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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest October 4, 1996
event reported)
Harbourton Financial Services, L.P.
(Exact name of registrant as specified in its charter)
Delaware 1-9742 52-1573349
(State or other (Commission (IRS Employer Identification
jurisdiction of File Number) No.)
incorporation or
organization)
2530 South Parker Road, Suite 500, 80014
Aurora, Colorado
(Address of principal executive (Zip code)
offices)
Registrant's telephone number, (303) 745-3661
including area code:
Item 5. Other Events
On October 4, 1996, Harbourton Financial Services L.P. (the
"Partnership") executed a Purchase and Sale Agreement with Source
One Mortgage Services Corporation, an unrelated third-party, for
the sale of the Partnership's servicing rights related to high
coupon GNMA loans with unpaid principal balances totaling
approximately $2.8 billion. Source One Mortgage Corporation is a
Delaware corporation located in Farmington Hills, Michigan. The
sale of the servicing rights will be recognized by the
Partnership during the three months ended December 31, 1996. The
Partnership anticipates the transfer of its servicing
responsibilities will occur on or about November 1, 1996.
The Partnership expects to receive net proceeds, after
transaction and transfer costs, of approximately $47 million from
this sale. Such proceeds will be used to reduce the
Partnership's term debt. The consideration to be received was
based on the estimated fair value of the servicing rights
determined during August 1996.
The effect of this sale will decrease both revenues and expenses
associated with the Partnership's GNMA servicing. Specifically,
loan servicing fees and ancillary income (e.g., late fees) will
be reduced. In addition, the benefit derived from the portfolio's
custodial balances will be reduced. This reduction in revenues
will be offset by a reduction in servicing costs, prepayment
costs and interest curtailments, provision for foreclosure costs
and amortization of mortgage servicing rights. Further, interest
expense on related term debt will be reduced. At September 30,
1996, the portfolio sold consisted approximately of the following
key characteristics:
Unpaid Principal Balance $2,800,000,000
Number of Loans 55,000
Weighted Average Net Servicing Fee Rate
(as a percent of the unpaid principal balance) .45%
Total Custodial Balances $34,000,000
In addition, the Partnership's historical average servicing cost
per loan and average ancillary income per loan approximated
$90.00 and $70.00, respectively.
Item 7. Financial Statements and Exhibits
(a) Financial Statements - not applicable
(b) Exhibit
1) Agreement for Purchase, dated October 4, 1996
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
HARBOURTON FINANCIAL SERVICES L.P.
By: Harbourton Mortgage Corporation, its
General Partner
Date: October 21, 1996 By: s/ Jack W. Schakett
Jack W. Schakett
Chief Executive Officer
AGREEMENT FOR PURCHASE
AGREEMENT, dated as of the 30th day of September, 1996
between SOURCE ONE MORTGAGE SERVICES CORPORATION, a Delaware
corporation ("Purchaser"), whose address is 27555 Farmington
Road, Farmington Hills, Michigan 48334 and HARBOURTON MORTGAGE
CO., L.P., a Delaware limited partnership ("Seller"), whose
address is 2530 South Parker Road, 5th Floor, Aurora, Colorado
80014.
WITNESSETH:
WHEREAS, Seller, pursuant to the Government National
Mortgage Association ("GNMA") Servicing Agreement, services
approximately 59,195 residential first mortgages as described on
Appendix I hereto (the "Mortgages") which Mortgages had an
aggregate outstanding balance at June 30, 1996 of approximately
$3,062,441,107 (see attached copy of the bid letter dated August
23, 1996 designated Appendix II incorporated herein which further
describes the servicing portfolio); and
WHEREAS, Seller is willing to transfer and assign to
Purchaser the servicing of such Mortgages on the terms and
subject to the conditions of this Agreement for Purchase; and
WHEREAS, Purchaser desires to acquire all right, title and
interest in and to such servicing upon the terms and subject to
the conditions of this Agreement for Purchase;
NOW, THEREFORE, in consideration of the mutual covenants
made herein, the parties hereto agree as follows:
1. SALE OF SERVICING AND RELATED ITEMS
1.1 Items to be Sold.
(a) Subject to, and upon the terms and conditions of
this Agreement for Purchase, Seller shall, on and as of
September 30, 1996 (the "Sale Date"), transfer, assign and
deliver to Purchaser all of Seller's right, title and
interest in and to (i) the servicing of the Mortgages
("Servicing"), (ii) mortgage escrow accounts with respect
to the Mortgages maintained by or on behalf of Seller in
accordance with the GNMA Servicing Agreement (hereinafter
"Related Escrow Accounts"); and (iii) amounts due Seller
from mortgagors under the Mortgages by virtue of advances
made by Seller with respect to the Mortgages in accordance
with the GNMA Servicing Agreement including P & I
Advances, T & I Advances and other servicing advances as
may be mutually agreed upon (all of said amounts described
in this clause (iii) are hereinafter referred to as
"Accounts Receivable"). Subject to, and upon the terms
and conditions of this Agreement for Purchase, Seller
shall, as of the effective date of GNMA's consent to the
transfer from Seller to Purchaser of the Servicing with
respect to any Mortgage (each such date, a "GNMA Transfer
Date"), transfer, assign and deliver to Purchaser all of
Seller's legal right, title and interest in and to the
Servicing relating to such Mortgage. Subject to, and upon
the terms and conditions of this Agreement for Purchase,
as of the commencement of business on November 2, 1996
(the "Transfer Date"), Seller shall commence physical
servicing (or subservicing in accordance with Section
10.20) of the Mortgages.
(b) Notwithstanding the foregoing, on the Transfer
Date, Purchaser shall neither pay for nor accept the
Servicing on any of the following Mortgages: (i) ortgages
which are In Foreclosure or In Bankruptcy (see definition
below) and are three (3) or more payments past due as of
the Cutoff Date for Transfer (as used in this Agreement, a
Mortgage is considered to be three (3) payments past due
when the payment due for a given month has not been
received on or before the close of business on the last
business day of the month that is two months after the
month when such payment was due, crediting all payments
received in order to the oldest unpaid installment;
similar conventions apply whenever this Agreement refers
to a loan that is one (1) or two (2) payments past due);
or (ii) Mortgages which are, as of the Cutoff Date for
Transfer, the subject of non-bankruptcy or non-foreclosure
litigation (see definition below) described as excluded
Mortgages in Schedule I attached; or (iii) Mortgages which
are in pools that are not final certified as of the Sale
Date. The foregoing Mortgages (items (i) through (iii)
above) are collectively referred to as "Excluded
Mortgages". In addition, unless Seller shall have
received from GNMA a waiver of the GNMA pool
recertification fee with respect to GNMA pools having
three (3) or fewer Mortgages, Seller shall have the right
to exclude from the Mortgages transferred to Purchaser
hereunder all Mortgages included in such pools, in which
case all such loans shall also be "Excluded Mortgages."
Upon final determination that any Mortgage is an Excluded
Mortgage or will otherwise not be transferred to Purchaser
under this Agreement (including, without limitation, under
the provisions of Section 2.1(c)(i)), Purchaser shall take
such action and execute such documents as Seller may
reasonably request to retransfer to Seller all rights in
such Mortgages (including the beneficial interest
therein), and the related Servicing, documents, Related
Escrow Accounts and Accounts Receivable.
"In Foreclosure": Describes a Mortgage with respect to
which, as of the Sale Date, foreclosure proceedings have
been referred to an attorney under Seller's standard
procedures or applicable GNMA requirements or have been
instituted and are pending or have been completed, or a
deed in lieu of foreclosure has been accepted or is
pending. For purposes of this Agreement, a Mortgage will
be deemed to be In Foreclosure when the first action
required by state law or the insurer to be taken to
commence proceedings In Foreclosure, or a sale under power
of sale, or other acquisition of title to the Mortgaged
Property based upon a default by the Mortgagor under the
Mortgage Note or Mortgage, under the law of the State
wherein the Mortgage is to be enforced, has been taken.
"In Bankruptcy": Describes a Mortgage with respect to
which, as of the Sale Date, the Mortgagor has (i) made an
assignment for the benefit of creditors or petitioned or
applied to any tribunal for the appointment of a
custodian, receiver or trustee for him or for a
substantial part of his assets, (ii) has commenced any
proceeding under any bankruptcy, reorganization,
readjustment of debt, dissolution, or liquidation law or
statute of any jurisdiction, whether now or hereafter in
effect; or (iii) has pending any such petition,
application or proceeding.
"Non-Foreclosure" or "Non-Bankruptcy Litigation":
Describes a Mortgage that, as of the Sale Date, has been
referred to an attorney for collection (other than by
foreclosure proceeding), or with respect to which any
action, suit or proceeding (other than a bankruptcy or
similar proceeding) before a court, governmental agency or
arbitrator has been instituted and is pending or has been
settled or otherwise finalized in a manner materially and
adversely affecting the mortgagor's obligations or ability
to make all payments to be made under the Mortgage in
accordance with the terms thereof, or the enforceability
or priority of the Mortgage granted in the mortgaged
property and any other property serving as collateral for
the Mortgage. All Mortgages that, as of the Sale Date,
are the subject of Non-Foreclosure or Non-Bankruptcy
Litigation are listed on Schedule I hereto.
1.2 Evidence of Sale. No later than the Transfer Date
(with respect to Mortgages and pools that have been recertified
and are eligible for GNMA transfer on that date), and from time
to time thereafter as additional Mortgages and pools are
recertified and become eligible for GNMA transfer, Seller and
Purchaser shall execute and deliver assignment agreements and
other documents required by GNMA which agreements and documents
shall be reasonably satisfactory in form and substance to Seller
and Purchaser, and shall execute and deliver such other
instruments or documents as the parties shall reasonably
determine are necessary to evidence the transaction contemplated.
In the event of any conflict or inconsistency between this
Agreement for Purchase and the agreements or documents required
by GNMA, the agreements or documents so required by GNMA shall be
controlling.
2. CONSIDERATION
2.1 Purchase Price. In full consideration for the sale
of the Servicing and related items as specified in Section 1.1
hereof, and upon the terms and conditions of this Agreement for
Purchase, Purchaser shall pay to Seller (in accordance with
Section 2.3), a Servicing Purchase Price in the total sum of the
following:
(a) an amount equal to 1.80% of the aggregate
outstanding principal balance of the Mortgages as of the
Sale Date other than (i) Excluded Mortgages;
(ii) mortgages with respect to which the monthly mortgage
payment is three (3) or more payments past due
("Delinquent Loans"); (iii) Mortgages which are In
Bankruptcy and are one (1) or more payments past due (a
Mortgage will be deemed one or more payments past due as
of the Sale Date if the payment that was due on September
1, 1996 has not been made as of the Sale Date); (iv)
Mortgages listed on Schedule 2.1(a) that have a payoff
request pending on the Sale Date and which Mortgage pays
off on or before November 30, 1996 (a "Payoff Mortgage"),
and (v) any Mortgage described as a Texas Veterans Land
Board "piggyback" loan. The amount determined in this sub
paragraph 2.1(a) hereof shall be referred to as the
"Servicing Purchase Price" plus;
(b) an amount equal to one hundred percent (100%) of
the face amount of the aggregate balance of the Accounts
Receivable (the "Accounts Receivable Price"). The
Accounts Receivable Price will be calculated as of the
Cutoff Date for Transfer.
(c) In addition, the Servicing Purchase Price shall
be adjusted as follows: (i) As of the Cutoff Date for
Transfer, Seller may choose not to transfer the pools
containing the loans with non-foreclosure and non-
bankruptcy litigation, or substitute other pools
(acceptable to Purchaser) with similar characteristics
that do not contain loans with non-foreclosure and non-
bankruptcy litigation (except such loans as set forth in
Schedule I), provided that the principal balance of the
removed pools shall not be in excess of $10 million; (ii)
Of the remaining loans which are Delinquent Loans as of
the Cutoff Date for Transfer, or In Bankruptcy and are one
(1) or more payments past due as of the Cutoff Date for
Transfer, which have not been voluntarily removed and/or
required to be removed from the sale under any other
provision of this Agreement, Seller shall pay Purchaser a
$1,500 administrative fee for each such loan.
(d) Any loan which is subsequently repurchased and
removed from the sale under the terms of Section 1.1(b)
and/or Section 2.1(c)(i) above, at or prior to the Cutoff
Date for Transfer, and had been included in the Servicing
Purchase Price calculation made on the Sale Date, shall be
repurchased at a price equal to that which was paid by the
Purchaser with respect to such loan on the Sale Date
(i.e., 20% of the Servicing Purchase Price thereof) plus
interest on such amount at the floating rate equal to the
Fed Funds rate for the appropriate period.
2.2 Determination of Servicing Purchase Price. Within
five (5) business days after the Sale Date, Seller shall provide
a report (the "Downpayment Report") of the aggregate outstanding
principal balance of all Mortgages as of the Sale Date (excluding
any Mortgages that Purchaser is not required to pay for under
this Agreement), which report shall be utilized by Purchaser and
Seller to determine the Servicing Purchase Price and as the basis
for determining the twenty percent (20%) of the Servicing
Purchase Price to be paid by Purchaser to Seller on the third
business day following the Purchaser's receipt of the Downpayment
Report and the applicable certified schedules referred to in
Section 9.2 below. The Servicing Purchase Price shall be based
upon the principal balance as of the Sale Date, but shall be
reduced for the Excluded Mortgages on the Sale Date and further
reduced for any additional Excluded Mortgages as of the Cutoff
Date for Transfer and increased for any loans that were reported
as Excluded Mortgages as of the Sale Date but are not Excluded
Mortgages as of the Cutoff Date for Transfer, all as provided for
in this Agreement. All information necessary to determine the
adjustments to the Servicing Purchase Price required under this
Agreement shall be sent to the Purchaser within five (5) Business
Days after the Cutoff Date for Transfer (all such information,
the "Cutoff Date Report").
2.3 Payment of Servicing Purchase Price by Purchaser.
The Servicing Purchase Price shall be paid by Purchaser to
Seller, by wire transfer, of immediately available funds to the
account designated by Seller in Section 10.21 of this Agreement
as follows:
(a) A cash downpayment equal to twenty percent (20%)
of the estimated Servicing Purchase Price, together with
interest thereon at the Fed Funds Rate from the Sale Date
to the date of payment, shall be paid to the Seller on the
third business day following the Purchaser's receipt of
the Downpayment Report required in Section 2.2 above and
the applicable certified schedules referred to in Section
9.2 below.
On or before the third business day following the
Purchaser's receipt of the Cutoff Date Report required in
Section 2.2 above, the applicable certified schedules
referred to in Section 9.2 below and the servicing files
and other documents described in Section 9.6 (the
"Transfer Payment Date"), Purchaser shall pay to Seller
(i) with respect to all Mortgages that are eligible for
GNMA transfer (i.e. recertification into Seller has
occurred and the GNMA assignment agreement and other GNMA
transfer documents contemplated by Section 1.2 have been
approved by GNMA) as of such date, the balance (i.e. 80%)
of the Servicing Purchase Price relating to such
Mortgages, together with interest thereon accruing at a
floating rate equal to the Fed Funds rate from the Sale
Date until the date such payment is made, less a document
delivery holdback (the "Document Delivery Holdback") in an
amount equal to $2,000,000, less a declining indemnity
holdback (the "Indemnity Holdback") in the amount of
$600,000, and (ii) with respect to the remainder of the
Mortgages, 15% of the Servicing Purchase Price relating to
such Mortgages, together with interest thereon accruing at
a floating rate equal to the Fed Funds rate from the Sale
Date until the date such payment is made. As to such
Mortgages that are not eligible for GNMA transfer on the
Cutoff Date for Transfer, the remaining 65% of the
Servicing Purchase Price relating to such loans shall be
paid by Purchaser to Seller, together with interest
thereon accruing at a floating rate equal to the Fed Funds
rate from the Sale Date until the date of payment, as
recertification into Seller occurs and the GNMA assignment
agreement and other GNMA transfer documents contemplated
by Section 1.2 have been approved by GNMA with respect to
such Mortgages.
Notwithstanding the preceding paragraph, Purchaser shall
not be required to make payment of the portion of the
Servicing Purchase Price due on the Transfer Payment Date
until one business day after the servicing files and other
items referred to in Section 9.6 have physically arrived
at Purchaser's offices accompanied by shipping manifests
listing servicing files for each of the Mortgages
In addition to the holdbacks referred to above, the
Purchaser will be entitled to retain a holdback from the
portion of the purchase price payable following the
Transfer Date for any loans for which the Purchaser
notifies the Seller at least three (3) business days after
the Cutoff Date for Transfer that the representation set
forth in the last sentence of Section 5.12 is untrue (the
"Nonamortization Holdback"), and which is not cured on or
before the Transfer Date. The amount of the holdback for
any nonamortizing loan will be equal to the amount
necessary to cause such loan to fully amortize on or
before its scheduled maturity date. Upon Seller's
delivery of evidence reasonably satisfactory to Purchaser
that it has cured any nonamortizing loan (by funding the
appropriate deficiency amount), Purchaser shall release
the related holdback amount to Seller, together with
interest thereon at a floating rate equal to the Fed Funds
rate from the Sale Date to the date of payment.
(b) The Document Delivery Holdback shall be remitted
to Seller, together with interest thereon at a floating
rate equal to the Fed Funds Rate from the Sale Date to
each date of payment described below, in accordance with
this Agreement as follows:
(i) $1,100,000 of the
Document Delivery Holdback (the "Assignment Reserve")
shall be released to the Seller in monthly
installments equal to (i) $10 for each mortgage
assignment that has been duly completed and sent for
recording in the prior month in accordance with
Section 9.8.3 and (ii) $10 for each recorded
assignment that has been delivered to Purchaser in
the prior month in accordance with Section 9.8.3;
provided, that the total amount released under this
paragraph shall not exceed $1,100,000 and any portion
of the Document Delivery Holdback may be used to
compensate Purchaser for any losses resulting from
the Seller's failure to deliver assignments. Within
five (5) business days after the end of each month,
Seller shall provide Purchaser with an officer's
certificate certifying as to the mortgage that have
been sent for recording in the prior month and as to
each recorded mortgage that has been delivered to
Purchaser in the prior month. Within five
(5) business days of receipt of Seller's certificate,
Purchaser shall release the appropriate amount of the
Assignment Reserve to Seller, together with interest
on the amount so paid at a floating rate equal to the
Fed Funds Rate from the Sale Date to each date of
payment.
(ii) $850,000 of the
Document Delivery Holdback (the "Exception Reserve")
shall be released to Seller as set forth in this
paragraph in monthly installments as custodial file
exceptions are cleared. Within 90 days after Seller
provides written notice to Purchaser that Seller's
personnel no longer require access to Purchaser's
custodian's premises and within 90 days of each GNMA
Transfer Date thereafter, Purchaser shall deliver to
Seller a complete custodial file exception report
prepared by Purchaser's document custodian for all
Mortgages transferred on the related GNMA Transfer
Date. From the time of receipt of the first
exception report until receipt of the exception
report relating to the final GNMA Transfer Date,
Purchaser shall release to Seller $20 for each
exception that is cleared by Seller. Within ten (10)
business days after receipt of the exception report
relating to the final GNMA Transfer Date, the parties
shall calculate the total remaining number of
uncleared exceptions listed on all exception reports
and shall divide the remaining amount of the
Exception Reserve by the aggregate number of
remaining uncleared exceptions. The quotient so
obtained shall be the "Exception Clearance Amount."
From and after the date that the Exception Clearance
Amount is determined, Purchaser shall release to
Seller the Exception Clearance Amount for each
exception that is cleared by Seller. Within five (5)
business days after the end of each month, Seller
shall provide Purchaser with an officer's certificate
(which may be combined with the certificate provided
under paragraph (i) above), countersigned or
otherwise approved in writing by Purchaser's
custodian, certifying as to the number of exceptions
that have been cleared in the prior month. Within
five (5) business days of receipt of Seller's
certificate, Purchaser shall release the appropriate
amount of the Exception Reserve to Seller, together
with interest on the amount so paid at a floating
rate equal to the Fed Funds Rate from the Sale Date
to each date of payment.
(iii) The remaining
$50,000 of the Document Delivery Holdback together
with any remaining amount in the Assignment Reserve
(the "Final Reserve") shall be released to the
Seller, together with interest at a floating rate
equal to the Fed Funds Rate from the Sale Date to the
date of payment, upon Purchaser's clearance of
substantially all of the custodial file exceptions.
(iv) The Indemnity
Holdback will be released pursuant to Section
10.3(e).
(c) The Accounts Receivable Price shall be paid as
set forth in this Section 2.3(c). Seller shall be
entitled to the Accounts Receivable Price by (i) netting
the Escrow Advances from the Related Escrow Accounts
remitted to Purchaser in accordance with Sections 9.5 and
9.7 of this Agreement and (ii) recovering any P&I
Advances, together with interest thereon at the Fed Funds
rate from the Cutoff Date for Transfer to the payment
date, by Purchaser making payment of such advances to
Seller on the business day prior to the related GNMA
remittance date.
(d) Any material failure of the Seller to satisfy
its obligations under the terms of this Agreement prior to
the Transfer Date, which failure continues unremedied for
a period of five business days after Seller's receipt of
notice of such failure from Purchaser, shall entitle
Purchaser to terminate this Agreement and receive the
entire twenty percent (20%) cash Downpayment with interest
at the floating rate equal to the Fed Funds rate from the
date Purchaser paid the cash down payment until the date
that the cash down payment is returned to Purchaser no
later than two (2) days of Purchaser's written notice of
termination. Upon any such termination, Purchaser shall
pay to Seller the amount of any servicing income and
ancillary income received, net of any subservicing fees
paid, in respect of the Servicing from the Sale Date with
interest at the Fed Funds rate and Purchaser shall take
such action and execute such documents as Seller may
reasonably request to retransfer to Seller all rights in
the Mortgages (including the beneficial interest therein),
and the related Servicing, documents, Related Escrow
Accounts and Accounts Receivable and thereafter the
parties shall have no further liability to the other.
(e) If Seller has made any servicing advances with
respect to the Mortgages that are not included within the
Accounts Receivable (i.e., any advances that the parties
did not mutually agree upon in accordance with Section
1.1(a)(iii)) (the "Excluded Advances"), Purchaser shall
promptly remit to Seller any funds received by Purchaser
after the Sale Date in respect of the Excluded Advances,
whether such funds are received from the related mortgagor
or from FHA/VA claim proceeds. To the extent permitted by
applicable insurer regulations, Purchaser shall include
such advances in any claim submissions made to the FHA or
VA in respect of any Mortgage for which Seller has made
Excluded Advances.
2.4 Undertakings by Purchaser.
(a) Purchaser covenants and agrees, upon acceptance
of the assignment of the Servicing on the Transfer Date
and the Related Escrow Accounts on the Transfer Payment
Date, to pay, perform and discharge all of the obligations
of Servicer relating to the Servicing and Related Escrow
Accounts assigned to and accepted by Purchaser which arise
from and after the Sale Date. Purchaser further agrees to
accept and assume such obligations relating to the
Servicing and Mortgages as shall be required by GNMA, as
applicable and as provided in the agreements and documents
executed by the parties pursuant to Section 1.2.
(b) Notwithstanding the foregoing, the parties
mutually acknowledge that it will be impracticable for
Purchaser to immediately assume and perform the Servicing
and other obligations as of the Sale Date and that a
reasonable period of time will be required for Seller to
directly perform such Servicing. Accordingly, on or before
the Sale Date, Purchaser and Seller shall execute an
Interim Servicing Agreement satisfactory in form and
substance to the parties, by which Seller will agree to
act as independent contractor for Purchaser in respect to
the Mortgages, in accordance with the terms and conditions
of such Interim Servicing Agreement.
2.5 Obligations of Seller.
(a) Seller covenants and agrees to pay, perform or
discharge all of its liabilities and obligations which
arose before the Sale Date relating to the Servicing, the
Related Escrow Accounts and the Mortgages, to the extent
the same are unpaid or unfulfilled on the Sale Date.
(b) Except as otherwise provided in the Interim
Servicing Agreement to be entered into pursuant to Section
2.4(b), all monies received by Seller after the Sale Date
relating to the Mortgages and the Accounts Receivable
shall be administered and remitted in accordance with the
terms of the GNMA Guides and the Interim Servicing
Agreement and all servicing fees and ancillary income
accruing after the Sale Date with respect to the Servicing
shall inure to the benefit of Purchaser.
(c) Seller represents and warrants to Purchaser that
all of its obligations with respect to the Servicing and
Related Escrow Accounts have been performed, paid and
discharged to the extent that the same are to have been
performed or paid prior to the Sale Date and Seller agrees
that Purchaser shall not be responsible for the actions or
omissions of Seller prior to the Sale Date nor for any
other obligations or liabilities of Seller whatsoever,
whether or not related to the Servicing, except as
provided for in this Agreement and the GNMA Servicing
Agreement.
(d) Seller shall prepare, execute and record at its
expense all necessary assignments to assign the Mortgages
to Purchaser, as outlined in the Transfer Instructions
(Appendix III). At Purchaser's request, Seller shall
prepare on Purchaser's behalf and deliver to Purchaser's
document custodian assignments of the Mortgages from
Purchaser to GNMA. Purchaser shall pay Seller $1.00 for
the satisfactory preparation and delivery of each such
assignment. Such fee shall be paid to Seller within 30
days of receipt of the subject assignments and an invoice
from Seller therefor and Purchaser's verification (which
shall be completed promptly) of satisfactory preparation.
An assignment shall be deemed to have been satisfactorily
prepared if it is prepared in recordable form in
compliance with applicable state law and GNMA
requirements.
(e) All invoices (including, without limitation, tax
and insurance invoices) pertaining to the servicing of the
Mortgages and which are due prior to the Transfer Date or
within 30 days after the Cutoff Date for Transfer, shall
be paid by Seller before the Cutoff Date for Transfer;
provided, that Seller shall not be required to make
payment of (i) any tax invoice that was issued by the
applicable governmental authority later than seven (7)
business days prior to the Cutoff Date for Transfer or
(ii) any insurance invoice that was not in Seller's
possession as of the Cutoff Date for Transfer. All other
invoices, transmittal lists or any other information used
to pay such invoices which are received after the Cutoff
Date for Transfer shall be forwarded by Seller to
Purchaser in accordance with the Transfer Instructions.
All penalties and interest due with respect to any
Mortgage resulting from Seller's failure to pay invoices
it was required to pay under the first sentence of this
paragraph, or where Seller failed to forward invoice
information to Purchaser pursuant to the Transfer
Instructions, shall be borne by Seller.
3. Closing
Subject to the terms and conditions set forth in this
Agreement for Purchase and applicable GNMA requirements, the
assignment of the Servicing and other assets or rights
transferred hereunder will occur as of the close of business on
the Sale Date, upon satisfaction of the requirements of this
Agreement for Purchase unless both parties agree in writing to
extend the Sale Date. With respect to the pools described in
Section 5.15, legal title to the Servicing shall be transferred
on the respective GNMA Transfer Dates in accordance with Section
4. The Cutoff Date for Transfer shall be the date the Interim
Servicing Agreement expires, which is the close of business on
November 1, 1996. The Transfer Date shall be the commencement of
business on November 2, 1996. Within five (5) business days
after the Cutoff Date for Transfer, Seller shall deliver to
Purchaser the complete servicing files and all other documents in
accordance with Section 9.6 and the Transfer Instructions.
4. GNMA APPROVAL
The assignment of Servicing under this Agreement for
Purchase is subject to the consent of GNMA. The parties agree to
use their best efforts to obtain GNMA's consent to the transfer
of each of the pools to be transferred hereunder. The parties
shall notify GNMA that Purchaser will subservice from and after
the Transfer Date those pools described in Section 5.15 and
listed on Schedule 5.15 for which GNMA's consent to transfer has
not been obtained.
If, as of August 31, 1997, any pools have not been recertified
into Seller or are otherwise not yet eligible for GNMA transfer,
at Purchaser's election to be exercised by written notice to
Seller within 30 days after August 31, 1997, Seller shall
repurchase, and Purchaser shall reconvey, the Servicing, the
Related Escrow Accounts and Accounts Receivable related to all
Mortgages in pools that are not eligible for transfer or, at
Seller's option (if permitted by GNMA), the Mortgages, the
Servicing, Related Escrow Accounts and Accounts Receivable
relating only to the Mortgages that are preventing the
recertification of the affected pools. The purchase price for
any Servicing repurchased from Purchaser hereunder shall equal
the Repurchase Price (as defined below), and shall be paid within
fifteen (15) days following receipt from Purchaser of written
demand therefor. Immediately upon completion of the repurchase
of such Servicing by Seller, Purchaser shall assign to Seller all
of its rights, title and interest in and to such Mortgages and
Servicing and shall forward to Seller the applicable Related
Escrow Accounts, Custodian Files, Servicing Files and other
documents relating to such repurchased Servicing. As used in
this Agreement, "Repurchase Price" means, with respect to any
Mortgage, the product of the unpaid principal balance of the
Mortgage as of the date of repurchase times 1.80% (but only if
the Servicing Purchase Price was paid in respect of the related
Mortgage) plus the related Accounts Receivable.
5. WARRANTIES AND REPRESENTATIONS OF SELLER
Seller warrants and represents to Purchaser as follows:
5.1 Organization, Good Standing, Power, Etc. Seller is a
limited partnership duly organized, validly existing and in good
standing under the laws of the State of Delaware.
5.2 Authority and Capacity. Seller has all requisite
partnership power, authority and capacity to enter into this
Agreement for Purchase and to perform the obligations required of
it hereunder, in particular the partnership power and authority
to transfer all right, title and interest in the Servicing,
Mortgages, Related Escrow Accounts and Accounts Receivable,
subject to obtaining the consent of GNMA as provided in Section
4.
5.3 Effective Agreement. The execution and performance
of this Agreement for Purchase by Seller, its compliance with the
terms hereof and the consummation of the transactions
contemplated (assuming receipt of the various consents and
releases required pursuant to this Agreement for Purchase) will
not violate any material provisions of law applicable to Seller
and do not and will not conflict with any of the terms of its
Certificate of Limited Partnership or Limited Partnership
Agreement or any other governing instrument relating to the
conduct of its business or the ownership of its properties, or
any other agreement to which Seller is a party.
5.4 Compliance with Contracts and Regulations. Seller
has not received any notice of material default from GNMA with
respect to Seller's obligations under the Servicing and Seller
has no knowledge of any non-compliance by it with applicable laws
and regulations which will cause the cancellation of the
Servicing, FHA insurance, or VA guaranty. Seller is in
compliance with Chapter 10-32 and 10-33 of HUD Handbook 4330.1
REV-5.
5.5 Filing of Reports. Seller has filed all reports
required by GNMA with respect to the rights being assigned to
Purchaser hereunder, and it has complied with all federal, state
and municipal laws, regulations and ordinances affecting the
Servicing and other rights being transferred hereunder.
5.6 Title to the Servicing, Related Escrow Accounts and
Accounts Receivable. Seller is the lawful owner of the Servicing
and the Accounts Receivable as well as the fiduciary for the
Related Escrow Accounts with the customary rights and
responsibilities which are being transferred, assigned and
delivered to Purchaser hereunder, and such transfer, assignment
and delivery pursuant to, and in accordance with, the terms and
conditions of this Agreement for Purchase will transfer and
assign to Purchaser all right, title and interest therein free
and clear of any and all claims, charges, defenses, offsets and
encumbrances of any kind or nature whatsoever (after giving
effect to the application of the proceeds of the Servicing
Purchase Price and otherwise subject to Section 10.21).
5.7 Validity of Servicing. Seller has not received
notice of any default by it under the Servicing, and, to Seller's
knowledge, no other party thereto is in default thereunder.
5.8 Mortgage Escrow Accounts. All Related Escrow Accounts
required to be maintained by Seller are being maintained on the
Sale Date in accordance with applicable law and the terms of the
Mortgages and the Servicing related thereto, and, where
applicable, in accordance with the regulations of the GNMA and
other governmental agencies having jurisdiction. Except as to
payments which are past due under Mortgages, all escrow balances
required by the Mortgages and paid to Seller for the account of
the mortgagors and investors for whom Seller is servicing
Mortgages, are on deposit in the appropriate escrow accounts.
5.9 Accounts Receivable. The Accounts Receivable are
valid and subsisting amounts owing to Seller, and are carried on
the books of Seller at values determined in accordance with
generally accepted accounting principles, and are subject to no
setoffs or claims of the account debtor arising from acts or
omissions of Seller.
5.10 Litigation; Compliance with Laws. There is no
litigation, proceeding or governmental investigation pending or,
to the knowledge of Seller, threatened, or any order, injunction
or decree outstanding, against or relating to Seller that has not
been disclosed by Seller to Purchaser or its counsel in writing,
which could have a material adverse effect upon the Servicing and
rights being purchased by Purchaser hereunder, nor does Seller
know of any basis for any such litigation, proceeding, or
governmental investigation, except for the loans described in
Schedule I.
5.11 Statements Made. No representation, warranty or
statement made by Seller in this Agreement for Purchase or in any
document referred to herein or in any schedule, statement or
certificate hereafter furnished pursuant to this Agreement for
Purchase or in connection with the transactions provided for in
this Agreement for Purchase, contains or will contain any untrue
statement of a material fact or omits or will omit to state a
material fact necessary to make the statements contained herein
or therein not misleading, except to the extent previously
disclosed to Purchaser.
5.12 Loans by Seller. Any and all Mortgages, the
servicing of which is being assigned to Purchaser, were not made
and/or consummated in violation of applicable federal and state
law and regulations as a result of which the validity of the
Mortgages or the enforceability of the mortgagor's obligations
thereunder would be adversely affected. As of the Sale Date, all
Mortgages will be scheduled to fully amortize on or before their
stated maturity date.
5.13 No Accrued Liabilities. There are no accrued
liabilities of Seller with respect to the Servicing or
circumstances under which such accrued liabilities will arise
against Seller, or Purchaser as successor to the servicing, with
respect to occurrences prior to the Sale Date. The parties
acknowledge that some termination or transfer fees payable by
Seller to GNMA may be outstanding on the date of Sale, however,
Seller assumes full responsibility for any such fees.
5.14 Premiums. The required premiums for all loans with
mortgage insurance are being paid by the Mortgagor, not Seller.
5.15 Pool Certification. Upon transfer of the Servicing
Rights to Purchaser, all GNMA Pools will be in compliance with
all applicable Investor requirements and the securities backed by
such Pools have been issued on uniform documents, promulgated in
the GNMA Seller Service Guides 5000.1 and 5000.2 without any
material deviation therefrom. As of the Sale Date, all pools
relating to the Mortgage loans shall be final certified when
transferred to Purchaser, and when recertified by Seller and upon
completion and delivery of the assignments contemplated by
Section 2.5(d) they shall be eligible for recertification by
Purchaser's custodian. Purchaser acknowledges that certain pools
associated with recent bulk acquisitions described on Schedule
5.15 may not be eligible for transfer as of the Cutoff Date for
Transfer due to the pools not being recertified because of
missing prior intervening assignments. Purchaser agrees to
accept physical transfer of the servicing responsibilities for
such pools on the Transfer Date and subservice such pools on
behalf of the Seller until such pools have been recertified by
Seller and legal title can be transferred. Purchaser will be
entitled to all of the benefits associated with such pools as
compensation for subservicing these pools, as well as being
responsible for risks normally assumed by a Purchaser (i.e.
prepays, foreclosure expense, interest curtailments, but
excluding such things as all problems related to Seller's failure
to recertify pools in a timely manner). The Servicing Purchase
Price relating to such pools and the associated Servicing shall
be paid in accordance with Section 2.3(a). Seller agrees to give
Purchaser power of attorney to request documents on Seller's
behalf in regard to the pools that are in the recertification
process. Seller will be responsible for curing any deficiencies
that must be cured in order for Purchaser to obtain such
recertification within sixty (60) calendar days of receipt of
written notice of such defect from Purchaser. In the event that
said cure does not occur within 60 days, Seller will bear any and
all reasonable out-of-pocket fees, costs, expenses, and/or losses
associated with Seller's failure to fulfill its documentation
delivery obligations, including but not limited to the reasonable
out-of-pocket fees and costs incurred by Purchaser for document
recreation and/or recordation and custodial and/or other bank
charges. Seller hereby agrees that with respect to any GNMA pool
that does not receive final certification or recertification
prior to the time frames specified by GNMA, Seller shall be
responsible for payments of any administrative sanctions imposed
by GNMA, including but not limited to costs associated with
posting of letters of credit in the event that the pools are not
timely certified or recertified as a result of Seller's actions
or inactions.
6. WARRANTIES AND REPRESENTATIONS OF PURCHASER
Purchaser warrants and represents to Seller as follows:
6.1 Due Incorporation and Good Standing. Purchaser is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware.
6.2 Authority and Capacity. Purchaser has all requisite
corporate power, authority and capacity to enter into this
Agreement for Purchase and, subject to appropriate regulatory
approval, to perform the obligations required of it hereunder.
6.3 Effective Agreement. The execution and performance of
this Agreement for Purchase by Purchaser, its compliance with the
terms hereof and the consummation of the transactions
contemplated (assuming receipt of the various consents required
pursuant to this Agreement for Purchase) will not violate any
provision of law applicable to it and will not conflict with the
terms or provisions of its Certificate of Incorporation or By-
Laws, or any other instrument relating to the conduct of its
business or the ownership of its property, or any other Agreement
to which Purchaser is a party.
6.4 Statements Made. No representation, warranty or
statement made by Purchaser in this Agreement for Purchase or in
any document referred to herein or in any schedule, statement or
certificate hereafter furnished pursuant to this Agreement for
Purchase or in connection with the transactions between Seller
and Purchaser provided for in this Agreement for Purchase,
contains or will contain any untrue statement of a material fact
or omits or will omit to state a material fact necessary to make
the statements contained herein or made in any document referred
to herein not misleading.
6.5 Compliance with Contracts and Regulations. Purchaser
is in good standing with GNMA. Purchaser has not received any
notice of material default from GNMA with respect to Purchaser's
servicing obligations and Purchaser has no knowledge of any non-
compliance by it with applicable laws and regulations which will
cause the cancellation of the Purchaser's status as a GNMA
Seller/Servicer or an FHA and VA approved mortgagee in good
standing.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
The obligations of Purchaser under this Agreement for
Purchase are subject to the satisfaction of each of the following
conditions at or prior to the Sale Date (unless waived in writing
by Purchaser):
7.1 Correctness of Warranties and Representations. The
warranties and representations made by Seller in this Agreement
for Purchase are true and correct in all material respects and
shall continue to be true and correct in all material respects on
the Sale Date.
7.2 Compliance with Conditions. All of the terms,
covenants and conditions of this Agreement for Purchase required
to be complied with and performed by Seller at or prior to the
Sale Date shall have been duly complied with and performed.
7.3 Opinion of Counsel for Seller. Purchaser shall have
received an opinion of Lowenstein, Sandler, Kohl, Fisher &
Boylan, P.A., counsel to Seller in connection with this
transaction, on the Sale Date, in form and substance reasonably
satisfactory to counsel to Purchaser, to the effect that: (i)
Seller is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware,
(ii) Seller has all requisite partnership power, authority and
capacity to enter into this Agreement for Purchase and to perform
the obligations required of it hereunder, in particular the
corporate power and authority to transfer all right, title and
interest in the Servicing, Related Escrow Accounts and Accounts
Receivable (subject to its receipt of the consents and releases
referred to herein), (iii) the execution and performance of this
Agreement for Purchase by Seller its compliance with the terms
hereof and the consummation of the transactions contemplated
hereby, do not and will not conflict with any of the terms of its
Certificate of Limited Partnership or Limited Partnership
Agreement or any other governing instruments known to such
counsel, (iv) this Agreement for Purchase has been duly executed
by Seller and is a valid and legally binding obligation of Seller
in accordance with its terms, subject to bankruptcy, insolvency
and similar laws affecting generally the enforcement of
creditors' rights and subject to principles of equity, and (v) to
the knowledge of such counsel, other than foreclosure actions,
there is no litigation, proceeding or governmental investigation
existing, pending, or threatened, or any order, injunction or
decree outstanding, against or relating to Seller which is
expected to have a material adverse effect upon the rights being
assigned to Purchaser hereunder after the Sale Date and which has
not been disclosed by Seller to Purchaser or its counsel in
writing.
7.4 Corporate Resolution. Purchaser shall have received
a duly executed Certificate of the Secretary of Seller reciting
the Board of Directors approval of the sale and authorizing the
officers to execute documents. In addition, Purchaser shall have
received such certificates and resolutions of any guarantor of
Seller's obligations hereunder as may reasonably be requested by
counsel to Purchaser.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
The obligations of Seller under this Agreement for
Purchase are subject, at Seller's option, to the satisfaction at
or prior to the Sale Date of each of the following conditions:
8.1 Correctness of Warranties and Representations. The
warranties and representations made by Purchaser in this
Agreement for Purchase are true and correct in all material
respects and shall continue to be true and correct in all
material respects on the Sale Date.
8.2 Compliance with Conditions. All of the terms,
conditions and covenants of this Agreement for Purchase required
to be complied with and performed by Purchaser at or prior to the
Sale Date shall have been duly complied with and performed.
8.3 Opinion of Counsel for Purchaser. Seller shall have
received an opinion of Robert V. Schrader, Esq., counsel to
Purchaser in connection with this transaction, on the Sale Date,
in form and substance reasonably satisfactory to counsel to
Seller, to the effect that: (i) Purchaser is a corporation duly
organized, validly existing and in good standing under the laws
of the State of Delaware, (ii) Purchaser has all requisite
corporate power, authority and capacity to enter into this
Agreement for Purchase and to perform the obligations required of
it hereunder, (iii) the execution and performance of this
Agreement for Purchase by Purchaser, its compliance with the
terms hereof and the consummation of the transactions
contemplated hereby, do not and will not conflict with any of the
terms of its Certificate of Incorporation, By-Laws or any other
corporate governing instruments known to such counsel, (iv) this
Agreement for Purchase has been duly executed by Purchaser in
accordance with its terms, subject to bankruptcy, insolvency and
similar laws affecting generally the enforcement of creditors'
rights and subject to principles of equity, and (v) after inquiry
to the knowledge of such counsel other than foreclosure actions,
there is no litigation, proceeding or governmental investigation
existing, pending, or threatened, or any order, injunction or
decree outstanding, against or relating to Purchaser which is
expected to have a material adverse effect upon this transaction
after the Sale Date and which has not been disclosed by Purchaser
to Seller or its counsel in writing.
8.4 Corporate Resolution. Seller shall have received a
duly executed Certificate of the Secretary reciting the Board of
Directors approval of the sale and authorizing the officers to
execute documents.
9. DELIVERY OF DOCUMENTS
9.1 Reserved..
9.2 Schedule of Servicing. No later than five (5)
business days after the Sale Date, Seller shall deliver to
Purchaser a schedule reflecting the status of the mortgages as of
the close of business on Sale Date, and again no later than five
(5) business days after the Cutoff Date for Transfer, Seller
shall deliver a schedule reflecting the status of the mortgages
as of the close of business on the Cutoff Date for Transfer,
certified as being true and correct, on behalf of Seller by an
authorized officer thereof, containing the following information
with respect to each Mortgage being serviced by Seller under the
Servicing being assigned on the Sale Date: (i) loan number, (ii)
mortgagor's name, (iii) address of mortgaged premises, (iv)
principal balance due and owing on the note, (v) the interest
rate provided in the note, (vi) next payment due date, (vii) type
of loan, (viii) amount held in escrow for the account of the
mortgagor, (ix) monthly P & I installment, (x) monthly escrow
installment.
9.3 Reserved.
9.4 Schedule of Loans in Default. No later than five (5)
business days after the Cutoff Date for Transfer, Seller shall
deliver to Purchaser a schedule reflecting the status of the
mortgages as of the close of business on the Cutoff Date for
Transfer, certified as being true and correct, on behalf of
Seller by an authorized officer thereof, listing all Mortgages
that were two (2) or more payments past due as of the Sale Date
and indicating the status of such Mortgages as of the Cutoff Date
for Transfer. Any loans which enter bankruptcy or foreclosure
after Sale Date, and on or before the Cutoff Date for Transfer
shall be added to the schedule of loans in default.
9.5 Schedule of Delivery of Escrow and Principal and
Interest Accounts. No later than five (5) business days after
the Cutoff Date for Transfer, Seller shall deliver to Purchaser a
trial schedule dated as of the Cutoff Date for Transfer which
shall be certified as being true and correct by an authorized
officer thereof, setting forth the Accounts Receivable (other
than Principal and Interest Accounts Receivable) relating to the
Servicing being assigned. On or before the Transfer Payment
Date, Seller shall wire to the Purchaser all tax and insurance
escrow balances as well as all other non-P&I escrow balances
(including interest on escrow amounts through the Sale Date), net
of the Accounts Receivable in accordance with Section 2.3(c))
with the exception of the Principal and Interest balances.
On or before November 11, 1996, Seller shall deliver to
Purchaser a trial schedule dated as of the Cutoff Date for
Transfer, which shall be certified as being true and correct on
behalf of Seller by an authorized officer thereof, setting forth
the Principal and Interest Accounts Receivable relating to the
Servicing being assigned. At least one (1) business day before
the GNMA remittance date, Purchaser shall remit sufficient funds
(that is, fund net of Principal and Interest balances collected
by Seller on or prior to the Cutoff Date for Transfer) to Seller
so that Seller will be able to pay the GNMA remittance for the
Servicing being assigned and in accordance with the terms of the
Interim Servicing Agreement. The Purchaser's remittance shall
include all Principal and Interest Advances due Seller.
9.6 Documentation to be Delivered. Within five (5)
business days after the Cutoff Date for Transfer, Seller shall,
at its expense, deliver to Purchaser complete servicing files
(which may be in the form of the conversion tape) containing all
documents on each Mortgage covered by the Servicing being
assigned hereunder, including all necessary and usual
documentation, and also including, without limitation, with
respect to each mortgage loan, ledger history, tax records, flood
and hazard insurance policy information and/or records,
collection records and property address listing, letters to
hazard insurance carrier changing insurance endorsements to read
in favor of Purchaser (which may be on fiche), all reports made
to GNMA with respect to the Mortgages within the three month
period prior to the Transfer Date (which may be on fiche), and
such other necessary and customary servicing documents and
information as Purchaser shall reasonably request pursuant to the
Transfer Instructions. With respect to flood and hazard
insurance policies, Seller agrees to secure adequate evidence of
insurance in accordance with the Transfer Instructions and Seller
shall pay Purchaser $45,000 (which shall be paid by offset
against the portion of the Purchase Price due on the Transfer
Payment Date) to permit Purchaser to perform a flood audit with
respect to the Mortgages.
9.7 Reconciliation. Seller shall, within five (5)
business days after the Cutoff Date for Transfer, reconcile pool
principal balances to security balances outstanding, principal
and interest cash balances to minimum cash requirements, and
shall adequately explain differences to meet GNMA's balancing
requirements for collateral and minimum cash. Any monetary
adjustments necessary to bring all balances into agreement will
be transferred between Seller and Purchaser as appropriate.
(This includes monetary adjustments resulting from any type of
pool or loan level deficiency or discrepancy for new loan
originations unavailable for verification during Purchaser's due
diligence examination prior to the Sale Date). In addition,
Seller shall explain and document all pass through rates, service
fees and payment schedules prior to the Cutoff Date for Transfer.
9.8 Assignments.
9.8.1 Transfer of Mortgage Escrow Accounts. Subject to
the provisions of Sections 2.3(c) and 9.5, on the Transfer
Payment Date, Seller shall transfer the Mortgage Escrow Account
balances related to the Servicing Rights and Accounts Receivable
transferred on such date to accounts in Purchaser's name as
custodian or trustee, in one (1) or more depository institutions
identified by Purchaser and acceptable to GNMA.
9.8.2 Assignment of Servicing Rights. On each GNMA
Transfer Date, Seller shall assign to Purchaser with respect to
the Servicing Rights being transferred on the date in question,
all remaining right, title and interest in and to the related
Servicing Agreements and the related Advances, Pools, Note and
Mortgages, and other instruments related to the Advances, Pools,
Notes and Mortgages as required by GNMA.
9.8.3 Assignments Recorded As Required. Seller, at its
sole expense, shall prepare all endorsements in blank to the
applicable Mortgage Notes and assignments of the applicable
Mortgages as contemplated by Section 2.5(d) and shall forward for
recording to the appropriate state or local recording offices (i)
at least 75% of the assignments within 60 days after each
applicable GNMA Transfer Date and (ii) substantially all of the
assignments within 75 days after each applicable GNMA Transfer
Date. Seller shall provide to Purchaser copies of such executed
Mortgage assignments, and Seller shall certify that each
assignment for each Mortgage has been submitted for recording.
Seller shall forward to Purchaser each recorded assignment
promptly upon Seller's receipt of such recorded assignment.
Purchaser shall have the option at its sole expense to review
assignments prior to recording, so long as such review does not
delay the recertification process.
10. MISCELLANEOUS
10.1 Conduct of Seller's Business. From and after the
date of this Agreement for Purchase until the Sale Date, Seller
covenants and agrees that it will keep the Servicing in full
force and effect.
10.2 Rebate of Servicing Purchase Price
(a) In the event GNMA demands a repurchase of a
Mortgage at any time due to any event or circumstance for
which Purchaser is indemnified against under Section 10.3,
and Seller is unable to cure any such defect in the
Mortgage within the cure period permitted by GNMA, the
Purchaser shall be entitled to an immediate repurchase of
the Mortgage. Purchaser shall provide Seller with prompt
written notice of any repurchase demand received from GNMA.
If a repurchase is required, the loan must be repurchased
by Seller at the Repurchase Price (as defined in Section 4)
plus the cost of repurchasing the loan out of the
applicable pool plus all of Purchaser's reasonable out-of-
pocket expenses resulting from the repurchase of the
Mortgage. Immediately upon repurchase, Purchaser shall
reconvey the loan (and all related files and escrows, net
of advances) to Seller.
(b) If any of the bankruptcies that are current at
the Sale Date (as identified on Schedule 10.2(b)) are not
current six (6) months after the Sale Date, Seller shall
refund the Servicing Purchase Price of the loans to
Purchaser within two (2) business days plus interest at the
floating rate equal to the Fed Funds rate from Sale Date to
the date payment is received. From and after the Transfer
Date, Purchaser shall service all such loans in accordance
with customary servicing procedures and with the same
standard and diligence as it does for its other GNMA loans
that are In Bankruptcy.
10.3 Indemnification.
(a) Seller shall indemnify and hold harmless
Purchaser, and will promptly reimburse Purchaser for any
losses, damages, deficiencies or reasonable out-of-pocket
expenses of any nature (including reasonable attorney's
fees) incurred by Purchaser after the Sale Date which
result from occurrences prior to Sale Date:
(i) Resulting from any material misrepresentation
made by Seller in this Agreement for Purchase, or in
any schedule, statement, certificate, or information
furnished pursuant to this Agreement for Purchase; or
(ii) Resulting from any breach of warranty by
Seller, or the nonfulfillment of any covenant of
Seller contained in this Agreement for Purchase, or
in any schedule, statement or certificate furnished
pursuant to this Agreement for Purchase;
(iii) Resulting from any defects existing as of the
Sale Date (including those defects subsequently
discovered by either Purchaser, or GNMA) in any
Mortgage, including but not limited to, missing or
inadequate documentation, typographical errors and
misspellings and substandard loan underwriting which
cause GNMA to require repurchase of a loan or result
in a denial of foreclosure reimbursements by FHA or
VA;
(iv) Resulting from errors of Seller in servicing
the Mortgages (including, but not limited to,
misquoted payoffs, misapplied payments, incorrect
servicing sale transfer information, failure to file
timely notice of default and improperly or untimely
securing of vacant property) prior to the Sale Date,
or as a result of Seller's negligence or malfeasance
thereafter;
(v) Resulting from any casualty damage to a
mortgaged property (including, but not limited to,
earthquake or flood damage) existing as of the Sale
Date, which damage is not covered by insurance; and
(vi) Without limiting any other indemnity provided
hereunder, resulting from the Seller's failure to
deliver a servicing file for any Mortgage; provided,
that Purchaser shall provide Seller with a schedule
of all missing servicing files within 90 days after
the Transfer Date.
(b) For a period of two (2) years following the Sale
Date, Seller shall indemnify and hold harmless Purchaser,
and will promptly reimburse Purchaser for any amounts
representing reasonable out-of-pocket expenses and/or
losses, including but not limited to, principal, interest,
reasonable attorneys' fees, and court costs and interest
incurred by Purchaser in connection with any Mortgage
listed on Schedule 10.3(b) which is two (2) or more
payments past due on the Sale Date (and unpaid by the
Mortgagor), net of any such amounts which are paid to
Purchaser in respect of such Mortgage by any other person,
including the Mortgagor, FHA or VA, and net of the $1,500
administrative fee paid by Seller under Section 2.1(c).
From and after the Transfer Date, Purchaser shall service
all such delinquent loans (including prosecution of
foreclosure proceedings and bankruptcy actions and
administration of FHA and VA claims) in accordance with
customary servicing procedures and with the same standard
and diligence as it does for the other delinquent FHA and
VA loans in its portfolio.
(c) For a period of two (2) years from the Sale
Date, Seller agrees to indemnify Purchaser from any buy-
down amount associated with any VA loan with respect to
which Purchaser or Seller is notified by the VA that the VA
will not specify an amount to be credited to the
indebtedness incident to the foreclosure sale of the
mortgaged property relating to such VA loan. Purchaser and
Seller agree to elect the Buydown option for the 2 year
period following the Sale Date.
(d) Seller shall indemnify and hold harmless
Purchaser, and will promptly reimburse Purchaser for any
losses, damages, reasonable out-of-pocket costs,
deficiencies, or reasonable out-of-pocket expenses of any
nature (including reasonable attorneys' fees) incurred by
Purchaser after the Sale Date by reason of Purchaser being
added as defendant in any of the cases referenced in
Schedule I.
(e) Except for Mortgages fraudulently originated or
referenced in Sections 10.3(a)(vi), 10.3 (b) and (c),
Purchaser's right to indemnification from Seller hereunder
shall expire seventy-two (72) months from and after the
Transfer Date. If, prior to the expiration of the
applicable seventy-two (72) month period, Purchaser has
notified (as hereinafter provided) Seller in writing of any
fact, claim or litigation giving rise to any of Seller's
obligations under this Section 10.3, Seller shall be
responsible until the matter is completely resolved.
Purchaser's right to indemnification from Seller under
Section 10.3(a)(vi) shall survive for the life of each of
the Mortgages referenced on the schedule to be delivered in
accordance with Section 10.3(a)(vi).
For the first twenty-four (24) months of the
indemnification period, Purchaser shall retain the
declining Indemnity Holdback referred to in Section 2.3(a).
If, prior to the expiration of the applicable twenty-four
(24) month period, Purchaser has notified (as hereinafter
provided) Seller in writing of any fact, claim or
litigation giving rise to any of Seller's indemnification
obligation under this Section 10.3, the amount of the
retained funds payable by Purchaser to Seller shall be
reduced by such amounts as are necessary to satisfy
Seller's indemnification obligations under the Section
10.3. If at any time the funds retained by Purchaser are
not sufficient to satisfy the indemnified claims and
expenses incurred by Purchaser, which are proven or
justified, Seller shall promptly pay the necessary
additional funds to Purchaser. Upon the final
determination of all such indemnified matters, the balance
of the retained funds held by Purchaser shall be paid to
Seller together with interest as provided below. One year
after the Transfer Date, Purchaser shall pay to Seller one-
half (1/2) of all sums retained (together with interest as
provided below) in accordance herewith and not subject to
an indemnification claim as the result of notices from
Purchaser to Seller of any fact, claim or litigation
forming the basis for any of Seller's indemnification
obligations under this Section 10.3. Purchaser shall pay
to Seller the balance of all sums retained in accordance
herewith (together with interest as provided below) and not
subject to an indemnification claim as the result of
notices made in good faith from Purchaser to Seller of any
fact, claim or litigation forming the basis for any of
Seller's indemnification obligations under this Section
10.3. However, Seller shall continue to be liable in
accordance with the provisions hereof for the seventy-two
(72) month indemnification period notwithstanding the
release of all or a portion of the Indemnity Holdback at
the expiration of the twenty-four (24) month period.
Notwithstanding the foregoing, Seller shall only be liable
to Purchaser, and the Indemnity Holdback may only be
reduced, for amounts that are actually incurred by
Purchaser and are indemnified against by Seller under
Sections 10.3(a), (b), (c) and (d). All payments of the
Indemnity Holdback or portions thereof released to Seller
hereunder shall be accompanied by interest on the amount
released at a floating rate of interest equal to the Fed
Funds Rate from the Sale Date to the date such payment is
made.
(f) Purchaser shall indemnify and hold harmless
Seller, and will promptly reimburse Seller for any losses,
damages, deficiencies or reasonable out-of-pocket expenses
of any nature (including reasonable attorney's fees)
incurred by Seller after the Sale Date which result from
occurrences after the Sale Date:
(i) Resulting from any material misrepresentation
made by Purchaser in this Agreement for Purchase, or
in any schedule, statement, certificate, or
information furnished pursuant to this Agreement for
Purchase; or
(ii) Resulting from any breach of warranty by
Purchaser, or the nonfulfillment of any covenant of
Purchaser contained in this Agreement for Purchase,
or in any schedule, statement or certificate
furnished pursuant to this Agreement for Purchase;
(iii) Resulting from errors of Purchaser in
servicing or subservicing the Mortgages (including,
but not limited to, misquoted payoffs, misapplied
payments, incorrect servicing sale transfer
information, failure to file timely notice of
default) or remitting funds to investors on or after
the Transfer Date, or as a result of Purchaser's
negligence or malfeasance thereafter;
(iv) Resulting from any actions taken by Seller at
Purchaser's direction during the Interim Servicing
period.
(g) In the case of any claim for indemnification
arising hereunder, the party claiming indemnification (the
"indemnified party") shall give prompt written notice to
the party liable for indemnification (the "indemnifying
party") within ten (10) days of the date the same becomes
known to the indemnified party (provided, that the failure
of the indemnified party to give such notice shall not
relieve the indemnifying party of its obligations hereunder
unless, and only to the extent, such failure deprives the
indemnifying party of the right to contest any claim,
increases the amount of such claim, or decreases the amount
of the claim that could have been avoided had proper notice
been given). If the indemnified claim is based on a claim
or demand brought by a third party, the indemnifying party
shall have the right to defend and to direct the defense
against any such claim or demand, in its name or in the
name of the indemnified party, as the case may be, at the
expense of the indemnifying party, and with counsel
selected by the indemnifying party and acceptable to the
indemnified party. Notwithstanding anything in this
Agreement to the contrary, the indemnified party shall, at
the expense of the indemnifying party, cooperate with the
indemnifying party, and keep the indemnifying party fully
informed, in the defense of such claim or demand. The
indemnified party shall have the right to participate in
the defense of any claim or demand with counsel employed at
its own expense. The indemnifying party shall have no
indemnification obligations with respect to any such claim
or demand which shall be settled by the indemnified party
without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld or
delayed. Notwithstanding the preceding sentence, Purchaser
shall have the exclusive right, absent fraud or bad faith,
to settle any claim for less than $5,000 from the Indemnity
Holdback; provided that all claims so settled by Purchaser
shall not exceed $20,000 in the aggregate.
10.4 Undertakings to Obtain Consents. Seller and
Purchaser shall each use all reasonable efforts in good faith to
obtain all requisite consents and to take all other actions
required in order to consummate the transactions contemplated
herein.
10.5 Notification of Mortgagors, Taxing Authorities,
Insurance Companies, GNMA Prior to the date of termination of
the Interim Servicing Agreement provided for in Section 2.4(b),
Seller shall, at its expense, transmit to the mortgagors whose
Mortgages are being serviced pursuant to Servicing, the requisite
taxing authorities, insurance companies and/or agents, GNMA, and
the banks at which escrow deposits are maintained, notification
of the assignment of the Servicing and of the Related Escrow
Accounts and Accounts Receivable and instructions to deliver all
payments, notices, tax bills, insurance statements and escrow
account statements, as the case may be, to Purchaser from and
after such date.
10.6 Supplementary Information. From time to time prior
to the Sale Date, Seller shall furnish Purchaser such information
supplementary to the information contained in the documents and
schedules delivered pursuant hereto and file such reports as
Purchaser may reasonably request.
10.7 Further Assurances. Seller and Purchaser will each,
at the request of the other, take such further actions and
execute and deliver to each other all such other instruments that
either may reasonably request in order to perfect the transfer,
assignment and delivery to Purchaser of the rights to be
transferred, assigned and delivered and the consummation of the
agreements hereunder.
10.8 Access to Information. Seller shall give to Purchaser
and its counsel, accountants and other representatives,
reasonable access during normal business hours upon reasonable
prior notice throughout the period prior to the Sale, to all of
Seller's files, books and records relating to the rights being
transferred, assigned and delivered to Purchaser pursuant hereto.
If the transactions contemplated by this Agreement for Purchase
are not consummated, Purchaser and its representatives and
affiliates shall treat all information obtained in such
investigation, not otherwise in the public domain, as
confidential. Purchaser shall give to Seller and its counsel,
accountants and other representatives, reasonable access during
normal business hours upon reasonable prior notice, to all of
Purchaser's files, books and records relating to the collection
of Accounts Receivable as described in Section 1.1 and in
connection with all matters pertaining to any claim of Purchaser
for indemnification by Seller under Section 10.3 hereof and,
during the period that Purchaser is subservicing the Mortgages
(or thereafter in connection with any investor or agency audit or
investigation) access to all of Purchaser's servicing files,
books and records relating to the rights being transferred,
assigned and delivered to Purchaser hereunder. This right shall
expire six (6) years from the Sale Date, except with respect to
any outstanding unresolved claims as of that date.
10.9 Broker's Fees. Any fee or commission in the nature of
a finder's or originator's fee due to Bayview Financial Trading
Group, Inc. ("Bayview") arising out of or in connection with the
subject matter of this Agreement for Purchase shall be paid by
Seller. Purchaser and Seller each represent to the other that no
broker or finder, other than Bayview, was involved in any aspect
of this transaction.
10.10 Survival of Warranties and Representations. Each
party hereto covenants and agrees that its warranties and
representations in this Agreement for Purchase, and in any
document delivered or to be delivered pursuant hereto, shall
survive the Sale Date, but shall not be deemed to be continuing
representations or warranties.
10.11 Form of Payment to be Made. All payments to be
made to Seller hereunder by Purchaser shall be made by wire
transfer in immediately available funds in accordance with
Section 10.21 below.
10.12 Notices. All notices, requests, demands and other
communications which are required or permitted to be given
under this Agreement for Purchase shall be in writing and shall
be deemed to have been duly given upon the delivery or mailing
thereof, as the case may be, sent by registered or certified
mail, return receipt requested, postage prepaid or by overnight
delivery service with receipt.
(a) If to Purchaser, to:
Mr. Eugene J.
Lavigne, Vice President
Source One Mortgage Services Corporation
27555 Farmington Road
Farmington Hills, MI 48334
With a copy to:
Robert V. Schrader, Esq.
Source One Mortgage
Services Corporation
27555 Farmington Road
Farmington Hills, MI 48334
(b) If to Seller, to:
Harbourton Mortgage Co., L.P.
2530 South Parker Road
Suite 500
Aurora, CO 80014-1630
Attention: President
With a copy to:
Harbourton Mortgage Co., L.P.
601 Fifth Avenue
Scottsbluff, NE 69361
Attention: Executive Vice President,
Servicing Administration
or to such other address as Purchaser or Seller shall have
specified in writing to the other.
10.13 Waivers. Either Purchaser or Seller may, by written
notice to the other:
(a) Extend the time for the performance of any of
the obligations or other transactions of the other;
(b) Waive compliance with any of the terms,
conditions or covenants required to be complied with by the other
hereunder; and
(c) Waive or modify performance of any of the
obligations of the other hereunder. The waiver of any party
hereto or a breach of any provisions of this Agreement for
Purchase shall not operate or be construed as a waiver of any
other or subsequent breach.
10.14 Entire Agreement. This Agreement for Purchase
constitutes the entire Agreement for Purchase between the parties
with respect to the subject matter hereof.
10.15 Binding Effect; Assignment. This Agreement for
Purchase shall inure to the benefit of and be binding upon the
parties hereto and their successors and assigns. This Agreement
(including the right to indemnification hereunder) may not be
assigned by either party to any person or entity other than a
transferee of all or substantially all of the servicing rights of
such party without the prior written consent of the other party,
which consent shall not unreasonably be withheld or delayed;
provided that once Purchaser has made payment of the entire
purchase price payable hereunder (except for holdbacks
aggregating $1,000,000 or less), Purchaser may assign this
Agreement without Seller's consent. Notwithstanding such
assignment, the original party hereto shall remain liable for all
of the obligations of such party hereunder. Nothing in this
Agreement for Purchase, express or implied, is intended to confer
on any person other than the parties hereto and their successors
and assigns, any rights, obligations, remedies or liabilities.
10.16 Headings. Headings of the sections in this Agreement
for Purchase are for reference purposes only and shall not be
deemed to have any substantive effect.
10.17 Applicable Laws. This Agreement for Purchase shall
be governed by and construed in accordance with the laws of the
State of Michigan.
10.18 Transfer Instructions. Seller agrees to abide by all
terms and conditions of Purchaser's transfer instructions
(Appendix III which is incorporated herein by reference) to be
mutually agreed upon by the parties. If Purchaser finds that
Seller has not followed the transfer instructions in any material
respect after the servicing has been transferred to Purchaser
(and Purchaser has not waived the applicable portions of such
instructions), Seller agrees to pay Purchaser for any and all
reasonable out-of-pocket losses and/or costs incurred by
Purchaser as a result of Seller's failure to follow such transfer
instructions. In the event of any inconsistency between the
provisions of this Agreement and the provisions of the bid letter
(Appendix II) or the Transfer Instructions (Appendix III), the
provisions of this Agreement shall control.
10.19 Solicitation of Mortgage Loans. After the Sale Date,
neither Seller nor any affiliate of Seller shall, during the
remaining term of any of the Mortgage Loans, take any action to
personally, by telephone, by mail or otherwise, solicit the
prepayment of the Mortgage Loans by the mortgagors, in whole or
in part, or solicit the Mortgage Loans for any other purpose,
without the prior written consent and approval of Purchaser.
Nothing in this Section 10.19 shall prohibit Seller from (i)
taking applications from those mortgagors who initiate refinance
action on their own or (ii) from engaging in a program generally
to encourage or recommend loan prepayments respecting other loans
owned and/or serviced by Seller so long as notices or other
program material are not addressed to borrowers under the
Mortgages or (iii) from making a general solicitation to the
public, so long as such solicitation is not based on information
concerning the Mortgages being transferred hereunder.
10.20 Subservice Agreements.
(a) Seller shall subservice (pursuant to the terms of
a mutually agreeable Subservicing Agreement to be executed by
the parties), and shall not physically transfer the Texas
Veterans Land Board Loans. The FHA/VA portion of the loan
shall be subserviced for $7.00 per month. All service fee
income and all ancillary income except for float income shall
be for the benefit of Purchaser. Float income shall be for
the benefit of Seller. The "piggyback" portion of the loan
shall not be paid for nor shall a subservicing fee be paid.
All economic benefits of the "piggyback" loan shall be for the
benefit of Seller.
(b) Purchaser shall subservice (pursuant to the terms
of a mutually agreeable Subservicing Agreement to be executed
by the parties and separate from the Agreement referenced
above in Section 10.20(a)) the Mortgages referenced in Section
5.15.
10.21 Seller's Lender. The parties agree that prior to the
Purchaser's payment of the 20% portion of the Servicing Purchase
Price due on the third business day following the Purchaser's
receipt of the Downpayment Report required in Section 2.2 above
and the applicable certified schedules referred to in Section 9.2
above, Purchaser shall have received evidence reasonably
satisfactory to Purchaser's counsel that First Bank National
Association ("First Bank"), as holder of the sole security
interest in the Servicing, shall have executed documents in form
and substance reasonably satisfactory to Purchaser's counsel
releasing its security interest in the Servicing, which release
documents shall be held in escrow on such date by First Trust
National Association, pursuant to an Escrow Agreement to be
entered into among Purchaser, Seller, First Bank and First Trust
National Association, and which release shall be effective and
released from escrow upon payment of the portion of the Servicing
Purchase Price due and payable on the Transfer Payment Date.
Notwithstanding the foregoing, Purchaser and Seller acknowledge
that First Bank has a security interest in this Agreement and the
proceeds hereof, including the Servicing Purchase Price to be
paid hereunder.
In order to induce First Bank to execute and deliver
the releases set forth above, Seller hereby irrevocably directs
Purchaser to make all payments of the Servicing Purchase Price
that are payable on or before the effective date of First Bank's
release of its security interest in the Servicing by wire
transfer to the following account:
First Bank, National Association
Minneapolis, MN
ABA #0910-0002-2
Credit: Harbourton Mortgage Co., L.P.--Collateral
Account
Account #1902-7206-3180
Ref: Source One Sale
First Bank is a third party beneficiary of the above payment
instructions, which may not be changed without First Bank's
written consent. All other payments to be made by Purchaser to
Seller hereunder shall be made by wire transfer to any account
designated by Seller in writing.
10.22 Counterparts. This Agreement may be executed in
counterparts, each of which, when so executed and delivered,
shall be deemed to be an original and all of which, taken
together, shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the undersigned parties to this
Agreement for Purchase has caused this Agreement for Purchase to
be duly executed in its corporate name by one of its duly
authorized officers, all as of the date first above written.
ATTEST: SOURCE ONE MORTGAGE SERVICES
CORPORATION,
a Delaware corporation,
By:__________________________ By:____________________________
__ Name: Eugene J. Lavigne
Name: Title: Vice President
Title:
HARBOURTON MORTGAGE CO., L.P.,
a Delaware limited partnership
By: Harbourton Funding
Corporation,
a Delaware corporation,
its general partner
By:__________________________
__ By:___________________________
Name: Name: Rick W. Skogg
Title: Title: President
INDEX TO SCHEDULES
Appendix I Summary of Mortgage Loans
Appendix II Bid Letter
Appendix III Transfer Instructions
(including required contents of Servicing Files
and
Custodial Files)
Schedule I Litigation Loans
Schedule 2.1(a) Loans with Payoff Requests
Pending at Sale Date
Schedule 5.15 Uncertified Pools
Schedule 10.2(b) Loans In Bankruptcy but not
Past Due at Sale Date
Schedule 10.3(b) Loans Two or More Payments Past
Due at Sale Date
APPENDIX I
The following is a summary description of Mortgages which are
covered by the Servicing assigned under this Agreement for
Purchase.
