Exhibit 10.4
June 30, 2010
Home Loan Center, Inc.
163 Technology Drive
Irvine, CA 92618
Attn: Rian Furey, Senior Vice President
Email: Rian.Furey@lendingtree.com
Re: Transactions Terms Letter for Master Repurchase Agreement
Ladies and Gentlemen:
This Transactions Terms Letter is made and entered into, as of the date set forth above, by and between Bank of America, N.A. (“Buyer”) and Home Loan Center, Inc. (“Seller”). This Transactions Terms Letter supplements the Master Repurchase Agreement (the “Agreement”) by and between Buyer and Seller. In the event there exists any inconsistency between the Agreement and this Transactions Terms Letter, the latter shall be controlling notwithstanding anything contained in the Agreement to the contrary. All capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to such terms in the Agreement. This Transactions Terms Letter supercedes all previous Transactions Terms Letters and amendments as of the Effective Date.
Effective Date: | June 30, 2010 | |
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Expiration Date: | Expiring on June 29, 2011 | |
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Aggregate Transaction Limit: | Fifty Million Dollars ($50,000,000) | |
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Financial Covenants: | Seller shall maintain the following financial covenants: | |
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| (a) | Minimum Tangible Net Worth (calculated per HUD guidelines): $25,000,000. |
| (b) | Minimum Liquidity: Seller to maintain unrestricted cash or unrestricted Cash Equivalents in a minimum amount equal to 25% of Seller’s Tangible Net Worth, inclusive of the Over/Under Account Balance and available draws from Warehouse and Repurchase facilities. By way of example but not limitation, cash in escrow and/or impound accounts shall not be included in this calculation. |
| (c) | Maximum ratio of Total Liabilities and Warehouse Credit (Warehouse Credit is inclusive of outstandings on warehouse lines, repurchase facilities or other off balance sheet financing) to Tangible Net Worth: 8:1. (excluding the Early Purchase Program with Buyer) |
| (d) | Net Income: Seller shall show positive pre-tax net income, on a rolling two quarter basis. |
| (e) | Seller shall not add additional mortgage financing facilities (including warehouse, repurchase, purchase or off-balance sheet facilities) without prior written notification to Buyer. |
| (f) | Payment of Dividends: Seller may, without the prior written consent of Buyer, (a) declare or pay dividends upon its shares of stock now or hereafter outstanding, including dividends payable in the capital stock of Seller, or make any distribution of assets to its shareholders, whether in cash, |
Acknowledged:
Home Loan Center, Inc.: RF
Bank of America, N.A.: BK
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| property or secutities, or (b) acquire, purchase, redeem or retire shares of its capital stock now or hereafter outstanding for value; provided that a Potential Default or an Event of Default is not existing and will not occur as a result thereof, or such distribution payments will not otherwise cause Seller to be in breach of its obligations hereunder. |
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Other Covenants: | Seller shall maintain the following other covenants: | |
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| (a) | To help ensure that Seller has adequate approved investors for mortgage loans originated by Seller, Seller shall become and remain an approved client of Bank of America’s Correspondent Lending group (“Correspondent Lending”). |
| (b) | If the financial or other material covenants of Seller under any current, future or modified third party warehouse, repurchase, financing or similar agreement are, or become, more favorable to Buyer than the equivalent covenants under the Agreement, or if one or more personal and/or corporate guaranties are currently required or later become required in connection with any such third party agreements, Seller shall promptly notify Buyer and Buyer shall have the right, in its sole discretion, to modify the Agreement to include such covenants and/or to require such personal and/or corporate guaranties of the Agreement. Further, at the request of Buyer, Seller shall promptly provide Buyer with its financial covenants and any other covenants that Buyer deems material under any such current, future or modified third party agreement and/or copies of any personal and/or corporate guaranties required in connection with such third party agreement. |
| (c) | Delinquency Covenant. If, in any two consecutive fiscal quarters of Seller, the delinquency rate for first-lien residential mortgage loans originated by Seller and sold to Correspondent Lending is greater than one hundred and fifty percent (150%) of the average delinquency rate for first-lien residential mortgages sold by all clients of Correspondent Lending, Buyer may immediately terminate the Agreement. |
| (d) | Loss Mitigation Covenant. If the sum total of all Total Adjusted Estimated Loss (the “Billable Amount”), (including for example, outstanding repurchase obligations), as disclosed in the Seller Repurchase Obligations Report, owed by Seller to Correspondent Lending at the end of a calendar quarter is equal to or greater than thirty five percent (35%) of Seller’s Tangible Net Worth, then Buyer may immediately suspend Transactions under the Agreement and Correspondent Lending may immediately cease purchasing mortgage loans from Seller. |
| (e) | Seller shall not have any undisputed accounts receivables owed to Correspondent Lending that are aged over sixty (60) days exceeding in the aggregate $5,000. |
Acknowledged:
Home Loan Center, Inc.: RF
Bank of America, N.A.: BK
Facility Fee: | Due annually, 25 basis points, payable in quarterly installments, with the first installment due prior to the Effective Date. Upon early termination of the Agreement by Seller, the entire Facility Fee will be due and owing. The fee is payable based on Aggregate Transactions Limit only and will be prorated in the event of increases. |
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Unused Facility Fees: | For any given calendar quarter, Seller’s average outstanding Transactions must be greater than or equal to 50% of the Aggregate Transaction Limit, otherwise Seller shall pay Buyer 25 basis points (0.25%) times the unused portion of the Aggregate Transaction Limit, annualized. For the purposes of this calculation, outstanding Transactions shall include EPP Loans under Seller’s EPP Addendum with Buyer. |
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Transaction Request Deadline: | 2:00 p.m. (Pacific time). |
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Deadline for Daily Receipt | 2:00 p.m. (Pacific time). |
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Minimum Over/Under | $1,125,000 (minimum of 150 basis points of the combined Repurchase and EPP facility limits). |
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| Seller to be entitled to interest on a monthly basis thereon at an annual rate of LIBOR plus the Type A Margin over 30 day LIBOR spread on the positive monthly average Over/Under Balance for the portion that is equal to or less than 20% of the average monthly outstanding Transactions for such month and; Seller to be entitled to interest on a monthly basis at an annual rate of LIBOR minus twenty five (25) basis points (0.25%) on the remaining portion of the positive monthly average Over/Under Balance that is greater than 20% but less than or equal to 75% of the average monthly outstanding Transactions for such month. For the purpose of this calculation, average outstanding Transactions shall include EPP Loans under Seller’s EPP Addendum with Buyer. “LIBOR” shall mean the greater of (i) the daily rate per annum for one-month U.S. dollar denominated deposits as offered to prime banks in the London interbank market or (ii) 2%, as applicable. |
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Eligible Loans: | Prior to being eligible for a Transaction, each mortgage loan shall comply with Buyer’s and Correspondent Lending’s then-current underwriting requirements and eligibility guidelines and no mortgage loan shall be more than 30 days past its original funding date or contractually delinquent 30 days or more. Underwriting requirements and eligibility guidelines are subject to change at Buyer’s sole discretion. |
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Securitization: | Unless otherwise agreed to by Buyer, mortgage loans which Seller intends to securitize shall not be eligible for Transactions. |
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Loans to Officers, Directors, | Transactions for a loan to be made to an officer, director, senior manager or owner of Seller or any guarantor (if applicable) shall |
Acknowledged:
Home Loan Center, Inc.: RF
Bank of America, N.A.: BK
| be subject to the prior approval of Buyer and such Transaction requirements as determined in Buyer’s sole discretion. | ||
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Reporting requirements: | Financial Reports & Officer’s Certificate: Seller shall deliver to Buyer, within thirty (30) days after the end of each month, financial statements of Seller, including statements of income and changes in shareholders’ equity (or its equivalent) for such month and the related balance sheet as at the end of such month, all in reasonable detail acceptable to Buyer and certified by the chief financial officer of Seller, subject, however, to year-end audit adjustments. Together with such financial statements, Seller shall deliver an officer’s certificate substantially in a form to be provided by Buyer, which shall include funding and production volume reports for the previous month. | ||
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| Annual Reports: Seller shall deliver to Buyer, within ninety (90) days after the end of each fiscal year of Seller, audited financial statements of Seller, including statements of income and changes in shareholders’ equity for such fiscal year and the related balance sheet as at the end of such fiscal year, all in reasonable detail acceptable to Buyer and certified by the chief financial officer of Seller stating, at a minimum, that the financial statements fairly present the financial condition and results of operations of Seller as of the end of, and for, such year. | ||
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| Government Insuring Reports: Seller shall provide Buyer within thirty (30) days after the end of each quarter, or as requested by Buyer, the following government insuring reports (including 15 month history): | ||
| (a) | Loans Originated - Current Defaults and Claims Reported — United States (from FHA Connection): | |
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| · | Output option: all loans |
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| · | Performance period: current period |
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| · | All insured single family loans with a beginning amortization within the last two years |
| (b) | HUD Pipeline/Uninsured Query: | |
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| · | Date range: use default |
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| · | Sort by: originating ID in ascending order |
| (c) | Indemnification Query: | |
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| · | Date range: last five years |
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| · | Sort by: case # in descending order |
| (d) | Late Endorsement Query: | |
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| · | Loan status: Active, claimed |
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| · | Date range: last two year period |
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| · | Sort by: # days closing to Endr pkg Rcvd in descending order |
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| Hedging Report: Seller shall deliver to Buyer each Monday a loan and rate lock position report and hedge report containing product level pricing and interest rate sensitivity analysis (shocks) or as requested by Buyer (data elements to be agreed upon). | ||
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| If requested by Buyer, Seller shall provide to Buyer within five (5) days of such request, in a form reasonably acceptable to Buyer, a detailed aging report of all outstanding loans on warehouse/ purchase/ repurchase facilities, and detail of all uninsured government loans. | ||
Acknowledged:
Home Loan Center, Inc.: RF
Bank of America, N.A.: BK
Reimbursement of Expenses: | Seller shall reimburse Buyer for certain costs and expenses including, without limitation, the following: | |||
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| (a) | Amendments: Seller shall pay Buyer $2,500 for any future amendments to Transactions Documents or covenant violation notices. The amendment fee shall be waived for any future amendments or modifications requested by Seller regarding increases to the Aggregate Transaction Limit. | ||
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Fees: | Wire Transfer Fee: |
| $10.00 per Transaction | |
| File Fee: |
| $30.00 per Transaction | |
| Shipping Fee: |
| $15.00 per Transaction for all investors other than Bank of America, N.A.; and | |
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| $0.00 for all Bank of America loans | |
| Non compliant Fee: |
| $25.00 | |
| Wet Deficiency Fee: |
| $10.00 per day | |
| Other Fees: |
| As set forth within Schedule 1 hereto | |
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Buyer’s Guidelines, Policies and Procedures: | The terms and conditions of this Transactions Terms Letter and the Agreement shall be subject to Buyer’s guidelines, policies and procedures, as may be changed from time to time. Buyer may communicate changes to its guidelines, policies and procedures to Seller via Buyer’s website, email or in writing. | |||
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Guarantors: | Lending Tree, LLC, Tree.com, Inc., and LendingTree Holdings, Inc | |||
Please acknowledge your agreement to the terms and conditions of this Transactions Terms Letter by signing in the appropriate space below and returning a copy of the same to the undersigned. Facsimile signatures shall be deemed valid and binding to the same extent as the original. Buyer shall have no obligation to honor the terms and conditions of this Transactions Terms Letter if Seller fails to fully execute and return this document to Buyer within thirty (30) days after the date of issuance.
Sincerely, |
| Agreed to and Accepted by: | ||
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Bank of America, N.A. |
| Home Loan Center, Inc. | ||
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By: | /s/ Blair Kenny |
| By: | /s/ Rian Furey |
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Name: | Blair Kenny |
| Name: | Rian Furey |
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Title: | Senior Vice President |
| Title: | Senior Vice President |
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Dated: | July 15, 2010 |
| Dated: | July 15, 2010 |
Acknowledged:
Home Loan Center, Inc.: RF
Bank of America, N.A.: BK
SCHEDULE 1
(Eligible Mortgage Loans)
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| Type |
| Margin over 30 |
| Type Purchase Price |
| Maximum |
| Transaction |
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Type A: Conventional Conforming Mortgage Loans (Agency eligible 1st mortgages with Full/Alt doc types only) |
| 100% |
| 2.25 |
| 97.00 |
| 30 days |
| None |
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Type B: Government Mortgage Loans |
| 100% |
| 2.25 |
| 97.00 |
| 30 days |
| None |
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Type B-1: Bond Loans |
| 20% |
| 2.25 |
| 97.00 |
| 45 days |
| None |
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Type C: Jumbo Mortgage Loans |
| 10% |
| 2.25 |
| 95.00 |
| 30 days |
| Rate Lock and CLUES or Prior Approval |
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Noncompliant Mortgage Loans |
| 7% |
| 2.00 over the initial margin |
| See schedule 2 |
| Additional 45 days |
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Wet Mortgage Loans |
| 40%, |
| Noncompliant or default spreads, if applicable, over the initial Type Margin over 30 day LIBOR |
| The initial Type Purchase Price Percentage. If Transaction exceeds the Wet Mortgage Loans Maximum Dwell Time, see Schedule 3 |
| 5 business days |
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(A) | The Purchase Price shall be calculated and equal to multiplying the unpaid principal balance times the lesser of (i) the Type Purchase Price Percentage times the lesser of par, takeout price or current market price or; (ii) 98% of the takeout price or current market price or fair market value. Seller will have the ability to reduce the Type Purchase Price Percentage to no less than 10% once per month, not to be applied retroactively |
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(B) | For the purpose of calculating the Margin over 30 day LIBOR, “LIBOR” shall mean the greater of (i) the daily rate per annum for one-month U.S. dollar denominated deposits as offered to prime banks in the London interbank market or (ii) 2%, as applicable. |
· All Transactions are to the closing table.
· Delegated underwriting status does not satisfy the Transaction Requirements contained herein.
· Transaction Requirement Definitions and Doc Type Definitions are set forth on Buyer’s website.
· All loan amounts, FICO scores, LTV/CLTV, and document types shall meet Correspondent Lending guidelines.
SCHEDULE 2
Noncompliant Mortgage Loans (Applicable to dry Transactions only)
Days over Maximum Dwell |
| Reduction in Value of |
1 to 15 Days |
| 10 |
16 to 30 Days |
| 20 |
31 to 45 Days |
| 30 |
Investor Rejects |
| 25 |
SCHEDULE 3
Wet Noncompliant Mortgage Loans (Applicable to wet Transactions only)
Days over Maximum Dwell Time |
| Reduction in Value of |
1 to 5 Business Days |
| 10 |
Acknowledged:
Home Loan Center, Inc.: RF
Bank of America, N.A.: BK