WORKOUT AND
FOREBEARANCE AGREEMENT
This Workout and Forebearance Agreement
("Agreement") is entered as of July 20, 2005 by and between FIRST
PREFERENCE MORTGAGE CORPORATION ("FPMC") and CITIMORTGAGE, INC.,
successor by separate mergers with First Nationwide Mortgage
Corporation and Principal Residential Mortgage, Inc. (hereinafter
referred to as "CMI").
WHEREAS, First Nationwide Mortgage
Corporation ("Nationwide") and FPMC were parties to a Mortgage Loan
Purchase and Sale Agreement dated as of May 23, 1996 ("Nationwide
Agreement") and, in connection with Nationwide's merger into CMI,
FPMC executed a Correspondent Loan Purchase Agreement dated as of
December 26, 2002 ("CMI Agreement"), both setting forth the terms
and conditions under which FPMC would sell mortgage loans to
CMI;
WHEREAS, Principal Residential
Mortgage, Inc. ("Principal") and FPMC were parties to a Whole Loan
Sale Agreement dated as of March 11, 1997 ("Principal Agreement")
and, in connection with Principal's merger into CMI, FPMC became
obligated to CMI under the Principal Agreement for mortgage loans
sold to Principal (the "Nationwide Agreement, Principal Agreement
and CMI Agreement shall be hereinafter collectively referred to as
"Loan Purchase Agreement");
WHEREAS, under the terms of the Loan
Purchase Agreement, FPMC sold certain mortgage loans to CMI, as to
which FPMC breached certain Loan Purchase Agreement
representations, warranties and covenants by, among other
things: i) failing to timely obtain government insurance
thereby rendering them uninsurable; and ii) originating other
mortgage loans with deficiencies that rendered them not to be of
Fannie Mae and Freddie Mac investment quality (these loans are
detailed on the attached Exhibit A and shall hereinafter be
referred to as the "Loans");
WHEREAS, pursuant to the provisions of
the Loan Purchase Agreement FPMC was/is obligated to repurchase the
Loans from CMI;
WHEREAS, at the request of FPMC, CMI
previously agreed, as set forth in separate indemnity letters
executed by FPMC in favor of CMI for each such Loan, to accept an
indemnification fee for some of the uninsured loans in lieu of
requiring FPMC to immediately repurchase them (the "Indemnification
Transactions");
WHEREAS, pursuant to the
Indemnification Transactions FPMC remains liable for all losses
incurred by CMI in connection with any of the Loans, less the
indemnification fees paid by FPMC;
WHEREAS, CMI has foreclosed on some of
the Loans covered by the Indemnification Transactions and, after
applying any applicable mortgage insurance or other credits, has
reduced to sums certain (not including interest) the amount owed
CMI by FPMC to satisfy its obligations with respect to each (these
loans are identified on Exhibit A and shall hereinafter be referred
to as the "Liquidated Loans");
WHEREAS, FPMC desires to confirm its
agreement for repayment of the amounts due with respect to the
Liquidated Loans;
WHEREAS, other of the Loans remain
active on CMI's servicing system (the "Active Loans")-the borrowers
on some of the Active Loans continue generally to honor their
obligations as they become due (the "Active Non-defaulted
Loans")-other of the Active Loans are in default and CMI is
completing the foreclosure and REO process with respect to them
(the "Active Defaulted Loans");
WHEREAS, FPMC acknowledges its
repurchase obligation with respect to the Active Non-defaulted
Loans and the Active Defaulted Loans, all of which are also
identified on Exhibit A;
WHEREAS, FPMC desires to honor its
obligations under the Loan Purchase Agreement and repurchase the
Active Non-defaulted Loans from CMI (on a service released basis,
without recourse or warranty of any kind other than that CMI is the
present owner and holder of the Active Non-defaulted Loans) in
order to immediately sell the Active Non-defaulted Loans to EMC
Mortgage Corporation ("EMC") on a service released basis for
$2,221,859.17, which is a price representing a discount of the
total amount outstanding and due CMI with respect to the Active
Non-defaulted Loans (the "Discounted Purchase Price");
WHEREAS, FPMC desires to acknowledge
and reaffirm its as yet unliquidated repurchase or indemnity
obligations with respect to the Active Defaulted Loans;
WHEREAS, FPMC and CMI desire to set
forth herein the terms and conditions under which it will settle
any and all issues, disputes and claims between them with respect
to FPMC's repurchase or indemnity obligations to CMI on the Loans,
all in an effort to avoid the cost, delay and uncertainty of any
further discussion or proceedings;
NOW, THEREFORE, in consideration of
this Agreement, CMI's forbearance from requiring immediate
satisfaction of FPMC's repurchase or indemnity obligations under
the Loan Purchase Agreement with respect to the Loans, and other
good and valuable consideration described in this Agreement, the
receipt and adequacy of which the parties acknowledge by their
signatures below, the parties agree:
1. Recitals Part of
the Agreement.
The recitals set forth above are
incorporated in, and become part of this Agreement as if fully set
forth below.
2. Accommodation Payments
and Other Obligations.
2
(a)
FPMC will pay (in cash or certified funds) $6,618,792.62 (which
includes interest through the transfer date of August 12, 2005 but
not including ongoing servicing expenses that will become due from
FPMC to CMI following July 20, 2005, on all Loans covered by this
Agreement, which expenses will be included in the calculation of
any Revised Settlement Amount under paragraph 2(b)) to satisfy its
repurchase obligations to CMI with respect to all but the Active
Defaulted Loans in accordance with the payment schedule indicated
below (the "Initial Settlement Amount");
(i) FPMC will
pay CMI $254,544 with the signing of this Agreement;
(ii) FPMC will pay
CMI or cause EMC Mortgage Corporation to pay CMI on FPMC's behalf
the Discounted Purchase Price with respect to the Active
Non-defaulted Loans immediately upon FPMC's sale of the Active
Non-defaulted Loans. The difference between the Discounted
Purchase Price and the total amount outstanding and due CMI with
respect to the Active Non-defaulted Loans will be included in the
amount to be repaid under the repayment schedule referred to in
items (iii) and (iv) below. The payment to CMI of the
Discounted Purchase Price shall be treated as a curtailment
reducing the Initial Settlement Amount that does not affect the
repayment schedule set forth in items iii) and iv) below;
(iii) FPMC will pay CMI
two curtailments of $50,000 (each) on June 1, 2006 and December 1,
2006, also reducing the Initial Settlement Amount, in accordance
with the repayment schedule as set forth in the attached Exhibit
B.
(iv) FPMC will pay
CMI the monthly installments as set forth in the repayment schedule
as set forth in the attached Exhibit B, commencing with a payment
of $20,000 on the 1st day of October, 2005, and continuing on the
first day of each calendar month thereafter with payments that
increase by $2,500 every three months, until FPMC has paid CMI the
Initial Settlement Amount and the increases thereto as set forth in
paragraph 2(b) below.
3
(b) As
CMI completes the foreclosure, REO, any insurance claim or other
process (including collateral abandonment where deemed necessary
due to environmental hazard or other matter rendering foreclosure
not economically feasible in CMI's reasonable business judgment) on
the Active Defaulted Loans and reduces to sums certain (not
including interest) the amount owed CMI by FPMC to satisfy its
obligations with respect to each Active Defaulted Loan, the
following shall occur: (i) CMI shall advise FPMC of any such
amounts, (ii) FPMC shall have thirty (30) days to pay all or part
of such amount, and (iii) if FPMC elects not to pay all of such
amount, then any remaining balance shall be added to the Initial
Settlement Amount on an ongoing basis. The Initial Settlement
Amount as increased from time to time by the amounts coming due CMI
under this paragraph and under paragraph 2 (a) above shall be
referred to as the Revised Settlement Amount. For each
calendar quarter in which there is any increase in the Initial
Settlement Amount or a subsequent Revised Settlement Amount, CMI
shall, by the 15 th day of the next calendar quarter,
re-calculate and send to FPMC, a repayment schedule in the format
provided for Paragraph 2(a)(iv) above to fully amortizing the new
Revised Settlement Amount (without interest) by December 31,
2008 ("Maturity Date"), according to the same quarterly-increasing
payment formula provided for in Paragraph 2(a)(iv) above.
This Active Defaulted Loan process shall be followed by the parties
until each Active Defaulted Loan has been concluded and any amount
due CMI from FPMC has been included in a Revised Settlement
Amount. Notwithstanding the provision in this paragraph (b)
for recalculation of any Revised Settlement Amount and its
associated repayment schedule, in no event shall FPMC's debt
service with respect to the Loans covered by this Agreement exceed
nine hundred thousand dollars ($900,000) in any calendar year
("Maximum Debt Service"). To the
