UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
IXI QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
I I TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-9742
HARBOURTON FINANCIAL SERVICES L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1573349
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
2530 S. Parker Road, Suite 500, Aurora, CO
80014
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 745-3661
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Preferred Units New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
At August 14, 1997, registrant had 41,169,558 Preferred Units
outstanding.
TABLE OF CONTENTS
PART I
Item 1. Financial Statements
Consolidated Balance Sheet as of December 31, 1996 3
Condensed Consolidated Statement of Net Assets in Liquidation as of June
30, 1997 (unaudited) 4
Consolidated Statement of Operations for the Three Months and Six Months
Ended June 30, 1996 (unaudited) 5
Condensed Consolidated Statement of Changes in Net Assets in Liquidation
For the Six Months Ended June 30, 1997 (unaudited) 6
Consolidated Statement of Cash Flows for the Six Months Ended June 30,
1996 (unaudited) 7
Notes to Consolidated Financial Statements as of June 30, 1997
(unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 18
PART II
OTHER INFORMATION 24
SIGNATURES 25
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
Consolidated Balance Sheet
as of December 31, 1996
(After Corporate Reorganization -- Note 1)
(audited) (in thousands)
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents $ 1,951
Mortgage loans held for sale, net 214,609
Mortgage loans held for investment, net of 3,178
reserves of $307
CMO bonds, residual interests, investment
securities and SMATs, net of accumulated 3,583
amortization of $577
Notes receivable - affiliates 587
Investment in loans repurchased from GNMA 40,127
pools, net of reserves of $1,120
Advances receivable, net of reserves of $3,984 5,709
Mortgage servicing rights, net of accumulated 41,773
amortization of $9,268
Deferred acquisition, transaction and borrowing
costs, net of accumulated amortization of $1,075 2,825
Property, equipment and leasehold improvements,
net of accumulated amortization of $4,567 5,773
Investment in affiliates 405
Due from affiliates --
Excess cost over identifiable tangible and
intangible assets acquired, net of accumulated 2,633
amortization of $577
Bulk and flow sales of servicing receivables 52,658
Other assets 8,309
Total Assets $384,120
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Installment purchase and sale obligations - servicing $ 1,303
Foreclosure, repurchase and indemnification reserves 6,403
Lines of credit & short-term borrowings 212,388
Servicing facility 54,400
Notes payable - affiliates 38,412
Due to affiliates 1,678
Accounts payable and other liabilities 10,604
Total Liabilities 325,188
Partners' Capital 58,932
Total Liabilities and Partners' Capital $384,120
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
(a partnership in liquidation)
Condensed Consolidated Statement of Net Assets in Liquidation
as of June 30, 1997
(unaudited) (in thousands)
<TABLE>
<S> <C>
Assets, at estimated realizable values:
Cash and cash equivalents $ 4,486
Mortgage loans held for sale, net 10,928
Mortgage loans held for investment, net 11,802
Investment in loans repurchased from GNMA pools, net 12,251
Advances receivable 11,413
Mortgage servicing rights and servicing receivables 60,127
Property, equipment and leasehold improvements 2,149
Other assets 7,915
Total Assets $121,071
Less - Liabilities, at estimated settlement amounts:
Installment purchase and sale obligations - servicing 1,156
Foreclosure, repurchase and indemnification reserves 8,165
Lines of credit 20,743
Term Loan 7,500
Notes payable - affiliates 23,178
Due to affiliates 6,726
Accounts payable and other liabilities 6,258
Total Liabilities 73,726
Net Assets in Liquidation $ 47,345
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 1996
(unaudited) (in thousands)
Three Six
Months
Ended
June 30, 1996
<TABLE>
<S> <C> <C>
REVENUES
Loan servicing fees $ 6,373 $ 12,661
Ancillary income 1,889 3,824
Gain on sale of defaulted loans to affiliates 229 511
Investment income net of interest 2,686 4,466
expense on escrows
Total servicing revenue 11,177 21,462
Gain on sale of mortgage loans and 4,697 9,663
related mortgage servicing rights
Interest income, net of related 1,556 2,482
warehouse interest expense
Other production income 3,772 7,512
Total production income - gross 10,025 19,657
Other investment and interest income 3,093 3,653
Total Revenue 24,295 44,772
EXPENSES
Servicing costs 2,516 4,771
Prepayment costs and interest curtailments 604 1,173
Provision for foreclosure losses 1,500 3,593
Amortization of mortgage servicing rights 3,158 5,501
Total servicing expenses 7,778 15,038
Loan production and secondary marketing costs 9,931 18,228
General and administrative costs, 1,694 3,212
including management fees
Interest expense - term loans 752 1,528
Other interest expense 323 797
Other interest expense-affiliates, net 738 1,084
of interest income-affiliates
Other amortization and depreciation 423 901
Total Expenses 21,639 40,788
Net Income Before Equity in Earnings of
Affiliates and Gain on Bulk Sale of $ 2,656 $ 3,984
Servicing
Equity in earnings of affiliates 5 5
Net Income $ 2,661 $ 3,989
Net Income per Preferred Unit, based on
41,414 and 41,658 weighted average $ 0.06 $ 0.09
number of Preferred Units
outstanding, respectively
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For The Six Months Ended June 30, 1996
(unaudited) (in thousands)
Six Months
Ended
June 30,
1996
<TABLE>
<S> <C>
Cash Flows From Operating Activities:
Net Income $ 3,989
Adjustments to reconcile net income to net cash from
operating activities:
Gain on sale of defaulted loans (511)
Net unrealized gain on CMO bonds, residual (2,486)
interests and SMATs
Mortgage servicing rights valuation allowance (1,043)
Amortization and depreciation 7,444
Equity in earnings of affiliates (5)
Provision for foreclosure losses 3,593
Changes in operating assets and liabilities:
Mortgage loans held for sale and investment, net (36,477)
Advances receivable (11,384)
Other assets (9,285)
Due to/from affiliates 4,665
Accounts payable and other liabilities (3,875)
Net Cash Flows From Operating Activities (45,375)
Net Cash Flows From Investing Activities:
Proceeds from sale of CMO bonds, residual 5,550
interests and SMATs
Gain on sale associated with retained servicing (14,644)
Settlement of installment purchase obligation (4,975)
Funding of deferred acquisition and transaction costs (226)
Amortization of CMO bonds, residual interests, and (70)
investment securities
Investment in subsidiary (100)
Purchases of property and equipment (2,183)
Net Cash Flows From Investing Activities (16,648)
Cash Flows From Financing Activities:
Net borrowings on lines of credit and short-term 26,711
borrowings
Principal payments on term loans (4,135)
Funding of deferred loan costs (72)
Term debt advances 8,248
Redemption of Preferred Units (1,100)
Net (repayments) borrowings from notes payable-affiliates 33,734
Net Cash Flows From Financing Activities 63,386
Increase (decrease) in cash and cash equivalents 1,363
Cash and cash equivalents at beginning of period 2,273
Cash and cash equivalents at end of period $ 3,636
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
(a partnership in liquidation)
Condensed Consolidated Statement of Changes in Net Assets in
Liquidation
(unaudited) (in thousands)
<TABLE>
<S> <C>
Net partners' equity at December 31, 1996 $58,932
Net loss during the three months ended March 31, 1997 (2,718)
Adjustment of carrying values of assets and
liabilities to estimated realizable values and
estimated settlement amounts, respectively, at
March 31, 1997, upon adoption of liquidation
basis of accounting:
Mortgage loans held for sale 1,393
Mortgage servicing rights 9,006
Property, equipment and leasehold improvements (779)
Foreclosure, repurchase and indemnification reserves (2,400)
Other liabilities related to liquidation (5,830)
Net assets in liquidation at March 31, 1997 $57,604
Changes from March 31, 1997 in estimated realizable
values and estimated settlement amounts:
Mortgage servicing rights (3,000)
Property, equipment and leasehold improvemnts (238)
Foreclosure, repurchase and indemnification (4,700)
Other liabilities related to liquidation (2,321)
Net assets in liquidation at June 30, 1997 $47,345
Preferred Units outstanding at March 31, and June 30, 1997 41,170
</TABLE>
The accompanying notes are an integral part of these unaudited
consolidated financial statements.
HARBOURTON FINANCIAL SERVICES L.P. AND SUBSIDIARIES
(a partnership in liquidation)
Notes to Consolidated Financial Statements
December 31, 1996 and June 30, 1997
Note 1. Description of Business and Organization
Harbourton Financial Services L.P. ("HBT") was created pursuant
to a Certificate of Limited Partnership filed with the Secretary
of the State of Delaware on August 12, 1987 and a limited
partnership agreement (the "HBT Agreement") (as amended and
restated) dated as of August 12, 1987. Harbourton Mortgage
Corporation (the "General Partner") was incorporated in the State
of Delaware on August 12, 1987. The General Partner manages the
business and affairs of HBT and has exclusive authority to act on
behalf of HBT. HBT's termination date is December 31, 2050
unless sooner dissolved or terminated pursuant to the HBT
Agreement. See Note 4, Liquidation of Partnership.
Harbourton Assignor Corporation ("Assignor Limited Partner") is
the sole limited partner of HBT. Pursuant to the HBT Agreement,
the Assignor Limited Partner holds for the benefit of the holders
of the Preferred Units all of the limited partnership interests
underlying such Preferred Units. Each Preferred Unit is
evidenced by a beneficial assignment certificate, which is issued
by the Assignor Limited Partner and HBT in fully registered form.
Each holder of a Preferred Unit is entitled to all of the
economic rights and interests in the underlying limited
partnership interest held by the Assignor Limited Partner, and
each holder of a Preferred Unit has the right to direct the
Assignor Limited Partner on voting and certain other matters with
respect to such underlying limited partnership interests.
HBT's primary business activity has been mortgage banking, which
has been conducted through its wholly-owned subsidiary Harbourton
Mortgage Co., L.P. ("HMCLP"). Mortgage banking consists of (i)
mortgage loan servicing activities, including the acquisition and
sale of mortgage servicing rights, (ii) the origination and
purchase of mortgage loans, including the securitization and sale
of mortgage loans with the related servicing rights retained or
released, and (iii) investments in other mortgage-related
securities. HMCLP is an approved Government National Mortgage
Association ("GNMA"), Federal National Mortgage Association
("FNMA"), and Federal Home Loan Mortgage Corporation ("Freddie
Mac") licensee. HBT, HMCLP and its general partners Harbourton
Funding Corporation ("HFC"), and HMCLP's 50% equity investment in
HTP Financial, L.P. ("HTP") are hereinafter collectively referred
to as the "Partnership" unless otherwise noted.
In general, each quarter the Partnership allocates 99% and 1% of
profits and losses to the Preferred Unitholders and General
Partner, respectively, up to a maximum amount as defined in the
HBT Agreement ("Participating Amount"). This Participating
Amount generally does not exceed the product of the cash or fair
value of property contributed to the Partnership in consideration
for the issuance of Preferred Units and the appropriate weighted
average Treasury Index. Profits that exceed this Participating
Amount, up to an additional amount as defined, are allocated 75%,
12.5% and 12.5% to the Preferred Unitholders ("Preferred
Amount"), General Partner and Subordinated Unitholder,
respectively. Preference amounts ("Second Preference") beyond
these levels, up to an additional amount as defined, are then
allocated 62.5%, 18.75% and 18.75% to the Preferred Unitholders,
General Partner and Subordinated Unitholder, respectively.
Preference amounts in excess of the Second Preference are then
allocated 55%, 22.5%, and 22.5% to the Preferred Unitholders,
General Partner, and Subordinated Unitholder, respectively. Cash
distributions are allocated approximately in the same manner as
allocated taxable profits. Losses are allocated up to the amount
of the sum of the undistributed Preferred Amount allocations,
Second Preference allocations and Participating Amount
allocations to the Preferred Unitholders, Subordinated
Unitholders, and General Partner in proportion to their
respective interest in the sum of such undistributed allocations.
After the allocation of profits or losses and the payment of or
provision for all debts, liabilities and obligations of the
Partnership, liquidating distributions are allocated to the
General Partner and Preferred and Subordinated Unitholders in
accordance with and in proportion to their respective capital
account balances as determined in accordance with the HBT
Agreement. At June 30, 1997, the Subordinated Unitholders
capital account balances totaled $0. Management believes that
there will be no liquidating distributions distributed to
Subordinated Unitholders.
Note 2. Summary of Significant Accounting Policies
(Consolidated Balance Sheet at December 31, 1996 and
Statement of Operations and Cash Flows for the Three
and Six Months Ended June 30, 1996 - Going Concern
Basis of Accounting)
Basis of Presentation - The consolidated financial statements
primarily include the accounts of HBT, HMCLP, HFC, and a 50%
equity interest in HTP. All intercompany accounts and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents - Cash and cash equivalents consist of
cash on hand and in banks and short-term instruments with
original maturities of three months or less.
Mortgage Loans Held for Sale - Mortgage loans held for sale are
stated at the lower of aggregate cost, net of deferred loan
production fees and costs, or market value.
Mortgage Loans Held for Investment - Mortgage loans held for
investment are stated at the amount of unpaid principal, reduced
by an allowance for loan losses, based upon management's
evaluation of the economic conditions of borrowers, loan loss
experience, collateral value and other relevant factors, which
approximates the lower of cost or market.
Investment in Loans Repurchased from GNMA Pools - The Partnership
has repurchased loans from GNMA pools which it services.
Advances Receivable - Funds advanced for mortgagor escrow
deficits, foreclosures and other investor requirements are
recorded as advances receivable in the consolidated statements of
financial condition. Such receivables are generally recoverable
from the insurers or guarantors, which are generally government
agencies, or the mortgagors through increased monthly payments,
as applicable. A reserve for uncollectible items has been
established for those receivables which management estimates are
not recoverable.
Mortgage Servicing Rights - The Partnership capitalizes the cost
of mortgage servicing rights and amortizes such costs in
proportion to, and over the period of, estimated future
undiscounted net servicing income.
Collateralized Mortgage Obligation ("CMO") Bonds, Residual
Interests, Investment Securities, and Securitized Mortgage
Acceptance Trusts ("SMATs") - The Partnership classifies its CMO
bonds, residual interests, and SMATs portfolio as trading
securities since the securities are being held with the intent of
selling them in the near term. Accordingly, such assets are
stated at fair value and unrealized gains and losses are
recognized in earnings. The Partnership classifies its
investment securities as available for sale. Accordingly, such
assets are stated at fair value and unrealized gains and losses
are recognized as a component of partners' capital.
Deferred Acquisition, Transaction and Borrowing Costs - Deferred
borrowing costs are amortized over the life of the servicing
facility agreement using the straight-line method which
approximates the effective interest method. Deferred acquisition
and transaction costs are amortized over a period of five to
fifteen years using the straight-line method.
Property, Equipment and Leasehold Improvements - Property,
equipment and leasehold improvements are stated at cost less
accumulated depreciation. Depreciation is computed using the
straight-line method over the assets' useful lives, which are
estimated to be 30 years for depreciable real property and 2 to
15 years for furniture, fixtures and equipment. Leasehold
improvements are amortized using the straight-line method over
the lease life.
Investment in Affiliates - HMCLP recorded its 50% investment in
HTP based on the equity method of accounting for the year ended
December 31, 1996.
Excess Cost Over Identifiable Tangible and Intangible Assets
Acquired - Excess cost over identifiable tangible and intangible
assets acquired is amortized using the straight-line method over
15 years.
Loan Servicing Fees and Servicing Costs - Loan servicing fees are
based on a contractual percentage of the unpaid principal balance
of the related loans and are recognized in income as earned.
Servicing costs are charged to operations as incurred.
Investment Income Net of Interest Expense - Investment income net
of interest expense includes primarily the gain on sale of
reinstated loans, interest income on investment in loans
repurchased from GNMA pools, net of interest expense on related
borrowings to fund such investments and the earnings derived from
the servicing portfolio custodial balances.
Loan Production Fees and Costs - Certain direct loan production
fees and costs associated with mortgage loans held for sale are
deferred until the related loans are sold.
Foreclosure, Repurchase, and Indemnification Reserves -
Foreclosure reserves are maintained to provide for an estimate of
the losses associated with delinquent loans and loans in
foreclosure or bankruptcy ("Defaulted Loans") in which the
Partnership services and retains certain recourse obligations.
The reserves are established based on management's expectations
and historical loss experience and are adjusted periodically
through charges to current operations to reflect changes in the
Defaulted Loans, net of actual charge-offs.
As part of its production operations, the Partnership is subject
to certain repurchase and indemnification provisions through its
contractual agreements with the investors to which it sells
mortgage loans. These provisions generally provide that the
Partnership repurchase from the investor, i) loans in which the
borrower defaults on the first payment, ii) loans which have not
been insured by the government in a timely manner or are
uninsurable, and iii) mortgage loans in which an origination
(i.e., underwriting) defect is discovered. The investor,
however, may require the Partnership to indemnify them against
future losses that might result rather than repurchase the loan.
The reserve is based on management's expectations and historical
loss experience. The provisions for this reserve are charged
against loan production and secondary marketing costs.
Income Taxes - The Partnership is a limited partnership and is
not liable for federal income taxes, however, individual
unitholders have liability for income taxes. As a result of the
provisions currently in the tax law, the Partnership will be
assessed an excise tax equal to 3.5% of its gross profit from
operations for federal income tax purposes for its tax year
beginning on January 1, 1998.
Use of Estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
Note 3. Summary of Significant Accounting Policies
(Condensed Consolidated Statement of Net Assets in Liquidation as
of June 30, 1997 and Condensed Consolidated Statement of Changes
in Net Assets in Liquidation For the Three and Six
Months Ended June 30, 1997 - Liquidation Basis of
Accounting)
All statements contained herein, as well as statements made in
press releases and oral statements that may be made by the
Partnership, the General Partner or by officers, directors or
employees of the General Partner acting on the Partnership's
behalf, that are not statements of historical fact, constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and
other factors that could cause the actual results of the
liquidation or operations of the Partnership to be materially
different from historical results or from any future results
expressed or implied by such forward-looking statements. Among
the factors that could materially affect such forward-looking
statements are the following: market conditions in the mortgage
banking industry, prevailing interest rates, the realization of
contingent payments owing to the Partnership, the Partnership's
ability to dispose of its remaining assets at expected prices,
the settlement of and provision for contingent liabilities and
claims, the length of time required to complete the disposition
of the Partnerships assets and the Partnership's liquidation, the
actual costs incurred in the liquidation, general business and
economic conditions and other risk factors described from time to
time in the Company's reports filed with the Securities and
Exchange Commission ("SEC"). All cautionary statements made
herein should be read as being applicable to all forward-looking
statements by or on behalf of the Partnership wherever they
appear, including, but not limited to, all subsequent written and
oral forward-looking statements.
Basis of Presentation-The condensed consolidated financial statements
primarily include the accounts of HBT, HMCLP, and HFC. All
intercompany accounts and transactions have been eliminated in
consolidation. As a result of the Partnership's determination to
liquidate during January 1997 (see Note 4), the Partnership has
changed its basis of accounting from a going concern basis to a
liquidation basis of accounting. Under the liquidation basis of
accounting, carrying values of assets are presented at estimated
net realizable values and liabilities are presented at estimated
settlement amounts. The basis for determining estimated net
realizable values and estimated settlement amounts are described
below. At March 31, 1997, certain secured obligations were offset
against the related assets. However, at June 30, 1997, secured
obligations were not offset against the related assets.
Mortgage Loans Held for Sale - Mortgage loans held for sale are
stated at their estimated realizable value, including the value
for the related servicing rights, which was determined based on
the mandatory and optional forward commitments matched against
applicable loans and servicing rights.
Mortgage Loans Held for Investment - Mortgage loans held for
investment are stated at the amount of unpaid principal and
accrued interest, reduced by an allowance for loan losses, based
upon management's evaluation of the economic conditions of
borrowers, loan loss experience, collateral value and other
relevant factors, which approximates estimated net realizable
value.
Investment in Loans Repurchased from GNMA Pools - The investment
in loans repurchased from GNMA pools consists of the amount of
unpaid principal, interest, and funds advanced for mortgagor
escrow deficits, foreclosures and other investor requirements. A
reserve for uncollectible items (based on loan types and loan
loss experience) has been established for those receivables which
management estimates are not recoverable. The investment in loans
repurchased from GNMA pools approximates its estimated net
realizable value at June 30, 1997 except for certain loss
reserves which are included in foreclosure, repurchase and
indemnification reserves in the accompanying condensed
consolidated statement of net assets in liquidation.
Advances Receivable - Advances receivable, which approximates
estimated net realizable value, represents funds advanced for
mortgagor escrow deficits, foreclosures and other investor
requirements and are generally recoverable from the insurers or
guarantors, which are generally government agencies, or the
mortgagors through increased monthly payments, as applicable. A
reserve for uncollectible items (based on loan types and loan
loss experience) has been established for those receivables
which management estimates are not recoverable and is reflected
in foreclosure, repurchase and indemnification reserves in the
accompanying financial statements.
Mortgage Servicing Rights - Mortgage servicing rights are stated
at their net estimated realizable value which was determined
based on transactions completed subsequent to June 30, 1997 and
current third-party negotiations.
Property, Equipment and Leasehold Improvements - Property,
equipment and leasehold improvements are stated at estimated
realizable value which was determined based on current third-
party negotiations and management's estimate of liquidation
value.
Foreclosure, Repurchase and Indemnification Reserves -
Foreclosure reserves are maintained to provide for an estimate of
the losses associated with delinquent loans and loans in
foreclosure or bankruptcy in which the Partnership services and
retains certain recourse obligations. The reserves are
established based on management's expectations and historical
loss experience.
As part of its production operations, the Partnership is subject
to certain repurchase and indemnification provisions through its
contractual agreements with the investors to which it sells
mortgage loans. These provisions generally provide that the
Partnership repurchase from the investor, i) loans in which the
borrower defaults on the first payment, ii) loans which have not
been insured by the government in a timely manner or are
uninsurable, and iii) mortgage loans in which an origination
(i.e., underwriting) defect is discovered. The investor,
however, may require the Partnership to indemnify them against
future losses that might result rather than repurchase the loan.
The reserve is based on management's expectations and historical
loss experience.
Lines of Credit and Term Loan - The Partnership's lines of credit
consists of working capital revolving lines of credit which are
secured by mortgage loans held for sale, mortgage loans held for
investment, mortgage servicing rights, and advances receivable
and substantially all other assets of the Partnership not secured
by other debt. The Partnership's term is secured by mortgage
servicing and servicing receivables and substantially all other
assets of the Partnership not secured by other debt.
Other Assets and Liabilities - All other assets and liabilities
not described above are stated at book value which management
believes approximates estimated realizable values and estimated
settlement amounts. In addition, in accordance with liquidation
basis accounting, a liability has been established for
anticipated operating expenses in excess of operating revenues
during the anticipated liquidation period.
Note 4. Liquidation of Partnership
On January 31, 1997, pursuant to the HBT Agreement (as amended
and restated) the Board of Directors of the General Partner
determined that there was a substantial risk that an Adverse Tax
Consequence (as defined below) would occur within one year and
that it was in the best interests of the Partnership and the
holders of beneficial interests in the Partnership (collectively,
"Unitholders") to sell or otherwise dispose of all of the assets
of the Partnership and to liquidate the Partnership as soon as
reasonably practicable. Pursuant to Section 8.10 of the HBT
Agreement, in the event that the General Partner reasonably
believes that within one year there is a substantial risk of the
Partnership being treated for federal income tax purposes as a
corporation (an "Adverse Tax Consequence") as a result of, among
other things, a reclassification of the Partnership as a
corporation under the Revenue Act of 1987 (the " 1987 Act") for
its first taxable year beginning after December 31, 1997, the
General Partner may take certain actions (described further
below), including the liquidation of the Partnership, upon not
less than 30 days prior written notice to the Partners and the
Unitholders unless, prior to the taking of such action, the
Unitholders shall have voted against such action by a vote of at
least two-thirds of all Limited Partnership Interests in the
Partnership. Affiliates of HBT and the General Partner are the
owners of approximately 85% of the issued and outstanding
Preferred Units, and thus, no vote will be taken.
Under existing tax law, the Partnership is treated as a
partnership and is not separately taxed on its earnings. Rather,
income (or loss) of the Partnership is allocated to the
Unitholders pursuant to the terms of the HBT Agreement (see Note
1) and is included by them in determining their individual
taxable incomes, subject to certain special rules applicable to
publicly traded partnerships. By contrast, a corporation is
subject to tax on its net income and any dividends or liquidating
distributions paid to stockholders are then subject to a second
tax at the stockholder level. Accordingly, under current tax
law, the Partnership enjoys a tax advantage over a similarly
situated entity which is taxed as a corporation.
The 1987 Act generally requires publicly traded partnerships to
be taxed as corporations. However, under the 1987 Act existing
partnerships, such as the Partnership, were allowed to continue
to be treated as partnerships for federal income tax purposes for
all taxable years commencing on or prior to December 31, 1997.
From time to time, legislation has been introduced in Congress
that would have the effect of extending the December 31, 1997
grandfather date or eliminating altogether the relevant
provisions of the 1987 Act. Subsequent to the Partnership's
decision on January 31, 1997, to liquidate, legislation passed as
part of
the Taxpayer Relief Bill of 1997, that was signed by the
President on August 5, 1997, that will tax publicly traded
partnerships 3.5% of its gross income from operations beginning
January 1, 1998. This provision was not beneficial to the
Partnership for two reasons. First, the legislation was passed
after the plan of liquidation was nearly complete and secondly,
the cost of the 3.5% tax on gross income is a greater tax burden
that the tax cost of operating as a corporation.
Pursuant to Section 8.10 of the HBT Agreement, the General
Partner had the right to take one of several actions when it
believed there was a substantial risk that an Adverse Tax
Consequence will occur within one year. For instance, the
General Partner had the power to (a) modify, restructure or
reorganize the Partnership as a corporation, a trust or other
type of legal entity, (b) liquidate the Partnership, (c) halt or
limit trading in the Units or cause the Units to be delisted from
the NYSE, or (d) impose restrictions on the transfer of Units.
The General Partner believed that the consolidation taking place
in the mortgage banking industry made it difficult for the
Partnership to compete effectively with market participants that
are larger and more readily able to recognize substantial
economies of scale in their operations than the Partnership.
The General Partner believed that its competitive tax structure
advantage of operating as a partnership would be eliminated beginning
January 1, 1998. This belief was confirmed by the legislation that
was passed on August 5, 1997 that assessed a 3.5% tax on gross income
of publicly traded partnerships. These factors
weighed in favor of liquidating the Partnership rather than
attempting to continue the Partnership's business in its present
or some other form.
Although no assurances can be given, the General Partner believes
that substantially all of the Partnership's assets can be
disposed of and liabilities can be settled in an orderly fashion
by the end of 1997.
Disposition of Assets - See "Management's Discussion and Analysis
of Financial Condition and Results of Operations - Liquidation of
Assets"
Wind Down of Operations - Upon completion of the disposition of
the Partnership's assets and settlement of liabilities, the
Partnership will be required to wind down the operations of the
disposed units including, without limitation, the production,
servicing and related general administration functions including
financial reporting and accounting. Upon completion of the wind
down functions, the Partnership will be required to terminate
employees not hired by the purchasers of the Partnership's
business units. Towards this end, the Partnership has announced
and provided notice of termination (in accordance with the
Worker's Adjustment and Retraining Notification Act, WARN) to all
employees located in its corporate headquarters located in
Aurora, Colorado. Accordingly, at June 30, 1997, the Partnership
has provided for anticipated severance costs which include a
component to induce certain notified employees to remain until
the liquidation is complete in order to ensure the Partnership
meets all obligations to its investors and creditors.
Liquidating Distribution - Once the assets of the Partnership
have been sold and the Partnership's creditors have been paid in
full, or adequate provision for such payment has been made, the
General Partner will cause the Partnership to pay liquidating
distributions to Unitholders upon the surrender of their Units.
While the exact timing and nature of any liquidating
distributions cannot be precisely determined at this time, the
Partnership will not make any distributions prior to the fourth
quarter of 1997. However, because of the nature of the
Partnership's business, it is possible that Unitholders may
receive a portion of their distributions in the form of an
interest in another entity, such as a liquidating trust. Any
such interests would not, in all likelihood, be transferable by a
Unitholder.
During 1997, the Partnership may incur additional expense and
liabilities associated with its liquidation, including, without
limitation, expenses incurred in connection with the disposition
of its business operations and its winding down. In order for
distributions to be made to the Unitholders at the end of 1997,
the General Partner will have to make provision for the post-1997
liabilities of the Partnership, by means of a liquidating trust,
an arrangement with another entity, or other procedure. The post-
1997 liabilities represent obligations of the Partnership which
will survive beyond December 31, 1997, such as indemnification or
repurchase obligations with respect to mortgage loans and
servicing rights sold or to be sold in prior periods or in 1997
or indemnification obligations with respect to business
operations sold or to be sold in 1997. The actual amount of such
additional expenses to be incurred by the Partnership in 1997 may
be different from those estimated and is dependent in part on
factors beyond the Partnership's control, such as the timing and
difficulty of the disposition of the Partnership's assets and the
winding-down process. In addition, the net amount ultimately
available for distribution from the liquidated Partnership
depends on many unpredictable factors, such as the amounts
ultimately realized on the sale of the remaining assets, carrying
costs of the assets prior to sale, collection of receivables,
settlement of claims and commitments, the amount of revenue and
expenses of the Partnership until completely liquidated and other
uncertainties.
Federal Income Tax Consequences of Liquidation - Any taxable gain
or loss recognized by the Partnership on the sale of its assets
in connection with the liquidation will be allocated among the
Partners for income tax purposes in accordance with the HBT
Agreement. Assuming that a Partner's interest in the Partnership
is liquidated entirely for cash during 1997, then the Partner
will realize gain or loss to the extent that the cash received is
greater or less than the Partner's adjusted income tax basis in
his or her partnership interest, and the Partner will be
permitted to claim any losses from the Partnership which were
previously suspended under the rules regarding losses from
passive activities. Special rules would apply, however, if a
Partner did not receive a full distribution in cash of his or her
interest in the Partnership during the year. After the payment of
or provision for all debts, liabilities and obligations and the
allocation of income (loss), liquidating distributions are
allocated to the General Partner and Preferred and Subordinated
Unitholders in accordance with and in proportion to their
respective capital account balances as determined in accordance
with the HBT Agreement.
Note 5. Contingencies
On March 18, 1997, HMCLP and certain other affiliates were sued
in Federal Court in the Eastern District of Virginia by a
mortgage loan borrower alleging, on behalf of the borrower and on
behalf of an alleged class of similarly situated borrowers from
HMCLP since March 17, 1996, that certain payments made by HMCLP
to a mortgage broker in connection with the plaintiff's loan, and
loans to members of the purported class, violated Section 8 of
RESPA. The Partnership has received an offer to settle this suit
for an immaterial amount.
See "Management's Discussion and Analysis of Financial Condition
and Results of Operations" for a discussion of events subsequent
to June 30, 1997.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
All statements contained herein, as well as statements made in
press releases and oral statements that may be made by the
Partnership, the General Partner or by officers, directors or
employees of the General Partner acting on the Partnership's
behalf, that are not statements of historical fact, constitute
"forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and
other factors that could cause the actual results of the
liquidation or operations of the Partnership to be materially
different from historical results or from any future results
expressed or implied by such forward-looking statements. Among
the factors that could materially affect such forward-looking
statements are the following: market conditions in the mortgage
banking industry, prevailing interest rates, the realization of
contingent payments owing to the Partnership, the Partnership's
ability to dispose of its remaining assets at expected prices,
the settlement of and provision for contingent liabilities and
claims, the length of time required to complete the disposition
of the Partnerships assets and the Partnership's liquidation, the
actual costs incurred in the liquidation, general business and
economic conditions and other risk factors described from time to
time in the Company's reports filed with the Securities and
Exchange Commission ("SEC"). All cautionary statements made
herein should be read as being applicable to all forward-looking
statements by or on behalf of the Partnership wherever they
appear, including, but not limited to, all subsequent written and
oral forward-looking statements.
The following is management's discussion and analysis of the
financial condition and results of operations of the Partnership.
The discussion and analysis should be read in conjunction with
the financial statements included herein.
The decrease in the Partnership's net assets in liquidation from
approximately $57.6 million (or $1.40 per Unit) at March 31, 1997
to approximately $47.3 million (or $1.15 per Unit) at June 30,
1997 is attributable to the following: i) an increase in the
Partnership's foreclosure and repurchase and indemnification
reserves of approximately $4.7 million, ii) a decrease in the
estimated net realizable value of the Partnership's mortgage
servicing rights of approximately $3.0 million (based on actual
realized sales that occurred in April and July 1997), iii) a
decrease in the estimated net realizable value of the
Partnership's fixed assets of approximately $.3 million (based on
actual realized sales that occurred in July 1997 and updated
market information), and iv) an increase in the Partnership's
estimate of future liquidation costs of approximately $2.0
million.
The higher foreclosure and repurchase and indemnification
reserves reflect i) the occurrence of foreclosure losses at a
higher rate than previously forecast and a corresponding increase
in the Partnership's estimate of future foreclosure losses and
ii) the assertion against the Partnership of a greater volume of
repurchase claims than previously forecast and a corresponding
increase in the Partnership's estimate of such claims in the
future. Additional facts that
become known during the anticipated liquidation period could
increase or decrease the reserve recorded at June 30, 1997.
The increase in the Partnership's estimate of future liquidation
costs of approximately $2.0 million is due primarily to an
increase in accruals for i) employee severance costs, ii) legal
costs, iii) lease cancellation costs, and iv) administrative
services costs related to the wind-down of the Partnership through
the end of the fiscal year.
The Partnership currently estimates that the amount to be
received in liquidation by its Preferred Unitholders will be
approximately $1.15 per unit. Such estimated value involves
known and unknown risks, uncertainties and other factors that
could cause the actual liquidation value of the Partnership to be
materially different from the estimated value. Among the factors
that could materially affect such estimated value are the
following: the realization of contingent payments owing to the
Partnership (affected by market conditions in the mortgage
banking industry and prevailing interest rates), the
Partnership's ability to dispose of its remaining assets at
expected prices, the settlement of and provision for contingent
liabilities and claims, including the Partnership's foreclosure
reserve and reserve for indemnification and repurchase
obligations with respect to mortgage loans and servicing rights
sold, the length of time required to complete the disposition of
the Partnership's assets and the Partnership's liquidation, the
actual costs incurred in the liquidation, general business and
economic conditions and other risk factors described from time to
time in the Company's reports filed with the Securities and
Exchange Commission.
Recent Developments
Liquidation of Partnership and Subsequent Events
On January 31, 1997, pursuant to the HBT Agreement (as amended
and restated) the Board of Directors of the General Partner
determined that there was a substantial risk that an Adverse Tax
Consequence (as defined below) would occur within one year and
that it was in the best interests of the Partnership and the
holders of beneficial interests in the Partnership (collectively,
"Unitholders") to sell or otherwise dispose of all of the assets
of the Partnership and to liquidate the Partnership as soon as
reasonably practicable. Pursuant to Section 8.10 of the HBT
Agreement, in the event that the General Partner reasonably
believes that within one year there is a substantial risk of the
Partnership being treated for federal income tax purposes as a
corporation (an "Adverse Tax Consequence") as a result of, among
other things, a reclassification of the Partnership as a
corporation under the Revenue Act of 1987 (the " 1987 Act") for
its first taxable year beginning after December 31, 1997, the
General Partner may take certain actions (described further
below), including the liquidation of the Partnership, upon not
less than 30 days prior written notice to the Partners and the
Unitholders unless, prior to the taking of such action, the
Unitholders shall have voted against such action by a vote of at
least two-thirds of all Limited Partnership Interests in the
Partnership. Affiliates of HBT and the General Partner are the
owners of approximately 85% of the issued and outstanding
Preferred Units, and thus, no vote will be taken.
Liquidation of Assets
During the first quarter of 1997, the Partnership began the
process of liquidating its assets. The disposition of the
Partnership's significant assets can be summarized into the
following categories: i) wholesale production operations, ii)
retail production operations, iii) remaining servicing assets,
iv) servicing operation, and v) other assets.
Wholesale Production Operations
On March 31, 1997, the Partnership's subsidiary, HMCLP, sold its
wholesale loan production branch operations to CrossLand Mortgage
Corp. ("CrossLand"), a subsidiary of First Security Corporation,
for approximately $4 million in cash. In addition, HMCLP will
receive an earnout payment based on the aggregate principal
amount of loans generated, between $1.5 billion and $4.0 billion,
from the transferred facilities during the thirteen months
following the closing date of March 31, 1997. If the aggregate
principal amount of loans generated is less than $1.5 billion,
the Partnership will not receive an earnout payment. If
CrossLand maintains the same volume of wholesale loan
originations as HMCLP experienced in 1996 (approximately $2.8
billion), this earnout payment would total approximately $3.3
million. Management has established a receivable for this
estimated amount which is recorded as a component of other assets
in the accompanying June 30, 1997 consolidated financial
statements. To date, the Partnership has not collected any
amounts related to this receivable. The purchase did not include
the wholesale mortgage loan pipeline being processed by HMCLP at
the time of the sale. These excluded loans were processed and
closed for HMCLP's account by CrossLand pursuant to an
administrative services agreement between the parties.
Retail Production Operations
On March 19, 1997, HMCLP sold a majority of its retail loan
production branch operations to an unaffiliated third party for
an amount approximately equal to the net book value of the fixed
assets owned by the retail branches. The purchase did not include
the retail mortgage loan pipeline being processed by HMCLP at the
time of the sale. These excluded loans were processed and closed
for HMCLP's account by the unaffiliated third party pursuant to
an administrative services agreement between the parties. The
remaining retail branches were either closed or sold subsequent
to March 31, 1997.
Servicing Assets
Effective April 30, 1997, the Partnership executed a purchase and
sale agreement with an unrelated third party for the sale of the
Partnership's servicing rights related to non-recourse FNMA and
Freddie Mac loans and GNMA loans with unpaid principal balances
totaling approximately $1.5 billion. The transfer of the
servicing responsibilities occurred in July 1997. Net proceeds,
which were substantially collected in July and August 1997, from
the sale approximated $25.7 million and were used to reduce the
Partnership's servicing facility.
Remaining Servicing Portfolio and Servicing Operation
As of June 30, 1997, the Partnership's remaining servicing
portfolio totaled approximately $1.2 billion. Subsequent to June
30, 1997, the Partnership agreed to sell to an unrelated third-
party approximately $1.1 billion of its remaining servicing
portfolio and its National Servicing Center located in
Scottsbluff, Nebraska. The Partnership's Servicing Center,
including the operations, facilities, fixed assets and employees,
was sold along with the Partnership's GNMA pool buyout and
reinstatement unit, and its streamline refinance capability and
certain fixed assets located in Aurora, Colorado for
approximately $1.85 million. The carrying value of the servicing,
facilities and fixed assets is reflected at its net realizable
value, based upon this sales transaction, in the accompanying
June 30, 1997 consolidated financial statements.
The sale of $1.1 billion of servicing rights, including the
related advance receivables, was recognized by Harbourton upon
the execution of the Purchase and Sale Agreement; however, the
Partnership anticipates the transfer of its servicing
responsibilities will occur on or about September 1, 1997. The
Partnership expects to receive net proceeds, after transaction
and transfer costs, of approximately $18.4 million from this
sale. Such proceeds will be used to reduce Harbourton's debt.
In connection with the sales of the National Servicing Center and
of the $1.1 billion servicing portfolio, Harbourton entered into
an Administrative Services Agreement with a subsidiary of the
unaffiliated third party pursuant to which the subsidiary will
perform, on a fee basis, certain services on Harbourton's behalf,
including various ongoing servicing and loan administration
functions.
The Partnership is currently negotiating with an unaffiliated
third party to sell its remaining servicing portfolio available
for sale with unpaid principal balances totaling approximately
$70 million. It is anticipated a Purchase and Sale Agreement
will be executed by September 30, 1997. The Partnership expects
to sell these assets for an amount that approximates their net
book value at June 30, 1997.
Mortgage Loans Held for Investment
During the first quarter of 1997, the Partnership sold a portion
of its mortgage loans held for investment portfolio totaling
approximately $3.0 million to an unrelated third party for
approximately $2.8 million. An unrealized loss of approximately
$0.2 million was provided for in the December 31, 1996
consolidated financial statements and realized during the first
quarter of 1997.
Subsequent to June 30, 1997, the Partnership sold a portion of
its mortgage loans held for investment portfolio totaling
approximately $3.3 million to an unrelated third party for
approximately $3.1 million. It is anticipated that any
additional mortgage loans repurchased during 1997 and the
remaining portfolio will be marketed and sold in a similar
fashion. A reserve for anticipated future repurchase losses has
been established at June 30, 1997 and is included in the repurchase
and indemnification reserve in the accompanying condensed consolidated
statement of net assets in liquidation.
CMO Bonds, Residual Interests, Investment Securities and SMATs
During the first quarter of 1997, the Partnership sold its CMO
bond and residual interest portfolio, except for certain non-
economic residual interests (with a book value of $0), totaling
approximately $1.2 million to unrelated third parties for
approximately $3.1 million. An unrealized gain of approximately
$1.9 million was provided for, in accordance with SFAS No. 115,
in the December 31, 1996 consolidated financial statements.
During the second quarter of 1997, the Partnership sold its
remaining portfolio for approximately $0.7 million which
approximated its net realizable value reflected in the March 31,
1997 consolidated financial statements.
Investment in Loans Repurchased from GNMA Pools
At April 30, 1997, the Partnership sold approximately $35 million
of its investment in loans repurchased from GNMA pools to an
unrelated third party for an amount that approximated its net
book value. The Partnership is negotiating a sales transaction
with an unrelated third party with respect to its remaining
investment in loans repurchased from GNMA pools. The Partnership
expects to sell these assets for an amount that approximates
their net book value at June 30, 1997.
Other
The Partnership is currently in the process of marketing its
remaining assets (not discussed above) for sale. In addition,
the Partnership will market and dispose of its remaining
operating receivables and operating payables which are reflected
at their current estimated liquidation amounts and settlement
amounts, respectively, in the accompanying consolidated statement
of net assets in liquidation as of June 30, 1997. Operating
receivables (reflected as other assets in the accompanying
consolidated financial statements) consists primarily of
production operation receivables, mortgage loan interest
receivables, trade receivables, and prepaid assets (e.g.,
insurance and maintenance contracts). Operating payables
(reflected as accounts payable and other liabilities in the
accompanying consolidated financial statements) consists
primarily of production operation payables, interest payables on
lines of credit and other debt, and trade payables and an
estimate of operating expenses in excess of operating revenues
expected to be incurred through liquidation. The actual amounts
realized from the sale of the Partnership's assets and the actual
settlement amounts of the Partnership's remaining liabilities
could differ materially from their current carrying values.
Reduction in Borrowing Facilities
On July 31, 1997, the Partnership reduced its credit facilities
to a $10 million revolving servicing facility and a $15 million
working capital line of credit. The Partnership's revolving
committed warehouse facility was terminated.
Resignation of Officers
Mr. Rick Skogg (President and Chief Operating Officer),
Mr. Paul Szymanski (Executive Vice President, Chief Financial
Officer and Secretary), and Mr. Lee Trautman (Executive Vice
President), have resigned and accepted positions with a
subsidiary of the unaffiliated third party that purchased the
servicing rights and the National Servicing Center located in
Scottsbluff, Nebraska subsequent to June 30, 1997. Mr. Skogg has
also resigned as a director of Harbourton.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On March 18, 1997, HMCLP and certain other affiliates were sued
in Federal Court in the Eastern District of Virginia by a
mortgage loan borrower alleging, on behalf of the borrower and on
behalf of an alleged class of similarly situated borrowers from
HMCLP since March 17, 1996, that certain payments made by HMCLP
to a mortgage broker in connection with the plaintiff's loan, and
loans to members of the purported class, violated Section 8 of
RESPA. The Partnership has received an offer to settle this suit
for an immaterial amount.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
1) Purchase and Sale Agreement between Harbourton
Mortgage Co., L.P. and GMAC Mortgage Corporation dated
April 30, 1997
b. Reports on Form 8-K:
Not Applicable
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
HARBOURTON MORTGAGE CO., L.P.
By: Harbourton Mortgage Corporation, its
General Partner
Signatures Title Date
s/ Jack W. Schakett Chief Executive Officer and August 14,
Director of 1997
Jack W. Schakett the General Partner
(Principal Executive
Officer)
s/ Brent F. Dupes Executive Vice President August 14,
1997
Brent F. Dupes
s/ Bill L. Reid III Chief Accounting Officer August 14,
1997
Bill L. Reid III
PURCHASE AND SALE AGREEMENT
between
HARBOURTON MORTGAGE CO., L. P.
"Seller"
and
GMAC MORTGAGE CORPORATION
"Purchaser"
dated as of
April 30, 1997
TABLE OF CONTENTS
ARTICLE I
Definitions
Section Page
Definitions 1
ARTICLE II
Sale and Transfer of Servicing
2.1 Items to be Sold 8
2.2 Physical Transfer Date 8
2.3 Obligations of Seller 9
2.4 Obligations of Purchaser 9
2.5 Purchase Price and Terms of Payment 9
2.6 Computation; Adjustment 11
2.7 Transfer of Escrow Deposits 12
2.8 Update of Schedules and Exhibits 13
ARTICLE III
General Representations and Warranties of Seller
3.1 Due Organization and Good Standing 14
3.2 Authority and Capacity 14
3.3 Effective Agreement 14
3.4 Compliance with Applicable Requirements 15
3.5 Title to the Servicing and Related Escrow Accounts15
3.6 Litigation; Compliance with Laws 15
3.7 Statements Made 16
3.8 No Accrued Liabilities 16
3.9 Errors and Omissions and Fidelity Bond 16
3.10 No Adverse Selection 16
3.11 Non-Recourse Servicing 16
3.12 Approved Seller/Servicer 16
ARTICLE IV
Representations and Warranties Relating to Mortgage Loans
Section
Page
4.1 Information 17
4.2 Origination and Sale of Mortgage Loans 17
4.3 Enforceability 17
4.4 General Servicing of Mortgage Loans 17
4.5 Escrow Accounts 18
4.6 No Modifications 18
4.7 Mortgage Insurance 19
4.8 Hazard Insurance 19
4.9 Condition of Mortgaged Property; Casualties 19
4.10 Lien Priority; Title Insurance 20
4.11 Condemnation; Forfeiture 20
4.12 Custodial Files 20
4.13 FHLMC Notes 21
4.14 Exception Loans 21
4.15 Investor Repurchase and Indemnification...... ....21
4.16 Fraud 21
ARTICLE V
Representations and Warranties of Purchaser
5.1 Due Incorporation and Good Standing 22
5.2 Authority and Capacity 22
5.3 Effective Agreement 22
5.4 Approved Seller/Servicer 22
ARTICLE VI
Investor Approvals
6.1 Seller's Obligations 23
6.2 Purchaser's Obligations 23
ARTICLE VII
Conditions Precedent to Obligations of Purchaser
Section
Page
7.1 FNMA/FHLMC/GNMA Approvals 24
7.2 Certifications 24
7.3 Representations 24
7.4 Compliance with this Agreement 25
7.5 Interest Paid 25
7.6 Additional Documentation 25
7.7 Documentation and Files; Compliance 25
7.8 Corporate Resolution 26
7.9 Opinion 26
7.10 UCC Search Results 26
7.11 Material Adverse Change 26
7.12 Hart-Scott-Rodino 27
7.13 Limited Power of Attorney 27
7.14 Guaranty 27
7.15 Officer's Certificate 27
7.16 Non-satisfaction of Condition 27
ARTICLE VIII
Conditions Precedent to Obligations of Seller
8.1 FNMA/FHLMC/GNMA Approvals 28
8.2 Representations 28
8.3 Compliance with this Agreement 28
8.4 Additional Documentation 28
8.5 Corporate Resolution 29
8.6 Opinion 29
8.7 Hart-Scott-Rodino 29
8.8 Non-satisfaction of Condition 29
ARTICLE IX
Covenants
9.1 Mutual Cooperation 30
9.2 Assignments 30
9.3 Transfer Costs 30
9.4 Tax Service
Contracts........................................................
........ 31
9.5 Form 1099, Form 1098 - Seller's Obligation 31
9.6 Form 1099, Form 1098 - Purchaser's Obligation 31
9.7 Reimbursement of Costs and Expenses 31
Section
Page
9.8 Payment of Interest 31
9.9 Post-transfer Payments 32
9.10 Retention of Documents; Post-transfer Support 32
9.11 FHLMC Quality Control Program 32
ARTICLE X
Indemnification
10.1 Indemnification by Seller 33
10.2 Repurchase/Purchaser's Remedies 34
10.3 Indemnification by Purchaser 36
10.4 Limitation of Liability 36
ARTICLE XI
Miscellaneous
11.1 Costs and Expenses 38
11.2 Confidentiality of Information 38
11.3 Broker's Fees 38
11.4 No Solicitation 39
11.5 Survival 39
11.6 Notices 39
11.7 Applicable Law 41
11.8 Entire Agreement 41
11.9 Modification 41
11.10 Third Party Beneficiaries 41
11.11 Construction 41
11.12 Captions 42
11.13 Counterparts 42
11.14 Attorneys' Fees 42
11.15 Binding Effect 42
11.16 Assignment 42
11.17 Public Announcement 43
LIST OF SCHEDULES AND EXHIBITS 45
PURCHASE AND SALE AGREEMENT
PURCHASE AND SALE AGREEMENT dated as of April 30, 1997 by
and between Harbourton Mortgage Co., L. P. ("Seller"), a
Delaware limited partnership with its principal office located
at 2530 So. Parker Road, 5th Floor, Aurora, Colorado 80014, and
GMAC Mortgage Corporation ("Purchaser"), a Pennsylvania
corporation with its principal office located at 100 Witmer
Road, Horsham, Pennsylvania 19044-0963.
Recitals
1. Seller is the servicer of certain Mortgage Loan Pools
(collectively the "Pools") and certain Whole Loans (the "Whole
Loans") identified on the schedule attached hereto as Exhibit A,
having an aggregate outstanding principal balance of
approximately $1.5 billion as of December 31, 1996. The Pools
are backed by, and the Whole Loans represent, residential (1-4
family) mortgage loans (the "Mortgage Loans") originated,
purchased and/or sold by the Seller pursuant to certain pool
purchase contracts and whole loan sale and servicing contracts
(collectively referred to hereinafter as "Servicing
Agreements"). Each Servicing Agreement requires the servicer to
service the Mortgage Loans pursuant to the regulations and
guidelines of FNMA, FHLMC or GNMA (each, an "Investor,"
collectively, the "Investors").
2. Seller desires to sell and Purchaser desires to
purchase all right, title, and interest in and to the Servicing
in accordance with the terms and conditions of this Agreement,
subject to Investor approval.
NOW, THEREFORE, in consideration of the mutual promises
contained herein and for other good and valuable consideration
the receipt and sufficiency of which are hereby acknowledged,
the parties hereto hereby agree as follows:
ARTICLE I
Definitions
All words or phrases defined in this Article I (except as herein
otherwise expressly provided or unless the context otherwise
requires) shall, for the purposes of this Agreement, have the
respective meanings specified in this Article.
1.1 Affiliate means, with respect to any party hereto, any
person or entity which controls, is controlled by, or is under
common control with, such party.
1.2 Agreement means this Purchase and Sale Agreement and
any written and agreed to amendments or modifications hereto
signed by both Seller and Purchaser.
1.3 Ancillary Income means all income derived from the
Mortgage Loans other than servicing fees, including without
limitation late charges and other incidental fees and fees,
commissions or expense reimbursements relating to insurance.
1.4 Applicable Requirements means, with respect to each
and every Mortgage Loan and each and every REO Property (a) all
applicable contractual obligations, including without limitation
those contractual obligations contained in Mortgage Loan
Documents, in the Servicing Agreements, or in policies of
insurance pertaining to any Mortgage Loan or related Real
Property, (b) all applicable federal, state and local legal and
regulatory requirements (including statutes, rules, regulations
and ordinances), (c) all applicable requirements and guidelines
of each Investor and each governmental agency, government-
sponsored entity, board, commission, instrumentality and other
governmental body or officer having jurisdiction (including
without limitation FNMA, FHLMC, GNMA, FHA, FmHA, VA and their
respective selling and/or servicing guides), (d) all applicable
requirements and guidelines of PMI companies, and (e) all
applicable judicial and administrative judgments, consent
decrees, orders, stipulations, awards, settlement agreements,
writs and injunctions.
1.5 Business Day or Day means any day of the week other
than a Saturday, Sunday, or a legal holiday or a bank holiday in
the Commonwealth of Pennsylvania, the State of Iowa, the State
of Colorado or the State of Nebraska.
1.6 Buydown Loan means a Mortgage Loan as to which a
specified amount of interest is paid out of a related Escrow
Account in accordance with a related buydown agreement.
1.7 Certification Cutoff Date means November 30, 1997,
subject to extension by Purchaser in its sole discretion and on
a pool-by-pool basis.
1.8 Class A Deduction Loan means a Mortgage Loan which is
three (3) payments or more past due, but not in bankruptcy, in
litigation, in foreclosure or REO status, as those terms are
defined in Section 1.13.
1.9 Class B Deduction Loan means a Mortgage Loan which is
in bankruptcy, in litigation, or in foreclosure or REO status,
as those terms are defined in Section 1.13.
1.10 Custodial File means the documents required by the
applicable Investor under the Servicing Agreements to be
retained by a document custodian acceptable to Investor, or by
Investor.
1.11 Custodian means Bank of Maryland, or such other
document custodian as may be designated by Purchaser or defined
by the Investor.
1.12 Defect means a breach in any material respect of any
representation or warranty herein contained with respect to a
Mortgage Loan or any failure by Seller to comply with any
covenant herein contained with respect to a Mortgage Loan which
could reasonably be expected to result in a loss or damage to
Purchaser or the imposition of material additional servicing
burdens with respect to such Mortgage Loan.
1.13 Delinquent Loan means a Mortgage Loan which, if a FNMA
or FHLMC Mortgage Loan is two (2) payments or more past due and
if a GNMA Mortgage Loan, is three payments or more past due, and
is in bankruptcy, in litigation, in foreclosure or REO status.
The term "in bankruptcy" shall mean any non-current Mortgage
Loan in respect of which the related Mortgagor has sought relief
under or has otherwise been subjected to the federal bankruptcy
laws or any other similar laws of general application for the
relief of debtors, through the institution of appropriate
proceedings, and such proceedings are continuing, and shall
continue until the related Mortgaged Property is released from
the jurisdiction of the bankruptcy or other court in which the
matter is pending, regardless of whether such proceeding is
dismissed, finally concluded, or otherwise. The term "in
foreclosure" shall mean, as to any Mortgage Loan, that the first
action necessary to be taken to commence proceedings in
foreclosure or a sale under power of sale under the law of the
state wherein the Mortgage is to be enforced, has been taken,
and such proceedings are continuing, or should have been taken
in accordance with applicable Investor standards. The term "in
litigation" shall mean a legal action in foreclosure of a
Mortgage Loan, or for a deficiency thereunder, in which the sale
of the Mortgaged Property in foreclosure (whether by action,
power of sale, or otherwise) has been delayed by reason of the
defense of such action by the Mortgagor, or any other legal
action commenced or pending which involves the Mortgage Loan.
The term "REO status" shall mean the ownership of real property
as a result of foreclosure of a Mortgage or acquisition of a
deed in lieu of foreclosure with respect to a Mortgaged
Property.
1.14 Electronic Data File means test tape(s), sale tape(s)
and/or transfer tape(s) containing Mortgage Loan and/or
Servicing information to be delivered to Purchaser having the
magnetic format and substance specified in the Transfer
Instructions.
1.15 Eligible Mortgage Loan means a Mortgage Loan which is
not a Delinquent Loan and which is not an Excluded Loan.
1.16 Escrow Accounts means those accounts established and
maintained by Seller with commercial banking institutions or
savings and loan associations under the provisions of the
Servicing Agreements for (i) the deposit and retention of
interest and principal on account of the Mortgage Loans; (ii)
the deposit and retention of all collections of taxes,
assessments, ground rents, hazard and mortgage insurance or
comparable items on account of the Mortgage Loans; (iii) the
deposit and retention of buydown funds on account of the
Mortgage Loans, and all other escrow or similar accounts
maintained by Seller with respect to the Mortgage Loans.
1.17 Escrow Deposits means funds held in Escrow Accounts.
1.18 Excluded Loan means a Mortgage Loan which is
identified on Exhibit A-3 to the Agreement.
1.19 FHA means the Federal Housing Administration of the
Department of Housing and Urban Development of the United States
of America, or any successor thereto.
1.20 FHLMC means the Federal Home Loan Mortgage Corporation
and any successor or assignee thereof.
1.21 FmHA means the Farmers Home Administration, the United
States of America acting through Rural Housing Service or its
successor, the U.S. Department of Agriculture, or any successor
thereto.
1.22 FNMA means the Federal National Mortgage Association
and any successor or assignee thereof.
1.23 GNMA means the Government National Mortgage
Association and any successor or assignee thereof.
1.24 GNMA Purchase Price Percentage means 2.20 percent.
1.25 Guarantor means Harbourton Holdings, L. P., a
Delaware limited partnership.
1.26 Interest Rate means the average thirty (30) day rate
for high grade commercial paper (unsecured notes sold through
dealers by major corporations) as published daily in the Wall
Street Journal.
1.27 Interim Period means the period commencing with the
Sale Date and continuing through and until the Transfer Cutoff
Date.
1.28 Investor(s) means FNMA, FHLMC and/or GNMA, as the case
may be.
1.29 Investor Approval Date means the effective date
on which Purchaser will be recognized by the Investor as
Seller/Servicer or Issuer/Servicer, as applicable, with respect
to the related Mortgage Loans. Except for Subserviced Loans,
the Investor Approval Date will be the applicable Physical
Transfer Date.
1.30 Knowledge of Seller means the actual knowledge of the
senior management of Seller, including without limitation, the
senior servicing officer of Seller, at or prior to the date of
this Agreement.
1.31 Mortgage means a valid and enforceable Mortgage, Deed
of Trust, or other security instrument creating a first lien
upon described real property improved by a single family
dwelling which secures a Mortgage Note.
1.32 Mortgage Loan means an individual residential (1-4
family) mortgage loan which is the subject of the Servicing
Agreements and this Agreement, as identified in the schedule
attached hereto as Exhibit A.
1.33 Mortgage Loan Documents means all documents specified
in the Servicing Agreement pertaining to a particular Mortgage
Loan.
1.34 Mortgage Loan File means those origination and
servicing documents, escrow documents, and other documents
specified in Exhibit B to this Agreement other than those
documents listed on Exhibit B, the originals of which are
included in the Custodial File.
1.35 Mortgage Note means a written promise to pay a sum of
money at a stated interest rate during a specified term that is
secured by a Mortgage Loan.
1.36 Mortgaged Property means real property which is
subject to a lien created by a Mortgage as security for the
related Mortgage Loan.
1.37 Mortgagor means the obligor on a Mortgage Note.
1.38 P & I means principal and interest.
1.39 Physical Transfer Date means the date on which
Purchaser assumes physical servicing (or subservicing, as
applicable) of the Mortgage Loans and will be June 2, 1997 for
FNMA Mortgage Loans, June 3, 1997 for GNMA Mortgage Loans, and
June 16, 1997 for FHLMC Mortgage Loans.
1.40 PMI means any applicable carrier of private mortgage
insurance.
1.41 Pool or Pools means any pool(s) of Mortgage Loans
identified on the Summary of Pools attached hereto as Exhibit C.
1.42 Purchase Price Percentage means 1.78 percent, of the
aggregate unpaid principal balance of all Eligible Mortgage
Loans on the Sale Cutoff Date.
1.43 REO Property means, with respect to a Mortgage Loan
the real property to which Purchaser has taken ownership as a
result of foreclosure of a Mortgage or acceptance of a deed in
lieu of foreclosure with respect to a Mortgaged Property.
1.44 Repurchase Interest Expense means interest calculated
with respect to the Repurchase Price for a Mortgage Loan, such
interest to be calculated at the Interest Rate plus 200 basis
points for the period commencing with Purchaser's repurchase
date and continuing until the earlier of liquidation of the
repurchased Mortgage Loan or Seller's repurchase of such
Mortgage Loan.
1.45 Repurchase Price means with reference to a Mortgage
Loan, the sum of (a) all funds necessary to remove the Mortgage
Loan from a Pool, repurchase the Mortgage Loan or REO Property,
as applicable, from an Investor, or satisfy an Investor's make-
whole request, as may be the case, including interest thereon
calculated at the Mortgage Note rate through the last day of the
month of repurchase (to the extent required by the Investor),
and to cover any and all reasonable, out-of-pocket costs, and
expenses of Purchaser incurred with respect to such Mortgage
Loan, including but not limited to reasonable attorneys' fees
and costs, (b) the product of the Purchase Price Percentage and
the then-outstanding unpaid principal balance of such Mortgage
Loan, (c) an administrative fee in the amount of Five Hundred
Dollars ($500.00) and (d) to the extent that Purchaser fails to
repurchase a Mortgage Loan or REO Property as required under
Section 10.2 of this Agreement, Repurchase Interest Expense.
1.46 Sale Date means April 30, 1997.
1.47 Sale Cutoff Date means the end of business on the Sale
Date.
1.48 Servicing Agreement means a pool purchase contract or
whole loan sale and servicing contract pursuant to which a
Mortgage Loan was originated, purchased, sold and/or serviced by
the Seller for the benefit of an Investor.
1.49 Servicing Right or Servicing means the right, title,
and interest in and to the servicing of the Mortgage Loans and
the maintenance and servicing of the Escrow Accounts, along with
the right to receive the servicing fee income and any and all
Ancillary Income arising from or connected to any Mortgage Loan.
1.50 Significant Underwriting Deficiency shall, with
respect to a FNMA Mortgage Loan, have the meaning assigned to it
in the FNMA Selling/Servicing Guides, as amended, and, with
respect to FHLMC Mortgage Loan, shall mean that a FHLMC quality
control feedback letter has been issued with respect to the
eligibility of such Mortgage Loan for sale to FHLMC which would
require either repurchase of the Mortgage Loan or
indemnification of the Investor in the event of a future
default.
1.51 Subserviced Loan means a Mortgage Loan included in a
Pool identified on Schedule 1.51 hereof.
1.52 Subservicing Period means, with respect to a
Subserviced Loan, the period commencing with the Physical
Transfer Date and continuing through and until the applicable
Investor Approval Date.
1.53 T & I means taxes and insurance.
1.54 Transfer Cutoff Date means the end of business on the
Business Day immediately preceding the Physical Transfer Date.
1.55 Transfer Instructions means the loan servicing
transfer instructions attached as Exhibit D hereto.
1.56 VA means the Veterans Administration of the United
States of America, or any successor thereto.
1.57 VA No-Bid Instruction means an instruction given by VA
to the effect that VA will not accept conveyance of the REO
Property related to the foreclosure of a Mortgage Loan.
ARTICLE II
Sale and Transfer of Servicing
2.1 Items to be Sold.
Subject to, and upon the terms and conditions of this
Agreement, Seller shall, as hereinafter provided, sell,
transfer, assign and deliver to Purchaser, as of the Sale Date,
all of Seller's beneficial right, title and interest in and to,
including all economic benefit derived from, (a) the Servicing
Rights, and (b) the Escrow Accounts, provided, however, that
until the Investor Approval Date, Seller shall retain record
title in and to the Servicing and shall remain as the Servicer
of record with the related Investor, and fully subject to such
Investor's rights and requirements with respect to the
Servicing.
2.2 Physical Transfer Date.
(a) With respect to Mortgage Loans which are not
Subserviced Mortgage Loans, the Physical Transfer Date will be
the date on which all of Seller's remaining right, title, and
interest in and to the related Servicing Rights and Escrow
Accounts, including without limitation record title and the
obligation to service the Mortgage Loans, shall be transferred
to Purchaser.
(b) With respect to Subserviced Loans, the Physical
Transfer Date will be the date on which all of Seller's
beneficial right, title, and interest in and to the related
Servicing Rights and Escrow Accounts shall be transferred to
Purchaser, provided, however, that notwithstanding anything to
the contrary contained herein, until the Investor Approval Date,
Seller shall retain record title in and to the related
Servicing Rights and shall remain as Servicer of record with the
Investor, and fully subject to such Investor's rights and
requirements with respect to the Servicing. Purchaser and
Seller acknowledge that Purchaser will be identified to GNMA as
the subservicer of the Pools related to the Subserviced Loans
effective as of the Physical Transfer Date. On the Investor
Approval Date, all of Seller's right title and interest in and
to the Servicing Rights and Escrow Accounts related to the
Subserviced Loans, including without limitation record title and
the obligation to service the Subserviced Loans, shall be
transferred to Purchaser.
(c) The transfer will be conducted in accordance with the
Transfer Instructions. Except as provided herein, on each
Physical Transfer Date, Seller shall cease all servicing
responsibilities with regard to the related Mortgage Loans and
shall sever its mortgage servicing relationships with
Mortgagors.
2.3 Obligations of Seller.
Seller covenants and agrees, from the Sale Date through the
Transfer Cutoff Date, that:
(a) Seller shall pay, perform and discharge all
liabilities and obligations relating to ownership of the
Servicing Rights pursuant to Applicable Requirements and
all the rights, obligations and duties with respect to the
Escrow Accounts until the transfer of such items on the
Physical Transfer Date; and
(b) Seller shall continue to service the Mortgage Loans
during the Interim Period in accordance with Applicable
Requirements, and pursuant to an Interim Servicing
Agreement between Purchaser and Seller, in the form
attached as Exhibit E hereto; and
(c) Seller shall provide Purchaser with reasonably
requested information concerning GNMA Mortgage Loans. As
directed by Purchaser with respect to Delinquent Loans
specified by Purchaser, Seller will exercise all of its
rights to repurchase certain GNMA Mortgage Loans which are
Delinquent Loans. Purchaser will be responsible for
funding the repurchase price for such GNMA Mortgage Loans,
to be determined with reference to Applicable Requirements
and remitted at least one (1) Business Day prior to the
applicable GNMA remittance date. Seller will assign and
transfer such repurchased Mortgage Loans (a "Repurchased
GNMA Mortgage Loan") to Purchaser on the Investor Approval
Date.
(d) During the Subservicing Period, Seller will perform
its remaining obligations as servicer of the Subserviced
Loans pursuant to Applicable Requirements and will
cooperate reasonably with Purchaser to facilitate
Purchaser's performance of its subservicing obligations
pursuant to Section 2.4. Such cooperation will include
appointment of certain employees of Purchaser as officers
of Seller for the limited purpose of performing certain
necessary and delegable Investor reporting functions
including without limitation Investor remittance.
2.4 Obligations of Purchaser.
Purchaser covenants and agrees that Purchaser shall
subservice the Subserviced Loans on behalf of Seller during the
Subservicing Period in accordance with Applicable Requirements,
and pursuant to a Subservicing Agreement between Purchaser and
Seller, in the form attached as Exhibit F.
2.5 Purchase Price and Terms of Payment.
(a) The Purchase Price shall be calculated as follows:
(1) The Purchase Price shall be calculated for
the Mortgage Loans shown on Exhibit A by multiplying
the unpaid principal balance of all Eligible Mortgage
Loans, as of the Sale Cutoff Date, by the
corresponding Purchase Price Percentage.
(2) The Purchase Price shall be reduced by $250
for Servicing Rights related to each Mortgage Loan
which is a Class A Deduction Loan as of the Sale
Cutoff Date and by $500 for Servicing Rights related
to each Mortgage Loan which is a Class B Deduction
Loan as of the Sale Cutoff Date.
(3) No Purchase Price shall be paid for Servicing
Rights related to Mortgage Loans which are not
Eligible Mortgage Loans as of the Sale Cutoff Date.
(b) The Purchase Price shall be paid as follows:
(1) On the Sale Date, Purchaser shall pay Seller
thirty percent (30%) of the estimated Purchase Price
calculated based upon Schedules updated as of March
31, 1997, as provided in Section 2.8 hereof.
(2) Within five (5) Business Days after each
Physical Transfer Date and upon the receipt of
substantially all Mortgage Loan Files, Purchaser shall
pay Seller (A) sixty percent (60%) of the Purchase
Price for Servicing Rights related to Mortgage Loans
which are not Subserviced Loans and (B) fifty percent
(50%) of the Purchase Price for Servicing Rights
related to Mortgage Loans which are Subserviced
Loans.
(3) Upon the later of (A) thirty (30) days after
each Physical Transfer Date, (B) Purchaser's receipt
of any remaining Mortgage Loan Files and related
documentation pertaining to the Mortgage Loans, and
(C) verification of the Purchase Price computation,
Purchaser shall pay to the Seller the balance of the
actual Purchase Price for Servicing Rights related to
Mortgage Loans which are not Subserviced Loans.
(4) Upon the later of (A) thirty (30) days after
the applicable Investor Approval Date and (B)
Purchaser's receipt of any remaining Mortgage Loan
Files and related documentation pertaining to the
Mortgage Loans, Purchaser shall pay to the Seller the
balance of the actual Purchase Price for Servicing
Rights related to the applicable Subserviced Loans,
along with interest thereon calculated at the Interest
Rate for the period commencing with the Physical
Transfer Date for such Subserviced Loans through the
applicable Investor Approval Date.
(5) The portion of the remaining balance of the
Purchase Price to be withheld by Purchaser pursuant to
Sections 2.5(b)(3) and 2.5(b)(4) shall not in any
event exceed the greater of (A) the product of
$1,000.00 and the number of missing or materially
incomplete Mortgage Loan Files or (B) the sum of
$100,000.00. Any such Purchase Price withheld shall
be payable monthly and pro-rated based on the number
of Mortgage Loan Files cleared in that month in
relation to the total number of missing or materially
incomplete Mortgage Loan Files outstanding.
(6) In the event that the transaction contemplated
hereby fails to be consummated for any reason set out
in Article VII or Article VIII of the Agreement, as
applicable, (A) Seller shall promptly refund all
monies paid by Purchaser to Seller, including interest
thereon calculated at the Interest Rate; and (B)
Purchaser shall promptly refund to Seller any
servicing fees collected by Purchaser with respect to
the Mortgage Loans, including without limitation
interest thereon calculated at the Interest Rate.
Notwithstanding such refunds, each party shall retain
all additional remedies available to it under this
Agreement at law or in equity.
Unless otherwise agreed by the parties, all payments required
hereunder shall be made by bank wire transfer in immediately
available funds.
2.6 Computation; Adjustment.
It is understood and agreed that:
(a) All wiring instructions and Purchase Price
information necessary to effect payment of the
Purchase Price shall be provided to the appropriate
party at least two Business Days prior to the date of
payment.
(b) If the principal balance of any of the
Mortgage Loans used in computing the payment of the
Purchase Price shall be found to be incorrectly
computed, the Purchase Price shall be promptly and
appropriately adjusted and payment promptly made by
the appropriate party.
(c) To the extent that Purchaser should reasonably
determine that any advance made by Seller and
reimbursed by Purchaser is non-recoverable under
Applicable Requirements, Purchaser shall provide
Seller with a notice of such determination and the
basis thereof, whereupon Seller shall reimburse
Purchaser for such amounts within fifteen (15) days of
receipt of Purchaser's notice.
(d) Not later than seventy-five (75) days after
the Sale Date, Seller will reimburse Purchaser for the
Purchase Price paid with respect to any Mortgage Loan
which is prepaid in full within the thirty (30) day
period following the Sale Date.
2.7 Transfer of Escrow Deposits.
(a) On or before the fifth Business Day following each
Transfer Cutoff Date, Seller shall wire transfer to Purchaser
all related Escrow Deposits described at Section 1.16(i), (ii)
and (iii) (i.e., P & I, T & I and Buydown accounts). Such
transfer of funds shall be net of related P & I, T & I and
foreclosure and other servicing-related advances made by Seller
to the extent that (i) such advances have been made in
accordance with Applicable Requirements, and (ii) Seller
provides Purchaser with detail reasonably satisfactory to
support such advances in accordance with the Transfer
Instructions.
(b)
(1) In the event that the scheduled remittance date
for the applicable Investor (hereinafter, "Investor
Remittance Date") occurs four (4) or more Business
Days following the Transfer Cutoff Date, Seller shall,
no later than the fifth Business Day following the
related Transfer Cutoff Date, wire transfer to
Purchaser all Escrow Deposits described in Section
1.16 (i) (i.e., P & I accounts). Such transfer of
funds shall be net of (A) documented P & I advances
made by Seller, and (B) guaranty fees due Investor.
Seller shall provide Purchaser with reasonably
acceptable documentation supporting the transfer of
funds. Such documentation shall include a detailed
accounting, according to related Physical Transfer
Date trial balances, of Seller's P & I advances,
guaranty fees and remittance funds due Investor with
receipt of documentation at least five (5) Business
Days prior to the scheduled remittance date. Not less
than one Business Day prior to each Investor
Remittance Date, Purchaser shall wire transfer funds
due the related Investor to Seller's Escrow Account,
subject to timely receipt by Purchaser of such related
documentation.
(2) In the event that the Investor Remittance Date
occurs less than four (4) Business Days following the
Transfer Cutoff Date, Seller shall, at least one (1)
Business Day prior to such Investor Remittance Date,
provide to Purchaser a satisfactory accounting of the
related delinquent P & I payments netted against the
related prepaid P & I payments. The final position of
the netting process will determine in each instance
whether net funds are to be wire transferred from
Purchaser to Seller, or from Seller to Purchaser. The
resulting wire transfer shall be made by the
appropriate party no more than one Business Day
following receipt by Purchaser of such accounting.
(3) Purchaser shall pay Seller interest for Mortgage
Loans in FNMA MBS pools or GNMA securities that prepay
in full during the Interim Period, with such interest
paid at the Federal Funds Rate and will cover the
period between the date Escrow Deposits are
transferred to Purchaser and the date funds are
returned to Seller for Investor remittance.
(c) In accordance with the Transfer Instructions, on or
before the third Business Day following each Transfer Cutoff
Date, Seller shall provide Purchaser with an itemized accounting
of uncollected fees related to Ancillary Income, provided that
such fees are deemed earned as collected.
(d) With respect to Mortgage Loans contained in GNMA
Internal Reserve Pools (as defined in the GNMA Guide), Purchaser
shall be obligated to reimburse Seller for prior advances of P &
I only to the extent that such advances exceed the one-month P &
I advance required by GNMA to be reserved for any such Mortgage
Loan.
2.8 Update of Schedules and Exhibits.
On the Sale Date, Seller shall deliver to Purchaser addenda
to all Schedules provided for hereunder, updated based on
information dated as of March 31, 1997. Within five (5)
Business Days following the Sale Date, Seller shall deliver to
Purchaser an addendum to Exhibit A, updated as of the Sale Date.
ARTICLE III
General Representations and Warranties of Seller
As an inducement to Purchaser to enter into this Agreement,
Seller represents and warrants as follows, as of the Sale Date
and as of the Physical Transfer Date:
3.1 Due Organization and Good Standing.
Seller is a limited partnership duly organized, validly
existing and in good standing under the laws of the State of
Delaware during the time of its activities with respect to the
Mortgage Loans and the Servicing. To the extent required by
applicable law, Seller is properly licensed and qualified to
transact business in all appropriate jurisdictions and to
conduct all activities performed with respect to the origination
and servicing of the Mortgage Loans.
3.2 Authority and Capacity.
Seller has all requisite power, authority and capacity to
enter into this Agreement and the Interim Servicing Agreement
and to perform the obligations required of it hereunder and
thereunder. The execution and delivery of this Agreement and
the Interim Servicing Agreement and the consummation of the
transactions contemplated hereby and thereby, have each been
duly and validly authorized by all necessary action. This
Agreement constitutes the valid and legally binding agreement of
Seller enforceable in accordance with its respective terms,
subject to bankruptcy laws and other similar laws of general
application affecting rights of creditors and subject to the
application of the rules of equity, including those respecting
the availability of specific performance.
3.3 Effective Agreement.
The execution, delivery and performance of this Agreement
by Seller, its compliance with the terms hereof and consummation
of the transactions contemplated hereby (assuming receipt of the
various consents required pursuant to this Agreement) will not
violate, conflict with, result in a breach of, constitute a
default under, be prohibited by or require any additional
approval under its partnership agreement, bylaws, or any
instrument or agreement to which it is a party or by which it is
bound or which affects the Servicing (including any of the
Servicing Agreements), or any state or federal law, rule, or
regulation or any judicial or administrative decree, order,
ruling or regulation applicable to it or to the Servicing,
subject to obtaining the approval of the applicable Investor to
the transfer of the Servicing and the release of any lien upon
the Servicing Rights by Seller's lender.
3.4 Compliance with Applicable Requirements.
Except as set forth in Schedule 4.12, prior to the
applicable Physical Transfer Date, Seller will have complied in
all respects with all Applicable Requirements or will have cured
any such non-compliance to bring it into compliance with
Applicable Requirements in all respects. Seller has done and
Seller will do, no act or thing which may adversely affect the
Servicing. No event has occurred and is continuing which, under
the provisions of such contracts or such other documents or
agreements but for the passage of time or the giving of notice,
or both, would constitute an event of default thereunder, and
Seller has not received any notice or other information from the
Investor that it has terminated the Servicing Agreements or that
it intends to do so. All fees and expenses due and owing to any
Investor under the Servicing Agreements have been remitted to
the Investor.
3.5 Title to the Servicing and Related Escrow Accounts.
Seller is the lawful owner of the Servicing, is custodian
of the Escrow Accounts and has the sole right and authority to
transfer the Servicing as contemplated hereby. The transfer,
assignment and delivery of the Servicing and of the Escrow
Accounts in accordance with the terms and conditions of this
Agreement shall vest in Purchaser all rights as servicer, free
and clear of any and all claims, charges, defenses, offsets and
encumbrances of any kind or nature whatsoever, including but not
limited to those of Seller. Except as disclosed to Purchaser
prior to the Sale Date, neither the Mortgage Loans nor the
Servicing Rights have been, and continue to be, hypothecated,
assigned, or pledged as collateral by Seller for any loan or for
any other purpose.
3.6 Litigation; Compliance with Laws.
Except as disclosed in Schedule 3.6 hereto, there is no
litigation, proceeding or governmental investigation pending, or
any order, injunction or decree outstanding which might
materially affect any of the Mortgage Loans or the Servicing.
Additionally, there is no litigation, proceeding or governmental
investigation existing or pending or to the Knowledge of Seller
threatened, or any order, injunction or decree outstanding
against or relating to Seller, or the Servicing, that has not
been disclosed by Seller to Purchaser or its counsel in writing
prior to the execution of this Agreement, which could have a
material adverse effect upon the Servicing or the other assets
being purchased by Purchaser hereunder, nor does Seller know of
any basis for any such litigation, proceeding, or governmental
investigation. Seller has not violated any applicable law,
regulation, ordinance, order, injunction or decree, or any other
requirement of any governmental body or court, which may
materially affect any of the Mortgage Loans or the Servicing.
3.7 Statements Made.
No representation, warranty or written statement made by
Seller in this Agreement or in any exhibit, schedule, written
statement or certificate furnished to Purchaser in connection
with the transactions contemplated hereby by Seller contains or
will contain any untrue statement of a material fact or omits to
state a material fact necessary to make the statements contained
herein or therein not misleading.
3.8 No Accrued Liabilities.
There are no accrued liabilities of Seller with respect to
the Mortgage Loans or the Servicing or circumstances under which
such accrued liabilities will arise against Purchaser as
successor to the Servicing, with respect to occurrences prior to
the Physical Transfer Date.
3.9 Errors and Omissions and Fidelity Bond.
Seller has in full force and effect an errors and omissions
policy or policies and Fidelity Bond with respect to its
servicing operations and a blanket bond in accordance with
Investor requirements.
3.10 No Adverse Selection.
The Seller used no adverse selection procedures in
selecting the Servicing Agreements. Copies of each of the
Servicing Agreements have been previously furnished or will be
furnished to Purchaser prior to the execution of this Agreement,
accompanied by a transmittal letter so identifying them.
3.11 Non-Recourse Servicing.
Except with respect to GNMA Mortgage Loans and as disclosed
in Schedule 3.11, the Servicing is without recourse or shared
risk to the servicer.
3.12 Approved Seller/Servicer.
Seller is an approved FNMA and FHLMC Seller/Servicer, GNMA
Issuer/Servicer, FmHA Servicer and VA and FHA mortgagee in good
standing.
ARTICLE IV
Representations and Warranties Relating to Mortgage Loans
As further inducement to Purchaser to enter into this
Agreement, Seller represents and warrants to Purchaser as of the
Sale Date and as of the Physical Transfer Date, with respect to
each Mortgage Loan, as follows:
4.1 Information.
(a) All information contained in each Mortgage Loan File,
and in any Electronic Data File, with regard to loan origination
and servicing activity contains all information necessary to
properly service the Mortgage Loans in accordance with
Applicable Requirements, and is accurate in all material
respects, and all monies received with respect to each Mortgage
Loan have been properly accounted for and applied. All Mortgage
Loan Files are complete in all material respects with regard to
origination and servicing activity.
(b) The amount of the unpaid balance for each Mortgage
Loan which is reflected on Exhibit A is true and correct as of
the date of Exhibit A.
4.2 Origination and Sale of Mortgage Loans.
(a) Each Mortgage Loan has been originated and/or sold in
accordance, in all material respects, with Applicable
Requirements, including without limitation, applicable state or
federal laws, rules, or regulations pertaining to consumer
credit, truth-in-lending and usury.
(b) The selling and origination representations and
warranties made by Seller to Investors under the Servicing
Agreements are true and correct in all material respects as of
the date made.
4.3 Enforceability.
Each Mortgage Note and each Mortgage has been duly executed
by the appropriate obligor and each is a valid and enforceable
document, subject only to applicable antideficiency and
bankruptcy statutes and to application of the rules of equity,
and there are no defenses, setoffs or counterclaims against any
Mortgage Loan.
4.4 General Servicing of Mortgage Loans.
(a) As of the Sale Date, each Mortgage Loan has been
serviced in accordance with Applicable Requirements in all
material respects.
(b) Except as set forth on Schedule 4.12, Seller has not
taken any action or failed to take any action which might cause
the cancellation of or otherwise affect any of the insurance
contracts pertaining to Servicing of a Mortgage Loan (including
without limitation PMI, FHA insurance or VA guaranty) or which
might otherwise materially and adversely affect the Servicing.
4.5 Escrow Accounts.
(a) All Escrow Accounts are maintained in accordance with
Applicable Requirements. Except as to payments which are past
due under the Mortgage Loan, all Escrow Account balances
required by the Mortgage Loan Documents and paid to Seller for
the account of the Mortgagor and Seller are on deposit in the
appropriate Escrow Accounts.
(b) All payments for taxes, assessments, ground rents,
mortgage insurance, hazard and flood insurance or other payments
made from the T & I Escrow Account have been made on a timely
basis, and Seller has paid to the Mortgagor interest on Escrow
Accounts only to the extent such payment is required by
Applicable Requirements. Seller shall have properly conducted an
escrow analysis for each Mortgage Loan within the twelve (12)
month period immediately preceding the Physical Transfer Date.
All books and records with respect to each Mortgage Loan shall
be in good condition and shall have been adjusted to reflect
properly the results of the escrow analysis.
(c) With respect to any Mortgage Loan for which a negative
escrow balance in excess of Four Hundred Dollars ($400.00)
existed as of the Sale Date, Seller has performed an escrow
analysis on such Mortgage Loan for the purpose of correcting the
negative escrow balance, and has adjusted the related monthly
escrow payment on Seller's servicing system as a result of such
analysis.
(d) Where applicable, Seller has notified each Mortgagor,
in accordance with Applicable Requirements, as to any payment
adjustments which resulted from an escrow analysis. Seller
shall provide Purchaser with copies of any notices and analyses
prepared in accordance with subsection 4.5(b) above.
(e) Every Escrow Account established with respect to
a Buydown Loan has been fully funded by Seller, and not
discounted to present value or otherwise.
4.6 No Modifications.
Except with respect to partial releases, actions required
by a divorce decree, assumptions, or as otherwise permitted
under Applicable Requirements, (a) the terms of each Mortgage
Note and Mortgage have not been modified by Seller, (b) no party
thereto has been released in whole or in part by Seller and (c)
no part of the Mortgaged Property has been released by Seller.
The full original principal amount of each Mortgage Note listed
has been advanced to the Mortgagor.
4.7 Mortgage Insurance.
Except as disclosed in Schedule 4.12, as required by the
applicable Investor, the Mortgage Loans are validly insured by
mortgage insurance, and all premiums or other charges due in
connection with such insurance have been paid.
4.8 Hazard Insurance.
There is in force with respect to each Mortgaged Property a
hazard insurance policy that provides, at a minimum, for fire
and extended coverage in an amount which is the lesser of (i)
the outstanding principal balance of the Mortgage Loan or (ii)
the full insurable value of improvements, but in no event less
than the amount required under Applicable Requirements. If
required by the Flood Disaster Protection Act of 1973, as
amended, or by the Investor, each Mortgaged Property is and will
be covered by a flood insurance policy in an amount not less
than the lesser of (i) the outstanding principal balance of the
applicable Mortgage Loan, or (ii) the maximum amount of
insurance that is available under the Flood Disaster Protection
Act of 1973, as amended.
4.9 Condition of Mortgaged Property; Casualties.
(a) There exists no damage to any Mortgaged Property from
fire, windstorm, earthquake, other casualty, environmental
hazard, or any other circumstances or conditions that would
cause any Mortgage Loan to become delinquent or otherwise
materially and adversely affect the value or marketability of
such Mortgage Loan or related Mortgaged Property.
Notwithstanding anything to the contrary contained in this
Section, to the extent that timely repairs are presently being
undertaken utilizing casualty insurance proceeds pursuant to an
insurance claim which is being timely processed with the
insurance company, such repairs shall not constitute a breach of
this warranty provided, however, that upon completion of such
repairs, the collateral value of the repaired Mortgaged Property
shall not be diminished materially from its value prior to such
casualty loss.
(b) There are (i) no uninsured casualty losses and (ii) no
insured casualty losses relating to any Mortgaged Property where
coinsurance has been, or Seller has reason to believe it will
be, claimed by the insurance company or where the loss,
exclusive of contents, is greater than the net recovery from the
fire insurance carrier. Casualty insurance proceeds paid with
respect to a Mortgage Loan have been used either to reduce the
Mortgage Loan balance or for the purpose of making repairs to
the Mortgaged Property. Unless such insurance proceeds have
been used to reduce the Mortgage Loan balance, all damage with
respect to which casualty insurance proceeds have been received
by or through Seller has been properly repaired or is in the
process of being repaired with such proceeds.
4.10 Lien Priority; Title Insurance.
As required by Applicable Requirements, a title policy,
binding title commitment or attorney's opinion as to title, as
the case may be, has been issued and is currently in effect for
each Mortgage Loan insuring that the related Mortgage is a valid
first lien on the Mortgaged Property which has not been
modified, and that such Mortgaged Property is free and clear of
all encumbrances and liens having priority over the first lien
of the Mortgage, except for liens for real estate taxes and
special assessments not yet due and payable and except for
easements and restrictions of record identified in such title
policy and such other matters as are permissible under
Applicable Requirements.
4.11 Condemnation; Forfeiture.
Except as disclosed in Schedule 4.11 hereto, to the
Knowledge of Seller, no Mortgaged Property has been or will be
subject to an action seeking condemnation or forfeiture of such
Mortgaged Property.
4.12 Custodial Files.
Except as disclosed in Schedule 4.12 hereto, the Custodial
Files for each Mortgage Loan will contain, upon transfer of the
Servicing Rights to Purchaser, all items required by applicable
Investor regulations for the certification of each and every
Pool, and each and every Pool will be in compliance with all
applicable Investor requirements and guidelines. Except as
disclosed in Schedule 4.12 hereto, all Pools have been certified
in accordance with, and the securities backed by such Pools are
issued on uniform documents promulgated in, the applicable
Investor Guide without any material deviation therefrom. All
Pools shall be, on the applicable Investor Approval Date,
finally certified in accordance with applicable Investor
requirements and procedures and Purchaser shall be under no
obligation to accept Pools which have not been so certified.
All Pools shall be, when transferred to Purchaser on the
applicable Investor Approval Date, as applicable, eligible for
recertification by Custodian (except, in the case of GNMA Pools
only, for the preparation and recording, if necessary, of
appropriate assignments of Mortgages from Seller to Purchaser
and from Purchaser to GNMA), and Seller will be responsible for
cure of any deficiencies necessary for recertification. The
principal balances outstanding and owing on the Mortgage Loans
in each Pool equal or exceed the amounts owing to the security
holders of each Pool. It is understood that any deficiencies in
the Pool certifications will be cured at the sole cost and
responsibility of the Seller and in the time frame required
under applicable Investor guidelines for such cure.
4.13 FHLMC Notes.
Subject to Applicable Requirements, original FHLMC Mortgage
Notes are held by FHLMC.
4.14 Exception Loans.
Except as disclosed in Schedule 4.14 hereto, no Mortgage
Loan is a VA vendee loan, an FHA Section 235 loan, an FHA
Section 203(k) loan, an FmHA loan or a GNMA "Targeted Lending
Initiative" (reduced guaranty fee) loan.
4.15 Investor Repurchase and Indemnification.
Except as disclosed in Schedule 4.15 hereto, as of the Sale
Date, no Mortgage Loan is subject to (a) a pending request or
initial inquiry relating to either repurchase or indemnification
by an Investor; (b) an Investor indemnification agreement,
and/or (c) an Investor determination of Significant Underwriting
Deficiency.
4.16 Fraud.
To the Knowledge of Seller, as of the Sale Date, no
fraudulent action, error, omission, misrepresentation,
negligence, or similar occurrence with respect to a Mortgage
Loan has taken place on the part of any person, including
without limitation the Mortgagor, any appraiser, any builder or
developer or any other party involved in (a) the origination of
the Mortgage Loan or (b) the application of any insurance
proceeds with respect to a Mortgage Loan, Mortgaged Property or
REO Property.
ARTICLE V
Representations and Warranties of Purchaser
As an inducement to Seller to enter into this Agreement,
Purchaser represents and warrants as follows, as of the Sale
Date, and as of the Physical Transfer Date:
5.1 Due Incorporation and Good Standing.
Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of
Pennsylvania. Purchaser is qualified to transact business in
each jurisdiction in which such qualification is deemed
necessary.
5.2 Authority and Capacity.
Purchaser has all requisite corporate power, authority and
capacity to enter into this Agreement and the Interim Servicing
Agreement and to perform the obligations required of it
hereunder and thereunder. The execution and delivery of this
Agreement and the Interim Servicing Agreement and the
consummation of the transactions contemplated hereby and
thereby, have each been duly and validly authorized by all
necessary corporate action. This Agreement constitutes the
valid and legally binding agreement of the Purchaser enforceable
in accordance with its terms, subject to bankruptcy laws and
other similar laws of general application affecting rights of
creditors and subject to the application of the rules of equity,
including those respecting the availability of specific
performance.
5.3 Effective Agreement.
The execution, delivery and performance of this Agreement
by Purchaser, its compliance with the terms hereof and the
consummation of the transactions contemplated hereby will not
violate, conflict with, result in a breach of, constitute a
default under, be prohibited by or require any additional
approval under its certificate of incorporation, bylaws, or any
instrument or agreement to which it is a party or by which it is
bound or which affects the Servicing, or any state or federal
law, rule or regulation or any judicial or administrative
decree, order, ruling or regulation applicable to it or to the
Servicing, subject to obtaining the necessary Investor approval
to the transfer of the Servicing.
5.4 Approved Seller/Servicer.
Purchaser is an approved FNMA and FHLMC Seller/Servicer,
GNMA Issuer/Servicer, FmHA Servicer and VA and FHA mortgagee in
good standing.
ARTICLE VI
Investor Approvals
6.1 Seller's Obligations.
(a) Seller shall request and shall do all things
appropriate to secure the approval of the Investors to transfer
the Servicing Rights, together with all Custodial Files and
Escrow Accounts to Purchaser.
(b) Seller shall satisfy all applicable Investor
requirements to transfer effectively the Servicing Rights from
Seller to Purchaser and pay and bear any and all fees imposed by
Investors to effect the transfer, including, but not limited to,
the transfer fee.
(c) Seller will file for the period through and including
the Transfer Cutoff Date all required reports including but not
limited to reports to all governmental agencies having
jurisdiction over the Servicing (including without limitation
FHA and VA) and all appropriate PMI companies.
6.2 Purchaser's Obligations.
Purchaser shall cooperate with and assist Seller in
obtaining the approval of the Investors, and shall provide all
financial and other information typically required by the
Investors for approval of a transfer of servicing.
ARTICLE VII
Conditions Precedent to Obligations of Purchaser
The obligations of Purchaser hereunder shall be subject to
satisfaction of each of the following conditions:
7.1 FNMA/FHLMC/GNMA Approvals.
(a) Delivery by Seller to Purchaser of written approval
from each of FNMA, FHLMC and GNMA for the transfer of the
Servicing Rights (except for Subserviced Loans) from Seller to
Purchaser prior to the related Physical Transfer Date; (b)
Seller shall have obtained verbal approval from each of FNMA,
FHLMC and GNMA for such transfer of Servicing Rights (except for
Subserviced Loans) no later than fifteen (15) days prior to the
related Physical Transfer Date; and (c) acceptance by Purchaser
of any and all conditions or restrictions which may be imposed
by FNMA, FHLMC and/or GNMA on the sale and assignment of
Servicing Rights by Seller to Purchaser.
7.2 Certifications.
As of the related Physical Transfer Date, each Pool, the
Servicing Rights to which are to be purchased by Purchaser and
transferred to Purchaser on such Physical Transfer Date (but
excluding Subserviced Loans) shall have been certified and shall
be recertifiable by Purchaser's Custodian in accordance with all
applicable Investor requirements and procedures (except, in the
case of GNMA Mortgage Loans only, for assignments from Seller to
Purchaser and from Purchaser to GNMA which are to be delivered
following the applicable Investor Approval Date). Seller shall
provide Purchaser with copies of such custodial certifications.
7.3 Representations.
The representations and warranties made by Seller in this
Agreement are true and correct and shall continue to be true and
correct in all material respects on the Sale Date and the
Physical Transfer Date, unless stated to be made as of a
different date.
7.4 Compliance with this Agreement.
All of the terms, covenants, and conditions of this
Agreement (including the Transfer Instructions), and of the
Interim Servicing Agreement, required to be complied with and
performed by Seller at or prior to the Physical Transfer Date
shall have been duly complied with and performed by such date.
7.5 Interest Paid.
As of the Physical Transfer Date and pursuant to the
Transfer Instructions, Seller shall have paid interest on Escrow
Accounts for the period ending on the Transfer Cutoff Date, to
the extent required by Applicable Requirements, and shall have
paid any interest shortfall between the amount of interest
collected and the amount of interest required to be remitted to
security holders, including without limitation interest payable
on pay-offs and curtailments.
7.6 Additional Documentation.
Purchaser and Seller shall have approved and accepted any
and all documentation which may be reasonably required to
effectuate the sale and assignment of Servicing to Purchaser on
or before the Sale Date.
7.7 Documentation and Files; Compliance.
Prior to the Sale Date, Purchaser shall have determined
that
(a) The books, records and accounts of Seller with
respect to the Servicing are in order pursuant to
Applicable Requirements, and the information provided
to Purchaser in connection with the Servicing is true
and correct;
(b) The Mortgage Loans meet Purchaser's credit
underwriting and quality control standards, and
Seller's servicing and origination practices are
satisfactory to Purchaser;
(c) The terms of any bond and/or Private Investor
Servicing Agreements are acceptable to Purchaser; and
(d) Any pending class action litigation against Seller,
and any settlement or consent decree entered into by
Seller with respect to class action litigation, will
not have a material adverse effect on the Servicing.
7.8 Corporate Resolution.
A Secretary's Certificate of Seller, together with a
corporate resolution approving the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby, in form and substance acceptable to
Purchaser, shall be delivered to Purchaser no later than the
Sale Date.
7.9 Opinion.
An Opinion of Counsel of the Seller and the Guarantor in
the form attached as Exhibit G to this Agreement, shall be
delivered to Purchaser no later than the Sale Date.
7.10 UCC Search Results.
(a) Seller shall have reimbursed Purchaser no later than
the Sale Date for the actual costs of a Uniform Commercial Code
search (including copies of all UCC financing statements
disclosed by such search) made at the request of Purchaser at
the office of the Secretary of State of the state in which the
Seller maintains its principal place of business and chief
financial office and/or such other state or county filing office
as Purchaser shall designate.
(b) In the event any UCC financing statement obtained by
Purchaser pursuant to Section 7.10(a) shows Seller (or any
Affiliate of Seller) as Debtor and refers or relates to, in the
opinion of Purchaser and its counsel, any of the Seller's
Servicing Rights or Escrow Accounts, Seller shall obtain from
the Secured Party shown on such UCC financing statements and
deliver to Purchaser on or before the Sale Date (i) a release or
termination of such UCC financing statements in a form
acceptable to Purchaser and the applicable filing office or (ii)
a written agreement, in form and substance acceptable to
Purchaser, to the effect that such Secured Party releases any
right, title and interest it may have in the Servicing Rights
and/or the Escrow Accounts.
7.11 Material Adverse Change.
On or before the Sale Date there shall not have occurred
any event which constitutes a change in the Servicing, the
Escrow Accounts, the Mortgage Loans, Seller's financial
condition and/or its relationship with or authority from
Investor, which change, in the judgment of Purchaser, materially
and adversely affects Seller's ability to perform its
obligations under this Agreement, including without limitation
Seller's obligation to provide indemnification and/or repurchase
pursuant to Article X. Purchaser acknowledges that Seller has
advised it of Seller's and Seller's parent's announced intention
to liquidate their assets and dissolve. Such actions shall not
be deemed a default under this Agreement.
7.12 Hart-Scott-Rodino.
(a) Seller and its parent shall prepare and file, and shall
in all respects cooperate with Purchaser and its parent in the
preparation and filing of, any documents required in connection
with providing notification to the Federal Trade Commission
("FTC") and the Antitrust Division of the Department of Justice
of the transactions contemplated hereunder, and shall respond,
or cooperate in responding, to any inquiry made by either with
respect to such transactions; and (b) any waiting period
following such a filing shall have expired without governmental
action or shall be the subject of early termination by FTC.
7.13 Limited Power of Attorney.
A Limited Power of Attorney executed by Seller, in the form
attached as Exhibit H to this Agreement, shall be delivered to
Purchaser no later than the Sale Date.
7.14 Guaranty.
A Guaranty executed by Guarantor, in the form attached as
Exhibit I to this Agreement, shall be delivered to Purchaser no
later than the Sale Date.
7.15 Officer's Certificate.
An Officer's Certificate of a senior officer of the Seller
in the form attached as Exhibit J to this Agreement, shall be
delivered to Purchaser no later than the Sale Date.
7.16 Non-satisfaction of Condition.
In the event that Purchaser should become aware of facts or
circumstances which would constitute nonsatisfaction of any of
the foregoing conditions, Purchaser shall use its best efforts
to provide Seller with written notice of such facts or
circumstances within three (3) Business Days following its
discovery thereof. Seller shall have an opportunity to cure such
non-satisfaction for a cure period to be calculated as the
lesser of (i) five (5) Business Days from Seller's receipt of
such notice, or (ii) such lesser period as may be required by
Applicable Requirements. In the event that Purchaser
determines, upon the expiration of any applicable cure period
hereunder, that the non-satisfaction of condition has not been
cured to the satisfaction of Purchaser, Purchaser may terminate
this Agreement. Upon such a termination, Seller shall promptly
refund, by wire transfer of immediately available funds, any
portion of the Purchase Price or any other amount paid by
Purchaser to Seller hereunder together with interest calculated
at the Interest Rate. Such interest shall cover the period
commencing with the Day of Seller's receipt of the payments and
ending the Day prior to Purchaser's receipt of the refund.
ARTICLE VIII
Conditions Precedent to Obligations of Seller
The obligations of Seller hereunder shall be subject to
satisfaction of each of the following conditions:
8.1 FNMA/FHLMC/GNMA Approvals.
(a) Delivery by Seller to Purchaser of written approval
from each of FNMA, FHLMC and GNMA for the transfer of the
Servicing Rights (except for Subserviced Loans) from Seller to
Purchaser prior to the related Physical Transfer Date; (b)
Seller shall have obtained verbal approval from each of FNMA,
FHLMC and GNMA for such transfer of Servicing Rights (except for
Subserviced Loans) no later than fifteen (15) days prior to the
related Physical Transfer Date; and (c) acceptance by Seller of
any and all conditions or restrictions which may be imposed by
FNMA, FHLMC and/or GNMA on the sale and assignment of Servicing
Rights by Seller to Purchaser.
8.2 Representations.
The representations and warranties made by Purchaser in
this Agreement are true and correct and shall continue to be
true and correct in all material respects on the Sale Date and
the Physical Transfer Date unless stated to be made as of a
different date.
8.3 Compliance with this Agreement.
All of the terms, covenants, and conditions of this
Agreement, including the Transfer Instructions, required to be
complied with and performed by Purchaser at or prior to the
Physical Transfer Date shall have been duly complied with and
performed by such date.
8.4 Additional Documentation.
Purchaser and Seller shall have approved and accepted any
and all documentation which may be reasonably required to
effectuate the sale and assignment of Servicing to Purchaser on
or before to the Sale Date.
8.5 Corporate Resolution.
A Secretary's Certificate of Purchaser, together with a
corporate resolution approving the execution and delivery of
this Agreement and the consummation of the transactions
contemplated hereby shall be delivered to Seller no later than
the Sale Date.
8.6 Opinion.
An Opinion of Counsel of Purchaser in the form attached as
Exhibit K to this Agreement, shall be delivered to Seller no
later than the Sale Date.
8.7 Hart-Scott-Rodino.
(a) Purchaser and its parent shall prepare and file, and
shall in all respects cooperate with Seller and its parent in
the preparation and filing of, any documents required in
connection with providing notification to the Federal Trade
Commission ("FTC") and the Antitrust Division of the Department
of Justice of the transactions contemplated hereunder, and shall
respond, or cooperate in responding, to any inquiry made by
either with respect to such transactions; and (b) any waiting
period following such a filing shall have expired without
governmental action or shall be the subject of early termination
by FTC.
8.8 Non-satisfaction of Condition.
In the event that Seller should become aware of facts or
circumstances which would constitute nonsatisfaction of any of
the foregoing conditions, Seller shall use its best efforts to
provide Purchaser with written notice of such facts or
circumstances within three (3) Business Days following its
discovery thereof. Purchaser shall have an opportunity to cure
such non-satisfaction for a cure period to be calculated as the
lesser of (i) five (5) Business Days from Purchaser's receipt of
such notice, or (ii) such lesser period as may be required by
Applicable Requirements. In the event that Seller determines,
upon the expiration of any applicable cure period hereunder,
that the non-satisfaction of condition has not been cured to the
satisfaction of Seller, Seller may terminate this Agreement.
Upon such a termination, Purchaser shall promptly refund, by
wire transfer of immediately available funds, any amount paid by
Seller to Purchaser hereunder together with interest calculated
at the Interest Rate. Such interest shall cover the period
commencing with the Day of Purchaser's receipt of the payments
and ending the Day prior to Seller's receipt of the refund.
ARTICLE IX
Covenants
9.1 Mutual Cooperation.
To the extent possible, the parties hereto shall cooperate
and assist each other, as requested, in carrying out the other's
covenants, agreements, duties and responsibilities under this
Agreement and in connection therewith shall execute and deliver
all such documents and instruments and shall take such further
actions as shall be necessary and appropriate in the furtherance
thereof. The parties agree to use best efforts to effectuate
the transfer of Servicing contemplated herein in accordance with
MBA approved industry standards for servicing transfers, and
with Investor requirements for the transfer of servicing.
9.2 Assignments.
Seller shall take such actions as may be necessary to
transfer all its right, title, and interest in and to the
Mortgage Loans and the Servicing to Purchaser, including but not
limited to assigning the Mortgages securing the Mortgage Loans
to Purchaser in accordance with the specifications of the
Transfer Instructions, procuring recorded intervening
assignments of Mortgages from prior servicers or third party
originators to Seller, or other transfer documents, as needed,
preparing, filing and recording all assignments of Mortgages
from Seller to Purchaser as required, preparing and executing
all assignments of Mortgages from Purchaser to Investor, in
recordable form, on Purchaser's behalf as required, and properly
endorsing the Mortgage Notes to Purchaser without recourse.
9.3 Transfer Costs.
Seller shall pay all costs associated with the transfer of
the Servicing to Purchaser, including without limitation, (a)
costs of securing Investor approval, and of any transfer fees
due Investors; (b) custodian fees through the applicable
Investor Approval Date; (c) costs related to compliance with
Section 9.2 above; (d) costs of transfer of each Custodial File
to Custodian (excluding Purchaser's custodial fees); (e) any
costs associated with the Seller's obligation to complete the
automated transfer of Servicing to Purchaser, including but not
limited to Seller's data processing costs with respect to
preparation of the Electronic Data File and conversion of
Mortgage Loan Files (including tax and insurance information) to
Purchaser's data processing system; (f) costs of delivery of
Mortgage Loan Files and information to Purchaser, and (g) costs
associated with preparation and submission by Seller of transfer
notifications to hazard/flood carriers, PMI carriers, Pool
insurers, Mortgagors (other than Purchaser's welcome letters),
tax authorities, tax service companies, HUD, FHA, FmHA and VA.
9.4 Tax Service Contracts.
Seller shall provide life of loan transferable tax service
contracts from Transamerica or First American with respect to
all Mortgage Loans transferred to Purchaser, and shall comply
with those provisions of the Transfer Instructions pertaining to
tax service contracts.
9.5 Form 1099, Form 1098-Seller's Obligation.
Seller shall mail, on or before the date required by law,
IRS Form No. 1099 to all parties entitled to receive interest on
Escrow Accounts for the period of January 1, 1997 through the
Transfer Cutoff Date, where applicable, as well as IRS Form No.
1098 to each Mortgagor for the period from January 1, 1997
through the Transfer Cutoff Date. Seller will file all required
reporting with the IRS, including without limitation IRS Form
No. 1041 and IRS Form K-1 where applicable, on or before the
date required by law for the period from January 1, 1997 through
the Transfer Cutoff Date. Seller shall provide Purchaser with
microfiche copies of all forms filed under this section with
respect to Mortgage Loans.
9.6 Form 1099, Form 1098-Purchaser's Obligation.
Purchaser shall mail, on or before the date required by
law, IRS Form No. 1099 to all parties entitled to receive
interest on Escrow Accounts for the period from the Transfer
Cutoff Date through December 31, 1997, where applicable, as well
as IRS Form No. 1098 to each mortgagor from the Transfer Cutoff
Date through December 31, 1997. Purchaser shall file all
required reporting with the IRS, including without limitation
IRS Form No. 1041 and IRS Form K-1 where applicable, on or
before the date required by law, for the period from the related
Physical Transfer Date through December 31, 1997.
9.7 Reimbursement of Costs and Expenses.
Seller shall reimburse Purchaser for its reasonable costs
and expenses incurred which are necessary (a) to bring the
Servicing into compliance with the Transfer Instructions or
applicable Investor specifications, or (b) to resolve servicing
issues arising prior to the Physical Transfer Date. In addition,
in the event that any advance reimbursed to Seller pursuant to
Section 2.4 is subsequently reasonably determined to be non-
recoverable under Applicable Requirements, Seller shall
reimburse Purchaser in the amount of such advance.
9.8 Payment of Interest.
Seller shall be responsible through the Transfer Cutoff
Date for (a) payment of any interest on Escrow Accounts, to the
extent required by law, and for posting such payments to
individual Mortgagors' accounts, and (b) payment of any interest
shortfall between the amount of interest collected and the
amount of interest required to be remitted to Investors,
including without limitation interest payable on pay-offs and
curtailments, where applicable.
9.9 Post-transfer Payments.
All monies received by Seller after the Physical Transfer
Date relating to the Mortgage Loans and the Escrow Accounts
shall be promptly turned over to Purchaser for distribution in
accordance with the respective Servicing Agreements and until so
remitted shall be held in trust for Purchaser and segregated
from all other assets of Seller.
9.10 Retention of Documents; Post-transfer Support.
Subsequent to the Physical Transfer Date, Seller will
provide for Purchaser, upon request, history ledgers, canceled
checks, vouchers, bills and other pertinent documents to assist
Purchaser in disputes with outside agencies (e.g., taxing
authorities, PMI companies, hazard insurance companies, etc.).
Seller shall provide such documentation within ten (10) days of
written request by Purchaser. Following the Physical Transfer
Date, Seller shall make available servicing personnel qualified
to assist Purchaser in the resolution of post-transfer issues.
In addition, Seller shall dedicate sufficient personnel to
complete recertification of Mortgage Loan Pools subject to
Applicable Requirements.
9.11 FHLMC Quality Control Program.
Seller covenants and agrees that within five (5) Business
Days after the Physical Transfer Date, Seller shall provide
Purchaser with records of any quality control findings, along
with documentation of any corrective action taken, reported to
FHLMC for any Mortgage Loans included in the transfer which were
originated within three (3) years prior to the Physical Transfer
Date. This requirement is pursuant to Sections 48.1-48.12 of the
FHLMC Sellers' and Servicers' Guide (the "Guide"), as amended
from time to time.
ARTICLE X
Indemnification
10.1 Indemnification by Seller.
Seller shall indemnify and hold Purchaser harmless from and
against, and shall reimburse Purchaser for, any losses, damages,
deficiencies, claims, liabilities, causes of action or expenses
of any nature (including reasonable attorneys' fees and costs,
and/or Purchaser's direct internal costs) incurred by Purchaser
before or after the Physical Transfer Date which:
(a) Result from any breach of any representation and/or
warranty by Seller, or the nonfulfillment of any covenant
(including without limitation those contained in the
Transfer Instructions) or condition of Seller contained in
this Agreement, or in any exhibit, schedule, statement or
certificate furnished by Seller pursuant to this Agreement.
Seller shall indemnify Purchaser as set forth in this
Section 10.1 for breaches of representations and warranties
regardless of any qualifications as to the Knowledge of
Seller concerning the truth or accuracy of such
representations and warranties when made.
(b) Result from any Defect in any Mortgage Loan existing
as of the Sale Date (including those Defects subsequently
discovered), or as a result of any act or omission of
Seller prior thereto;
(c) Result from any and all items listed as exceptions to
Seller's representations and warranties on the Schedules
attached to, or otherwise made a part of, this Agreement
(including without limitation updated Schedules); or
(d) Result from Seller's failure to comply with any bulk
transfer or similar statutory provisions in effect in any
applicable jurisdiction; or
(e) Result from receipt of a VA No-Bid Instruction with
respect to a Mortgage Loan within two (2) years following
the Sale Date. Notwithstanding anything to the contrary
contained in this section, upon notification of VA's intent
to No-Bid a Mortgage Loan within the applicable timeframe,
Purchaser shall buy down the principal balance of such
Mortgage Loan in, and Seller's indemnification obligation
under this Section 10.2(e) shall be limited to, an amount
necessary to avoid the VA No-Bid. Seller shall reimburse
Purchaser for the amount of such VA buy-down within five
(5) Business Days following its receipt of notice of the
buy-down from Purchaser, which notice shall be accompanied
by information sufficient to permit the Seller to verify
the calculation of the buy-down amount.
10.2 Repurchase/Purchaser's Remedies.
(a)
(i) If, at the applicable Investor Approval
Date, or subsequent thereto but prior to
recertification by the Custodian, there is a
Defect in any Mortgage Loan or Pool which
constitutes a breach of the representations and
warranties made in Section 4.12 of the Agreement
(a "Certification Defect"), Seller shall use its
reasonable best efforts to cure, to Investor's
satisfaction, such Certification Defect as soon
as reasonably practicable, but not later than the
one hundred eighty (180) days from the applicable
Investor Approval Date or such earlier date as
may be required under Applicable Requirements,
such cure period subject to extension by consent
of the Purchaser, which consent shall not
unreasonably be withheld. To the extent that any
Certification Defect should remain uncured for a
period of more than 180 days following the
applicable Investor Approval Date, Seller shall,
commencing on such 180th day, pay Purchaser an
administrative charge of Five Dollars ($5.00) for
each month in which such Certification Defect
remains uncured. Seller agrees to notify
Purchaser as soon as is reasonably practicable if
such Certification Defect is not curable. If the
Certification Defect is not cured by the
applicable recertification deadline, Purchaser
shall have the remedies set forth in this Article
X including without limitation rights of
repurchase (at the Repurchase Price) and
indemnification.
(ii) In addition, in the event that any Investor
should, as a result of an uncured Certification
Defect, require that Purchaser post a letter of
credit or performance bond with respect to the
related Pool (in addition to other Pools serviced
by Purchaser), Seller shall pay all of
Purchaser's out-of-pocket costs and expenses
incurred in connection with posting such letter
of credit or performance bond. In the event that
any Investor should, as a result of an uncured
Certification Defect, require that Seller post a
letter of credit or performance bond with respect
to the related Pool, Seller shall post such
letter of credit or performance bond, at Seller's
cost and in a form acceptable to Investor.
(iii) In the event that any Pool comprised of
Subserviced Loans is not finally certified by the
Certification Cutoff Date, the Subserviced Loans
comprising such Pool and all of Purchaser's
right, title and interest in and to such Pool
will be physically transferred by Purchaser to
Seller or its designee, and Seller will pay to
Purchaser within thirty (30) days following the
Certification Cutoff Date (A) all out-of-pocket
costs and expenses associated with such transfer
and (B) the percentage paid of the product of the
outstanding unpaid principal balance of each such
Subserviced Loans as of the Certification Cutoff
Date and the GNMA Purchase Price Percentage,
subject to adjustment to reflect any Purchase
Price reduction made as of the Sale Date with
respect to such Subserviced Loan pursuant to
Section 2.5(a)(2) or 2.5(a)(3) of the Agreement.
Notwithstanding anything to the contrary
contained herein, Seller shall have the right to
avoid repurchase of any Pool under this Section
10.2(a)(3) by repurchasing from the Investor, at
Seller's option, individual Subserviced Loans for
the purpose of facilitating final certification
of such Pool, provided that any repurchase of
individual Subserviced Loans must occur within a
timeframe sufficient to allow final certification
of the Pool not later than the Certification
Cutoff Date.
(b) Notwithstanding anything to the contrary contained
hereinabove, in the event of a PMI denial or rescission of
coverage, an Investor repurchase or make-whole request, or
an Investor determination of Significant Underwriting
Deficiency with respect to a Mortgage Loan, which results
from the origination, delivery or servicing of the Mortgage
Loan prior to the Physical Transfer Date, Purchaser shall
use its best efforts to provide Seller with written notice
of such denial, rescission, request or determination within
five (5) Business Days following Purchaser's receipt of
such notice, provided, however, that failure by the
Purchaser to give such notice shall not relieve the Seller
from any liability it shall otherwise have pursuant to this
Agreement except to the extent that the Seller is
materially prejudiced by such failure. The Seller shall
have the burden of establishing such prejudice by a
preponderance of the evidence. Seller shall have an
opportunity to cure the defect or condition giving rise to
such denial, rescission, request or determination and/or
negotiate with the applicable Investor or PMI carrier for a
cure period to be calculated as the lesser of sixty (60)
days from Seller's receipt of such notice, or such lesser
period as may be required by the applicable Investor or PMI
carrier. If, upon expiration of any applicable cure period,
such defect or condition has not been cured, then Seller
shall, at Purchaser's option, (i) repurchase the related
Mortgage Loan or Mortgage Loans for, or, in the case of an
Investor make-whole request pay to Purchaser, the
Repurchase Price, (ii) subject to Investor consent,
repurchase the Servicing Rights pertaining to the related
Mortgage Loan or REO Property at a price to be calculated
as the product of the Purchase Price Percentage and the
then-outstanding unpaid principal balance of such Mortgage
Loan or REO Property plus an administrative fee in the
amount of Five Hundred Dollars ($500.00), or (iii) in the
case of a Significant Underwriting Deficiency, agree to
provide the remedy described in subsection (i) above upon
demand by Purchaser at such future time as Purchaser may,
in its sole discretion, elect. Notwithstanding anything to
the contrary contained in this section, any failure by
Purchaser to provide timely notice to Seller of any such
denial, rescission, request or determination affecting a
Mortgage Loan shall not in any event be construed to limit
remedies available to Purchaser under Section 10.1 of the
Agreement except to the extent that the Seller is
materially prejudiced by such failure. The Seller shall
have the burden of establishing such prejudice by a
preponderance of the evidence.
(c) Seller shall, within thirty (30) Business Days of
repurchase of a Mortgage Loan or REO Property under sub-
section (a) or (b) above, assume servicing responsibilities
or provide for transfer of Servicing with respect to such
repurchased Mortgage Loan or REO Property to a fully
qualified and approved servicer. In the event of
repurchase, Purchaser shall, upon receipt of the Repurchase
Price, assign and deliver the related Mortgage Loan
Documents to Seller. If Seller fails to repurchase a
defective Mortgage Loan or REO Property at the time and in
the manner provided in this Section, Purchaser shall have
all other rights and remedies provided in this Agreement or
by law or equity.
(d) In the event that Seller should fail to make any
payment to Purchaser required to be made pursuant to this
Article X within thirty (30) days following demand
therefor, or within such other timeframe as may be
specified under the applicable provisions of Section 10.1
or Section 10.2, interest shall accrue on such payment, to
be compounded daily at the Interest Rate plus 200 basis
points, from the date of demand until such payment is
received by Purchaser.
10.3 Indemnification by Purchaser.
Purchaser shall indemnify and hold Seller harmless from and
shall reimburse Seller for any losses, damages, deficiencies,
claims, causes of action or expenses of any nature (including
reasonable attorneys' fees and costs) incurred by Seller and
arising after the Physical Transfer Date which:
(a) Result from any misstatement or misrepresentation made
by Purchaser in this Agreement;
(b) Result from any breach of warranty by Purchaser, or
the nonfulfillment of any covenant of Purchaser contained
in this Agreement, or in any exhibit, schedule, statement
or certificate furnished by Purchaser pursuant to this
Agreement; or
(c) Result from Purchaser's failure to service any
transferred Mortgage Loan after the Physical Transfer Date
in accordance with Applicable Requirements in any material
respect.
10.4 Limitation of Liability.
(a) Except as provided in Section 10.4(b) below, the
obligations of the parties under this Article X shall
be limited to the seven (7) year period following the
Sale Date.
(b) Notwithstanding anything to the contrary contained
herein, the obligations of Seller under this Article X
shall continue in full force and effect with respect
to any Mortgage Loan which, on or before the seven-
year anniversary of the latest Physical Transfer Date
to occur, becomes the subject of an agreement to
indemnify the related Investor for losses, damages,
costs and/or expenses occurring as a result of Defects
in the origination, delivery and/or servicing (prior
to the related Physical Transfer Date) of such
Mortgage Loan.
ARTICLE XI
Miscellaneous
11.1 Costs and Expenses.
Except as otherwise provided herein, each party shall be
responsible for its accounting, legal and related costs and
expenses incurred with respect to the transfer of Servicing,
including without limitation costs and expenses incurred in
compliance with the provisions of Section 7.12 or 8.7 hereof, as
the case may be.
11.2 Confidentiality of Information.
Seller and Purchaser and their Affiliates shall, and shall
cause their respective directors, officers, employees and
authorized representatives to hold in strict confidence and not
use or disclose to any other party without the prior written
consent of the other party all information concerning customers
(including customer lists in any form whatsoever) or proprietary
business procedures, servicing fees or prices, policies or plans
of the other party or any of its Affiliates received by them
from the other party in connection with the transactions
contemplated hereby, except to the extent that such disclosure
is required by applicable law or the legal process.
11.3 Broker's Fees.
Seller shall be responsible for fees due Bayview Financial
Trading Group Inc.. Each party hereto represents and warrants to
the other that it has made no agreement to pay any agent,
finder, or broker or any other representative, any fee or
commission in the nature of a finder's or originator's fee
arising out of or in connection with the subject matter of this
Agreement, except for such fees as may be payable to Bayview
Financial Trading Group Inc. by Seller, and both the parties
hereto covenant with each other and agree to indemnify and hold
each other harmless from and against any such obligation or
liability and any expense incurred in investigation or defending
(including reasonable attorneys' fees) any claim based upon the
other party's actions in connection with such obligation.
11.4 No Solicitation.
(a) Seller agrees neither to solicit, nor assist in
the solicitation, directly or indirectly, for any purpose
including without limitation refinance, home equity or
insurance, any of the Mortgage Loans. Seller shall not provide
a listing of Mortgagors to any third party. It is understood and
agreed that promotions undertaken by the Seller which are
directed to the general public at large, including without
limitation mass mailings based on commercially acquired mailing
lists, and newspaper, radio and television advertisements, shall
not constitute solicitation hereunder.
(b) Seller further agrees to use its best efforts to cause
any Affiliate or originator and/or prior servicer of the
Mortgage Loans to refrain from taking any action which is
prohibited under this section with respect to the Mortgage Loans
and/or Mortgagors.
(c) Seller agrees to refrain from engaging in any program
to recover accrued late charges with respect to Mortgage Loans,
other than in the normal course of servicing or customary past
practices as disclosed to Purchaser prior to the Sale Date.
11.5 Survival.
Each party hereto covenants and agrees that the
representations and warranties, covenants and obligations
contained in Articles III through V, IX, X and Sections 11.2
through 11.4 of this Agreement, and in any document delivered or
to be delivered pursuant hereto, shall survive both the
execution hereof, and the Physical Transfer Date, and any
inspection, investigation, or determination made by, or on
behalf of, either party, for a period of seven (7) years
commencing on the Sale Date, except as otherwise provided in
Section 10.4(b) of the Agreement.
11.6 Notices.
All notices, requests, demands and other communications
which are required or permitted to be given under this Agreement
shall be in writing and shall be deemed to have been duly given
if personally delivered, sent by overnight courier, or mailed by
certified mail, return receipt requested, postage prepaid, or
transmitted by facsimile and confirmed by a similar mailed
writing:
(a) If to the Purchaser, to:
GMAC Mortgage Corporation
100 Witmer Road
Horsham, PA 19044-0963
Attention: Chief Financial Officer
Fax: (215) 682-1467
with a copies to:
Glen W. Snyder
General Counsel
GMAC Mortgage Corporation
100 Witmer Road
Horsham, PA 19044-0963
Fax: (215) 682-1467
and
GMAC Mortgage Corporation
3451 Hammond Avenue
Waterloo, IA 50702
Attention: General Manager
Fax: (319) 236-5175
(b) If to Seller, to:
Harbourton Mortgage Co., L. P.
2530 South Parker Road
Fifth Floor
Aurora, CO 80014
Attention: President
and
Harbourton Mortgage Co., L. P.
601 Fifth Avenue
Scottsbluff, NE 69361
Attention: Servicing Manager
and
Lowenstein, Sandler, Kohl, Fisher & Boylan
65 Livingston Avenue
Roseland, NJ 07068-1791
Attention: Allen B. Levithan, Esquire
or to such other address as Purchaser or Seller shall have
specified in writing to the other.
11.7 Applicable Law.
The construction of this Agreement and the rights,
remedies, and obligations arising by, under, through, or on
account of it shall be governed by the laws of the United States
of America and, where applicable, the Commonwealth of
Pennsylvania.
11.8 Entire Agreement.
This Agreement, the Interim Servicing Agreement and the
Subservicing Agreement, including the Exhibits, Schedules and
certifications hereto and thereto, all of which are incorporated
herein by reference, embodies the entire agreement between the
parties as to the subject matter of the Agreement, and
supersedes all prior agreements and understandings relating to
the subject matter of the Agreement. WITHOUT LIMITING THE
GENERALITY OF THE FOREGOING, THIS AGREEMENT REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AS TO THE SUBJECT MATTER OF THE
AGREEMENT, AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES;
AND THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
11.9 Modification.
This Agreement may not be changed orally but only by an
agreement in writing, signed by the party against whom
enforcement of any waiver, change, modification, or discharge is
sought. Subject to the foregoing, any of the terms or
conditions of this Agreement may be waived or modified at any
time by the party entitled to the benefit thereof, but no such
waiver, express or implied, shall affect or impair the right of
the waiving party to require observance, performance, or
satisfaction of either (1) the same term or condition as it
applies on a subsequent or previous occasion or (2) any other
term or condition hereof.
11.10 Third Party Beneficiaries.
This Agreement is intended for the benefit of the parties
hereto only. There shall be no third party beneficiaries
hereof.
11.11 Construction.
In construing the words of this Agreement, plural
constructions shall include the singular, and singular
constructions shall include the plural. The words "herein",
"hereof", and other similar compounds of the word "here" shall
mean and refer to this entire Agreement, not to any particular
provision, section, or subsection of it. This Agreement
constitutes a negotiated document. In case of any alleged
ambiguity in any term of this Agreement, such term shall not be
construed in favor of or against either party by reason of the
participation of such party or its attorneys in the negotiation
or drafting of this Agreement.
11.12 Captions.
Paragraph captions in this Agreement are for ease of
reference only and shall be given no substantive or restrictive
meaning or significance whatsoever.
11.13 Counterparts.
This Agreement may be executed in two counterparts, each of
which shall be an original regardless of whether all parties
sign the same document. Regardless of the number of
counterparts, they shall constitute only one agreement. It
shall not be necessary in making proof of this Agreement to
produce or account for more than one counterpart.
11.14 Attorneys' Fees.
If any action of law or in equity, including an action for
declaratory relief, is brought to enforce or interpret the
provisions of this Agreement, the prevailing party shall be
entitled to recover reasonable attorneys' fees and costs from
the other party. Such fees may be set by the Court in the trial
of such action or may be enforced in a separate action brought
for that purpose. Such fees shall be in addition to any other
relief that may be awarded.
11.15 Binding Effect.
This Agreement shall inure to the benefit of and be binding
upon the parties hereto and their successors and permitted
assigns. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto
and their successors and permitted assigns, any rights,
obligations, remedies or liabilities.
11.16 Assignment.
Each party to this Agreement may assign its rights and
obligations hereunder only after receiving, in writing, consent
to such assignment by the other party hereto.
11.17 Public Announcement.
The timing and content of any press release or other public
announcement relating to the transactions contemplated by this
Agreement shall be subject to the approval of Seller and
Purchaser.
IN WITNESS WHEREOF, each of the undersigned parties to this
Purchase and Sale Agreement has caused this Purchase and Sale
Agreement to be duly executed in its corporate name by one of
its duly authorized officers, all as of the date first above
written.
"PURCHASER"
ATTEST: GMAC MORTGAGE CORPORATION
______________________ By:
____________________________
Its: ___________________________
"SELLER"
ATTEST: HARBOURTON MORTGAGE CO., L. P.
______________________ By: Harbourton Funding
Corporation,
its general partner
By: ___________________________
Its: ___________________________
LIST OF SCHEDULES AND EXHIBITS
Schedule 1.50 Schedule of Subserviced Loans
Schedule 3.6 Schedule of Litigation
Schedule 3.11 Schedule of Recourse Servicing
Schedule 4.11 Schedule of
Condemnation/Forfeiture Proceedings
Schedule 4.12 Schedule of Uncertified Pools
Schedule 4.14 Schedule of Exception Loans
Schedule 4.15 Schedule of Investor Indemnification Agreements
Exhibit A Schedule of Mortgage Loans
A-1 Schedule of
Delinquent Loans
A-2 Schedule of
Deduction Loans
Exhibit B Contents of
Mortgage Loan Files
Exhibit C Summary of Pools
Exhibit D Transfer Instructions
Exhibit E Interim Servicing Agreement
Exhibit F Subservicing
Agreement
Exhibit G Seller's Opinion of Counsel
Exhibit H Seller's Limited Power of
Attorney
Exhibit I Seller's
Guaranty
Exhibit J Seller's
Officer's Certificate
Exhibit K Purchaser's Opinion of Counsel
EXHIBIT B TO PURCHASE AND SALE AGREEMENT
Contents of Mortgage Loan Files
Mortgage Loan Files (where applicable, original microfiche files
or hard copy files) shall include, without limitation the
following:
a) All applicable origination documentation including:
Transmittal Summary FNMA/FHLMC Form 1008
Loan Application Form 1003 (initial and final
signed application)
Credit Report
Final Truth-in-Lending Disclosure Statement
Verification of Employment
IRS Form 4506 for self-employed borrowers (Request
for copy of Tax Form)
Verification of Deposit
HUD 1 on previous property, if applicable
HUD 1/Settlement Statement on subject property
Appraisal
Satisfactory Completion Certificate Form 442, if
applicable
Executed Sales Contract;
b) Copy of Note with Note Addenda, if applicable;
c) Original limited power of attorney, if applicable;
d) Original recorded Mortgage/Deed of Trust or copy of
the original, certified by the recording agency to be a true and
exact copy of the recorded document;
e) Original or duplicate original final Title Policy;
f) Original or copy of PMI Certificate (may be on fiche);
g) Original or duplicate original LGC/MIC;
h) Original recorded intervening Assignment (FNMA A/A and
MRS and FHLMC);
i) Abstract of Title - in states where required other
than those where evidence exists indicating sent to borrower;
and
j) Previous assumption information, if applicable.
EXHIBIT E TO PURCHASE AND SALE AGREEMENT
Form of Interim Servicing Agreement
INTERIM SERVICING AGREEMENT
INTERIM SERVICING AGREEMENT dated as of April 30, 1997, by
and between Harbourton Mortgage Co., L. P., ("Servicer") a
Delaware limited partnership with its principal office located
at 2530 So. Parker Road, 5th Floor, Aurora, Colorado 80014, and
GMAC Mortgage Corporation ("GMACM"), a Pennsylvania corporation
with its principal office located at 100 Witmer Road, Horsham,
Pennsylvania 19044-0963.
Recitals
1. Servicer and GMACM entered into a Purchase and Sale
Agreement dated as of April 30, 1997 (the "Agreement"), pursuant
to which Servicer will sell, assign, convey, transfer and
deliver to GMACM on the Sale Date (as defined in the Agreement)
all beneficial right, title and interest in and to the Servicing
Rights, as defined in the Agreement.
2. The parties mutually acknowledge that the transaction
contemplated by the Agreement is subject to prior approval by
the Investors. Until such approvals are obtained, Servicer
shall retain record title to the Servicing Rights and the
related primary obligations to the Investors as servicer of the
Servicing. Accordingly, GMACM will be unable to assume and
perform the Servicing and other obligations under the Servicing
Agreements before the Physical Transfer Date.
NOW, THEREFORE, in consideration of the mutual
promises contained herein and for other good and valuable
consideration the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. For purposes of this Interim Servicing
Agreement (the "Interim Servicing Agreement"), unless otherwise
indicated, all terms shall have the meanings defined in the
Agreement.
2. Term. The term of this Interim Servicing Agreement
shall commence as of the Sale Cutoff Date and shall terminate as
provided by Section 8 herein.
3. Relationship of Servicer and GMACM.
(a) Except as specifically provided herein, in
performing its duties and obligations hereunder,
Servicer is an independent contractor and not an agent
of GMACM.
(b) The parties acknowledge that all beneficial
right, title and interest in and to the Servicing
after the Sale Date and through the Physical Transfer
Date was conveyed to GMACM pursuant to the Agreement,
notwithstanding that record title to the Servicing,
along with all obligations to any Investor, and all
Mortgage Loan Documents necessary for the performance
of such obligations shall remain in the possession of
Servicer during the term hereof to facilitate the
performance of servicing activities described herein.
(c) Servicer acknowledges that the Escrow Accounts
and any collections Servicer may receive on the
Mortgage Loans serviced pursuant to Servicing
Agreements during the term of this Interim Servicing
Agreement ("Serviced Loans") are for the account of
the Investors or of GMACM as their interests may
appear. For convenience of administration, the
balances in the Escrow Accounts and any collections
may continue to be held in the bank accounts
heretofore employed by Servicer for such purpose under
the Servicing Agreements, provided that such funds
shall be maintained in accordance with Investor
regulations, and shall not be commingled by Servicer
with its own funds.
(d) Servicer agrees to service the Serviced Loans in
accordance with Applicable Requirements. Servicer
shall employ the same standard of care in performing
its duties pursuant to this Interim Servicing
Agreement as it exercises in servicing loans for its
own account, and shall adhere to recognized industry
standards for servicing of mortgage loans. Servicer
shall bear all costs of servicing the Serviced Loans.
(e) Servicer shall be responsible for payment of any
interest on Escrow Accounts, to the extent required by
law, and of any interest shortfall between the amount
of interest collected and the amount of interest
required to be remitted to Investors, including
without limitation interest payable on pay-offs and
curtailments, and custodial charges, where applicable,
up to the Physical Transfer Date.
(f) Servicer shall maintain and employ throughout the
term hereof a sufficient number of qualified employees
to perform the servicing activities to be carried out
hereunder in an efficient and professional basis as
carried out by Servicer when it was the owner of the
Servicing. If necessary to perform its duties
hereunder, Servicer shall employ additional or more
qualified personnel. Servicer shall maintain
throughout the term hereof physical facilities from
which the servicing activities can be performed in a
manner consistent with the foregoing.
4. Servicing Activities. During the term of this Interim
Servicing Agreement:
(a) Collections. Servicer shall on behalf of GMACM,
diligently collect all payments due by obligors to
Investors and GMACM under the Serviced Loans as they
become due, including but not limited to (i)
principal, (ii) interest, (iii) advances for hazard
insurance premiums, payments with regard to prior
liens, taxes, legal fees, foreclosure costs, and other
miscellaneous advances, (iv) late charges, (v) NSF
charges, and (vi) payments for optional insurance
premiums, such efforts to include but not be limited
to the specific duties set forth herein.
(b) Servicing Fee Remittances. During the Interim
Servicing Period, Servicer shall remit to GMACM any
and all net servicing fees earned by Servicer within
five (5) Business Days after the related Investor
reporting cutoff, net of guaranty fees and fees due
Servicer as compensation for servicing the loans, and
provide GMACM with supporting documentation in
substantially the form of Attachment A.
(c) Investor Remittance and Reporting. Servicer
shall remain responsible for Investor reporting and
remittances for monthly activities through the
Transfer Cutoff Date.
(d) Payment of Property Insurance Premium. Servicer
shall pay, prior to the Physical Transfer Date, all
property insurance premiums due prior to the Physical
Transfer Date as well as any due within thirty (30)
days after the Physical Transfer Date; provided that
Servicer shall have received invoices or statements
therefor not less than three (3) Business Days prior
to the Transfer Cutoff Date.
(e) Property Taxes. Servicer shall pay, when due,
all tax bills (including all interest, late payments,
and penalties in connection therewith) issued by a
taxing authority due prior to the Physical Transfer
Date as well as any due within thirty (30) days after
the Physical Transfer Date; provided that Servicer
shall have received invoices or statements therefor
not less than three (3) Business Days prior to the
Transfer Cutoff Date.
(f) Acceptance of Payments. Servicer shall not
accept with respect to a Mortgage Loan any payments
insufficient to maintain or restore the Mortgage Loan
to a state of currency, except as required or
permitted by Applicable Requirements. Except as
required or permitted by Applicable Requirements,
Servicer shall not reduce the principal balance of any
of the Mortgage Loans with any funds except funds
received from the Mortgagor for such purposes. The
parties shall use their best efforts to communicate
and respond with respect to workout situations
involving Mortgagors.
(g) Misapplied Payments. "Misapplied payment" shall
mean a Mortgagor payment for which funds have been
deposited in an incorrect Escrow Account or applied to
an incorrect Mortgagor's account. The existence of a
canceled Mortgagor check bearing the endorsement of
Servicer, for which funds have not been allocated to
the proper Escrow Accounts, shall be considered
conclusive evidence of a misapplied payment.
Misapplied payments shall be processed as follows:
(i) Both parties shall cooperate in
correcting misapplication errors.
(ii) The party receiving notice of a
misapplied payment occurring prior to the
Physical Transfer Date and discovered after the
Physical Transfer Date shall immediately notify
the other party.
(iii) If a misapplied payment cannot be
identified by either party and said misapplied
payment has resulted in a shortage in a Mortgage
account, Servicer shall be liable for the amount
of such shortage. Servicer shall reimburse GMACM
for the amount of such shortage within fifteen
(15) days after receipt of written demand
therefor from GMACM.
(iv) If a misapplied payment has created an
improper Purchase Price as the result of an
inaccurate outstanding principal balance, a check
shall be issued to the party shorted by the
improper payment application within three (3)
Business Days after the month-end in which notice
and correction thereof was made by the other
party.
(v) Any check issued under the provisions
of this Paragraph shall be accompanied by a
statement indicating the purpose of the check,
the mortgagor and property address involved, and
the corresponding Servicer and/or GMACM account
number.
5. Foreclosure. During the term of this Interim
Servicing Agreement, Servicer agrees to take the following
actions as independent contractor with respect to defaulted
items of the Serviced Loans:
(a) On or prior to the Sale Date, Servicer shall
consult with GMACM to determine in whose name
foreclosure proceedings should be instituted during
the term of this Agreement.
(b) Servicer shall perform with respect to the
Serviced Loans all foreclosure activities, in addition
to those specified herein, as required by the
Servicing Agreements.
6. Insurance. Servicer shall maintain at its expense and
keep in effect through out the term hereof, fidelity bond and
errors and omissions coverage covering all its employees
handling funds, monies, documents and papers, such as those
received or held for FNMA or FHLMC, with respect to their
performance of their duties hereunder in amounts sufficient to
comply with all applicable FNMA or FHLMC requirements, and with
carriers reasonably satisfactory to GMACM. Servicer shall
provide GMACM with evidence satisfactory to GMACM of Servicer's
compliance with the requirements of this Section.
7. Compensation. During the Interim Servicing Period,
GMACM shall compensate Servicer for servicing the Mortgage Loans
in accordance with the standards established in this Interim
Servicing Agreement at a rate equal to Six Dollars ($6.00) per
Mortgage Loan per month, pro-rated for partial months. As
additional compensation, Servicer shall also retain all
Ancillary Income and any benefit derived from Servicer's Escrow
Accounts between the Sale Date and the Physical Transfer Date.
8. Termination.
(a) This Interim Servicing Agreement will terminate
upon completion of the procedures defined in the
Transfer Instructions.
(b) This Interim Servicing Agreement may be
terminated by both parties upon mutual written
agreement.
9. Indemnification. Pursuant to and in accordance with
the provisions of Article X of the Agreement, but without
limiting the indemnification provisions contained in the
Agreement, the parties agree as follows:
(a) Servicer shall indemnify and hold GMACM harmless
from and against, and shall reimburse GMACM for, any
losses, damages, deficiencies, claims, liabilities,
causes of action or expenses of any nature (including
reasonable attorneys' fees and costs) which result
from breach by Servicer of any of the covenants and
agreements contained in this Interim Servicing
Agreement.
(b) GMACM shall indemnify and hold Servicer harmless
from and against, and shall reimburse Servicer for,
any losses, damages, deficiencies, claims,
liabilities, causes of action or expenses of any
nature (including reasonable attorneys' fees and
costs) which result from breach by GMACM of any of the
covenants and agreements contained in this Interim
Servicing Agreement.
10. Miscellaneous.
(a) Reasonable Access. Between the date of this
Interim Servicing Agreement and the Physical Transfer
Date, Servicer shall give GMACM and its authorized
representatives reasonable access to all documents,
files, books, records, accounts, offices and other
facilities of Servicer related to the Servicing Rights
transferred hereby, and permit GMACM to make such
inspections thereof as GMACM may reasonably request
during normal business hours, provided, however, that
such investigation or inspection shall be conducted in
such a manner as to not interfere unreasonably with
Servicer's business operations.
(b) Prohibited Repurchase. During the Interim
Servicing Period, Servicer shall not repurchase a
Mortgage Loan except with respect to a breach of
representation or warranty of the related Servicing
Agreement or as required by an Investor under the
related Servicing Agreement or otherwise with
Purchaser's consent.
(c) Referral of Refinance Inquiries. During the
Interim Servicing Period, Servicer will promptly refer
to GMACM any Mortgagor inquiries as to refinance of
Mortgage Loans.
(d) Modification. This Interim Servicing Agreement
may not be modified or changed except by an instrument
in writing duly executed by all the parties hereto.
(e) Governing Law. This Interim Servicing Agreement
shall be construed and enforced in accordance with the
laws of the Commonwealth of Pennsylvania.
(f) Notices. All notices, requests, demands and
other communications which are required or permitted
to be given under this Interim Servicing Agreement
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:
If to GMACM, to:
GMAC Mortgage Corporation
3451 Hammond Avenue
Waterloo, Iowa 50704-0780
Attn: General Manager
Fax: (319) 236-5175
If to Servicer, to:
Harbourton Mortgage Co., L. P.
2530 South Parker Road
Fifth Floor
Aurora, CO 80014
Attention: President
and
Harbourton Mortgage Co., L. P.
601 Fifth Avenue
Scottsbluff, NE 69361
Attention: Servicing Manager
and
Lowenstein, Sandler, Kohl, Fisher & Boylan
65 Livingston Avenue
Roseland, NJ 07068-1791
Attention: Allen B. Levithan, Esquire
or to such other address as GMACM or Servicer shall have
specified in writing to the other.
IN WITNESS WHEREOF, each of the undersigned parties to this
Interim Servicing Agreement has caused this Interim Servicing
Agreement to be duly executed in its corporate name by one of
its duly authorized officers, all as of the date first above
written.
ATTEST: GMAC MORTGAGE CORPORATION
______________________ By:
____________________________
Its: ___________________________
ATTEST: HARBOURTON MORTGAGE CO., L. P.
______________________ By: Harbourton Funding
Corporation,
its general partner
By: ____________________________
Its: ___________________________
ATTACHMENT A TO INTERIM SERVICING AGREEMENT
INTERIM SERVICE FEES:
PERIOD __________ TO _________
INVESTOR * _________________
REMITTANCE TYPE * ___________
FUNDS DUE GMACM:
SERVICE FEE COLLECTIONS (GROSS) $____________
LESS GUARANTY FEE $____________
TOTAL $____________
LESS COMPENSATION DUE SERVICER:
(LOAN COUNT ____________ X ($6.00 PER LOAN)
COMPENSATION DUE _____________
TOTAL WIRE OF INCOME DUE GMACM ON
5TH BUSINESS DAY AFTER CUTOFF $____________
* COMPLETE SEPARATELY FOR EACH INVESTOR AND INVESTOR
REMITTANCE TYPE.
EXHIBIT F TO PURCHASE AND SALE AGREEMENT
Form Of Subservicing Agreement
SUBSERVICING AGREEMENT
THIS SUBSERVICING AGREEMENT, dated as of April 30,
1997 (the "Subservicing Agreement"), is made by and between GMAC
Mortgage Corporation, a Pennsylvania corporation
("Subservicer"), and Harbourton Mortgage Co., L. P., a Delaware
limited partnership ("Harbourton").
BACKGROUND:
Subservicer and Harbourton have entered into a
Purchase and Sale Agreement dated as of April 30, 1997 (the
"Sale Agreement") that provides, inter alia, for the sale,
assignment and transfer of Servicing Rights pertaining to
certain GNMA Pools from Harbourton to Subservicer. The Sale
Agreement further provides for the transfer of subservicing
responsibility with respect to certain Subserviced Loans on the
Physical Transfer Date. The Parties desire to enter into this
Agreement to set forth the terms and conditions under which
Subservicer will subservice the Subserviced Loans from the
Physical Transfer Date to the related Investor Approval Date.
NOW THEREFORE, the Parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. For the purpose of this
Agreement, capitalized terms have the meanings set out below, or
elsewhere in this Agreement, or (if not defined in this
Agreement) in the Sale Agreement.
"Sale Agreement" means the Purchase and Sale
Agreement, dated of even date herewith, between Harbourton and
Subservicer, and any addenda thereto.
"Servicing Advance" means an advance of funds which in
the prudent business judgment of Subservicer is an appropriate
expenditure made or to be made in connection with the
performance of the Subservicing Functions, including advances
related to the maintenance of hazard insurance, payment of
property taxes or FHA insurance premiums, advances to pay
expenditures related to foreclosure proceedings, expenditures
related to the defense of any lawsuit, to defend title to any
property subject to a Subserviced Loan or to defend title to any
property acquired as a result of a foreclosure, and all expenses
incurred in making repairs to any property subject to a
Subserviced Loan, advances necessary due to deficiencies in the
amount of principal, interest or escrow payments received by
Subservicer, including payments of interest due Investors under
the terms of the Servicing Agreements even though no such
interest is due from the Mortgagor, and other advances to pay
third party expenses related to the servicing of Subserviced
Loans.
"Subservicing Functions" means the servicing functions
to be performed by Subservicer with respect to the Subserviced
Loans, as specified in Section 2.4 hereof.
ARTICLE II
APPOINTMENT; TERM; TRANSFER OF SUBSERVICING FUNCTIONS
Section 2.1 Contract for Subservicing.
Harbourton hereby contracts with Subservicer as an independent
contractor to perform the servicing of each Subserviced Loan in
accordance with this Agreement for the related Subservicing
Period, and Subservicer hereby agrees to service the Subserviced
Loans in accordance with this Agreement during the related
Subservicing Period.
Section 2.2 Term. Except as provided otherwise
herein, the term of this Agreement shall commence as of the
close of business on the Physical Transfer Date, and shall
terminate upon the earlier of (i) the last date on which legal
title to the Servicing Rights related to all of the Subserviced
Loans has been transferred to Subservicer pursuant to Section
2.2(b) of the Sale Agreement, or (ii) the date this Agreement is
terminated pursuant to Article VI hereof.
Section 2.3 Mechanics of Transfer; Commencement of
Servicing. Prior to the Physical Transfer Date for any
Subserviced Loan, Harbourton shall provide Subservicer with a
schedule of Subserviced Loans to be subserviced hereunder as the
Physical Transfer Date and shall cause the servicing for such
Subserviced Loans to be transferred to Subservicer as of the
Physical Transfer Date in accordance with the Sale Agreement and
the Transfer Instructions. Notwithstanding anything to the
contrary contained in this Agreement, Subservicer shall not be
required to commence subservicing the Subserviced Loans
hereunder unless on or before the Physical Transfer Date, (i)
each of the applicable conditions set forth in Article VII of
the Sale Agreement have been satisfied to Subservicer's
satisfaction; and (ii) Harbourton has obtained the consents and
approvals required by Section 4.1 hereof.
Section 2.4 Subservicing Functions. The servicing
functions to be performed by Subservicer with respect to each
Subserviced Loan during the Subservicing Period, referred to
herein as the "Subservicing Functions", are as follows:
(a) distribute payment medium to Mortgagors and
receive and process all Mortgagor payments;
(b) accept transfer of, or set up, and manage
the Escrow Accounts;
(c) commencing as of the second scheduled
remittance following the Physical Transfer Date, make all
disbursements of principal, interest and other amounts due to
Investors, including Servicing Advances but excluding guaranty
fees which will be remitted by wire transfer directly to
Harbourton one (1) Business Day before the related GNMA guaranty
fee draft date;
(d) prepare and submit mortgage loan reports
required under the Servicing Agreements;
(e) provide and file any and all IRS reports and
information returns incident to the servicing of the Subserviced
Loans covering the Subservicing Period for each such Subserviced
Loan;
(f) provide and handle all FHA and VA
delinquency notices, provided that Subservicer shall be provided
with correct and current information as to the reporting
requirements applicable to individual Subserviced Loans;
(g) handle or, as appropriate, supervise,
monitor and carry out collection actions, delinquency management
activities, bankruptcy actions, foreclosure proceedings (which
may be commenced or continued in Harbourton's name), and FHA or
VA claim submissions with respect to the Subserviced Loans;
(h) process Subserviced Loan payoffs and provide
for release of the related Mortgage, all in Harbourton's name;
(i) furnish to Harbourton a completed copy of
GNMA Form 1710D two (2) days prior to the applicable GNMA
reporting date;
(j) commencing with the second month of the
Subservicing Period, furnish to Harbourton by the tenth Business
Day of each month (i) pool to security balance report; (ii)
report of expected P & I; (iii) adjusted GNMA form 1710A; and
(iv) reconciliation of loan trial balances to pool balances; and
(k) commencing with the second month of the
Subservicing Period, furnish to Harbourton within 45 days
following the related month-end custodial reconciliation for
principal and interest/ taxes and insurance.
Section 2.5 Escrow Accounts. Harbourton shall
provide Subservicer immediately available funds in the amount of
the escrow and suspense balances of the Escrow Accounts and the
loss draft balances associated with the Subserviced Loans at the
times and in the manner set forth in Section 2.7 of the Sale
Agreement. After receipt of same from Harbourton pursuant to
the Sale Agreement, Subservicer shall maintain the Escrow
Accounts related to the Subserviced Loans in accordance with
Applicable Requirements. Subservicer shall be solely
responsible for the management of the funds in the Escrow
Accounts and shall be entitled to all benefits associated with
the Escrow Accounts (whether such accounts are maintained in
Subservicer's or Harbourton's name). To the extent permitted by
the GNMA Guide and to facilitate Subservicer's ability to
perform its functions hereunder, Subservicer shall have all
signatory responsibility on the Escrow Accounts. Subservicer
shall be responsible for payment of any interest due to
Mortgagors on funds on deposit in the Escrow Accounts after the
Physical Transfer Date.
Escrow Accounts relating to payments in respect of
principal and interest on the Subserviced Loans shall be
established by the Subservicer in Harbourton's name.
Subservicer shall cause all funds received in respect of
principal and interest (net of all amounts that Subservicer is
entitled to retain for its own account in accordance with
Applicable Requirements and this Agreement) and all Servicing
Advances required to be made in respect of principal and
interest to be deposited in such Escrow Accounts. All monthly
remittances of principal, interest and other amounts due to
Investors and the GNMA security holders shall be made by
Subservicer in the name of Harbourton out of funds available
therefor in the applicable Escrow Accounts on a timely basis in
accordance with the GNMA Guide. Notwithstanding anything to the
contrary contained in this section, Subservicer will wire to
Harbourton amounts sufficient for Harbourton to pay guaranty
fees directly to GNMA.
Section 2.6 Subservicing Standards; Obligations of
Harbourton
(a) Subservicer shall continuously manage,
service and administer the Subserviced Loans during the
Subservicing Period in conformity with the terms of this
Agreement and Applicable Requirements. Subservicer shall employ
the same degree of skill and standard of care in performing its
duties pursuant to this Agreement as it exercises in servicing
similar mortgage loans for its own account, giving due
consideration to Applicable Requirements. Except as otherwise
provided herein, Subservicer shall have full power and authority
consistent with the aforementioned standards to do any and all
things it may deem necessary or desirable in connection with
such servicing and administration, including taking all actions
that a mortgagee is permitted or required to take by applicable
law and which the Subservicer may deem necessary or desirable
and consistent with the terms of this Agreement, Applicable
Requirements and Subservicer's equitable ownership of the
related Servicing Rights, including without limitation,
instituting foreclosure proceedings or accepting deeds in lieu
of foreclosure; provided, however, that to the extent
Subservicer is prohibited by any applicable rule, regulation,
judicial or administrative determination or other order
applicable to it from carrying out any of its obligations or
duties provided for herein or in any document contemplated
herein, such failure shall not constitute a breach of this
Agreement.
(b) Notwithstanding anything in this Agreement
to the contrary, Harbourton, and not Subservicer, shall perform,
at Harbourton's sole cost and expense (but subject to
Subservicer's obligations to make all Servicing Advances
hereunder during the Subservicing Period), any responsibilities
under the Servicing Agreements which, by their terms, must be
performed by Harbourton and not Subservicer, or which cannot be
delegated by Harbourton to Subservicer (such as those non-
delegable duties described in Section 2-1 of the GNMA Guide).
Harbourton shall perform such responsibilities, if any, in a
timely fashion and in strict accordance with the terms of the
Servicing Agreements and the GNMA Guide. If appropriate,
Subservicer shall assist Harbourton in the performance of such
responsibilities. To the extent permitted by Applicable
Requirements, Harbourton may appoint one or more employees of
Subservicer (to be designated by Subservicer) as officers of
Harbourton for the purpose of performing any non-delegable
duties for, on behalf of, and in the name of, Harbourton.
Nothing contained in this Agreement shall limit
the obligations of Harbourton arising under the Sale Agreement,
including the obligation of Harbourton to cause each of the
Pools to be finally certified and recertified.
Section 2.7 Title to Servicing. The Parties agree
that legal title to the Servicing Rights related to each
Subserviced Loan shall remain with Harbourton until the related
Investor Approval Date. The Parties further acknowledge that
subject to Applicable Requirements, and subject to the terms and
conditions of the Sale Agreement, effective as of the close of
business on the Sale Date, Subservicer owns all of Harbourton's
beneficial right, title and interest in and to the Servicing
Rights.
ARTICLE III
FEES; EXPENSES
As compensation for its servicing activities
hereunder, and in recognition of Subservicer's beneficial
ownership of each of the Subserviced Loans, Subservicer shall be
entitled to receive or retain the entire servicing fee (net of
the applicable GNMA guaranty fee) and any Ancillary Income
associated with the servicing of the Subserviced Loans during
the Subservicing Period. Subservicer shall also be entitled to
all economic benefits derived from the maintenance of the Escrow
Accounts to the extend permitted by Law and not contrary to the
related Mortgage or Mortgage Note. The Subservicer shall be
obligated to pay from its own funds all expenses incurred in
connection with the performance of its obligations hereunder,
including, without limitation, any fees of Subservicer relating
to the preparation and recording of the documentation for the
release, satisfaction or discharge of any Mortgage for the
related Subserviced Loan. Except as specifically provided
herein, the Subservicer shall not be entitled to reimbursement
for the payment of any such expenses.
ARTICLE IV
APPROVALS; NOTIFICATIONS;
LITIGATION; FUNDS TRANSFERS
Section 4.1 Agency and Investor Approvals.
Harbourton shall be responsible for compliance with any state,
Agency or Investor requirements applicable to the transfer of
the Subservicing Functions including obtaining all necessary
Investor consents or approvals as may be required by the
Servicing Agreements, and shall deliver copies of such consents
or approvals to Subservicer prior to the Investor Approval Date.
Section 4.2 GNMA Subservicing Requirements.
Harbourton and Subservicer agree that each shall comply with the
GNMA subservicing requirements as set forth in the GNMA Guide.
Notwithstanding any other provision of this Agreement,
Harbourton as issuer agrees to perform the functions
specifically required to be performed by issuer under the GNMA
Guide. Harbourton shall cooperate with Subservicer in
purchasing Delinquent Loans out of Pools as contemplated by
Section 2.3(c) of the Sale Agreement.
Section 4.3 Cooperation. The Parties agree to
cooperate with respect to the servicing of the Subserviced Loans
hereunder. Harbourton shall deliver to Subservicer a limited
Power of Attorney in form and substance reasonably satisfactory
to Subservicer to enable Subservicer to carry out actions
hereunder in the name of Harbourton.
ARTICLE V
INSURANCE
Harbourton and Subservicer each hereby agrees to
obtain and maintain at its own expense, and shall furnish each
other with satisfactory evidence of, a blanket fidelity bond and
errors and omission/mortgage impairment insurance policy in full
force and effect throughout the term of this Agreement covering
their respective officers and employees and other persons acting
on their behalf in their respective capacities as principal and
Subservicer with regard to the Subserviced Loans. The type and
amount of coverage shall be at least equal to the coverage that
would be required by GNMA with respect to each party. In the
event that any such bond or policy shall cease to be in effect,
Harbourton and Subservicer, as the case may be, shall obtain
from an insurer a replacement bond and policy with equivalent
coverage. No provision of this Section shall operate to
diminish, restrict or otherwise limit Harbourton's or
Subservicer's responsibilities and obligations as set forth in
this Agreement.
ARTICLE VI
TERMINATION
This Agreement may be terminated as follows:
(a) by mutual consent of Subservicer and
Harbourton;
(b) upon the Certification Cutoff Date, as
provided in Section 10.2(a)(iii) of the Sale Agreement, or
(c) upon termination of the Sale Agreement in
accordance with Article VII thereof.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Notices. All notices, requests,
demands and other communications which are required or permitted
to be given under this Subservicing Agreement shall be given in
the manner provided in Section 11.6 of the Sale Agreement.
Section 7.2 Assignment; Successors and Assigns; No
Third Party Rights. This Subservicing Agreement shall be
binding upon and inure to the benefit of the Parties and their
respective successors and permitted assigns. This Subservicing
Agreement may not be assigned in whole or in part by any Party
except in connection with that Party's permitted assignment of
its interest in the Sale Agreement. This Subservicing Agreement
shall be for the sole benefit of the Parties and their
respective successors, assigns and legal representatives and is
not intended, nor shall be construed, to give any Person, other
than the Parties and their respective successors, assigns and
legal representatives, any legal or equitable right, remedy or
claim hereunder.
Section 7.3 Entire Agreement. This Subservicing
Agreement, including the Schedules and Exhibits attached hereto
and thereto, constitutes the entire agreement among the Parties
with respect to the matters covered hereby and supersedes all
previous written, oral or implied understandings among them with
respect to such matters.
Section 7.4 Amendment, Modification and Waivers.
This Agreement may only be amended or modified in a writing
signed by the party against whom enforcement of such amendment
or modification is sought. Any of the terms or conditions of
this Agreement may be waived at any time by the party or parties
entitled to the benefit thereof, but only by a writing signed by
the party or parties waiving such terms of conditions.
Section 7.5 Severability. The invalidity of any
portion hereof shall not affect the validity, force or effect of
the remaining portions hereof. If it is ever held that any
restriction hereunder is too broad to permit enforcement of such
restriction to its fullest extent, such restriction shall be
enforced to the maximum extent permitted by law.
Section 7.6 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania, regardless of the conflict of laws
principles thereof.
Section 7.7 No Waiver. Unless expressly
provided to the contrary, the failure of any Party to insist
upon strict performance of any covenant or obligation in this
Agreement shall not be a waiver of such Party's right to demand
strict compliance in the future or to pursue or enforce whatever
remedies may be available to such Party for any breach or
default of or in such covenant or obligation (subject to
applicable statutes of limitation). No consent or waiver,
express or implied, to or of any breach or default in the
performance of any covenant or obligation in this Agreement
shall constitute a consent or waiver to or of any other breach
or default in the performance of the same of any other covenant
or obligation hereunder.
Section 7.8 Rules of Construction. In this
Subservicing Agreement, unless specified otherwise:
(a) "Any" means "any one or more"; "including"
means "including without limitation"; "day" means "calendar
day," unless "Business Day" is specified.
(b) Singular words include plural, and vice
versa. For example, the words "Party" and "Parties" each means
"Party or Parties as the case may be."
(c) Headings are for convenience only, and do
not affect the meaning of any provision.
(d) Reference to an agreement includes reference
to its permitted supplements, amendments and other
modifications.
(e) Reference to a law includes reference to any
amendment or modification of the law and to any rules or
regulations issued thereunder.
(f) Reference to a Person includes reference to
its permitted successors and assigns in the applicable capacity.
(g) Reference to an Article, Section, Exhibit,
or Schedule signifies reference to an Article, Section, Exhibit,
or Schedule of this Agreement, unless the context clearly
indicates otherwise.
(h) "Hereunder," "hereto," "hereof," "herein,"
and like words, refer to the whole of this Agreement rather than
to a particular part hereof, unless the context clearly
indicates otherwise.
In the event of any inconsistency between the
provision of this Subservicing Agreement and the provisions of
the Sale Agreement, the provisions of the Sale Agreement shall
govern absent manifest error.
Section 7.9 Reproduction of Documents. This
Subservicing Agreement and each other document or instrument
executed and delivered in connection with the transactions
contemplated hereby and thereby, may be reproduced by any
photographic, photostatic, facsimile, electronic or other
similar process. Any such reproduction shall be admissible in
evidence as the original itself in any judicial, administrative
or arbitrate proceeding, whether or not the original is in
existence and whether or not such reproduction was made by a
Party in the regular course of business.
Section 7.10 Counterparts. This Subservicing
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, the Parties hereby duly execute
and deliver this Agreement:
ATTEST: GMAC MORTGAGE CORPORATION
______________________ By:
____________________________
Its: ___________________________
ATTEST: HARBOURTON MORTGAGE CO., L. P.
______________________ By: Harbourton Funding
Corporation,
its general partner
By: ____________________________
Its: ___________________________
EXHIBIT G TO PURCHASE AND SALE AGREEMENT
Form of Opinion of Counsel to the Seller
EXHIBIT H TO PURCHASE AND SALE AGREEMENT
FORM OF SELLER'S LIMITED POWER OF ATTORNEY
LIMITED POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
THAT HARBOURTON MORTGAGE CO., L. P., A LIMITED PARTNERSHIP
ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE,
AND HAVING ITS PRINCIPAL OFFICE LOCATED AT 2530 SOUTH PARKER
ROAD, IN THE CITY OF AURORA, STATE OF COLORADO, HATH MADE,
CONSTITUTED AND APPOINTED, AND DOES BY THESE PRESENTS MAKE,
CONSTITUTE AND APPOINT GMAC MORTGAGE CORPORATION, A CORPORATION
ORGANIZED AND EXISTING UNDER THE LAWS OF THE COMMONWEALTH OF
PENNSYLVANIA, ITS TRUE AND LAWFUL ATTORNEY-IN-FACT, WITH FULL
POWER AND AUTHORITY HEREBY CONFERRED IN ITS NAME, PLACE AND
STEAD AND FOR ITS USE AND BENEFIT, TO MAKE, SIGN, EXECUTE,
ACKNOWLEDGE, DELIVER, FILE FOR RECORD, AND RECORD ANY INSTRUMENT
ON ITS BEHALF AND TO PERFORM SUCH OTHER ACT OR ACTS AS MAY BE
CUSTOMARILY AND REASONABLY NECESSARY AND APPROPRIATE TO
EFFECTUATE THE FOLLOWING ENUMERATED TRANSACTIONS IN RESPECT OF
ANY OF THE MORTGAGES OR DEEDS OF TRUST (THE "MORTGAGE" AND THE
"DEED OF TRUST", RESPECTIVELY) FOR WHICH THE RELATED SERVICING
RIGHTS ARE TO BE SOLD AND TRANSFERRED BY THE UNDERSIGNED TO GMAC
MORTGAGE CORPORATION PURSUANT TO THE PURCHASE AND SALE AGREEMENT
DATED AS OF APRIL 30, 1997 BY AND BETWEEN HARBOURTON MORTGAGE
CO., L. P. AND GMAC MORTGAGE CORPORATION (THE "AGREEMENT")
THIS APPOINTMENT SHALL APPLY TO THE FOLLOWING ENUMERATED
TRANSACTIONS ONLY:
1. THE MODIFICATION OR RE-RECORDING OF A MORTGAGE OR DEED OF
TRUST, WHERE SAID MODIFICATION OR RE-RECORDING IS FOR THE
PURPOSE OF CORRECTING THE MORTGAGE OR DEED OF TRUST TO
CONFORM SAME TO THE ORIGINAL INTENT OF THE PARTIES THERETO
OR TO CORRECT TITLE ERRORS DISCOVERED AFTER SUCH TITLE
INSURANCE WAS ISSUED AND SAID MODIFICATION OR RE-RECORDING,
IN EITHER INSTANCE, DOES NOT ADVERSELY AFFECT THE LIEN OF
THE MORTGAGE OR DEED OF TRUST AS INSURED.
2. THE SUBORDINATION OF THE LIEN OF A MORTGAGE OR DEED OF
TRUST TO AN EASEMENT IN FAVOR OF A PUBLIC UTILITY INVESTOR
OR A GOVERNMENTAL AGENCY OR UNIT WITH POWERS OF EMINENT
DOMAIN; THIS SECTION, SHALL INCLUDE THE EXECUTION OF
PARTIAL SATISFACTION/RELEASES, PARTIAL RECONVEYANCES OR THE
EXECUTION OF REQUESTS TO TRUSTEES TO ACCOMPLISH SAME.
3. WITH RESPECT TO A MORTGAGE OR DEED OF TRUST, THE
FORECLOSURE, COMPLETION OF JUDICIAL OR NON-JUDICIAL
FORECLOSURE OR TERMINATION, CANCELLATION OR RESCISSION OF
ANY SUCH FORECLOSURE, INCLUDING, WITHOUT LIMITATION, ANY
AND ALL OF THE FOLLOWING ACTS: (i) THE SUBSTITUTION OF
TRUSTEE(S) SERVING UNDER A DEED OF TRUST IN ACCORDANCE WITH
STATE LAW AND THE DEED OF TRUST; (ii) STATEMENTS OF BREACH
OR NON-PERFORMANCE; (III) NOTICES OF DEFAULT; (iv) NOTICES
OF SALES; (v) CANCELLATIONS/RESCISSIONS OF NOTICES OF
DEFAULT AND/OR NOTICES OF SALE; (vi) THE TAKING OF A DEED
IN LIEU OF FORECLOSURE; (vii) THE ACCEPTANCE OF A SHORT
PAYOFF IN LIEU OF FORECLOSURE, AND (viii) SUCH OTHER
DOCUMENTS AS MAY BE NECESSARY UNDER THE TERMS OF THE
MORTGAGE, DEED OF TRUST OR STATE LAW TO EXPEDITIOUSLY
COMPLETE SAID TRANSACTIONS.
4. THE CONVEYANCE OF THE PROPERTIES TO THE MORTGAGE INSURER,
OR THE CLOSING OF THE TITLE TO THE PROPERTY TO BE ACQUIRED
AS REAL ESTATE OWNED, OR CONVEYANCE OF TITLE TO REAL ESTATE
OWNED.
5. THE COMPLETION OF LOAN ASSUMPTION AGREEMENTS.
6. THE FULL SATISFACTION/RELEASE OF A MORTGAGE OR DEED OF
TRUST OR FULL RECONVEYANCES UPON PAYMENT AND DISCHARGE OF
ALL SUMS SECURED THEREBY INCLUDING WITHOUT LIMITATION
CANCELLATION OF THE RELATED MORTGAGE NOTE.
7. THE FULL ASSIGNMENT OF A MORTGAGE OR DEED OF TRUST UPON
PAYMENT AND DISCHARGE OF ALL SUMS SECURED THEREBY IN
CONJUNCTION WITH THE REFINANCING THEREOF, INCLUDING WITHOUT
LIMITATION THE ASSIGNMENT OF THE RELATED MORTGAGE NOTE.
8. TO RECEIVE, ENDORSE, CASH OR DEPOSIT CHECKS OR OTHER ORDERS
OF PAYMENT, PAYABLE TO THE ORDER OF HARBOURTON MORTGAGE
CO., L. P., AND TO SIGN ITS NAME, PLACE AND STEAD ANY
DOCUMENT WHATSOEVER NECESSARY UNDER LAW TO CARRY OUT THE
TRANSACTIONS CONTEMPLATED BY THE AGREEMENT AND ONLY WITH
RESPECT TO THOSE LOANS SOLD AND TRANSFERRED PURSUANT TO THE
TERMS OF THE AGREEMENT.
THE UNDERSIGNED GIVES TO SAID ATTORNEY-IN-FACT FULL POWER AND
AUTHORITY TO EXECUTE SUCH INSTRUMENTS AND TO DO AND PERFORM ALL
AND EVERY ACT AND THING NECESSARY AND PROPER TO CARRY INTO
EFFECT THE POWER OR POWERS GRANTED BY OR UNDER THIS LIMITED
POWER OF ATTORNEY AS FULLY AS THE UNDERSIGNED MIGHT OR COULD DO,
AND HEREBY DOES RATIFY AND CONFIRM TO ALL THAT SAID ATTORNEY-IN-
FACT SHALL LAWFULLY DO OR CAUSE TO BE DONE BY AUTHORITY HEREOF.
THIRD PARTIES WITHOUT ACTUAL NOTICE MAY RELY UPON THE EXERCISE
OF THE POWER GRANTED UNDER THIS LIMITED POWER OF ATTORNEY; AND
MAY BE SATISFIED THAT THIS LIMITED POWER OF ATTORNEY SHALL
CONTINUE IN FULL FORCE AND EFFECT AND HAS NOT BEEN REVOKED
UNLESS AN INSTRUMENT OF REVOCATION HAS BEEN MADE IN WRITING BY
THE UNDERSIGNED. THIS LIMITED POWER OF ATTORNEY IS GRANTED AS
OF APRIL 30, 1997. ALL POWERS GRANTED HEREIN SHALL TERMINATE ON
OCTOBER 31, 1998.
WITNESS: HARBOURTON MORTGAGE CO., L.
P.
BY: HARBOURTON FUNDING
CORPORATION,
_________________________________ ITS
GENERAL PARTNER
BY:
VICE PRESIDENT
_________________________________
___________________________________________
ASST.
SECRETARY
STATE OF )
) SS
COUNTY OF )
ON APRIL __, 1997, BEFORE ME, A NOTARY PUBLIC IN AND FOR
THE ABOVE COUNTY AND STATE, PERSONALLY APPEARED
____________________ AND ____________________ TO ME PERSONALLY
KNOWN TO BE THE _____________________ AND
____________________________ OF SAID HARBOURTON MORTGAGE CO., L.
P., THAT THE SEAL AFFIXED TO SAID INSTRUMENT IS THE SEAL OF SAID
LIMITED PARTNERSHIP, AND THAT SAID INSTRUMENT WAS SIGNED AND
SEALED ON BEHALF OF SAID LIMITED PARTNERSHIP BY AUTHORITY OF ITS
BOARD OF DIRECTORS, AND THEY ACKNOWLEDGED THE EXECUTION OF SAID
INSTRUMENT TO BE THE VOLUNTARY ACT AND DEED OF SAID CORPORATION,
BY IT VOLUNTARILY EXECUTED.
IN WITNESS WHEREOF, I HAVE HEREUNTO SIGNED MY NAME AND
AFFIXED MY NOTARIAL SEAL THE DAY AND YEAR LAST WRITTEN.
__________________________________________
NOTARY PUBLIC IN AND FOR
SAID COUNTY AND STATE
MY COMMISSION EXPIRES:
EXHIBIT I TO PURCHASE AND SALE AGREEMENT
FORM OF GUARANTY
UNCONDITIONAL GUARANTY
THIS UNCONDITIONAL GUARANTY ("Guaranty") is made by
HARBOURTON HOLDINGS, L. P., a Delaware limited partnership (the
"Guarantor"), in favor of GMAC MORTGAGE CORPORATION, a
Pennsylvania corporation ("GMACM"), as of April 30, 1997.
RECITALS:
A. GMACM and HARBOURTON MORTGAGE CO., L. P., a
Delaware limited partnership ("Seller") have entered into a
Purchase and Sale Agreement for Mortgage Loan Servicing dated as
of April 30, 1997 (together with any addenda thereto, the
"Purchase and Sale Agreement") relating to the purchase by GMACM
of certain residential mortgage loan servicing rights from
Seller subject to the satisfaction of certain conditions
contained therein.
B. Guarantor is the indirect holder of a majority of the
partnership interest in Seller. To induce GMACM to
consummate the transactions contemplated by the Purchase and
Sale Agreement, Guarantor is willing to satisfy a condition of
GMACM's obligations under the Purchase and Sale Agreement by
providing this Unconditional Guaranty of the payment and
performance by Seller of the terms, covenants and obligations of
Seller under the Purchase and Sale Agreement.
NOW, THEREFORE, in consideration of the foregoing and other
good and valuable consideration, Guarantor agrees with GMACM as
follows:
1. Guaranty of Payment and Performance. Guarantor
absolutely and unconditionally guarantees to GMACM the full and
punctual payment of any and all amounts for which Seller on or
after the date of this Agreement becomes obligated to pay to
GMACM pursuant to the Purchase and Sale Agreement as the same
shall become due and payable under the Purchase and Sale
Agreement, and the full and punctual performance and observance
by Seller of all other terms, covenants, and conditions of the
Purchase and Sale Agreement, whether according to their present
terms, or pursuant to any extension of time or to any change or
changes in the terms, covenants, or conditions of the Purchase
and Sale Agreement now or subsequently made or granted
(collectively, all such obligations are the "Seller
Obligations"). All sums due and payable by Guarantor to GMACM
under this Guaranty shall be payable within three (3) Business
Days (as defined below) after the date written notice is given
by GMACM, without further demand of any nature. Guarantor shall
perform any obligations under this Guaranty within a reasonable
time after notice is given by GMACM, without further demand of
any nature. Payment or performance by Guarantor under this
Guaranty may be required by GMACM on any number of occasions. A
"Business Day" is any day other than a Saturday, a Sunday, or
any other day on which GMACM is regularly scheduled to be
closed.
2. Guarantor's Agreement to Pay Costs and Expenses;
Interest. Guarantor further agrees, as the principal obligor
and not as a guarantor only, to pay to GMACM, on demand, all
reasonable out-of-pocket costs and expenses (including court
costs and legal expenses, including reasonable attorneys' fees)
incurred or expended by GMACM in connection with any demand,
notice (other than as provided in Section 1 or this Section 2)
or investigation made under this Guaranty and its collection or
other enforcement, whether or not suit is brought, together with
interest on amounts recoverable under this Section 2 from the
time when such amounts become due and notice is given as
provided in Section 1 until payment, whether before or after
judgment, at the prime rate as published in the Wall Street
Journal.
3. Waivers by Guarantor; GMACM's Freedom to Act.
(a) Guarantor agrees that the Seller Obligations will
be paid and performed strictly in accordance with their
respective terms, subject to the requirements of any applicable
law, regulation or order now or subsequently in effect in any
jurisdiction affecting any of such terms or the rights of GMACM
with respect to such obligations; provided, however, that as
long as Guarantor's performance of such obligations is not
contrary to the requirements of any such law, regulation or
order, Guarantor shall not rely on any such law, regulation or
order for the purpose of avoiding its obligations under this
Guaranty. To the full extent Guarantor may do so, Guarantor
waives the benefit of all exemptions to which it may be
entitled, and further waives notice of the acceptance of this
guaranty, presentment, demand, protest non-performance, non-
observance, or other proof or notice of demand (except as
provided in Sections 1 and 2), and waives all notices of any
other kind, any and all defenses which it may have to
performance of its obligations hereunder, including without
limitation the defenses of setoff and counterclaim and any
defenses which may be available by virtue of any valuation,
stay, moratorium law or other similar law now or subsequently in
effect, and any right to require the marshaling of assets of
Seller or any other entity or other person primarily or
secondarily liable with respect to any of the Seller
Obligations, and all suretyship defenses generally.
(b) Without limiting the generality of the provisions
set forth in (a) above, Guarantor agrees to the provisions of
any instrument evidencing, securing or otherwise executed or to
be executed in connection with any Seller Obligation by Seller
to GMACM and agrees that the obligations of Guarantor under this
Guaranty shall not be released or discharged, in whole or in
part, or otherwise affected by:
(i) the assertion by GMACM of any rights or
remedies which it may have under or with respect to the Purchase
and Sale Agreement;
(ii) the failure of GMACM to assert or any delay
in asserting any claim or demand or to enforce any right or
remedy against Seller or any other entity or other person
primarily or secondarily liable with respect to any of the
Seller Obligations;
(iii) any extensions or renewals of any Seller
Obligation;
(iv) any rescissions, waivers, amendments,
modifications, assignments or sales of or supplements to any of
the terms or provisions of the Purchase and Sale Agreement;
(vi) the adjudication in bankruptcy of Seller,
the filing of a petition for any relief under the Bankruptcy Act
by Seller, or the dissolution of Guarantor; or
(vii) any other act or omission which might in
any manner or to any extent vary the risk of Guarantor or
otherwise operate as a release or discharge of Guarantor, all of
which may be done without notice to Guarantor.
Guarantor further agrees that other indulgences or
forbearances may be made, done, or suffered without notice to,
or further consent of, Guarantor.
(c) To the fullest extent permitted by law, Guarantor
also expressly waives any and all rights or defenses arising by
reason of (i) any "one action" or "anti-deficiency" law which
would otherwise prevent GMACM from bringing any action,
including any claim for a deficiency, against Guarantor before
or after GMACM's commencement or completion of any enforcement
action, whether judicially, by exercise of power of sale or
otherwise, or (ii) any other law which in any other way would
otherwise require any election or remedies by GMACM. Guarantor
waives all rights and defenses arising out of an election of
remedies by GMACM, even though that election of remedies has
destroyed Guarantor's rights of subrogation and reimbursement
against Seller by the operation of Section 580d of the
California Code of Civil Procedure or otherwise.
(d) Guarantor consents to any and all forbearances and
extensions of time for payment of Seller's obligations, and to
any and all changes in the terms, agreements and conditions of
the Purchase and Sale Agreement subsequently made or granted.
4. Unenforceability of Obligations Against Seller. If for
any reason Seller has no legal existence or is under no legal
obligation to discharge any of the Seller Obligations, or if any
of the Seller Obligations have become irrecoverable from Seller
by reason of Seller's insolvency, bankruptcy or reorganization
or by other operation of law or for any other reason, this
Guaranty shall nevertheless be binding on Guarantor to the same
extent as if Guarantor at all times has been the principal
obligor on all such Seller Obligations.
5. Obligations of Guarantor Independent.
(a) The obligations of Guarantor under this Guaranty
shall be independent of the obligations of Seller, and a
separate action or actions may be brought and prosecuted against
Guarantor to recover all or any portion of the amounts due under
the Purchase and Sale Agreement, whether or not any action is
brought against Seller or in the event that Seller becomes
subject to a bankruptcy, reorganization or similar preceding, to
file any claim, and irrespective of whether Seller is joined in
such action or actions.
(b) Provided that GMACM or its agent has given written
notice to Seller and Seller has failed to pay or perform the
Seller Obligations within ten (10) Business Days after the date
of any such notice, Guarantor agrees that this Guaranty may be
enforced by GMACM against Guarantor without first resorting to
or exhausting any other security or collateral, provided,
however, that nothing contained in this Guaranty shall prevent
GMACM from suing on, or from exercising any other rights under,
any of the Purchase and Sale Agreement and provided, further,
that GMACM agrees to first exhaust its remedies against the
remaining portion of the Purchase Price payable to Seller under
the Purchase and Sale Agreement. If such other remedy is
availed of, only the net proceeds from such remedy, after
deduction of all charges and expenses of every kind and nature
whatsoever, shall be applied in reduction of the amount due
under the Purchase and Sale Agreement.
6. Negative Covenant of Guarantor. Guarantor agrees that,
following any default that has not been cured to GMACM's
satisfaction under the Purchase and Sale Agreement, until the
final payment and performance in full of all of the Seller
Obligations and any and all other obligations of Seller to
GMACM, Guarantor shall not exercise any rights against Seller
arising as a result of payment by Guarantor under this Guaranty,
by way of subrogation or otherwise, Guarantor will not demand,
sue for or otherwise attempt to collect any indebtedness of
Seller to Guarantor, and Guarantor will not accept any payment
or satisfaction of any kind of any indebtedness of Seller to
Guarantor.
7. Representations and Warranties of Guarantor. Guarantor
represents and warrants to GMACM that:
(a) Guarantor is a limited partnership duly organized,
validly existing and in good standing under the laws of the
State of Delaware;
(b) Guarantor has a direct financial interest in Seller
and will receive direct financial benefits and accommodations as
a result of GMACM's purchase of mortgage servicing rights from
Seller pursuant to the Purchase and Sale Agreement;
(c) Guarantor has the necessary power and authority to
execute and deliver this Guaranty and to perform its obligations
hereunder, and such execution, delivery and performance do not
constitute violations of any provisions of its partnership
agreement, by-laws or any agreements or instruments to which it
is a party; and
(d) Guarantor will not become insolvent by entering
into this Guaranty.
8. Term. This Guaranty shall remain in full force and
effect until the date on which all Seller Obligations have been
paid or performed.
9. Successors and Assigns; No Assignment. This Guaranty
shall be binding upon Guarantor, its successors and permitted
assigns, and shall inure to the benefit of and may be enforced
by GMACM and its successors and permitted assigns. This
Guaranty may not be assigned in whole or in part by GMACM or
Guarantor, except that GMACM may assign its rights and
obligations hereunder to any affiliated entity. Any purported
assignment by Guarantor shall be void and shall not relieve
Guarantor of any of its obligations under this Guaranty.
10. Insolvency of Seller. In addition to all other rights
of GMACM, if (a) an event shall occur which, pursuant to the
terms of the Purchase and Sale Agreement, would entitle GMACM to
require payment of any obligation guaranteed by this Guaranty,
but (b) there shall be filed with respect to Seller a petition
in bankruptcy or for similar relief under the United States
Bankruptcy Code or any similar law, and by reason of such filing
or as a result of any order of court, GMACM shall be prevented
from obtaining such payment, then GMACM shall have the right to
demand from Guarantor payment in full of, and Guarantor shall
pay in full, all obligations guaranteed by this Guaranty,
including all amounts, costs, fees and charges, due from Seller.
11. Further Assurances.
(a) As long as this Guaranty is in full force and
effect, Guarantor agrees to furnish GMACM annually, as soon as
available and in any event within ninety (90) days after the end
of Guarantor's fiscal year, Guarantor's most recent audited
financial statements, prepared in accordance with generally
accepted accounting principles (GAAP) applied on a consistent
basis, and on a consolidated basis with Guarantor's
subsidiaries. Such financial statements shall include a balance
sheet, an income statement, a statement of retained earnings, a
cash flow statement, all related notes to the financial
statements, and the opinion of an independent certified public
accountant, and shall be accompanied by a certificate signed by
the chief financial officer of Guarantor stating that said
financial statements fairly and accurately present the financial
condition and results of operations of Seller (and, if
applicable, its Affiliates) as at the end of, and for, such
year. At such times and from time to time, with reasonable
promptness, Guarantor also shall provide other financial
information regarding the business, operations, properties or
financial condition of Guarantor as GMACM may reasonably
request.
(b) Guarantor also agrees to execute all such
documents as GMACM may consider reasonably necessary or
desirable to give full effect to, and to perfect and preserve
the rights and powers of GMACM under, this Guaranty.
(c) Guarantor acknowledges and confirms that Guarantor
itself has established its own adequate means of obtaining from
Seller on a continuing basis all information desired by
Guarantor concerning the financial condition of Seller and that
Guarantor will look to Seller and not to GMACM in order for
Guarantor to keep adequately informed of changes in Seller's
financial condition.
(d) If there is a partnership reorganization or
restructuring of Guarantor or a sale or other transfer of a
material portion of the assets of Guarantor, Guarantor agrees
promptly to notify GMACM of the effects of such reorganization,
restructuring, sale or other transfer on the financial worth of
Guarantor. The phrase "or other transfer" in the preceding
sentence does not include Guarantor's payment of a dividend in
the ordinary course of business, including a dividend that
passes through dividend payments made to Guarantor by its
subsidiaries in the ordinary course of business.
12. Amendments and Waivers. No amendment or waiver of any
provision of this Guaranty nor consent to any departure by
Guarantor from such provision shall be effective unless the same
shall be in writing and signed by GMACM. No failure on the part
of GMACM to exercise, and no delay in exercising, any right
under this Guaranty shall operate as a waiver, nor shall any
single or partial exercise of any right under this Guaranty
preclude any other or further exercise of, or the exercise of,
any other right under this Guaranty.
13. Notices. All notices and other communications called
for under this Guaranty shall be made in writing to the other
party and, unless otherwise specifically provided, shall be
deemed to have been duly made or given when delivered by hand or
mailed first class, postage prepaid, addressed to Guarantor at
the address set forth beneath its signature, or to GMACM at 100
Witmer Road, Horsham, PA 19044-0963, Attention: Chief
Financial Officer, with a copy to the General Counsel at the
same address, or at such address as either party may designate
in writing to the other.
14. Governing Law; Consent to Jurisdiction. THIS GUARANTY
IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
COMMONWEALTH OF PENNSYLVANIA WITHOUT GIVING EFFECT TO INTERNAL
CHOICE-OF-LAW RULES. Guarantor agrees that any suit for the
enforcement of this Guaranty may be brought in the courts of the
Commonwealth of Pennsylvania or any federal court sitting in
that jurisdiction and consents to the nonexclusive jurisdiction
of such court and to service of process in any such suit being
made upon Guarantor by mail at the address specified by
reference in Section 13. Guarantor waives any objection that it
may now or subsequently have to the venue of any such suit or
any such court or that such suit was brought in an inconvenient
court.
15. Waiver of Jury Trial. GUARANTOR WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF
ANY DISPUTE IN CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR
OBLIGATIONS UNDER THIS GUARANTY OR THE PERFORMANCE OF ANY OF
SUCH RIGHTS OR OBLIGATIONS.
16. Miscellaneous. This Guaranty constitutes the entire
agreement of Guarantor with respect to the matters set forth in
this Guaranty. The rights and remedies provided are cumulative
and not exclusive of any remedies provided by law or any other
agreement. The invalidity or unenforceability of any one or
more sections of this Guaranty shall not affect the validity or
enforceability of its remaining provisions. Captions are for
the ease of reference only and shall not affect the meaning of
the relevant provisions. The meanings of all defined terms used
in this Guaranty shall be equally applicable to the singular and
plural forms of the terms defined.
IN WITNESS WHEREOF, Guarantor has caused this Guaranty to
be executed and delivered as of the date first written above.
GUARANTOR:
HARBOURTON HOLDINGS, L. P.,
a Delaware limited partnership
By: HARBOURTON GENERAL
CORPORATION,
its managing general partner
By: __________________________________________
Print Name: ___________________________________
Title: _________________________________________
Address: ______________________________________
______________________________________
______________________________________
ATTEST:
By: ________________________________________
Print Name: _________________________________
Title: ______________________________________
(SEAL)
______________________________________)
) SS:
______________________________________)
The foregoing instrument was acknowledged before me this
______ day of April, 1997, by _________________________________,
the ____________ of HARBOURTON GENERAL CORPORATION in its
capacity as general partner of HARBOURTON HOLDINGS, L. P., a
Delaware limited partnership.
__________________________________________
Notary Public
(SEAL)
My Commission Expires:
__________________________________________
GMACM ACKNOWLEDGES EXECUTION
AND DELIVERY OF THIS GUARANTY.
GMAC MORTGAGE CORPORATION
By: ____________________________________________
Print Name: _____________________________________
Title: ___________________________________________
Date: ___________________________________________
(SEAL)
EXHIBIT J TO PURCHASE AND SALE AGREEMENT
Form of Seller's Officer's Certificate
State of Colorado } ss.
of
The undersigned, being first duly sworn, deposes and says
that:
1. I am the duly elected President of Harbourton Mortgage
Co., L. P. (the "Seller"), a limited partnership organized
and existing under the laws of the State of Delaware,
2. Except as identified in Schedule 3.6 to the Purchase
and Sale Agreement (the " Purchase and Sale Agreement")
dated as of April 30, 1997, between the Seller and GMAC
Mortgage Corporation (the "Purchaser"), there is no
litigation, proceeding or governmental investigation
pending, or any order, injunction or decree outstanding
which might materially affect any of the Mortgage Loans or
the Servicing. Additionally, there is no litigation,
proceeding or, to the Knowledge of Seller, governmental
investigation existing or pending or to the Knowledge of
Seller threatened, or any order, injunction or decree
outstanding against or relating to Seller, or the
Servicing, that has not been disclosed by Seller to
Purchaser or its counsel in writing prior to the execution
of this Agreement, which if adversely determined,
individually or in the aggregate, could have a material
adverse effect upon the Servicing or the other assets being
purchased by Purchaser hereunder, or which would adversely
affect the performance of the Company's obligations under
the Agreement, nor does Seller know of any basis for any
such litigation, proceeding, or governmental investigation.
3. No consent, approval, authorization or order of any
court or governmental agency or body is required for the
execution, delivery and performance by the Seller of, or of
compliance by the Seller with, the Purchase Agreement, or
the consummation of the transactions contemplated by the
Purchase Agreement.
4. Neither the consummation of the transactions
contemplated by, nor the fulfillment of the terms of the
Purchase Agreement conflicts or will conflict with or
results or will result in a breach of or constitutes or
will constitute a default under the charter or by-laws of
the Seller, the terms of any material indenture or other
material agreement or instrument to which the Seller is a
party or by which it is bound or to which it is subject, or
any statute or order, rule, regulation, writ, injunction or
decree of any court, governmental authority or regulatory
body to which the Seller is subject or by which it is
bound.
5. Each person who, as an officer or representative of
the Seller, signed the Purchase and Sale Agreement and any
other document delivered prior hereto or on the date hereof
in connection with the transaction described in the
Purchase and Sale Agreement was, at the respective times of
such signing and delivery duly elected or appointed,
qualified and acting as such officer or representative,
and the signatures of such persons appearing on such
documents are their genuine signatures.
6. Except as disclosed to Purchaser, the Mortgage Loans
and the Servicing Rights referred to in the Purchase and
Sale Agreement are not subject to any security interest,
pledge or hypothecation for the benefit of any entity,
institution or person. The Seller is not contractually
obligated to sell the Servicing to any other party. The
transfer, assignment and delivery of the Servicing and of
the Escrow Accounts in accordance with the terms and
conditions of the Purchase and Sale Agreement shall vest in
the Purchaser all rights as servicer, free and clear of any
and all claims, charges, defenses, offsets and encumbrances
of any kind or nature whatsoever, including but not limited
to those of the Seller.
7. Attached hereto is a certified true copy of the
resolution of the Board of Directors of the Seller with
respect to the transactions governed by the Agreement.
_________________________________________
Rick W. Skogg
President
Subscribed and sworn to before me this day of
1997
My term expires
_________________________________________
Notary Public
EXHIBIT K TO PURCHASE AND SALE AGREEMENT
April 30, 1997
Harbourton Mortgage Co., L. P.
601 Fifth Avenue
Scottsbluff, NE 69361
Dear Sirs:
You have requested my opinion, as counsel to GMAC Mortgage
Corporation, a Pennsylvania corporation (the "Purchaser"), with
respect to certain matters in connection with the sale by
Harbourton Mortgage Co., L. P. (the "Seller") pursuant to that
certain Purchase and Sale Agreement, dated as of April 30, 1997
(the "Purchase Agreement") between the Seller and the Purchaser,
of the Seller's servicing rights relating to certain Pools and
Whole Loans serviced by the Seller, as defined in the Purchase
Agreement. Capitalized terms not otherwise defined herein have
their respective meanings set forth in the Purchase Agreement.
I have examined the following documents:
1. the Purchase Agreement,
2. the Interim Servicing Agreement,
3. the Subservicing Agreement (the Purchase Agreement, the
Interim Servicing Agreement and the Subservicing Agreement
hereinafter referred to collectively as the "Agreements"),
4. such other documents, records and papers as I have deemed
necessary and relevant as a basis for this opinion.
Based upon the foregoing, and subject to the qualification set
forth at the end of this letter, it is my opinion that:
1. The Purchaser is a corporation duly organized, validly
existing and in good standing under the laws of the
Commonwealth of Pennsylvania.
2. The Purchaser has the requisite power to engage in the
transactions contemplated by the Agreements and all
requisite power, authority and legal right to execute and
deliver the Agreements and to perform and observe the terms
and conditions of such instruments.
3. The Agreements have been duly authorized, executed and
delivered by the Purchaser and are legal, valid and binding
agreements enforceable in accordance with their terms
against the Purchaser, subject to bankruptcy laws and other
similar laws of general application affecting rights of
creditors and subject to the application of the rules of
equity, including those respecting the availability of
specific performance.
4. No consent, approval, authorization or order of any court
or governmental agency or body is required for the
execution, delivery and performance by the Purchaser of, or
of compliance by the Purchaser with, the Agreements, or the
consummation of the transactions contemplated by the
Agreements.
5. Neither the consummation of the transactions contemplated
by, nor the fulfillment of the terms of the Agreements
conflicts or will conflict with or results or will result
in a breach of or constitutes or will constitute a default
under the Articles of Incorporation or By-laws of the
Purchaser, the terms of any material indenture or other
material agreement or instrument to which the Purchaser is
a party or by which it is bound or to which it is subject,
or any statute or order, rule, regulation, writ, injunction
or decree of any court, governmental authority or
regulatory body to which the Purchaser is subject or by
which it is bound.
6. There is no action, suit, proceeding or investigation
pending or, to the best of my knowledge, threatened against
the Purchaser which, in my judgment, either in any one
instance or in the aggregate, may reasonably be expected to
result in any material adverse change in the business,
operations, financial condition, properties or assets of
the Purchaser or in any material impairment of the right or
ability of the Purchaser to carry on its business
substantially as now conducted or in any material liability
on the part of the Purchaser or which would draw into
question the validity of the Agreements or of any action
taken or to be taken in connection with the transactions
contemplated thereby, or which would be likely to impair
materially the ability of the Purchaser to perform under
the terms of the Agreements.
The opinions rendered in paragraphs 4 and 5 above are subject to
the need to obtain the consents of applicable investors to the
transfer of the servicing subject to the Purchase Agreement.
I do not undertake to advise you of matters which may come to my
attention subsequent to the date hereof which may affect my
legal opinions expressed herein.
This opinion is delivered to you solely for your use in
connection with the execution and delivery of the Purchase and
Sale Agreement. This opinion is not to be used, circulated,
quoted or otherwise referred to for any other purpose, or to or
by any other person, with or without reference to my name,
without my prior express written consent.
Very truly yours,
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6 MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 4486
<SECURITIES> 0
<RECEIVABLES> 46610
<ALLOWANCES> 0
<INVENTORY> 22730
<CURRENT-ASSETS> 121071
<PP&E> 2149
<DEPRECIATION> 0
<TOTAL-ASSETS> 121071
<CURRENT-LIABILITIES> 73726
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 47345
<TOTAL-LIABILITY-AND-EQUITY> 121071
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
