RESIDENTIAL MORTGAGE SERVICES
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of Texas
August 11, 1999
Community Home Mortgage Corporation
510 Broadhollow Road, Suite 100
Melville, NY 11747
Attention: Ira Silverman
MORTGAGES PURCHASE AGREEMENT
Dear Mr. Silverman:
OVERVIEW
Section 1. Warehouse Facility. HSA Residential Mortgage Services of
Texas, Inc. ("RMST") has established a mortgage gestation facility with various
financial institutions pursuant to which the institutions, at the request of
RMST, will purchase certain mortgage loans which are originated to finance the
purchase or re-financing of owner-occupied and investor owned, 1-4 family
residential dwellings and the land on which they are situated.
Section 2. Certain Terms. We are pleased to advise you that RMST has
approved the participation by the Company in the Warehouse Facility on the terms
set forth in this agreement (as it may from time to time be supplemented,
amended or restated, this "Agreement"). The following are certain terms of the
Company's participation. (See Section 3 for additional defined terms.)
Company Community Home Mortgage Corporation
Key Principals Ira Silverman
Purchase Limit Ten Million Dollars ($10,000,000)
Second Lien Sub-Limit Three Million Dollars ($3,000,000);
30% of Purchase Limit
Sub-Prime Sub-Limit Two Million Five Hundred Thousand
Dollars ($2,500,000); 25% of the
Purchase Limit
Agency Rate Prime -25%
Non-Agency Rate Prime + 0%
Default Rate Prime + 3%
Loan Set Up Fee Twenty dollars ($20.00) per Mortgage
Minimum Net Worth Two Million Dollars ($2,000,000)
Guarantor(s) Ira Silverman
Section 3. Certain Definitions. The following terms shall have the
meaning set forth below in this Agreement:
(a) Affected Mortgage. The term "Affected Mortgage" is defined
in Section 23 and Section 26.
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(b) Agency Mortgage. An "Agency Mortgage" is a Mortgage that
is eligible for purchase by the Federal Home Loan Mortgage Association,
the Federal National Mortgage Corporation or the Government National
Mortgage Association.
(c) Agent. The person acting at the time as administrative
agent and collateral agent for the Warehouse Purchasers is referred to
as the "Agent." All references to the Agent are to the Agent in its
capacity as administrative agent and collateral agent for the Warehouse
Purchasers and not in its own capacity or for its own account. The
Agent currently is Chase Bank of Texas, National Association. RMST will
promptly advise the Company of any successor Agent.
(d) Applicable Repurchase Amount. The term "Applicable
Repurchase Amount" means the payment to the Agent in good, collected
Bank funds of the sum of (y) an amount equal to the Minimum Net Share
which would have been earned in respect of that Mortgage if its
purchase by the Investor provided for in the Commitment represented by
the Company to have most recently covered it (whether or not it was
actually so covered) were completed in strict accordance with its terms
and on its stated expiration date plus (z) (without duplication of any
payment) an amount equal to any increase in the Minimum Net Share due
to the passage of time or to RMST's or the Agent's having provided
additional custodial-type services since that expiration date.
(e) Bank Prime. The "Bank Prime" is the prime rate as
announced by Chase Bank of Texas, National Association from time to
time. This rate is a reference rate and does not necessarily represent
its best or lowest rate and is not necessarily a favored rate. Bank
Prime shall be adjusted as of the effective date of each change in the
prime rate announced by Chase Bank of Texas, National Association.
(f) Bank. The term "Bank" is defined in Section 19.
(g) Banking Business Day. The term "Banking Business Day" is
defined in the RMST Procedures.
(h) Bulk Mortgage Takeout Protection Account. The term "Bulk
Mortgage Takeout Protection Account" is defined in Section 33.
(i) Bulk Purchase Mortgage Takeout Date. The term "Bulk
Purchase Mortgage Takeout Date" is defined in Section 9.
(j) Bulk Purchase Mortgage. A "Bulk Purchase Mortgage" is an
Eligible Mortgage that meets RMST's criteria for funding without a
Commitment.
(k) Closer. The term "Closer" is defined in Section 12.
(1) Commitment. A "Commitment" is a written commitment to
purchase a Mortgage as a whole loan obtained by the Company and
approved in writing by RMST, issued by a reputable investor or
securities broker-dealer (the "Investor") acceptable to RMST and the
Agent. In addition to any other criteria established by RMST from time
to time by notice given to the Company, each Commitment shall be
written, describe the types of Mortgages the Investor agrees to
purchase, state the settlement date, price (including any applicable
servicing release premium) and expiration date for the purchase, be (or
be endorsed to be) in favor of RMST and its assigns, be enforceable and
be irrevocable until a date shown on the Commitment.
(m) Debtor Laws. The term "Debtor Laws" is defined in Section
44.
(n) Default. The term "Default" is defined in Section 44.
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(o) Defective Mortgage. A "Defective Mortgage" is a Mortgage
which has been purchased by the Warehouse Purchasers but meets RMST's
criteria for Defective Mortgages which are attached as Appendix 7. RMST
may change the criteria by notice given to the Company.
(p) Document File. The term "Document File" is defined in
Section 9.
(q) Eligible Mortgage. An "Eligible Mortgage" is Mortgage
which meets RMST's criteria for funding under the Warehouse Facility.
RMST's current criteria for Eligible Mortgages is attached as Appendix
8. RMST may change the criteria by notice given to the Company.
(r) Enclosures. The term "Enclosures" is defined in Section 9.
(s) Failure Date. The term "Failure Date" is defined in
Section 22.
(t) Guide. The term "Guide" is defined in Section 34.
(u) Includes. Wherever the words "including," "which includes"
or any correlative appears in this Agreement, it shall be read to mean,
"including by way of example but not without limiting the generality of
the subject or concept referred to."
(v) Investor. An "Investor" is a person issuing a Commitment
to the Company or otherwise agreeing to purchase a Mortgage from the
Warehouse Purchasers.
(w) Lost Commitment Mortgages. The term "Lost Commitment
Mortgages" is defined in Section 20.
(x) Make Whole Payment. The term "Make Whole Payment" is
defined in Section 30.
(y) Minimum Net Share. The term "Minimum Net Share" is defined
in Section 17.
(z) Mortgage Default Date. The "Mortgage Default Date" is
defined in Section 20, Section 22 and Section 24.
(aa) Mortgage Purchase Cost. The term "Mortgage Purchase Cost"
is defined in Section 17.
(bb) Mortgage. A "Mortgage" is a mortgage loan secured by
residential real property.
(cc) Offer. The term "Offer" is defined in Section 9.
(dd) Period Held. The term "Period Held" is defined in Section
17.
(ee) Proceeds Account. The term "Proceeds Account" is defined
in Section 19.
(ff) Qualified Substitute Takeout. The term "Qualified
Substitute Takeout" is defined in Section 20.
(gg) RMST Advance. The term "RMST Advance" is defined in
Section 13.
(hh) RMST Procedures. The "RMST Procedures" are those
procedures promulgated by RMST from time to time specifying the times
by which certain actions are to be taken in connection with purchases
under the Warehouse Facility. The current RMST Procedures are attached
as Appendix 2.
(ii) Sale Proceeds. The term "Sales Proceeds" is defined in
Section 17.
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(jj) Second Lien Mortgage. A "Second Lien Mortgage" is a
Mortgage that is secured by a second priority lien on the real property
that secures it.
(kk) Settlement Account. The term "Settlement Account" is
defined in Section 19.
(ll) Shortfall Amount. The term "Shortfall Amount" is defined
in Section 25.
(mm) Substitute Mortgage. The term "Substitute Mortgage" is
defined in Section 24.
(nn) Warehouse Facility. The facility described in Section 1
as it may be amended, supplemented, modified or replaced is referred to
as the "Warehouse Facility."
(oo) Warehouse Purchasers. The institutions purchasing
Eligible Mortgages under the Warehouse Facility from time to time are
referred to collectively as the "Warehouse Purchasers," and
individually as a "Warehouse Purchaser."
(pp) Value Replacement Payments. The term "Value Replacement
Payments" is defined in Section 32.
(qq) Year 2000 Compliant. The term "Year 2000 Compliant" is
defined in Section 48(aa).
PURCHASE OF ELIGIBLE MORTGAGES
Section 4. Revolving Purchase Facility. Although the Company will offer
the Mortgages to RMST for purchase under the Warehouse Facility on a
case-by-case basis and RMST will evaluate each Mortgage to determine whether it
is an Eligible Mortgage, the Company and RMST mutually contemplate that this
will be a revolving purchase facility pursuant to which the Company will sell
Mortgages to the Warehouse Purchasers.
Section 5. No Obligation. This Agreement does not obligate RMST to
cause the Warehouse Purchasers to purchase Mortgages from the Company. RMST, in
its sole discretion, may elect to cause the Warehouse Purchasers to purchase a
Mortgage from the Company or may elect not to cause them to purchase the
Mortgage.
Section 6. Limits. The outstanding balance of the aggregate purchase
prices paid to the Company by the Warehouse Purchasers for Eligible Mortgages
(including Second Lien Mortgages and Bulk Purchase Mortgages, if any) which have
not yet been sold to an Investor shall not exceed the Purchase Limit at any
time. The outstanding balance of the aggregate purchase prices paid to the
Company by the Warehouse Purchasers for Second Lien Mortgages which have not yet
been sold to an Investor shall not exceed the Second Lien Sub-Limit at any time.
The outstanding balance of the aggregate purchase prices paid to the Company by
the Warehouse Purchasers for Bulk Purchase Mortgages which have not yet been
sold to an Investor shall not exceed the Bulk Purchase Sub-Limit at any time.
RMST reserves the right to reduce the Purchase Limit, the Second Lien Sub-Limit
or Bulk Purchase Sub-Limit by giving sixty (60) days' written notice to the
Company specifying the new limit at any time and for any reason.
Section 7. Prior Approval of Investors. Each Investor shall have been
approved by RMST and the Agent prior to the Offer of a Mortgage as to which the
Commitment applies. To be considered for approval by RMST, the Investor must, at
a minimum, meet the criteria set forth on Appendix 9. RMST may change the
minimum criteria for approval of an investor by notice given to the Company. The
approval of an Investor by RMST or the Agent shall not cause RMST or the Agent
to be a guarantor of the Investor's performance. Any dealings by the Company
with an Investor (whether or not approved by RMST or the Agent) shall be at the
sole risk of the Company.
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Section 8. Commitment. Each Eligible Mortgage acquired from the Company
under the Warehouse Facility except Bulk Purchase Mortgages shall have a
Commitment. The Company shall provide RMST a copy of the Commitment at the same
time the Company delivers to RMST the Document File. If RMST is dissatisfied, in
its sole discretion, with either the form or terms of any Commitment, it shall
have no obligation to cause the Warehouse Purchasers to acquire any Mortgage
covered by that Commitment.
Section 9. Offer. If the Company wishes to sell a Mortgage through RMST
to the Warehouse Purchasers under this Agreement, the Company shall submit a
written Offer to Sell Mortgages in the form attached as Appendix 1 to this
Agreement (the "Offer") with all enclosures required by Appendix 4 to this
Agreement (the "Enclosures"), and with all blocks and blanks in the Offer and
the Enclosures properly completed (the Offer and Enclosures, if applicable,
together are called the "Document File"). Appendix 1 and Appendix 4 are subject
to modification by RMST by notice given to the Company. If the Mortgage is
requested to be a Bulk Purchase Mortgage, the Offer shall state the date by
which an Investor will purchase the Mortgage (the "Bulk Purchase Mortgage
Takeout Date"). The purchase price for an Eligible Mortgage shall be the least
of (i) the price the Investor has promised to pay for the Mortgage pursuant to
the Commitment (this factor is inapplicable to a Bulk Purchase Mortgage); (ii)
the face principal amount of the promissory note evidencing the Mortgage; or
(iii) the r unpaid principal balance of the promissory note. Upon acceptance of
the Offer, any Commitment referred to in the Offer shall be deemed assigned and
transferred to RMST and its assigns without any further act by the Company.
Section 10. Acceptance or Rejection. If RMST elects to accept an Offer,
then if the Mortgage is an Eligible Mortgage and the Company is in compliance
with all the terms of this Agreement, RMST will cause the Warehouse Purchasers
to pay the purchase price for the Eligible Mortgages stated in the Offer and,
upon. that acceptance, to cause the Warehouse Purchasers to become the owner of
the Eligible Mortgages. RMST has no obligation to accept any Offer.
Section 11. Endorsement and Closing Instructions. The Company shall
endorse in blank the promissory note to evidence each Eligible Mortgage which is
the subject of an accepted Offer when, or before, the note is executed by its
maker. The Company hereby declares its intent that each such endorsement be
effective as to each such note from such note's inception, regardless of when
the endorsement is actually made. The Company shall give the Closer of each
Eligible Mortgage the written instructions for the closing of the transaction
set forth on Appendix 5, and will not give any rescinding, inconsistent or
conflicting instructions. Additionally, should the Closer not comply with the
written instructions for the closing of the transaction as set forth on Appendix
5, the Company shall use its best efforts to insure compliance and provide
timely to RMST the necessary documents as required in the Agreement. Appendix 5
is subject to modification by RMST by notice given to the Company. The Company
or the Closer shall deliver to RMST the Eligible Mortgage and all of its related
documentation (including for each Eligible Mortgage the documents listed on
Appendix 4) to be physically held by the Agent until the Mortgages are either
(i) shipped by the Agent to an Investor or its document custodian for purchase
or (ii) the Company repurchases the Mortgage in accordance with its obligations
stated in Section 20, Section 22 or Section 24.
Section 12. Payment by Warehouse Purchasers. The purchase price for
Eligible Mortgages shall be paid at the request of RMST by the Agent (i) to the
Company, in the case of Eligible Mortgages purchased after the Company has
closed them; or (ii) in all other instances, by providing money for the original
funding of the Mortgages directly to the title company or other person or entity
handling the closing (the "Closer"), net of origination, discount points, and
any other fees and other prepaid items the Company may stipulate. For purposes
of this Agreement the Company may fund the Mortgages at the lesser of the loan
amount or the commitment from the Investor. The payment will be made at the time
and in the manner specified in the RMST Procedures.
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Section 13. Advances by RMST. In its sole discretion, RMST may advance
funds to the Company, in the case of Eligible Mortgages purchased after the
Company has closed them, or to the Closer, in all other instances, to pay
amounts relating to the origination of a Mortgage. These funds so advanced (an
"RMST Advance") are a loan from RMST to the Company, are secured by the security
interest created by Section 39, bear interest at the Default Rate and are due on
demand unless earlier repaid in connection with the sale of the Mortgage to
which the RMST Advance relates.
SALE TO INVESTORS
Section 14. Sale to Investors. The Company will take all steps
necessary to cause:
(a) all Eligible Mortgages and their related mortgage files to
be correctly closed, funded, documented and completed;
(b) the sale as whole loans of all Eligible Mortgages to be
timely completed in accordance with any related Commitment;
(c) the entire sale price due from Eligible Mortgages sold to
be transferred by Fed funds wire directly to the account of the Agent
at Chase Bank of Texas, National Association or at a bank designated by
RMST.
Section 15. Instruction to Investors. Promptly after any Eligible
Mortgages which is subject to a commitment is purchased by the Warehouse
Purchasers, the Company shall: (i) direct the Investor which issued the
Commitment to pay the entire amount of the purchase consideration for those
Eligible Mortgages directly to the Agent and to confirm receipt of that
direction directly with the Agent, with a copy to RMST; (ii) not issue any
conflicting instructions to the Investors; and (iii) not cause or permit any
cash proceeds of any of those Mortgages to be issued to, registered in the name
of, or paid to, anyone other than the Agent.
Section 16. Shipment to Investors. Mortgages shipped to Investors for
purchase shall be shipped under letters substantially in the form of letter
attached as Appendix 10, in the case of Mortgages sold by the Agent, or Appendix
11, in the case of Mortgages sold by RMST. The letters may be revised by RMST by
notice given to the Company.
PAYMENT TO RMST AND DISTRIBUTION TO COMPANY
Section 17. Minimum Net Share. The Agent will retain, for the benefit
of the Warehouse Purchasers and RMST-or, in the case of Mortgages sold by RMST,
RMST will retain for its benefit-from the sale proceeds (the "Sale Proceeds")
received for and allocable to each Mortgage sold to an Investor hereunder an
amount (the "Minimum Net Share") equal to the sum of:
(i) the purchase price paid by the Warehouse Purchasers for
the Eligible Mortgage reduced by any amounts paid to the
Warehouse Purchasers by the obligor of the Mortgage as
principal or interest on the Mortgage and also reduced by any
Value Replacement Payments made with respect to the Mortgage
(the "Mortgage Purchase Cost");
plus (ii) a return on the daily balance of the Mortgage Purchase
Cost which accrues daily during the period (the "Period Held")
consisting of the actual number of days from (and including)
the date on which the Warehouse Purchasers funded the
acquisition of the Mortgage to (but excluding) the date on
which the Agent (or RMST) receives the Sale Proceeds for the
Mortgage, at a per annum rate equal to the Agency Rate if the
Mortgage is an Agency Mortgage or equal to the Non-Agency Rate
if the Mortgage is not an Agency Mortgage. After the Mortgage
Default Date the per annum rate as to any
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Affected Mortgage shall be the greater of (y) the Default Rate
or (z) the annual interest rate stated on the promissory note
related to the Affected Mortgage. After the occurrence of a
Default, the per annum rate as to all Mortgages shall be the
Default Rate. The calculations based on the per annum rates
shall be made on a daily basis during the Period Held and on
the basis of a 360-day year;
plus (iii) any RMST Advance with respect to that Mortgage together
with interest on the RMST Advance at the Default Rate from the
date on which the RMST Advance was made to (but excluding) the
date on which the Agent (or RMST) receives the Sales Proceeds
for the Mortgage;
plus (iv) the Loan Set Up Fee for the Mortgage.
Section 18. Interest Collected and Remitted. Interest on an Eligible
Mortgage collected by the Company shall be remitted to RMST whereby RMST will
bill the Company on a monthly basis for its Minimum Net Share for any Mortgage
that has been funded for a period greater than sixty days and has not been
purchased by the Investor. Interest collected and remitted by the Company shall
be treated as part of the proceeds received for the sale of the Mortgage to the
Investor for purposes of determining the Minimum Net Share.
Section 19. Balance of Sales Proceeds. Provided that the Company is not
then in default of any of its obligations under this Agreement, RMST shall
deposit the balance of the Sales Proceeds remaining after deducting the Minimum
Net Share in a demand deposit account maintained at Chase Bank of Texas,
National Association (in its capacity as a depository institution, the "Bank")
in the name of RMST for the benefit of the Company (the "Proceeds Account"), but
as to which the Company shall have no rights of withdrawal. As long as the
Company is not then in default of any of its obligations under this Agreement,
RMST shall transfer the collected funds in the Proceeds Account to a demand
deposit account (the "Settlement Account") maintained at the Bank in the name of
the Company and under the exclusive control of the Company. If, there is a
Default, then any amounts then remaining in the Proceeds Account shall be cash
collateral securing any rights RMST shall have pursuant to this Agreement and
the Company shall not withdraw any funds from the Settlement Account without the
prior consent of RMST.
FAILURE OF COMMITMENT
Section 20. Loss of Commitment. If for any reason, except the willful
or grossly negligent act or omission of RMST, the Agent or the Warehouse
Purchasers, any Commitment in respect of any Eligible Mortgage is canceled,
paired off or revoked by any means, or if the Investor shall at any time have a
defense to performance of its obligations under the Commitment either on account
of offsetting obligations against the Company or for any other reason, or the
Commitment is terminated for any reason (other than expiration by the passage of
time) (collectively, these Mortgages are referred to as the "Lost Commitment
Mortgages"), then, on or before the date (the "Mortgage Default Date" for that
Mortgage) that is ten (10) days after the date on which the Commitment was
terminated or cancelled or otherwise lost, the Company shall either (i) obtain
and furnish to RMST for the Warehouse Purchasers a replacement Commitment
acceptable (and issued by an Investor acceptable) to RMST and the Agent and
having characteristics all of which can be satisfied by the Eligible Mortgage
and providing for the purchase of the Mortgage for no less than the Minimum Net
Share for that Mortgage (a "Qualified Substitute Takeout"), or (ii) repurchase
the Lost Commitment Mortgage from the Warehouse Purchasers (or RMST if RMST has
purchased the Mortgage) for the Applicable Repurchase Amount.
Section 21. Assistance by RMST. RMST will exert reasonable efforts to
assist the Company to obtain a Qualified Substitute Takeout, but RMST shall do
so only as an accommodation to the Company.
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RMST shall have no additional obligation to the Company as a result of its
efforts and no liability to the Company for the results (or failure) of its
efforts.
Section 22. Failure to Sell. If for any reason, except the willful or
grossly negligent act or omission of RMST, the Agent or the Warehouse
Purchasers, the Company has not caused any Eligible Mortgage to be sold to an
Investor on or before the date (the "Failure Date") that is the earlier of:
(a) ninety (90) days after the Warehouse Purchasers purchased
the Eligible Mortgage or
(b) (i) in the case of Bulk Purchase Mortgages, the Bulk
Mortgage Takeout Date or, (ii) as to all other Eligible Mortgages, the
date the Commitment which relates to that Eligible Mortgage expires,
then, on or before the date (the "Mortgage Default Date" for that Mortgage) that
is three (3) Banking Business Days after the Failure Date, the Company shall
repurchase the Eligible Mortgages from the Warehouse Purchasers (or RMST if RMST
has purchased the Mortgage) for the Applicable Repurchase Amount.
Section 23. Effect of Company's Failure. If by the Mortgage Default
Date the Company has not repurchased the Lost Commitment Mortgage or obtained a
Qualified Substitute Takeout in the case of a failure under Section 20, or
repurchased the Mortgage in the case of a failure under Section 22, then the
Company shall be in default of its obligations under this Agreement with regard
to that Mortgage (which shall be "Affected Mortgage" after that failure) and
shall have committed a breach of this Agreement.
DEFECTIVE MORTGAGES
Section 24. Defective Mortgages. If RMST determines that any Eligible
Mortgage is a Defective Mortgage the Company shall wholly cure (to the
satisfaction of RMST and the Agent) such defects in the Mortgage upon notice
from RMST. If the Company fails to wholly cure such defects by the day which is
three (3) Banking Business Days after the notice to cure from RMST (the
"Mortgage Default Date" for that Mortgage), then, by notice given to the
Company, RMST may require that by the close of the next Banking Business Day
following receipt of RMST's notice, the Company shall either (i) repurchase the
Defective Mortgage from the Warehouse Purchasers (or RMST if RMST has purchased
the Mortgage) for the Applicable Repurchase Amount, or (ii) substitute a new
Eligible Mortgage (the "Substitute Mortgage"), which is in all respects
acceptable to RMST and the Agent in their reasonable discretion.
Section 25. Payment of Shortfall Amount. If the aggregate principal
balances of all Substitute Mortgages are less than the aggregate principal
balances of all Defective Mortgages being replaced, then the Company shall remit
with such Substitute Mortgages an amount equal to the difference (the "Shortfall
Amount") between the aggregate principal balance of the Substitute Mortgages and
the Defective Mortgages, plus any fees that would have been earned under this
Agreement on the aggregate principal balance difference calculated as if, on the
date of such remittance, the Company were repurchasing a Mortgage in principal
amount equal to the Shortfall Amount and covered by the same Commitment as the
Defective Mortgages which were only partially replaced, with the Period Held
applicable to such hypothetical Mortgage being repurchased ending on the date of
such remittance. Absent manifest error, or if the Company does not object in
writing to RMST's calculation of a Shortfall Amount and fees on or before thirty
(30) days after RMST gives the Company written notice of RMST's calculated value
of that Shortfall Amount and fees, RMST's calculation of the Shortfall Amount
and fees shall be conclusive and binding.
Section 26. Effect of Company's Failure. If by the close of the next
Banking Business Day after notice under Section 24 the Company has not delivered
a Substitute Mortgage or repurchased; the
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Defective Mortgage, then the Company shall be in default of its obligations
under this Agreement with regard to that Mortgage (which shall be "Affected
Mortgage" after that failure) and shall have committed a breach of this
Agreement.
REMEDIES-AFFECTED MORTGAGES
Section 27. Effect of Breach. Upon the occurrence of a breach under
Section 23 or Section 26, RMST, in addition to its rights otherwise provided for
under this Agreement, may elect then, or at any time thereafter, to: (i)
terminate the Company's rights and obligations to service the Affected Mortgage;
(ii) obtain a new Commitment from a third party to purchase the Affected
Mortgage; (iii) cause the Warehouse Purchasers to sell-or, if RMST has purchased
the Affected Mortgage, sell-the Affected Mortgage to a third party; (iv)
terminate this Agreement by giving notice to the Company in which event the
provisions of Section 45 shall apply; or (v) do any combination of those things.
Section 28. Effect on Value Replacement Obligations. The Company's
breach of this Agreement under Section 23 or Section 26 shall not terminate or
abate the Company's value replacement obligations to RMST with regard to the
Affected Mortgage, as provided for in Section 32 of this Agreement, and the
value replacement obligations to RMST with regard to the Affected Mortgage shall
only terminate upon (i) the sale of the Affected Mortgage to a third party, or
(ii) the repurchase by the Company of the Affected Mortgage from the Warehouse
Purchasers (or RMST if RMST has purchased the Mortgage) for the Applicable
Repurchase Amount.
Section 29. Sale to Third Party. If RMST causes the Warehouse
Purchasers to sell any Affected Mortgage to a third party as permitted under
Section 27, then, in the absence of manifest error, the purchase price obtained
by the Warehouse Purchasers shall be conclusively presumed to be the fair market
value of that Affected Mortgage (which mayor may not be the same as the quoted
market value for comparable mortgages as quoted on the quotation system which is
used for calculating the value replacement obligations to RMST as provided for
in Section 32).
Section 30. Make Whole Payment. Upon the sale of any Affected Mortgage
to a third party, the Company shall promptly pay to the Agent an amount (the
"Make Whole Payment") equal to the Minimum Net Share as of the sale date, less
the net proceeds realized by the Warehouse Purchasers upon the sale of the
Affected Mortgage. RMST may offset any value replacement previously paid by the
Company with respect to the to the Affected Mortgage against the Company's
obligation to pay the Make Whole Payment, and if there is any excess of value
replacement related to the Affected Mortgage after applying the value
replacement to the Make Whole Payment, RMST will refund such excess to the
Company, provided that the Company is not then in default in performance of any
of its obligations under this Agreement in any other respect. However,
application of the value replacement related to the Affected Mortgage to the
Make Whole Payment shall in no way limit or waive any rights RMST may possess
under or diminish any obligations of the Company with respect to, any provision
of the Agreement for any Mortgage, including the Affected Mortgage.
VALUE PROTECTION
Section 31. Reliance by RMST. The Company acknowledges that when
arranging for the purchase of Mortgages, RMST will rely on the Company's
representations that: (i) the Commitment obtained by the Company in respect of
each Offer (other than an Offer relating to a Bulk Purchase Mortgage) will be
the source for RMST and the Warehouse Purchasers to recover the Minimum Net
Share in respect of the Mortgage and the Mortgage will be purchased by the
Investor no later than the i date prescribed in the Commitment; and (ii) each
Bulk Purchase Mortgage will be ii acquired by. Investors by .its Bulk Purchase
Mortgage Takeout Date for an amount at least sufficient to permit RMST and the
Warehouse Purchasers to recover the Minimum Net Share with respect to the
Mortgage.
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Section 32. Value Replacement Payment. If the Warehouse Purchasers or
RMST hold any Bulk Purchase Mortgages or if there are any Lost Commitment i
Mortgages which have not been sold to Investors or repurchased by the Company,
then RMST may require the Company to make payments to the Warehouse
Purchasers-or to RMST if RMST holds the Bulk Purchase Mortgages or Lost
Commitment Mortgages-to reduce the purchase price for the Lost Commitment
Mortgages and the Bulk Purchase Mortgages ("Value Replacement Payments"). The
amount of the Value Replacement Payment on any day for a Bulk Purchase Mortgage
or Lost Commitment Mortgage is the amount, if greater than zero, sufficient to
cause (i) the Minimum Net Share for that day for that Mortgage based on the
purchase price paid by the Warehouse Purchasers for that Mortgage (reduced by
this and any prior Value Replacement Payment), to be no greater than (ii) the
value on that day of mortgage-backed securities based on and backed by mortgage
loans comparable to the Mortgage. In determining the Value Replacement Payment,
RMST may use such reasonable averaging, allocation and attribution methods as it
shall elect, and absent manifest error, the market value quoted for any such
security as quoted on the quotation system to which RMST subscribes (or any
comparable system to which RMST may hereafter subscribe and RMST may elect to
use for the purposes of determining the market value of mortgage-backed
securities) shall be conclusive evidence of the market value of such security.
The Company shall pay the Value Replacement Payment to RMST no later than the
next Banking Business Day after RMST makes demand by notice to the Company.
Section 33. Bulk Mortgage Takeout Protection. The Bank shall maintain
the Bulk Mortgage Protection Amount on deposit in an account (the "Bulk Mortgage
Takeout Protection Account") in a bank designed by RMST. The Bulk Mortgage
Takeout Protection Account shall be an account in the name of RMST for the
benefit of the Company but as to which the Company shall have no rights of
withdrawal. If there is a Default, any amounts remaining in the Bulk Mortgage
Takeout Protection Account shall be cash collateral securing any rights RMST
shall have pursuant to this Agreement.
SERVICING
Section 34. Servicing After Purchase. After the Eligible Mortgages are
purchased, the Company agrees to service and administer the Eligible Mortgages
for the benefit of the Warehouse Purchasers in accordance with prudent mortgage
loan servicing standards and procedures generally accepted in the mortgage
banking industry and in accordance with the servicing provisions of the
applicable GNMA, FNMA or FHLMC mortgage-backed securities seller/servicer guide
("Guide") for the account, however, of the Warehouse Purchasers instead of GNMA,
FNMA or FHLMC, provided that the Company shall at all times comply with
applicable law, FHA regulations and VA regulations and: the requirements of any
private mortgage insurer so that the FHA insurance, VA guarantee or any other
applicable insurance or guaranty applicable to any Mortgage is not voided or
reduced.
Section 35. Remittances. As long as the Warehouse Purchasers own a
Mortgage, the Company agrees to remit to RMST according to the terms and
provisions contained in Section 18. Such sums received will be for the benefit
of the Warehouse Purchasers.
Section 36. Escrow Accounts. All escrow amounts relating to all
Eligible Mortgages shall be maintained on deposit in an individual custodial
account at a bank that meets the definition of "well capitalized" and is insured
by the Federal Deposit Insurance Corporation. until the Eligible Mortgage is
sold to an Investor.
Section 37. No Charge for Services. The Company's services under
Section 34 shall be provided without charge.
Section 38. Termination of Servicing. If RMST terminates the Company's
rights and obligations to service a Mortgage, the Company shall promptly deliver
all files and papers related to that Mortgage to
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of Texas
RMST. Any ancillary income received by RMST related to the servicing of the
Mortgage shall not be applied to or reduce the Minimum Net Share for the
Mortgage.
SECURITY
Section 39. Security Agreement. To secure performance of all of the
Company's obligations under this Agreement and under each Offer, the Company
hereby grants to RMST, for itself, the Agent and the Warehouse Purchasers, a
security interest in all of the Company's present and future right, title and
interest in and to: (i) the Company's share of Sale Proceeds, if any; (ii) each
unexpired Commitment; (iii) the Settlement Account; (iv) the Proceeds Account;
and (v) the Bulk Mortgage Takeout Protection Account. All such security
interests granted hereby shall be first and prior and shall continue in full
force and effect, notwithstanding any termination of this Agreement, until all
of the Company's obligations to RMST, the Agent and the Warehouse Purchasers
under this Agreement and every accepted Offer have been fully performed and
satisfied. RMST shall have all of the rights of a secured party under the laws
of the state where such collateral is located, and shall have the express right
to transfer any collateral into its own name, either before or after default.
Section 40. Right of Offset. RMST shall also have a right of offset
against the Proceeds Account for, and to secure, any and all sums due RMST, the
Agent or the Warehouse Purchasers under this Agreement.
Section 41. Subrogation to Rights Under Commitment. The Company
recognizes that by virtue of the Warehouse Purchasers' ownership of the
Mortgages and RMST's rights under this Agreement, RMST, the Agent and the
Warehouse Purchasers have a valuable property right in the Commitment, and to
secure that right the Company shall permit RMST to subrogate to all rights the
Company may have in the Commitment if the Company fails to perform any of its
obligations under this Agreement.
Section 42. Construction as Financing. Without limiting any of the
foregoing provisions, if for any reason any court of competent jurisdiction
shall construe the purchase by the Warehouse Purchasers of any Eligible
Mortgages to be a loan or extension of credit rather than the absolute and
unconditional sale to the Warehouse Purchasers which the Company and: RMST
expressly hereby declare that they intend it to be, then the provisions of this
Agreement shall be construed and given effect so as to create and perfect in
RMST, for itself, the Agent and the Warehouse Purchasers, a first, prior and
continuous security interest in all of the Company's interests in each of the
affected Eligible Mortgages and all proceeds from (1) the earlier of (a) the
date the Warehouse Purchasers give value for the Eligible Mortgage or (b) the
date the Company acquires (or reacquires) an interest in the Eligible Mortgage
until (2) the earlier of (x) the sale of the Eligible Mortgage to an Investor
pursuant to the terms of this Agreement or (y) complete fulfillment of all of
the Company's obligations to RMST under this Agreement. The term "proceeds"
shall be construed to include each Commitment related to the Mortgage. In the
event of such a construction, the amount of all fees and realizations owed to,
earned by or payable to RMST or the Warehouse Purchasers for the transaction or
transactions so construed shall be absolutely limited to the maximum
non-usurious amount of interest allowed by whichever of applicable Texas (or
other applicable state law) or federal laws permit the higher amount of r
interest to be contracted for, reserved, charged or received (as applicable to
the circumstance), it being the intention of the parties to comply with, and not
to evade, all usury and other applicable laws.
INDEMNITY
Section 43. Indemnification of RMST and Others. The Company agrees to
and does hereby indemnify and hold harmless RMST, the Agent and the Warehouse
Purchasers against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, cost, expenses and
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disbursements of any kind or nature whatsoever, which may be imposed on,
incurred by, or assessed against RMST, the Agent or the Warehouse Purchasers in
any way related to, or arising out of any of the loan papers or any of the
transactions contemplated therein, to the extent that any of the same results
directly or indirectly from any claims made or actions, suits or proceedings
commenced by or on behalf of any person other than RMST, the Agent or the
Warehouse Purchasers, provided that RMST, the Agent and the Warehouse Purchasers
shall not have the right to be indemnified hereunder for their own fraud or
negligence. The indemnities contained in this section shall survive the
termination of this Agreement.
DEFAULT
Section 44. Default. The following shall be a Default under this
Agreement:
(a) as to any FNMA, FHLMC, GNMA or HUD programs for which the
Company has, at any time, represented to RMST that the Company was
eligible to participate, the Company loses its eligibility to
participate in that program;
(b) the Company's participation in a take out program is
suspended by the Investor offering that program for a reason other than
termination of the program as a whole by the Investor;
(c) anyone of the Key Principals ceases to be actively
involved in the management of the Company for any reason (including
death, disability or retirement) or the ceases to own an equity
Interest In the Company;
(d) any equity interest in the Company is issued to any person
who is not a Key Principal;
(e) there is, in the reasonable judgement of RMST, a material
adverse change in the Company's financial condition, the prospects for
the Company's timely and complete performance of its obligations under
this Agreement or the prospects for the Company's continuing in
business as a going concern;
(f) the Agent determines that the Company is no longer
eligible to participate in the Warehouse Facility;
(g) the fair value of the Company's assets do not exceed its
liabilities, or the Company does not have sufficient cash flow to
enable it to pay its debts as they mature or the Company has an
unreasonably small capital to conduct its business;
(h) the Company voluntarily seeks, consents to, or acquiesces
in the benefit of any liquidation, conservatorship, bankruptcy,
moratorium, arrangement, receivership, insolvency, reorganization or
similar laws from time to time in effect and affecting creditors'
rights generally (collectively "Debtor Laws") or becomes a party to, or
is made the subject of, any proceeding provided for by any Debtor Law
(other than as a creditor or claimant) that could stay the enforcement
of RMST's rights or the rights of the Warehouse Purchasers;
(i) the Company is not, in the reasonable judgement of RMST,
able to comply with the underwriting, closing, delivery and funding
requirements of any of its institutional end-loan investors; or
(j) the Company commits a breach of this Agreement which is
not cured within five (5) Banking Business Days of the giving of the
notice of default by RMST provided there shall be no cure period for a
breach under Section 23 or Section 26.
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of Texas
Section 45. Remedies. Upon the occurrence of a Default, in addition to
its rights under Section 27, RMST may by notice given to the Company(i)
terminate the Company's rights and obligations to service any or all Eligible
Mortgages purchased by the Warehouse Purchasers; (ii) terminate any obligations
RMST has to cause future purchases to be funded under this Agreement; (iii)
cause the Warehouse Purchasers to sell-or, if RMST has purchased some or all of
the Eligible Mortgages, sell-any or all of the Eligible Mortgages to one or more
third parties; (iv) terminate this Agreement by giving notice to the Company; or
(v) do any combination of those things.
Section 46. Effect of Termination. Upon termination, this Agreement
will survive and otherwise remain in full force and effect with respect to all
of Company's obligations and responsibilities for Mortgages purchased hereunder
except that all monetary obligations of the Company to RMST, the Agent or the
Investors shall bear interest at the Default Rate and the determination of
Minimum Net Share shall be determined using the Default Rate for all periods
after the occurrence of the Default. The Company will, after such termination,
reasonably cooperate with RMST, the Agent, the Warehouse Purchasers and the
Investors in completing all transactions, documents, reports,- payments and acts
contemplated or provided hereunder.
Section 47. Costs of Collection and Enforcement. The Company shall pay
(i) all fees, charges, or taxes for the recording or filing of any document to
create or perfect the security interest created by Section 39; (ii) all amounts
reasonably expended, advanced or incurred by RMST, the Agent or the Warehouse
Purchasers to satisfy any obligation of the Company under this Agreement, to
collect the any obligations arising under this Agreement or to enforce the
rights of RMST, the Agent or the Warehouse Purchasers under this Agreement,
including all court costs, attorneys' fees (whether for trial, appeal, other
proceedings or otherwise), fees of auditors and accountants and investigation
expenses reasonably incurred by RMST, the Agent or the Warehouse Purchasers in
connection with any such matters; and (iii) interest at an annual interest rate
equal to the Default Rate on each item specified in clauses (i) and (ii) above
from ten (10) days after the date of written demand or request for reimbursement
to the date of reimbursement.
REPRESENTATIONS AND WARRANTIES; COVENANTS
Section 48. Representations and Warranties. The Company represents and
warrants (and such representations and warranties shall be deemed remade at the
time any Mortgage is sold to the Warehouse Purchasers pursuant to this
Agreement) as set forth below.
(a) Blank Assignments' Validity. The written assignment of
each Mortgage in blank from the Company is valid and effective and RMST
or the Agent and each of its successors, substitutes and assigns are
each duly authorized to complete the blanks in each such assignment and
to take such other steps as are necessary or appropriate, in the
judgment of the person acting, to transfer the Mortgage and any related
Commitment, as contemplated by the Specific Power of Attorney form
attached as Appendix 3 (and the Company hereby agrees to execute one or
more originals of such Specific Power of Attorney and any supplement to
it which RMST may from time to time request from the Company.)
(b) Documents Genuine, Statements True. All documents
submitted in connection with each Offer are genuine, the statements
contained in the Offer submitted to RMST and all other statements and
representations as to any such Mortgages are accurate, true and correct
in all material respects and meet each of the requirements and
specifications of this Agreement.
(c) Delivery Risk and Responsibility. All deliveries of all
Mortgage documents shall be at the Company's risk and (except only for
deliveries of Mortgages required to be made by the Agent as custodian
under the relevant GNMA, FNMA or FHLMC Guide) the Company's
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responsibility, and the Company agrees to indemnify RMST, the Agent and
the Warehouse Purchasers and hold each of them harmless from all bona
fide and reasonable claims, loss, cost, damage or expense (including
reasonable attorneys' fees) arising out of or incurred in connection
therewith, including any resulting in whole or in part from RMST's, the
Agent's or the Warehouse Purchaser's own acts except only to i the
extent that any such loss, cost or expense results solely from their
negligent acts or omissions or breach of this Agreement.
(d) Each Mortgage Valid. Each Mortgage sold to the Warehouse
Purchasers has been duly executed by the mortgagor(s), acknowledged and
recorded (or duly sent by the Closer to be recorded) and is valid and
binding upon such mortgagor(s) and enforceable in accordance with its
terms.
(e) Mortgage Guaranty and Insurance. Each Mortgage that the
Company represents to be insurable by FHA or by a private mortgage
insurer, or sufficient to be guaranteed by the VA, is or will be so
insured or guaranteed as represented.
(f) Mortgages' Characteristics. The full principal amount of
each Mortgage has been (or when funded by the Warehouse Purchasers if
so requested, will be) advanced to the mortgagor under the Mortgage,
either by payment directly to the mortgagor or by payment made on the
mortgagor's request or approval; the unpaid principal balance is as
stated in the Offer; all costs, fees and expenses incurred in making,
closing and recording the Mortgage have been paid (or will be paid at
the closing); no part of the property covered by the Mortgage has been
or will be released from its lien; the terms of the Mortgage have in no
way been changed or modified and the Mortgage is current and not in
default.
(g) Mortgages Comply with Law. As to each individual Mortgage
offered to or purchased by the Warehouse Purchasers, and all escrow
balances related to the Mortgages, all applicable federal, state and
local laws, rules and regulations have been complied with, including
the Real Estate Settlement Procedures Act, the Equal Credit Opportunity
Act, the Flood Disaster Protection Act, the Truth- in-Lending Act of
1968, the Depository Institutions Deregulatory and Monetary Control Act
of 1980, all as amended, and regulations issued pursuant to them; and
all usury laws and limitations, all conditions within the control of
the Company as to the validity of the insurance or guaranty required by
the National Housing Act of 1934, as amended, and the rules and
regulations thereunder, and the Servicemen's Readjustment Act of 1944,
as amended, and the rules and regulations thereunder, and all
requirements of the mortgage insurance companies or other insurers,
have been properly satisfied, and such insurance or guaranty is valid
or enforceable. All escrow balances have been calculated in accordance
with the contractual provisions of the Mortgage, or, if more
restrictive, in accordance with any applicable GNMA, FNMA or FHLMC
Guides.
(h) Title Insurance. There is in force a paid-up title
insurance policy on each Mortgage issued by an accredited title insurer
in an amount at least equal to the outstanding principal balance of
such Mortgage. The title insurance policy has been, or shall be, issued
by a title insurance underwriter duly authorized to issue title
insurance in the state where the real property covered by the Mortgage
is located.
(i) Hazard Insurance. Hazard insurance policies meeting the
requirements of each the Mortgage and of the relevant GNMA, FNMA or
FHLMC Guide and the Investor's requirements are in force.
(j) Servicing Not Otherwise Pledged. If applicable, the
Company has not directly or indirectly pledged any servicing rights
with respect to any Mortgages offered to or purchased
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of Texas
by the Warehouse Purchasers under this Agreement to any person or
entity other than the Warehouse Purchasers pursuant to this Agreement,
nor will the Company do so without RMST's prior written approval.
(k) Commitments. The Company warrants that each Commitment is,
and will remain forever, free of any security interest, lien, claim, or
encumbrance of any kind and may be assigned by the Company to RMST and
its assigns.
(l) Appraisals Satisfy Applicable Requirements. A written
appraisal of the real property securing each :Mortgage has been
prepared by a duly-licensed appraiser and satisfies all requirements
for any applicable VA guaranty, FHA insurance or private mortgage
insurance and all requirements imposed by the Investor which issued the
Commitment covering such Mortgage, as well as the requirements of 12
C.F.R., Part 323, as amended or replaced (if the Mortgage is two
hundred fifty thousand dollars ($250,000) or more).
(m) Quality Control Reports. The Company agrees at its own
cost to provide periodic reports to RMST as requested by RMST from time
to time, of the Company's Mortgage loan origination, acquisition and
servicing operations performed by the quality-control reviewer, which
is satisfactory to the applicable governing agency and RMST.
(n) Eligibility. The Company will be approved, qualified and
in good standing as:
(i) an FHA-approved mortgage, eligible to
originate, purchase, hold, sell and service
FHA loans;
(ii) a VA-approved (not VA automatic) mortgagee,
eligible to originate, purchase, hold, sell
and service VA loans;
prior to making an Offer for a FHA or VA loan, as the case may be, and
at the time of making that Offer meets all requirements applicable to
its status as such. The Company agrees not to take or omit to take any
act which would result in its losing its status as an eligible
mortgagee, seller and issuer as described above.
(o) Organization; Good Standing. The Company (i) is a
corporation duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation; (ii) has the
requisite legal power and authority to own its property and to carry on
its business as currently conducted and (iii) is duly qualified as a
foreign corporation to do business and is in good standing in each
jurisdiction in which the transaction of its business makes such
qualification necessary, except in jurisdictions, if any, where a
failure to be in good standing has no material adverse effect on its
financial condition.
(p) Licensed. The Company is licensed and qualified to
transact the mortgage origination business in, and is in good standing
under, the laws of each state in which real estate which secures a
Mortgage is located or is otherwise exempt under applicable law from
such licensing and qualification. There has been no unsatisfied demand
made upon the Company by any state in which real estate which secures a
Mortgage is located that the Company be licensed or qualified to
transact the mortgage origination business under the laws of that
state. The Company is in compliance with the laws of all states
necessary to insure the enforceability of each Mortgage.
(q) Authorization; No Conflict. The Company has the power and
authority to execute, deliver and comply with the terms of this
Agreement. The Company's execution, delivery and performance of this
Agreement: (i) have been duly and validly authorized by all necessary
corporate action on the Company's part (none of which action has been
modified or
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of Texas
rescinded and all of which is in full force and effect); (ii) do not
and will not: (1) conflict with or violate any laws or court orders of
which the Company is, or in the normal course of its business should
be, aware of, or the Company's articles of incorporation or bylaws; (2)
either conflict with, result in a breach of, constitute a default
under, require any consent under, or result in the creation of any lien
or security interest (other than the security interest created by this
Agreement) upon any of the Company's property under any agreement,
indenture or other papers to which the Company is party or by which the
Company or its property may be bound or affected; and (iii) do not and
will not result in, or permit the holder of any such agreement,
indenture or other papers to cause, the acceleration of any of the
Company's: (1) debt; (2) obligations in respect of letters of credit,
acceptances or similar obligations issued or created for the Company's
account; (3) direct or indirect guaranties of debt of others; (4)
liabilities secured by any lien or security interest existing on
property owned by the Company, including secured liabilities which have
not been assumed by the Company or with respect to which the Company is
not personally liable; or (5) liabilities in respect l of unfunded and
vested benefits-under ERISA plans.
(r) Enforceability. This Agreement constitutes the valid and
binding I obligation of the Company enforceable in accordance with its
terms, except as, limited by (i) bankruptcy, insolvency or other
similar laws now or hereafter in effect affecting the enforcement of
creditors' rights and (ii) the application of equitable principles.
(s) Approvals. The Company's execution and delivery of this
Agreement and the Company's performance of its obligations do not
require any license, consent, approval or other action of any court or
other governmental authority other than those that the Company is, or
in the normal course of its business should be, aware of, other than
those which have been obtained and remain in full force and effect.
(t) Financial Statements. The Company's annual financial
statements for the most recent two fiscal years ending more than ninety
(90) days prior to the date of this Agreement have been furnished to
RMST. The annual financial statements are audited.
(u) Presentation. The financial statements furnished as
described in (t) above and any financial statements provided to RMST
pursuant to Section 49 fairly present the Company's financial condition
and the results of the Company's operations as of and for the fiscal
period ended on the respective dates of such financial statements. On
the dates of such financial statements, the Company was, and on the
date of any sale of any Mortgage hereunder is, solvent (i.e., able to
pay its debts as they mature and having assets with value greater than
its liabilities). Such financial statements were prepared in accordance
with generally-accepted accounting principles. Since the date of such
financial statements, nothing has occurred which has had a material
adverse effect on the Company's operations or financial condition nor
is the Company aware of any state of facts which (with or without
notice or lapse of time or both) would or could result in such a
material adverse effect, and the Company is solvent as of the date of
this Agreement and will maintain its solvency on a continuing basis.
Notwithstanding any of the aforementioned the Company further agrees to
maintain its tangible net worth at a minimum of Two Million Dollars
($2,000,000).
(v) Litigation. There are no actions, claims, suits or
proceedings pending, or to the Company's knowledge, threatened or
reasonably anticipated, against or affecting the Company by any person,
entity or governmental authority, other than those disclosed in (i) its
most recent audited annual financial statements or (ii) as listed on
Appendix 6 which, if adversely determined, may reasonably be expected
to result in a material adverse effect on the Company's operations or
financial condition.
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of Texas
(w) Payment of Taxes. The Company has filed or caused to be
filed all of the Company's federal, state and other tax returns
required to be filed, all such returns are true and correct and the
Company has paid (or caused to be paid) all material taxes that are due
and payable as shown on such returns, including all applicable FICA
payments and withholding taxes, except taxes being contested in good
faith. The amounts reserved as a liability for taxes payable in the
financial statements described above are sufficient for payment of all
of the Company's unpaid taxes, whether or not disputed, accrued for or
applicable to the period and on the dates of such financial statements
and all years and periods prior to them and for which the Company may
be liable in its own right or as transferee of the assets of, or as
successor to, any other person or entity.
(x) VA and FHA Loans. The Company has complied, and will
continue to comply, with all applicable laws in respect of the FHA
insurance or VA guaranty of each Mortgage offered or sold to the
Warehouse Purchasers and designated by the Company as an FHA loan or a
VA loan, respectively, and such insurance or guaranty is and will
continue to be in full force and effect. All such FHA loans or VA loans
comply and will continue to comply in all respects with all applicable
requirements for purchase under the industry standard forms of selling
contracts for FHA loans or VA loans, respectively, and any supplement
to them then in effect. All Mortgages offered to the Warehouse
Purchasers under this Agreement and represented to be (i) VA loans are
currently guaranteed by VA or (ii) FHA loans are currently insured by
FHA. With respect to Mortgages not yet endorsed by FHA for insurance
and Mortgages for which the Company has not yet obtained evidence of
guaranty from VA or insurance from FHA, the Company shall proceed
diligently and promptly to comply with the documentation requirements
and all other applicable requirements in order to procure the FHA
endorsement for insurance or evidence of VA guaranty or FHA insurance,
as the case may be and, in the event that the Company ever has reason
to believe that any such endorsement or evidence will not be
forthcoming, the Company shall promptly so notify RMST and repurchase
the related FHA loan or VA loan.
(y) Fire and Casualty Policies. All fire and casualty policies
covering the premises encumbered by each Mortgage offered to or
purchased by the Warehouse Purchasers under this Agreement: (i)
presently name and will continue to name the Company "and its
successors and/ or assigns in interest as they may appear" of each as
the insured under a standard mortgage clause or, for newly funded
Mortgages, a notice for an endorsement changing the named mortgagee has
been submitted to the carrier and will be pursued diligently until
issued; (ii) are and will continue to be in full force and effect; and
(iii) afford and will continue to afford insurance against fire and
such other risks as are usually insured, against in the broad form of
extended coverage insurance from time-to-time available, as well as
insurance against flood hazards if it is required by FHA, VA or any
applicable law, court or other governmental authority.
(z) Flood Insurance. Mortgages offered to or purchased by the
Warehouse Purchasers under this Agreement which are secured by premises
located in a special flood hazard are designated as such by the
Secretary of HUD which require flood insurance are and shall continue
to be covered by special flood insurance under the National Flood
Insurance Program.
(aa) Year 2000. The Company has undertaken a detailed
inventory, review, and assessment of all areas within and affecting the
Company's business and operations that could be adversely affected by
the failure of the Company to be Year 2000 Compliant on a timely basis;
has developed a detailed plan and time line for becoming Year 2000
Compliant on a timely basis; and, to date, has implemented that plan in
accordance with the specified timetable in all material respects. The
Company has made written inquiry of each of the Company's key
suppliers, vendors and customers as to whether they will be Year 2000
Compliant in all material respects on
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of Texas
a timely basis and on the basis of that inquiry believes that all of
them will be so compliant. As used herein, "Year 2000 Compliant" shall
mean that all software, embedded microchips and other processing
capabilities utilized by the Company or the Company's key suppliers,
vendors and customers will correctly process, sequence, and calculate,
without interruption, all date and date related data for all dates to,
through and after January 1, 2000, including leap year calculations,
and recognize, store and transmit date data in a format which clearly
indicates the correct century. As used herein, "key suppliers, vendors
and customers" means those suppliers, vendors, and customers of the
Company whose business failure or material business disruption would,
in RMST's judgment, be reasonably likely to result in a material
adverse change in the business, properties, condition (financial or
otherwise), or prospects of the Company.
Section 49. Covenants.
(a) Servicing. The Company agrees to service (or cause to be
serviced) all Mortgages purchased by the Warehouse Purchasers under
this Agreement which the Company has the right to service, in
accordance with the servicing standards stated above in this Agreement
and all applicable GNMA, FNMA, FHLMC, FHA and VA requirements,
including taking all actions necessary to enforce the obligations of
the obligors under such Mortgage.
(b) Comply with Commitments. The Company agrees to timely
comply in all respects with all terms and conditions of all Commitments
covering any Eligible Mortgage (and any renewals, extensions, or
modifications of them or substitutions for them), and cause the
Mortgages covered by and intended to be sold under each Commitment to
be so sold before its expiration date and in the manner and order
contemplated by the Commitment.
(c) Maintain Commitments. The Company agrees to maintain each
Commitment and all of the Company's rights and obligations under it in
full force and effect, not to pair off or otherwise cause or acquiesce
in the effective partial or complete cancellation of any Commitment
without RMST's specific written consent, not to suffer or permit any
default under any Commitment, and to enforce performance by the issuer
of each Commitment. Without limitation, the Company expressly agrees to
timely deliver any and all margin required by the terms of each
Commitment.
(d) Change in Status. The Company agrees to give prompt
written notice to RMST of any change in its status as such or in the
relationship between the Company and any Investor approved by RMST.
(e) Notification of Mortgage Defaults. The Company agrees to
immediately notify RMST upon learning of any default under any of the
Mortgages purchased (or agreed to be purchased) by the Warehouse
Purchasers, or of the institution of any proceeding before any court or
other governmental authority in respect of a claimed violation by the
Company or any other person of any statute, rule or regulation relating
to any the Mortgage or a claimed defense or offset to any Mortgage.
(f) Loan Documents. The Company agrees to maintain -at the
Company's principal office or in the office of a computer service
bureau engaged by the Company -the originals (or copies in any case
where the original has been delivered to RMST or the Agent) of all
promissory notes and mortgages or deeds of trust for the Mortgages, and
all Commitments related to them, and all related papers, as well as
files, surveys, certificates, correspondence, appraisals, computer
programs, tapes, disks, cards, accounting records and other information
and data relating to such Mortgages for a period not to exceed one
year. Upon RMST's written request, the Company will promptly make them
conveniently available to RMST.
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RESIDENTIAL MORTGAGE SERVICES
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of Texas
(g) Current Financial Information. The Company agrees to
furnish RMST, within ninety (90) days after the end of the Company's
fiscal year, audited annual financial statements for that year end,
reflecting the corresponding figures for the preceding fiscal year in
comparative form, accompanied by the related report acceptable to RMST
prepared by the Company's independent certified public accountants
stating that the statements were prepared according to generally
accepted account principles applied on a basis consistent with prior
periods except for such changes in generally accepted accounting
principles concurred in by the Company's independent public
accountants. Promptly when available and least within sixty (60) days
after the end of each of the first three fiscal quarters in the
Company's fiscal year, the Company shall furnish RMST its financial
statements for that quarter and the year to date, each reflecting the
corresponding figures for the same quarter in the preceding fiscal year
in comparative form. If requested by RMST, the Company will provide
RMST monthly financial statements no later than twenty (20) days after
the close of each month in its fiscal year.
(h) Year 2000. The Company shall deliver to RMST promptly
after they become available the Company's Year 2000 plan and time line,
all periodic internally and externally prepared evaluations and
progress reports concerning the Company's Year 2000 plan and Year 2000
readiness, any management or other letters from the Company's
accountants addressing or mentioning the Company's Year 2000
Compliance, and such other information, documentation and materials as
RMST may reasonably request from time to time in order to confirm that
the Company is Year 2000 Compliant and the methods used by the Company
to become Year 2000 Compliant.
(i) Other Information. Promptly upon request, the Company
agrees to furnish such other information as RMST may request concerning
the Company, its business affairs, the Mortgages and its relationship
with any Investor.
Section 50. Adjustment to Loan Set Up Fee. RMST may elect to increase
or decrease the Loan Set Up Fee from time to time by giving the Company written
notice of the change specifying a date when the change will become effective
which is at least thirty (30) days after the notice. Any change in the Loan Set
Up Fee shall be effective only as to Mortgages acquired by the Warehouse
Purchasers on or after the effective date of the change.
MISCELLANEOUS
Section 51. Assignment Prohibited. This Agreement may not be assigned
by the Company.
Section 52. Notices. All notices, demands, consents, requests and other
communications required or permitted to be given or made hereunder shall be in
writing and shall be delivered in person or telecopied (with an additional copy
to be mailed as provided herein) or mailed, first class, return receipt
requested, postage prepaid, addressed to the respective parties hereto at their
respective addresses hereinafter set forth or, as to any such party, at such
other address as may be designated by it in a notice to the other given in the
manner provided in this Section. All notices shall be conclusively deemed to
have been properly given or made when duly delivered, in person, to an Executive
Vice President or more senior officer of the addressee, or if mailed, on the
first Banking Business Day after being deposited in the mails or if telecopied
when transmitted, addressed as follows:
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RESIDENTIAL MORTGAGE SERVICES
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of Texas
If to the Company: Ira Silverman
President
And/or
Daniel Silverman
Executive Vice President
Community Home Mortgage Corporation
510 Broadhollow Road, Suite 100
Melville, NY 11747
Telephone: (516) 391-9100
Telecopy: (516) 391-9119
If to RMST: HSA Residential Mortgage Services of Texas, Inc.
4550 Post Oak Place Drive, Suite 335
Houston, Texas 77027
Attention: Lawrence J. Trevino
Telephone: (713) 843- 7301
Telecopy: (713) 888-9014
If to Guarantor Ira Silverman
Community Home Mortgage Corporation
510 Broadhollow Road, Suite 100
Melville, NY 11747
Telephone: (516) 391-9100
Telecopy: (516) 391-9119
With Copies to Howard M. Sommers, Esq.
950 3rd Avenue
New York, NY 10022
Telephone: (212)-935-9060
Telecopy: (212)-421-1650
No notice to or demand on the Company or any other person shall entitle the
Company or any other person to any other or further notice or demand in similar
or other circumstances.
Section 53. No Financing Intended. This Agreement evidences a facility
for the sale of Mortgages to the Warehouse Purchasers, and is not intended by
the Company or RMST to evidence a financing arrangement. The Company will report
the sale of the Mortgages under generally accepted accounting principles and for
federal income tax purposes as a sale of the entire mortgage, subject to a
limited right of RMST to require the repurchase of Defective Mortgages, and
subject to a Make Whole Payment for breach of the warranties, representations or
covenants given by the Company in this Agreement. The consideration received by
the Company upon the sale of each Mortgage will constitute reasonably equivalent
value and fair consideration for the transfer of ownership of the Mortgages. The
Company warrants and covenants that it is solvent at all times relevant to the
sale of any Mortgage, and will not be made insolvent by the sale of any
Mortgage. The Company will not sell any Mortgage to the Warehouse Purchasers
with any intent to hinder, delay or defraud any of the Company's creditors.
Section 54. Confidential/Proprietary Information. This Agreement is
considered the confidential and proprietary information of RMST, and the Company
may not reveal this Agreement or its contents to any person other than employees
of the Company who need to have knowledge of its content to perform their
duties, or to the attorneys and auditors of the Company solely in connection
with
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MORTGAGES PURCHASE AGREEMENT PAGE 20
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RESIDENTIAL MORTGAGE SERVICES
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of Texas
their representation of the Company. This Agreement is subject to the copyright
of RMST and may not be reproduced without the express permission of RMST.
Section 55. Unilateral Amendment. RMST reserves the right to
unilaterally amend this Agreement in its sole discretion to comply (to the sole
satisfaction of RMST) with any law, rule or regulation affecting RMST in effect
now or hereafter. Any such amendment shall be effective immediately. However,
and notwithstanding any other provision of this Agreement, in the event of a
unilateral amendment, the Company shall have the right to terminate this
Agreement by written notice to RMST within ten (10) days of the Company's
receipt of notice of such amendment. Termination shall not affect any obligation
of the Company incurred prior to RMST's receipt of notice of termination.
Section 56. Binding. This Agreement supersedes and replaces entirely
any and all similar agreements and arrangements heretofore existing between the
Agent and the Company or between RMST and the Company and shall bind and benefit
the Company, RMST and their respective successors, trustees, receivers and
permitted assigns.
Section 57. Governing Law; Venue. This Agreement shall be governed by
applicable United States and Texas law with specific venue in Harris County,
Texas.
Section 58. Headings. The headings and captions used in this Agreement
are for convenience only and shall not be deemed to limit, amplify or modify the
terms of l this Agreement, nor shall they effect their meaning.
Section 59. Number; Gender. Whenever the singular number is used
herein, it includes the plural where appropriate, and words of any gender shall
include each i other gender where appropriate.
Section 60. Counterparts. This Agreement may be executed in
counterparts each of which shall constitute an original instrument.
Section 61. Severability. If any provision of this Agreement is held
invalid, illegal or unenforceable, the remaining provisions shall be enforced
and shall not be affected or impaired thereby.
Section 62. Incorporated Documents. Each reference made in this
Agreement to any Appendix, Exhibit, Schedule or Annex shall be read as a
reference to that Appendix, Exhibit, Schedule or Annex to this Agreement except
where otherwise expressly specified, and each Appendix, Exhibit, Schedule and
Annex to this Agreement is hereby incorporated into this Agreement as if set
forth verbatim at each place in this Agreement where it is referred to. Each
Appendix, Exhibit, Schedule or Annex which is a form to be completed, executed
and delivered pursuant to this Agreement may be completed in accordance with
this Agreement by either the Company or RMST before, when or after it is
executed and delivered.
Section 63. Guaranty. The Guarantor unconditionally guarantees the
payment when due of any and all indebtedness and the satisfaction and
performance when required of all covenants, obligations and liabilities
(collectively, the "Obligations and Liabilities") of the Company under this
Agreement. If any or all Obligations and Liabilities of the Company hereunder
are not timely satisfied by the Company, the Guarantor unconditionally promises
to perform or cause to be performed such Obligations and Liabilities to RMST or
to pay to RMST, without deduction of any kind, in lawful money of the United
States, the amount of the Obligation and Liability if the same shall be monetary
in nature. The Guarantor acknowledges that a separate action or actions may be
brought and prosecuted against him/her/them whether or not action is brought
against the Company and whether or not the Company is joined in any such
separate action or actions. The Guarantor authorizes RMST, without notice or
demand (except as shall be required by applicable law providing the same cannot
be waived), and without affecting or impairing the liability of the Guarantor
under this Section, from time to time in accordance with this Agreement or by
mutual agreement with the Company, to renew, compromise, extend, increase,
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MORTGAGES PURCHASE AGREEMENT PAGE 21
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RESIDENTIAL MORTGAGE SERVICES
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of Texas
accelerate or otherwise change the time for payment of, or otherwise .change the
terms of, any indebtedness of the Company or to modify the terms and time for
performance of any or all Obligations and Liabilities under this Agreement. The
Guarantor waives notice of dishonor, notice of acceptance, any right to require
RMST to proceed against the Company, or to pursue any other remedy in RMST's
power whatsoever. Until all of the Obligations and Liabilities shall have been
fully performed, and until all periods under applicable law to contest
preferential or fraudulent payments have expired, Guarantor waives all rights of
contribution and subrogation from the Company.
Section 64. Entire Agreement. This Agreement represent the final
agreement between the parties and may not be contradicted by evidence of prior
contemporaneous, or subsequent oral agreements of the parties. There are no
unwritten oral agreements between the parties.
COMMUNITY HOME MORTGAGE HSA RESIDENTIAL MORTGAGE
CORPORATION SERVICES OF TEXAS, INC.
By: /s/ Ira Silverman By: /s/ Lawrence J. Trevino
---------------------- -----------------------
Name: Ira Silverman Name: Lawrence J. Trevino
Title: President Title: President
Date: 08/27/99 Date: 08/30/99
-------------------- --------
GUARANTOR
By: /s/ Ira Silverman
------------------------
Name: Ira Silverman
Attached:
Appendix 1 Offer to Sell Mortgage
Appendix 2 RMST Procedures
Appendix 3 Specific Power of Attorney
Appendix 4 Collateral/Credit Documents
Appendix 5 Special Closing Instructions
Appendix 6 Pending or Threatened Litigation
Appendix 7 Defective Mortgage Criteria
Appendix 8 Eligible Mortgage Criteria
Appendix 9 Minimum Criteria for Investors
Appendix 10 Bailee Letter (from Agent)
Appendix 11 Bailee Letter (from RMST)
283172..093098.12085
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MORTGAGES PURCHASE AGREEMENT PAGE 22
