SERVICING RIGHTS PURCHASE AND SALE AGREEMENT

Exhibit 2.1

 

Execution Draft

 

SERVICING RIGHTS

PURCHASE AND SALE AGREEMENT

 

between

 

WELLS FARGO BANK, N.A.

 

Purchaser

 

and

 

COMMERCIAL FEDERAL BANK

 

Seller

 

Dated as of March 31, 2005

TABLE OF CONTENTS

 

 

i

 

 

Seller’s Disclosure Schedule

 

ii

SERVICING RIGHTS

PURCHASE AND SALE AGREEMENT

 

THIS SERVICING RIGHTS PURCHASE AND SALE AGREEMENT , dated as of the 31st day of March, 2005 (the “Agreement”), is hereby mutually agreed upon and entered into by and between Wells Fargo Bank, N.A., a national banking association (“Purchaser”) and Commercial Federal Bank, a federal savings bank (“Seller”).

 

WITNESSETH:

 

WHEREAS , Purchaser desires to purchase the right to service certain one-to-four family residential mortgage loans currently serviced by Seller; and

 

WHEREAS , Purchaser and Seller desire to set forth the terms and conditions pursuant to which Seller will sell, transfer and assign to Purchaser all of Seller’s right, title and interest in and to Servicing Rights, and Purchaser will purchase and assume all right, title and interest in and to Servicing Rights.

 

NOW, THEREFORE , in consideration of the mutual premises, covenants and conditions and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and upon the terms and subject to the conditions set forth herein, the parties hereto agree as follows:

 

ARTICLE I.

 

DEFINITIONS

 

As used in this Agreement, the following terms shall have the meanings specified below.

 

“ Advances ” means, with respect to the Mortgage Loans, the outstanding moneys that have been advanced, as applicable, by Seller from its funds in connection with its servicing of such Mortgage Loans in accordance with Applicable Requirements (which moneys include principal, interest, taxes, ground rents, assessments, insurance premiums and other costs, fees and expenses pertaining to the acquisition of title to, preservation, repair and conveyance of the Mortgaged Properties), together with all rights of reimbursement from Mortgagors, Agencies, Insurers, Investors or otherwise.

 

“ Agency or Agencies ” means Fannie Mae, Freddie Mac, GNMA, FHA, VA or HUD, as applicable.

 

“ Agreement ” means this Servicing Rights Purchase and Sale Agreement, including all amendments, supplements, Exhibits and Schedules hereto.

 

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“ Ancillary Fees ” means all fees derived from the Mortgage Loans, excluding Servicing Fees and Prepayment Charges attributable to the Mortgage Loans, including but not limited to late charges, fees received with respect to checks or bank drafts returned by the related bank for non-sufficient funds, assumption fees, optional insurance administrative fees and all other incidental fees and charges collected from or assessed against the Mortgagor, other than those charges payable to an Agency or Investor under the terms of the applicable Servicing Agreements.

 

“ Applicable Requirements ” means, as of the time of reference, (i) all contractual obligations of Seller and any Originator with respect to the applicable Servicing Rights, including without limitation those contractual obligations contained herein, in the applicable Servicing Agreements, in any agreement with any Agency, Insurer or Investor or in the Mortgage Loan Documents for which Seller, or any Originator, is responsible or at any time was responsible; (ii) all applicable federal, state and local laws, statutes, rules, regulations and ordinances applicable to Seller, any Originator, or to the applicable Servicing Rights or the origination, purchase, sale, enforcement and insuring or guaranty of, or filing of claims in connection with, the related Mortgage Loans, including, without limitation, the applicable requirements and guidelines of any Agency, Investor or Insurer, or any other governmental agency, board, commission, instrumentality or other governmental or quasi-governmental body or office; and (iii) all other judicial and administrative judgments, orders, stipulations, awards, writs and injunctions applicable to Seller, any Originator, the applicable Servicing Rights or the related Mortgage Loans.

 

“ Assignments of Mortgage Instruments ” means an assignment of Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction where the related Mortgaged Property is located to reflect the transfer of the Mortgage to the party indicated therein or if the related Mortgage has been recorded in the name of MERS or its designee, such actions as are necessary to cause the designee to be shown as the owner of the related Mortgage on the records of MERS for purposes of the system of recording transfers of beneficial ownership of mortgages maintained by MERS.

 

“ Bankruptcy Loan ” means a Mortgage Loan with respect to which, as of the Sale Date, the Mortgagor thereof has sought relief under or has otherwise been subjected to the federal bankruptcy laws or any other similar federal or state laws of general application for the relief of debtors, through the institution of appropriate proceedings, and such proceedings are continuing.

 

“ Business ” means the business of purchasing first-lien and subordinate-lien residential mortgage loans from third party originators, including Persons who take or process loan applications and/or close or fund such mortgage loans.

 

“ Business Day ” means any day other than (i) a Saturday or Sunday, or (ii) a day on which banking and savings and loan institutions in the State of Nebraska are authorized or obligated by law or executive order to be closed.

 

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“ Buydown Loan ” means a Mortgage Loan whereby monthly Mortgage Loan Payments are paid or partially paid with funds deposited in any separate account established by the Seller, the Mortgagor or anyone on behalf of the Mortgagor, or paid by any source other than the Mortgagor.

 

“ Call Rights ” means the right of Seller under any Servicing Agreement to purchase the outstanding Mortgage Loans covered thereby when the aggregate outstanding principal balance of such Mortgage Loans is reduced below a specific amount.

 

“ Claim ” means any third-party claim, demand or litigation.

 

“ Credit Enhancement ” means Seller’s credit enhancement obligations under its PFI Agreement for the loss incurred or arising from the default of Mortgage Loans serviced for the MPF Bank under the MPF Program.

 

“ Credit Enhancement Fees ” mean the fees payable monthly by the MPF Bank to Seller, as a “participating financial institutions,” in consideration of the Seller’s obligation to bear the financial risk of Credit Enhancement with respect to the Mortgage Loans for which the MPF Bank is the Investor.

 

“ Custodial Accounts ” means the accounts in which Custodial Funds are deposited and held by Servicer.

 

“ Custodial Funds ” means all funds held by Servicer with respect to the related Mortgage Loans including, but not limited to, all principal and interest funds and any other funds due Investors, maintained by Servicer relating to the Mortgage Loan.

 

“ Custodian ” means an entity acting as a mortgage loan document custodian under any custodial agreement or pursuant to Applicable Requirements.

 

“ Escrow Account ” means the accounts in which Escrow Funds are deposited and held by a Servicer.

 

“ Escrow Funds ” means funds held by a Servicer with respect to the related Mortgage Loans for the payment of taxes, assessments, insurance premiums, ground rents, funds from hazard insurance loss drafts, other mortgage escrow and impound items and similar charges (including interest accrued thereon for the benefit of the Mortgagors under the Mortgage Loans, if applicable), maintained by Servicer relating to the Mortgage Loans.

 

“ Exhibit ” means an exhibit attached hereto or delivered or to be delivered pursuant to this Agreement.

 

“ Fannie Mae ” means the entity formerly know as Federal National Mortgage Association (FNMA), or any successor thereto.

 

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“ Federal Funds Rate ” means the federal funds rate as reported in the Federal Reserve 11.15(519) Statistical Release as of the first Business Day of each month, or is such Statistical Release is no longer published, the average of the “high” and the “low” interest rate for reserves traded among commercial banks for overnight use in amounts of one million dollars ($1,000,000.00) or more, as reported by The Wall Street Journal under “Federal Funds” rates as of the first Business Day of each month.

 

“ FHA ” means Federal Housing Administration of the United States Department of Housing and Urban Development or any successor thereto.

 

“ FHA Mortgage Insurance Certificate ” means HUD Form 59100 or such other form as HUD may prescribe from time to time, evidencing mortgage insurance provided by FHA, as authorized under the National Housing Act.

 

“ FNCL Rate ” means, as of any date of determination, Fannie Mae 30 Year Current Coupon Yield as of the close of business, New York time on such date as reported on Bloomberg, which may be obtained by hitting the following Bloomberg keystrokes: MTGEFNCL <index> HP <go>.

 

“ Freddie Mac ” means the Federal Home Loan Mortgage Corporation (FHLMC) or any successor thereto.

 

“ GNMA ” means Government National Mortgage Association or any successor thereto.

 

“ Holdback ” shall have the meaning provided in Section 3.03.

 

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, 15 U.S.C. Section 18a and the regulations promulgated thereunder.

 

“ HUD ” means United States Department of Housing and Urban Development or any successor thereto.

 

“ Insurer ” or “ Insurers ” means any Person providing any standard hazard insurance policy, any federal flood insurance policy, any title insurance policy, any earthquake insurance policy, or any other insurance policy applicable to a Mortgage Loan or Pool and any successor thereto providing, including, without limitation, as applicable, an Agency, private mortgage insurer or other insurer or guarantor under such policies.

 

“ Interim Servicing Agreement ” means that certain Interim Servicing Agreement by and between Seller and Purchaser which may be required to effectuate the transfer of Servicing Rights to the Purchaser. Such agreement shall be in the form furnished by the Purchaser and mutually agreeable to the Seller and the Purchaser.

 

“ Interim Servicing Fee ” means the amount payable to Seller by the Purchaser, as consideration for servicing Mortgage Loans during an Interim Servicing Period.

 

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“ Interim Servicing Period ” means the period of time, if any, between the Sale Date and the applicable Transfer Date.

 

“ Investor ” means with respect to each Mortgage Loan, Fannie Mae, Freddie Mac, GNMA, MPF Bank, Nebraska Investment Finance Authority or any other bond program, or any trust or private investor, as applicable, which owns such Mortgage Loan.

 

“ Investor Consent ” means, if required by the Applicable Requirements, the written affirmative consent of approval of the applicable Investor to the transfer of Servicing Rights from Seller to Purchaser.

 

“ Litigation Loan ” means a Mortgage Loan with respect to which, as of the Sale Date, any litigation is pending relating to the Mortgage Loan and materially and adversely affecting the value of the related Servicing Rights or subjecting the Servicer to potential liability or cost (excluding class action lawsuits or loan level lawsuits that do not affect the value of the Servicing Rights).

 

“ Loss ” or “ Losses ” means any and all direct, actual and out-of-pocket losses, damages, deficiencies, claims, costs or expenses, including without limitation, reasonable attorneys’ fees and disbursements, excluding (i) any amounts attributable to or arising from overhead allocations, general or administrative costs and expenses, or any cost for the time of any Party’s employees, (ii) consequential losses or damages consisting of speculative lost profits, lost investment or business opportunity, damage to reputation or operating losses, or (iii) punitive or treble damages; provided, however, that the exclusions set forth in clauses (ii) and (iii) above do not apply if and to the extent any such amounts are actually incurred in payment to a third party or government entity.

 

“ MERS ” means the Mortgage Electronic Registration System that enables members to execute and deliver an Assignment of Mortgage Instrument with respect to a Mortgage Loan to MERS for recording in the office of the appropriate local jurisdiction and thereby, if acceptable to the applicable Investor, avoid the need for the execution, delivery and recordation of an Assignment of Mortgage from the existing to the new Servicer when the Servicing with respect to the Mortgage Loan is transferred and the execution and delivery of an Assignment of Mortgage from the new Servicer to the applicable Investor.

 

“ Mortgage Escrow Payments ” means the portion, if any, of the Mortgage Loan Payment in connection with a Mortgage Loan that will, upon receipt by Seller, become part of the Escrow Funds.

 

“ Mortgage File ” means the file containing copies in the form set forth in Section 2.08, and original documents to the extent required by the Applicable Requirements, of the Mortgage Loan Documents with respect to a Mortgage Loan, as well as the related credit and closing packages, disclosures, custodial documents, and all other files, books, records and documents necessary, as applicable, to (i) establish the eligibility of the Mortgage Loan for insurance by an Insurer or pooling by the applicable Investor, (ii) service the

 

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Mortgage Loan in accordance with Applicable Requirements, and (iii) comply with Applicable Requirements regarding the Mortgage Loan documentation to be maintained by the Servicer of the Mortgage Loan, or its document custodian.

 

“ Mortgage Instrument ” means any deed of trust, security deed, mortgage, security agreement or any other instrument which constitutes a first lien on real estate securing payment by a Mortgagor of a Mortgage Note.

 

“ Mortgage Loan ” means the one-to-four family residential mortgage loans as to which Seller is the owner of the Servicing Rights, including the Pools on which related securities may be based and by which such securities may be backed, for which the related Servicing Rights are the subject of this Agreement.

 

“ Mortgage Loan Documents ” means (a) with respect to any Mortgage Loan (i) the original Mortgage Note, (ii) the original Mortgage Instrument, (iii) a mortgagee title insurance policy (or other evidence of title acceptable under Applicable Requirements), (iv) the private mortgage insurance policy, FHA Mortgage Insurance Certificate or the VA Loan Guaranty Certificate, as applicable, and (v) the original, recorded Assignments of Mortgage Instrument(s), as required under Applicable Requirements, along with such other documents or instruments, or substitutes therefore, as are required to be retained by the Custodian pursuant to Applicable Requirements.

 

“ Mortgage Loan Payment ” means, with respect to a Mortgage Loan, the amount of each monthly installment on such Mortgage Loan, whether principal and interest or interest alone or escrow or other payment, required to be paid by the Mortgagor in accordance with the terms of the Mortgage Loan Documents.

 

“ Mortgage Loan Schedule ” means the schedule of the related Mortgage Loans to be attached hereto or provided in electronic form by Seller to Purchaser setting forth information with respect to such Mortgage Loans.

 

“ Mortgage Note ” means the promissory note executed by a Mortgagor and secured by a Mortgage Instrument evidencing the indebtedness of the Mortgagor under a Mortgage Loan.

 

“ Mortgaged Property ” means the fully constructed one-to-four family residential real property that is encumbered by a Mortgage Instrument, including all buildings and fixtures thereon and all accessions thereto including installations of mechanical, electrical, plumbing, heating and air conditioning systems located in or affixed to such buildings, and all alterations, additions and replacements.

 

“ Mortgagor ” means any obligor under a Mortgage Note or a Mortgage Instrument.

 

“ MPF Bank ” means the Federal Home Loan Bank of Topeka.

 

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“ MPF Program ” means the Mortgage Partnership Finance® Program created and administered by the Federal Home Loan Bank of Chicago.

 

“ Originator ” means, with respect to any Mortgage Loan, any Person(s) that (i) took the loan application, or (ii) processed the loan application, or (iii) underwrote the loan application, or (iv) closed and/or funded the Mortgage Loan.

 

“ Parties ” means Seller and Purchaser.

 

“ Payment Date ” shall mean the date or dates on which Purchaser pays the portion of the Purchase Price described in Section 3.03(b) with respect to the Servicing Rights transferred on the related Transfer Date. The Payment Date shall occur on the date five (5) Business Days after the related Transfer Date.

 

“ Person ” means an individual, a corporation, a partnership, a limited liability company, a joint venture, a trust, an unincorporated association or organization, or a government body, agency or instrumentality.

 

“ PFI Agreement ” means the agreement(s) between the MPF Bank and Seller, as a “participating financial institution,” which sets out the terms under which the Seller originates Mortgage Loans as agent for the MPF Bank or sells Mortgage Loans to the MPF Bank, provides Credit Enhancement for the Mortgage Loans and/or performs servicing functions for the MPF Bank.

 

“ Pool ” means one or more Mortgage Loans that have been aggregated pursuant to the requirements of the applicable Investor, and have been pledged to secure or support payments on specific securities or participation certificates.

 

“ Prepayment Charge ” means with respect to any Mortgage Loan, the charges or premiums, if any, due in connection with a Principal Prepayment of such Mortgage Loan, in accordance with the terms of the related Mortgage Note or Mortgage Instrument, and in accordance with applicable state and federal laws.

 

“ Previously Disclosed ” by Seller means information set forth in the Disclosure Schedule, it being understood and agreed that disclosure of any information or other item in any section of the Disclosure Schedule shall, should the existence of such information or other item or its contents clearly be relevant to any other section, be deemed to be disclosed in that section whether or not an explicit cross-reference appears.

 

“ Principal Prepayment ” means any recovery of principal on a Mortgage Loan which is received in advance of its scheduled due date, and which is not accompanied by an amount of interest representing scheduled interest due on any date subsequent to the month of prepayment.

 

“ Prior Servicer ” means any Person that was the servicer of any Mortgage Loan before Purchaser became the Servicer of the Mortgage Loan.

 

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“ Purchase Price ” means, with respect to Servicing Rights to be sold to Purchaser hereunder, the total amount to be paid by Purchaser to Seller pursuant to Article III to acquire the Servicing Rights.

 

“ Purchase Price Percentage ” means the product, expressed as a percentage, of (i) the weighted average servicing fee (rounded to the nearest one-tenth of a basis point) as of the Sale Date and (ii) the applicable multiple set forth under the column “Multiple” on the pricing matrix attached as Exhibit A hereto, correlating to the applicable FNCL Rate as of the Sale Date and subject to adjustment as provided in such pricing matrix.

 

“ Purchaser ” has the meaning set forth in the introductory phrase of this Agreement.

 

“ Recourse ” means any arrangement pursuant to which the Servicer or any successor servicer bears the risk of all or any part of the ultimate credit losses incurred in connection with a default under, or the foreclosure of, acceptance of deed in lieu of foreclosure or related action in connection with, a Mortgage Loan, except that Recourse does not include losses in connection with a failure by the Servicer or any successor servicer to comply with the Applicable Requirements. Notwithstanding the foregoing, a Mortgage Loan shall not be considered subject to Recourse merely because Seller retains a contingent liability to repurchase a Mortgage Loan that is determined to have been ineligible for sale to the applicable Investor due to a breach of one or more representations and warranties, or because the Investor is GNMA, but shall be considered subject to Recourse if Seller has a Credit Enhancement obligation with respect thereto.

 

“ Required Investor Consents ” shall mean the written Investor Consents of Fannie Mae, Freddie Mac and GNMA

 

“ Sale Date ” means March 31, 2005.

 

“ Seller ” has the meaning set forth in the introductory phrase of this Agreement.

 

“ Servicer ” means the party contractually obligated to administer Servicing Rights under the applicable Servicing Agreements.

 

“ Servicing Agreements ” means the contracts, and all applicable rules, regulations, procedures, manuals and guidelines incorporated therein, defining the rights and obligations of the applicable Investor and Servicer, with respect to the servicing of Mortgage Loans to which Servicing Rights pertain.

 

“ Servicing Fee ” means the amount payable to Servicer under the applicable Servicing Agreement related to a Mortgage Loan, as consideration for servicing the Mortgage Loan.

 

“ Servicing Rights ” means the rights and obligations of Servicer to administer, collect the payments for the reduction of principal and application of interest, collect payments on

 

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account of taxes and insurance, pay taxes and insurance, remit collected payments, provide foreclosure services, provide full escrow administration and any other obligations required by any Agency, Investor or Insurer in, of, for or in connection with the related Mortgage Loans pursuant to the applicable Servicing Agreements, together with the right to receive the Servicing Fee, Prepayment Charges, if any, and any Ancillary Fees arising from or connected to the Mortgage Loans, and all rights, powers, and privileges incident to any of the foregoing.

 

“ Servicing Transfer Instructions ” means the instructions detailing the procedures pursuant to which Seller shall effect the transfer of Servicing Rights, Mortgage Files and Servicing Agreements to Purchaser, which instructions are attached hereto as Exhibit B.

 

“ Transfer Date ” the date or dates with respect to any Servicing Rights, on which, (a) pursuant to the applicable related Investor Consent, the Purchaser commences servicing the related Mortgage Loans, and (b) the other conditions to the transfer of such Servicing Rights have been satisfied or waived.

 

“ VA ” means the United States Department of Veterans Affairs and any successor thereto.

 

“ VA Loan Guaranty Certificate ” means the certificate evidencing a loan guaranty provided by VA, as authorized under the Serviceman’s Readjustment Act.

 

ARTICLE II.

 

SALE AND TRANSFER OF SERVICING RIGHTS

 

Section 2.01. Conveyance of Servicing Rights .

 

Upon the terms and subject to the conditions of this Agreement, and subject to the Applicable Requirements (including without limitation the rights of the applicable Agencies and Investors), and subject to the expiration of any waiting period under the HSR Act if the HSR Act is determined to apply to the transaction contemplated by this Agreement, Seller shall, on the Sale Date, sell and assign to Purchaser, and Purchaser shall purchase and assume from Seller, all beneficial right, title, interest and obligation of Seller in and to: (i) the Servicing Rights to the Mortgage Loans identified on the Mortgage Loan Schedule, and all rights related thereto, (ii) the Advances, (iii) the Custodial Funds and Escrow Funds, (iv) the Mortgage Files, (v) the exclusive right to enter into arrangements that generate, or to otherwise receive, Ancillary Fees with respect to the Mortgage Loans, (vi) the right to collect and retain Prepayment Charges, (vii) Call Rights related to the Mortgage Loans, (viii) any optional product agreements directly pertaining to the Mortgage Loans, as identified and agreed to by Purchaser and Seller prior to the applicable Transfer Date, and (ix) the goodwill associated with the Seller’s present conduct of the Business, including any customer lists of third party originators from which Seller purchases or accepts the assignment of eligible residential mortgage loans; provided, however, that Seller is not conveying, and Purchaser is not acquiring or assuming, any contracts, agreements, or other tangible or intangible assets, liabilities, obligations, of Seller, or Claims of or against Seller in

 

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connection with the Business; and provided, further, that Seller shall retain all right, title and interest in and to the Credit Enhancement Fees, which Purchaser shall remit to Seller on a monthly basis. On each Transfer Date, Seller shall transfer and assign to Purchaser, and Purchaser shall assume from Seller, all legal right, title and interest in and to the applicable: (i) the Servicing Rights to the Mortgage Loans identified on the Mortgage Loan Schedule, and all rights related thereto, (ii) the Advances, (iii) the Custodial Funds and Escrow Funds, (iv) the Mortgage Files, (v) the exclusive right to enter into arrangements that generate, or to otherwise receive, Ancillary Fees with respect to the Mortgage Loans, (vi) the right to collect and retain Prepayment Charges, (vii) Call Rights related to the applicable Mortgage Loans, and (viii) any optional product agreements directly pertaining to the Mortgage Loans, as identified and agreed to by Purchaser and Seller prior to the applicable Transfer Date.

 

Section 2.02. Assumption of Liabilities.

 

Upon the terms and subject to the conditions of this Agreement, and subject to the Applicable Requirements (including without limitation the rights of the applicable Agencies and Investors), and subject to the expiration of any waiting period under the HSR Act if the HSR Act is determined to apply to the transaction contemplated by this Agreement, Purchaser shall, on the Sale Date, assume the contractual duties and obligations of Seller to be performed after the Sale Date (and prior to the Sale Date to the extent required by the applicable Investor to obtain the related Investor Consent, but subject to the repurchase and indemnification obligations of Seller set forth Section 4.04) with respect to any Servicing Rights and related assets described in Section 2.01, pursuant to the Servicing Agreements, and any other liabilities as are expressly assumed by Purchaser under this Agreement, as may be limited in this Agreement.

 

Section 2.03. Evidence of Sale.

 

Prior to each Transfer Date, Purchaser and Seller shall execute and deliver the documents required by each applicable Investor in connection with the transfer of the related Servicing Rights hereunder, in form and substance reasonably satisfactory to Purchaser and Seller, and shall execute and deliver such other instruments or documents as Purchaser and Seller shall reasonably determine are necessary to evidence the transactions contemplated hereby.

 

Section 2.04. Interim Servicing.

 

The Parties shall execute and deliver a Interim Servicing Agreement between them, providing for the servicing of Mortgage Loans during each Interim Period. Seller shall pay, perform and discharge all liabilities and obligations related to the applicable Servicing Rights, Custodial Funds and Mortgage Loans during the related Interim Servicing Period in accordance with the terms and conditions of the Interim Servicing Agreement.

 

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Section 2.05. Servicing Transfer Instructions.

 

In connection with the transfer of Servicing Rights from Seller to Purchaser pursuant to this Agreement, Seller and Purchaser shall follow the Servicing Transfer Instructions attached hereto as Exhibit B in all material respects. If necessary, Seller shall cause any prior Servicer to comply with the Servicing Transfer Instructions and the servicing transfer provisions set forth in this Agreement and to take all steps necessary or appropriate to effectuate and evidence the transfer of the servicing of the related Mortgage Loans to Purchaser. The Servicing Transfer Instructions may be modified from time to time by mutual agreement between Purchaser and Seller. In any instance in which the Servicing Transfer Instructions conflict with the terms of this Agreement, the Servicing Transfer Instructions shall control.

 

Section 2.06. Delivery of Mortgage Loan Data and Files.

 

(a) Sale Date Data Tapes . No later than five (5) days before the Sale Date hereunder, Seller shall provide Purchaser with a preliminary tape(s) containing the information necessary to purchase the Servicing Rights to be sold on the Sale Date.

 

(b) Transfer Date Data Tape . No later than five (5) days after the Sale Date, Seller shall deliver to Purchaser a separate actual data tape or tapes delivered in connection with the Sale Date hereunder to test the conversion of Seller’s records to Purchaser’s data processing system, in accordance with the Servicing Transfer Instructions.

 

(c) Delivery of Mortgage Loan Files . No later than each Transfer Date, or the first Business Day thereafter if the Transfer Date is not a Business Day, Seller shall, at its sole expense and in accordance with the Servicing Transfer Instructions, provide Purchaser with the data, information and materials necessary for Purchaser to service the related Mortgage Loans, including but not limited to Mortgage Notes (including e-Notes), riders, loan modification documents and servicing files, in accordance with the Applicable Requirements. Seller shall, at its sole expense and in accordance with the Servicing Transfer Instructions, package and ship to Purchaser and/or Purchaser’s designee for inside delivery, to be received by Purchaser and/or Purchaser’s designee no later than five (5) Business Days after the applicable Transfer Date, all Mortgage Files pertaining to the related Mortgage Loans and the related servicing records in Seller’s possession. Seller shall provide Purchaser with prior written notice of the carrier, shipping arrangements and insurance arrangements with respect to the delivery of the Mortgage Files. There will be no boarding fees related to any Mortgage Loans. However, Purchaser and Seller agree to work together to identify and cure any data deficiency issues that may arise.

 

Section 2.07. Assignments.

 

Within the time period provided by the applicable Investor, Seller shall promptly take all such actions as may be necessary to transfer all right, title and interest in the Mortgage Loans to the Investor and the Servicing Rights with respect to the Mortgage Loans to Purchaser, consisting of (i) assigning nominal title to the related Mortgage Instruments to Purchaser; (ii)

 

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preparing or causing to be prepared and recorded all prior intervening Assignments of Mortgage Instruments, as required by the applicable Investor; and (iii) endorsing or causing to be endorsed the related Mortgage Notes to Investor, without recourse. Seller shall bear all costs and all responsibility associated with the preparation of such Assignments of Mortgage Instruments, and shall record such Assignments of Mortgage Instruments, if, and to the extent, such recordation is required by Applicable Requirements, and shall bear all costs and all responsibility associated with the recordation thereof. Seller shall forward to Purchaser the original recorded Assignments of Mortgages upon return from the recording office on a monthly basis.

 

If requested by Purchaser to prepare Assignments of Mortgage Instruments from Purchaser to the applicable Investor for Purchaser’s signature at the same time that Seller is preparing the Assignments of Mortgage Instruments from it to Purchaser, Seller shall cause to be prepared such Assignments of Mortgage Instruments at Purchaser’s expense for Seller’s out of pocket costs that shall not exceed one dollar ($ 1.00) per Assignment of Mortgage Instrument. None of the Assignments of Mortgage Instruments that Seller prepares, or causes to be prepared, from Seller to Purchaser or from Purchaser to the applicable Investor shall be blanket Assignments of Mortgage Instruments.

 

Notwithstanding the foregoing provisions of this Section 2.07, if a Mortgage Loan already is registered with MERS, Seller shall follow the requirement of the applicable Agency and Investor and MERS to reflect in the records of MERS the transfer of Servicing to the Mortgage Loan from Seller to Purchaser. Seller shall continue the transmission of recording information of the Mortgage Instruments to MERS after the Transfer Date, until all such recording information is received and transmitted to MERS and Purchaser. Seller shall bear all costs and all responsibility associated with the registration of a Mortgage Loan with MERS, to the extent done before the Sale Date or to the extent Seller chooses to do so before the Transfer Date, including without limitation the related preparation and recordation of an Assignment of Mortgage Instrument, and all costs and responsibility associated with the reflection of the transfer of Servicing to the Mortgage Loan in the records of MERS. For each Mortgage Loan registered with MERS, Seller shall provide Purchaser with the MERS mortgage loan identification number in an electronic format acceptable to the parties.

 

Section 2.08. Transfer of Mortgage Loan Files.

 

Seller shall be responsible for ensuring all required documents comprising the Mortgage File, related to the Mortgage Loans, are transferred to Purchaser in a timely manner including but not limited to Mortgage Notes (including e-Notes), riders, loan modification documents and servicing files. In the event the required Mortgage Loan files and documents other than recorded mortgages, interim assignments and title policies are not received within one hundred eighty (180) days following the applicable Transfer Date, Purchaser may bill Seller for the out of pocket costs associated with creating or obtaining any required missing Mortgage Loan Documents, not to exceed One Hundred and Fifty Dollars ($150.00) per Mortgage Loan.

 

Anything to the contrary contained in this Agreement or the Interim Servicing Agreement, if applicable, notwithstanding, with respect to each Mortgage Loan, any documents required to be delivered to Purchaser may be provided by means of electronic data containing the

 

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relevant information or a computer disk containing scanned images of some or all documents relating to the Mortgage Loan with the exception of Note, HUD-1, right of rescission (if applicable), recorded Mortgage Instrument, any applicable recorded assignments and the title policy or any other collateral documents required by the Agencies to be retained in original form. Any such disk may contain images of one or more Mortgage Loans. Any document required to be retained by Seller may, in Seller’s sole discretion, be retained solely by means of scanned images.

 

Section 2.09. Transfer of Escrows Funds, Custodial Funds, Advances and Reconciliation.

 

Within five (5) Business Days after the applicable Transfer Date, the Seller shall remit and deliver to Purchaser, or Purchaser’s designee, Escrow Funds, Custodial Funds and all other funds and collections net of the then outstanding Advances related to the Servicing Rights, the legal, right, title and interest to which were transferred to Purchaser on the Transfer Date and shall reconcile such amounts with the Purchaser in accordance with the Servicing Transfer Instructions.

 

Section 2.10. Investor Consents.

 

Seller agrees to obtain any written Investor approvals as required under the Applicable Requirements to effectuate any servicing transfers. Seller shall deliver to Purchaser the applicable written approvals of transfer of Servicing Rights no later than twenty (20) days prior to the related Transfer Date. To the extent the sale of any Servicing Rights is subject to approval by an Investor in accordance with the Applicable Requirements, Seller shall submit to each applicable Investor all materials necessary to obtain the related Investor Consents in a timely manner with respect to the transfer of Servicing Rights from Seller to Purchaser. Seller shall use commercially reasonable efforts to obtain Investor Consents promptly, and Purchaser shall cooperate with Seller in obtaining the Investor Consents. Seller shall pay any and all costs of securing Investor Consents for the transactions contemplated in this Agreement, including, without limitation, fees to the Investors for the transfer of Servicing Rights in accordance with the Applicable Requirements. Seller shall promptly notify Purchaser in writing if an Investor advises Seller that any Servicing Rights may not be transferred to Purchaser.

 

Section 2.11. Final Certification and Recertification.

 

Seller shall obtain such documents and shall take such steps as are necessary to enable Purchaser, through the exercise of reasonable efforts after the applicable Transfer Date, to obtain by the appropriate deadline the final certification and/or recertification, as applicable, of any Pool, including any required recertification of Pools in connection with the transfer of Servicing Rights to Purchaser hereunder. If Seller does not take such actions and, as a result, Purchaser cannot obtain by the appropriate deadline, through the exercise of reasonable efforts after the applicable Transfer Date, the final certification and/or recertification of any Pool, then upon the request of Purchaser, Seller shall (i) reimburse Purchaser for any reasonable expense or cost, including without limitation any internal expenses or costs, incurred by Purchaser in attempting to obtain final certification and/or recertification by the required deadline and (ii) reimburse Purchaser for any Losses resulting from, arising out of or relating to the failure to obtain final certification and/or recertification by the deadline.

 

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On and after the applicable Transfer Date, all documents necessary for the final certification and/or recertification of a Pool shall be delivered by Seller to Purchaser or Purchaser’s designee. If Purchaser’s document custodian returns a document to Purchaser for correction or missing information, Purchaser shall forward the document to Seller, and Seller shall promptly correct the document or insert the appropriate information and return the document to Purchaser.

 

Section 2.12. Liability for Failure to Deliver Mortgage Files.

 

Purchaser shall have no liability for any failure to carry out its servicing responsibilities hereunder which is directly caused by the failure of Seller to deliver, or to cause a Prior Servicer to deliver, to Purchaser the Mortgage Files (or portions thereof) necessary to service the related Mortgage Loans in material compliance with the Applicable Requirements. Seller shall bear any material incremental out-of-pocket expenses incurred by Purchaser arising from the transfer of Mortgage Loans to Purchaser where either (i) the servicing for the Mortgage Loans cannot be transferred in all material respects in accordance with Applicable Requirements and the Servicing Transfer Instructions, (ii) the Mortgage Loans cannot be serviced in accordance with Applicable Requirements based on the information within the existing Mortgage Files or (iii) Purchaser shall, at Seller’s request, correct a Prior Servicer or Seller’s failure to maintain, for each Mortgage Loan, complete and accurate Mortgage Loan Documents or servicing records.

 

Section 2.13. Costs of Transfer.

 

Except as otherwise provided herein (i) Seller shall be responsible for all transfer and recording fees, costs and expenses with respect to the transfer of Servicing Rights, the delivery of Mortgage Loan Files and related documents, the remittance of Custodial Funds, and all other fees, costs and expenses incurred by Seller in its performance of its obligations under this Agreement, including without limitation the fees of Seller’s document custodian, attorneys and accountants, and (ii) Purchaser shall be responsible for the fees, costs and expenses of Purchaser in its performance of its obligations under this Agreement, including without limitation the fees of Purchaser’s attorneys and accountants.

 

Section 2.14. Notice to Borrowers.

 

Not less than fifteen (15) days prior to the applicable Transfer Date, Seller and Purchaser shall deliver to each borrower under an applicable Mortgage Loan a joint letter advising the borrower of the transfer of Servicing Rights contemplated herein. Such joint letter shall be mutually agreeable to the parties and shall comply with all Applicable Requirements, including, without limitation, the federal Real Estate Settlement Procedures Act, as amended, and Regulation X, as amended. The parties shall split the cost of such joint letter.

 

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Section 2.15. Tax Contracts.

 

No later than the applicable Transfer Date, Seller shall assign to Purchaser the tax contracts with Fidelity National Tax Services on each Mortgage Loan, as applicable. In addition, Seller shall pay Fifteen Dollars ($15.00) per Mortgage Loan.

 

Section 2.16. Flood Contracts.

 

No later than the applicable Transfer Date, Seller shall assign to Purchaser the flood contracts with First American Flood Service on each Mortgage Loan, as applicable.

 

Section 2.17. Purchase of Goodwill Associated with the Business

 

From the date hereof until the Sale Date, Seller shall use commercially reasonable efforts to maintain the general character of the Business and conduct the Business in a commercially reasonable manner. Seller authorizes Purchaser to make offers of employment to Seller’s employees who work primarily in connection with the production of residential mortgage loans for the Business on such terms and conditions as Purchaser may determine in its sole discretion, and Seller shall cooperate with Purchaser to facilitate Purchaser’s consideration of such employment offers.

 

ARTICLE III.

 

PURCHASE OF SERVICING RIGHTS

 

Section 3.01. Purchase Price.

 

In full consideration for the transfer and sale of Servicing Rights as of a particular agreed upon Sale Date, Purchaser shall pay to Seller in the manner provided in Section 3.03, and subject to the adjustments provided for in Section 3.04, an amount equal to (i) the Purchase Price Percentage multiplied by the aggregate outstanding principal balance, as of the Sale Date, of the Mortgage Loans, plus (ii) all Advances funded by Seller, plus (iii) Two Million Dollars ($2,000,000.00).

 

Section 3.02. Verification of Purchase Price Items.

 

(a) Within five (5) Business Days prior to the Sale Date, Seller shall provide Purchaser with a preliminary Mortgage Loan Schedule that sets forth the Mortgage Loans relating to the Servicing Rights being purchased as of the Sale Date, the aggregate actual unpaid principal balance of each such Mortgage Loan as of the Sale Date and all other mortgage loan data reasonably required by the Purchaser at such time. On or prior to the Sale Date, the Seller shall deliver to Purchaser a preliminary Mortgage Loan Schedule relating to the Sale Date. If Purchaser notifies Seller that the preliminary Mortgage Loan Schedule is

 

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acceptable, then the Mortgage Loan Schedule shall become final. If, however, after reviewing the preliminary Mortgage Loan Schedule, Purchaser reasonably believes that there is an error in the preliminary Mortgage Loan Schedule, Purchaser may so notify Seller and in such event the Parties shall cooperate in connection with resolving the matter. Upon resolution of the matter, the Mortgage Loan Schedule shall be finalized, after any applicable revisions to the preliminary Mortgage Loan Schedule are made. The applicable portion of such payment, if any, shall promptly be returned by Seller to Purchaser, and any amounts received by Purchaser under the Interim Servicing Agreement shall promptly be returned by Purchaser to Seller relating to the applicable Servicing Rights, if (i) the conditions precedent set forth in Article V of this Agreement are not met by August 1, 2005 (including, but not limited to, the failure to receive the applicable Required Investor Consents) or (ii) any other Investor either (x) explicitly rejects the transfer of the related Servicing Rights or (y) does not provide a required Investor Consent, in writing, to the transfer of the related Servicing Rights by the initial Transfer Date but subsequently provides a written rejection of the request to transfer such Servicing Rights to Purchaser within six (6) months after the initial Transfer Date. Except in the case of the Servicing Rights pertaining to the MPF Bank as the Investor, an Investor shall be presumed to have consented to the transfer of the related Servicing Rights to Purchaser if such Investor neither provides an explicit Investor Consent nor rejects in writing a request for such Investor Consent within six (6) months after the initial Transfer Date pertaining to the Fannie Mae Servicing Rights. If permitted pursuant to the applicable Servicing Agreement, Purchaser shall subservice that portion of the Servicing Rights as to which the requisite Investor Consents have not been obtained by the initial Transfer Date, Purchaser shall pay the Purchase Price therefor (subject to the mechanics of Section 3.03(c), including, without limitation, the Holdback specified in Section 3.03(c) below), and Purchaser shall be entitled to both all of the economics related thereto and the Seller’s protections afforded under this Agreement, as if the Purchaser were the owner of such Servicing Rights; provided, that, Purchaser shall be responsible for its acts, errors and omissions as subservicer.

 

(b) By the sixtieth (60 ^th ) day following the Sale Date, Seller shall prepare and provide Purchaser with a schedule listing all Mortgage Loans that prepaid on or within thirty (30) days after the Sale Date (“Prepaid Mortgage Loans”) and the actual unpaid principal balances of which were included in the calculation of the related Purchase Price and appropriate supporting documentation. Upon agreement to the form and substance of such schedule by Purchaser, Seller shall promptly, but in no event later than thirty (30) days following receipt by Purchaser of such schedule, remit to Purchaser an amount equal to the portion of the Purchase Price paid by Purchaser on the related Sale Date attributable to such Prepaid Mortgage Loans.

 

Section 3.03. Payment of Purchase Price by Purchaser.

 

The Purchase Price for the Servicing Rights shall be paid by Purchaser to Seller as follows:

 

(a) Sale Date . On the Sale Date, Purchaser shall pay to Seller by wire transfer of immediately available funds (i) seventy percent (70%) of the estimated portion of the Purchase Price attributable to Section 3.01(i) hereof, and (ii) one hundred percent (100%) of

 

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the portion of the Purchase Price attributable to Sections 3.01(ii) and 3.01(iii) hereof. To the extent the Purchase Price Percentage, unpaid principal balance of the Mortgage Loans, or amount of Advances as of the Sale Date cannot be definitively determined, the forgoing calculations shall be based on such figures and amounts most recently available, and the amount of the Purchase Price paid as a result adjusted to reflect the Sale Date figures and amounts by an addition or subtraction to the amount paid pursuant to Section 3.03(b), as appropriate.

 

(b) Payment Date . Subject to the holdbacks and adjustments set forth in this Article III, on each Payment Date, Purchaser shall pay to Seller by wire transfer of immediately available funds the pro rata portion of the Purchase Price attributable to Section 3.01(i) hereof applicable to the Servicing Rights transferred on the related Transfer Date, net of any payments due pursuant to Section 2.15 hereof.

 

(c) Holdback . For each Mortgage Loan with respect to which Servicing Rights were transferred on the related Transfer Date, Purchaser shall hold back from the amount paid to Seller in accordance with Section 3.03(b) an amount (the “Holdback”) equal to equal to five percent (5%) of the Purchase Price attributable to Section 3.01(i) hereof applicable to such Servicing Rights. Within thirty (30) days following such Transfer Date, Purchaser shall deliver or cause to be delivered to Seller a list identifying any missing Mortgage Loan Documents with respect to such Mortgage Loans. Purchaser shall release the Holdback to Seller on a loan level, pro rata basis on the last Business Day of each month (beginning in the sixty (60) days the applicable Transfer Date) for each Mortgage Loan with respect to which Purchaser has received all of the Mortgage Loan Documents identified on such list (other than the recorded Assignments required as a result of this transaction), to include each Mortgage Loan with respect to which Purchaser has not identified any missing Mortgage Loan Documents on such list, provided, however, that the Holdback with respect to any Mortgage Loan shall be released not later than one hundred and eighty (180) days after the applicable Transfer Date, subject to withholding of any amount which may be due to Purchaser pursuant to Section 2.08 of this Agreement.

 

Section 3.04. Adjustments.

 

If within two hundred and ten (210) days after the payment of all or any portion of the Purchase Price, transfer of the Custodial Funds, payment for the Advances or the payment or transfer of any other amounts due under this Agreement to either Party, an error is discovered with respect to the calculation of the payment or amount transferred, within five (5) Business Days after the receipt of information sufficient to provide notice that payment is due, the Party benefiting from the error shall pay an amount sufficient to correct and reconcile the error and shall provide a reconciliation statement and such other documentation sufficient to satisfy the other Party (in such other Party’s exercise of its reasonable discretion), concerning the accuracy of such reconciliation.

 

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Section 3.05. Form of Payment to be Made.

 

Unless otherwise agreed to by the Parties, all payments to be made by a party to another party, or such other party’s designee, shall be made to by wiring immediately available funds to the accounts designated by the party receiving the payment.

 

ARTICLE IV.

 

REPRESENTATIONS AND WARRANTIES; REMEDIES FOR BREACH

 

Section 4.01. Representations and Warranties of the Seller.

 

Except as Previously Disclosed, Seller hereby makes the following representations and warranties as of the Sale Date and each related Transfer Date:

 

(a) Due Organization and Good Standing . Seller is a federal savings bank, duly organized, validly existing, and in good standing under federal law. Subject to all applicable Federal preemption laws, Seller has in full force and effect (without notice of possible suspension, revocation or impairment) all applicable qualifications, permits, approvals, licenses, and registrations to conduct all activities in all states in which its activities with respect to the Mortgage Loans or Servicing Rights require it to be qualified or licensed, except where the failure of Seller to possess such qualifications, licenses, permits, approvals and registrations would not have a material adverse effect on the ability of a Servicer to enforce any Mortgage Loan or to obtain the full benefits of any Servicing Rights;

 

(b) Authority and Capacity . Seller has all requisite organizational power, authority and capacity to carry on its business as it is now being conducted, to execute and deliver this Agreement and to perform all of its obligations hereunder. Seller does not believe, nor does it have any cause or reason to believe, that it cannot perform each and every covenant contained in this Agreement;

 

(c) Effective Agreement . The execution, delivery and performance of this Agreement by Seller and consummation of the transactions contemplated hereunder have been or will be duly and validly authorized by all necessary organizational or other action; this Agreement are valid and legally binding agreements of Seller enforceable against Seller in accordance with their respective terms, subject to bankruptcy, insolvency and similar laws affecting generally the enforcement of creditor’s rights and the discretion of a court to grant specific performance;

 

(d) No Conflict . Subject to (i) expiration of the waiting period under the HSR Act prior to the Sale Date and (ii) receipt of the Investor Consents on or prior to the applicable Transfer Dates, neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby, nor compliance with its respective terms and conditions,

 

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shall (a) violate, conflict with, result in the breech of, constitute a default under, be prohibited by, or require any additional approval under any of the terms, conditions or provisions of the articles of incorporation, by-laws or other organizational documents of Seller, as applicable, or of any mortgage, indenture, deed of trust, loan or credit agreement or other agreement or instrument to which Seller is now a party or by which Seller is bound, or of any law, ordinance, rule or regulation of any governmental authority applicable to Seller, or of any order, judgment or decree of any court or governmental authority applicable to Seller, or (b) result in the creation or imposition of any lien, charge or encumbrance of any nature upon the Servicing Rights or any Mortgage Loans or the properties or assets of Seller;

 

(e) Consents, Approvals and Compliance . Any requisite consents or approvals of other Persons, including without limitation Investor Consents, to the execution and delivery of this Agreement or the performance of the transactions contemplated hereby by Seller have been or will be obtained prior to the applicable Transfer Date or such other earlier or later date as expressly provided herein. Seller is approved and in good standing with each applicable Agency, Investor and Insurer. Seller has complied with, and is not in default under, any law, ordinance, requirement, regulation, rule, or order applicable to its business or properties, the violation of which might materially and adversely affect the operations or financial condition of Seller or its ability to perform its obligations hereunder;

 

(f) Solvency . The sum of the assets of Seller, at fair valuation, exceeds the debts of Seller, the present fair saleable value of the assets of Seller is greater than the amount required to pay the liabilities of Seller on its debts as such debts become absolute and mature, and Seller has sufficient capital with which to conduct its business;

 

(g) Ordinary Course of Business . The consummation of the transactions contemplated by this Agreement is in the ordinary course of business of Seller and is not a sale of all or substantially all of the assets of Seller. The transfer, assignment and conveyance of the Servicing Rights by Seller pursuant to this Agreement are not subject to the bulk transfer or any similar statutory provisions in effect in any jurisdiction, the laws of which apply to such transfer, assignment and conveyance;

 

(h) Insurance . Errors and omissions and fidelity insurance coverage, in amounts as required by the Agencies, are in effect with respect to Seller and will be maintained until the transactions contemplated by this Agreement have been consummated in accordance with terms hereof;

 

(i) Litigation . Except as Previously Disclosed, there is no litigation, claim, demand, proceeding or governmental investigation existing or pending, or to the best of seller’s knowledge, threatened, or any order, injunction or decree outstanding, against or relating to Seller that could have a material adverse effect upon: (i) the Servicing Rights being purchased by Purchaser hereunder; (ii) the performance by Seller of its obligations under the applicable Servicing Agreements; or (iii) the performance by Seller of its obligations under this Agreement;

 

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(j) No Accrued Liabilities . There are no accrued or contingent liabilities of Seller with respect to the Mortgage Loans or Servicing Rights for which Purchaser would be responsible, or circumstances under which such accrued or contingent liabilities will arise against Purchaser, with respect to occurrences prior to the Sale Date;

 

(k) Brokers Fees . If Seller has utilized a broker for which a fee or commission may be due, Seller represents and warrants that such fee or commission shall be the sole responsibility of the Seller.

 

Section 4.02. Mortgage Loan and Servicing Rights Representations and Warranties.

 

Except as Previously Disclosed, the Seller hereby makes the following representations and warranties with respect to each Mortgage Loan and the related Servicing, as of the Sale Date:

 

(a) General Compliance . Each Mortgage Loan conforms in all material respects to the Applicable Requirements, and each Mortgage Loan was eligible for sale to, insurance by, or pooling to back securities issued or guaranteed by, or participation certificates issued by, the applicable Agency, Investor or Insurer upon such sale, issuance of insurance or pooling, there has been no act or omission or alleged act or omission, or error by Seller or any employee, agent or representative acting on Seller’s behalf, with respect to the origination, underwriting or servicing of any of the Mortgage Loans which are not in conformity with the Applicable Requirements. Each Mortgage Loan has been originated, underwritten and serviced in compliance with all Applicable Requirements. Seller is not otherwise in default with respect to Seller’s obligations under the applicable Servicing Agreement or Applicable Requirements;

 

(b) Enforceability of Mortgage Loan . Each Mortgage Note and the related Mortgage Instrument are genuine and each is the legal, valid and binding obligation of the maker thereof, enforceable in accordance with its terms, subject to bankruptcy, insolvency and similar laws affecting generally the enforcement of creditor’s rights and the discretion of a court to grant specific performance. All parties to the Mortgage Note and the Mortgage Instrument had legal capacity to execute the Mortgage Note and the Mortgage Instrument and each Mortgage Note and Mortgage Instrument has been duly and properly executed by such parties. The Mortgage Loan is not subject to any right of rescission, set-off, counterclaim or defense against Purchaser, including the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage Instrument, or the exercise of any right there under, render either the Mortgage Note or the Mortgage Instrument unenforceable by Purchaser, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense against Purchaser, including the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted to Seller or any Originator with respect thereto;

 

(c) Disbursements; Future Advancements . The full original principal amount of each Mortgage Loan (net of any discounts) has been fully advanced or disbursed to the Mortgagor named therein, there is no requirement for future advances and any and all

 

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requirements as to completion of any on-site or off-site improvements and as to disbursements of any escrow funds, except for escrows established or created due to seasonal weather conditions, therefore have been satisfied. All costs, fees and expenses incurred in making, closing or recording the Mortgage Loan were paid. There is no obligation on the part of Seller, or of any other party, to make supplemental payments in addition to those made by the Mortgagor. Any future advances that were made in connection with a Mortgage Loan have been consolidated with the outstanding principal amount secured by the Mortgage Instrument, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term. The lien of the Mortgage Instrument securing the consolidated principal amount is expressly insured as having first lien priority by a title insurance policy meeting the standards of the Applicable Requirements. The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan;

 

(d) Priority of Lien . Each Mortgage Instrument has been duly acknowledged and recorded and is a valid and subsisting first lien, and the Mortgaged Property is free and clear of all encumbrances and liens having priority over the lien of the Mortgage Instrument, other than (i) liens for real estate taxes and special assessments not yet due and payable, (ii) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording, acceptable to mortgage lending institutions generally and (iii) other matters to which like properties are commonly subject which do not interfere with the benefits of the security intended to be provided by the Mortgage Instrument or the use, enjoyment, value or marketability of the related Mortgaged Property. There are no mechanics or similar liens or claims which have been filed for work, labor or material (and to the best of Seller’s knowledge no rights are outstanding that under law could give rise to such lien) affecting the Mortgaged Property that are or may be liens prior to, or equal or coordinate with, the lien of the Mortgage Instrument. All tax identifications and property descriptions in the Mortgage Instruments are legally sufficient;

 

(e) Title Insurance . For any Mortgage Loan secured by Mortgaged Property located in the state of Iowa, an opinion of counsel of the type customarily rendered in such state in lieu of title insurance has been received and is acceptable to the applicable Investor. Each other Mortgage Loan is or will be covered by an ALTA lender’s mortgage title insurance policy that is in an amount and form acceptable to the applicable Agency and Investor, with such endorsements, including without limitation endorsements regarding environmental hazards and toxic substances and regarding adjustments to the interest rate, as required by the applicable Investor. The title insurance policy has been or will be issued by a title insurer acceptable to the applicable Investor with respect to the Mortgage Loan, and insures or will insure the mortgagee, its successors and assigns, as to the first priority lien of the Mortgage Instrument in the original principal amount of the Mortgage Loan. The mortgagee, its successors and/or assigns, is the named insured and the sole insured of such mortgage title insurance policy, proper assignment of the title policy has been or by the applicable Transfer Date will be made to Purchaser, and the assignment to Purchaser of such interest in such mortgage title insurance policy does not require the consent of or notification to the Insurer, or any required consent has been obtain by Seller at the time of assignment. Such mortgage title insurance policy is in full force and effect, no claims have been made under such mortgage title insurance policy, and neither Seller nor any Originator, as applicable, has done, by act or omission, anything that would impair the coverage of such mortgage title insurance policy;

 

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(f) No Default/No Waiver . There is no default, breach, violation or event of acceleration existing under any Mortgage Loan that is not an Bankruptcy Loan, Litigation Loan, a Mortgage Loan that has been referred to an attorney for foreclosure proceedings, or a Mortgage Loan that is one or more payments past due, and to the best of Seller’s knowledge no event has occurred that, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration, and Seller has not waived any default, breach, violation or event of acceleration, in connection with any Mortgage Loan than any Mortgage Loan that is a Bankruptcy Loan, Litigation Loan, a Mortgage Loan that has been referred to an attorney for foreclosure proceedings, or a Mortgage Loan that is one or more payments past due. Other than as approved by the applicable Investor and Insurer, neither Seller nor Originator has (i) agreed to any modification, extension or forbearance in connection with a Mortgage Note or Mortgage Instrument, (ii) released, satisfied or canceled any Mortgage Note or Mortgage Instrument in whole or in part, (iii) subordinated any Mortgage Instrument in whole or in part, or (iv) released any Mortgaged Property in whole or in part from the lien of any Mortgage Instrument, and the written instrument necessary to effect any of the foregoing has been recorded, if necessary, and is held in the Mortgage File and satisfies the Applicable Requirements. Seller has not advanced its funds to cure a default or delinquency with respect to any such Mortgage Loans, other than required Advances with respect to deficiencies under the Mortgage Instruments; or, except with respect to Buydown Loans, induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required under the Mortgage Loan;

 

(g) Application of Funds . All payments received by Seller with respect to any Mortgage Loan have been remitted and property accounted for as required by Applicable Requirements. All funds received by Seller in connection with the satisfaction of Mortgage Loans, including but not limited to insurance proceeds from hazard losses, have been deposited in the appropriate Custodial Account, and all such funds have been applied to reduce the principal balance of the Mortgage Loan in question, or for reimbursement of repairs to the Mortgaged Property or as otherwise required by Applicable Requirements, or are or will be on deposit in an appropriate Custodial Accounts on the Transfer Date. The unpaid balance of each Mortgage Loan is as stated in the Mortgage File to be delivered to Purchaser;

 

(h) Mortgage Insurance . Each Mortgage Loan which is represented by Seller to have mortgage insurance or a guaranty certificate has such, and each of Seller and any Originator, has complied with applicable provisions of the insurance or guaranty contract and all other Applicable Requirements. All premiums or other charges due in connection with such insurance or guaranty have been paid, there has been no act or omission that would or may invalidate any such insurance or guaranty with respect to Purchaser, and the insurance or guaranty is, or when issued, will be, in full force and effect with respect to each Mortgage Loan. There are no defenses, counterclaims, or rights of set-off which could be charged against Purchaser affecting the validity or enforceability of any mortgage insurance or guaranty with respect to a Mortgage Loan;

 

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(i) Compliance with Laws . Seller and each Originator have complied with the Applicable Requirements, and any and all other applicable federal, state, or local law, statute, ordinance, rule, regulation, or order pertaining to the subject matter of this Agreement, including, without limitation, the Federal Fair Housing Act, federal Equal Credit Opportunity Act and Regulation B, Federal Fair Credit Reporting Act, Federal Truth in Lending Act and Regulation Z, National Flood Insurance Act of 1968, Federal Flood Disaster Protection Act of 1973, Federal Real Estate Settlement Procedures Act and Regulation X, Federal Fair Debt Collection Practices Act, Federal Home Mortgage Disclosure Act and Regulation C, and state consumer credit and usury codes and laws;

 

(j) High Cost Mortgage Loans. No Mortgage Loan is classified as a “high cost mortgage” under Section 32 of the Home Ownership and Equity Protection Act of 1994 or is considered a “high cost mortgage” loan under any other federal, state or local anti-predatory lending law applicable at the time the loan was originated. Each Originator was qualified to do business, and had all requisite licenses, permits and approvals, in the states in which the applicable Mortgaged Properties are located, except where the failure to possess such qualifications, licenses, permits and approvals would not materially and adversely affect the enforceability of the Mortgage Loan Documents by Purchaser;

 

(k) Filing of Reports . Seller has filed all reports required by Agencies, Investors and Insurers with respect to the Mortgage Loans and the Servicing Rights. Seller has filed, or will file, all IRS Forms, including but not limited to Forms 1041 K1, 1041, 1099 INT, 1099 MISC, 1099A and 1098, as appropriate, which are required to be filed with respect to the Servicing Rights for activity that occurs on or before the Sale Date;

 

(l) Custodial and Escrow Accounts . All Custodial and Escrow Accounts required to be maintained by Seller have been established and continuously maintained in accordance with Applicable Requirements. Custodial Funds and Escrow Funds received by Seller have been credited to the ap