MASTER REPURCHASE AGREEMENT

 

 

TABLE OF CONTENTS

 

ARTICLE 1
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION

 

Section 1.1	Defined Terms	1
Section 1.2	Principles of Constructions	1
ARTICLE 2
AMOUNTS AND TERMS OF TRANSACTIONS
Section 2.1	Agreement to Enter into Transactions	1
Section 2.2	Transaction Limits	2
Section 2.3	Description of Purchased Assets	2
Section 2.4	Maximum Transaction Amounts	2
Section 2.5	Use of Proceeds	2
Section 2.6	Price Differential	2
Section 2.7	Terms and Conditions of Transactions	3
Section 2.8	Guarantee	3
ARTICLE 3
PROCEDURES FOR REQUESTING AND ENTERING INTO TRANSACTIONS
Section 3.1	Policies and Procedures	3
Section 3.2	Request for Transaction; Asset Data Record	3
Section 3.3	Delivery of Mortgage Loan Documents	4
Section 3.4	Haircut	4
Section 3.5	Over/Under Account	4
Section 3.6	Payment of Purchase Price	6
Section 3.7	Approved Payees	7
Section 3.8	Funding Drafts	8
ARTICLE 4
REPURCHASE
Section 4.1	Repurchase Price	9
Section 4.2	Repurchase Acceleration Events	10
Section 4.3	Reduction of Asset Value as Alternative Remedy	10
Section 4.4	Designation as Noncompliant Mortgage Loan as Alternative Remedy	10
Section 4.5	Illegality or Impracticability	10
Section 4.6	Payments Pursuant to Sale to Approved Investors	11
Section 4.7	Application of Payments from Seller or Approved Investors	12
Section 4.8	Method of Payment	12
Section 4.9	Notification of Payment	12
Section 4.10	Authorization to Debit	13
Section 4.11	Book Account	13
Section 4.12	Full Recourse	13
ARTICLE 5
FEES
Section 5.1	Payment of Fees	12

 

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ARTICLE 6
SECURITY; SERVICING; MARGIN ACCOUNT MAINTENANCE; CUSTODY OF MORTGAGE LOAN
DOCUMENTS AND REPURCHASE TRANSACTIONS
Section 6.1	Precautionary Grant of Security Interest	13
Section 6.2	Servicing	13
Section 6.3	Margin Account Maintenance	17
Section 6.4	Custody of Mortgage Loan Documents	18
Section 6.5	Release of Mortgage Loan Documents	19
Section 6.6	Sales Transactions; Repurchase Transactions	19
ARTICLE 7
CONDITIONS PRECEDENT
Section 7.1	Initial Transaction	20
Section 7.2	All Transactions	21
Section 7.3	Intercreditor Agreements	22
Section 7.4	Satisfaction of Conditions	22
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
Section 8.1	Representations and Warranties Concerning Seller	22
Section 8.2	Representations and Warranties Concerning Purchased Assets	25
Section 8.3	Continuing Representations and Warranties	27
ARTICLE 9
AFFIRMATIVE COVENANTS
Section 9.1	Financial Statements and Other Reports	27
Section 9.2	Inspection of Properties and Books	28
Section 9.3	Notice	29
Section 9.4	Additional Financing	30
Section 9.5	Servicing of Mortgage Loans	30
Section 9.6	Evidence of Purchased Assets	30
Section 9.7	Protection of Purchased Mortgage Loans	30
Section 9.8	Further Assurances	31
Section 9.9	Fidelity Bonds and Insurance	31
Section 9.10	Wet Mortgage Loans	31
ARTICLE 10
NEGATIVE COVENANTS
Section 10.1	Liabilities and Advances	31
Section 10.2	Debt and Subordinated Debt	31
Section 10.3	Loss of Eligibility	32
Section 10.4	Financial Covenants and Ratios	32
Section 10.5	Loans to Officers, Employees and Shareholders	32
Section 10.6	Liens on Purchased Mortgage Loans and Purchased Assets; Liens on Other Assets	32
Section 10.7	Transactions with Affiliates	32
Section 10.8	Consolidation, Merger, Sale of Assets and Change of Control	32
Section 10.9	Payment of Dividends and Retirement of Stock	33
Section 10.10	Purchased Assets	33

 

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Section 10.11	Secondary Marketing, Underwriting, Third Party Origination and Interest Rate Risk Management Practices	33
ARTICLE 11
DEFAULTS AND REMEDIES
Section 11.1	Events of Default	33
Section 11.2	Remedies	35
Section 11.3	Treatment of Custodial Account	36
Section 11.4	Sale of Purchased Assets	36
Section 11.5	No Obligation to Pursue Remedy	36
Section 11.6	Reimbursement of Costs and Expenses	36
Section 11.7	Application of Proceeds	37
Section 11.8	Rights of Set-Off	37
Section 11.9	Reasonable Assurances	37
ARTICLE 12
INDEMNIFICATION
Section 12.1	Indemnification	38
Section 12.2	Payment of Taxes	38
ARTICLE 13
TERM AND TERMINATION
Section 13.1	Term	38
Section 13.2	Termination	38
Section 13.3	Extension of Term	39
ARTICLE 14
GENERAL
Section 14.1	Integration	39
Section 14.2	Amendments	39
Section 14.3	No Waiver	39
Section 14.4	Remedies Cumulative	40
Section 14.5	Assignment	40
Section 14.6	Successors and Assigns	40
Section 14.7	Participations	40
Section 14.8	Invalidity	40
Section 14.9	Additional Instruments	40
Section 14.10	Survival	40
Section 14.11	Notices	40
Section 14.12	Personal Identification Number	41
Section 14.13	Governing Law	41
Section 14.14	Counterparts	41
Section 14.15	Headings	42
Section 14.16	Joint and Several Liability of Each Seller	42
Section 14.17	Confidential information	42
Section 14.18	Intent	42
Section 14.19	Right to Liquidate	43
Section 14.20	Insured Depository Institution	43
Section 14.21	Netting Contract	43
Section 14.22	Reimbursement of Expenses	43

 

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EXHIBITS

 

Exhibit A:	Glossary of Defined Terms
Exhibit B:	Irrevocable Closing Instructions
Exhibit C:	Secretary’s Certificate
Exhibit D:	Corporate Resolutions
Exhibit E:	Officer’s Certificate
Exhibit F:	Assignment of Closing Protection Letter
Exhibit G:	Assignment of Fidelity Bond and Errors and Omission Policy
Exhibit H:	Form of Power of Attorney
Exhibit I:	Acknowledgement of Password Confidentiality Agreement
Exhibit J:	Reserved
Exhibit K:	Form of Servicer Notice
SCHEDULES
Schedule 1:	Filing Jurisdictions and Offices

 

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MASTER REPURCHASE AGREEMENT

 

THIS MASTER REPURCHASE AGREEMENT (the “Agreement” ) is made and entered into as of January 25, 2008 by and between Countrywide Bank, FSB, a California corporation ( “Buyer” ) , and Home Loan Center, Inc., a California corporation ( “Seller” ).

 

RECITALS

 

A.             Seller has requested Buyer to enter into transactions with Seller whereby Seller may, from time to time, sell to Buyer certain 1 ^st and 2 ^nd lien residential mortgage loans and/or other mortgage related assets and interests, against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to sell to Seller such purchased assets at a date certain after the Purchase Date, against the transfer of funds by Seller (each such transaction, a “Transaction” ).

 

B.             Buyer has agreed to enter into such Transactions, subject to the terms and conditions set forth in this Agreement.

 

C.             Seller and Buyer have previously entered into that certain Revolving Credit and Security Agreement dated March 17, 2003 (the “Warehouse Agreement” ). As of the date of this Agreement, Seller has one or more outstanding Advances (as defined in the Warehouse Agreement) under the Warehouse Agreement and Buyer has a secured interest in the Collateral (as defined in the Warehouse Agreement) pledged by Seller for such outstanding Advances. By execution of this Agreement, Seller and Buyer restate their respective rights, obligations and interests with respect to such Advances and Collateral, and hereby agree that such Collateral shall constitute Purchased Assets and that such outstanding Advances shall constitute the Purchase Price for the Purchased Mortgage Loans relating to such Purchased Assets (as each such term is defined in this Agreement). Further, each Purchased Mortgage Loan shall be subject to a Transaction hereunder as of the Effective Date. The restatement of rights, obligations and interests of Seller and Buyer under this recital shall not be a novation of the Warehouse Agreement and such rights, obligations and interests shall be continuous.

 

NOW, THEREFORE, in consideration of the mutual rights and obligations provided herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Seller and Buyer agree as follows:

 

ARTICLE 1
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION

 

1.1            Defined Terms .   As used in this Agreement, capitalized terms shall have the meanings set forth in Exhibit A hereto, unless the context otherwise requires. All such defined terms shall, unless specifically provided to the contrary, have the defined meanings set forth herein when used in any other agreement, certificate or document made or delivered pursuant hereto.

 

1.2            Principles of Constructions .

 

(a)                                   Accounting Terms . Accounting terms not otherwise defined herein shall have the meanings given under GAAP.

 

(b)                                  Number . All terms defined in this Agreement may be used in the singular or the plural, as the context requires.

 

(c)                                   Successors and Assigns . Reference to any party shall mean that party and its successors and assigns permitted by the terms of this Agreement.

 

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ARTICLE 2
AMOUNT AND TERMS OF TRANSACTIONS

 

2.1            Agreement to Enter into Transactions .   Subject to the terms and conditions of this Agreement and provided that no Event of Default has occurred and is continuing, Buyer agrees, from time to time during the term of this Agreement, to enter into Transactions with Seller; provided, however, that the Buyer shall not have any obligation to enter into any Transaction which will cause the total aggregate Transactions outstanding at any one time to exceed the Aggregate Transaction Limit or the aggregate type of Transactions outstanding at any one time to exceed the applicable Type Sublimit.

 

2.2            Transaction Limits .   The Aggregate Transaction Limit and each Type Sublimit shall be as set forth in the Transactions Terms Letter. Upon the occurrence of an Event of Default, Buyer shall have the right, in its sole and good faith discretion, to reduce, whether permanently or temporarily, and without refund of any fee or other amount previously paid by Seller, the Aggregate Transaction Limit and/or each Type Sublimit. In the event of any reduction pursuant to this Section 2.2 , Buyer shall give Seller prior written notice thereof, which notice shall designate (a) the effective date of any such reduction, (b) the amount of the reduction and (c) the Transaction and/or Type Sublimit limit(s) to which such reduction amount shall apply. Buyer shall not be liable to Seller for any costs, losses or damages arising from or relating to a reduction by Buyer in the Aggregate Transaction Limit or any Type Sublimit.

 

2.3            Description of Purchased Assets .   With respect to each Transaction, Seller shall cause to be maintained with Buyer Purchased Assets consisting of a Purchased Mortgage Loan(s) with a Asset Value not less than, at any date, the related Purchase Price for such Transaction. With respect to each Transaction, the type of Purchased Mortgage Loan shall be the type of Mortgage Loan as specified in the Transactions Terms Letter as the Type, and in each case shall consist of the type of mortgage loans, mortgage related securities, or interests therein as described in Bankruptcy Code section 101(47)(A). If there is uncertainty as to the Type of a Purchased Mortgage Loan, Buyer, in its sole and good faith discretion, shall determine the correct Type for such Purchased Mortgage Loan.

 

2.4            Maximum Transaction Amounts .   Each Transaction shall not exceed the lesser of:

 

(a)                                   the applicable Type Sublimit, as determined by the type of Purchased Mortgage Loan;

 

(b)                                  the Aggregate Transaction Limit, minus the aggregate amount of all other Transactions outstanding, if any; and

 

(c)                                   the Asset Value of the related Purchased Mortgage Loan(s).

 

2.5            Use of Proceeds .   Seller shall use the Purchase Price of each Transaction solely for the purpose of originating and/or acquiring the related Purchased Mortgage Loan(s).

 

2.6            Price Differential .

 

(a)                                   Pricing Rate .   Notwithstanding that Buyer and Seller intend that the Transactions hereunder be sales by Seller to Buyer of the Purchased Mortgage Loans for all purposes except accounting and tax purposes, Seller shall pay Buyer a price differential on the Purchase Price for each Purchased Mortgage Loan from the Date of Disbursement until, but not including, the date of repurchase, at an annual rate equal to the sum of the Applicable Pricing Rate plus the applicable Margin; provided, however, that if a Purchased Mortgage Loan is deemed to be a Noncompliant Mortgage Loan, thereafter, such Purchase Price shall bear a price differential at an annual rate equal to the sum of the Applicable Pricing Rate plus the Type Margin for a Noncompliant Mortgage Loan.

 

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Notwithstanding the foregoing, if the Repurchase Price for a Transaction is not paid by Seller when due (whether at the Repurchase Date, upon acceleration or otherwise), the Purchase Price shall bear a price differential from the date due until paid in full at an annual rate equal to the Default Rate.

 

(b)                                  Time for Payment . Accrued interest for each Purchase Price shall be due and payable on each Payment Date which occurs prior to the date on which the Repurchase Price is paid. On the date that the Repurchase Price is paid, all accrued interest not otherwise paid by Seller shall be due and payable.

 

(c)                                   Computations . All computations of price differentials and fees payable hereunder shall be based upon a year of three-hundred sixty (360) days.

 

2.7            Terms and Conditions of Transactions .   Upon the occurrence of an Event of Default, the terms and conditions of the Transactions as set forth in the Transactions Terms Letter, this Agreement or otherwise may be changed from time to time by Buyer at its sole and good faith discretion by providing prior notice to Seller.

 

2.8            Guarantee .   As may be determined necessary by Buyer from time to time in its sole and good faith discretion and as indicated in the Transactions Terms Letter, Seller agrees to cause to be executed and delivered to Buyer such Guarantees and/or additional security agreements as additional support for Seller’s obligations hereunder, which Guarantees and/or additional security agreements shall be considered “margin payments” as such term is defined in Bankruptcy Code Section 741(5).

 

ARTICLE 3
PROCEDURES FOR REQUESTING AND ENTERING INTO TRANSACTIONS

 

3.1            Policies and Procedures .   In connection with the Transactions contemplated hereunder, Seller shall comply with all applicable policies and procedures of Buyer as may currently exist or as hereafter created to conform to current legal and reasonable market requirements. Such policies and procedures may be in writing, published on Buyer’s website(s) or otherwise contained in the Handbook. Buyer shall have the right to change, revise, amend or supplement its policies and procedures and the Handbook from time to time to conform to current legal requirements or Buyer practices by giving advance notice via Buyer’s website thereof to Seller.

 

3.2            Request for Transaction; Asset Data Record .

 

(a)                                   Request for Transaction .   Seller shall request a Transaction by delivering to Buyer, electronically or in writing, an Asset Data Record for each Mortgage Loan intended to be the subject of the Transaction no later than the Transaction Request Deadline; provided, however, that if Seller intends to request a Transaction or series of Transactions equal to or greater than ten million ($10,000,000) dollars, Seller shall provide Buyer not fewer than one (1) Business Day prior written notice thereof. If Buyer determines that the requested Transaction complies with the terms and conditions of this Agreement, Buyer shall confirm to Seller the terms of Transactions electronically or in writing. Buyer reserves the right to reject any Transaction request that Buyer determines, in its sole and good faith discretion, fails to comply with the terms and conditions of this Agreement or Buyer’s then current policies and procedures, which current policies and procedures shall be available via Buyer’s website prior to any request for a Transaction.

 

(b)                                  Failure to Enter into Transaction: Cancellation of Transaction .   Other than those Transactions that Buyer declines, or a return of Repurchase Price of a Wet Mortgage Loan as defined in Section 3.6(d) if Seller fails five (5) times or more to enter into a particular Transaction after Seller has requested a particular Transaction and submitted a

 

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Asset Data Record in connection with such request, for each Transaction requested by Seller thereafter for which Seller fails to enter into such Transaction, Seller shall pay Buyer the Breakage Fee and reimburse Buyer for any reasonable out-of-pocket losses, costs and expenses incurred by Buyer in connection with such failure to enter into the Transaction, including, without limitation, costs relating to re-employment of funds obtained by Buyer and fees payable to terminate the arrangements through which such funds were obtained. In addition, if following disbursement by Buyer of the Purchase Price relating to any Transaction, Seller cancels such Transaction, regardless of the number of Transactions Seller has previously cancelled, Seller shall pay Buyer a price differential on such Purchase Price from the Date of Disbursement until, but not including, the date the Purchase Price is returned to Buyer.

 

(c)                                   Form of Asset Data Record .   Buyer shall have the right to revise or supplement the form of the Asset Data Record from time to time by giving reasonable prior notice thereof to Seller via Buyer’s website.

 

3.3            Delivery of Mortgage Loan Documents .

 

(a)                                   Dry Mortgage Loans .   Prior to any Transaction related to a Dry Mortgage Loan, Seller shall deliver to Buyer acting as custodian or its Custodian, or authorize and direct the Closing Agent to deliver to Buyer acting as custodian or its Custodian, the related Mortgage Loan Documents.

 

(b)                                  Wet Mortgage Loans .   With respect to a Transaction the subject of which is a Wet Mortgage Loan, Seller shall deliver to Buyer or its Custodian, or authorize and direct the Closing Agent to deliver to Buyer or its Custodian, the related Mortgage Loan Documents within the Wet Mortgage Loans Maximum Dwell Time.

 

(c)                                   Government Mortgage Loans .   If a Government Mortgage Loan is the subject of a Transaction, Seller shall, at the request of Buyer, deliver to Buyer acting as custodian or its Custodian, within sixty (60) calendar days following the date of such Transaction, a mortgage insurance policy issued under an FHA insurance program or a guaranty for the full and timely payment of principal and interest issued by the VA, as applicable, or evidence of such insurance or guaranty, as applicable, including proof of payment of the premium and the case number so Buyer can access the information on the computer system maintained by FHA or the VA.

 

(d)                                  Mortgage Loan Documents in Seller’s Possession .   At all times during which the Mortgage Loan Documents related to any Purchased Mortgage Loan are in the possession of Seller, and until such Purchased Mortgage Loan is repurchased by Seller, Seller shall hold such Mortgage Loan Documents in trust for the exclusive benefit of Buyer and shall act only in accordance with Buyer’s written instructions thereto.

 

(e)                                   Other Mortgage Loan Documents in Seller’s Possession .   With respect to each Purchased Mortgage Loan, until such Purchased Mortgage Loan is repurchased by Seller, Seller shall hold in trust all mortgage loan documents related to such Purchased Mortgage Loan and not delivered to Buyer, including, without limitation, the Other Mortgage Loan Documents, as applicable.

 

3.4            Haircut .   With respect to each Transaction, Seller shall ensure that there are sufficient funds on deposit in the Over/Under Account such that following the withdrawal of the Haircut by Buyer, the balance of the Over/Under Account is equal to or greater than the minimum required balance, as set forth in the Transactions Terms Letter.

 

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3.5            Over/Under Account .

 

(a)                                   Minimum Balance .   Seller shall at all times maintain a margin balance in the Over/Under Account of not than less than that amount set forth in the Transactions Terms Letter, which account shall be used to assist in settling the Transactions and any other obligations under this Agreement. Buyer shall not be required to segregate and hold funds deposited by or on behalf of Seller in the Over/Under Account separate and apart from Buyer’s own funds or funds deposited by or held for others. Upon the occurrence of an Event of Default, Buyer shall have the right, in its sole and good faith discretion, to increase the minimum margin balance Seller is required to maintain in the Over/Under Account by giving notice to Seller thereof.

 

(b)                                  Deposits .

 

(i)             Seller .   Seller shall deposit margin in the form of funds in the Over/Under Account in accordance with the terms of this Agreement, including, without limitation, Section 3.4 and Section 3.5(a) .

 

(ii)            Buyer .   Buyer shall credit to the Over/Under Account all amounts in excess of those amounts due to Buyer in accordance with the Principal Agreements on the date Buyer receives or has received both (1) a payment by Seller or an Approved Investor pursuant to a Purchase Commitment and (2) a Purchase Advice relating to such payment without discrepancy; provided, however, that funds and Purchase Advices received by Buyer after that time set forth in the Transactions Terms Letter, shall be deemed to have been received on the next Business Day. Buyer shall use reasonable efforts to notify Seller if there is a discrepancy between a wire transfer and the related Purchase Advice, and thereafter, Seller shall notify Buyer as to whether Buyer should accept such settlement payment despite the discrepancy between the amount received and the related Purchase Advice; provided, however, that if an Event of Default has occurred and is continuing, Buyer is not obligated to receive approval from Seller prior to accepting any amounts received and releasing the related Purchased Assets.

 

(iii)           Settlement Statement .   Buyer shall deliver to Seller via facsimile or make available to Seller via the Internet within one (1) Business Day following settlement of an Transaction, or as soon thereafter as is reasonably possible, a settlement statement, which includes an explanation of all amounts credited by Buyer to the Over/Under Account to settle the Transaction.

 

(c)                                   Withdrawals .

 

(i)                                      Seller .   If the amount credited to the Over/Under Account creates a balance in excess of the minimum margin balance required pursuant to Section 3.5(a)  above, provided that no Event of Default has occurred and is continuing, Seller may submit a written request to Buyer for return or payment of such excess funds. If any such request is received by Buyer prior to 10:00 a.m. (Pacific time) on a Business Day, Buyer shall use commercially reasonable efforts to wire such requested excess funds to Seller by the end of such Business Day and in no event no later than two (2) Business Days after Buyer’s receipt of such request. Notwithstanding anything contained in this Section 3.5(c)(i)  to the contrary, Buyer reserves the right to reject any request for excess funds from the Over/Under Account if Buyer determines, in its sole and good faith discretion, that such excess funds shall be used to satisfy Seller’s outstanding obligations under this Agreement or are subject to other rights as provided in this Agreement.

 

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(b)                                  Methods of Payment .  On the Purchase Date for each Transaction:

 

(i)                                      Buyer may pay the Purchase Price (A) by wire transfer in accordance with Seller’s wire instructions in Exhibit J , (B) if Seller is approved to receive the Purchase Price via cashiers check and has requested to receive the Purchase Price via cashiers check, by cashiers check or (C) if Seller is approved to present funding drafts to Buyer and Seller has requested to receive the Purchase Price via funding draft, by funding draft, subject to the requirements of Section 3.8 . Unless Seller is approved to receive the Purchase Price via cashiers check or funding draft and Seller has requested that payment be made using one of these methods for a particular Transaction, Buyer shall pay the Purchase Price for all Transactions by wire transfer. Buyer shall have no obligation to pay the Purchase Price by cashiers check or funding draft unless and until Seller has requested to receive payment in such manner and Seller has otherwise complied with all applicable policies and procedures regarding such methods of payment. Notwithstanding the foregoing, Buyer shall not be obligated to pay the Purchase Price under any method of payment to any Closing Agent or warehouse lender that is not an Approved Payee. Further, the payment of the Purchase Price by Buyer to any Closing Agent or warehouse lender that is not an Approved Payee shall not make such Closing Agent or warehouse lender an Approved Payee. Any funds disbursed by Buyer to Seller or its Approved Payee shall be subject to all applicable federal, state and local laws, including, without limitation, regulations and policies of the Board of Governors of the Federal Reserve System on Reduction of Payments System Risk. Seller acknowledges that as a result of such applicable laws, regulations and policies, equipment malfunction, Buyer’s approval procedures or circumstances beyond the reasonable control of Buyer, the payment of a Purchase Price using one or more of the methods described above may be delayed. Further, Seller acknowledges that a funding draft may not constitute “good funds” under certain state laws and funds will not be released to the payee until Buyer, in its sole and good faith discretion, has reviewed and accepted the funding draft following presentment of the draft to the payor bank. Buyer shall not be liable to Seller for any costs, losses or damages arising from or relating to any such delays; or

 

(ii)                                   Notwithstanding the foregoing, where a Purchased Mortgage Loan is the subject of third party financing, Buyer may pay all or any portion of the Purchase Price directly to the warehouse or other lender that has a security interest in the Purchased Mortgage Loan to satisfy the related indebtedness and obtain a release of such security interest.

 

(c)                                   Transaction Limitations and Other Restrictions Relating to Closing Agents .  Notwithstanding that a particular Transaction request will not exceed the Aggregate Transaction Limit or applicable Type Sublimit, if the payment of the Purchase Price for such Transaction to the related Closing Agent will violate Buyer’s applicable policies and procedures (as contained in the Handbook or otherwise) regarding payments to Closing Agents, Buyer may refuse to pay the Purchase Price to such Closing Agent.

 

(d)                                  Return of Purchase Price .  If a Wet Mortgage Loan subject to a Transaction is not closed within three (3) Business Days following the payment of the Purchase Price, Seller shall immediately return, or cause to be immediately returned, the Purchase Price to Buyer. If the Purchase Price was paid by cashiers check or funding draft, Seller shall immediately void, or cause to be immediately voided (i.e. direct the Closing Agent to immediately void) the cashiers check or funding draft, as applicable. Further, Seller shall pay Buyer all fees and any price differential thereon immediately upon notification from Buyer; provided, however, that price differential shall continue to accrue until the Purchase Price is returned to Buyer or the voided cashiers check is received and cancelled by Buyer, as

 

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applicable. If a cashier’s check has been issued with respect to any Transaction, Buyer shall not be obligated to wire funds or issue another cashiers check to fund such Transaction until the original voided cashiers check has been received and cancelled by Buyer.

 

3.7                                  Approved Payees .

 

(a)                                   Closing Agents .  In order for a Closing Agent to be designated an Approved Payee with respect to any Purchase Price, Seller shall submit to Buyer the following documents:

 

(i)                                      if the title company issuing the title policy that covers the applicable Purchased Mortgage Loan has not issued to Buyer a blanket Closing Protection Letter, which covers closings conducted by this Closing Agent in the jurisdiction where this closing will take place:

 

(1)                                   a valid blanket Closing Protection Letter, in a form acceptable to Buyer, issued to Seller or Buyer by the title company, which is issuing the title insurance policy that covers the related Purchased Mortgage Loan, that covers closings conducted by the Closing Agent in the jurisdiction where this closing will take place and if applicable, an assignment to Buyer of such Closing Protection Letter, substantially in the form of Exhibit F hereto; or

 

(2)                                   a valid Closing Protection Letter, in a form acceptable to Buyer, issued to Seller or Buyer by the title company, which is issuing the title insurance policy that covers the related Purchased Mortgage Loans, that covers the closing of this specific Purchased Mortgage Loan and if applicable, an assignment to Buyer of such Closing Protection Letter, substantially in the form of Exhibit F hereto; or

 

(3)                                   if Closing Protection Letters are not available or are limited in their applicability in the jurisdiction where the closing takes place, any other documents Buyer may reasonably require, including without limitation an assignment to Buyer of Seller’s rights under its fidelity bond and errors and omissions policy, substantially in the form of Exhibit F hereto; and

 

(ii)                                   evidence that the Irrevocable Closing Instructions, in the applicable form and signed by Seller and Buyer, have been delivered to such Closing Agent.

 

(b)                                  Warehouse Lenders .  In order for a warehouse lender to be designated an Approved Payee with respect to any Purchase Price, Seller shall submit to Buyer a written request, including the name and address of the warehouse lender, demonstrating a need for such designation. Notwithstanding the foregoing, Buyer reserves the right to refuse to designate any warehouse lender as an Approved Payee, or, alternatively, to require additional terms and conditions in order for Buyer to pay a Purchase Price to the warehouse lender.

 

(c)                                   Approval Process .  Buyer shall review the applicable documents and notify Seller within two (2) Business Days as to whether such Closing Agent or warehouse lender has been designated by Buyer, in its sole and good faith discretion, to be an Approved Payee with respect to such Purchase Price. Buyer may withdraw its approval of any Closing Agent or warehouse lender as an Approved Payee if Buyer becomes aware of any facts or circumstances at any time related to such Closing Agent or warehouse lender which Buyer determines, in its sole and good faith discretion, materially and adversely affects

 

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the Closing Agent or warehouse lender or otherwise makes the Closing Agent or warehouse lender unacceptable as an Approved Payee upon notification to Seller.

 

3.8                                  Funding Drafts .

 

(a)                                   Blank Funding Drafts .  If Seller is approved by Buyer to receive Purchase Prices by funding draft, Buyer, at its discretion, shall provide Seller with a limited number of blank drafts. Seller shall store such blank drafts in a secure location and employ sufficient security procedures to ensure that each funding draft issued by Seller is authorized, authentic and complete. As requested by Buyer, Seller shall submit to Buyer an accounting of all blank drafts provided to Seller, certified by Seller’s president or chief financial officer. Seller shall notify Buyer immediately if it discovers that any blank drafts are missing or otherwise not accounted for.

 

(b)                                  Completion of Funding Drafts .  With respect to any Purchase Price to be paid by funding draft, Seller shall not complete a funding draft until after it has submitted a Asset Data Record for the related Transaction to Buyer that includes the number of the draft that is to be used for the Purchase Price. Seller is responsible for completing each funding draft clearly and accurately. Buyer shall not be obligated to accept any funding draft that contains incorrect information, is illegible or is not signed by at least two (2) authorized officers of Seller. If Seller makes an error in completing a funding draft, Seller shall void the draft and return the voided draft to Buyer with its accounting of blank drafts. Further, Seller shall notify Buyer immediately in order to confirm a new draft number with respect to the Purchase Price. Buyer shall not have an obligation to accept any funding draft if the draft number does not match that approved by Buyer in connection with a specific Transaction.

 

(c)                                   Acceptance of Funding Drafts .  The payment of the Purchase Price by funding draft is subject to Buyer’s acceptance of the funding draft following presentment to the payor bank. Buyer will accept a funding draft upon confirmation of Seller’s compliance with the terms of this Agreement, including, without limitation, receipt by Buyer of the Asset Data Record prior to the date the funding draft was written, information contained on the funding draft is consistent with that previously provided to Buyer and the payee is an Approved Payee, as applicable. If Buyer rejects a funding draft for any reason, the Purchase Price for such Transaction may be paid by a new funding draft, provided all applicable procedures are followed, or by an alternate payment method.

 

(d)                                  Condition Precedent .  As a condition precedent to Seller issuing a funding draft, Seller shall have delivered to Buyer:

 

(i)                                      a completed signature card, in form and substance satisfactory to the bank on which the funding drafts are drawn; and

 

(ii)                                   a certificate of Seller’s corporate secretary, dated as of the current date, as to the incumbency and authenticity of the signatures of the officers of Seller authorized to sign funding drafts and the resolutions of the board of directors authorizing such officers to sign funding drafts on behalf of Seller.

 

ARTICLE 4
REPURCHASE

 

4.1                                  Repurchase Price .

 

(a)                                   Payment of Repurchase Price .  The Repurchase Price for each Purchased Mortgage Loan shall be payable in full and by wire transfer in accordance with Buyer’s wire

 

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instructions in Exhibit J upon the earliest to occur of (i) the Repurchase Date of the Purchased Mortgage Loan, (ii) the occurrence of any Repurchase Acceleration Event with respect to such Transaction or (iii) the expiration or termination of this Agreement. Such obligation to repurchase exists without regard to any prior or intervening liquidation or foreclosure with respect to any Purchased Mortgage Loan. While it is anticipated that Seller will repurchase each Purchased Mortgage Loan on its related Repurchase Date, Seller shall repurchase any Purchased Mortgage Loan hereunder on demand without any pre-payment penalty or premium.

 

(b)                                  Effect of Payment of Repurchase Price .  On the Repurchase Date (or such other date on which the Repurchase Price is paid by Seller), termination of the related Transaction will be effected by the repurchase by Seller or its designee of the Purchased Mortgage Loans and the simultaneous transfer of the Repurchase Price to an account of Buyer, or transfer of additional Mortgage Loan(s) (in each case as further described at Section 6.5), and all of Buyer’s rights, title and interests therein shall then be conveyed to Seller or its designee. Seller is obligated to obtain the Mortgage Loan Documents from Custodian at Seller’s expense on the Repurchase Date.

 

4.2                                  Repurchase Acceleration Events .  The occurrence of any of the following events shall be a Repurchase Acceleration Event with respect to a Transaction:

 

(a)                                   Buyer in its sole and good faith discretion has determined that the Purchased Mortgage Loan is a Defective Mortgage Loan;

 

(b)                                  thirty (30) calendar days elapse from the date the Mortgage Loan Documents relating to the Purchased Mortgage Loan were delivered to an Approved Investor and such Approved Investor has not returned the Mortgage Loan Documents or purchased the Purchased Mortgage Loan, unless an extension is granted by Buyer, in its sole and good faith discretion;

 

(c)                                   ten (10) Business Days elapse from the date a Mortgage Loan Document relating to the Purchased Mortgage Loan was delivered to Seller for correction or completion, without being returned to Buyer or its designee;

 

(d)                                  Seller fails to deliver to Buyer the related Mortgage Loan Documents within the Wet Mortgage Loans Maximum Dwell Time or any Mortgage Loan Document delivered to Buyer, upon examination by Buyer, is found not to be in compliance with the requirements of this Agreement or the related Purchase Commitment and is not corrected within the Wet Mortgage Loans Maximum Dwell Time;

 

(e)                                   Regardless of whether a Purchased Mortgage Loan is a Defective Mortgage Loan, a foreclosure or similar type of proceeding is initiated with respect to the Purchased Mortgage Loan; or

 

(f)                                     the further sale of the Purchased Mortgage Loan by Seller.

 

4.3                                  Reduction of Asset Value as Alternative Remedy .  In Buyer’s sole and good faith discretion, in lieu of requiring full repayment of the Repurchase Price upon the occurrence of a Repurchase Acceleration Event, Buyer may elect to reduce the Asset Value of the related Purchased Mortgage Loan (to as low as zero) and accordingly require a full or partial repayment of such Repurchase Price or the delivery of other funds or collateral, which additional assets shall be “margin payments” or “settlement payments” as such terms are defined in Bankruptcy Code Section 741(5) and (8), respectively.

 

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4.4                                  Designation as Noncompliant Mortgage Loan as Alternative Remedy .  In Buyer’s sole and good faith discretion, in lieu of requiring full repayment of the Repurchase Price upon the occurrence of a Repurchase Acceleration Event, Buyer may elect to deem the related Purchased Mortgage Loan a Noncompliant Mortgage Loan, provided that (a) after such Purchased Mortgage Loan is deemed to be a Noncompliant Mortgage Loan, the aggregate original Asset Value of all Noncompliant Mortgage Loans does not exceed the Type Sublimit for Noncompliant Mortgage Loans; (b) the Asset Value of the Noncompliant Mortgage Loan is greater than the Repurchase Price or Seller provides additional Purchased Assets or repays part of the Repurchase Price as provided in Section 6.3 in each case as a “margin payment” as such term is defined in Bankruptcy Code Section 741(5); and (c) Seller delivers to Buyer all documentation relating to the Purchased Mortgage Loan reasonably requested by Buyer.

 

4.5                                  Illegality or Impracticability .  Notwithstanding anything to the contrary in this Agreement, if Buyer determines in its sole and good faith discretion that any law, regulation, treaty or directive or any change therein or in the interpretation or application thereof, or any circumstance materially and adversely affecting the London interbank market, the repurchase market for mortgage loans or mortgage-backed securities or the source or cost of Buyer’s funds, shall make it unlawful, impractical, or commercially unreasonable for Buyer to enter into or maintain Transactions as contemplated by this Agreement (a) the commitment of Buyer hereunder to enter into or to continue to maintain Transactions shall be cancelled and (b) the Repurchase Price for each Transaction then outstanding shall be immediately due and payable upon the earlier to occur of (i) the related scheduled Repurchase Date, (ii) within five (5) Business Days after the date required by any financial institution providing funds to Buyer, (iii) sale of the Purchased Mortgage Loan in accordance with the terms of this Agreement, (iv) the date as of which Buyer determines that such Transactions are unlawful or (v) within five (5) Business Days after the date Buyer determines that the payment of the Repurchase Price on its scheduled Repurchase Date will be impractical or commercially unreasonable because of the severe nature of the material and adverse change affecting the London interbank market, the repurchase market for mortgage loans or mortgage-backed securities or the source or cost of Buyer’s funds. For the avoidance of doubt, it is understood and agreed that a material and adverse change affecting the London interbank market, the repurchase market for mortgage loans or mortgage-backed securities or the source or cost of Buyer’s funds shall not automatically require Seller to pay the Repurchase Price for any Transaction then outstanding before its related scheduled Repurchase Date unless Buyer has made an additional determination that such change is severe, in which case, Seller shall have the time specified in subsection (v) in which to pay the Repurchase Price for each such Transaction. Buyer shall not be liable to Seller for any costs, losses or damages arising from or relating from any actions taken by Buyer pursuant to this Section 4.5 .

 

4.6                                  Payments Pursuant to Sale to Approved Investors .  Seller shall direct each Approved Investor purchasing a Purchased Mortgage Loan to pay directly to Buyer, by wire transfer of immediately available funds, the full purchase price, without set-off, as set forth in the applicable Purchase Commitment. In addition, Seller shall provide Buyer with a Purchase Advice relating to such payment. Seller shall not direct the Approved Investor to pay to Buyer an amount less than the full purchase price set forth in the applicable Purchase Commitment or modify or otherwise change the wire instructions for payment of the purchase price provided to Approved Investor by Buyer. Buyer shall apply all amounts received for the account of Seller in accordance with Section 4.7 below and credit all amounts due Seller to the Over/Under Account in accordance with Section 3.5(b)(ii)  above. Buyer may reject any amount received from an Approved Investor and not release the related Purchased Mortgage Loan if (a) Buyer does not receive a Purchase Advice in respect of any wire transfer, or (b) Buyer does not receive the full purchase price, without set-off, as set forth in the applicable Purchase Commitment or (c) the amount received is not sufficient to pay the Repurchase Price. Alternatively, in lieu of rejecting an amount received by Buyer from an Approved Investor, at Buyer’s sole option and discretion, if the amount received from the Approved Investor does not equal or exceed the Repurchase Price, Buyer may accept the amount received from the Approved Investor and deduct the remaining amounts owed by Seller from the Over/Under Account or demand payment of such remaining amount from Seller.

 

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If Seller receives any funds intended for Buyer, Seller shall segregate and hold such funds in trust for Buyer and immediately pay to Buyer all such amounts by wire transfer of immediately available funds together with providing Buyer with a settlement statement for the transaction.

 

4.7                                  Application of Payments from Seller or Approved Investors .  Unless Buyer determines otherwise in its sole and good faith discretion, payments made directly by Seller or an Approved Investor to Buyer shall be applied in the following order of priority:

 

(a)                                   first , in the exercise of Buyer’s rights under Section 6.3(d)  or Buyer’ or its Affiliates’ rights under Section 11.8 .

 

(b)                                  second, to all costs, expenses and fees incurred or charged by Buyer under this Agreement that are not related to a specific Transaction;

 

(c)                                   third, to any amounts due and owing to Buyer pursuant to Section 6.3 ;

 

(d)                                  fourth , to all costs, expenses and fees incurred or charged by Buyer under this Agreement that are related to the Transaction in connection with which the payment is made;

 

(e)                                   fifth, to the price differential due and owing on the Purchase Price in connection with which the payment is made;

 

(f)                                     sixth , to the price differentials on any Purchase Prices related to any other Transactions that are outstanding, due and owing, applied first to the Transaction with the earliest date;

 

(g)                                  seventh, to the amount of the Repurchase Price for the Transaction in connection with which the payment is made; and

 

(h)                                  eighth, to the amount of any Repurchase Prices related to any other Transactions that are outstanding, due and owing, applied first to the Transaction with the earliest date.

 

Buyer and Seller intend and agree that all such payments shall be “settlement payments” as such term is defined in Bankruptcy Code Section 741(8). After the settlement payments have been applied as set forth above, Buyer shall deposit in the Over/Under Account any amounts that remain.

 

4.8                                  Method of Payment .  Except as otherwise specifically provided herein, all payments hereunder must be received by Buyer on the date when due and shall be made in United States dollars by wire transfer of immediately available funds to such account designated by Buyer from time to time. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and with respect to payments of the Purchase Price, the price differential thereon shall be payable at the Applicable Pricing Rate during such extension. All payments made by or on behalf of Seller with respect to any Transaction shall be applied to Seller’s account in accordance with Section 3.5(b)(ii)  and Section 4.7 above and shall be made in such amounts as may be necessary in order that all such payments after withholding for or on account of any present or future taxes, levies, imports, duties or other similar charges of whatsoever nature imposed by any government or any political subdivision or taxing authority hereof, other than any taxes on or measured by the net income of Buyer pursuant to the state, federal and local tax laws of the jurisdiction where Buyer’s principal office or offices or lending office or offices are located, compensate Buyer for any additional cost or reduced amount receivable of making or maintaining Transactions as a result of such taxes, imports, duties or other charges. All payments to be made by or on behalf of Seller with respect to any Transaction shall be made without set-off, counterclaim or other defense.

 

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4.9                                  Notification of Payment .  Seller shall provide Buyer not fewer than one (1) Business Day prior written notice if Seller or an Approved Investor intends to remit a payment to Buyer equal to or greater than ten million ($10,000,000) dollars.

 

4.10                            Authorization to Debit .  In addition to any other authorizations to and rights of Buyer hereunder, Seller hereby expressly authorizes Buyer to debit any account maintained by Seller with any depository institution into which any funds related to the Purchased Mortgage Loans or related Purchased Assets have been deposited, including without limitation, any operating, settlement or custodial account, for the deposited amounts related to the Purchased Mortgage Loans due Buyer hereunder. For the avoidance of doubt, the foregoing debit rights of Buyer shall not apply to Purchased Mortgage Loans which have been repurchased by Seller pursuant to Section 6.5 .

 

4.11                            Book Account .  Buyer and Seller shall maintain an account on their respective books of all Transactions entered into between Buyer and Seller and for which the Repurchase Price has not yet been paid. As a courtesy to Seller, Buyer shall provide such information to Seller via the Internet or by telephone or facsimile, if Seller is unable to access the information via the Internet. Notwithstanding the foregoing, Seller shall be responsible for maintaining its own book account and records of Transactions entered into with Buyer, amounts due to Buyer in connection with such Transactions and for paying such amounts when due. Failure of Buyer to provide Seller with information regarding any Transaction shall not excuse Seller’s timely performance of all obligations under this Agreement, including, without limitation, payment obligations under this Agreement.

 

4.12                            Full Recourse .  The obligations of Seller from time to time to pay the Repurchase Price, Margin Deficit payments, settlement payments and all other amounts due under this Agreement shall be full recourse obligations of Seller.

 

ARTICLE 5
FEES

 

5.1                                  Payment of Fees .  Seller shall pay to Buyer those fees set forth in this Agreement or the Transactions Terms Letter when they become due and owing. Without limiting the generality of the foregoing, the initial Facility Fee shall be paid on or before the Effective Date and if this Agreement is renewed, thereafter on or before the anniversary of the Effective Date. Further, the Unused Facility Fee shall be paid quarterly in arrears, on the first day of the months of January, April, July and October, for each preceding calendar quarter. Buyer shall be entitled to withdraw from the Over/Under Account or retain from payments made by Seller or an Approved Investor, subject to Section 4.6 , any fees permitted under this Agreement that are due and owing. If such amounts on deposit in the Over/Under Account or payments received in connection with a Transaction are not sufficient to pay Buyer all fees owed, Buyer shall notify Seller and Seller shall pay to Buyer, within one (1) Business Day, all unpaid fees.

 

ARTICLE 6
SECURITY; SERVICING; MARGIN ACCOUNT MAINTENANCE; CUSTODY OF MORTGAGE LOAN
DOCUMENTS AND REPURCHASE TRANSACTIONS

 

6.1                                  Precautionary Grant of Security Interest .  Although the parties intend that all Transactions hereunder be sales and purchases (other than for accounting and tax purposes) and not loans, and without prejudice to the provisions of Section 6.6 and the expressed intent of the parties, if any Transactions are deemed to be loans, as security for the performance of all of Seller’s obligations hereunder, Seller hereby pledges, assigns and grants to Buyer a continuing first priority security interest in and lien upon the Purchased Assets, and Seller shall have all the rights and remedies of a “secured party” under the Uniform Commercial Code. Possession of any promissory notes, instruments or documents by the Custodian shall constitute possession on behalf of Buyer. At any time and from time to time, upon the written request of Buyer, and at the sole expense of Seller, Seller will promptly and duly execute and deliver, or will promptly cause to

 

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be executed and delivered, such further instruments and documents and take such further action as Buyer may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the Purchased Assets and the liens created hereby. Seller also hereby authorizes Buyer to file any such financing or continuation statement in a manner consistent with this Agreement to the extent permitted by applicable law. A carbon, photographic or other reproduction of this Agreement shall be sufficient as a financing statement for filing in any jurisdiction. This Agreement shall constitute a security agreement.

 

6.2                                  Servicing .

 

(a)                                   Servicer .  Other than as set forth in Section 6.2(m) , Seller shall service, or shall cause the Servicer to service, the Purchased Mortgage Loans on behalf of Buyer as agent for Buyer for the period between the Purchase Date and the Repurchase Date of the Purchased Mortgage Loans.

 

(b)                                  Servicing Agreement .  If there is a Servicer of the Purchased Mortgage Loans, Seller shall enter into a Servicing Agreement with the Servicer on behalf of Buyer, which such Servicing Agreement shall be on terms agreed to by Buyer, and which shall include, at a minimum, (i) a recognition by the Servicer of Buyer’s interests and rights to the Purchased Mortgage Loans as provided under this Agreement; (ii) an obligation for the Servicer to service the Purchased Mortgage Loans consistent with the degree of skill and care that the Servicer customarily requires with respect to similar Mortgage Loans owned or managed by it but in no event no less than in accordance with Accepted Servicing Practices; (iii) an obligation to comply with all applicable federal, state and local laws and regulations; (iv) an obligation to maintain all state and federal licenses necessary for it to perform its servicing responsibilities; (v) an obligation not to impair the rights of Buyer in any Purchased Mortgage Loans or any payment thereto and (vi) an obligation to collect all sums payable in respect of the Purchased Mortgage Loans on behalf of Buyer, in trust, in segregated custodial accounts. Further, such Servicing Agreement shall contain express reporting requirements and other rights to allow Buyer to inspect the records of the Servicer with respect to the Purchased Mortgage Loans. Buyer may terminate the servicing of any Purchased Mortgage Loan with the then existing Servicer in accordance with either Section 6.2(f)  or Section 6.2(m) .

 

(c)                                   Servicing Obligations of Seller .  To the extent Seller shall service any Purchased Mortgage Loan, Seller shall:

 

(i)             Service and administer the Purchased Mortgage Loans on behalf of Buyer in accordance with prudent mortgage loan servicing standards and procedures generally accepted in the mortgage banking industry and in accordance with the degree of care and servicing standards generally prevailing in the industry, including all applicable requirements of any Agency, and the requirements of any applicable Purchase Commitment and the Approved Investor, so that the eligibility of the Purchased Mortgage Loan for purchase under such Purchase Commitment is not voided or reduced by such servicing and administration;

 

(ii)            Subject to Subsection 6.2(f) , and to the extent not otherwise held by the Custodian, Seller shall at all times maintain and safeguard the Mortgage Loan File for the Purchased Mortgage Loan, and in any event shall maintain and safeguard photocopies of the documents delivered to Buyer pursuant to Section 3.3 , and accurate and complete records of its servicing of the Purchased Mortgage Loan; Seller’s possession of such Mortgage Loan File is for the sole

 

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purpose of servicing such Purchased Mortgage Loan and such retention and possession by Seller is in a custodial capacity only;

 

(iii)           Buyer may, at any time during Seller’s business hours on reasonable notice, examine and make copies of such documents and records, or require delivery of the originals of such documents and records to Buyer or its designee;

 

(iv)           At Buyer’s request, Seller shall promptly deliver to Buyer reports regarding the status of any Purchased Mortgage Loan being serviced by it, which reports shall include, but shall not be limited to, a description of any default thereunder for more than thirty (30) days or such other circumstances that could cause a Material Adverse Change on such Purchased Mortgage Loan, Buyer’s title to such Purchased Mortgage Loan or the collateral securing such Purchased Mortgage Loan; Seller is required to deliver such reports until the repurchase of the Purchased Mortgage Loan by Seller; and

 

(v)            Seller shall immediately notify Buyer if Seller becomes aware of any payment default that occurs under a Purchased Mortgage Loan.

 

(d)            Sale or Transfer of Servicing Rights .  Seller shall not sell or transfer any rights to service a Purchased Mortgage Loan without the prior written consent of Buyer.

 

(e)            Release of Mortgage Loan Files .  Seller shall release its custody of the contents of any Mortgage Loan File only in accordance with the written instructions of Buyer, except when such release is required as incidental to Seller’s servicing of the Purchased Mortgage Loan, is required to complete the Purchase Commitment, or as required by law.

 

(f)             Right to Appoint Successor Servicer .  Buyer reserves the right, upon the occurrence of an Event of Default, to appoint a successor servicer to service any Purchased Mortgage Loan (each a “Successor Servicer” ). In the event of such an appointment, Seller shall perform all acts and take all action so that any part of the Mortgage Loan File and related servicing records held by Seller, together with all funds in the Custodial Account and other receipts relating to such Purchased Mortgage Loan, are promptly delivered to the Successor Servicer. Seller shall have no claim for lost Servicing Fees, lost profits or other damages if Buyer appoints a Successor Servicer hereunder.

 

(g)            Reserved .

 

(h)            Reserved .

 

(i)             Reserved .

 

(j)             Servicer Notice .  Seller shall provide promptly to Buyer (i) a Servicer Notice addressed to and agreed to by the Servicer, advising the Servicer of such matters as Buyer may reasonably request, including, without limitation, recognition by the Servicer of Buyer’s interest in such Purchased Mortgage Loans and the Servicer’s agreement that upon receipt of notice of an Event of Default from Buyer, it will follow the instructions of Buyer with respect to the servicing of the Purchased Mortgage Loans.

 

(k)            Notification of Servicer Defaults .  If Seller should discover that, for any reason whatsoever, any entity responsible to Seller by contract for managing or servicing any such Purchased Mortgage Loan has failed to perform fully Seller’s obligations under this Agreement or any of the obligations of such entities with respect to the Purchased Mortgage Loans, Seller shall promptly notify Buyer.

 

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provided by Buyer to Seller electronically or in writing, such as via electronic mail or posting such notice on Buyer’s customer website(s).

 

(c)            Buyer’s Discretion . Buyer’s election not to make a Margin Call at any time there is a Margin Deficit shall not in any way limit or impair its right to make a Margin Call at any time a Margin Deficit exists.

 

(d)            Over/Under Account . Buyer may, in its sole and good faith discretion, withdraw from the Over/Under Account amounts equal to any Margin Deficit which is not otherwise satisfied by Seller within the time frames provided in this Section 6.3 .

 

(e)            Credit to Repurchase Price . Any cash transferred to Buyer pursuant to this Section 6.3 shall be credited to the Repurchase Price of the related Transaction(s).

 

6.4            Custody of Mortgage Loan Documents .

 

(a)            Custodial Arrangements . Buyer may appoint any Person to act as the Custodian to hold possession of the Mortgage Loan Documents (or a portion thereof) and to take actions at the direction of Buyer. Seller hereby consents to any and all such appointments and agrees to deliver the Mortgage Loan Documents to the Custodian upon the direction of Buyer. Seller further agrees that (i) the Custodian shall be exclusively the agent, bailee and/or custodian of Buyer; (ii) receipt of the Mortgage Loan Documents by the Custodian shall be constructive receipt by Buyer of the Mortgage Loan Documents; (iii) Seller shall not have and shall not attempt to exercise any degree of control over the Custodian or any Mortgage Loan Document held by the Custodian.

 

(b)            Temporary Withdrawal of Mortgage Loan Documents for Correction . Buyer may, in its sole and good faith discretion, permit Seller to withdraw, for a period not to exceed ten (10) Business Days, specified Mortgage Loan Documents for the purpose of correcting or completing such documents; provided, however, that unless otherwise agreed to by Buyer in writing, in no event shall the outstanding balance of the Transactions related to such Mortgage Loan Documents exceed five percent (5%) of the Aggregate Transaction Limit. Notwithstanding the foregoing, Buyer shall be deemed to be in possession of any Mortgage Loan Documents released pursuant to this Section 6.4(b) , and the interest of Buyer in the related Purchased Mortgage Loan shall continued unimpaired until the Mortgage Loan Documents are returned to, or the proceeds thereof are received by, Buyer.

 

(c)            Delivery of Mortgage Loan Documents to Approved Investors . Provided that no Event of Default has occurred and is continuing, upon the written request of Seller, Buyer may, at its option and in its sole and good faith discretion, deliver to an Approved Investor set forth in the related Purchase Commitment, or its custodian, the Mortgage Loan Documents relating to a specified Purchased Mortgage Loan. All such Purchased Mortgage Loans and the related Mortgage Loan Documents shall at all times be covered by one or more Bailee Agreements, and Buyer or its designee will not release Mortgage Loan Documents to an Approved Investor unless Buyer or its Custodian has received a signed Bailee Agreement from the Approved Investor. Notwithstanding the foregoing, Buyer shall be deemed to be in possession of any Mortgage Loan Documents released pursuant to this Section 6.4(c) , and the interest of Buyer in the related Purchased Mortgage Loan shall continue unimpaired until the Mortgage Loan Documents are returned to, or proceeds thereof are received by, Buyer. If the Approved Investor does not purchase a Purchased Mortgage Loan as contemplated by the related Purchase Commitment, Seller shall, upon the request of Buyer, assist Buyer in the recovery of any Mortgage Loan Documents not returned by the Approved Investor to Buyer.

 

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(d)            Delivery of Mortgage Loan Documents Relating to Mortgage-Backed Securities . Upon the written request of Seller, Buyer may, at its option and in its sole and good faith discretion, deliver to the certifying custodian the Mortgage Loan Documents relating to those Purchased Mortgage Loans that will be pooled to support a Mortgage-Backed Security. All such Purchased Mortgage Loans and the related Mortgage Loan Documents shall at all times be covered by a Bailee Agreement, and Buyer or its designee will not release Mortgage Loan Documents to a certifying custodian unless Buyer or its designee has received a signed tri-party custodial agreement from such custodian, in a form acceptable to Buyer. Buyer shall have no obligation to release any Mortgage Loan Documents to any certifying custodian that will not sign a custodial agreement acceptable to Buyer. Notwithstanding the foregoing, Buyer shall be deemed to be in possession of any Mortgage Loan Documents released pursuant to this Section 6.4(d) , and the interest of Buyer in the related Purchased Mortgage Loan shall continue unimpaired until the Mortgage Loan Documents are returned to, or proceeds thereof are received by, Buyer. Seller shall pay for all costs of the certifying custodian and use its best efforts to ensure that the issuer delivers the Mortgage-Backed Securities to the certifying custodian.

 

6.5            Release of Mortgage Loan Documents . Provided that no Event of Default has occurred and is continuing, Seller may repurchase a Purchased Mortgage Loan by either:

 

(a)          paying, or causing an Approved Investor to pay, to Buyer, subject to Sections 4.6 and 4.7 above, the Repurchase Price; or

 

(b)          transferring to Buyer additional Mortgage Loan(s) satisfactory to Buyer and/or cash, in aggregate amounts sufficient to cover the amount by which the aggregate amount of Transactions then outstanding hereunder (plus accrued interest and accrued fees with respect thereto) exceeds the Asset Value of the existing Purchased Mortgage Loan(s), excluding the Purchased Mortgage Loan(s) to be released.

 

Upon receipt of the applicable amount, as set forth above, Buyer shall deliver or shall cause the Custodian to deliver the related Mortgage Loan Documents to Seller or Seller’s designee, if such documents have not already been delivered pursuant to a Bailee Agreement. If such release gives rise to or perpetuates a Margin Deficit, Buyer shall notify Seller of the amount thereof and Seller shall thereupon satisfy the Margin Call in the manner specified in Section 6.3(b) . Buyer shall have no obligation to release a repurchased Purchased Mortgage Loan or terminate its security interest in such Purchased Mortgage Loan until such Margin Call is satisfied.

 

6.6            Sales Transactions; Repurchase Transactions . For the avoidance of doubt, Buyer and Seller confirm that the Transactions contemplated by this Agreement are intended to be sales transactions and absolute assignments of the Purchased Mortgage Loans by Seller to Buyer, and not borrowings secured by the Purchased Mortgage Loans. Title to all Purchased Mortgage Loans and related Purchased Assets shall pass to Buyer upon payment of the Purchase Price. Accordingly, beginning on the Purchase Date and prior to the Repurchase Date, Buyer may in its sole discretion and without notice to Seller engage in repurchase transactions with respect to any or all of the Purchased Mortgage Loans or otherwise pledge, hypothecate, assign, transfer or convey any or all of the Purchased Mortgage Loans (such transactions, “Repurchase Transactions” ), provided, however, that to the extent Buyer engages in any Repurchase Transactions, it shall have reacquired title to the Purchased Mortgage Loans prior to the Repurchase Date. Seller shall not be responsible for any additional obligations, costs or fees in connection with such Repurchase Transactions. Seller shall not take any action inconsistent with Buyer’s ownership of a Purchased Mortgage Loan and shall not claim any legal, beneficial or other interest in such a Purchased Mortgage Loan other than the limited right and obligations to provide servicing of such Purchased Mortgage Loans where Buyer designates Seller as servicer as provided in Section 6.2 .

 

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ARTICLE 7

CONDITIONS PRECEDENT

 

7.1            Initial Transaction . As conditions precedent to Buyer’s obligation to enter into the initial Transaction hereunder:

 

(a)            Seller shall have delivered to Buyer, in form and substance satisfactory to Buyer:

 

(i)             this Agreement signed by Seller;

 

(ii)            the Transactions Terms Letter signed by Seller;

 

(iii)           an Electronic Tracking Agreement signed by Seller;

 

(iv)           if required in the Transactions Terms Letter, a Guarantee(s) signed by each Guarantor(s);

 

(v)            a Power of Attorney signed by Seller;

 

(vi)           a certified copy of Seller’s articles or certificate of incorporation and bylaws (or corresponding organizational documents if Seller is not a corporation) and, if required by Buyer, a certificate of good standing issued by the appropriate official in Seller’s jurisdiction of organization, dated no less recently than one (1) month prior to the date hereof;

 

(vii)          a certificate of Seller’s corporate secretary, substantially in the form of Exhibit C   hereto, dated as of the Effective Date, as to the incumbency and authenticity of the signatures of the officers of Seller executing the Principal Agreements and the resolutions of the board of directors of Seller (or its equivalent governing body or Person), substantially in the form of Exhibit D hereto;

 

(viii)         independently audited financial statements of Seller (and its Subsidiaries, on a consolidated basis) for each of the two (2) fiscal years most recently ended (if available), containing a balance sheet and related statements of income, stockholders’ equity and cash flows, all prepared in accordance with GAAP, applied on a basis consistent with prior periods, and otherwise acceptable to Buyer, together with an auditor’s opinion that is unqualified or otherwise is consented to in writing by Buyer;

 

(ix)           if more than one (1) year has passed since the close of the most recently ended fiscal year, interim financial statements of Seller covering the period from the first day of the current fiscal year to the last day of the most recently ended month;

 

(x)            financial statements of each of the Guarantors, if any, signed by them, dated no less recently than three (3) months prior to the date of the initial Transaction;

 

(xi)           Reserved. (there is no section 9.11)

 

(xii)          if required by Buyer, a subordination agreement, in form and substance satisfactory to Buyer, executed by any Person which is, as of the Effective Date, a creditor of Seller, including each Guarantor (if required by the Transaction Terms Letter) and each Affiliate of Seller that is a creditor of Seller;

 

(xiii)         an Acknowledgement of Confidentiality of Password Agreement;

 

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(xiv)         the initial Facility Fee, if applicable;

 

(xv)          a Servicer Notice, if applicable;

 

(xvi)         if so requested by Buyer, the Control Agreement in a form reasonably satisfactory to Buyer;

 

(xvii)        if required, a Servicing Agreement signed by the Servicer and Seller;

 

(xviii)      a copy of Seller’s underwriting guidelines for Mortgage Loans:

 

(xix)         that certain letter agreement regarding Acquisition of Home Loan Center, Inc. by LendingTree, LLC, dated as of January 25, 2008 by and between Buyer, Seller and LendingTree, LLC; and

 

(xx)          such other documents as Buyer or its counsel may reasonably request.

 

(b)            Buyer shall have determined that it has received satisfactory evidence that the appropriate Uniform Commercial Code Financial Statements (UCC-1) and/or such other instruments as may be necessary in order to create in favor of Buyer, a perfected first-priority security interest in the Purchased Mortgage Loans and related Purchased Assets should any of the Transactions be deemed to be loans, and same shall have been duly executed and appropriately filed or recorded in each office of each jurisdiction in which such filings and recordations are required to perfect such first-priority security interest.

 

7.2            All Transactions . As conditions precedent to Buyer considering whether to enter into any Transaction hereunder, including the initial Transaction:

 

(a)            Seller shall have delivered to Buyer, in form and substance satisfactory to Buyer and not later than the Transaction Request Deadline:

 

(i)             a Asset Data Record for the Purchased Mortgage Loan, which Asset Data Record may be an individual record or part of a group report and shall be authenticated by Seller with the PIN or the handwritten signature of an authorized officer of Seller;

 

(ii)            the Mortgage Loan Documents relating to the Purchased Mortgage Loan, unless such Purchased Mortgage Loan is a Wet Mortgage Loan;

 

(iii)           a copy of a Purchase Commitment for the related Purchased Mortgage Loan, unless the Transactions Terms Letter states otherwise;

 

(iv)           written evidence that all Transaction Requirements have been satisfied; and

 

(v)            such other documents pertaining to the Transaction as Buyer may reasonably request, from time to time.

 

(b)            an amount equal to the Haircut plus the minimum required balance, as set forth in Section 3.5(a) , shall be on deposit in the Over/Under Account;

 

(c)            Seller shall have paid all Facility Fees and Unused Facility Fees that are due;

 

(d)            Seller shall have designated an Approved Payee, if applicable, to whom such funds shall be delivered;

 

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(e)            the representations and warranties of Seller set forth in Article 8 hereof shall be true and correct in all material respects as if made on and as of the date of each Transaction. At the request of Buyer, Buyer shall have received an officer’s certificate signed by a responsible officer of Seller certifying as to the truth and accuracy of same;

 

(f)             if required by Buyer, Seller and each Guarantor (if required by the Transactions Terms Letter) shall have performed all agreements to be performed by them hereunder and under the Guarantee, respectively, and after giving effect to the requested Transaction, there shall exist no Event of Default or Potential Default hereunder;

 

(g)            no Potential Default, Event of Default or a Material and Adverse Change shall have occurred and be continuing; and

 

(h)            Seller shall have deposited all amounts required under Section 6.2(g)  into the Custodial Account.

 

7.3            Intercreditor Agreements . If required by Buyer, within sixty (60) calendar days following the Effective Date, Seller shall deliver to Buyer an lntercreditor Agreement signed by each creditor that provides warehouse lines of credit, repurchase facilities or similar mortgage finance arrangements to Seller. By way of example but not limitation, if Seller has a mortgage financing agreement with a syndication of creditors or if an Affiliate of Seller is providing Seller a warehouse line of credit or mortgage financing, Buyer may require that such creditors execute an lntercreditor Agreement. If Seller fails to provide Buyer with any required Intercreditor Agreement within the time frame stated herein, Buyer may, in its sole and good faith discretion, determine that such failure adversely affects the creditworthiness of Seller and may modify the terms and conditions under which it will continue to enter into Transactions with Seller. Buyer shall not be liable to Seller for any costs, losses or damages arising from or relating to any changes made by Buyer to the terms and conditions under which it will continue to enter into Transactions with Seller. Further, Buyer agrees that it shall deliver to Seller a signed Intercreditor Agreement substantially in a form similar to Exhibit L, as requested by Seller if required by any other creditor that provides Seller warehouse lines of credit, repurchase facilities or similar mortgage finance arrangements.

 

7.4            Satisfaction of Conditions . The entering into of any Transaction prior to or without the fulfillment by Seller of all the conditions precedent thereto, whether or not known to Buyer, shall not constitute a waiver by Buyer of the requirements that all conditions, including the non-performed conditions, shall be required to be satisfied with respect to all Transactions. All conditions precedent hereunder are imposed solely and exclusively for the benefit of Buyer and may be freely waived or modified in whole or in part by Buyer. Any waiver or modification asserted by Seller to have been agreed by Buyer must be in writing. Buyer shall not be liable to Seller for any costs, losses or damages arising from Buyer’s determination that Seller has not satisfactorily complied with any applicable condition precedent.

 

ARTICLE 8

REPRESENTATIONS AND WARRANTIES

 

8.1            Representations and Warranties Concerning Seller . Seller represents and warrants to and covenants with Buyer that the following are true and correct as of the Effective Date through and until the date on which all obligations of Seller under this Agreement are fully satisfied:

 

(a)            Due Formation and Good Standing . Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has the full legal power and authority to own its property and to carry on its business as currently conducted and is duly qualified to do business and is in good standing in each jurisdiction in which the transaction of its business makes such qualification necessary.

 

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(b)            Authorization . The execution, delivery and performance by Seller of the Principal Agreements and all other documents and transactions contemplated thereby, are within Seller’s corporate powers, have been duly authorized by all necessary corporate action and do not constitute or will not result in (i) a breach of any of the terms, conditions or provisions of Seller’s articles or certificate of incorporation or bylaws (or corresponding organizational documents if Seller is not a corporation); (ii) a material breach of any legal restriction or any agreement or instrument to which Seller is now a party or by which it is bound; (iii) a material default or an acceleration under any of the foregoing; or (iv) the violation of any law, rule, regulation, order, judgment or decree to which Seller or its property is subject.

 

(c)            Enforceable Obligation . The Principal Agreements and all other documents contemplated thereby constitute legal, binding and valid obligations of Seller, enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditor’s rights.

 

(d)            Approvals . The execution and delivery of the Principal Agreements and all other documents contemplated thereby and the performance of Seller’s obligations thereunder do not require any license, consent, approval, authorization or other action of any Person, including any state, federal, governmental or regulatory authority, or if required, such license, consent, approval, authorization or other action has been obtained prior to the Effective Date.

 

(e)            Compliance with Laws . Seller is not in violation of any provision of any applicable law, or of any judgment, award, rule, regulation, order, decree, writ or injunction of any court or public regulatory body or authority that will have a material adverse effect on the business, operations, assets or financial condition of Seller.

 

(f)             Financial Condition . All financial statements of Seller and each Guarantor (if indicated in the Transactions Terms Letter) delivered to Buyer fairly and accurately present the financial condition of the parties for whom such statements are submitted. The financial statements of Seller have been prepared in accordance with GAAP consistently applied throughout the periods involved, and there are no contingent liabilities not disclosed thereby that would adversely affect the financial condition of Seller. Since the close of the period covered by the latest financial statement delivered to Buyer with respect to Seller, there has been no material adverse change in the assets, liabilities or financial condition of Seller nor is Seller aware of any facts that, with or without notice or lapse of time or both, would or could result in any such material adverse change. No event has occurred, including, without limitation, any litigation or administrative proceedings, and no condition exists or, to the knowledge of Seller, is threatened, that (i) might render Seller unable to perform its obligations under the Principal Agreements and all other documents contemplated thereby; (ii) would constitute an Event of Default; or (iii) might adversely affect the financial condition of Seller or the validity, priority or enforceability of the Principal Agreements or any other documents contemplated thereby.

 

(g)            Credit Facilities . The only credit facilities, including repurchase agreements for mortgage loans and mortgage-backed securities, of Seller that are presently in effect and are secured by mortgage loans or provide for the purchase, repurchase or early funding of mortgage loan sales, are with Persons disclosed to Buyer at the time of application, or thereafter disclosed to and approved by Buyer, and, if required by Buyer, such Persons have executed and delivered an Intercreditor Agreement (or will execute and deliver an lntercreditor Agreement within sixty (60) days following the Effective Date in accordance with Section 7.3 ) or warehouse lenders that are Approved Payees.

 

(h)            Title to Assets . Seller has good, valid, insurable (in the case of real property) and marketable title to all of its properties and other assets, whether real or personal, tangible

 

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or intangible, reflected on the financial statements delivered to Buyer with respect to Seller, except for such properties and other assets that have been disposed of in the ordinary course of business of Seller’s mortgage banking business, and all such properties and other assets are free and clear of all liens except as disclosed in such financial statements.

 

(i)             Litigation . There are no actions, claims, suits, investigations, or proceedings pending, or to the knowledge of Seller, threatened or reasonably anticipated against or affecting Seller in any court or before or by any arbitrator, government commission, board, bureau or other administrative agency that, if adversely determined, may reasonably be expected to result in any material and adverse change in the business, operations, assets, licenses, qualifications or financial condition of Seller.

 

(j)             Payment of Taxes . To the best of its knowledge, Seller has filed all tax returns and reports required to be filed and has paid all taxes, assessments, fees and other governmental charges levied upon it or its property or income that are due and payable, including interest and penalties, or has provided adequate reserves for the payment thereof.

 

(k)            No Defaults . Seller is not in default under any indenture, mortgage, deed of trust, agreement or other instrument or contractual or legal obligation to which it is a party or by which it is bound.

 

(i)             ERISA . If applicable, Seller is in compliance in all material respects with the requirements of ERISA, and no Reportable Event has occurred under any Plan maintained by Seller.

 

(m)           Approved Mortgagee . If represented in Buyer’s Credit Application or otherwise indicated by Seller to Buyer, Seller is an approved FHA, VA, Ginnie Mae, Fannie Mae and/or Freddie Mac seller, mortgagee and/or servicer and is in good standing with these agencies.

 

(n)            True and Complete Disclosure . Seller shall make full disclosure to Buyer of all information that could materially adversely affect the execution, delivery and performance by Seller of its obligations under the Principal Agreements. All information furnished to Buyer by or on behalf of Seller in connection with the Principal Agreements or any transaction contemplated thereby, including, without limitation, all information set forth in the Application, is true, accurate and complete in all material respects on the date furnished, and there has been no material adverse change in the condition, financial or otherwise, of Seller from the time such information was provided to Buyer.

 

(o)            Ownership; Priority of Liens .  Seller owns all Mortgage Loans identified in the Transactions Terms Letter that are to become Purchased Mortgage Loans, and any Transaction shall convey all of Seller’s right, title and interest in and to such Purchased Mortgage Loans and other Purchased Assets to Buyer. This Agreement shall also create in favor of Buyer, a valid, enforceable, perfected first priority lien and security interest in the Purchased Mortgage Loans and other Purchased Assets, prior to the rights of all third Persons and subject to no other liens.

 

(p)            Investment Company Act . Seller is not an “investment company” or a company controlled by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

(q)            Filing Jurisdictions; Relevant States . Schedule 1 sets forth all of the jurisdictions and filing offices in which a financing statement should be filed in order for Buyer to perfect its

 

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security interest in the Purchased Assets. Schedule 1 sets forth all of the states or other jurisdictions in which Seller originates Mortgage Loans in its own name or through brokers on the date of this Agreement.

 

(r)             Seller Solvent; Fraudulent Conveyance . As of the date hereof and immediately after giving effect to each Transaction, the fair value of the assets of Seller is greater than the fair value of the liabilities (including, without limitation, contingent liabilities if and to the extent required to be recorded as a liability on the financial statements of Seller in accordance with GAAP) of Seller and Seller is and will be solvent, is and will be able to pay its debts as they mature and does not and will not have an unreasonably small capital to engage in the business in which it is engaged and proposes to engage. Seller does not intend to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Seller is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of Seller or any of its assets. Seller is not transferring any Mortgage Loans with any intent to hinder, delay or defraud any of its creditors.

 

(s)            Custodial Account . All funds required to be segregated and deposited into the Custodial Account have been so segregated and deposited.

 

(t)             Chief Executive Office . Seller’s principal place of business is located at 163 Technology Drive, Irvine, CA 92618.

 

8.2            Representations and Warranties Concerning Purchased Assets . Seller represents and warrants to and covenants with Buyer that the following are true and correct with respect to each Purchased Mortgage Loan as of the related Purchase Date through and until the date on which such Purchased Mortgage Loan is repurchased by Seller:

 

(a)            Eligible Loan . The Mortgage Loan is a Conventional Conforming Mortgage Loan, Government Mortgage Loan, Jumbo Mortgage Loan, Super Jumbo Mortgage Loan, Expanded Criteria Mortgage L