Mortgage
Selling And
Servicing
Contract
FannieMae
Xxxxxx Xxx Mortgage Selling and Servicing Contract
This contract for selling and servicing mortgages (the "Contract") is between
the Mortgage Lender (the "Lender") that signs this document and the Federal
National Mortgage Association ("Xxxxxx Mae", "we", "our", "us"), a corporation
organized and existing under the laws of the United States.
I General Information
This section contains important basic information about the Contract, which we
are permitted to enter into under authority of Title III of the National Housing
Act (12 U.S.C. 1716, et. seq.), which is also known as the Federal National
Mortgage Association Charter Act.
A. Purpose of Contract
The purpose of this Contract is:
- to establish the Lender as an approved seller of mortgages and
participation interests to us;
- to provide the terms and conditions of the sales;
- to establish the Lender as an approved servicer of mortgages we have
purchased or in which we have purchased a participation interest; and
- to provide the terms and conditions of servicing.
B. Consideration
In consideration of the purpose of this Contract and of all the provisions and
mutual promises contained in it, the Lender and Xxxxxx Xxx agree to all that
this Contract contains.
C. Our Guides
We issue Xxxxxx Mae's Guides to Lenders (our "Guides") and furnish them to the
Lender. These Guides are:
- Selling;
- Servicing; and
- Multifamily.
Whenever there is a reference to the Guides in this Contract, it means the
Guides as they exist now and as they may be amended or supplemented in writing.
We may amend or supplement them, at our sole discretion, by furnishing
amendments or supplementary matter to the Lender.
The term "Guides" also includes anything that, in whole or in part, supersedes
or is substituted for the Guides.
D. Important Definitions
Anywhere the words that appear below are used in this Contract, the following
definitions apply:
1. "Mortgage"--A loan, evidenced by a note, bond or other instrument of
indebtedness. The loan is secured by a mortgage, deed of trust, deed to secure
debt or other instrument of security that applies to property. "Mortgage"
includes such instruments of indebtedness and security, together with
- the evidence of title;
- the chattel mortgage or security agreement and financing statement; and
- all other documents, instruments and papers pertaining to the loan.
2. "FHA/VA Mortgage"--A mortgage insured or guaranteed in whole or in part by
the Federal Housing Administration or Veterans Administration.
3. "Conventional Mortgage"--A mortgage other than an FHA/VA mortgage, which
Xxxxxx Xxx is authorized to purchase under the Federal National Mortgage
Association Charter Act.
4. "Property" or "Mortgaged Property"--The property that is now subject to a
mortgage, or was subject to such mortgage, where the mortgage has been
foreclosed or possession or title to the property has been taken by Xxxxxx Mae
or on our behalf.
5. "Participation Interest" or "Participation Interest in Mortgages"--An
undivided interest in mortgages, specified in the applicable participation
certificate that is evidence of such interest. A "participation interest" or
"participation interest in mortgages" consists of a specified percentage of the
principal (and a like percentage of all rights and benefits of the mortgagee or
equivalent party under such mortgage) together with a specified yield on it.
II Eligibility Requirements For Lenders
For us to purchase mortgages or participation interests from a Lender, the
Lender must meet the eligibility requirements specified in this section.
A. General Requirements
These are the general requirements the Lender must meet to be eligible to sell
mortgages or participation interests or service mortgages for us:
1. Meet Xxxxxx Xxx Standards. The Lender must have as two of its principal
business purposes:
- making mortgages of the type that we will purchase entirely or purchase a
participation interest in under this Contract; and
- servicing such mortgages.
In addition, the Lender, in our judgment, must have at all times the capacity to
originate and sell to us mortgages and participation interests that meet our
purchase standards and the standards generally imposed by private institutional
mortgage investors, and must at all times have the capacity to service such
mortgages for us under those standards.
2. Have Qualified Staff and Adequate Facilities. The Lender must, at all times,
have employees who are well trained and qualified to perform the functions
required of the Lender under this Contract.
In addition, the Lender must maintain facilities that are adequate to perform
its functions under this Contract.
3. Maintain Fidelity Bonds and Errors and Omissions Coverage. The Lender must
maintain, at its own expense, a fidelity bond and errors and omissions
insurance, as required by our Guides.
4. Report Basic Changes. The Lender must notify us promptly in writing of any
changes that occur in its principal purpose, activities, staffing or facilities.
B. Ownership and Status of Lender
When we approve a Lender, one of the major considerations is the information the
Lender has provided about the eligibility, qualifications and financial status
of the Lender and its owners.
Consequently, the Lender must give us immediate notice of a change in its status
or ownership, including any:
- sale or transfer of a majority interest in it;
- merger;
- consolidation; or
- change in legal structure.
C. Finances
In order to remain an approved Lender under this Contract, the Lender must meet
our current net worth requirements. These requirements are contained in our
Guides.
The required net worth must be maintained in the form of assets acceptable to
us.
The Lender must give us a copy of its annual financial statements and any other
related information that we may require.
D. Access to Lender's Records
The Lender agrees to permit our employees or designated representatives to
examine or audit records or accounts relating to mortgages or participation
interests sold or serviced under this Contract. All records relative to the
Lender's continued eligibility to sell or service mortgages under this Contract
may also be examined or audited. Any examination or audit made on our behalf
will be conducted during regular business hours unless the Lender agrees
otherwise.
III Sale of Mortgages and Participation Interests
This section contains the basic rules governing our purchase of mortgages and
participation interests.
A. What Governs Purchases
Purchases of mortgages and participation interests will be governed by:
- our written commitment to purchase;
- our Guides, including all amendments in effect on the day we make our
written commitment; and
- this Contract.
B. What We Purchase
The mortgages or participation interests that we purchase must meet the
requirements found in our Guides on the day we make our written commitment.
C. Lender's Obligation To Purchase Xxxxxx Mae Stock
If our Guides require, the Lender will promptly purchase our common stock each
time it delivers a mortgage or participation interest to us. The amount of stock
to be purchased and the procedures for buying it are also found in our Guides.
D. Xxxxxx Xxx Xxxx No Obligation to Purchase
The fact that we have signed this Contract does not mean that we must make a
commitment to purchase any mortgage or participation interest from the Lender.
IV Sale of Mortgages and Participation Interests
-- Lender's Warranties
The Lender makes certain warranties to us.
These warranties:
- apply to each mortgage sold to us in its entirety;
- apply to each mortgage in which a participation interest is sold to us;
- are made as of the date transfer is made to us;
- continue after the purchase of the mortgage or participation interest;
- continue after payment by us of the purchase price to the Lender; and
- are for our benefit as well as the benefit of our successors and assigns.
Warranties may be waived, but only by us in writing.
A. Specific Warranties
Following are the specific warranties made by the Lender.
1. Mortgage Meets Requirements. The mortgage conforms to all the applicable
requirements in our Guides and this Contract.
2. Lender Authorized To Do Business. The Lender and any other party that held
the mortgage were, at all times during which the holder held the mortgage,
authorized to transact business in the jurisdiction where the property is
located.
However, if the Lender or any other party that held the mortgage was not
authorized to do business in the jurisdiction where the property is located,
then the warranty is made that none of the following activities of the Lender or
other parties constituted doing business in that jurisdiction:
- lending the mortgage funds;
- acquiring the mortgage;
- holding the mortgage; or
- transferring the mortgage in whole or to the extent of a participation
interest.
3. Lender Has Full Right To Sell And Assign. The Lender is the sole owner and
holder of the mortgage and has full right and authority to sell and assign it,
or a participation interest in it, to us. In addition, the Lender's right to
sell or assign is not subject to any other party's interest or to an agreement
with any other party.
4. Lender's Lien on Property. The mortgage, whether represented by the Lender as
the first lien or as the second lien, is a valid and subsisting lien on the
property described in it.
If the mortgage is represented by the Lender as the first lien, the property is
free and clear of all encumbrances and liens having priority over it except for
liens for real estate taxes, and liens for special assessments, that are not yet
due and payable.
If the mortgage is represented by the Lender as the second lien, the property is
free and clear of all encumbrances and liens having priority over it except for
one property recorded first mortgage lien, real estate taxes and liens of
special assessments not yet due and payable.
Any security agreement, chattel mortgage or equivalent document that is related
to the mortgage and that is held by the Lender or delivered to us, is a valid
and subsisting lien on the property described in such document, of the same
priority as the mortgage.
The Lender has full right and authority to sell or assign each lien to us or to
an extent that is proportionate to our participation interest.
5. Documents Are Valid And Enforceable. The mortgage and any security
agreements, chattel mortgages, or equivalent documents relating to it have been
properly signed, are valid, and their terms may be enforced by us, our
successors and assigns, subject only to bankruptcy laws, Soldiers' and Sailors'
Relief Acts, laws relating to administering decedents' estate, and general
principles of equity.
6. Property Not Subject To Liens. The Property is free and clear of all
mechanics' liens, materialmen's liens or similar types of liens. There are no
rights outstanding that could result in any of such liens being imposed on the
property.
This warranty is not made if the Lender furnishes us with title insurance that
gives us substantially the same protection as this warranty.
7. Title Insurance. There is a mortgage title insurance policy, or other title
evidence acceptable to us, on the property. The title insurance policy is on a
current ALTA form (or other generally acceptable form) issued by a generally
acceptable insurance company.
The title insurance insures (or the other title evidence protects) us or the
Lender and its successors and assigns, as holding a lien of the priority
warranted in "4. Lender's Lien on Property."
8. Modification or Subordination of Mortgage. The Lender has not done any of the
following:
- materially modified the mortgage;
- satisfied or cancelled the mortgage in whole or in part;
- subordinated the mortgage in whole or in part, unless it is represented
to us as a second mortgage;
- released the property in whole or in part from the mortgage lien; or
- signed any release, cancellation, modification or satisfaction of the
mortgage.
This warranty is not made if any of the things just mentioned have been done but
have been expressly brought to our attention in a letter before we make payment
to the Lender. The letter must be acknowledged by us in writing.
9. Mortgage In Good Standing. There are no defaults under the mortgage, and all
of the following that have become due and payable have been paid or an escrow of
funds sufficient to pay them has been established:
- taxes;
- government assessments;
- insurance premiums;
- water, sewer and municipal charges;
- leasehold payments; or
- ground rents.
1O. Advances. The Lender has not made or knowingly received from others, any
direct or indirect advance of funds in connection with the loan transaction on
behalf of the borrower except as provided in our Guides. This warranty does not
cover payment of interest from the earlier of:
- the date of the mortgage note; or
- the date on which the mortgage proceeds were disbursed to
- the date one month before the first installment of principal and interest
on the mortgage is due.
11. Property Conforms To Zoning Laws. The Lender has no knowledge that any
improvement to the property is in violation of any applicable zoning law or
regulation.
12. Property Intact. The property is not damaged by fire, wind or other cause of
loss. There are no proceedings pending for the partial or total condemnation of
the property.
13. Improvements. Any improvements that are included in the appraised value of
the property are totally within the property's boundaries and building
restriction lines. No improvements on adjoining property encroach on the
mortgaged property unless FHA or VA regulations or our Guides permit such an
encroachment.
14. Mortgage Not Usurious. The mortgage is not usurious and either meets or is
exempt from any usury laws or regulations.
15. Compliance With Consumer Protection Laws. The Lender has complied with any
applicable federal or state laws, regulations or other requirements on consumer
credit, equal credit opportunity and truth-in-lending.
16. Property Is Insured. A casualty insurance policy on the property is in
effect. It is written by a generally acceptable insurance company and provides
fire and extended coverages for an amount at least equal to the amount required
by our Guides.
A flood insurance policy is in effect on the property if any part of it is in an
area listed in the Federal Register by the Federal Emergency Management Agency
as an area with special flood hazards, and if insurance is available. The flood
insurance is written by a generally acceptable insurance company, meets current
guidelines of the Federal Insurance Administration, and is for an amount at
least equal to the amount required by our Guides.
The Lender will make sure the required insurance is maintained as long as it
services the mortgage. Any policy mentioned in this warranty contains a standard
mortgage clause that names us or the Lender and its successors and assigns as
mortgagee.
17. Mortgage Is Acceptable Investment. The Lender knows of nothing involving the
mortgage, the property, the mortgagor or the mortgagor's credit standing that
can reasonably be expected to:
- cause private institutional investors to regard the mortgage as an
unacceptable investment;
- cause the mortgage to become delinquent; or
- adversely affect the mortgage's value or marketability.
18. Mortgage Insurance or Guaranty In Force. If the Lender represents that the
mortgage is insured or guaranteed under the National Housing Act as amended, or
under the Servicemen's Readjustment Act of 1944 as amended, or by a contract
with a mortgage insurance company, the insurance or guaranty is in full force.
In addition, the Lender has complied with all applicable provisions and related
regulations of the Act, or the insurance contract, that covers the mortgage.
19. Adjustable Mortgages. If the mortgage provides that the interest rate or the
principal balance of the mortgage may be adjusted, all of the terms of the
mortgage may be enforced by us, our successors and assigns.
These adjustments will not affect the priority of the lien warranted in "4.
Lender's Lien on Property."
2O. Participation Information Is Correct. All the information and statements in
any participation certificate that the Lender delivers to us are complete,
correct and true.
B. Consequences of Untrue Warranties -- Repurchase
We may require the Lender to repurchase a mortgage or participation interest
sold to us if any warranty made by the Lender about the mortgage or
participation interest is untrue (whether the warranty is in this Contract or
was made at our specific request).
We may require repurchase whether or not the Lender had actual knowledge of the
untruth. We may also enforce any other available remedy.
The Lender must pay us the repurchase price within 3O days of our demand. The
repurchase price, as provided in our Guides, will not be adjusted because the
Lender paid us fees or charges or subscribed to our capital stock.
C. Consequences of Untrue Warranties -- Termination of Contract
While untrue warranties about a particular mortgage or participation interest
may be the basis for requiring repurchase of the particular mortgage or
participation interest, there can be additional consequences. They may also give
rise to responsibilities of the Lender under "D. Indemnification For Breach of
Warranty; Holding Us Harmless." In addition, untrue warranties can, under
certain circumstances, be treated as a breach of contract that could result in
the withdrawal of our approval of a Lender and the termination of this Contract
(details are contained in Sections VIII and IX).
D. Indemnification for Breach of Warranty; Holding Us Harmless
If there is a breach of warranty under this Contract, the Lender, at our
request, will indemnify us and hold us harmless against any related losses,
damages, judgments or legal expenses.
V Servicing Mortgages
This section contains the basic rules governing the servicing of mortgages that
we purchase, or in which we purchase a participation interest.
A. Servicing Duties of the Lender
The servicing duties of the Lender are:
1. Scope of Duties. The Lender will diligently perform all duties that are
necessary or incident to the servicing of:
- all mortgages it is servicing for us on the date this Contract takes
effect; and
- all other mortgages that the Lender is required to service by the terms
of this Contract or any other existing or future agreement between us and
the Lender:
2. Mortgages To Be Serviced. Any mortgage we have purchased from the Lender, or
in which we have purchased a participation interest from the Lender, will be
serviced by the Lender for us according to the terms of this Contract, unless:
- the mortgage is not within any category of those that are required by our
Guide to be serviced; or
- we give the Lender written notification or consent that a mortgage to be
purchased by us will not be serviced by the Lender.
3. Service According To Guides. Any mortgage serviced under this Contract, which
we own or in which we have purchased a participation interest, must be serviced
by the Lender according to the provisions in our Guides that are in effect on
the date of this Contract or as amended in the future. This is true regardless
of when:
- the mortgage was originated;
- the mortgage or a participation interest in it was transferred to us; or
- the Lender began servicing the mortgage.
The Lender will also follow other reasonable instructions we give it and must
strictly follow accepted industry standards when servicing a mortgage for us.
4. Service At Lender's Own Expense. The cost of servicing will be the Lender's
unless our Guides expressly provide otherwise.
5. Special Responsibilities In Foreclosures. Among the other duties that may be
assigned to the Lender through our special instructions or under the terms of
our Guides is the responsibility to manage and appropriately dispose of property
when a mortgage it is servicing for us has been foreclosed, or possession or
title has been taken by us or on our behalf.
The Lender must manage and dispose of the property according to the terms of the
mortgage and our Guides.
6. Service Until Need Ends. The Lender must service each mortgage continuously
from the date its servicing duties begin until:
- the mortgage's principal and interest have been paid in full;
- the mortgage has been liquidated and the mortgaged property properly
disposed of (if the Lender is required to do these things); or
- the Lender's servicing duties are terminated according to Section IX of
this Contract.
B. Compensation
The Lender's compensation for servicing mortgages, including the management and
disposal of properties, under this Contract is specified in our Guides.
We may change the Lender's compensation by modifying our Guides at any time.
However, such a change will not affect mortgages that we have purchased or
committed to purchase before the date of the change.
C. Ownership of Records
All mortgage records reasonably required to document or properly service any
mortgage we own in its entirety are our property at all times. This is true
whether or not the Lender developed or originated them.
The following are considered mortgage records:
- all mortgage documents;
- tax receipts;
- insurance policies;
- insurance premium receipts;
- ledger sheets;
- payment records;
- insurance claim files and correspondence;
- foreclosure files and correspondence;
- current and historical data files; and
- all other papers and records.
1. Lender As Custodian. The mortgage records belong to us. The Lender can have
possession of the mortgage records only with our approval, and the Lender is
acting as our custodian. This is true whether the Lender receives the mortgage
records from an outside source or prepares them itself.
2. Delivery. When we ask for any mortgage records in writing, the Lender will
deliver them to us or someone we choose. The Lender must also send us a list
that identifies each mortgage, and must give us other information we request to
identify the mortgages delivered.
We will not be required to sign or deliver any trust receipts before the Lender
delivers the mortgage records we have requested.
If we ask the Lender in writing for reproductions of any mortgage records the
Lender microfilmed or condensed, the Lender will reproduce them promptly at no
cost to us or the party to whom we want them delivered.
3. Joint ownership. If we own a participation interest in a mortgage, the other
owners and we own the mortgage records jointly. For these mortgages, the Lender
possesses the mortgage records as a custodian for the joint owners.
If we ask for copies of the mortgage records and servicing information about any
such mortgages, the Lender will furnish them. Or, if we need any mortgage
records for legal evidence or other purposes, the Lender will release them to us
for a reasonable time.
D. Agreement to Indemnify and Hold Harmless
The Lender will indemnify us and hold us harmless against all losses, damages,
or legal expenses that result from its failure in any way to perform its
services and duties in connection with servicing mortgages or managing or
disposing of property according to this Contract or our Guides.
If any private entity or governmental agency sues us, makes a claim against us
or starts a proceeding against us based on the Lender's acts or omissions in
servicing mortgages or managing or disposing of property, the Lender's
obligation to indemnify and hold us harmless must be met regardless of whether
the suit, claim or proceeding has merit or not.
The Lender's obligation does not apply, however, if during a suit, claim or
proceeding, we give the Lender express written instructions and as a result of
the Lender following them we suffer losses, damages, judgments or legal
expenses.
E. Ownership of Our Stock
If our Guides require, the Lender will continuously own our common stock in
connection with all mortgages it services under this Contract. The amount of
stock to be owned will be established by our Guides as they were in existence on
the date the Lender started servicing the applicable mortgages.
Vl Assignment, Consideration And Continuance
This section describes our requirements covering assignment of, consideration
for and continuance of this Contract.
A. Assignment
Because the relationships created by this Contract are personal, the Lender may
not, without our prior written approval, assign:
- this Contract under any circumstances, either voluntarily or
involuntarily, by operation of law, or otherwise; or
- its responsibility for servicing individual mortgages we own or in which
we have a participation interest. (See Section VII of this Contract for
required procedures governing assignments of servicing).
B. Limited Value of Contract to Lender
The Lender acknowledges that it has paid us no monetary consideration for making
it an approved mortgage seller or servicer, except an application fee to
reimburse us for the expenses of reviewing its application.
The Lender also agrees that, except for the purchase of mortgages, the servicing
of mortgages, or any fee for the termination of this Contract, this Contract has
no value to the Lender.
C. Requirements for Continuance
The Lender's right to continue selling and servicing mortgages under this
Contract depends on, among other things, its continuing to meet the eligibility
requirements in Section II of this Contract.
Vll Assigning Mortgage Servicing
The Lender may not assign its responsibility for servicing all or any part of
the mortgages that it is servicing for us without first obtaining our written
consent.
Any Lender to which servicing is assigned must:
- be acceptable to us; and
- sign a Mortgage Selling and Servicing Contract with us.
We may require that the Lender and transferee lender sign documents and take
other reasonable steps to perfect the assignment.
VlIl Breaches of Contract
The Lender's taking certain actions, or failing to take certain actions, can be
treated by us as a breach of contract. A breach of contract can lead to a
termination of the Contract. Termination is provided for in detail in Section
IX.
A. Specific Breaches of Contract
Breaches of this Contract include the following:
1. Harm, Damage, Loss or Untrue Warranties. It is a breach if any act or
omission of the Lender in connection with the origination and sale to us of any
mortgage or participation interest causes us harm, damage or loss. It is also a
breach if the Lender sells us any mortgage or participation interest knowing
that any of the mortgage warranties are untrue (these warranties are listed in
Section IV A).
2. Failure To Comply With This Contract or our Guides. It is a breach if the
Lender does not comply with this Contract or our Guides through any act or
omission, including, without limitation, the following:
- failure to establish and maintain accounts for our funds or mortgagors'
funds as required by our Guides;
- use of our or mortgagors' funds in any manner other than that permitted
by our Guides, including the Lender's failure to deposit all mortgage funds
if, when, and to the extent required by our Guides;
- failure to remit all funds due to us within the time periods required by
our Guides;
- failure to make or ensure, according to the provisions of each mortgage
or of applicable laws or regulations, proper and timely payment of all:
-- taxes;
-- assessments;
-- leasehold payments;
-- ground rents;
-- insurance premiums (including premiums of casualty, liability and
mortgage insurance and other forms of required insurance);
-- required interest on escrow funds; and
-- other required payments with respect to any mortgage (including
mortgaged property) serviced;
unless the Lender is relieved of these responsibilities by the express
provisions of our Guides, or by our written instructions that relate to a
particular mortgage or property;
- failure to renew or ensure renewal of any required insurance policy on
any mortgage (including mortgaged property) serviced under this Contract;
- failure to maintain adequate and accurate accounting records and mortgage
servicing records for the mortgages, or to maintain proper identification
of the applicable loan files and mortgage records that prove our
outstanding participation interests;
- failure to submit adequate and accurate accounting and mortgage servicing
reports within the time required by our Guides; or
- failure to take prompt and diligent action under applicable law or
regulation to collect past due sums on mortgages, or to take any other
diligent action described in our Guides that we reasonably require for
mortgages in default.
3. Failure To Properly Foreclose or Liquidate. Where a mortgage is in default
and the Lender is required or has decided to foreclose or liquidate it, it is a
breach if the Lender fails to take prompt and diligent action consistent with
applicable law or regulations to foreclose on or otherwise appropriately
liquidate such mortgage and to perform all incident actions. It is a breach
whether or not the failure results from the acts or omissions of an attorney,
trustee or other person or entity the Lender chooses to effect foreclosure or
liquidation.
4. Failure To Properly Manage, Dispose of, or Effect Proper Conveyance of Title.
It is a breach if any mortgage serviced under this Contract has been foreclosed
or the possession or title to the property has been taken by us or on our
behalf, or on behalf of other owners of a participation interest in the
mortgage, and the Lender:
- fails to properly manage, dispose of or effect proper conveyance of title
to the mortgaged property; or
- fails to do the above in accordance with this Contract, our Guides, and
any pertinent laws, regulations, or mortgage insurance policies or
contracts.
5. Lender's Financial Ability Impaired. It is a breach if there is a change in
the Lender's financial status that, in our opinion, materially and adversely
affects the Lender's ability to satisfactorily service mortgages.
Changes of this type include:
- the Lender's insolvency;
- adjudication of the Lender as a bankrupt;
- appointment of a receiver for the Lender; or
- the Lender's execution of a general assignment for the benefit of its
creditors.
If any such change does take place:
- no interest in this Contract will be considered an asset or liability of
the Lender or of its successors or assigns; and
- no interest in this Contract will pass by operation of law without our
consent.
6. Failure To obtain our Prior Written Consent. It is a breach if the Lender
fails to obtain our prior written consent for:
- a sale of the majority interest in the Lender; or
- a change in its corporate status or structure.
7. Failure To Comply With This Contract or our Guides. It is a breach if the
Lender fails at any time to meet our standards for eligible mortgage sellers or
servicers so that, in our opinion, the Lender's ability to comply with this
Contract or our Guides is adversely affected.
8. Court Findings Against Lender or Principal Officers. It is a breach if:
- a court of competent jurisdiction finds that the Lender or any of its
principal officers has committed an act of civil fraud; or
- the Lender or any of its principal officers is convicted of any criminal
act related to the Lender's lending or mortgage selling or servicing
activities or that, in our opinion, adversely affects the Lender's
reputation or our reputation or interests.
B. Actions to Correct a Breach
If there is a breach of contract by the Lender, we will have the right to take
any reasonable action to have any breach corrected by the Lender before we
exercise any right we have to terminate this Contract in whole or in part;
however, we are not required to try to have a breach corrected before
termination.
Any forbearance by us in exercising our right to terminate this Contract in
whole or in part will not be a waiver of any present or future right we have
under this Contract to so terminate it.
IX Termination of Contract
The reason why this Contract may be terminated and the ways in which this may be
done are outlined in this section. When the Contract is terminated, the entire
relationship between the Lender and us ends (with certain exceptions that are
explained in this section).
A. Termination By Either Party of Mortgage Selling Arrangements
The provisions of this Contract covering the sale of mortgages or participation
interests under this Contract may be terminated by the Lender or by us, with or
without cause, by giving notice to the other party. Notice of termination may be
given at any time but must conform to Section XII of this Contract.
Termination is effective immediately upon notice of termination, unless the
notice specifies later termination.
Termination will not affect any outstanding commitments we have made to purchase
mortgages or participation interests from the Lender. However, if the Lender has
breached this Contract, we may declare any or all outstanding commitments void.
B. Termination by Lender of Mortgage Servicing Arrangements for
Wholly-Owned Mortgages
The Lender may terminate the provisions of this Contract covering the servicing
of mortgages we entirely own by giving us notice at any time. Notice must
conform to Section XII of this Contract.
Termination is effective the last day of the third calendar month after the
calendar month in which notice is given.
If the Lender terminates this Contract in whole or in part, we will not pay the
Lender a termination fee.
C. Termination by Us of Servicing Arrangements for Wholly-Owned
Mortgages
We may terminate the provisions of this Contract covering the servicing under
this Contract of any or all mortgages that we entirely own. This may be done by
following the procedures outlined below.
1. Termination Without Cause. We may terminate servicing for any reason, by
giving the Lender notice of the termination. If we do so, the provisions of this
Contract covering the servicing of the affected mortgages will automatically
terminate on the thirtieth day following the day our notice is given. Whenever
we do this (and the termination is not because of any breach by the Lender as
described in Section IX C2) we will pay the Lender, for each mortgage on which
servicing is terminated, a lump-sum termination fee as provided in a. below.
However, whenever we terminate solely in order to transfer the servicing to
another Lender, and there has been no sale of our interest in the affected
mortgages, the provisions of b. below will apply.
a. Termination Fee. The termination fee will be an amount equal to twice the
Lender's annualized servicing compensation, at the rate of compensation that is
in effect for the mortgage as of the date of the termination, applied against
the unpaid principal balance of the mortgage as of such date.
For purposes of determining the termination fee:
- The Lender's servicing compensation consists of the servicing fee at the
Applicable Servicing Rate plus any previously agreed upon excess yield that
the Lender is permitted to retain on the applicable mortgage.
- "Applicable Servicing Rate" means the rate of the servicing fee for the
servicing of the mortgage, expressed as an annualized fractional
percentage.
[Refer to appropriate sections of our Guides for more detailed information
regarding the computation of termination fees.]
b. Termination To Effect Transfer. Whenever we terminate servicing solely in
order to transfer servicing of the mortgages to another Lender, and there has
been no sale of our interest in the mortgages, we will give the Lender notice of
the required transfer. Within the 90-day period immediately following the date
our notice is given, the Lender may arrange for the sale of the servicing to
another Xxxxxx Xxx-approved Lender in good standing that, in our judgment, will
properly service the mortgages to be transferred. Within that 90-day period, the
Lender will give notice of any proposed sale to us, together with all related
information. The sale of servicing is conditioned upon our approval, which will
not be unreasonably withheld. Any resulting transfer of servicing will be
completed not later than 60 days after our approval of the transfer; and
- the Lender will be entitled to the proceeds of the sale of servicing, and
will bear all costs and expenses related to the sale and transfer of
servicing;
- the Lender will not pay us a transfer fee;
- we will not pay the Lender a termination fee;
- we may require the purchaser of the servicing to assume any or all
warranties that were made to us in connection with the sale to us of the
affected mortgages; and
- the purchaser of the servicing will succeed to the Lender's obligations,
rights and servicing compensation, under the provisions of this Contract
covering the servicing of the affected mortgages. For all of the affected
mortgages that we purchased under a net-yield contract, the servicing
compensation will include the specified minimum servicing fee, plus the
Lender's share of that portion of the yield which exceeds the stated net
yield, as provided under the commitment contract.
[Refer to appropriate sections of our Guides for more detailed information
regarding the computation of the Lender's servicing compensation.]
If at the end of the 90-day period following our notice, the Lender has not
arranged to sell and transfer the servicing of the affected mortgages to another
Lender acceptable to us and given us the required notice, the provisions of this
Contract covering the servicing of the mortgages will automatically terminate on
the fifteenth day following the end of the 90-day period, and we will transfer
the servicing to a Lender of our choice. In such a case, we will pay the Lender,
for each mortgage on which servicing is terminated, a termination fee computed
as provided under a. above. We will deduct from the termination fee paid to the
Lender a transfer fee that is the greater of $500.00 or 1/100 of 1% of the
aggregate unpaid principal balance of all of the affected mortgages on which
servicing is transferred.
c General Criteria For Termination Fees. Notwithstanding anything to the
contrary in this Contract, we may change the amount of termination fee that we
pay, or other provisions of this Section IX C1, from time to time, by changing
the appropriate provisions of our Guides. However, such a change will not affect
mortgages that we have purchased or that we have committed to purchase before
the date of the change.
Our written tender of the termination fee to the Lender, or its successors or
assigns, is complete compensation for each mortgage serviced by the Lender on
which servicing is terminated. Any sums we owe the Lender for servicing prior to
the termination date are not included in the termination fee. When we pay a
termination fee, the Lender will not be entitled to the proceeds for any sale of
the servicing involved.
2. Termination With Cause. We may terminate if the Lender breaches any agreement
in this Contract, including, without limitation, any of those breaches listed in
Section VIII A. This may be done by giving the Lender notice of termination.
Notwithstanding anything in this Contract to the contrary, if we terminate for
breach, we may make it effective immediately, and we will not pay the Lender a
termination fee or proceeds from any sale of the servicing involved.
Furthermore, we will not pay a servicing termination fee if a mortgage is
repurchased by the Lender because a warranty is untrue.
D. Termination by Us of Servicing Arrangements for Mortgages in Which
We have a Participation Interest
If the Lender breaches any agreement in this Contract, including, without
limitation, any breach listed in Section VIII A, we may terminate the provisions
of this Contract covering the servicing of any or all mortgages in which we own
a participation interest. This may be done by giving notice of termination. Such
termination may be effective immediately, and we will not pay the Lender a
termination fee.
1. Transfer of Lender's Powers. Upon termination, we will automatically succeed
to all the Lender's rights in and responsibilities for servicing of the affected
mortgages. We will also have the option to exercise all the Lender's powers
relating to these mortgages, and to designate any person or firm to exercise
those powers. However, exercise of the Lender's powers must be consistent with
the Lender's and our respective participation interests.
The mortgage instruments for these mortgages and all related mortgage records
will be delivered to us or a party we designate. The Lender will also deliver
necessary assignments, transfers and documents of authority.
2. Transfer of Servicing. If we terminate the Lender's servicing of any such
mortgages, we are authorized to transfer the servicing of the mortgages to new
servicers and pay the new servicers a fee. The fee will apply to the total
outstanding principal balance on each mortgage, including our participation
interest in each mortgage as well as the participation interest of the Lender
and of any other owner.
3. Liability For Fees. The Lender and all additional owners of a participation
interest will be liable for their respective shares of the servicing fee we pay.
They will also be liable for their respective shares of advances that, in our
sole discretion, are required. Advances may be required for insurance, taxes,
maintenance, improvements or other necessary outlays.
If the Lender or other owners fail to promptly provide their share of funds for
advances, or for any other necessary expenses, during any period, we may supply
the funds. The fact that we do this does not release the Lender or other owners
from their liability. We may deduct any amount we advance the next time we owe
money to the Lender or other owners.
E. Rights of Termination Not Impaired
The exercise of a right of termination under any provision of this Contract will
not impair any further right of termination under another provision.
X Continuance of Responsibilities or Liabilities
Responsibilities or liabilities of the Lender that exist before the termination
of this Contract will continue to exist after termination unless we expressly
release the Lender from any of them in writing. This is true whether the
Contract was terminated by the Lender or by us.
Xl Participation Interests-Special Provisions
This section contains special provisions that govern participation interests.
A. After the Sale of a Participation Interest
Listed below are the consequences of the sale of a participation interest.
1. Transfer of Undivided Interest. When the Lender sells and conveys to us a
participation interest in one or more mortgages, this is a transfer of an
undivided interest in each mortgage.
The sale and conveyance of the participation interest will have the same force
and effect as:
- a separate assignment of each mortgage executed and delivered to us by
the Lender; and
- a promissory note separately endorsed or transferred to us.
2. Assurance of our Legal Rights. If federal or state laws or regulations now,
or later, provide that the purchase of a participation interest is an extension
of credit, the Lender will take whatever additional steps we may require to
assure our legal rights as a purchaser of participation interests.
Such steps may include:
- placing legends on promissory notes;
- endorsing promissory notes in blank and delivering them to us; and
- executing mortgage assignments in a form acceptable to us and delivering
them to us.
3. No Partnership or Joint Venture. Neither the simultaneous ownership of
interests in one or more mortgages nor any provision of this Contract will mean
that a partnership or joint venture exists between the Lender and us.
B. Payments to Us
The Lender will make the following payments to us, according to our Guides, for
mortgages in which both the Lender and we own an interest:
1. Ratable Sharing of Principal. The Lender will ratably share with us all
mortgage principal payments.
2. Participation Share of Interest. The Lender will pay us our participation
share of interest payments up to:
- an amount sufficient for us to earn our yield on each mortgage; plus
- any amounts due us pursuant to this section.
C. Enforcement of Due-On-Sale and Call Options
As required by our Guides, the Lender will enforce the due-on-sale provisions
and call options in the mortgages it services for us.
D. Repurchase Option
The Lender will have the option to repurchase our interest in a mortgage if:
- the Lender is required by our Guides to enforce a due-on-sale clause of a
mortgage in which the Lender and we own an interest; or
- we elect to exercise a call option provision of such a mortgage.
If the Lender wishes to repurchase our interest in such a mortgage, it may do so
by:
- giving us notice of its intention to repurchase; and
- paying us an amount calculated according to the provisions of our Guides.
E. Note Rate Increase, Foreclosure Expenses and Prepayment Charges.
The note rate of a mortgage is stated in the participation certificate or
attached loan schedule.
1. Note Rate Increase. If, for any reason, there is an increase of the note rate
of a mortgage in which we hold a participation interest, the Lender will pay us,
according to our Guides, a percentage of the increase equal to the percentage
represented by our participation interest in the mortgage. This amount will be
in addition to our yield on the mortgage.
2. Foreclosure Expenses. The Lender will ratably share with us any reasonable
foreclosure and related expenses in connection with a mortgage in which we own a
participation interest.
3. Prepayment Charges. The Lender will ratably share with us any prepayment
charges collected for mortgages in which we own a participation interest.
F. Advances
The Lender will not make any optional or voluntary advances to the borrower
under an open-end mortgage in which we own a participation interest.
G. Assignment or Sale of Participation Interests
Participation interests may be assigned either by the Lender or us, as follows:
1. By Us. Without the Lender's consent we may assign:
- our participation interest in any mortgage; and
- all rights in the mortgage we own under this Contract or under any other
instruments.
2. By Lender To Transferee. The Lender may sell or transfer all or part of any
participation interest that it owns in any mortgage under this Contract unless
expressly prohibited from doing so by our Guides.
This sale or transfer of participation interests is subject to the conditions
below, as well as to our Guides as they are in effect on the date of our
commitment to purchase.
For every sale or transfer, the Lender must obtain and furnish us with a
properly executed instrument by which the transferee:
- agrees to be bound by the terms of this Contract; and
- acknowledges our rights and interests under this Contract with respect to
the mortgage.
Our rights and interests that must be acknowledged include, without limitation,
the right to assess a servicing fee against the owner of each participation
interest if we:
- assume the servicing of the mortgage; or
- transfer the servicing to a new servicer under Section IX D of this
Contract.
The sale or transfer of a participation interest does not relieve the Lender of
any responsibility or liability under this Contract. For example, the Lender
continues to be liable for any fees and other amounts charged under Section IX
D3 of this Contract against the participation interest that is transferred. We
may collect these amounts from the Lender or from the transferee.
3. By Lender To Bank. The Lender may be a member of, or be required to maintain
reserves with a Federal Home Loan Bank or Federal Reserve Bank. If so, and the
Lender transfers its participation interests in any mortgage under this Contract
to such a bank to secure one or more advances, then the bank will not be deemed
to have assumed the mortgage warranties found in Section IV A.
Also, such a transfer to the bank will not relieve the Lender of any
responsibility or liability under this Contract.
Xll Notice
Whenever notice is required under this Contract, it must be given as described
in this section.
A. Notice of Termination
Any notice of termination given under this Contract must be:
- in writing;
- delivered in person or sent by registered or certified mail, with a
return receipt requested; and
- addressed to the party to which notice is being given.
Delivery and notice is given when we or the Lender mail or register the notice
with any post office.
B. Our Guides and Other Documents
Our Guides, including any amendments or supplements, and any other notices,
demands or requests under this Contract or applicable law will be:
- in writing;
- delivered in person or mailed from any post office, substation, or letter
box;
- enclosed in a postage prepaid envelope; and
- addressed to the Lender to which the matter is directed.
C. Address
For purposes of notice, the following rules apply:
1. Our address is the address of our regional office given in this Contract.
2. The Lender's address is that of its principal place of business given in this
Contract. Any change of address must be given in writing.
XlIl Prior Agreements
This Contract supersedes any prior agreements between the Lender and us that
govern selling or servicing of mortgages and participation interests to which
this Contract relates.
However, this section will not release the Lender from any responsibility or
liability under any prior agreements and understandings.
XIV Severability And Enforcement
If any provision of this Contract conflicts with applicable law, the other
provisions of this Contract that can be carried out without the conflicting
provision will not be affected.
All rights and remedies under this Contract are distinct and cumulative not only
as to each other but as to any rights or remedies afforded by law or equity.
They may be exercised together, separately or successively. These rights and
remedies are for our benefit and that of our successors and assigns.
XV Captions
This Contract's captions and headings are for convenience only and are not part
of the Contract.
XVI Scope of Contract
The following provisions apply, whether or not they are contrary to other
provisions in this Contract.
A. Restriction of Lender
We reserve the right to restrict the Lender's sale or servicing of mortgages or
of participation interests to the type that the Lender and its employees have
the experience and ability to originate, sell or service.
B. Types of Mortgages Covered
This Contract covers only the sale of mortgages and participation interests and
the servicing of mortgages, within the following categories:
XVII Signatures And Date
By executing this Contract, the Lender and we agree to all of this Contract's
terms and provisions. Both the Lender and we have signed and dated this Contract
below.
This Contract takes effect on the date we sign it.
Lender: Citizens Mortgage Service Company
Address: Xxxxxxxx Xxx Xxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxxxxx 00000
By: /s/ Xxxxxx Xxxxxxx, President
-----------------------------
Xxxxxx Xxxxxxx
(Authorized Signature)
Xxxxxx Xxxxxxx, President
(Type Name and Title)
Date: October 27, 1986
Federal National Mortgage Association
Address: 51O Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxxxxx, XX 00000
By: /s/ Xxxxxx X. Xxxxxxx
---------------------
Xxxxxx X. Xxxxxxx
(Authorized Signature)
Xxxxxx X. Xxxxxxx, Vice President
(Type Name and Title)
Date: November 12, 1986
