EXHIBIT 10.37
LOAN SERVICING PURCHASE AND SALE AGREEMENT
This Loan Servicing Purchase and Sale Agreement for the purchase and sale
of mortgage loan servicing rights (the "Agreement") is made and entered into as
of this 15th day May, 1996 by and between Western Financial Savings Bank F.S.B.,
a federally chartered savings institution("Buyer"), having a place of business
at 23 Pasteur, Irvine, California, 92718, and Fidelity Federal Bank F.S.B., a
federally chartered bank savings institution, ("Seller"), having its principal
place of business at 4565 Colorado Boulevard, Los Angeles, California 90039.
W I T N E S S E T H:
WHEREAS, Buyer desires to buy and Seller desires to sell the Servicing
Rights Seller has in certain Mortgage Loans secured by first or second liens on
real estate;
WHEREAS, the Seller has (i) originated, (ii) purchased and underwritten or
(iii) purchased the Servicing Rights to the Mortgage Loans and serviced the
Mortgage Loans which are the subject of this Agreement and herein makes certain
representations relative thereto; and
WHEREAS, Buyer and Seller have agreed upon the terms set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties do 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 all
purposes of the Agreement, have the respective meanings specified in this
Article.
Section 1.01. Accounts Receivable means, including but without limitation,
principal and interest Advances with respect to the Mortgage Loans, escrow
account receivables and foreclosure account receivables net of escrow Advances.
Section 1.02. Advances means payments of principal, interest, taxes, insurance,
ground rents, assessments and similar charges advanced on behalf of the
Mortgagor under a Mortgage Loan by Seller or Buyer, as the case may be, with
respect to the Mortgage Loans.
Section 1.03. Agreement means this Loan Servicing Purchase and Sale Agreement
and any written, executed and delivered amendments or modifications thereto.
Section 1.04. Borrower means the obligor on a mortgage note.
Section 1.05. Business Day means any day of the week other than Saturday,
Sunday or a legal holiday or a day or portion thereof during which the Purchaser
or the Seller is not open for business.
Section 1.06. Custodian is an entity acting as a Mortgage Loan document
Custodian under any custodial agreement or pursuant to Agency requirements, or
any successor in interest to the Custodian.
Section 1.07. Cut-off Date means the date each month coinciding with the
applicable Investor accounting cycle on which a reconciliation is performed of
all funds received on behalf of any Investor during the proceeding accounting
cycle.
Section 1.08. Defect means any untruth, omission or incorrectness, in any
material and adverse respect, of any representation or warranty contained
herein.
Section 1.09. Eligible Mortgage Loan is defined in Section 2.02.01.
Section 1.10. Escrows or Escrow Accounts means all escrow, impound and
custodial accounts maintained under the Servicing Agreements or otherwise
relating to the Mortgage Loans including, without limitation, all buydown
accounts and all accounts established for purposes of receiving funds for the
payment of principal, interest, taxes, insurance premiums, assessments and
similar charges, suspense, buydown funds, completion escrow monies and unearned
fees, provided such fees are deemed earned as collected relating to the Mortgage
Loans and interest accrued on such funds for the benefit of the Mortgagors under
the terms of the Mortgage Loan or applicable law or otherwise.
Section 1.11. Estimated Purchase Price means the amount calculated as described
in Section 2.03.01 as of the Sale Date.
Section 1.12. FHLMC means the Federal Home Loan Mortgage Corporation, or any
successor thereto.
Section 1.13. FNMA means the Federal National Mortgage Association, or any
successor thereto.
Section 1.14. Foreclosure Mortgages means all loans which have been either
recommended to the Investor for foreclosure by Seller, or are 90 days or more
past due as of the Sale Date, or are actually in foreclosure.
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Section 1.15. Interim Period is the period between the Sale Date and the
Transfer Date.
Section 1.16. Investor means FNMA (Federal National Mortgage Association), or
FHLMC (Federal Home Loan Mortgage Corporation), or any other person, party or
entity that owns in whole or in part the Mortgage Loans.
Section 1.17. Liquidate means, with reference to a Mortgage Loan, to remit to
Buyer all funds necessary to remove the Mortgage Loan from the Pool and to cover
out-of-pocket costs and expenses for such removal paid by Buyer with respect to
such Mortgage Loan.
Section 1.18. Loan Servicing Purchase and Sale Agreement means this Agreement
between Buyer and Seller whereby Buyer agrees to buy from Seller and Seller
agrees to sell, transfer and assign to Buyer all right, title and interest of
Seller in the Servicing Rights.
Section 1.19. Mortgage means a mortgage, Deed of Trust or other instrument
pledging property as security for payment of a Mortgage Note.
Section 1.20. Mortgage Documents means all documents specified in the Transfer
Procedures set forth in Exhibit C and by reference made a part hereof,
pertaining to a particular Mortgage Loan.
Section 1.21. Mortgage Loan means an individual Mortgage Loan the Servicing
Rights of which are sold by Seller to Buyer under this Agreement as more fully
identified in Exhibit A, attached hereto and incorporated herein by reference.
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This term includes Eligible Mortgage Loans and Non-Eligible Mortgage Loans, but
excludes Foreclosure Mortgages, even if the latter are identified on Exhibit A.
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Section 1.22. Mortgage Loan File means all documents relating to the Mortgage
Loan that are necessary or customary for servicing in accordance with Investor
guidelines and procedures, applicable law and regulatory requirements,
including, but not limited to those documents described in Exhibit C.
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Section 1.23. Mortgage Note means a promissory note secured by a Mortgage.
Section 1.24. Mortgagor means any pledgor of the real estate encumbered as
security for a Mortgage Note.
Section 1.25. Non-Eligible Mortgage Loan means a loan that is not an Eligible
Mortgage Loan as defined in Section 2.02.01.
Section 1.26. Original Mortgage Loan Files means all documents relating to the
Mortgage Loan that are necessary or customary for servicing in accordance with
Investor guidelines and procedures,
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applicable law and regulatory requirements, including, but not limited to those
documents described in Exhibit C.
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Section 1.27. P & I means principal and interest.
Section 1.28. PMI means private mortgage insurance and refers to the companies
providing such insurance.
Section 1.29. Pool means a group of Mortgage Loans that collateralized a
mortgage-backed security issue.
Section 1.30. Private Investor means any investor, including the Seller, other
than FHLMC and FNMA.
Section 1.31. Purchase Price is defined in Section 2.03.
Section 1.32. Records means Mortgage Loan Files, insurance files, tax records,
collection records, Mortgage Documents, ledgers, computer printouts and other
records, data or information relating to the Mortgage Loans, the Escrow
Accounts, the Pools or as otherwise provided in this Agreement.
Section 1.33. Loan Repurchase or Repurchase means that Buyer shall return to
Seller all Servicing Rights related to the applicable Mortgage Loan(s) and
Seller shall refund to Buyer the Purchase Price of such Servicing Rights to
include the following:
For the first five years, after the Sale Date, Seller shall reimburse
Buyer the then current unpaid principal balance times 1.142%, (or .85% if the
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loan is from Exhibit G), plus the unpaid principal balance and any premium for
Mortgage Loans requested and paid for by the Investor, accrued unpaid interest
paid by Buyer to Investor, plus any unpaid advances. Subsequent to the end of
the five year period after the Sale Date, repurchases shall be consummated by
payment of all unpaid advances then in existence, reimbursements of any premiums
to Investor, the unpaid principal balance and accrued, unpaid interest paid by
Buyer to Investor.
Any loan repurchase shall be completed by the parties according to Investor
requirements or at the latest, within 30 days after any valid written Investor
repurchase demand is made by Buyer or Investor, and after Seller has exhausted
any appeal processes with Investor as provided for herein. If there is no
Investor on a Mortgage Loan being repurchased, the loan repurchase shall be
completed within 30 days after any demand by Buyer.
Section 1.34. Sale Date is defined in Section 2.04.
Section 1.35. Subservicing Fee is defined in Section 3.01.
Section 1.36. Servicing Rights means all of Seller's right to receive the
servicing fee income and any and all ancillary or other
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income including, without limitation, late charge income, and all of Seller's
right to hold and administer any related Escrows and the Records arising from or
connected to any of the servicing of the Mortgage Loans identified on Exhibit A,
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attached hereto and incorporated herein by reference, as of the Sale Date.
Section 1.37. Settlement Date shall be defined as five (5) Business Days after
Transfer Date.
Section 1.38. T & I means taxes and insurance.
Section 1.39. Transfer means, Buyer receives from Seller originals or copies,
as applicable, of all documents as outlined on Exhibit C. Seller will insure an
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orderly transfer of servicing and comply with Buyer's transfer Instructions,
(Exhibit E attached hereto and incorporated herein by reference) and such other
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reasonable requirements pertaining to the processing and shipping of the loan
files, insurance files, tax records, collection records and any other records,
including tapes and disks, that Buyer reasonably deems proper and necessary to
transfer records in order to service the Mortgage Loans.
Section 1.40. Transfer Date is defined in Section 2.05.
ARTICLE II.
Terms and Conditions
Section 2.01. Purchase and Sale
Buyer hereby agrees to buy from Seller and Seller hereby agrees to sell,
transfer and assign to Buyer all right, title and interest of Seller in and to
the Servicing Rights.
Section 2.02. Eligible Mortgage Loans
2.02.01. Eligible Mortgage Loans are limited to Mortgage Loans, as of the
Sale Date, which are not (i) two monthly installments or more past due, (ii)
Foreclosure Mortgages, (iii) in bankruptcy, or (iv) in litigation, (except
disclosed ARM litigation, Exhibit F). Any Mortgage Loan, the facts of which
place it within the situation described in (i), (ii), (iii), and/or (iv) above,
shall be deemed a Non-Eligible Mortgage Loan for purposes of this Agreement.
Buyer shall have no obligation on the Sale Date or at any date subsequent
thereto, to pay for the Servicing Rights to any Non-Eligible Mortgage Loans;
however, Non-Eligible Mortgage Loans may be transferred to and accepted at
Buyer's option under and subject to all terms of this Agreement. For any
Mortgage Loan for which a payoff statement was issued on or prior to the Sale
Date and subsequently pays off within 30 days after the Sale Date, the loan
becomes ineligible and Seller will refund any Purchase
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Price paid less servicing income earned to the Purchaser. Foreclosure
Mortgages, as of the Sale Date, and the Servicing Rights to such Foreclosure
Mortgages, shall not be transferred to or purchased by the Buyer, as
contemplated herein or if not repurchased prior to the Transfer Dates, Seller
agrees to pay Buyer the sum of $500 for each Foreclosure Mortgage transferred.
Seller will exercise its best reasonable efforts to see that Foreclosure
Mortgages and the Servicing rights thereto are not included in Mortgage Loans
identified for transfer to Buyer.
2.02.02. Buyer reserves the right to reject, prior to the Sale Date, any
Mortgage Loans where properties, based on the sole discretion of the Buyer, are
delinquent or require substantial repairs due to natural disasters (including
but not limited to earthquakes and floods).
Section 2.03. Purchase Price and Terms of Payments
2.03.01. Purchase Price. The Purchase Price shall be the result of
multiplying 1.142% by the unpaid principal balance of all Eligible Mortgage
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Loans as defined in Section 2.02., with the exception of that group of loans
identified in Exhibit G and by reference made a part hereof, totalling 687 loans
for approximately $63 million which shall be priced by multiplying .85% by the
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unpaid principal balance. Notwithstanding anything to the contrary, should any
Mortgage Loan(s), the Servicing Rights of which are sold hereunder, be removed
from this Agreement prior to the Sale Date, pursuant to applicable provisions of
the Agreement, then, in such event, the Purchase Price shall be adjusted
accordingly by Buyer using the same pricing methodology used by Buyer to
calculate the original Purchase Price.
2.03.02. Terms of Payment. The payment of the Purchase Price shall be as
follows:
(A) 20% of the Purchase Price ("Initial Deposit") will be paid to Seller as a
credit against the Purchase Price, within three (3) business days after the
execution of the Purchase and Sale Agreement, by wire transfer of
immediately available funds.
The Initial Deposit shall be refunded to Buyer together with accrued
interest at the average Federal Funds Rate as published in the Wall Street
Journal during the period from payment by Buyer through refund to Buyer, in
the event that the Buyer declines to consummate the transaction prior to
the transfer pursuant to its rights as set forth herein. The refund shall
be paid within three business days from the notice by Buyer that it is
declining to consummate the transaction. The Servicing fees remitted to
Buyer during the Interim Period (Sale Date through Transfer Date) shall be
refunded to Seller and the Subservicing fees paid to Seller during the
Interim Period shall be refunded to Buyer.
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(B) 70% of the Purchase Price shall be paid to Seller by wire transfer of
immediately available funds, at the later of five (5) business days after
the Transfer Date or upon receipt of materially all records related to the
servicing of the Mortgage Loans by Buyer or Buyer's designated Custodian.
The respective Transfer Dates will be the dates on which the Servicing
functions are actually assumed by the Buyer and is anticipated to be June
1, 1996 for the FNMA and Private Investor loans, and June 16, 1996 for the
FHLMC loans.
(C) The balance of the Purchase Price shall be paid to Seller by wire transfer
of immediately available funds, at the later of 30 days after the Transfer
Date or upon receipt of all remaining records and loan documents related to
the servicing of the Mortgage Loans by Buyer or Buyer's custodian as
directed in Section 3.03. If all documentation, other than recorded
assignments from Seller to Buyer, has not been received within ten (10)
business days after the Transfer Date, Purchaser shall be entitled to
retain and pay upon receipt of such documentation, the pro-rata portion of
the remaining Purchase Price as specified in the Agreement with respect to
such Mortgage Loans for which not all documentation has been delivered to
Buyer.
Section 2.03.03. Verification of Estimated Purchase Price and Other Amounts to
be Transferred (a) As soon as possible, but no later than within five (5)
Business Days after the Sale Date, Seller shall determine with respect to the
Mortgage Loans as of the Sale Date from its books and Records and promptly
notify Buyer in writing of : (i) the aggregate outstanding principal balance of
all Mortgage Loans; (ii) the aggregate principal balance of all Non-Eligible
Mortgage Loans; (iii) the amount of all Accounts Receivable; and (iv) the
amount of Escrow Accounts. All such amounts shall be reconciled by Seller to
reports generated by the Seller's automated servicing system and to reports made
to the Investors and all such reports shall be sent to the Buyer within five (5)
Business Days after the Sale Date. Buyer shall notify Seller of any
discrepancies within ten (10) Business Days of receipt thereof.
Section 2.03.04. Verification of Purchase Price and Other Amounts Transferred
(a) As soon as possible, but no later than within five (5) Business Days after
the Transfer Date, Seller shall determine with respect to the Mortgage Loans as
of the Cutoff Date immediately preceding the Transfer Date from its books and
Records and promptly notify Buyer in writing of: (i) the aggregate outstanding
principal balance of all Mortgage Loans; (ii) the aggregate principal balance of
all Non-Eligible Mortgage Loans; (iii) the amount of all Accounts Receivable;
and (iv) the amount of Escrow Accounts. All such amounts shall be reconciled by
Seller to reports generated by Seller's automated servicing system and to
reports made to the Investors and all such reports and reconcilements shall be
sent to the Buyer within five (5) Business Days after the Transfer Date. Upon
receipt of the above, Buyer
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shall notify Seller of any discrepancies within ten (10) Business Days.
Section 2.04. Sale Date
The Sale Date shall be May 31, 1996, for the FNMA and FHLMC and Private
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Investor Servicing Rights as described in Exhibit A. Ownership of all the
Servicing Rights shall be transferred to Buyer on the Sale Date and Seller shall
subservice the Mortgage Loans on behalf of Buyer, pursuant to Section 3.01
below, from the Sale Date to the Transfer Date.
Section 2.05. Transfer Date
The Transfer Date shall be the date on which the Buyer assumes the physical
servicing administration of the Mortgage Loans. The transfer date shall be June
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1, 1996 for the FNMA and Private Investor loans and June 16, 1996 for the FHLMC
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loans assuming that the conditions to such transfer have been met. On the
Transfer Date, Buyer shall relieve Seller of its subservicing responsibilities
for the Mortgage Loans transferred. The latest date for the posting of
transactions by the Seller shall be the close of business May 31, 1996 for the
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FNMA and Private Investor loans and June 15, 1996 for the FHLMC loans.
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Section 2.06. Conditions of Sale
2.06.01. The obligations of Buyer hereunder shall be subject to the
satisfaction of the following conditions or Buyer's written waiver thereof:
(A) Delivery by Seller to Buyer of Investor's written approval of the transfer
of Servicing Rights and responsibilities to Buyer prior to Transfer Date.
(B) The material accuracy of all Seller representations and warranties as of
the Sale Date and Transfer Date.
(C) Material compliance by Seller with all its obligations hereunder as of the
Transfer Dates.
(D) Except as disclosed in Exhibit "F", Seller has no knowledge of any
litigation, legal or regulatory proceeding pending, threatened or
contemplated against the Seller which would have a material adverse effect,
in the Buyer's reasonable opinion, upon the related Servicing Agreements,
the Mortgage Loans, the Servicing Rights, or the transactions contemplated
herein, or the ability of the Seller to consummate the transaction
contemplated herein or to perform the obligations of the Seller under this
Agreement as of the Sale Date and the Transfer Date.
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(E) Prior to Sale Date, Buyer's receipt of the resolution of the Board of
Directors of the Seller approving the execution of the delivery and
performance of this Agreement certified by the Secretary or an Assistant
Secretary of the Seller (Exhibit D).
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2.06.02. In the event of the failure of any condition set forth in Section
2.06.01 prior to the Transfer Date, after notice and a thirty (30) day period
during which Seller shall have the right to cure such failure, Buyer may elect
to cancel and terminate this Agreement and forthwith receive refund of all sums
paid to Seller including but not limited to the any deposits together with per
diem interest at the average Federal Funds Rate as published in the Wall Street
Journal during the period from payment by the Buyer through refund to the Buyer,
and subservicing fees paid to Seller less any servicing fees actually remitted
to Buyer in accordance with 3.01 from the date such funds were deposited with
Seller through the date of cancellation or termination.
2.06.03 The obligations of Seller hereunder shall be subject to the
satisfaction of each of the following conditions or Seller's written waiver
thereof:
(A) Prior to Sale Date, Seller's receipt of the resolutions of the Board
of Directors of Buyer approving the execution, delivery and
performance of this Agreement certified by the Secretary or Assistant
Secretary of Buyer.
(B) The material accuracy of all of Buyer's representations
and warranties as of the Sale Date and Transfer Date.
(C) Compliance by Buyer with all of its obligations hereunder.
(D) Approval by Investor to transfer the Servicing Rights to
the Buyer as contemplated herein.
(E) Execution of a mutually acceptable Servicing Agreement with respect to
Seller's Mortgage Loans.
Section 2.07. Division of Costs
Seller shall pay all costs incurred by Seller in the performance of its
obligations under this Agreement, including but not limited to fees for Seller's
attorneys, accountants, Seller's computer service and related costs and broker,
Countrywide Servicing Exchange. Seller shall pay the applicable Investor
transfer fee(s) for the Mortgage Loans transferred to the Buyer. Seller shall
prepare individual assignments and interim or intervening assignments as
required on each of the Mortgage Loans to complete the chain of title to the
Buyer and/or Investor as
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applicable and as required by Investor guidelines, regulations or requirements,
or state or federal law. Seller shall record all such assignments, except those
from Buyer to Investor, and deliver all unrecorded assignments to Buyer, within
five (5) business days after Transfer Date, at its own expense. Prior to the
Settlement Date the Seller will deliver to the Buyer the Seller's certification
that such assignments have been prepared as provided herein and mailed for
recording and Seller shall deliver copies of such assignments sent for recording
to the Buyer. All assignments sent for recording or copies thereof sent to
Buyer shall contain the Seller's and Buyer's loan numbers. Substitutions of
Trustee are to be prepared and recorded on each individual loan, in each
respective county at Seller's expense. On Seller owned Mortgage Loans, a Power
of Attorney will be provided to Buyer to allow Buyer to execute all necessary
documents to process foreclosures and or documents to discharge the lien and or
any other documents needed to service the Mortgage Loans pursuant to the
Agreement.
Buyer shall pay all costs incurred by Buyer in the performance of its
obligations under this Agreement including, but not limited to, fees for Buyer's
attorneys, accountants, computer services, and related costs.
Section 2.07.01 Transportation Costs
Seller shall pay for all costs associated with the shipment of all Records
and Mortgage Loan Files required to be transferred to Buyer or Buyer's Custodian
hereunder. Seller shall bear the risk of loss during transit until such Records
and files are received by the Buyer, or Buyer's Custodian.
ARTICLE III.
Covenants of Servicer
Section 3.01. Servicing Duties Prior to and Subsequent to Transfer Date
Seller shall subservice for Buyer, during the Interim Period, the Mortgage
Loans in accordance with all applicable Investor regulations and procedures,
laws and regulations, and generally accepted prudent servicing standards.
During the Interim Period, Seller shall not accept, with respect to any Mortgage
Loan, any payment insufficient to maintain or restore the Mortgage Loan to a
state of current status, including partial payments and short payments of full
P.I.T.I. except as required by applicable law or regulation, existing
agreements, or Investor requirements. During the Interim Period, Buyer shall be
entitled to receive all (100%) of the Servicing Fees net of the sum of
curtailment interest expense on FHLMC loans less the Subservicing Fee of $5.50
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per loan plus ancillary income including but not limited to late charges,
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assumption fees, and miscellaneous fees. The Servicing Fees are to be
calculated and reported to the Buyer no later than the third (3rd) Business Day
after the Investor cutoff. All service fees shall be paid to the Buyer and
shall be paid within five (5) business days after the Investor's cutoff date.
The Seller will retain all escrow balances and any benefit derived therefrom
including, but not limited to, late charges collected during the Interim Period.
Seller shall prepare and deliver such reports as reasonably requested by the
Buyer during the Interim Period. Examples of such reports are described in
3.01.02 below. Within two (2) Business Days after the Transfer Date, Seller
shall deliver to Buyer, Seller's trial balance or a substitute acceptable to
Buyer of Mortgage Loans as of the Cutoff Date immediately preceding the Transfer
Date and all other Records described herein if not previously delivered to Buyer
as required hereunder.
3.01.01 Except as required by applicable law or regulation, Seller shall
not waive any individual escrow requirements on the Mortgage Loans during the
Interim Period without the express written consent of the Buyer.
3.01.02 The Seller's possession of any portion of the Mortgage Documents
and Mortgage Loan Files after the Sale Date shall be at the will of the Buyer
for the sole purpose of facilitating Servicing of the Mortgage Loans during the
Interim Period, and such retention and possession by the Seller is in a
custodial capacity only. During the Interim Period, on the terms set forth in
Section 3.01 above, Seller shall deliver to Buyer, on a monthly basis for each
month commencing on the Sale Date, the reports specified as investor reporting
documentation requirements in Exhibit B.
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Section 3.02. Investor reporting documentation and remittance requirements are
specified in Exhibit B.
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1. The T&I and buydown custodial account balances shall be based on the
positive escrow balance plus accrued escrow interest through the Transfer Date,
less escrow advances. Seller shall deliver such funds to Buyer within five (5)
business Days after the Transfer Date.
2. The P&I funds shall be paid to Buyer five (5) Business Days after the
Cutoff Date immediately preceding the Transfer Date via wire transfer of
immediately available funds.
3. No adjustments are to be made to the Pools and the Mortgage Loans in the
Pools between the Sale Date and the Transfer Date without Buyer's written
consent and Investor approval unless such adjustments are normal and customary
and are made in accordance with Investor guidelines.
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Buyer will verify the P&I, T&I and Buydown Custodial Account balances
within five (5) Business Days after receipt of the supporting documentation.
Any discrepancies between Buyer and Seller will be resolved within ten (10)
Business Days.
4. Seller will complete all investor reporting and remitting for the activity
up to and including the Transfer Date.
Section 3.03. Transfer of Records.
3.03.01. At its sole expense, Seller shall deliver to Buyer all documents,
files, reports and similar items as set forth in Exhibit B and Exhibit C
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attached hereto and by reference made a part hereof. All Original Mortgage Loan
Files and Microfiche Jackets must be delivered to Buyer's office no later than
the fifth (5th) Business Day after the respective Investor Transfer Date.
Mortgage Loan Files shall be delivered to:
Western Financial Savings Bank, F.S.B.
23 Pasteur
Irvine, CA 92718
Attn: Paul Mattheson, 3rd Floor, Loan Service
3.03.02. All custodial files held by the Seller's Custodian shall be
delivered to the office of Buyer's Custodian, or as otherwise directed by the
Buyer, within five (5) Business Days after the Transfer Date.
Custodial files for FNMA shall be delivered to: Same
3.03.03. Payments and Notices received After Transfer Date
Seller and Buyer acknowledge that, during the sixty (60) day period after
the Transfer Date, all correspondence and funds received by Seller in connection
with the Mortgage Loans, including, but not limited to, tax bills, insurance
premiums, principal, interest, mortgage guaranty or mortgage insurance payment
bills, insurance loss drafts, tax refunds and all other types of payments, are
to be immediately paid over to the Buyer without offset or deduction. Buyer
shall be entitled to the service fees and other servicing related income on all
such payments. During the first thirty (30) day period such correspondence and
funds shall be identified by the Seller by the Seller's loan numbers and shall
be immediately delivered to the Buyer at the Seller's expense by overnight
courier, for the next Business Day delivery, at the address for notice to Buyer.
During the second thirty (30) day period, Seller shall use regular mail to make
such delivery to Buyer. In addition, the Seller shall deliver or cause to be
delivered to the Buyer, as promptly as practicable after receipt by the Seller,
copies of all correspondence received from any Borrower or otherwise relating to
the Mortgage Loans. Following such sixty (60) day period, all such funds and
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correspondence shall be returned by Seller to the sender with a letter of
explanation, a copy of which letter shall be sent to the Buyer. Funds accepted
by Seller shall be forwarded to Buyer with a letter of explanation.
Section 3.04. Service Bureau Cooperation
The Seller and Buyer will cause their respective service bureaus and/or EDP
departments to cooperate with each other. Seller shall deliver a test tape,
trial tape and an accurate conversion tape at the request of the Buyer. Seller
will provide a written report of all such reports, computer file layouts, and
definitions as needed to facilitate automated transfer, which may be reasonably
requested. Costs incurred by the Seller in the performance of these
aforementioned requirements will be borne by the Seller.
Section 3.05. Investor Approvals and Costs
3.05.01. Prior to the respective FNMA Private Investor and FHLMC Transfer
Dates, Seller shall have secured and delivered to the Buyer, the written
Investor approvals, satisfactory to Buyer, to transfer the Servicing Rights
contemplated hereunder, together with all requisite approvals for the transfer
of custodial and trust documentation and funds (i.e., P&I and T&I) to Buyer.
3.05.02. Seller will satisfy all Investor requirements to transfer
effectively the Servicing Rights from Seller to Buyer and pay and bear any and
all reasonable fees imposed by the Investor to effect the transfer.
Section 3.06. Year-end Reporting
Seller shall be responsible for all government and regulatory reporting
pertaining to servicing activities prior to the Transfer Date including but not
limited to all 1996 year-end Statements to the Mortgagors and to government
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agencies, such as Form 1099s, 1098s, K-1s and HMDA reporting. Buyer shall be
responsible for all such reporting pertaining to servicing activities after the
Transfer Date.
Section 3.07. Interest on Escrow
Seller shall indemnify and hold Buyer harmless from any and all claims,
damages, costs and/or liabilities arising out of or in connection with Seller's
obligations to pay interest on Escrow Accounts up to the Sale Date. Within five
(5) business days after the Transfer Date, Seller shall remit to Buyer a sum
equal to the interest accrued on impounds as of the Sale Date along with reports
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separately detailing the accrued but unpaid interest as of the Sale Date and as
of the Transfer Date.
Section 3.08. Notification to Mortgagors
No later than fifteen (15) days prior to the Transfer Date, Seller shall
mail to all Mortgagors, at Seller's cost and expense, a notice advising them of
the occurrence of the sale contemplated hereby and when and where to make
payments on and after the Transfer Date and such other disclosures as required
by Investor or Federal or State law. The letter effecting such notification
shall be reviewed and accepted by Buyer prior to mailing to Mortgagors. In any
event, such notification will be in compliance with all Investor, Federal and
State requirements. Buyer shall at its own expense, within the time period
provided by applicable Federal or State law provide such notification required
to be given by Buyer with respect to the transfer of Servicing Rights pursuant
to this Agreement.
Section 3.09. Notification to Insurance Carriers
Seller shall mail a notice to all appropriate insurance companies, with
respect to the property securing each Mortgage Loan of the occurrence of the
sale contemplated hereby and request the following:
3.09.01. The fire and extended coverage policy with respect to the
property securing each Mortgage Loan, shall name Buyer, its successors and
assigns as mortgagee.
3.09.02. The Private Mortgage Insurance companies and optional insurance
companies Records reflect Buyer as servicer of the Mortgage Loans.
3.09.03. Any flood insurance policy and the catastrophe insurance policy,
with respect to the property securing each Mortgage Loan, shall name Buyer, its
successors and assigns as an insured and contain a lender's loss payable
endorsement in favor of Buyer, its successors and assigns.
Section 3.10. Payment of Property Insurance and Mortgage Insurance Premiums
Seller shall pay, or cause to be paid, prior to the Transfer Dates, all
property and mortgage insurance premiums due prior to and including the Transfer
Date and those due 30 days after the Transfer Date. On the Transfer Date,
Seller shall provide to Buyer a list of those loans on which insurance premiums
are due but, despite Seller's best efforts, it has been unable to pay due to non
receipt of premium billing or for other reasons outside of Sellers control.
Seller agrees to forward to Buyer within three (3)
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Business Days of receipt all such insurance bills received by Seller.
3.11. Payment of Property Taxes
3.11.01. Seller shall pay or cause to be paid, on all impounded loans,
prior to the Transfer Date, all real estate tax bills issued by the
jurisdictions (including all interest, late payments and penalties in connection
therewith) that are due to each taxing authority and relating to the property
securing the Mortgage Loan prior to the Transfer Date. All delinquent taxes will
be advanced on those non-impounded loans with the exception of those tax
installments due April 10, 1996 and December 10, 1996 and those tax installments
due December 10, 1995 and April 10, 1996 for the Seller owned loans. Seller
agrees to forward to Buyer within three (3) Business Days of receipt thereof of
all tax bills received by the Seller. Mortgage Loans with five year pay plans
for delinquent taxes are not acceptable. Mortgage Loans for which Seller is the
Investor and for which Seller has entered into agreements for the repayment of
advances, and five year payment plans for delinquent taxes are acceptable.
3.11.02. Seller shall forward to Buyer, within three (3) Business Days
after Seller's receipt thereof, all property tax bills received by Seller
relating to the Mortgage Loans and which are due more than thirty (30) days
after the Transfer Dates.
3.11.03. For the first sixty (60) days following the Transfer Date, such
delivery shall be made by overnight express service and shall be delivered to
the address referenced in Section 3.03.01.
3.11.04. Seller will insure that all tax identification information for
each Mortgage Loan is maintained on Seller's servicing system to allow the
automated transfer of such data on the Transfer Date.
3.11.05. Seller will load all available hazard insurance policy numbers in
a manner that will allow automated transfer of such data on the Transfer Date.
3.11.06. Seller shall load all PMI Certificate numbers on Seller's
servicing system to allow the automated transfer of such data on the Transfer
Date.
3.11.07. Seller, prior to Transfer Date, shall correctly code all
conventional insured loans on its system to allow the automated transfer of such
data on the Transfer Date.
3.11.08. Seller shall insure that the appraisal values maintained on its
system are accurate, as of the date of the last appraisal, prior to the
Transfer Date.
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3.11.09. Seller shall cause Lereta Tax Service to perform an audit of all
------------------
loans to determine if there are any unpaid taxes outstanding as of the Transfer
Date, and issue a certification to Buyer stating all taxes due have been paid,
or list all such outstanding taxes due with explanations of why the taxes are
not paid. Buyer has the option to decline to accept any Mortgage Loan that has
outstanding taxes owed.
3.11.10. On the Transfer Date, Seller shall cause Seller's tax service to
provide Buyer's tax service with all necessary data to facilitate the transfer
of service.
Section 3.12. Assumptions
Simultaneously with the delivery of the Mortgage Loan Files after the
Transfer Date, Seller shall deliver to Buyer a list of Mortgage Loans on which
Seller has received written notice of pending assumptions. Such list shall
include the assuming Mortgagor's name and social security number, Seller's
Mortgage Loan number, and, if any, the name and social security number of co-
borrowers. Additionally, Seller shall provide to Buyer copies of any assumption
instructions Seller has issued.
Section 3.13. No Solicitation Rights of Buyer and Seller
Solicitation Prohibition
From and after the Sale Date, Buyer and any of its affiliates, has the
unconditional right to directly or indirectly solicit, by means of direct mail,
telephonic or personal solicitation, or otherwise, the Borrowers/Mortgagors of
any of the Mortgage Loans subject to this Agreement, for purposes of prepayment,
refinance, modification of such Mortgage Loans, optional insurance or for any
related or other types of products or services offered by Buyer or any of its
affiliates, for the life of such Mortgage Loans.
From and after the Sale Date, Seller, its agents and affiliates, shall not
directly or indirectly, solicit, and Seller shall exercise reasonable efforts to
prevent any of its agents and affiliates from directly or indirectly soliciting,
by means of direct mail, telephonic, personal solicitation, or otherwise, the
Mortgagors/Borrowers of any of the Mortgage Loans subject to this Agreement, for
purposes of prepayment, refinance, or modification of such Mortgage Loans,
optional insurance or for any related or other types of products or services
offered by Seller or any of its affiliates or agents, for the life of such
Mortgage Loans. Notwithstanding the foregoing prohibition on Seller, it is
understood and agreed that promotions undertaken by Seller or any affiliate or
agent of Seller which are directed at the general public at large or to Seller's
depositors and other non-mortgage customers, including without limitation mass-
mailings based on commercially acquired mailing lists, and newspaper, radio and
16
television advertisements, shall not constitute solicitation under this section.
In spite of the above, Seller does not grant Buyer the right to send a
solicitation that solely solicits the borrower for prepayment, refinance or
modification of a Mortgage Loan which is owned by the Seller. Buyer may,
however, make a solicitation that includes a solicitation for prepayment,
refinance or modification on any and all Mortgage Loans owned by Seller that are
subject to this Agreement, so long as such solicitation includes other types of
products, services, and/or insurance offered by Buyer or any of its affiliates.
Section 3.14. Powers of Attorney
On the Transfer Date, Seller shall deliver to Buyer a special Power of
Attorney, in a form satisfactory to Buyer and its counsel, empowering Buyer to
endorse in the name of Seller, Mortgage Loan payment checks, loss draft checks
relating to Mortgage Loans, and similar items to Buyer. Such Powers of Attorney
shall expire on December 30, 1996.
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Section 3.15. Escrow and Escrow Analysis
3.15.01 Seller shall refund any escrow overages (surpluses) in excess of
$50 as a result of escrow analysis prior to the Transfer Date. All negative
balances will be researched and analyzed prior to transfer.
ARTICLE IV.
Representations and Warranties
Section 4.01. General Representation and Warranties of Seller
Seller hereby represents and warrants that as of the Sale Date and as the
Transfer Date:
4.01.01. Seller is a duly organized and validly existing federally
chartered savings institution.
4.01.02. This Agreement has been duly authorized on behalf of Seller by
all requisite corporate action as a valid and existing obligation of Seller,
enforceable against Seller in accordance with its terms, subject to laws
respecting bankruptcy, receivership, insolvency and other laws affecting
creditor's rights generally.
4.01.03. Seller has good and marketable title to all the Servicing Rights,
and is aware of no adverse claims to or encumbrances on such rights. Seller has
the sole right and authority to sell the Servicing Rights to Buyer and is not
contractually or otherwise obligated to sell the Servicing Rights
17
to any other party. Neither the Mortgage Loans nor the Servicing Rights are
hypothecated, assigned or pledged as collateral for any obligations of Seller,
provided, however, loans for which Seller is the Investor, (exclusive of the
Servicing Rights, therefor) may be hypothecated, assigned or pledged as
collateral.
4.01.04. Neither the execution of this Agreement nor the consummation of
this transaction results in a violation of Seller's articles of incorporation or
bylaws, is a breach of or constitutes an event of default under any contract,
loan agreement, indenture, mortgage or other undertaking to which Seller is
subject, nor violates any outstanding judgment, order, injunction, law, rule or
regulations to which Seller is subject or by which it or its properties may be
bound.
4.01.05. No authorization, approval or consent of or declaration of filing
including, but not limited to, any filing required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, with any governmental authority
or regulatory body, Federal, State or local, is necessary or required of the
Seller in connection with the execution and delivery of this Agreement or the
performance by the Seller, except approval from the Investor for the transfer of
the Servicing Rights to the Buyer.
4.01.06. The Seller's capital level exceeds the minimum regulatory
requirements for a "well capitalized" institution as of the Sale Date.
Section 4.02. Representations and Warranties of Seller Relating to the Pools
and Servicing Rights:
Seller represents and warrants that as of the Sale Date:
4.02.01. Seller has been duly and validly authorized to sell, assign and
transfer the Servicing Rights, and the sale will be in compliance with all laws,
regulations and guidelines under which Seller operates, subject to approval of
such transfer by the Investors.
4.02.02. Except for the relevant servicing contracts, the Seller has not
entered into any contract affecting the Servicing Rights which is or will be
binding to Buyer.
Section 4.03. Representations and Warranties of Seller Relating to the
Servicing of the Mortgage Loans:
Seller represents and warrants that as of the Sale Date and the Transfer
Date:
4.03.01. (i) The unpaid balances of the Mortgage Loans are as stated in
the Mortgage Documents and Mortgage Loan Files to be delivered to Buyer. All
payments received by Seller with respect
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to any Mortgage Loan have been remitted and properly accounted for as required
by the Investors.
(ii) No payment of principal or interest on any such Mortgage Loan
has been forgiven, suspended or rescheduled except as disclosed and no waiver,
alteration or modification has been made to the terms or provisions of such
Mortgage Loans except as allowed by Investor guidelines, regulations or
requirements.
4.03.02. Except as disclosed in Exhibit "F", and by reference made a part
hereof, there are no actions, claims, litigation, lawsuit or governmental
investigations pending or, to the knowledge of the Seller, threatened that
relate to the Servicing Rights, the Mortgage Loans or any of them, other than
usual and customary actions such as foreclosure proceedings.
4.03.03. Seller has and will keep in full force and effect an Errors and
Omissions policy with respect to its servicing operations and a Financial
Institution's Fidelity Blanket Bond in an amount sufficient to comply with
Investor guidelines. Such policies shall be maintained for a period of no less
than one year subsequent to the Transfer Date.
4.03.04. There is in force with respect to mortgaged property subject to
any Mortgage Loan, (i) a hazard insurance policy issued by an insurance carrier,
which provides at a minimum for fire and extended coverage in an amount not less
than the outstanding principal balance of the Mortgage Loan or guaranteed
replacement value of improvements, whichever is less, and, conforms with
Investor guidelines and applicable statutes and (ii) if required by the flood
Disaster Protection Act of 1973, a flood insurance policy in an amount
representing coverage not less than the lesser of: (1) the outstanding
principal balance, or (2) the maximum amount of insurance which is available
under such Act.
4.03.05. Accounts Receivable: The Accounts Receivable are valid and
existing accounts owing to Seller, and are carried on the books of Seller at
values determined in accordance with generally accepted accounting principles,
and are not subject to any setoffs or claims of the account debtor arising from
acts or omissions of, or otherwise known to, Seller.
4.03.06. Missing Social Security Number: Forms W-8 or W-9 The Seller
will, at the Transfer Date, provide a report satisfactory in form and content to
the Buyer to substantiate compliance with Internal Revenue Service and other
applicable U.S. Treasury Department regulations and requirements applicable to
reporting of interest and obtaining Social Security numbers. The Seller also
agrees to provide the certification of an authorized officer of the Seller
certifying that the Seller has complied with all Internal Revenue Service and
U.S. Treasury Department requirements for due diligence in obtaining and
maintaining tax
19
identification numbers for each Mortgage Loan. In addition to the foregoing,
the Seller agrees to reimburse the Buyer for any and all penalties and/or costs
incurred because of Internal Revenue Service and, or, U.S. Treasury Department
requirements for any missing tax identification numbers and forms incurred as a
result of infractions which occurred prior to the Transfer Date.
4.03.07. All Investor Pools have been properly certified and/or recertified
as required by Investor requirements and otherwise comply with all Investor
requirements and regulations.
Section 4.04. Representations and Warranties Relating to Mortgage Loans:
Seller represents and warrants that as of the Sale Date and Transfer Date:
4.04.01. The Mortgage Note and the related Mortgage (or Deed of Trust) are
genuine and each is a legal, valid and binding obligation of the maker thereof,
enforceable in accordance with its terms. All parties to the Mortgage Note and
the Mortgage had legal capacity to execute the Mortgage Note and the Mortgage
and each Mortgage Note and Mortgage have been duly and properly executed by such
parties, and is properly assigned in the name of the Investor.
4.04.02. The terms of each Mortgage Note and Mortgage have not been
modified, no party thereto has been released in whole or in part and no part of
the mortgaged property has been released unless approved by the Investor, if
required. The full original principal amount of the Mortgage has been advanced
to the Mortgagor or paid to third parties on his behalf in accordance with
Investor guidelines, regulations and requirements.
4.04.03. To Seller's knowledge there are no uninsured casualty losses or
casualty losses 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 hazard insurance carrier.
No casualty insurance proceeds have been used to reduce Mortgage Loan balances
or for any other purposes except to make repairs to the mortgaged premises or as
otherwise allowed by the Investor. All damages with respect to which casualty
insurance proceeds have been received by or through Seller have been properly
repaired or are in the process of such repair with such proceeds in accordance
with Investor requirements, regulations and guidelines.
4.04.04. All other documentation with respect to the Mortgage Loans has
been properly and accurately completed and executed and all documents required
by the Investor and necessary to service the Mortgage Loans are in Mortgage Loan
Files or such documentation is held in the Seller's Pool custodial files held by
the Seller's document custodian.
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4.04.05. The PMI premiums, if applicable, have been paid. Seller has not
acted or failed to act in any manner, the effect of which with respect to each
Mortgage Loan would be to invalidate the contract of insurance or guarantee with
the PMI carriers.
4.04.06. Each Mortgage Loan meets, or is exempt from, applicable state or
federal laws, regulations and other requirements pertaining to usury and no
Mortgage Loan is usurious.
4.04.07. Each Mortgage Loan was originated by Seller or purchased by
Seller from an approved third party originator or correspondent in conformity
with the requirements of all applicable federal and state laws, rules or
regulations governing consumer credit and truth-in-lending and Investor
guidelines and requirements. Each Mortgage Loan was made in compliance with all
other laws, rules and regulations pertaining thereto and there occurred no fraud
by the Borrower, Mortgagor or any other party or entity.
4.04.08. Seller has no knowledge of damage to the property securing a
Mortgage Loan by fire, windstorm or other casualty, or any other circumstances
or conditions which would cause any Mortgage Loan to become delinquent, or
adversely affect the value or marketability of the Mortgage Loans. If timely
repair is presently being undertaken with casualty insurance proceeds or an
insurance claim is being processed with the appropriate insurance company, no
breach of this warranty shall occur provided the repaired property securing a
Mortgage Loan is restored to substantially the same condition it was in prior to
the casualty.
4.04.09. No Mortgage Loan has been originated and/or serviced in violation
of (a) any applicable federal or state law or regulation, or (b) the rules,
regulations or requirements of (i) any regulatory agency having jurisdiction
over Seller or (ii) any insurance company in any way associated with any
Mortgage Loan, the effect of which violation, (1) would impair, invalidate or
reduce (i) any Investor approvals, (ii) any private insurer (iii) any title
insurance policy, (iv) any hazard insurance policy, (v) any flood insurance
policy required by the National Flood Insurance Act of 1968 as amended, (vi) any
tax liens or assessment or (vii) any fidelity bond direct surety bond or errors
and omissions insurance required by FNMA and private Mortgage insurer, or any
investor; or (2) would result in a breach of a representation or warranty made
by Seller to Buyer or its successors and assigns hereunder or made by Seller to
any Investor; or (3) would result in Buyer, or its permitted assigns, having to
repurchase or incur curtailment of full reimbursement or enter into any form of
indemnification agreement with respect to such Mortgage Loan, or pay a fine.
4.04.10. Seller shall have properly conducted an escrow analysis for each
Mortgage Loan during the preceding twelve month period ending on the Transfer
Date in compliance with Federal,
21
State and RESPA regulations. All books and conditions 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. Seller shall have delivered
notification to the Mortgagor under each Mortgage Loan of all payment
adjustments resulting from such escrow analysis.
4.04.11. Seller has not been informed that any property subject to a
Mortgage has been or will be condemned, except if such condemnation will not
have a material adverse effect on the value of such property or its status as
security for a Mortgage Loan.
4.04.12. All documents submitted are genuine, and all other
representations as to each such Mortgage Loan are true and correct and meet the
requirements and specifications of all parts of this Agreement.
4.04.13. Seller represents that to the best of its knowledge as of the
Transfer Dates there are no properties securing Mortgage Loans subject to this
Agreement which are subject to any homeowner's assessment which impairs or could
impair the first lien priority on such properties.
4.04.14. All Mortgage Loans have been properly serviced in all material
respects in accordance with Investor guidelines, regulations and requirements.
4.04.15. Where applicable law requires the payment of interest on Escrow
Accounts, all such interest has been properly accrued and credited.
4.04.16. Left blank intentionally
4.04.17. To the best of Seller's knowledge, each Mortgage Loan that may
have been damaged due to earthquake, flood, fire or other natural disaster has
been fully repaired and restored, each loan file will have documentation to
substantiate required major repairs.
4.04.18. Each Mortgage Loan has a lender's policy of title insurance that
extends coverage to its successors and assigns as additional named insured of
said policy of title insurance running for the benefit of the Seller, its
successors or assigns.
4.04.19. All interest rate adjustments with respect to adjustable rate
mortgage loans, which have converted to fixed rate mortgage loans, including
periodic adjustments and the conversion adjustment, have been calculated
properly and made in accordance with the terms of the related Mortgage Note.
22
4.04.20. All interest rate adjustments with respect to adjustable rate
mortgage loans, have been calculated properly and made in accordance with
applicable law.
Section 4.05. Representations and Warranties of Buyer
Buyer hereby represents and warrants as follows:
4.05.01. Buyer is a duly organized federally chartered savings
institution, and validly existing at 23 Pasteur, Irvine, California, 92718, in
good standing. Buyer is in good standing in each jurisdiction in which the
failure to be in such good standing would have a material adverse effect on the
consummation of the transaction contemplated hereby or the Pools, Mortgage or
Servicing Rights.
4.05.02. This Agreement has been duly authorized by all requisite
corporate and regulatory action as deemed necessary and is a valid and existing
obligation of Buyer and is enforceable against Buyer in accordance with its
terms, subject to laws respecting bankruptcy, receivership, insolvency and other
laws affecting creditors' rights generally.
4.05.03. The execution and consummation of this transaction do not result
in a violation of Buyer's articles of incorporation or bylaws, and do not result
in a breach of or constitute an event of default under any contract, loan
agreement, indenture,mortgage or other undertaking to which Buyer is subject nor
violate any outstanding judgment, order, injunction, law rule or regulation to
which Buyer is subject or by which it or it's properties may be bound.
4.05.04. Buyer, is an approved Seller-Servicer, in good standing with the
Investors and has requisite financial criteria and adequate resources necessary
to complete this transaction.
4.05.05. There is no litigation, legal proceedings, or regulatory actions
pending, or threatened against the Buyer which can reasonably be expected to
have a material adverse effect upon this Agreement, or the transaction
contemplated hereunder, or Buyer's ability to perform its obligations hereunder.
4.05.06. The Buyer will service the Mortgage Loans in compliance with all
applicable FNMA/FHLMC and PMI company guidelines and regulations and shall
comply with all applicable state laws after the Transfer Date.
4.05.07. No authorization, approval or consent of, or declaration of
filing including, but not limited to, any filing required under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended, with any governmental
authority or regulatory body, federal, state or local, is necessary or required
of Buyer in
23
connection with the execution and delivery of this Agreement or the performance
by Buyer hereunder, except approval from the investor for the transfer of the
Servicing Rights to Buyer.
4.05.08. The Buyer's capital level is in full compliance with all
Regulatory and Investor requirements as of the Sale Date.
Section 4.06. Survival
All representations and warranties contained herein, and all rights of the
parties arising hereunder, shall remain in force for the life of each Mortgage
Loan and for one (1) year thereafter relative to the Mortgage Loans, Mortgage
Documents and Mortgage Loan files, and for a period of ten (10) years after
Transfer Date(s) relative to the Servicing of the Mortgage Loans.
ARTICLE V.
5.01. Indemnification of Buyer by Seller
5.01.01. Seller hereby agrees to indemnify and hold Buyer harmless,
against any claim, cause of action, suit, proceeding or demand, and any and all
losses, liabilities, costs and expenses of any nature whatsoever associated
therewith ("Buyer's Claims") arising out of, or in connection with, directly or
indirectly, any breach of any representation or warranty or any other obligation
of Seller under this Agreement or otherwise, resulting from any state of facts
and or conditions existing on or before the Transfer Dates involving the
Servicing Rights, Mortgage Loans and/or Pools subject to this Agreement,
including but not limited to:
(A) In the event any Investor requests or demands repurchase of any Mortgage
Loan and/or the Servicing Rights to which are transferred under this
Agreement, for any reason, or requires Buyer to indemnify such Investor
with respect to a Mortgage Loan, Seller shall indemnify and hold Buyer
harmless and make Buyer whole pursuant to any such repurchase and indemnity
required or demanded by Investor. This shall include, but is not limited to
Seller agreeing upon Buyer's demand to repurchase any Mortgage Loan and
Repurchase the Servicing Rights where there occurred fraud by the Borrower,
Mortgagor, or any other party, whether or not Seller had reason to believe
or know that such fraud occurred or existed.
(B) Any and all Buyer's Claims involving misrepresentations, breach of warranty
or nonfulfillment of any agreement or duty of Seller involving the Pools,
Mortgage, Mortgage Loans, or this Agreement and based upon a state of facts
existing on or before the Transfer Dates.
(C) Any and all Buyer's Claims involving unfair collection practices, failure
to disclose, deceptive acts or practices, breach
24
of contract, the collection of usurious interest and the like, pertaining
to the subject matter of this Agreement, and based upon a state of fact
existing on or before the Transfer Date.
(D) Any and all Buyer's Claims involving tax and insurance payments or escrow
deposits relating to the subject matter of this Agreement upon which tax
and insurance escrow deposits are provided for in the instruments securing
the Mortgage Loans and which were payable on or before the Transfer Date.
(E) Any and all actions of prior owners or servicers of the Mortgage Loans and
of Seller, its employees, representatives and agents, whether by omission,
acts, or commission, pertaining to the subject matter of the Agreement and
occurring prior to the Transfer Date which materially adversely affect the
enforceability of the instruments securing a Mortgage Loan or the
collectability of the Mortgage Notes.
(F) Any misrepresentation made by Seller pursuant to this Agreement, or in any
schedule, statement or certificate furnished by Seller pursuant to this
Agreement.
(G) Any breach of a representation or warranty by Seller, or the nonfulfillment
of any covenant or obligation of Seller contained in this Agreement, or in
any schedule, statement or certificate furnished by Seller pursuant to this
Agreement.
(H) This indemnity of the Buyer by the Seller, provided in this Article V.
shall remain in full force and effect regardless of any investigation made
by Buyer or its representatives.
5.01.02. Seller has disclosed to Buyer that it is a defendant in several
individual and purported class actions concerning the manner in which Seller has
adjusted the applicable interest rate or other terms on adjustable rate Mortgage
Loans and that there is a potential for additional similar or different claims
or actions to be made or brought with respect to other adjustable rate Mortgage
Loans (collectively, the "ARM Claims"). Seller hereby agrees to indemnify,
defend, and hold harmless Buyer and Buyer's parent companies, subsidiaries,
affiliates, officers, directors, employees and agents from and against all ARM
Claims and any and all losses, liabilities, damages, punitive damages,
assessments, liabilities, judgments, settlements, fees, fines, court costs,
attorneys' fees and other costs and expenses of any nature whatsoever associated
herewith, including, without limitation, all ARM Claims that directly or
indirectly arise from, are associated with or relate to (a) Seller's servicing
of the adjustable rate Mortgage Loans on or before the Transfer Date(s) and (b)
after the Transfer Date(s), Buyer continuing to service the adjustable rate
Mortgage Loans substantially in the same manner as Seller did on or before the
Transfer Date(s), provided that Buyer provides reasonably prompt notice of any
such ARM Claims to Seller and provides reasonable
25
cooperation to Seller and its counsel in the conduct of any defense. Seller
shall have the sole right and responsibility to select counsel to defend the ARM
Claims and such counsel may jointly represent Seller and Buyer, provided that
any such counsel shall be reasonably acceptable to Buyer. Buyer acknowledges at
the present time that it does not object to the following law firms: Gibson,
Dunn and Crutcher: Manatt, Phelps & Phillips and Sullivan & Cromwell. Anything
herein to the contrary notwithstanding, Seller's obligation to indemnify, defend
and hold harmless Buyer with respect to the ARM Claims shall include, without
limitation, (i) any restitution amounts ordered or requested by any regulatory
agency with authority over Seller or Buyer as well as any civil money penalties
and other costs and expenses incurred by Buyer and (ii) all audit, adjustment
and correction, documentation and other expenses and costs relating to the
resolution of any ARM Claim.
The parties acknowledge, recognize and agree that the Seller's manner of
servicing of the adjustable rate Mortgage Loans on or before the Transfer
Date(s) shall, as a practical matter, require the Buyer to service such Mortgage
Loans in a similar fashion after the Transfer Date(s). Accordingly, the parties
agree that the provisions of this section 5.01.02 shall apply notwithstanding
the fact that Buyer continues, after the Transfer Date(s), to service the
adjustable rate Mortgage Loans in substantially the same manner as Seller did on
or before the Transfer Date(s).
Seller's indemnification obligation under this Section 5.01.02 shall be a
payment obligation and not merely a reimbursement obligation, it being
understood that the parties have a "contrary intention" with respect to the
provisions of paragraph 2 of Section 2778 of the California Civil Code as in
effect on the date of this Agreement.
5.01.03. The indemnity of the Buyer by the Seller provided in this Section
5.01 shall remain in full force and effect for as long the representations and
warranties survive.
5.02. Indemnification of Seller by Buyer
5.02.01 Buyer hereby agrees to indemnify and hold Seller harmless against
any claim, cause of Action, suit proceedings or demand, and any and all losses,
liabilities, costs and expenses of any nature whatsoever associated therewith
Seller's ("Claims") arising out of, or in connection with, directly or
indirectly, and breach of any representation or warranty or any other obligation
of Buyer under this Agreement, any state of facts existing after the Transfer
Date which did not exist prior to the Transfer Date, involving the Servicing
Rights, Mortgage Loans and/or Pools subject to this Agreement, whether or ont
such Seller's Claims relate to the Servicing Rights, or this Agreement including
but not limited to:
26
(A) Any and all Seller's Claims involving unfair collection practices, failure
to disclose, deceptive acts or practices, breach of contract, the collection of
usurious interest and the like, pertaining to the subject matter of this
Agreement, and based upon a state of facts existing after the Transfer Date,
which did not exist prior to the Transfer Date.
(B) Any misrepresentation made by Buyer pursuant to this Agreement, or in any
schedule, statement or certificate furnished by Buyer pursuant to this
Agreement.
(C) Any breach of warranty by Buyer, or the nonfulfillment of any covenant of
buyer contained in this Agreement, or in any schedule, statement or certificate
furnished by Buyer pursuant to this Agreement.
(D) Any and all actions of Buyer, its employees, representatives and agents,
whether by omission or commission, pertaining to the subject matter of the
Agreement and occurring after the Transfer Date, which did not exist prior to
the Transfer Date, which materially adversely affect the enforceability of the
instruments securing a Mortgage Loan or the collectability of the Mortgage
Notes.
Section 5.03. Notification of Claims for Indemnification
5.03.01. Buyer agrees to promptly notify Seller in writing of the
existence of any fact known to Buyer giving rise to any obligations of Seller
under Section 5.01.01, and any fact known to Buyer which may give rise to any
such obligations. Buyer agrees promptly to notify Seller of the making of such
Claim or the commencement of such action by a third party as and when same
becomes known to Buyer. Seller shall be entitled to participate in the defense
of any action brought by a third party against Buyer, which may give rise to any
obligation of Seller, and, at Buyer's and Seller's election, to direct the
defense thereof at Seller's own expense. In the event that any cost, expense,
judgment or award is incurred by or levied against Buyer where Seller has
undertaken the defense of any such action, Seller shall pay or reimburse the
full amount of any such cost, expense, judgment or award to or for the benefit
of Buyer. Seller shall have thirty (30) days from receipt of such notice, in
accordance with Section 6.05, to cure the condition or state of facts giving
rise to any obligations of Seller under Section 5.01.01. Unless Buyer or Seller
is required by an Investor to repurchase a Mortgage Loan or indemnify an
Investor with respect to a Mortgage Loan in the meantime, in no event shall
Seller be required to repurchase any Mortgage Loan, pay any money or tender any
performance under Section 5.01.01 until the expiration of this thirty (30) day
period. If Seller elects to defend any actions in accordance with this Section,
Seller shall not be liable under Section 5.01.01 for the payment of legal fees
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of Buyer with respect to such action, from and after the date that Seller
assumes such defense.
5.03.02 Seller agrees to promptly notify Buyer in writing of the existence
of any fact know to Seller giving rise to any obligations of Buyer under Section
5.02.01, hereof or elsewhere in this Agreement and, in the case of any Claim or
any litigation brought by a third party, any fact known to Seller which may give
rise to any such obligations. Seller agrees promptly to notify Buyer of the
making of such claim or the commencement of such action by a third party as and
when same becomes known to Seller. Buyer shall be entitled to participate in
the defense of any action brought by a third party against Seller which may give
rise to any obligation of Buyer, and, at its election, to direct the defense
thereof at its own expense. Buyer shall have thirty (30) days from receipt of
such notice, in accordance with Section 6.07, to cure the condition or state of
facts giving rise to any obligations of Seller under Section 5.02.01. In no
event shall Buyer be required to pay any money or tender any performance under
Section 5.02.01 until the expiration of this thirty (30) day period. If Buyer
elects to defend any actions in accordance with this Section, Buyer shall not be
liable under Article V for the payment of legal fees and expenses of Seller with
respect to such action, from and after the date that Buyer assumes such defense.
5.03.03 For purposes of Article V, the term "Mortgage Loan(s)" shall
include within its definition Foreclosure Mortgages if any Foreclosure Mortgages
are transferred to Buyer pursuant to this Agreement.
5.03.04 Should Seller fail to meet the requirements to qualify as an
adequately capitalized institution under FDICIA, (Federal Deposit Insurance
Corporation Improvement Act) or fail to meet any other minimum regulatory
capital requirement to which it is subject, Buyer may offset against any amounts
due to Seller hereunder with respect to any Mortgage Loans owned by Seller and
serviced by Buyer after the Transfer Date(s) ("Seller Owned Mortgage Loans")
such amounts as may be owed by Seller to Buyer under Section 5.01 of this
Agreement. Seller hereby grants to Buyer a security interest in and to all
amounts due to Seller hereunder with respect to the Seller Owned Mortgage Loans
as further security for Seller's performance of all of Seller's obligations
under Section 5.01 of this Agreement. In the event of any default by Seller in
the performance of any of its obligations under Section 5.01 of this Agreement,
Buyer may exercise any of the remedies provided to a secured creditor under the
California Commercial Code. Buyer's right of offset under this Section 5.03.04
and the security interest created by this Section 5.03.04 shall survive any
sale, transfer, pledge or other disposition of all or any interest in any Seller
Owned Mortgage Loan, and Seller shall so notify, in writing, each purchaser of
all or any such interest. Seller shall require each such purchaser and its
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successors) to similarly notify subsequent purchasers. Seller shall require
each such purchaser to assume, in writing, joint and several liability, for all
of Seller's obligations under Section 5.01 of this Agreement. Seller shall
require each such purchaser (and its successors) to similarly require subsequent
purchasers to assume in writing, joint and several liability under Section 5.01
of this Agreement. No such assumption of liability shall release Seller or any
subsequent purchaser from liability under section 5.01 of this Agreement.
ARTICLE VI.
Loan Repurchase
Section 6.01. Seller's Repurchase After Sale Date.
If Buyer should be required or demanded to repurchase any Mortgage Loan by
any Investor after the Sale Date for reasons resulting from improper, incorrect,
missing and or fraudulent documentation related to a Mortgage Loan, of a breach
of a Seller's representation(s) and warranties hereunder or Seller's improper
pooling, errors, omissions, origination or servicing of such Mortgage Loan prior
to the Transfer Date or for reasons relating to the certification status of the
pools, Seller, at the request of Buyer, shall provide Buyer with funds for the
repurchase of said Mortgage Loan on the earlier of thirty (30) days of Buyer's
written demand or the date by which the Investor has requested Buyer to
indemnify or to repurchase the Mortgage Loan. The funds to be provided by Seller
to Buyer pursuant to this section shall for the first five years, after the Sale
Date, be equal to the then current unpaid principal balance times 1.142% plus
------
the unpaid principal balance and any premium for the Mortgage Loan requested and
paid for by the Investor, accrued unpaid interest paid by Buyer to Investor,
plus any unpaid advances. Subsequent to the end of the five year period after
the Sale Date, repurchases would be consummated by payment of all unpaid
advances then in existence, reimbursement of any premiums to Investor, the
unpaid principal balance and accrued, unpaid interest paid by Buyer to Investor.
Section 6.02 Seller' Right to Contest Repurchase
Seller shall have the right to contest any repurchase request of any Investor,
pursuant to the Investor requirements and within the Investor time limits as
they may be extended. However, if Buyer, pursuant to an Investor request, has
to repurchase or suffers any damages in the meantime, then Seller shall,
notwithstanding any contest or defense, repurchase the Mortgage Loan and
otherwise make Buyer whole at the time of Buyer' request.
Section 6.03 Buyer's re-assignment of Mortgage Loan to Seller
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Promptly upon any repurchase of a Mortgage Loan by Buyer using Seller funds
pursuant to 6.01, Buyer shall take all appropriate actions, execute all
necessary instruments and documents to re-assign such Mortgage Loan and related
Servicing Rights to Seller and return all Mortgage Loan Files and Records to
Seller.
Section 6.04 Buyer's Repurchase
If Buyer should be required to repurchase any Mortgage Loan by any Investor, at
any time after the Sale Date for reasons resulting from the improper servicing,
error or omission of Buyer, then Seller shall not be responsible for the
repurchase of said Mortgage Loan.
Section 6.05 Seller's Cure Rights
Within 30 days of Seller's receipt of a notice from Buyer of a claim under
Article V or a repurchase or indemnity request by an investor, Seller shall cure
the condition or state of facts giving rise to such claim or if a cure cannot
reasonably be completed such within such 30 days period, Seller shall have
commenced a cure for and hereby agrees to diligently pursue such cure to
completion provided, however, Seller may continue to pursue such cure for a
reasonable time beyond the 30 days period for so long as Buyer is not required
by an investor to repurchase or indemnify the Investor with respect to the
Mortgage Loan which is the subject of the cure. However, if Buyer, pursuant to
an Investor request, has to repurchase, indemnify or if Buyer suffers any
damages in the meantime, then Seller shall, notwithstanding any cure or cure
period, repurchase the Mortgage Loan and otherwise make Buyer whole at the time
of Buyer's request.
ARTICLE VII.
Miscellaneous Provisions
Section 7.01. Integration
This Agreement constitutes a final and complete integration of the
Agreement of the parties respecting the subject matter hereof, thereby
superseding all previous or contemporaneous oral and written agreements. There
are no contemporaneous oral agreements relating to the subject matter of this
Agreement.
Section 7.02. Modification
7.02.01. This Agreement may not be changed orally but only by an agreement
in writing signed by all parties. 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
30
impair the right of the waiving party to require observance, performance or
satisfaction of either (1) the same term or condition as it applied to a
subsequent or previous occasion of (2) any other term or condition hereof.
Section 7.03. Severability
If any portion of this Agreement is declared by a court of competent
jurisdiction to be invalid or unenforceable, such declaration shall not affect
the validity of the remaining provisions.
Section 7.04. Successors
This Agreement shall inure to the benefit of and be binding upon the heirs,
representatives, successors and assigns of each party.
Section 7.05. Governing Law
7.05.01. This Agreement is entered into and its construction and rights,
remedies and obligations arising by, under, through, or an account of it shall
be governed by the laws of the State of California.
Section 7.06. Assignability
Buyer shall have the right, without Seller's consent, to assign and
transfer this Agreement and all rights, obligations, benefits, privileges and
Agreements incident of Buyer provided, however, Buyer shall not be permitted to
assign and transfer this Agreement without Seller's consent, such consent not to
be unreasonably withheld, prior to the payment by Buyer to Seller of 100% of the
purchase price, and provide further that the Servicing Rights for Mortgage Loans
for which Seller is the Investor may not be assigned without Seller's consent,
such approval not to be unreasonable withheld.
Section 7.07. Notices
Any notice provided for or permitted hereunder shall be in writing and sent
by certified mail, return receipt requested, addressed to the parties at their
respective addresses set forth in the preamble hereof. All such notices shall
be addressed to the attention of the Senior Vice President of Seller and Vice
President, Loan Administration for the Buyer. The giving of notice shall be
complete three (3) Business Days after depositing of it, properly addressed and
postage prepaid, with the United States Postal Service. Failure to conform to
the requirement that mailing be done by certified mail shall not defeat the
effectiveness of notice actually received by the addressees, but such notice
shall
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be deemed given only upon such actual receipt. Address for notices may be
changed by giving notice hereunder.
Section 7.08. Attorney Fees, Costs, etc.
If any action at law or in equity, including an action for declaration
relief, is brought to enforce or interpret the provisions of this Agreement, the
prevailing party shall be entitled to recover reasonable attorney's fees 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.
Section 7.09. Independent Contractor
At no time shall Seller represent that it is acting as an agent for or on
behalf of Buyer. At all times, Seller shall act as an independent contractor.
At no time shall Buyer represent that it is acting as an agent for or on behalf
of the Seller. At all times Buyer shall act as an independent contractor.
Section 7.10. Broker's Fees
Each party will indemnify the other against claims by any person claiming a
finder's fee, commission, transfer or termination fee in connection with the
negotiation or consummation of this Agreement or the transaction contemplated
hereby. The parties acknowledge that a fee is due Countrywide Servicing
Exchange and that Seller shall pay such fee.
Section 7.11 Captions
Section captions in this Agreement are for ease of reference only and shall
be given no substantive or restrictive meaning or significance whatsoever.
Section 7.12. Counterparts
This Agreement may be executed in multiple counterparts, each of which
shall be an original regardless of whether all parties sign the document.
Regardless of the number of counterparts, they shall constitute only one
Agreement.
Section 7.13. Exhibits to the Agreement
The exhibits to this Agreement are hereby incorporated and made a part
hereof and are an integral part of this Agreement.
Section 7.14. Transfer Standards
32
The parties each agree to use its best efforts to execute the transfer of
the Servicing Rights contemplated in accordance with MBA's "Servicing Transfer
Standards of Practice", applicable laws and regulations, and Federal guidelines.
Transfer procedures required by Buyer and to be followed by Seller are attached
hereto as Exhibit E and by reference made a part hereof.
Section 7.15. Documentation
7.15.01. Prior to the Transfer Date, Seller shall deliver to Buyer a
certification from the Seller or its Custodian that all Pools are documented and
certified in accordance with Investor guidelines and applicable law and
regulations. Seller will deliver a copy of the inventory of Pools with such
certification. Such inventory and certification shall be in a form and content
satisfactory to Buyer. Seller will have their document custodian(s) contact
Buyer by letter to provide a status report of all Pools under their control that
are to be transferred as contemplated hereunder. Such custodian status reports
(if applicable), will be delivered to Buyer each month until the transfer is
completed and such reports will commence no later than thirty (30) days after
the Transfer Date.
7.15.02. Not later than the Transfer Date, Seller shall deliver to Buyer a
certification from the Seller that all original documents including the Mortgage
Note, PMI, title policy assignments to Investor, intervening assignments not
properly held by the custodian or Investor are held by the Seller for each of
the Mortgage Loans, and all such documents have been inventoried and accounted
for by the Seller. Seller shall deliver to Buyer a copy of said inventory with
such certification and inventory in a form and content satisfactory to the
Buyer, by placing a copy of all such documents in the Seller's servicing file,
identified with the Seller's loan number, for delivery to Buyer together with a
copy of said inventory on the Transfer Date.
7.15.03. All servicing files will be organized and fastened on file
folders that are clearly labeled with the Mortgagor's name and loan number as
specified by Buyer.
7.15.04. Original loan documents for each loan held by the custodian will
be filed in a separate file, labeled with the loan and Pool/PC number (if
applicable). In addition, all Pool documents will be filed in a separate
"Master Pool File" for each Pool held by the custodian, in compliance with all
Investor guidelines.
7.15.05. Seller shall provide Buyer a schedule indicating the location of
all the original documents described in Addendum C for the Mortgage Loans not
later than the Transfer Date.
Section 7.16. Termination
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In the event that, (i) the Seller is unable to obtain the necessary
Investor approvals to transfer the Servicing Rights to the Buyer, and such
Mortgage Loans that cannot be transferred, exceed 5% of the total, or (ii) the
Seller is unable to transfer the Servicing Rights as a result of actions taken
by regulatory authorities with appropriate jurisdiction, this Agreement shall
terminate. Upon such termination, (i) all right, title and interest in the
Servicing Rights shall revert to Seller, (ii) Seller shall refund to Buyer any
and all portions of the Purchase Price, together with interest, previously paid
to the Seller and (iii) the Buyer shall return to the Seller all Mortgage
Documents and Records previously delivered to Buyer by Seller at Seller's
expense, (iv) Buyer shall promptly execute and deliver to Seller for filing all
documents necessary to terminate the assignment to Buyer and transfer to Seller
all of Buyer's right, title and interest in the Servicing Rights and (v) Buyer
shall refund to Seller all servicing fees received by Buyer during the Interim
Period and Seller shall refund all Interim subservicing fees.
IN WITNESS WHEREOF, each of the undersigned parties to this Agreement has cause
this Agreement to be duly executed by one of its duly authorized officers as of
this 15th day of May, 1995.
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Fidelity Federal Bank
SELLER: /s/ Julie Chacon
--------------------------
Julie Chacon
Senior Vice President
ATTEST:
Name: /s/ Robert Dalton
---------------------------
Its: Asst Secretary
----------------------------
Western Financial Savings Bank,
BUYER: /s/ Barbara J. Darling
---------------------------
Barbara J. Darling
Vice President
Loan Administration
ATTEST:
Name: /s/ Tina Dunstan
--------------------------
Its: Asst Vice President
---------------------------
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