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EXHIBIT 10.31
Xxxxxxxxx, Xxxxxx & Xxxxxxxx
DLJ Mortgage Capital, Inc. . 000 Xxxxxxxx, Xxxxx 0000,
Xxx Xxxx, XX 00000-0000 . (000) 000-0000
May 22, 1995
Lomas Mortgage USA, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxx, Xxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attention: Xxxx Xxxxxxxx
This Commitment Letter confirms our agreement between Lomas Mortgage USA
("Lomas") and DLJ Mortgage Capital, Inc. ("DLJ") pursuant to which DLJ shall
provide committed financing collateralized by eligible Mortgage Loans or Other
Loans in accordance with the terms and conditions hereof and as set forth in
the Whole Loan Funding Facility, the Promissory Note, and the Pledge Agreement
dated May 16, 1994 and the Tri-Party Custody Agreement(s) executed by Lomas
related thereto (collectively, the "Agreements"). Capitalized terms not
defined herein shall have the meanings ascribed to them in the Agreements.
In the event of a conflict between the terms of this Commitment Letter and the
terms of the Agreements, the terms of this Commitment Letter shall control with
respect to those purchases of whole mortgage loans or any interests in any
whole mortgage loans by DLJ or Advances made by DLJ up to the amount committed
below. Amounts purchased by or borrowed from DLJ in excess of that committed
herein shall be made in accordance with the Agreements.
Subject to the terms and conditions hereof and the Agreements, including the
performance by Lomas of its obligations set forth below, DLJ hereby commits to:
1. Provide a revolving credit line for residential Mortgage Loans under
the Agreements until May 31, 1996 as follows, after which DLJ shall
have no further obligation to purchase or to make Advances under this
Commitment Letter, unless amended in writing by the parties hereto:
(a) $200 million for Mortgage Loans and Required Documents
delivered to Custodian in accordance with Section 3, 4 or 5 of
the Custody Agreement and where related Purchase Commitments
have been assigned and delivered to DLJSC ("Gestation
Transactions");
(b) $200 million for Mortgage Loans, which shall include all other
first-lien Mortgage Loans, and Required Documents delivered to
Custodian in accordance with Section 6 or 7 of the Custody
Agreement ("Interim Transactions");
(c) $200 million for Title I second mortgage Mortgage Loans,
manufactured housing loans, other second mortgage Mortgage
Loans and Required Documents delivered to Custodian in
accordance with the Custody Agreement ("Other Transactions");
provided, however, that:
(i) the total committed credit line of (a) and (b) above, when
combined, shall not exceed $200 million;
(ii) no Mortgage Loan shall be in excess of $650,000;
(iii) the total of all Advances involving Mortgage Loans not yet
delivered, but which shall be delivered, to Custodian in
accordance with Section 9(b) of the Custody Agreement ("Wet
Transaction"), shall not exceed $25 million; and
(iv) Lomas maintains outstanding transactions in an amount such
that the monthly average of all Interim Transactions exceeds
the monthly average outstanding of all Wet Transactions for
each calendar month.
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2. Maintain a funding rate as follows:
(a) 50 basis points over the offered LIBOR rate of comparable
maturity for any Mortgage-Backed Security repurchase agreement
transaction ("MBS Repo");
(b) 75 basis points over the offered LIBOR rate of comparable
maturity for any Gestation Transaction;
(c) 110 basis points over the opening Federal Funds rate of
comparable maturity for any Interim Transaction; and
(d) 150 basis points over the opening Federal Funds rate of
comparable maturity for any Other Transaction.
provided, however, that (i) on any calendar quarter end the funding
rate shall be as quoted by DLJ in good faith, (ii) DLJ may charge
Lomas for any related daylight overdraft charge imposed by Custodian,
if any, and (iii) DLJ shall charge Lomas additional basis points as a
funding rate (as agreed upon by Lomas and DLJ) for the impact on DLJ's
capital of any MBS Repo. The foregoing commitment by DLJ is
hereinafter referred to as the "Commitment."
3. DLJ shall maintain a funding rate of 1.625% for any Interim
Transaction that has been balance funded by escrow deposits at a
financial institution approved by DLJ in its sole discretion, provided
that Lomas irrevocably assigns any compensation that may be payable to
it by such financial institution to DLJ.
Lomas commits to:
1. Pay DLJ a Commitment Fee of $306,000 (15 bp Commitment plus $6,000 Due
Diligence review) payable as follows: $31,000 upon execution of this
Commitment Letter and $25,000 on the first Business Day of each month,
commencing July 1, 1995.
2. With respect to each Advance, provide to DLJ, when such Advance is
made and thereafter on a daily xxxx to market basis collateral
consisting of, amongst other items specified in the Agreements,
eligible Mortgage Loans equal to:
a. For Advances related to MBS Repo Transactions covered by a
Purchase Commitment from CALPERS, 101% of each such Advance;
b. For Advances related to Gestation Transactions, 102% of each
such Advance;
c. For Advances related to Wet Transactions and Interim
Transactions (other than Title I second mortgage Mortgage
Loans, manufactured housing loans, or other second mortgage
Mortgage Loans), 102% of each such Advance;
d. For Advances related to Wet and Interim Transactions Advances
related to Other Transactions, 105% of each such Advance;
3. Provide Purchase Commitment assignments related to the Collateral to
DLJ, such Purchase Commitments to adhere to "Good Delivery"
guidelines;
4. Pay DLJ by the tenth day of each month or of the month following the
expiration or termination of the Commitment, a Non-usage Fee if the
average principal balance of all Advances outstanding during the
immediately preceding calendar month is less than $100 million. Such
Non-usage Fee shall be calculated by multiplying (a) the amount
representing the difference between $100 million and the average
outstanding principal balance of all Advances for the relevant month
by (b) 15 basis points, and dividing such product by 12;
5. Provide evidence to DLJ that Lomas has, and will continue to maintain,
insurance coverage for itself and its subsidiaries that encompasses
employee dishonesty, forgery or alteration, theft, disappearance and
destruction, robbery and safe burglary, property (other than money and
securities), and computer fraud in an aggregate amount of at least
$1,000,000 and shall include DLJ Mortgage Capital, Inc. as a Loss
Payee; and
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6. Notify DLJ of its intent to borrow under an Advance no later than 11
a.m. (New York time) on the day of such Advance.
DLJ shall have the right to terminate this Commitment Letter, and DLJ shall no
longer be obligated to make Advances under this Commitment and may accelerate
the maturity dates of all Advances then outstanding, upon the occurrence of a
Commitment Letter Termination Event. Upon such termination, DLJ shall have no
obligation to return any fees collected and may utilize any remedy provided in
the Agreements. A Commitment Letter Termination Event shall include any one or
more of the following:
1. An "Event of Default" shall have occurred under any of the Agreements
which shall include a breach by Lomas of any agreement contained in
this Commitment Letter (following the expiration of any grace or
notice period) including the items set forth under "Required Financial
Statements", or there occurs any event set forth under "Litigation",
"Consolidation and Merger" or "Financial Requirements", in Annex A
attached hereto (following the expiration of any grace or notice
period).
2. A "Material Adverse Change" shall have occurred in the business or
operations of Lomas which is defined as the occurrence of any of the
events or circumstances set forth under "Financial Requirements" in
Annex A.
3. There occurs a change in ownership of Lomas, unless (i) the resulting,
surviving or transferee entity is a corporation organized under the
laws of the United States of America or a political subdivision
thereof; (ii) such entity assumes all the obligations of Lomas under
this Commitment Letter and Agreements and each outstanding Advance (or
has such obligations guaranteed in a manner and by a Guarantor
acceptable to DLJ); and (iii) DLJ receives as part of the
aforementioned transaction prior assurances or additional credit
support from such entity and any Guarantor to the extent that DLJ
would not otherwise be satisfied with the financial condition of the
surviving entity or Guarantor. "Guarantor" shall mean a guarantor or
a party providing a similar obligation satisfactory to DLJ.
4. There occurs a catastrophic event or events resulting in the effective
absence of a "repo market" for a period of at least 30 consecutive
days respecting mortgage loans and the same results in DLJ not being
able to finance any Advance through the repo market with DLJ's
traditional repo counterparties. Upon the occurrence of such an
event, Lomas shall not be obligated to make any further payments of
Commitment Fees or Non-usage Fees.
Please acknowledge your agreement to the foregoing by signing and returning the
enclosed duplicate of this letter, whereby this Commitment Letter shall become
a binding agreement between DLJ and Lomas.
DLJ Mortgage Capital, Inc.
BY: /s/ XXX XXXXXX
NAME: Xxx Xxxxxx
TITLE: Senior Vice President
AGREED AND ACCEPTED as of the date first above written:
Lomas Mortgage USA, Inc.
BY: /s/ XXXX X. XXXXXXXX
NAME: Xxxx X. Xxxxxxxx
TITLE: Senior Vice President
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ANNEX A
1. LITIGATION: Any litigation or proceeding affecting Lomas and its
subsidiaries that is likely to be adversely determined and which, if
adversely determined, could have a material adverse effect on the
Collateral or the ability of Lomas to pay and perform on the
Obligations.
2. CONSOLIDATION AND MERGER: Lomas consolidates or amalgamates with, or
merges into or transfers all or substantially all its assets to
another entity and, at the time of such consolidation, amalgamation,
merger or transfer, the resulting, surviving or transferee entity
fails to assume all the obligations of Lomas and its subsidiaries
under this Commitment Letter and the Agreements by operation of law or
pursuant to an agreement satisfactory to DLJ.
3. FINANCIAL REQUIREMENTS:
(a) A material adverse change in Lomas' business, operations or
financial condition that would materially and adversely affect the
ability of Lomas to perform its obligation under this Commitment
Letter and the Agreements as determined in good faith by DLJ;
(b) GAAP Net Worth is less than $150 million;
(c) Adjusted Net Worth (ANW) is less than $50 million*;
(d) Lomas, directly or indirectly, engages in any business other than
the mortgage banking business other than businesses related to the
mortgage banking industry or typically engaged in by participants in
such industry;
(e) Lomas sells any asset other than in the ordinary course of its
business; and
(f) Lomas guarantees the debt obligation of any other entity or
entities that , in aggregate, exceeds $50 million.
Adjusted Net Worth shall mean, at any date, the sum of Tangible Net
Worth** plus 1% of the aggregate outstanding principal balance of all
1 to 4 family residential mortgage loans in Lomas Mortgage USA, Inc.'s
owned servicing portfolio.
** Tangible Net Worth shall mean the excess of total assets over total
debt determined in accordance with GAAP but shall exclude all assets
(other than deferred commitment fees) which would be classified as
intangible assets under GAAP (e.g., purchased and capitalized value of
servicing rights, excess servicing fees, and goodwill).
4. REQUIRED FINANCIAL STATEMENTS:
(a) Lomas shall deliver to DLJ within 90 days after the last day of
its fiscal year, its audited consolidated statements of income and
statement of changes in cash flow for such year and balance sheet as
of the end of such year in each case presented fairly in accordance
with GAAP and the requirements of HUD Handbook IG 4000.3 REV and
accompanied, in all cases, by an unqualified report of Ernst & Young
or another firm of independent certified public accountants reasonably
acceptable to DLJ.
(b) Lomas shall deliver to DLJ within 60 days after the last day of
each of the first three fiscal quarters in any fiscal year of Lomas,
its consolidated statements of income and statement of changes in cash
flow for such quarter and balance sheet as of the end of such quarter
presented fairly in accordance with GAAP and accompanied by FNMA Form
1002 and FHLMC Form 1055.
(c) Lomas shall deliver to DLJ within 30 days after the last day of
each calendar month that is not a quarter or year end in any fiscal
year of Lomas, (i) its consolidated statement of income for such month
and balance sheet as of the end of such month accompanied in each case
by a certificate of the chief financial officer or treasurer of Lomas
stating that such financial statements are presented fairly in
accordance with GAAP and the requirements of HUD Handbook IG 4000.3
REV (subject to routine and year-end audit adjustments) and (ii) an
officer's certificate from its
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chief financial officer or treasurer certifying that there does not
exist an event of default in the Agreements or in this Annex.
(d) Lomas shall deliver to DLJ as soon as available copies of all
proxy statements, financial statements, and reports which Lomas sends
to its stockholders, and copies of all regular, periodic and special
reports, and all registration statements (without exhibits, unless
requested by DLJ) under the Securities Act of 1933, as amended, which
it files with the Securities and Exchange Commission or any
governmental authority which may be substituted therefor, or with any
national securities exchange.
(e) Lomas shall deliver or cause to be delivered to DLJ as soon as the
same are available, copies of all regular, periodic and special audit
reports conducted by GNMA, FNMA and/or FHLMC with respect to Lomas'
operations.
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COMPANY LETTERHEAD
Date
Xxxxxxxx Xxxxxx
Senior Credit Analyst
XXXXXXXXX, LUFKIN AND XXXXXXXX
Credit Administration, 25th Floor
000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
RE: The Commitment Letter dated as of May 22, 1995, between Lomas Mortgage
USA, Inc. (the "Borrower") and DLJ Mortgage Capital, Inc. ("DLJ")
Dear Xx. Xxxxxx:
This Compliance Certificate is furnished pursuant to the Agreement dated as of
____________ between Lomas Mortgage USA, Inc and DLJ.
The following is true, correct and complete:
1. I am a member of the management of the Borrower holding the office
indicated below;
2. I have reviewed the terms of the Agreement and I have made, or have
caused to be made under my supervision, a detailed review of the
transactions and conditions of the Borrower during the period from
the date of the last Compliance Certificate given under the Agreement
to the date hereof.
3. The examinations did not disclose, and I have no knowledge of, the
existence of any condition or event which constitutes a Default or
Event of Default during or at the end of the referenced period or as
of the date of this Compliance Certificate; and
4. Schedule 1 attached hereto sets forth financial data and computations
evidencing the Company's compliance with the financial covenants set
forth in the Agreement dated as of _____________________
The foregoing certifications are made and delivered this ____ day of
___________, 1995.
________________________________________
Officer of Lomas Mortgage USA, Inc.
Name:
Title:
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XXXXXXXXX, XXXXXX AND XXXXXXXX
COMPLIANCE CERTIFICATE
_____________________
Date
I. GAAP NET WORTH
Required Actual
-------- ------
$ 150,000,000 ________________
I. ADJUSTED NET WORTH
GAAP Net Worth ________________
Less:
Purchased Mtg. Servicing Rights ________________
Plus:
UPB of Owned Servicing Portfolio x 1% ________________
ACTUAL ADJUSTED NET WORTH $ 50,000,000 ________________
IV. OTHER INFORMATION
ORIGINATION YEAR TO DATE - Please send LOMEGA production report
monthly.
SERVICING AS OF MONTH END - Please send reports to include owned
servicing, subservicing, and master servicing to include delinquency
information and WAC information.
Please provide a breakdown of Notes Payable.
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