EXHIBIT 10.1
[EXECUTION COPY]
MASTER REPURCHASE AGREEMENT
Dated as of August 21, 1998
Between:
NOVASTAR FINANCIAL, INC.,
as Seller
and
FIRST UNION NATIONAL BANK,
as Buyer
1. Applicability
From time to time the parties hereto may enter into transactions in which the
Seller agrees to transfer to the Buyer mortgage loans or other assets (the
"Collateral") against the transfer of funds by the Buyer, with a simultaneous
agreement by the Buyer to transfer to the Seller such Collateral at a date
certain, against the transfer of funds by the Seller. Each such transaction
shall be referred to herein as a "Transaction" and, unless otherwise agreed in
writing, shall be governed by this Agreement.
2. Definitions
As used in this Agreement, and unless the context requires a different meaning,
the following terms shall have the meanings assigned to them below:
(a) "1934 Act" shall mean the Securities Exchange Act of 1934.
(b) "Act of Insolvency" shall mean, with respect to any party, (i) the
commencement by such party as debtor of any case or proceeding under
any bankruptcy, insolvency, reorganization, liquidation, moratorium,
dissolution, delinquency or similar law, or such party seeking the
appointment or election of a receiver, conservator, trustee, custodian
or similar official for such party or any substantial part of its
property, or the convening of any meeting of creditors for purposes of
commencing any such case or proceeding or seeking such an appointment
or election, (ii) the commencement of any such case or proceeding
against such party, or another seeking such an appointment or
election, or the filing against a party of an application for a
protective decree under the provisions of SIPA, which (A) is consented
to or not timely contested by such party, (B) results in the entry of
an order for relief, such an appointment or election, the issuance of
such a protective decree or the entry of an order having a similar
effect, or (C) is not dismissed within 15 days, (iii) the making by
such party of a general assignment for the benefit of creditors, or
(iv) the admission in writing by such party of such party's inability
to pay such party's debts as they become due.
(c) "Additional Collateral" shall mean Mortgage Loans and/or cash provided
by the Seller to the Buyer pursuant to Paragraph 5(b) hereof.
(d) "Additional Required Documents" shall mean the following documents
with respect to any Mortgage Loan:
(i) original disclosure statements complying with Regulation Z
("Truth in Lending") of the Board of Governors of the Federal
Reserve System and all agreements relating thereto, if
applicable;
(ii) original Equal Credit Opportunity Act notice and additional
disclosure statements or agreements relating thereto, if
applicable;
(iii) survey of the property covered by the Mortgage Loan, including
a determination of whether or not such property falls into a
flood zone as identified by a HUD identified flood map;
(iv) an attorney's opinion of title and abstract of title or an
ALTA mortgage title insurance policy or such other policy in
form acceptable to FNMA or FHLMC, issued by and constituting
the valid and binding obligation of a title insurer generally
acceptable to prudent mortgage lenders that regularly
originate or purchase mortgage loans comparable to the
Purchased Loans for sale to prudent investors in the secondary
market that invest in mortgage loans such as the Purchased
Loans and qualified to do business in the jurisdiction where
the related property is located, insuring the Seller, its
successors and assigns, as to the first priority lien of the
related Mortgage in the case of a Mortgage Loan secured by a
first priority lien and the second priority lien of the
Mortgage Loan in the case of a Purchased Loan secured by a
second lien on the related property, in the original principal
amount of the Purchased Loan; provided that the Seller shall
be the sole named insured of any such mortgage title insurance
policy, the assignment to the Buyer or the Custodian as
assignee of the Buyer of the Seller's interest in such
mortgage title insurance policy shall not require the consent
of or notification to the insurer or the same has been
obtained, and such mortgage title insurance policy shall be in
full force and effect and will be in full force and effect and
inure to the benefit of the Buyer upon the consummation of the
transactions contemplated by this Agreement; and, provided
further, that no claims shall have been made under such
mortgage title insurance policy and no prior holder of the
related Mortgage Loan, including the Seller, shall have done,
by act or omission, anything that would impair the coverage of
such mortgage title insurance policy;
(v) written statement signed by the attorney, title company or
closing agent responsible for supervising the closing of the
Mortgage Loan that such Person closed the Mortgage Loan in
accordance with any closing instructions received by such
Person;
(vi) a property and casualty insurance policy on the property
securing the Mortgage Loan covering fire, hazard and extended
coverage, and if applicable, flood and earthquake insurance,
all in amounts not less than the principal amount of the
promissory note relating to the Mortgage Loan (or the maximum
amount issuable for flood insurance) which insurance has been
endorsed to provide for payment thereof to the Seller, as
mortgagee, together with written notice to the mortgagor of
the fact, if true, that mortgagor's property lies within a
flood zone;
(vii) original or copy of executed application by the obligor on
such Mortgage Loan for such Mortgage Loan;
(viii) original or copy of credit bureau report on the obligor on
such Mortgage Loan;
(ix) original HUD-1 settlement statement duly executed by the
obligor on such Mortgage Loan;
(x) original complete appraisal obtained with respect to the
applicable property obtained in connection with the Mortgage
Loan; and
(xi) such other documents as the Buyer may reasonably request from
time to time, including but not limited to verification of
employment of the obligor on such Mortgage Loan, verification
of deposit by such obligor (if applicable), and any inspection
reports performed with respect to such obligor or the property
covered by such Mortgage Loan.
(e) "Agreement" shall mean this Master Repurchase Agreement, together with
all exhibits, schedules or amendments hereto and all Confirmations
hereunder.
(f) "Aggregate Commitment" shall have the meaning assigned to such term in
Paragraph 6.
(g) "Bankruptcy Code" shall mean Title 11 of the United States Code, as
amended.
(h) "Business Day" shall mean any day except Saturday, Sunday and any day
which is a legal holiday or a day on which banking institutions are
authorized or required by law to close in Charlotte, North Carolina.
(i) "Buyer" shall mean First Union National Bank, a national banking
association, with its principal place of business in Charlotte, North
Carolina.
(j) [reserved]
(k) "Collateral" shall have the meaning assigned to such term in Paragraph
1.
(l) "Confirmation" shall mean a confirmation for a Transaction as required
by Paragraph 4(a) hereof, substantially in the form of Exhibit A
hereto.
(m) "Current Margin" shall mean, with respect to any date, the difference
between (i) the aggregate Market Value of all Purchased Loans held by
the Buyer on such date and (ii) the aggregate Purchase Price paid by
the Buyer for all Purchased Loans held by the Buyer on such date.
(n) "Custodial Agreement" shall mean the Repurchase Facility Custodial
Agreement, dated as of August 21, 1998, among the Buyer, the Seller
and the Custodian.
(o) "Custodian" shall mean First Union National Bank, a national bank.
(p) "Default Rate" shall mean, for any day, the Pricing Rate for such day
plus 4.00%.
(q) "Eligible Mortgage Loan" shall mean a Mortgage Loan (i) with respect
to which each of the representations and warranties set out in Exhibit
B hereto is accurate and complete as of the date of the related
Confirmation (and the Seller by including any such Mortgage Loan in
any Transaction shall be deemed to so represent and warrant to the
Buyer at and as of the date of such Transaction) and (ii) that has
been outstanding no more than 180 days since first purchased by the
Buyer in a Transaction.
(r) "ERISA" shall mean the Employee Retirement Income Security Act of
1974.
(s) "Event of Default" shall have the meaning assigned to such term in
Paragraph 12.
(t) "FDIA" shall mean the Federal Deposit Insurance Act, as amended.
(u) "FDICIA" shall mean the Federal Deposit Insurance Corporation
Improvement Act of 1991.
(v) "GAAP" shall mean generally accepted accounting principles.
(w) "Income" shall mean, with respect to any Mortgage Loan at any time,
any payments of principal thereof and all payments of interest and
dividends or other distributions thereon.
(x) "Indemnified Parties" shall have the meaning assigned to such term in
Paragraph 15.
(y) "LIBOR" shall mean the London Interbank Offered Rate obtained on page
3750 of Telerate as being the rate at which deposits in immediately
available U.S. dollars having a maturity of one month are offered to
or by reference banks in the London interbank market, as determined by
the Buyer at the time of each Transaction.
(z) "Margin" shall mean, with respect to any Mortgage Loan or pool of
Mortgage Loans, the difference between the Market Value of such loan
or loans and the Purchase Price for such loan or loans.
(aa) "Margin Call" shall have the meaning assigned to such term in
Paragraph 5(b).
(bb) "Margin Deficit" shall have the meaning assigned to such term in
Paragraph 5(b).
(cc) "Market Value" shall mean, with respect to each Purchased Loan, the
market value of such Purchased Loan as determined by the Buyer in its
sole discretion.
(dd) "Mortgage Loan" shall mean a residential real estate secured loan to a
sub-prime borrower, including, without limitation: (i) a promissory
note, any reformation thereof and related deed of trust (or mortgage)
and security agreement; (ii) all guaranties and insurance policies,
including, without limitation, all mortgage and title insurance
policies and all fire and extended coverage insurance policies and
rights of the Seller to return premiums or payments with respect
thereto; and (iii) all right, title and interest of the Seller in the
property covered by such deed of trust (or mortgage).
(ee) "Original Margin" shall mean, with respect to any date, the difference
between (i) the aggregate Market Value of all Purchased Loans held by
the Buyer on such date, determined as of the most recent Purchase Date
for each such Purchased Loan, and (ii) the Purchase Price paid by the
Buyer for all such Purchased Loans on such Purchase Date(s); provided
that the Original Margin for any Transaction shall be deemed to be no
greater than the Original Margin set out in the related Confirmation.
(ff) "Person" shall mean a corporation, an association, a partnership, an
organization, a business, a trust, an individual, a government or
political subdivision thereof, any governmental agency or any other
entity.
(gg) "Plan Party" shall have the meaning assigned to such term in Paragraph
29(a).
(hh) "Price Differential" shall mean, with respect to any Transaction as of
any date, the difference between the Purchase Price paid by the Buyer
and the Repurchase Price to be paid by the Seller. The Pricing
Differential will equal the aggregate amount obtained by daily
application of the Pricing Rate for such Transaction to the Purchase
Price for such Transaction on a 360-day-per-year basis for the actual
number of days during the period commencing on (and including) the
Purchase Date for such Transaction and ending on (but excluding) the
Repurchase Date or other date of determination.
(ii) "Pricing Rate" shall mean the per annum rate for determination of the
Price Differential, which rate shall be LIBOR plus [ ] basis points or
such other rate as may be specified in a Confirmation.
(jj) "Purchase Date" shall mean the date on which Purchased Loans are to be
transferred by the Seller to the Buyer.
(kk) "Purchased Loans" shall mean the Mortgage Loans transferred by the
Seller to the Buyer in a Transaction hereunder. The term "Purchased
Loans" with respect to any Transaction at any time also shall include
Additional Collateral delivered pursuant to Paragraph 5(b) hereof.
(ll) "Purchase Price" shall mean the price at which Purchased Loans are
transferred by the Seller to the Buyer.
(mm) "Replacement Mortgage Loans" shall have the meaning assigned to such
term in Paragraph 13(c).
(nn) "Repurchase Date" shall mean the date on which the Seller is required
to repurchase the Purchased Loans from the Buyer, which shall be (i)
the 10th day of the calendar month in which the Purchase Date occurs
or, if such Purchase Date falls on or after the 10th day of such
month, the 10th day of the following calendar month (or, in each case,
if such day is not a Business Day, the next Business Day), (ii) such
earlier date as may be set forth in a Confirmation or (iii) such
earlier date as may be determined by application of the provisions of
Paragraph 13 hereof.
(oo) "Repurchase Price" shall mean the price at which Purchased Loans are
to be transferred from the Buyer to the Seller upon termination of a
Transaction, which will be determined in each case as the sum of the
Purchase Price and the Price Differential as of the date of such
determination.
(pp) "Repurchase Term" shall mean, with respect to any Transaction, the
period beginning on the Purchase Date and continuing through the
Repurchase Date.
(qq) "Required Documents" shall mean the following documents with respect
to any Mortgage Loan:
(i) the original executed and fully completed promissory note
relating to the Mortgage Loan (properly endorsed to the Seller
if purchased by the Seller from another originator), which
promissory note shall be duly endorsed in blank without recourse
by an authorized officer of the Seller;
(ii) the original executed and fully completed mortgage or deed of
trust relating to the Mortgage Loan in proper form for
recordation in the appropriate jurisdiction and duly recorded in
the appropriate jurisdiction; provided, however, that a
certified copy of the executed mortgage or deed of trust
relating to the Mortgage Loan may be delivered to the Buyer in
lieu of the original recorded deed of trust or mortgage until
such time as the original recorded mortgage or deed of trust is
received from the recording jurisdiction and submitted to the
Buyer; and
(iii) an original executed, fully completed and recordable but
unrecorded assignment of the mortgage or deed of trust relating
to the Mortgage Loan in proper form for recordation in the
appropriate jurisdiction (unless the Buyer determines in its
reasonable judgment that under applicable state law the
assignment should be recorded in order to adequately protect its
interest, in which case the assignment shall be recorded by the
Seller and a certified true copy thereof shall be provided to
the Buyer), together with the original or a duly certified copy
of the fully completed and proper assignment or assignments of
the mortgage or deed of trust from the original holder through
any subsequent transferees to the Seller in proper form for
recordation in the appropriate jurisdiction, duly recorded if
local requirements in the jurisdiction in which the property is
located required the recordation of such assignment or
assignments.
(rr) "SEC" shall mean the Securities and Exchange Commission.
(ss) "Servicer" shall mean NovaStar Mortgage, Inc.
(tt) "Servicing Agreement" shall mean the servicing agreement dated as of
August 21, 1998 between the Seller and the Servicer, as modified by
the First Amendment and Supplement to Servicing Agreement, dated as of
August 21, 1998, between the Buyer, the Seller and the Servicer.
(uu) "SIPA" shall mean the Securities Investor Protection Act of 1970.
(vv) "Transaction" shall mean each transaction between the Seller and the
Buyer that is undertaken pursuant to a Confirmation.
(ww) "Underwriting Standards" shall mean the underwriting policies of the
Seller set forth in Exhibit C hereto.
3. Initiation and Termination of Transactions
(a) An agreement to enter into a Transaction may be made in writing at the
initiation of the Seller and shall be evidenced by a Confirmation
delivered pursuant to Paragraph 4(a). On the Purchase Date for the
Transaction, the Purchased Loans shall be transferred to the Buyer or
its agent against the transfer of the Purchase Price to an account of
the Seller.
(b) The Buyer's obligation to purchase any Mortgage Loan shall be subject
to the following:
(i) The Buyer (or the Custodian, if so directed by the Buyer) shall
have possession of the Required Documents for each Mortgage Loan
to be purchased provided that such possession may have been
released to a prospective purchaser of a Mortgage Loan (or a
custodian acting on its behalf) if the Buyer or the Custodian,
as applicable, has received a bailment letter for the related
required documents.
(ii) The Buyer's determination that the Mortgage Loans to be
purchased in the requested Transaction satisfy the requirements
of this Agreement.
(iii) The Seller's representations and warranties contained in this
Agreement and reaffirmed in the Confirmation shall be true and
correct.
(iv) The Purchase Price for such Transaction shall be at least
$10,000,000.
(v) No Event of Default shall have occurred under this Agreement.
(c) On the Repurchase Date for each Transaction, termination of the
Transaction will be effected by transfer to the Seller or its agent of
the Purchased Loans and any Income in respect thereof received by the
Buyer (and not previously credited or transferred to, or applied to
the obligations of the Seller hereunder) against the transfer of the
Repurchase Price to an account of the Buyer.
4. Transaction Confirmation
(a) Upon the parties' agreement to enter into a Transaction hereunder, the
Buyer shall prepare and deliver to the Seller, at least one Business
Day prior to the Purchase Date for the Transaction, a Confirmation for
such Transaction.
(b) The Confirmation shall list the Purchased Loans and set forth (i) the
Purchase Date, (ii) the Purchase Price, (iii) the anticipated
Repurchase Date, (iv) the Pricing Rate or Repurchase Price applicable
to the Transaction, and (v) any additional terms or conditions of the
Transaction.
(c) The Confirmation, together with this Agreement, shall constitute
conclusive evidence of the terms agreed between the Buyer and the
Seller, and shall be binding upon the parties unless written notice of
objection is given by the objecting party prior to the closing of the
Transaction.
(d) In the event of any conflict between the terms of a Confirmation and
this Agreement, the Confirmation shall prevail.
5. Margin Maintenance
(a) On Monday of each week during the Repurchase Term (or more often, if
the Buyer in its sole discretion so decides), the Buyer will determine
(i) the aggregate Market Value of all Purchased Loans and other
Collateral held by the Buyer and (ii) the Current Margin for such
date.
(b) If on any date during the term of this Agreement the Current Margin
for such date is less than the Original Margin for such date (such
shortfall, a "Margin Deficit"), the Buyer may by notice to the Seller
(such notice, a "Margin Call") require that the Seller, at the
Seller's option, transfer to the Buyer cash or additional Mortgage
Loans reasonably acceptable to the Buyer (collectively, "Additional
Collateral"), so that the Current Margin for such date will then equal
or exceed the Original Margin for such date; provided, however, that
the Buyer may not make a Margin Call unless the Margin Deficit exceeds
$250,000.
(c) If any notice is given under subparagraph (b) of this Paragraph 5 on
any Business Day, then the Seller shall transfer cash or Mortgage
Loans as provided in such subparagraph no later than the close of
business on the second Business Day following the date on which such
notice is received. Any cash transferred to the Buyer pursuant to this
subparagraph (c) shall be held by the Buyer for so long as any
Transaction remains in effect and shall be applied against the
Repurchase Price for any terminated Transaction on the applicable
Repurchase Date.
6. Aggregate Commitment and Term
(a) The aggregate Purchase Price for all Purchased Loans owned by the
Buyer on any date shall at no time exceed $200,000,000 (the "Aggregate
Commitment").
(b) This Agreement shall continue in effect for a period of 364 days from
the date of its execution by both parties.
7. Payments on Mortgage Loans; Servicing
The parties acknowledge that the Servicer will act as servicer for all Mortgage
Loans, will service all Mortgage Loans in accordance the Servicing Agreement and
will not sell or transfer its rights to service such loans without the Buyer's
consent. Where a particular Transaction's term extends over a payment date on a
Purchased Loan, all Income received with respect to such Purchased Loan shall,
so long as no Event of Default with respect to the Seller shall have occurred
and be continuing, be the property of the Seller, and the Seller shall be
entitled to all Income with respect to Purchased Loans subject to Transactions.
Upon the occurrence and continuance of an Event of Default,
all Income received by the Servicer with respect to the Purchased Loans shall be
held in a segregated account established by the Servicer and shall be paid to
the Buyer within one Business Day of receipt.
8. Repurchase Prior to Repurchase Date
Notwithstanding any provision hereof to the contrary, the Buyer may require the
Seller to repurchase at the Repurchase Price any of the Purchased Loans subject
to a Transaction as to which a breach of any representation contained in
Paragraph (f) of Exhibit B hereto has occurred upon two Business Days' prior
notice. Notwithstanding the foregoing, the Seller may elect, in lieu of
repurchasing such Purchased Loans, to substitute for such Purchased Loans one or
more Eligible Mortgage Loans having an aggregate Market Value which equals or
exceeds that of the Purchased Loans required to be repurchased under this
Section 8.
9. Delivery of Mortgage Loans
All of the Required Documents for Mortgage Loans that are to be Purchased Loans
for a Transaction shall be delivered to the Buyer (or the Custodian, if so
directed by the Buyer) at least two Business Days prior to the Purchase Date for
such Transaction.
10. Representations and Warranties
(a) Each of the Buyer and the Seller represents and warrants to the other
that (i) it is duly authorized to execute and deliver this Agreement,
to enter into Transactions contemplated hereunder and to perform its
obligations hereunder and has taken all necessary action to authorize
such execution, delivery and performance, (ii) it will engage in such
Transactions as principal, (iii) the individual signing this Agreement
on its behalf is duly authorized to do so on its behalf, (iv) it has
obtained all authorizations of any governmental body required in
connection with this Agreement and the Transactions hereunder and such
authorizations are in full force and effect and (v) the execution,
delivery and performance of this Agreement and the Transactions
hereunder will not violate any law, ordinance, charter, bylaw or rule
applicable to it or any agreement by which it is bound or by which any
of its assets are affected. On the Purchase Date for any Transaction
the Buyer and the Seller shall each be deemed to repeat all the
foregoing representations made by it.
(b) In addition to the foregoing, the Seller hereby represents and
warrants that, as of the date of this Agreement and as of the Purchase
Date for each Transaction:
(i) The Seller is servicing or causing to be serviced all Mortgage
Loans in accordance with industry standards for loans held by
third parties.
(ii) No Event of Default has occurred or is continuing under this
Agreement.
(iii) Since the date of the most recent balance sheet or financial
statement delivered by the Seller to the Buyer pursuant to the
Agreement, there has been no material adverse change in its
financial condition or results of operations.
(c) The Seller hereby represents and warrants to the Buyer that, as to
each Mortgage Loan, as of the applicable Purchase Date or such other
date specified herein:
(i) The information set forth in the schedule of Mortgage Loans
attached to each Confirmation is true and correct in all material
respects.
(ii) Such Mortgage Loan is an Eligible Mortgage Loan.
11. Covenants
The Seller hereby covenants and agrees with the Buyer that, as long as the Buyer
has any obligation to enter into Transactions under the Agreement:
(a) The Seller (or the Servicer, at the option of the Seller) shall hold
all Additional Required Documents for the Mortgage Loans that are
Purchased Loans in trust for the benefit of the Buyer.
(b) The Seller shall furnish or cause to be furnished to the Buyer:
(i) Within 90 days after the last day of each fiscal year of the
Seller, consolidated statements of income (and, in the case of
the consolidated statement, cash flows) for the Seller for such
year and consolidated and consolidating balance sheets for the
Seller as of the end of such year (with the foregoing
consolidating statements to separately display the income and
balance sheet of each of the Seller and its consolidated
subsidiaries in a format reasonably acceptable to the Buyer),
presented fairly in all material respects in accordance with GAAP
and accompanied by an unqualified report of a firm of independent
certified public accountants of nationally recognized standing
and including therewith a copy of any management letter from such
certified public accountants; and
(ii) Within 45 days after the last day of each fiscal quarter, (A)
unaudited consolidated statements of income (and, in the case of
the consolidated statement, cash flows) for the Seller for such
quarter, and unaudited consolidated and consolidating balance
sheets for the Seller as of the end of such quarter (with the
foregoing consolidating statements to separately display the
income and balance sheet of each of the Seller and its
consolidated subsidiaries in a format reasonably acceptable to
the Buyer), and (B) a certificate of an officer of the Seller,
whose position is vice president or higher, stating that such
financial statements are presented fairly in all material
respects and in accordance with GAAP, subject to year-end audit
adjustments, and further certifying that neither the Seller nor
any affiliate thereof is in default under the terms and
conditions of any agreement evidencing or securing any
indebtedness of such entity.
(c) The Seller shall promptly furnish such additional financial and other
information, including, without limitation, financial statements of
the Seller, and information regarding the Purchased Loans, as the
Buyer may from time to time reasonably request.
(d) The Seller shall pay or otherwise satisfy at or before maturity or
before it becomes delinquent or accelerated, as the case may be, all
its indebtedness (including taxes), except indebtedness being
contested in good faith by appropriate proceedings and for which
provision is made to the reasonable satisfaction of the Buyer for the
payment thereof in the event the Seller is found to be obligated to
pay such indebtedness and which indebtedness is thereupon promptly
paid by the Seller.
(e) The Seller shall maintain its corporate existence and obtain and
maintain all rights, privileges, licenses, approvals, franchises,
properties and assets necessary or desirable in the normal conduct of
its business, including but not limited to all approvals with respect
to the SEC or the Securities Commission of the State of Maryland and
comply with all contractual obligations and requirements of law
(including, without limitation, any requirements of law under or in
connection with ERISA, the federal Consumer Credit Protection Act, the
federal Real Estate Settlement Procedures Act, the federal Equal
Credit Opportunity Act, the federal Truth-in-Lending Act, and any
regulations promulgated thereunder), except where the failure to so
comply is not likely to have a material adverse effect on the
business, operations, assets or financial or other condition of the
Seller or on the Purchased Loans.
(f) The Seller shall keep proper books of record and account in which
full, true and correct entries in conformity with GAAP and all
requirements of law shall be made of all dealings and transactions in
relation to its business and activities.
(g) The Seller shall permit representatives of the Buyer to (A) visit and
inspect any of its properties and examine and make abstracts from any
of its books and records (including without limitation books and
records relating to the Purchased Loans) at any reasonable time and as
often as may reasonably be desired by the Buyer (but, prior to the
occurrence of an Event of Default, only upon not less than two
Business Days' prior notice), and (B) discuss the business,
operations, properties and financial and other condition of the Seller
with officers and employees of the Seller, and with its independent
certified public accountants; provided, however, that the results of
any such visit, inspection, examination, discussion or audit, to the
extent such results are proprietary and non-public, shall be
maintained by the Buyer in confidentiality except as required by law
or regulation or by any governmental agency or regulatory body having
authority over the Buyer, or to the extent such information may be
communicated to the legal counsel or auditors of the Buyer.
(h) The Seller shall promptly give written notice to the Buyer of:
(i) the occurrence of any potential default or Event of Default
hereunder known to responsible management personnel of the
Seller and the proposed method of cure thereof;
(ii) any litigation or proceeding affecting the Seller or the
Purchased Loans which could have a material adverse effect on
the Purchased Loans, or the business, operations, property,
or financial or other condition of the Seller;
(iii) a material adverse change known to responsible management
personnel of the Seller in the business, operations, property or
financial or other condition of the Seller;
(iv) any changes in the following senior management positions of the
Seller: President, Chief Executive Officer, Chief Operating
Officer, Chief Financial Officer or any Executive Vice
President;
(v) any default by the Seller or any of the Seller's affiliates
under the terms and conditions of any agreement evidencing or
securing any indebtedness of such entity; and
(vi) any breach of a representation or warranty set out in Exhibit B
hereto.
(i) The Seller shall pay (i) all legal expenses of the Buyer incident to
the preparation and negotiation of this Agreement and related
documents, up to a maximum of $7,500 and (ii) all reasonable out-of-
pocket costs and expenses (including fees and disbursements of legal
counsel) of the Buyer incident to the preparation and negotiation of
documents relating to Transactions, and incident to the enforcement of
the Seller's obligations hereunder or under any Confirmation, whether
by judicial proceedings or otherwise, including, without limitation,
in connection with bankruptcy, insolvency, liquidations,
reorganization, moratorium or other similar proceedings involving the
Seller. The obligations of the Seller under this Paragraph 11(j) shall
be effective and enforceable whether or not any Transaction is
outstanding hereunder and shall survive the termination of this
Agreement.
(j) The Seller shall originate and acquire Mortgage Loans only in
accordance with the Seller's current Underwriting Standards; provided
that the Seller may permit reasonable exceptions to the Underwriting
Standards with compensating factors on a case-by-case basis.
(k) The Seller shall not, directly or indirectly, create, incur, assume or
suffer to exist, any lien or other encumbrance upon the Collateral.
(l) The Seller shall not, without 10 days' prior written notice to the
Buyer, alter its current Underwriting Standards in any material manner
from those disclosed to the Buyer and attached to the Agreement as
Exhibit C.
(m) The Seller shall comply fully with the terms of the Custodial
Agreement.
12. Events of Default
The following shall constitute Events of Default hereunder (each, an "Event of
Default"):
(a) the Seller's failure to transfer or the Buyer's failure to purchase
Purchased Loans upon the applicable Purchase Date;
(b) the Seller's failure to repurchase or the Buyer's failure to transfer
Purchased Loans upon the applicable Repurchase Date;
(c) the Seller's or the Buyer's failure to comply with Paragraph 5 hereof;
(d) an Act of Insolvency occurs with respect to the Seller or the Buyer;
(e) any representation or warranty made by the Seller (other than the
representations and warranties of the Seller set out in Paragraph
10(c)) or the Buyer in this Agreement shall have been incorrect or
untrue in any material respect when made or repeated or deemed to have
been made or repeated;
(f) the Seller or the Buyer shall admit to the other its inability to, or
its intention not to, perform any of its obligations hereunder;
(g) if, for any reason, any Transaction is not deemed to be a purchase and
sale, the Agreement shall for any reason cease to create a valid,
first priority security interest in any of the Purchased Loans
purported to be covered thereby;
(h) the Seller or the Buyer shall breach any covenant, requirement or
obligation contained in this Agreement (other than a covenant made
with respect to a specific Purchased Loan);
(i) a default or event of default shall occur under any credit agreement
or other material agreement for which the Seller is the primary
obligor, which default or event of default would have a material
adverse effect on the business or finances of the Seller (as
reasonably determined by the Buyer);
(j) the Seller shall fail to repurchase any Purchased Loans at the
Repurchase Price when required by Paragraph 8 of this Agreement;
(k) the Buyer or the Seller shall have reasonably determined that the
other party is or will be unable to meet its commitments under this
Agreement, shall have notified such other party of such determination
and such other party shall not have responded with appropriate
information to the contrary to the reasonable satisfaction of the
notifying party within one Business Day;
(l) in the reasonable judgment of the Buyer a material adverse change
shall have occurred in the business, operations, properties, prospects
or financial condition of the Seller; or
(m) the Seller shall merge or consolidate into any entity, unless the
surviving or resulting entity shall be acceptable to the Buyer, in its
reasonable discretion, and such entity expressly assumes by written
agreement, executed and delivered to the Buyer in form and substance
reasonably satisfactory to the Buyer, the performance of all the
Seller's duties and obligations hereunder.
13. Remedies upon Event of Default
Upon the occurrence of any Event of Default:
(a) The nondefaulting party may, at its option (which option shall be
deemed to have been exercised immediately upon the occurrence of an
Act of Insolvency), declare an Event of Default to have occurred
hereunder and, upon the exercise or deemed exercise of such option,
the Repurchase Date for each Transaction hereunder, shall, if it has
not already occurred, be deemed immediately to occur (except that, in
the event that the Purchase Date for any Transaction has not yet
occurred as of the date of such exercise or deemed exercise, such
Transaction shall be deemed immediately canceled). The nondefaulting
party shall (except upon the occurrence of an Act of Insolvency) give
notice to the defaulting party of the exercise of such option as
promptly as practicable.
(b) Upon the occurrence of an Event of Default by the Seller, if the Buyer
exercises or is deemed to have exercised the option referred to in
subparagraph (a) of this Paragraph, (i) the Seller's obligation to
repurchase all Purchased Loans, at the Repurchase Price therefor on
the Repurchase Date determined in accordance with subparagraph (a) of
this Paragraph, shall thereupon become immediately due and payable;
(ii) all Income paid after such exercise or deemed exercise shall be
retained by the Buyer and applied to the aggregate unpaid Repurchase
Price and any other amounts owing by the Seller hereunder; (iii) the
Seller shall immediately deliver to the Buyer any Purchased Loans that
are subject to a Transaction which are then in the Seller's possession
or control; (iv) the Buyer may, without notice to the Seller, (A)
immediately sell, in a recognized market (or otherwise in a
commercially reasonable manner) at such price or prices as the Buyer
may reasonably deem satisfactory, any or all Purchased Loans subject
to such Transactions and apply the proceeds thereof to the aggregate
unpaid Repurchase Prices and any other amounts owing by the Seller
hereunder or (B) in its sole discretion elect, in lieu of selling all
or a portion of such Purchased Loans, to give the Seller credit for
such Purchased Loans in an amount equal to the price therefor on such
date, obtained from a generally recognized source, against the
aggregate unpaid Repurchase Prices and any other amounts owing by the
Seller hereunder; and (v) the
Buyer may refuse to enter into any further Transactions with the
Seller under this Agreement and may determine that the Agreement is
terminated.
(c) Upon the occurrence of an Event of Default by the Buyer and tender by
the Seller of payment of the aggregate Repurchase Price for any
Transaction, (i) all right, title and interest in and entitlement to
all Purchased Loans subject to such Transaction shall be deemed
transferred to the Seller; (ii) the Buyer shall deliver all such
Purchased Loans to the Seller; (iii) the Seller may, without notice to
the Buyer, (A) immediately purchase, in a commercially reasonable
manner, at such price or prices as the Seller may reasonably deem
satisfactory, Mortgage Loans ("Replacement Mortgage Loans") of the
same class and amount as any Purchased Loans that are not delivered by
the Buyer to the Seller as required hereunder or (B) in its sole
discretion elect, in lieu of purchasing Replacement Mortgage Loans, to
be deemed to have purchased Replacement Mortgage Loans at the price
therefor on such date, obtained from a generally recognized source;
and (iv) the Buyer shall be liable to the Seller for any excess of the
price paid (or deemed paid) by the Seller for Replacement Mortgage
Loans over the Repurchase Price for the Purchased Loans replaced
thereby.
(d) The parties acknowledge and agree that (i) in the absence of a
generally recognized source for prices or bid or offer quotations for
any Mortgage Loan, the nondefaulting party may establish the source
therefor in its sole discretion; and (ii) all prices, bids and offers
shall be determined together with accrued Income (except to the extent
contrary to market practice with respect to the relevant Mortgage
Loans).
(e) For purposes of this Paragraph 13, the Repurchase Price for each
Transaction hereunder with respect to which the Buyer is in default
shall not increase above the amount of such Repurchase Price for such
Transaction determined as of the date of the exercise or deemed
exercise by the nondefaulting party of the option referred to in
subparagraph (a) of this Paragraph.
(f) The defaulting party shall be liable to the nondefaulting party for
(i) the amount of all reasonable legal or other expenses incurred by
the nondefaulting party in connection with or as a result of an Event
of Default, (ii) damages in an amount equal to the cost (including all
reasonable fees, expenses and commissions) of entering into
replacement transactions and entering into or terminating hedge
transactions in connection with or as a result of an Event of Default,
and (iii) any other loss, damage, cost or expense directly arising or
resulting from the occurrence of an Event of Default in respect of a
Transaction.
(g) To the extent permitted by applicable law, the defaulting party shall
be liable to the nondefaulting party for interest at the Default Rate
on any amounts owing by the defaulting party hereunder from the date
the defaulting party becomes liable for such amounts hereunder until
such amounts are (i) paid in full by the defaulting party or (ii)
satisfied in full by the exercise of the nondefaulting party's rights
hereunder.
(h) The nondefaulting party shall have, in addition to its rights
hereunder, any rights otherwise available to it under any other
agreement or applicable law.
(i) Upon default by the Seller, all rights of the Seller to receive
payments on the Mortgage Loans which it would otherwise be authorized
to receive hereunder shall cease, and all rights to such payments
shall become vested in the Buyer, which shall have the sole right to
receive such payments and apply them to the amounts owed by the Seller
pursuant to this Agreement. All payments that are received by the
Seller contrary to the provisions of this clause (i) shall be received
in trust for the benefit of the Buyer, shall be segregated from other
funds of the Seller and shall be promptly paid to the Buyer.
(j) In addition to the other remedies available to the Buyer upon the
occurrence and during the continuance of an Event of Default by the
Seller, the Buyer shall be entitled to the right of set-off with
respect to any amounts then owed by the Seller to the Buyer under any
contract, margin account or other arrangement. The Seller hereby
waives any right it may have to require that any deposits held by the
Buyer for the Seller be set off by the Buyer against the Seller's
obligations under the Agreement.
14. Application of Proceeds
The proceeds of any sale of or other realization on any or all of the Collateral
at the time held by the Buyer under the Agreement shall be applied by the Buyer
in the following order of priority:
(a) First, to the payment of all reasonable costs and expenses of such
sale incurred by the Buyer and its affiliates and all reasonable
expenses (including the fees and expenses of counsel), liabilities and
advances reasonably made or incurred by the Buyer and its affiliates
in connection therewith.
(b) Second, to the payment of the outstanding Repurchase Price owed by the
Seller under this Agreement.
(c) Third, to the payment of all other amounts owed by the Seller under
this Agreement.
(d) Fourth, to the payment of any other amounts owed by the Seller to the
Buyer or any affiliate thereof under any other instrument or
agreement.
(e) Fifth, to the payment to the Seller, or to such other Person as court
of competent jurisdiction may direct, of any surplus then remaining
from such proceeds and other cash.
As used in the Agreement, "proceeds" of the Collateral shall mean cash and other
property received or otherwise realized in respect of the Purchased Loans.
15. Indemnification
If the Buyer becomes involved in any capacity in any action, proceeding or
investigation in connection with any matter contemplated by this Agreement, the
primary focus of which action, proceeding or investigation concerns the Seller,
the Seller will reimburse the Buyer for its legal and other expenses (including
the cost of any investigation and preparation) as they are incurred by the
Buyer. The Seller also agrees to indemnify and hold harmless the Buyer and its
affiliates and their respective directors, officers, employees and agents
(collectively, the "Indemnified Parties"), from and against any and all losses,
claims, damages and liabilities, joint or several, related to or arising out of
any matters contemplated by this Agreement. Notwithstanding the foregoing, the
Seller shall have no obligation to reimburse or indemnify the Buyer hereunder if
it shall be finally judicially determined that such expenses, losses, claims,
damages or liabilities resulted primarily from the gross negligence or willful
misconduct of the Buyer.
If the foregoing indemnification is for any reason unavailable to any of the
Indemnified Parties, then the Seller shall contribute to the amount paid or
payable by the Indemnified Parties as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative benefits
received by the Seller, on the one hand, and such Indemnified Parties, on the
other, arising out of the matters contemplated by this Agreement.
The reimbursement, indemnity and contribution provided for herein shall be in
addition to any other liability that the Seller may otherwise have under this
Agreement, at law or in equity, and shall survive the termination or expiration
of this Agreement.
16. Payment and Transfer
Unless otherwise mutually agreed, all transfers of funds hereunder shall be in
immediately available funds. All Mortgage Loans transferred by one party hereto
to the other party (a) shall be in suitable form for transfer or shall be
accompanied by duly executed instruments of transfer or assignment in blank and
such other documentation as the party receiving possession may reasonably
request, (b) shall be transferred on the book-entry system of a Federal Reserve
Bank, or (c) shall be transferred by any other method mutually acceptable to the
Seller and the Buyer.
17. Limited Power of Attorney
The Seller hereby appoints the Buyer to act (but only after the occurrence and
during the continuation of an Event of Default) as the attorney-in-fact of the
Seller for the purpose of carrying out the provisions of this Agreement and
taking any action and executing any instruments that the Buyer shall deem
necessary or advisable to accomplish the purposes hereof. This appointment as
attorney-in-fact is irrevocable and is coupled with an interest. Without
limiting the generality of the foregoing, the Buyer and its assigns shall have
the right and power pursuant to this appointment to sell Purchased Loans and to
receive, endorse and collect all checks made payable to the order of the Seller
on account of the principal or interest on any of the Purchased Loans and to
give full discharge of the same.
18. Effect of Termination
The termination of this Agreement by either party shall not eliminate any
liability for losses incurred by either party during the duration of this
Agreement. To the extent that this Agreement is terminated, the terms of this
Agreement shall continue to apply to any Transactions outstanding after the
termination of this Agreement. The provisions of Paragraph 15 relating to
Indemnification shall survive the termination of this Agreement.
19. Time
All references to time contained in the Agreement shall be deemed to be local
time in Charlotte, North Carolina on the applicable day.
20. Fees and Expenses
Nothing in this Agreement shall act as a bar to the collection of any fees or
expenses of the Buyer that the Seller may agree to pay in any separate agreement
relating to any or all of the Transactions.
21. Payment of Secured Creditors
The Seller may direct the Buyer to pay all or any portion of the Purchase Price
for a Transaction to one or more creditors of the Seller, or any of its
affiliates, if such payment is necessary to release a lien on the Mortgage Loans
that are to be purchased in such Transaction. Such payment and release of an
existing lien may occur simultaneously with the purchase of Mortgage Loans under
this Agreement.
22. Opinions of Counsel
The Seller shall, on the date of the first Transaction hereunder and, upon the
request of the Buyer, on the date of any subsequent Transaction, cause to be
delivered to the Buyer, with reliance thereon permitted as to any Person or
entity that purchases the Purchased Loans from the Buyer, a favorable opinion of
the Seller's counsel with respect to the matters set forth in Exhibit D hereto,
in form and substance reasonably acceptable to the Buyer.
23. Single Agreement
The Buyer and the Seller acknowledge that, and have entered into this Master
Repurchase Agreement and will enter into each Transaction hereunder in
consideration of and in reliance upon the fact that, all Transactions hereunder
constitute a single business and contractual relationship and have been made in
consideration of each other. Accordingly, each of the Buyer and the Seller
agrees (a) to perform all of its obligations in respect of each Transaction
hereunder, and that a default in the performance of any such obligations shall
constitute a default by it in respect of all Transactions hereunder, (b) that
each of them shall be entitled to set off claims and apply property held by them
in respect of any Transaction against obligations owing to them in respect of
any other Transactions hereunder and (c) that payments, deliveries and other
transfers made by either of them in respect of any Transaction shall be deemed
to have been made in consideration of payments, deliveries and other transfers
in respect of any other Transactions hereunder, and the obligations to make any
such payments, deliveries and other transfers may be applied against each other
and netted.
24. Notices and Other Communications
Any and all notices, statements, demands or other communications hereunder may
be given by a party to the other by mail, facsimile, telegraph, messenger or
otherwise to the address listed below, or such other address as may be specified
in a notice of change of address hereafter received by the other:
SELLER: NovaStar Financial, Inc.
0000 Xxxx 00xx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
BUYER: First Union National Bank
000 Xxxxx Xxxxxxx Xxxxxx, XX-00
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attention: Xxxx Xxxxxxxxxx, Vice President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
All notices, demands and requests hereunder may be made orally, to be confirmed
promptly in writing, or by other communication as specified in the preceding
sentence.
25. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the parties
containing general terms and conditions for repurchase transactions. Each
provision and agreement herein shall be treated as separate and independent from
any other provision or agreement herein and shall be enforceable notwithstanding
the unenforceability of any such other provision or agreement.
26. Non-assignability; Termination
(a) The rights and obligations of the parties under this Agreement and
under any Transaction shall not be assigned by either party without
the prior written consent of the other party, and any such assignment
without the prior written consent of the other party shall be null and
void. Subject to the foregoing, this Agreement and any Transactions
shall be binding upon and shall inure to the benefit of the parties
and their respective successors and assigns. This Agreement may be
terminated by either party upon giving written notice to the other,
except that this Agreement shall, notwithstanding such notice, remain
applicable to any Transactions then outstanding.
(b) Subparagraph (a) of this Paragraph 26 shall not preclude a party from
assigning, charging or otherwise dealing with all or any part of its
interest in any sum payable to it under Paragraph 13 hereof.
27. Governing Law
THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF.
28. No Waivers, Etc.
No express or implied waiver of any Event of Default by either party shall
constitute a waiver of any other Event of Default and no exercise of any remedy
hereunder by any party shall constitute a waiver of its right to exercise any
other remedy hereunder. No modification or waiver of any provision of this
Agreement and no consent by any party to a departure herefrom shall be effective
unless in writing and duly executed by both of the parties hereto. Without
limitation on any of the foregoing, the failure to give a notice pursuant to
Paragraph 5(b) hereof will not constitute a waiver of any right to do so at a
later date.
29. Use of Employee Plan Assets
(a) If assets of an employee benefit plan subject to any provision of
ERISA are intended to be used by either party hereto (the "Plan
Party") in a Transaction, the Plan Party shall so notify the other
party prior to the Transaction. The Plan Party shall represent in
writing to the other party that the Transaction does not constitute a
prohibited transaction under ERISA or is otherwise exempt therefrom,
and the other party may proceed in reliance thereon but shall not be
required so to proceed.
(b) Subject to the last sentence of subparagraph (a) of this Paragraph,
any such Transaction shall proceed only if the Seller furnishes or has
furnished to the Buyer its most recent available audited statement of
its financial condition and its most recent subsequent unaudited
statement of its financial condition.
(c) By entering into a Transaction pursuant to this Paragraph, the Seller
shall be deemed to (i) represent to the Buyer that since the date of
the Seller's latest such financial statements, there has been no
material adverse change in the Seller's financial condition which the
Seller has not disclosed to the Buyer, and (ii) agree to provide the
Buyer with future audited and unaudited statements of its financial
condition as they are issued, so long as it is a Seller in any
outstanding Transaction involving a Plan Party.
30. Intent
(a) The parties recognize that each Transaction is a "repurchase
agreement" as that term is defined in Section 101 of Title 11 of the
Bankruptcy Code, and a "securities contract" as that term is defined
in Section 741 of the Bankruptcy Code. The parties further intend and
recognize that the Mortgage Loans constitute "securities" as such term
is defined in Section 101(49) of the Bankruptcy Code.
(b) It is understood that either party's right to liquidate Mortgage Loans
delivered to it in connection with Transactions hereunder or to
exercise any other remedies pursuant to Paragraph 13 hereof is a
contractual right to liquidate such Transaction as described in
Sections 555 and 559 of the Bankruptcy Code.
(c) Although the parties intend that all Transactions hereunder be sales
and purchases and not loans, in the event any such Transactions are
deemed to be loans, the Seller shall be deemed to have pledged to the
Buyer as security for the performance by the Seller of its obligations
under each such Transaction, and shall be deemed to have granted to
the Buyer a security interest in, all of the Purchased Loans with
respect to all Transactions hereunder and all Income thereon and other
proceeds thereof.
(d) The parties agree and acknowledge that if a party hereto is an
"insured depository institution," as such term is defined in FDIA,
then each Transaction hereunder is a "qualified financial contract,"
as that term is defined in FDIA and any rules, orders or policy
statements thereunder (except insofar as the type of assets subject to
such Transaction would render such definition inapplicable).
(e) It is understood that this Agreement constitutes a "netting contract"
as defined in and subject to Title IV of FDICIA and each payment
entitlement and payment obligation under any Transaction hereunder
shall constitute a "covered contractual payment entitlement" or
"covered contractual payment obligation", respectively, as defined in
and subject to FDICIA (except insofar as one or both of the parties is
not a "financial institution" as that term is defined in FDICIA).
31. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the parties is a broker or
dealer registered with the SEC under Section 15 of the 1934 Act, the
Securities Investor Protection Corporation has taken the position that
the provisions of SIPA do not protect the other party with respect to
any Transaction hereunder;
(b) in the case of Transactions in which one of the parties is a
government securities broker or a government securities dealer
registered with the SEC under Section 15C of the 1934 Act, SIPA will
not provide protection to the other party with respect to any
Transaction hereunder; and
(c) in the case of Transactions in which one of the parties is a financial
institution, funds held by the financial institution pursuant to a
Transaction hereunder are not on deposit and therefore are not insured
by the Federal Deposit Insurance Corporation or the National Credit
Union Share Insurance Fund, as applicable.
IN WITNESS WHEREOF, the Seller and the Buyer have caused this Master
Repurchase Agreement to be executed by their authorized representatives as of
this ___ day of ________, 1998.
NOVASTAR FINANCIAL, INC.,
as Seller
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
FIRST UNION NATIONAL BANK,
as Buyer
By:
----------------------------
Name:
--------------------------
Title:
-------------------------
EXHIBIT A
FORM OF CONFIRMATION
[Date]
NovaStar Financial, Inc.
0000 Xxxx 00xx Xxxxx, Xxxxx 000
Xxxxxxxx, Xxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxx
Ladies and Gentlemen:
Pursuant to the master repurchase agreement (the "Master Repurchase
Agreement"), dated as of August 21, 1998 between the undersigned (the "Buyer")
and you (the "Seller"), the Buyer hereby agrees to purchase the Mortgage Loans
identified on Schedule I attached hereto, subject to the terms set forth below:
Purchase Date: ________________
Repurchase Date: ________________
Purchase Price: ________________
Pricing Rate: ________________
Margin: [___]%
Original Margin: 2%
All of the representations and warranties made in the Master Repurchase
Agreement must be true and correct as of the Purchase Date and no Event of
Default shall have occurred. Capitalized terms not defined herein shall have
the meanings assigned to them in the Master Repurchase Agreement.
If you are in agreement with these terms, please execute the
acknowledgement and acceptance set forth below and return one copy of this
Confirmation to the Buyer.
Very truly yours,
FIRST UNION NATIONAL BANK,
as Buyer
By:______________________________
Name:____________________________
Title:___________________________
Accepted and Agreed as of
this ____ day of __________, ____.
NOVASTAR FINANCIAL, INC.,
as Seller
By:______________________________
Name:____________________________
Title:___________________________
SCHEDULE I TO CONFIRMATION
MORTGAGE LOAN SCHEDULE
EXHIBIT B
REPRESENTATIONS AND WARRANTIES
RELATING TO ELIGIBLE MORTGAGE LOANS
(a) The Mortgage Loan is a binding and valid obligation of the obligor
thereon, in full force and effect and enforceable in accordance with its terms
except as the same may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect relating to
creditors' rights generally.
(b) The Mortgage Loan is genuine in all respects as appearing on its face
and as represented in the books and records of the Seller and all information
set forth therein is true and correct in all material respects.
(c) The Mortgage Loan is free of any default of any party thereto
(including the Seller), other than as expressly permitted pursuant to
subparagraph (d) below, counterclaims, offsets and defenses and from any
rescission, cancellation or avoidance, whether by operation of law or otherwise.
(d) No payment under the Mortgage Loan is more than 59 days past due the
payment due date set forth in the underlying promissory note and deed of trust
(or mortgage); provided that no more than five percent of the Mortgage Loans
purchased by the Buyer in any Transaction may be more than 30 days past due the
payment due date set forth in the underlying promissory note and deed of trust
(or mortgage).
(e) The Mortgage Loan contains the entire agreement of the parties thereto
with respect to the subject matter thereof, has not been modified or amended in
any respect and is free of concessions or understandings with the obligor
thereon of any kind not expressed in writing therein.
(f) The Mortgage Loan complies in all respects and was originated in
accordance with all applicable laws and regulations governing the same,
including, without limitation, the federal Consumer Credit Protection Act, the
federal Real Estate Settlement Procedures Act, the federal Equal Credit
Opportunity Act, the federal Truth-in-Lending Act, and the regulations
promulgated thereunder and all applicable usury laws and restrictions, and all
notices, disclosures and other statements or information required by law or
regulation to be given, and any other act required by law or regulation to be
performed, in connection with the Mortgage Loan have been given and performed as
required.
(g) All proceeds of the Mortgage Loan have been fully disbursed.
(h) At all times the Mortgage Loan will be free and clear of all liens.
(i) The property covered by the Mortgage Loan is insured against loss or
damage by fire and all other hazards normally included within standard extended
coverage in accordance with the provisions of the Mortgage Loan with the Seller
named as a loss payee thereon.
(j) The property covered by the Mortgage Loan is free and clear of all
liens except:
(i) the lien in favor of the Seller;
(ii) the lien of current real property taxes and assessments not yet
due and payable;
(iii) covenants, conditions and restrictions, rights of way, easements
and other matters of the public record, as of the date of recording, as are
acceptable to mortgage lending institutions generally and specifically
referred to in a lender's title insurance policy delivered to the
originator of the Mortgage Loan and which (A) are referred to or otherwise
considered in the appraisal made for the originator of the Mortgage Loan or
(B) do not materially adversely affect the appraised value of the property
as set forth in such appraisal;
(iv) other matters to which like properties are commonly subject and
which do not materially interfere with the benefits of the security
intended to be provided by the Mortgage Loan or the use, enjoyment, value
or marketability of the related property;
(v) liens subordinate in priority to the lien in favor of the Seller;
and
(vi) in the case of second priority Mortgage Loans, one lien superior
in priority to the lien in favor of the Seller.
(k) The property shall be improved, and such improvements shall consist of
a completed one- to four-unit single family residence, including, but not
limited to, a condominium, planned unit development or townhouse, but excluding
in any event a co-op or mobile home.
(l) The Mortgage Loan is not subject to any servicing arrangement with any
Person other than the Servicer, nor are any servicing rights relating to the
Mortgage Loan subject to any lien, claim, interest or negative pledge in favor
of any Person other than as permitted hereunder.
(m) The Seller obtained an appraisal in connection with the origination of
the Mortgage Loan as would satisfy all appraisal requirements for the Mortgage
Loan if such had been originated by a federally-insured depositary institution
or in a form otherwise approved by the Buyer.
(n) The Mortgage Loan is secured by a first or second priority mortgage or
deed of trust on the property covered thereby.
(o) The Mortgage Loan is not a revolving credit facility.
(p) No real property taxes or insurance payments due and payable with
respect to the property (or escrow installments therefor) covered by the
Mortgage Loan are past due the payment due date thereof.
(q) The Mortgage Loan complies with the Underwriting Standards provided
that the Seller may permit reasonable exceptions to the Underwriting Standards
with compensating factors on a case-by-case basis.
(r) The Mortgage Loan shall have a cumulative Loan-to-Value Ratio of not
more than 100%.
EXHIBIT C
SELLER'S UNDERWRITING STANDARDS
EXHIBIT D
FORM OF OPINION OF COUNSEL
