SECURITY AND COLLATERAL AGENCY AGREEMENT

 

                                                                    EXHIBIT 10.2

 

 

                    SECURITY AND COLLATERAL AGENCY AGREEMENT

 

      THIS SECURITY AND COLLATERAL AGENCY AGREEMENT (this "Security Agreement")

is made and dated as of the 30th day of August, 2004, by and among AMERICAN HOME

MORTGAGE SERVICING, INC., a Maryland corporation ("AHMS"), AMERICAN HOME

MORTGAGE CORP., a New York corporation ("AHMC"), AMERICAN HOME MORTGAGE

ACCEPTANCE, INC., a Maryland corporation ("AHMA") (AHMS, AHMC and AHMA each, a

"Borrower" and, collectively, the "Borrowers"), BANK OF AMERICA, N.A., a

national banking association, acting in its capacity as administrative agent (in

such capacity, the "Administrative Agent") for the Lenders from time to time

party to that certain Credit Agreement dated as of even date herewith, by and

among the Borrowers, the Lenders and the Administrative Agent (as amended,

extended and replaced from time to time, the "Credit Agreement," and with

capitalized terms not otherwise defined herein used with the meanings given such

terms in the Credit Agreement, and DEUTSCHE BANK NATIONAL TRUST COMPANY, acting

in its capacity as custodian and collateral agent for the benefit of the

Administrative Agent and the Lenders (in such capacity, the "Collateral Agent").

 

                                     RECITAL

 

      As a condition precedent to the effectiveness to the Credit Agreement, the

Borrowers are required to execute and deliver this Security Agreement.

 

      NOW, THEREFORE, in consideration of the above Recital and for other good

and valuable consideration, the receipt and adequacy of which are hereby

acknowledged, the parties hereto hereby agree as follows:

 

                                    AGREEMENT

 

      1. Appointment of Collateral Agent. By executing and delivering the Credit

Agreement or otherwise becoming a "Lender" thereunder, each Lender shall

automatically be deemed to have appointed the Collateral Agent to act as secured

party, agent, bailee and custodian for the exclusive benefit of the

Administrative Agent, the Collateral Agent, and the Lenders (collectively and

severally, the "Secured Parties"), with respect to the Collateral (to the extent

that such Collateral consists of the documents delivered to the Collateral Agent

under Paragraph 2(a) hereof). The Collateral Agent hereby accepts such

appointment and agrees to maintain and hold all Collateral (to the extent that

such Collateral consists of the documents delivered to the Collateral Agent

under Paragraph 2(a) hereof) at any time delivered to it as secured party,

agent, bailee and custodian for the exclusive benefit of the Secured Parties.

The Collateral Agent acknowledges and agrees that the Collateral Agent is acting

and will act with respect to the Collateral for the exclusive benefit of the

Secured Parties and is not, and shall not at any time in the future be, subject

with respect to the Collateral, in any manner or to any extent, to the direction

or control of any of the Borrowers except as expressly permitted hereunder and

under the other Loan Documents. The Collateral Agent agrees to act in accordance

with this Security Agreement and in accordance with any written instructions

properly delivered pursuant hereto. Under no circumstances shall the Collateral

Agent deliver possession of Collateral to any of the Borrowers except in

accordance with the express terms of this Security Agreement and the other Loan

Documents. The Collateral Agent hereby confirms that it is a MERS patron member

in good standing and in compliance with all rules, regulations, procedures, and

requirements set forth by MERS with respect to patron members, including, but

not limited to, the payment of membership fees. The Borrowers shall cause the

MERS System to reflect the name of the Collateral Agent in the Custodian

Category; however the Collateral Agent's interest with respect to MERS Loans

governed hereby shall be only that of custodian on behalf of the Administrative

Agent. The Borrowers shall cause the MERS System to reflect the name of the

Administrative Agent in the Interim Funder Category and to reflect the security

interest granted to Administrative Agent on behalf of the Lenders. The Borrowers

shall provide the Administrative Agent and the Collateral Agent with MERS

Identification Numbers for each MERS Mortgage.

 

      2. Delivery of Required Documents; Review of Collateral; Up-Date of

Information.

 

            (a) From time to time, the Borrowers shall deliver or cause to be

delivered to the Collateral Agent Collateral consisting of, among other things,

Mortgage Loans and Mortgage-Backed Securities ("Mortgage-Related Collateral").

Such delivery shall be effected: (1) by delivery of the Required Documents

therefor (and the Additional Required Documents if so requested by the

Administrative Agent) under cover of a certificate in the form of Exhibit 1

(each, a "Delivery Certificate"), accompanied by the information described on

Exhibit 2 which the Borrowers shall automatically be deemed to have represented

and warranted to be accurate and complete (a "Mortgage-Related Collateral

Schedule") no later than 11:00 a.m. (Dallas time) on the Business Day preceding

the date such Mortgage Loans and Mortgage-Backed Securities secured or otherwise

supported by any Mortgage-Related Collateral (as used herein, "Warehouse-Related

MBS") are first to be included in the Warehouse Borrowing Base or (2) in the

case of a Wet Mortgage Loan, by the delivery of a Collateral Confirmation

Agreement covering such Mortgage Loan (and subsequent delivery of the Required

Documents therefor as required under Subparagraph (n) of the definition of

"Eligible Mortgage Loan" under cover of a Delivery Certificate accompanied by a

Mortgage-Related Collateral Schedule) by 3:00 p.m. (Dallas time) on the first

Business Day such Mortgage Loan is first to be included in the Warehouse

Borrowing Base.

 

            (b) Upon any receipt of Required Documents for any Mortgage-Related

Collateral, the Collateral Agent shall review the same and verify that:

 

                   (1) All the Required Documents relating to such item of

     Mortgage-Related Collateral appear regular on their face and, except for

     item number 5 on Schedule VI to the Credit Agreement unless specifically

     requested by the Administrative Agent, are in the possession of the

     Collateral Agent; and

 

                   (2) The statements set forth on Exhibit 3 hereto are accurate

     and complete in all respects.

 

If the Collateral Agent notes any exception in the review described in

Subparagraphs (1) and (2) above, the Collateral Agent shall prepare a report

covering the deficient Mortgage-Related Collateral noting such exception (an

"Exception Report") and deliver it to the Administrative Agent and the Borrowers

as soon as the review is complete but in no event later than 11:00 a.m. (Dallas

time) on the next Business Day following receipt of the Required Documents so

long as the Required Documents are received by 11:00 a.m. (Dallas time) on the

preceding Business Day by the Collateral Agent. Subject to the right of the

Administrative Agent to waive certain requirements for eligibility as expressly

set forth in the Credit Agreement (any such waiver to be evidenced by facsimile

notice to such effect delivered by the Administrative Agent to the Borrowers and

the Collateral Agent), the Mortgage-Related Collateral on the Exception Report

shall not be included in the Warehouse Borrowing Base until such

Mortgage-Related Collateral has been removed from the Exception Report.

 

            (c) The Collateral Agent shall not be required to make any

independent examination of any Mortgage-Related Collateral beyond the review

specifically required herein. The Collateral Agent's review of the

Mortgage-Related Collateral delivered by 11:00 a.m. (Dallas time) on any

Business Day shall be completed by 11:00 a.m. (Dallas time) on the next

succeeding Business Day; provided, however, that the Collateral Agent shall not

be required to review on any Business Day the Required Documents for more than

500 Mortgage Loans. It is expressly acknowledged and agreed that when the

Required Documents for a Mortgage Loan which was initially included in the

calculation of the Collateral Value of the Warehouse Borrowing Base pursuant to

a Collateral Confirmation Agreement are delivered on a given Business Day, the

Collateral Agent shall include said Mortgage Loan in the calculation of the

Collateral Value of the Warehouse Borrowing Base on such Business Day prior to

reviewing the Required Documents; provided, however, that such Required

Documents must be reviewed in accordance herewith following their delivery to

the Collateral Agent before the Mortgage Loan ceases to be subject to the Wet

Mortgage Loan provisions pursuant to Subparagraph (n) of the definition of

Eligible Mortgage Loan. If following such review the related Mortgage Loan

appears on the Exception Report, then, subject to the right of the

Administrative Agent to waive certain requirements for eligibility as expressly

set forth in the Credit Agreement, such Mortgage Loan shall not be included in

the calculation of the Collateral Value of the Warehouse Borrowing Base until

such Mortgage Loan has been removed from the Exception Report.

 

            (d) In the event any of the Borrowers has been requested to deliver

the Additional Required Documents with respect to any item of Mortgage-Related

Collateral, the Collateral Agent shall be notified of such request by the

Administrative Agent and the Collateral Agent shall review and verify such

Additional Required Documents consistent with the requirements set forth above

in subparagraph 2(b), as applicable, except that the Collateral Agent is not

required to verify whether it is in possession of the documents listed in item

number 4 or 7 of Schedule VII to the Credit Agreement unless Collateral Agent is

specifically requested to so verify by the Administrative Agent.

 

            (e) All Mortgage-Related Collateral at any time delivered to the

Collateral Agent hereunder shall be held by the Collateral Agent in a fire

resistant vault, drawer or other suitable depository maintained and controlled

solely by the Collateral Agent, with the Collateral Agent records showing the

interest therein of the Administrative Agent and the other Secured Parties and

not commingled with any other assets or property of, or held by, the Collateral

Agent.

 

            (f) On or before the close of business on the first Business Day of

each calendar week, the Borrowers will deliver to the Collateral Agent and the

Administrative Agent the information described on the Collateral Information

Certificate (herein so called) attached hereto as Exhibit 4, which the Borrowers

shall automatically be deemed to have represented and warranted to be accurate

and complete, dated as of the close of business of the Borrowers on the last

Business Day of the immediately preceding week and duly certified by a

responsible officer of the Borrowers.

 

            (g) From time to time, the Borrowers may cause to be delivered to

the Administrative Agent Collateral consisting of Warehouse-Related MBS by

causing such Warehouse-Related MBS to be the subject of a Perfected Assignment

such that the Administrative Agent's MBS Safekeeping Account receives a book

entry on the records of the applicable issuer of such Warehouse-Related MBS or

its trustee or transfer agent. The Borrowers shall notify the Administrative

Agent and the Collateral Agent in writing no later than 10:00 a.m. (Dallas time)

on the day such Warehouse-Related MBS are being issued, setting forth in such

written notice the initial face amount, the receipt or CUSIP number, the

interest rate and the delivery date of such Warehouse-Related MBS. Upon receipt

of evidence satisfactory to it that such Warehouse-Related MBS is the subject of

a Perfected Assignment, the Administrative Agent shall notify the Collateral

Agent whether to include such Warehouse-Related MBS into the calculation of the

Collateral Value of the Warehouse Borrowing Base in accordance with Paragraph

5(d) below.

 

            (h) The Collateral Agent shall examine the Required Documents

delivered by or on behalf of any of the Borrowers hereunder to determine whether

the Collateral includes the documents, and instruments required pursuant to this

Security Agreement (except with respect to item number 5 on Schedule VI to the

Credit Agreement and item numbers 4 and 7 on Schedule VII to the Credit

Agreement unless specifically requested by the Administrative Agent) and that

the same are in conformity with the requirements of Paragraph 2(b) of this

Security Agreement and any other customary collateral review criteria which the

Collateral Agent may communicate to the Borrowers and Administrative Agent from

time to time. Upon completing its review of the Delivery Certificate,

Mortgage-Related Collateral Schedule and Collateral Confirmation Agreement and

accompanying documents received each day, the Collateral Agent shall, not later

than 11:00 a.m. (Dallas time) on the next succeeding Business Day enter such

information in the data base maintained by the Collateral Agent. The Collateral

Agent shall within one Business Day of its receipt of Required Documents

pursuant to Paragraph 2, confirm that the Administrative Agent is listed as

Interim Funder.

 

      3. Grant of Security Interest. Each Borrower hereby pledges and grants to

the Administrative Agent for the benefit of the Secured Parties and to each of

the Secured Parties a first priority, perfected security interest in the

Collateral to secure payment and performance of the Obligations.

 

      4. Collateral. The Collateral shall consist of all now existing and

hereafter arising right, title and interest of any or all of the Borrowers in,

under and to each of the following:

 

            (a) All Mortgage Loans, now owned and hereafter acquired by any of

the Borrowers the Required Documents for which are delivered to the Collateral

Agent or which Mortgage Loans are otherwise identified as "Collateral" hereunder

(including, without limitation, on a Collateral Confirmation Agreement),

including, without limitation, the promissory notes or other instruments or

agreements evidencing the indebtedness of Obligors thereon, all mortgages, deeds

to secure debt, trust deeds and security agreements related thereto, all rights

to payment thereunder, all rights in the Properties securing payment of the

indebtedness of the Obligors thereon, all rights under documents related

thereto, such as guaranties and insurance policies (issued by governmental

agencies or otherwise), including, without limitation, mortgage and title

insurance policies, fire and extended coverage insurance policies (including

commitments to issue the same and the right to any return premiums) and FHA

insurance and VA guaranties, all casualty insurance assigned to any Borrower in

connection with any Mortgage Loan, and all rights in cash deposits consisting of

impounds, insurance premiums or other funds held on account thereof;

 

            (b) All Warehouse-Related MBSs (as defined in Paragraph 6(b)(2)

below), now owned and hereafter acquired by any of the Borrowers, which, if

uncertificated, are delivered to the Collateral Agent for inclusion as

"Collateral" hereunder, or which, if uncertificated, are subject to Perfected

Assignments pursuant to Paragraph 2(g) of this Security Agreement, and all right

to the payment of monies and non-cash distributions on account of any of the

above and all new, substituted and additional securities at any time issued with

respect thereto;

 

            (c) All rights of any of the Borrowers (but not its obligations)

under all Take-Out Commitments, Hedging Arrangements, now existing and hereafter

arising, covering any part of the foregoing Collateral, and all rights to

deliver Mortgage Loans and/or Warehouse-Related MBS included in the Collateral

to permanent investors and other purchasers, and all proceeds resulting from the

disposition of such Collateral;

 

            (d) All now existing and hereafter established accounts maintained

with broker-dealers by any Borrower for the purpose of carrying out transactions

under Take-Out Commitments and hedge contracts and other futures and futures

options transactions involving Mortgage Loans and/or Warehouse-Related MBS

included in the Collateral;

 

            (e) All now existing and hereafter arising rights to service,

administer and/or collect Mortgage Loans included in the Collateral at any date

(it being acknowledged and agreed that prior to the occurrence of an Event of

Default and acceleration of the Obligations, the security interest in such

servicing rights granted hereunder shall be automatically terminated without

need for further action upon the sale, transfer or other disposition of the

related Mortgage Loans in accordance with the provisions of the Loan Documents);

 

            (f) All now existing and hereafter arising Servicing Rights,

including, without limitation, rights relating in any way to any Borrower's

Servicing Contracts with FHLMC, FNMA, or GNMA, or other private investor,

together with all present and future sums paid or payable to any Borrower on

account of, or as a result of the performance of, those Servicing Rights,

whether as compensation for the performance by any Borrower, damages related to

any of the foregoing, amounts payable upon cancellation or termination thereof,

or otherwise;

 

            (g) All now existing and hereafter arising Servicing Receivables;

 

            (h) All now existing and hereafter arising accounts, escrow

accounts, contract rights and general intangibles constituting or relating to

any of the foregoing in this Paragraph 4;

 

            (i) All now existing and hereafter acquired files, documents,

instruments, surveys, certificates, correspondence, appraisals, computer

programs, tapes, discs, cards, accounting records and other books, records,

information and data of the Borrowers relating to the foregoing Collateral

(including all information, records, data, programs, tapes, discs, and cards

necessary or helpful in the administration or servicing of any of the foregoing

in this Paragraph 4);

 

            (j) The Funding Account, the Settlement Account, the MBS Safekeeping

Account, and any and all Custodian Settlement Accounts (as defined in Paragraph

6(c) below) and any and all funds at any time held in any such accounts; and

 

            (k) All products and Proceeds of any of the foregoing in this

Paragraph 4.

 

      5. Determination of Availability; Calculation Assumptions.

 

            (a) No later than 11:00 a.m. (Dallas time) on each Business Day, the

Collateral Agent shall independently calculate and certify the calculation of

the Collateral Value of the Warehouse Borrowing Base current as of 7:00 p.m.

(Dallas time) on the preceding Business Day with respect to Mortgage Loans for

which Required Documents have been received and reviewed by the Collateral

Agent, and current as of 11:00 a.m. (Dallas time) on such Business Day with

respect to Mortgage Loans submitted under a Collateral Confirmation Agreement

and all other Collateral included in the computation of the Collateral Value of

the Warehouse Borrowing Base and notify the Administrative Agent and the

Borrowers thereof via facsimile transmission (the "Collateral Value

Determination").

 

            (b) In making any Collateral Value Determination, the Collateral

Agent shall be permitted to rely, without independent investigation of the

correctness thereof and without any duty to verify that it has received the most

updated version of the following (including, without limitation, the Aggregate

Credit Limit (and the Administrative Agent or the Borrowers shall notify the

Collateral Agent of any changes in the Aggregate Credit Limit)): (1) with

respect to any Mortgage-Related Collateral, on information supplied by any of

the Borrowers to the Collateral Agent on the Delivery Certificate and

accompanying Mortgage-Related Collateral Schedule therefor, as the same

information is updated pursuant to the most recent Collateral Information

Certificate provided by the Borrowers pursuant to Paragraph 2(f) above and any

other information that the Collateral Agent receives from the Borrowers or the

Administrative Agent that the Collateral Agent requires in order for it to

calculate the Collateral Value of the Warehouse Borrowing Base, and (2) with

respect to a determination as to whether amounts received in the Settlement

Account represent the purchase price paid for a specific item of

Mortgage-Related Collateral and, consequently, whether such Mortgage-Related

Collateral should be removed from the calculation of the Collateral Value of the

Warehouse Borrowing Base, on information supplied by any of the Borrowers to the

Collateral Agent in writing.

 

            (c) No later than 1:00 p.m. (Dallas time) on each Business Day (the

"Information Cutoff Time") the Borrowers shall deliver to the Administrative

Agent and the Collateral Agent a list of Mortgage Loans that have been shipped

and sold to investors or for pool formation pursuant to the procedures in

Paragraph 6 below (the "Paid Loan Listing"), together with appropriate detail

identifying the specific wire that represents the proceeds of each Mortgage Loan

on the Paid Loan Listing.

 

             (d) Upon receipt of the Paid Loan Listing by the Information Cutoff

Time, the Collateral Agent will review all wires received in the Settlement

Account on or before 2:00 p.m. (Dallas time) (the "Wire Cutoff Time") and

confirm that the wires detailed in the Paid Loan Listing have been received in

the Settlement Account and that the actual amounts match those shown in the Paid

Loan Listing or, through confirmation with the Administrative Agent, that a book

entry for any identified uncertificated Warehouse-Related MBS has been received

in the MBS Safekeeping Account or that any identified certificated

Warehouse-Related MBS has been delivered to the Collateral Agent (the "Paid

Reconciliation Process"). The Collateral Agent will no later than 3:00 p.m.

(Dallas time) determine and notify the Administrative Agent in writing as to

which Mortgage Loans have been purchased and paid for and, consequently, which

should no longer be included in the calculation of the Collateral Value of the

Warehouse Borrowing Base, and by such time the Administrative Agent shall notify

the Collateral Agent in writing as to whether any Warehouse-Related MBS should

be included in the calculation of the Collateral Value of the Warehouse

Borrowing Base. Any Mortgage Loans that cannot be reconciled by the

Administrative Agent and the Collateral Agent will remain in the Warehouse

Borrowing Base, and the associated settlement proceeds will remain in the

Settlement Account until such time as the Administrative Agent and the

Collateral Agent receive the necessary information from the Borrowers to

complete the Paid Reconciliation Process.

 

            (e) On or before 3:30 p.m. (Dallas time), provided that the

Collateral Agent has timely received the reconciliation information from the

Administrative Agent, the Collateral Agent will remove the reconciled Mortgage

Loans from the Warehouse Borrowing Base, and will use commercially reasonable

efforts to provide an updated Collateral Value Determination reflecting the

removal of such Mortgage Loans from the Warehouse Borrowing Base; provided,

however, that the Collateral Agent shall not be obligated to provide such

updated Collateral Value Determination and, if it fails to do so, the Borrowers

acknowledge and agree that the Borrowers shall not be entitled to additional

advances under the Credit Agreement until an updated Collateral Value

Determination is provided as required pursuant to Paragraph 5(a) above.

 

      6. Handling of Collateral; Settlement Account.

 

            (a) Unless an Event of Default or Potential Default has occurred and

is continuing, from time to time until otherwise notified by the Administrative

Agent (which notice shall be by facsimile), the Collateral Agent is hereby

authorized to release documentation relating to Mortgage Loans to any of the

Borrowers against a Trust Receipt executed by the Borrowers in the form of

Exhibit 5 hereto. The Collateral Agent will hold all Trust Receipts as it holds

all other Mortgage-Related Collateral hereunder. The Borrowers hereby covenant

that any request by the Borrowers for release of Collateral under this

Subparagraph (a) shall be solely for the purposes of correcting clerical or

other non-substantial documentation problems in preparation for ultimate sale or

exchange and that the Borrowers have requested such release in compliance with

all terms and conditions of such release set forth herein and in the Credit

Agreement, including, without limitation, Subparagraph (k)(1) of the definition

of "Eligible Mortgage Loan." Any MERS Mortgage for which documentation is

delivered to the Borrowers pursuant to this subparagraph shall not be

de-registered from the Interim Funder Category or Custodian Category on the MERS

System with respect to such MERS Mortgage.

 

            (b) Unless an Event of Default or Potential Default has occurred and

is continuing, upon delivery by the Borrowers to the Collateral Agent of a

shipping request in the form of that attached hereto as Exhibit 6, the

Collateral Agent will transmit Mortgage-Related Collateral held by it as

directed by the Borrowers as follows:

 

                  (1) If the transmittal is of documentation for

      Mortgage-Related Collateral in the possession of the Collateral Agent in

      connection with the sale thereof to a permanent investor, as the

      Collateral Agent is notified by the applicable Borrower in writing, such

      transmittal will be under cover of a transmittal letter in the form of

      that attached hereto as Exhibit 7A.

 

                  (2) If the transmittal is of documentation for

      Mortgage-Related Collateral in the possession of the Collateral Agent in

      connection with the shipment to a custodian or trustee in connection with

      the formation of a mortgage pool supporting a Mortgage-Backed Security, as

       the applicable Borrower shall notify the Collateral Agent in writing:

 

                        (i) Such transmittal will be under cover of a

            transmittal letter in the form of that attached hereto as Exhibit 7B

            (or such other form as may be required under the government program

            pursuant to which such Warehouse-Related MBS is being issued); and

 

                        (ii) The Collateral Agent shall have delivered to the

            transfer agent or trustee for the Warehouse-Related MBS a letter in

            the form of that attached hereto as Exhibit 7C (or such other form

            as may be required under the government program pursuant to which

            such Warehouse-Related MBS is being issued); and

 

                         (iii) Such Warehouse-Related MBS is to be delivered by

            the transfer agent or trustee to:

 

                              a. A third party purchaser of such

                  Warehouse-Related MBS who has been instructed by the transfer

                  agent or trustee to remit the purchase price therefor directly

                  to the Settlement Account, or

 

                              b. A custodian, which custodian has agreed to hold

                  such Warehouse-Related MBS and the proceeds of any sale or

                  other disposition thereof as custodian, agent and bailee for

                  the benefit of the Secured Parties pursuant to a custodian

                  agreement in form and substance acceptable to the

                  Administrative Agent (the custodian acting in such capacity

                  being referred to herein as an "Approved Custodian"), or

 

                              c. If such Warehouse-Related MBS is

                  uncertificated, the MBS Safekeeping Account pursuant to a

                  Perfected Assignment; or

 

                              d. If such Warehouse-Related MBS is certificated,

                  the Collateral Agent, endorsed by the applicable Borrower; and

 

                         (iv) If such Warehouse-Related MBS is to be sent to an

            Approved Custodian, as the applicable Borrower shall notify the

            Collateral Agent in writing, there will be delivered to the Approved

            Custodian a letter in the form of that attached hereto as Exh