SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
October 30, 1998
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Date of report (Date of earliest
event reported)
WILSHIRE FINANCIAL SERVICES GROUP INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-21845 93-1223879
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(State or other jurisdiction of Commission File Number (I.R.S. Employer
incorporation) Identification Number)
1776 SW Madison Street, Portland, OR 97205
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(Address of principal executive offices)(Zip Code)
(503) 223-5600
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Registrant's telephone number, including area code
Not Applicable
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 30, 1998, Wilshire Financial Services Group Inc. ("WFSG" or the
"Company") sold a loan pool to Bear Stearns Mortgage Capital Corporation for
$232.5 million. The sales price was determined through arms length negotiations
between the purchaser and the Company. Cash proceeds from the sale were used to
repay principal and interest on the existing repurchase agreement with an
unrelated third party for which these loans served as collateral totaling $227.2
million.
The assets sold consisted of approximately 1,396 fully amortizing
fixed-rate mortgage loans secured by first liens on residential properties that
had a weighted average coupon of 8.15% and a weighted average remaining term to
maturity of 28.8 years.
The market for mortgage-backed securities and, in particular, subordinate
credit related tranches of these securities has experienced dramatically
widening spreads throughout the last ten weeks. Liquidity problems affecting
certain Wall Street firms, hedge funds and other financial instruments investors
have exacerbated this market phenomenon through forced liquidations of their
assets. This has led to an increased need for liquidity at WFSG both to meet
collateral calls and as a preemptive measure to protect against future MBS
spread distortions that the Company expects may be experienced by the markets in
general.
As a result, the Company, through this sale, has reduced debt and increased
current liquidity, enabling it to meet collateral calls. The Company recognized
an impairment loss on these assets totaling approximately $5.4 million, or $4.7
million net of tax benefit, during the quarter ended September 30, 1998. In
addition, the Company may recognize impairment losses on unsold assets and
assets sold which are not required to be covered under Form 8-K.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(b) Pro forma financial information related to the asset sold listed under Item
2 is attached hereto, and incorporated herein by reference, as Exhibit 99.
(c) Exhibits
The following exhibits are filed as part of this report:
2.1 Mortgage Loan Purchase Agreement dated October 30, 1998,
between Wilshire Funding Corporation and Bear Stearns
Mortgage Capital Corporation.
99 Pro forma financial information
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WILSHIRE FINANCIAL SERVICES
GROUP INC.
By: /s/ Lawrence A. Mendelsohn
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Lawrence A. Mendelsohn
President
Date: November 13, 1998 By: /s/ Chris Tassos
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Chris Tassos
Executive Vice President and
Chief Financial Officer
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INDEX TO EXHIBITS FILED HEREWITH
EXHIBIT DESCRIPTION PAGE
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2.1 Mortgage Loan Purchase Agreement dated October 30, 1998, 6
between Wilshire Funding Corporation and Bear Stearns
Mortgage Capital Corporation.
99 Pro Forma Financial Information - Narrative Format 20
Exhibit 2.1
MORTGAGE LOAN PURCHASE AGREEMENT
This is a Mortgage Loan Purchase Agreement (the "Agreement"), dated October
30, 1998, by and between Wilshire Funding Corporation, a Delaware corporation,
having an office at 1776 Southwest Madison Street, Portland, Oregon 97205 (the
"Seller") and Bear Stearns Mortgage Capital Corporation, a Delaware corporation,
having an office at 245 Park Avenue, New York, New York 10167 (the "Purchaser").
The Seller agrees to sell to the Purchaser and the Purchaser agrees to
purchase from the Seller certain mortgage loans listed on the Mortgage Loan
Schedule attached hereto as Schedule I, on a servicing-released basis as
described herein (the "Mortgage Loans"). The Seller shall interim service the
Mortgage Loans on behalf of the Purchaser or its designee pursuant to that
certain Interim Servicing Agreement, dated the date hereof, between the Seller
and the Purchaser (the "Servicing Agreement"). The following terms are defined
as follows:
Aggregate Principal Balance
(as of the Cut-Off Date): $229,479,667.24 (after deduction of all
principal payments actually received and
credited on or prior to the Cut-Off Date)
Closing Date: October 30, 1998, or such other date as may
be agreed upon by the parties hereto.
Cut-Off Date: As of the close of business on
October 28, 1998.
Headlands Agreement: That certain Mortgage Loan Purchase and
Warranties Agreement, Conventional
Residential Fixed Rate Mortgage Loans, Group
25113, dated JHeadlands998, between
Mortgage Company ("Headlands") and CSFB (as
defined herein).
Mortgage Loan: A fixed rate, fully-amortizing, first lien,
residential conventional mortgage loan
having a term of not more than 30 years.
Mortgage Property: A single parcel of real property with a
detached single-family or a two-to-four
family dwelling erected thereon, or a
townhouse, an individual condominium
project or an individual unit in a planned
unit development securing a Mortgage Loan.
Purchase Price Percentage: That certain purchase price percentage set
forth in the confirmation letter, dated
October 22, 1998, between the Seller and the
Purchaser, as may be adjusted as set
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forth therein (the "Confirmation").
Servicing Transfer Date: November 18, 1998, or such later date
selected by the Purchaser at its sole
option.
Capitalized terms used herein and not defined shall have the meanings set
forth in the Headlands Agreement. The parties intend hereby to set forth the
terms and conditions upon which the proposed transactions will be effected and,
in consideration of the premises and the mutual agreements set forth herein,
agree as follows:
SECTION 1. Agreement to Sell and Purchase Mortgage Loans. The Seller hereby
agrees to sell to the Purchaser and the Purchaser hereby agrees to purchase from
the Seller those certain Mortgage Loans, and the related servicing rights,
having an aggregate amount equal to the Aggregate Principal Balance as of the
Cut-Off Date. The Seller acquired the Mortgage Loans from Credit Suisse First
Boston Mortgage Capital LLC ("CSFB"), pursuant to that certain Assignment and
Assumption Agreement, dated June 30, 1998, among the Seller, Headlands and CSFB.
The Seller shall assign its right, title and interest in the Headlands Agreement
pursuant to an Assignment and Assumption Agreement, between the Seller and the
Purchaser, dated the Closing Date (the "Assignment").
SECTION 2. Mortgage Loan Schedule. The Seller has provided or shall provide
the Purchaser, prior to the Closing Date, with a schedule setting forth all of
the Mortgage Loans to be purchased on the Closing Date under this Agreement,
which shall be attached hereto as Schedule I (the "Mortgage Loan Schedule"),
setting forth that certain information with respect to each Mortgage Loan and
the Mortgage Loans in the aggregate as listed in the definition of "Mortgage
Loan Schedule" set forth in the Headlands Agreement.
SECTION 3. Purchase Price of Mortgage Loans. The purchase price (the
"Purchase Price") to be paid to the Seller by the Purchaser for the Mortgage
Loans and the related servicing rights shall be equal to (a) the product of (i)
the Purchase Price Percentage and (ii) the Aggregate Principal Balance as of the
Cut-Off Date plus (b) accrued interest on each Mortgage Loan at the related
gross rate from the related last interest paid-to-date for such Mortgage Loan to
the day prior to the Closing Date, inclusive. The Purchase Price shall be paid
on the Closing Date by wire transfer of immediately available funds to the
accounts specified by the Seller.
SECTION 4. Record Title and Possession of Mortgage Files. The Seller hereby
sells, transfers, assigns, sets over and conveys to the Purchaser, the Mortgage
Loans and the servicing rights appurtenant thereto, without recourse, but
subject to the terms of this Agreement and the Seller hereby acknowledges that
the Purchaser, subject to the terms of this Agreement, shall have all the right,
title and interest of the Seller in and to the Mortgage Loans and the servicing
rights appurtenant thereto. The delivery of each Mortgage File to the Purchaser
or its designee is at the expense of the Seller. From the Closing Date, but as
of the Cut-off Date, the ownership of each Mortgage Loan, including the Mortgage
Note, the Mortgage, the contents of the related Mortgage File and all rights,
servicing rights, benefits, proceeds and obligations arising therefrom or in
connection therewith, have been vested in the Purchaser. All rights arising out
of the Mortgage
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Loans including, but not limited to, all funds received on or in connection with
the Mortgage Loans and all records or documents with respect to the Mortgage
Loans prepared by or which come into the possession of the Seller shall be
received and held by the Seller pursuant to the Interim Servicing Agreement in
trust for the exclusive benefit of the Purchaser as the owner of the Mortgage
Loans.
SECTION 5. Delivery of Mortgage Files. Within three (3) business days prior
to the Closing Date, the Seller will deliver the Mortgage File to the Purchaser
or its designee, as directed by the Purchaser. The "Mortgage File" means, with
respect to each Mortgage Loan:
(a) The original mortgage note (the "Mortgage Note") endorsed in a
form directed by the Purchaser, and signed in the name of the Seller
by an authorized officer, with all intervening endorsements showing a
complete chain of title from the originator to the Seller. If the
Mortgage Loan was acquired by the Seller in a merger, the endorsement
must be by " , successor by merger to [name of predecessor]". If the
Mortgage Loan was acquired or originated by the Seller while doing
business under another name, the endorsement must be by " ,formerly
known as [previous name]".
(b) The original of any guarantee executed in connection with the
Mortgage Note.
(c) Original mortgage, deed of trust or other evidence of indebtedness
(the "Mortgage"), with evidence of recording thereon. If in connection
with any Mortgage Loan, the Seller cannot deliver or cause to be
delivered the original Mortgage with evidence of recording thereon on
the Closing Date because of a delay caused by the public recording
office where such Mortgage has been delivered for recordation or
because such public recording office retains the original recorded
Mortgage, or if the original recorded Mortgage is lost, the Seller
shall deliver, or cause to be delivered to the Purchaser, a photocopy
of such Mortgage, together with a certificate of the Seller that such
copy is a true and correct copy thereof and (i) in the case of a delay
caused by the public recording office, a statement that such Mortgage
has been dispatched to the appropriate public recording office for
recordation and that the original recorded Mortgage or a copy of such
Mortgage certified by such public recording office to be a true and
complete copy of the original recorded Mortgage will be promptly
delivered to the Purchaser upon receipt thereof by the Seller or (ii)
where a public recording office retains the original recorded Mortgage
or if the original recorded Mortgage is lost, a copy of such Mortgage
certified by such public recording office to be a true and complete
copy of the original recorded Mortgage.
(d) Any rider executed in connection with the related Mortgage Note or
Mortgage.
(e) Original assignment of Mortgage (the "Assignment of Mortgage")
from the Seller to an entity as directed by the Purchaser, which
Assignment shall be in form and substance acceptable for recording,
with evidence of recording thereon. If in connection with any Mortgage
Loan, the Seller cannot deliver or cause to be delivered the original
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Assignment of Mortgage with evidence of recording thereon on the
Closing Date because of a delay caused by the public recording office
where such Assignment of Mortgage has been delivered for recordation
or because such public recording office retains the original recorded
Assignment of Mortgage, or if the original recorded Assignment of
Mortgage is lost, the Seller shall deliver, or cause to be delivered
to the Purchaser, a photocopy of such Assignment of Mortgage, together
with a certificate of the Seller that such copy is a true and correct
copy thereof and (i) in the case of a delay caused by the public
recording office, a statement that such Assignment of Mortgage has
been dispatched to the appropriate public recording office for
recordation and that the original recorded Assignment of Mortgage or a
copy of such Assignment of Mortgage certified by such public recording
office to be a true and complete copy of the original recorded
Assignment of Mortgage will be promptly delivered to the Purchaser
upon receipt thereof by the Seller or (ii) where a public recording
office retains the original recorded Assignment of Mortgage, or if the
original recorded Assignment of Mortgage is lost, a copy of such
Assignment of Mortgage certified by such public recording office to be
a true and complete copy of the original recorded Assignment of
Mortgage.
(f) Originals of all intervening Assignments of Mortgage, showing a
complete chain of title from the originator to the Seller, with
evidence of recording thereon. If in connection with any Mortgage
Loan, the Seller cannot deliver or cause to be delivered the original
intervening Assignment of Mortgage with evidence of recording thereon
on the Closing Date because of a delay caused by the public recording
office where such intervening Assignment of Mortgage has been
delivered for recordation or because such public recording office
retains the original recorded intervening Assignment of Mortgage, or
if the original recorded intervening Assignment of Mortgage is lost,
the Seller shall deliver, or cause to be delivered to the Purchaser, a
photocopy of such intervening Assignment of Mortgage, together with a
certificate of the Seller that such copy is a true and correct copy
thereof and (i) in the case of a delay caused by the public recording
office, a statement that such intervening Assignment of Mortgage has
been dispatched to the appropriate public recording office for
recordation and that the original recorded intervening Assignment of
Mortgage or a copy of such intervening Assignment of Mortgage
certified by such public recording office to be a true and complete
copy of the original recorded intervening Assignment of Mortgage will
be promptly delivered to the Purchaser upon receipt thereof by the
Seller or (ii) where a public recording office retains the original
recorded intervening Assignment of Mortgage or if the original
recorded intervening Assignment of Mortgage is lost, a copy of such
intervening Assignment of Mortgage certified by such public recording
office to be a true and complete copy of the original recorded
intervening Assignment of Mortgage.
(g) Originals of each assumption, modification, consolidation,
substitution and extension agreement, or written assurance, if
applicable, with recording information thereof, if any.
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(h) Title insurance policy, including riders and endorsements thereto,
or if the policy has not yet been issued, (i) a written commitment or
interim binder for title issued by the title insurance or escrow
company dated as of the date the Mortgage Loan was funded, with a
statement by the title insurance company, or closing attorney that the
priority of the lien of the related Mortgage during the period between
the date of the funding of the related Mortgage Loan and the date of
the related title policy (which title policy shall be dated the date
of recording of the related Mortgage) is insured or (ii) a preliminary
title report issued by a title insurer in anticipation of issuing a
title insurance policy which evidences existing liens and gives a
preliminary opinion as to the absence of any encumbrance on title to
the Mortgaged Property, except liens to be removed on or before
purchase by the related borrower (the "Mortgagor") or which constitute
customary exceptions acceptable to lenders generally; the original
policy of title insurance shall be delivered promptly upon receipt
thereof by the Seller.
(i) Original of the primary mortgage insurance policy, if applicable.
(j) Original of any power of attorney, if applicable.
(k) Originals of any security agreement, chattel mortgage or
equivalent executed in connection with the Mortgage.
If the Seller cannot deliver the original recorded Mortgage Loan documents
or the original policy of title insurance, including riders and endorsements
thereto, on the Closing Date, the Seller shall, promptly upon receipt thereof
and in any case not later than 180 days from the Closing Date, deliver such
original documents, including original recorded documents, to the Purchaser or
its designee. If delivery is not completed within 180 days solely due to delays
in making such delivery by reason of the fact that such documents shall not have
been returned by the appropriate recording office, the Seller shall continue to
use it best efforts to effect delivery as soon as possible thereafter, provided
that if such documents are not delivered by the 270th day from the date of
execution, the Seller shall repurchase the related Mortgage Loans at the
Repurchase Price in accordance with Section 6.03 hereof.
If the Purchaser discovers any defect with respect to a Mortgage File, the
Purchaser shall give prompt written specification of such defect to the Seller,
and the Seller shall cure or repurchase such Mortgage Loan in accordance with
Section 6.03.
Within two (2) days after the Purchaser's request, the Seller will deliver
the servicing files and servicing records to the Purchaser or its designee, as
directed by the Purchaser.
The Seller shall prepare the endorsements of the Mortgage Notes and
Assignments of Mortgage in recordable form. The Purchaser shall pay all
recording fees for the Assignments of Mortgage and the Seller shall pay any fees
and expenses associated with the preparation of the Assignment of Mortgage, any
fees and expenses associated with the preparation of the endorsements and
preparation and recordation of any intervening Assignments of Mortgage, and all
other fees or
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costs in transferring the Mortgage Files and servicing files to the Purchaser or
its designee.
SECTION 6. Representations and Warranties.
SECTION 6.01 Representations and Warranties of the Seller.
The Seller hereby represents, warrants and covenants to the Purchaser that
as of the Closing Date or as of such date specifically provided herein:
(a) The Seller is a validly existing corporation in good standing under the
laws of the State of Delaware is qualified to transact business in, is in good
standing under the laws of, and possesses all licenses necessary for the conduct
of its business in, each state in which any Mortgaged Property is located or is
otherwise exempt or not required under applicable law to effect such
qualification or license and no demand for such qualification or license has
been made upon the Seller by any such state, and in any event the Seller is in
compliance with the laws of each such State to the extent necessary to ensure
the enforceability of each Mortgage Loan;
(b) The Seller has full power and authority to hold each Mortgage Loan, to
sell each Mortgage Loan pursuant to this Agreement and to execute, deliver and
perform, and to enter into and consummate all transactions contemplated by this
Agreement and to conduct its business as presently conducted, has duly
authorized the execution, delivery and performance of this Agreement, has duly
executed and delivered this Agreement and each Assignment of Mortgage to the
Purchaser constitutes a legal, valid and binding obligation of the Seller,
enforceable against it in accordance with its terms subject to bankruptcy laws
and other similar laws of general application affecting rights of creditors and
subject to the application of the rules of equity, including those respecting
the availability of specific performance;
(c) None of the execution and delivery of this Agreement, the origination
of the Mortgage Loans by the Seller, the sale of the Mortgage Loans to the
Purchaser, the consummation of the transactions contemplated hereby, or the
fulfillment of or compliance with the terms and conditions of this Agreement
will conflict with any of the terms, conditions or provisions of the Seller's
charter or by-laws or materially conflict with or result in a material breach of
any of the terms, conditions or provisions of any legal restriction or any
agreement or instrument to which the Seller is now a party or by which it is
bound, or constitute a default or result in an acceleration under any of the
foregoing, or result in the material violation of any law, rule, regulation,
order, judgment or decree to which the Seller or its property is subject;
(d) Each Mortgage Note, Mortgage, Assignment of Mortgage and any other
documents required to be delivered to the Purchaser or its designee pursuant to
this Agreement for each Mortgage Loan have been, on or before the Closing Date,
delivered to the Purchaser or its designee;
(e) There is no litigation pending or threatened with respect to the Seller
which
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is reasonably likely to have a material adverse effect on the sale of the
related Mortgage Loans, the execution, delivery or enforceability of this
Agreement, or which is reasonably likely to have a material adverse effect on
the financial condition of the Seller;
(f) No consent, approval, authorization or order of any court or
governmental agency or body is required for the execution, delivery and
performance by the Seller of or compliance by the Seller with this Agreement,
the sale of the Mortgage Loans or the consummation of the transactions
contemplated by this Agreement except for consents, approvals, authorizations
and orders which have been obtained;
(g) The consummation of the transactions contemplated by this Agreement is
in the ordinary course of business of the Seller, and the transfer, assignment
and conveyance of the Mortgage Notes and the Mortgages by the Seller pursuant to
this Agreement are not subject to bulk transfer or any similar statutory
provisions in effect in any applicable jurisdiction;
(h) The Seller used no selection procedures that identified the Mortgage
Loans as being less desirable or valuable than other comparable mortgage loans
in the Seller's portfolio at the Cut-off Date;
(i) The Seller will treat the sale of the Mortgage Loans to the Purchaser
as a sale for reporting and accounting purposes and, to the extent appropriate,
for federal income tax purposes;
(j) The 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;
(k) No statement, report or other document furnished or to be furnished
pursuant to the Agreement contains or will contain any statement that is or will
be inaccurate or misleading in any material respect or omits to state a material
fact required to be stated therein or necessary to make the information and
statements therein not misleading;
(l) No fraud, misrepresentation or omission of fact with respect to a
Mortgage Loan has taken place on the part of the Seller or the Mortgagor or, to
the best of the Seller's knowledge, any other party involved in the origination
or servicing of the Mortgage Loan; and
(m) The Seller is an approved seller/servicer of residential mortgage loans
for Fannie Mae with such facilities, procedures and personnel necessary for the
sound servicing of such mortgage loans. The Seller is in good standing to sell
mortgage loans to and service mortgage loans for Fannie Mae and no event has
occurred which would make the Seller unable to comply with eligibility
requirements or which would require notification to Fannie Mae.
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SECTION 6.02 Representations and Warranties as to Individual Mortgage
Loans.
The Seller hereby represents and warrants to the Purchaser as to each
Mortgage Loan, that as of the Closing Date or as of such other date specified
therein:
(a) No event has occurred from June 23, 1998 to the Closing Date, which
would make the representations and warranties set forth in Section 7 of the
Headlands Agreement to be untrue in any material respect, and the Seller hereby
restates the representations and warranties set forth in Section 7 of the
Headlands Agreement to the Purchaser as of the date hereof;
(b) The information set forth in the Mortgage Loan Schedule is true,
complete and correct in all material respects as of the Cut-Off Date;
(c) As of the close of business on September 30, 1998, each Mortgage Loan
has an actual paid-to-date of September 1, 1998, which payment has been posted
on the Seller's servicing system as of September 30, 1998, except with respect
to those certain Mortgage Loans listed on Schedule II attached hereto, as to
which, as result of the transfer of servicing from Headlands to the Seller, as
of the Cut-off Date, have an actual paid-to-date of September 1, 1998, which
payment has been posted on the Seller's servicing system as of the Cut-off Date.
As of the Cut-off Date, each Mortgage Loan will be due for the October 1, 1998
payment or later;
(d) Immediately prior to the sale of the Mortgage Loans by the Seller to
the Purchaser pursuant to this Agreement, the Seller was the sole owner of
record and holder of each Mortgage Loan. The Mortgage Loan is not assigned or
pledged, and the Seller has good and marketable title thereto, and has full
right to transfer and sell the Mortgage Loan therein to the Purchaser free and
clear of any encumbrance, equity, participation interest, lien, pledge, charge,
claim or security interest, and has full right and authority subject to no
interest or participation of, or agreement with, any other party, to sell and
assign each Mortgage Loan pursuant to this Agreement;
(e) The collection and servicing practices used by the Seller, with respect
to each Mortgage Note and Mortgage have been in all material respects legal,
proper and prudent in the mortgage servicing business; and
(f) The Seller has not agreed to the modification, amendment or alteration
of any Mortgage Loan. The Seller has not released any Mortgagor and the Seller
has not waived any default, violation or event of acceleration with respect to
any Mortgage Loan.
SECTION 6.03 Repurchase.
It is understood and agreed that the representations and warranties set
forth in Sections 6.01 and 6.02 shall survive the sale of the Mortgage Loans to
the Purchaser and delivery of the related Mortgage File to the Purchaser or its
designee and shall inure to the benefit of the Purchaser, notwithstanding any
restrictive or qualified endorsement on any Mortgage Note or Assignment of
Mortgage or the examination of any Mortgage File. Upon discovery by either the
Seller or the Purchaser of a breach of any of the foregoing representations and
warranties which
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materially and adversely affects the value of the Mortgage Loans or the interest
of the Purchaser in any Mortgage Loan, the party discovering such breach shall
give prompt written notice to the other. The Seller shall have a period of sixty
days from the earlier of its discovery or its receipt of notice of any such
breach within which to correct or cure such breach. The Seller hereby covenants
and agrees that if any such breach cannot be corrected or cured within such
sixty day period, the Seller shall, at the Purchaser's option and not later than
ninety days of its discovery or its receipt of notice of such breach, repurchase
such Mortgage Loan at the related Repurchase Price. In the event that any such
breach shall involve any representation or warranty set forth in Section 6.01 or
those relating to the Mortgage Loans or a portion thereof in the aggregate, and
such breach cannot be cured within sixty days of the earlier of either discovery
by or notice to the Seller of such breach, all Mortgage Loans or all affected
Mortgage Loans shall, at the option of the Purchaser, be repurchased by the
Seller at the Repurchase Price.
In the event of a repurchase by the Seller pursuant to this Section 6.03,
the Purchaser shall forward the Mortgage File for the related Mortgage Loan to
the Seller, which shall include the Mortgage Note endorsed without recourse to
the Seller or its designee, an assignment in favor of the Seller or its designee
of the Mortgage in recordable form and acceptable to the Seller in form and
substance and such other documents or instruments of transfer or assignment as
may be necessary to vest in the Seller or its designee title to any such
Mortgage Loan. The Purchaser shall cause the related Mortgage File to be
forwarded to the Seller immediately following the Purchaser's receipt of the
related Repurchase Price by wire transfer of immediately available funds to an
account specified by the Purchaser. For any Mortgage Loan, the "Repurchase
Price" shall be an amount equal to the Purchase Price Percentage multiplied by
the outstanding principal balance of such Mortgage Loan as of the date that such
Mortgage Loan is to be repurchased, plus accrued interest thereon from the date
on which interest has last been paid and distributed to the Purchaser to the end
of the month of the date of repurchase.
In addition to such cure and repurchase obligation, the Seller shall
indemnify the Purchaser and hold it harmless against any losses, damages,
penalties, fines, forfeitures, reasonable and necessary legal fees and related
costs, judgments, and other costs and expenses resulting from a breach by the
Seller of the representations and warranties contained in this Section 6. It is
understood and agreed that the obligations of the Seller set forth in this
Section 6.03 to cure or repurchase a defective Mortgage Loan and to indemnify
the Purchaser as provided herein constitute the sole remedies of the Purchaser
respecting a breach of the foregoing representations and warranties.
SECTION 7. Closing. The closing of the purchase and sale of the Mortgage
Loans shall take place on the Closing Date. Closing shall, at the Purchaser's
option, be either by telephone, confirmed by letter or wire or conducted in
person at the Purchaser's office.
The closing for the Mortgage Loans shall be subject to each of the
following conditions:
a) All of the representations and warranties of the parties in this
Agreement shall be true and correct as of the Closing Date, and
no event shall have occurred which, with
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notice or the passage of time, would constitute a default under
this Agreement;
b) Closing Documents identified in Section 8 of this Agreement duly
executed by all signatories as required pursuant to the
respective terms thereof shall be delivered to the parties
designated in accordance with Section 8 of this Agreement; and
c) All other terms and conditions of this Agreement shall have been
complied with.
Subject to the foregoing conditions, the Purchaser shall pay to the Seller
the Purchase Price in accordance with Section 3 of this Agreement.
SECTION 8. Closing Documents. The Closing Documents shall consist of the
following:
1. The Mortgage Loan Schedule;
2. The Mortgage File;
3. This Agreement, which may be executed in two counterparts; one
counterpart executed by the Seller to be delivered to the
Purchaser and one counterpart executed by the Purchaser to be
delivered to the Seller;
4. The Servicing Agreement, which may be executed in two
counterparts; one counterpart executed by the Seller to be
delivered to the Purchaser and one counterpart executed by the
Purchaser to be delivered to the Seller;
5. The Assignment, which may be executed in two counterparts; one
counterpart executed by the Seller to be delivered to the
Purchaser and one counterpart executed by the Purchaser to be
delivered to the Seller;
6. An officer's certificate of the Seller, in the form attached
hereto as Exhibit A;
7. An opinion of Seller's counsel (which may be in house counsel),
in the form attached hereto as Exhibit B; and
8. A security release certification with respect to the Mortgage
Loans, executed by First Union National Bank, in a form
acceptable to the Purchaser.
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SECTION 9. Costs. The Purchaser shall pay any commissions due its salesmen,
the legal fees and expenses of its attorneys, all costs and expenses of the
Purchaser set forth in Section 5, and any costs and expenses relating to any due
diligence performed by the Purchaser. The Seller shall pay all other costs and
expenses incurred in connection with the delivery of the Mortgage Loans and the
costs of delivering complete master-file tape information and other
electronically stored information to Purchaser; the costs of notifying the
mortgagors, hazard and flood insurance companies, and others, as necessary, the
costs and expenses of the Seller set forth in Section 5 and the legal fees and
expenses of the Seller's attorneys.
SECTION 10. Interim Servicing. The Mortgage Loans are sold on
servicing-released basis. Each Mortgage Loan shall be interim serviced by the
Seller for the Purchaser or its designee pursuant to the Servicing Agreement
until the Servicing Transfer Date.
SECTION 11. Reconstitution. The Seller and the Purchaser acknowledge and
agree that the Purchaser intends to transfer some or all of the Mortgage Loans
to a third party entity as a whole loan transfer (a "Whole Loan Transfer"),
which may be Fannie Mae or Freddie Mac, or to a trust to be formed as part of a
publicly-issued and/or privately placed, rated or unrated securitization (the
"Securitization") (a Whole Transfer or Securitization, each a "Transaction").
With respect to each Transaction, the Seller agrees to cooperate with respect to
all reasonable requests and provide the Purchaser with customary monthly
remittance reports, including scheduled balance information with respect to
certain dates selected by the Purchaser.
SECTION 12. Notices. All demands, notices and communications hereunder
shall be in writing and shall be deemed to have been duly given when deposited,
postage prepaid, in the United States mail, if mailed by registered or certified
mail, return receipt requested, or when received, if delivered by private
courier to another party, at the related address shown on the first page hereof,
or such other address as may hereafter be furnished to the parties by like
notice.
SECTION 13. Non-Solicitation. The Seller shall not take actions or permit
or cause actions to be taken by any of its agents or affiliates or by any
independent contractor on the Seller's behalf to personally, by telephone, mail,
or otherwise, solicit any Mortgagor to refinance a Mortgage Loan, in whole or in
part, without the prior written consent of the Purchaser. It is understood and
agreed that promotions undertaken by the Seller or any agent or affiliate of the
Seller which are directed to the general public at large, including, without
limitation, mass mailings based on commercially acquired mailing lists,
newspaper, radio and television advertisements shall not constitute solicitation
under this Section 13.
SECTION 14. Separability Clause. Any provision of this Agreement which is
prohibited or unenforceable or is held to be void or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction as to any Mortgage Loan shall not invalidate or render
unenforceable such provision in any other jurisdiction. To the extent permitted
by applicable law, the parties hereto waive any provision of law which prohibits
or renders void or unenforceable any provision hereof.
Page 11
<PAGE>
SECTION 15. Counterparts; Entire Agreement. This Agreement may be executed
simultaneously in any number of counterparts. Each counterpart shall be deemed
to be an original, and all such counterparts shall constitute one and the same
instrument. This Agreement and the Confirmation constitute the entire agreement
between the parties relating to the subject matter hereof and supersedes any
prior agreement or communications between the parties.
SECTION 16. Place of Delivery and Governing Law. This Agreement shall be
deemed in effect when counterparts hereof have been executed by each of the
parties hereto. This Agreement shall be deemed to have been made in the State of
New York. This Agreement shall be construed in accordance with the laws of the
State of New York and the obligations, rights and remedies of the parties
hereunder shall be determined in accordance with the laws of the State of New
York, without giving effect to its conflict of law principles.
SECTION 17. Successors and Assigns; Assignment of Agreement. This Agreement
shall bind and inure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns; provided that this Agreement may
not be assigned, pledged or hypothecated by the Seller to a third party without
the prior written consent of the Purchaser.
SECTION 18. Waivers; Other Agreements. No term or provision of this
Agreement may be waived or modified unless such waiver or modification is in
writing and signed by the party against whom such waiver or modification is
sought to be enforced.
SECTION 19. Survival. The provisions of this Agreement shall survive the
Closing Date and the delivery of the Mortgage Loans, and for so long thereafter
as is necessary (including, subsequent to the assignment of the Mortgage Loans)
to permit the parties to exercise their respective rights or perform their
respective obligations hereunder.
Page 12
<PAGE>
IN WITNESS WHEREOF, the Seller and the Purchaser have caused their names to
be signed hereto by their respective officers thereunto duly authorized as of
the date first above written.
WILSHIRE FUNDING CORPORATION
By:___________________________
Name:_________________________
Title:________________________
BEAR STEARNS MORTGAGE
CAPITAL CORPORATION
By:___________________________
Name:_________________________
Title:________________________
Page 13
EXHIBIT 99
WILSHIRE FINANCIAL SERVICES GROUP INC.
PRO FORMA FINANCIAL INFORMATION - NARRATIVE FORMAT
The following unaudited pro forma financial information of Wilshire
Financial Services Group Inc. ("WFSG" or the "Company") gives effect to the
disposition of certain real estate related assets as if the transaction occurred
as of June 30, 1998, the date of the loan pool acquisition, with respect to the
unaudited pro forma condensed consolidated operating information and as of June
30, 1998 with respect to the unaudited pro forma condensed consolidated
financial condition information.
The unaudited pro forma financial information reflects the effect of the
disposition of the assets along with pro forma adjustments. The unaudited pro
forma financial information should be read in conjunction with the historical
consolidated financial statements of WFSG, together with the related notes
thereto, which were filed August 14, 1998 on Form 10-Q for the six-months ended
June 30, 1998.
-----------------------------------
On October 30, 1998, Wilshire Financial Services Group Inc. ("WFSG" or the
"Company") sold a loan pool to Bear Stearns Mortgage Capital Corporation for
$232.5 million. The sales price was determined through arms length negotiations
between the purchaser and the Company. Cash proceeds from the sale were used to
repay principal and interest on the existing repurchase agreement with an
unrelated third party for which these loans served as collateral totaling $227.2
million.
The pro forma effect of this transaction on the June 30, 1998 statement of
financial condition would have resulted in a decrease in total assets from
$1,948.9 million to $1,709.3 million and a decrease in total liabilities from
$1,811.1 million to $1,576.3 million. The decrease in total assets of $239.6
million is the result of the following: 1) sale of the above mentioned loans for
$232.5 million, 2) recognition of an impairment loss of $4.7 million and 3)
decrease of $7.7 million of the loans sold from June 30, 1998 to the sale date
due to normal cash collections, offset in part, by 4) a net increase in cash
from sale of the loans of $5.3 million. Liabilities decreased as a result of
terminating the short-term financing on the assets sold.
The pro forma effect of this transaction on stockholders' equity on June
30, 1998 would be a decrease from $137.7 million to $133.0 million. The $4.7
million decrease is due to an impairment provision on the assets of $4.7 million
net of tax benefit.
Additionally, the pro forma effect of this transaction would give effect to
the following changes to the operations of the Company for the six months ended
June 30, 1998:
o Increase in the impairment provision on loans of $5.4
million for the six months ended June 30, 1998.
o Decrease in income tax provision of $0.7 million for the six
months ended June 30, 1998.
o Net income for the six-months ended June 30, 1998 would have
decreased from $7.2 million to $2.5 million. Basic and
diluted earnings per share of $0.65 and $0.61 would decrease
to $0.19 and $0.18, respectively.
<PAGE>
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements so long as those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those projected in such statements. All of the statements
contained in this report which are not identified as historical should be
considered forward-looking. In connection with certain forward-looking
statements contained in this report and those that may be made in the future by
or on behalf of the Company which are identified as forward-looking, the Company
notes that there are various factors that could cause actual results to differ
materially from those set forth in any such forward-looking statements. Such
factors include but are not limited to, the real estate market, the availability
of real estate assets at acceptable prices, the availability of financing and
interest rates. Accordingly, there can be no assurance that the forward-looking
statements contained in this report will be realized or that actual results will
not be significantly higher or lower. The forward-looking statements have not
been audited by, examined by, or subjected to agreed-upon procedures by
independent accountants, and no third party has independently verified or
reviewed such statements. Readers of this report should consider these facts in
evaluating the information contained herein. The inclusion of the
forward-looking statements contained in this report should not be regarded as a
representation by the Company or any other person that the forward-looking
statements contained in this report will be achieved. In light of the foregoing,
readers of this report are cautioned not to place undue reliance on the
forward-looking statements contained herein.
