connection with this
Agreement;
(ix) Neither Seller nor any affiliate thereof will
acquire at any time any economic interest in or obligation
with respect to any Mortgage Loan;
(x) Under generally accepted accounting principles
("GAAP") and for federal income tax purposes, Seller will
report each sale of a Mortgage Loan to the Purchaser
hereunder as a sale of the ownership interest in the
Mortgage Loan. Seller has been advised by or has confirmed
with its independent public accountants that the foregoing
transactions will be so classified under GAAP;
(xi) The consideration received by Seller upon the
sale of each Mortgage Pool will constitute reasonably
equivalent value and fair consideration for the ownership
interest in the Mortgage Loans included therein;
(xii) Seller will be solvent at all relevant times
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prior to, and will not be rendered insolvent by, any sale of
a Mortgage Loan to the Purchaser; and
(xiii) Seller will not sell any Mortgage Loan to
the Purchaser with any intent to hinder, delay or defraud
any of Seller's creditors.
(b) Seller shall comply, in all material respects, with all
laws, rules and regulations to which it is or may become subject.
(c) Seller shall, upon request of Purchaser, promptly
execute and deliver to Purchaser all such other and further documents and
instruments of transfer, conveyance and assignment, and shall take such other
action as Purchaser may require more effectively to transfer convey, assign to
and vest in Purchaser and to put Purchaser in possession of the property to be
transferred, conveyed, assigned and delivered hereunder and otherwise to carry
out more effectively the intent of the provisions under this Agreement.
Section 11. Term. This Agreement shall continue in effect
until terminated as to future transactions by written instruction signed by
either Seller or Purchaser and delivered to the other, provided that no
termination will affect the obligations hereunder as to any of the Mortgage
Loans purchased hereunder.
Section 12. Exclusive Benefit of Parties; Assignment. This
Agreement is for the exclusive benefit of the parties hereto and their
respective successors and assigns and shall not be deemed to give any legal or
equitable right to any other person, including the Custodian. Except as
provided in Section 7, no rights or obligations created by this Agreement may
be assigned by any party hereto without the prior written consent of the other
parties.
Section 13. Amendments; Waivers, Cumulative Rights. This
Agreement may be amended from time to time only by written agreement of Seller
and Purchaser. Any forebearance, failure or delay by either party in
exercising any right, power or remedy hereunder shall not preclude the further
exercise thereof. Every right, power and remedy of Purchaser shall continue in
full force and effect until specifically waived by Purchaser in writing. No
right, power or remedy shall be cumulative and in addition to any other right,
power or remedy, whether conferred hereby or hereafter available at law or in
equity or by statute or otherwise.
Section 14. Execution in Counterparts. This Agreement may be
executed in any number of counterparts, each of which shall be deemed an
original, but all of which shall constitute one and the same instrument.
Section 15. Effect of Invalidity of Provisions. In case any
one or more of the provisions contained in this Agreement should be or become
27
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein or therein shall
in no way be affected, prejudiced or disturbed thereby.
Section 16. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of
Illinois, without regard to conflict of laws rules.
Section 17. Notices. Any notices, consents, elections,
directions and other communications given under this Agreement shall be in
writing and shall be deemed to have been duly given when telecopied or
delivered by overnight courier, personally delivered, or on the third day
following the placing thereof in the mail, first class postage prepaid, to the
respective addresses set forth in the cover page hereof for Seller and
Purchaser, or to such other address as either party shall give notice to the
other party pursuant to this Section 17. Notices to any Assignee shall be
given to such address as Assignee shall provide to Seller in writing.
Section 18. Entire Agreement. This Agreement and the
Custodial Agreement contain the entire agreement between the parties hereto
with respect to the subject matter hereof, and supersede all prior and
contemporaneous agreements between them, oral or written, of any nature
whatsoever with respect to the subject matter hereof.
Section 19. Costs of Enforcement. In addition to any other
indemnity specified in this Agreement, in the event of a breach by Seller of
this Agreement, the Custodial Agreement or a Takeout Commitment, Seller agrees
to pay the reasonable attorneys' fees and expenses of Purchaser and/or
Assignee incurred as a consequence of such breach.
Section 20. Consent to Service. Each party irrevocable
consents to the service of process by registered or certified mail, postage
prepaid, to its at its address given in or pursuant to Section 17.
Section 21. Construction. The headings in this Agreement are
for convenience only and are not intended to influence its construction.
References to Sections, Exhibits and Annexes in this Agreement are to the
Sections of and Exhibits to this Agreement. The Exhibits are part of this
Agreement, and are incorporated herein by reference. The singular includes the
plural, the plural the singular, and the words "and" and "or" are used in the
conjunctive or disjunctive as the sense and circumstances may require.
IN WITNESS WHEREOF, Purchaser and Seller have duly executed
this Agreement as of the date and year set forth above.
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PNC MORTGAGE SECURITIES CORP.
By__________________________________
Name:
Title:
PREMIER MORTGAGE CORPORATION
By__________________________________
Name:
Title:
29
