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Exhibit 10.3
MORTGAGE WAREHOUSE LOAN AND SECURITY AGREEMENT
THIS AGREEMENT entered into effective as of this day, MAY 31, 2001, by and
between DUXFORD FINANCIAL, INC. AND/OR BAYPORT MORTGAGE, L. P., A CALIFORNIA
CORPORATION with offices at 1300 DOVE STREET, SUITE 200 NEWPORT BEACH, CA 92660
(hereinafter sometimes referred to as "Borrower") and First Tennessee Bank, 165
Madison Ave., Memphis, Tennessee (hereinafter referred to as "Bank").
W I T N E S S E T H
WHEREAS, Borrower is engaged in the business of originating and/or acquiring
mortgage loans secured by mortgages upon improved, residential real property,
including mortgage loans insured or to be insured by the Federal Housing
Administration (FHA), loans guaranteed or to be guaranteed by the Veterans
Administration (VA) and conventional loans and
WHEREAS, Borrower desires to borrow money from Bank under the Line of Credit to
assist in funding the origination and/or acquisition of such Eligible Mortgage
Loans, granting unto the Bank a first lien security interest in (i) each such
Eligible Mortgage Loan (ii) all contract and related rights with respect to each
such Lock related thereto (iii) the proceeds from the sale of such Eligible
Mortgage Loans (iv) all deposit accounts of Borrower maintained at Bank and (v)
other collateral (collectively, "Collateral") to secure such Line of Credit, and
the Bank is willing to provide financing to assist in funding the origination
and/or acquisition of such Eligible Mortgage Loans with advances under the Line
of Credit on the security of such Collateral and
WHEREAS, this Agreement has been entered into by the parties for the purpose of
confirming the terms and conditions under which all advances under the Line of
Credit shall be made by the Bank on behalf of the Borrower to assist in funding
the origination and/or acquisition of such Eligible Mortgage Loans.
NOW, THEREFORE, the parties mutually agree as follows:
1. DEFINITIONS
"Advance" shall mean any provision of money or credit to or for the benefit of
Borrower pursuant to this Agreement.
"Advance Amount" shall mean the lesser of:
1. the sum of (a) the unpaid principal balance of the Eligible Mortgage
Loan minus (2) all amounts shown on the HUD-1 which are to be
disbursed to, or retained by, the Borrower plus (3) all amounts
shown on the HUD-1 to be paid by the Borrower to arms-length third
parties; OR
2. the unpaid principal balance of the Eligible Mortgage Loan; OR
3. 99% of the Purchase Price to be paid by the Qualified Investor.
"Advance Date" shall mean the date the Closing Check is presented to Bank for
payment in accordance with Section 2.3. hereof.
"Advance Documents" with respect to any funding, shall mean the documentation
described in Section 2.3.5.
"Advance Request and Supplemental Closing Instructions" shall mean that document
to be executed by Borrower and Closing Agent with respect to each Eligible
Mortgage Loan to be funded hereunder and which shall serve as a cash
advance request hereunder by Borrower, in the form of Exhibit A attached
hereto, which may be changed from time to time at the sole discretion of
the Bank.
"Bailee Letter" shall mean a letter in the form of Exhibit C attached hereto
which shall be attached to the front of every Mortgage Note by the Bank and
used by the Bank and its bailees for the purposes stated therein.
"Bank" shall mean First Tennessee Bank, Memphis, Tennessee.
"Business Day" shall mean 8:30 AM until 4:00 PM, Central Time, any Monday,
Tuesday, Wednesday, Thursday or Friday on which the Bank is open for the
transaction of business in Memphis, Tennessee. Closing Checks in the form
of checks drawn on the Warehouse Line of Credit presented for payment
between 4:00 PM and 8:30 AM shall be included in the prior Business Day.
Closing Checks in the form of wire transfer requests drawn on the Warehouse
Line of Credit received by First Tennessee after 2:00 PM shall be included
in the following Business Day. All payments to the Warehouse Line of Credit
received after 4:00 PM shall be included in the following Business Day.
"Closing Agent" shall mean the attorney or title company designated by the
Borrower to close the Eligible Mortgage Loan on behalf of Borrower.
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"Closing Check" shall mean a check or wire transfer drawn on the Warehouse
Clearing Account and payable to the closing agent for the sole purpose of
closing or acquiring an Eligible Mortgage Loan.
"Collateral" shall mean each Mortgage Note and such other collateral as may be
pledged to Bank pursuant to this Agreement as described in section 2.8.1.
"Combined Net Worth" shall mean that sum calculated as follows from borrower and
guarantor financial statements bearing the same date as each other:
Borrower's Tangible Net worth plus Guarantor(s)' Tangible Net Worth minus
the sum of the following, if included in the Guarantor's Tangible Net
Worth: assets held jointly unless all owners guaranty this debt,
Guarantor's equity in the Borrower, receivables due from the Borrower,
unverified and unrealized appreciation in personal residence, equity in
automobiles and other personal property, and unsecured receivables, MINUS
payables due to Borrower.
"Commitment Letter" shall mean that letter from the Bank to the Borrower which
describes the terms under which this Agreement is being entered into and
which shall be considered a part hereof, a copy of which is attached hereto
as Exhibit "F".
"Eligible Mortgage Loan" shall mean each residential loan evidenced by a
Mortgage Note, Mortgage and related documents, which has been originated or
acquired by the Borrower, and which has been, or is to be, pledged to the
Bank as Collateral for the Line of Credit, and which meets all criteria
specified in the Schedule of Eligible Mortgage Loan Criteria attached
hereto as Exhibit "G", and which may change from time to time at the sole
discretion of the Bank.
"Eligible Prime Mortgage Loan" shall mean an Eligible Mortgage Loan which
conforms to FHA, VA, FHLMC, or FNMA guidelines. An Eligible Mortgage Loan
which conforms to all FNMA guidelines except maximum loan size and debt
ratios shall be considered to be an Eligible Prime Mortgage Loan.
"Eligible Sub-prime Mortgage Loan" shall mean any Eligible Mortgage Loan which
is not an Eligible Prime Mortgage Loan.
"Funding Date" shall mean the earlier of:
1. the date on the face of the Closing Check, which shall be equal to
the date the proceeds from the Eligible Mortgage Loan are disbursed
by the Closing Agent; OR
2. the date the Closing Check is deposited into an account of the
Closing Agent.
"Guarantor(s)" shall mean NONE.
"Line of Credit" or "Loan" shall mean the credit facility governed hereby.
"Liquidity" shall mean the sum of all Borrower and Guarantor assets owned and
held in cash or accounts which can be converted to cash within 30 days,
including but not limited to checking accounts, money market or savings,
certificates of deposit, and marketable securities. IRA's owned and held in
assets which can be converted to cash within 30 days will be discounted by
a factor of 40%.
"Loan Account" shall mean that account established by the Bank pursuant to
Section 2.2. hereof.
"Lock" with respect to any Eligible Mortgage Loan shall mean the obligation of a
Qualified Investor to Purchase such Eligible Mortgage Loan upon its
presentation to the Qualified Investor by or on behalf of the Borrower, as
well as the full amount which such Qualified Investor has committed to pay
for the same.
"Master Promissory Note" shall mean that note of even date herewith described in
Section 2.2., a copy of which is attached hereto as Exhibit "B", and any
extensions, modifications, and renewals thereof.
"Mortgage" shall mean or refer to the deed of trust, mortgage or other
instrument granting to the Borrower, or the holder of such deed of trust,
mortgage or instrument, a mortgage lien upon the property therein
described.
"Mortgage Note Rate" shall mean the interest rate stated on each Mortgage Note.
"Mortgage Note" shall mean an original promissory note evidencing an Eligible
Mortgage Loan.
"Mortgagor" shall mean that person or persons executing and delivering the
Mortgage Note and Mortgage.
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"Purchase" shall mean the act of a Qualified Investor or other person or entity
providing funds and remittance advice to the Bank in accordance with the
wire transfer instructions set forth on the applicable Bailee Letter in an
amount and in a manner sufficient to cause Bank to release its security
interest as provided hereunder.
"Purchase Date" shall mean the Business Day upon which the Bank receives both 1)
the Purchase Price, plus all accrued interest and other payments, if any,
due on the Purchase of the Eligible Mortgage Loan, and 2) remittance
instructions pertaining to such purchase proceeds.
"Purchase Price" shall mean the dollar amount the Qualified Investor has
contracted or agreed to pay for the Purchase of the particular Eligible
Mortgage Loan, not including any premium or other sums allocated to or for
the purchase of servicing rights and not including any sums for any
interest that has or will have accrued on the Eligible Mortgage Loan from
the date it is closed by the Closing Agent until the date the Eligible
Mortgage Loan is actually purchased by the Qualified Investor.
"Qualified Investor" shall mean an investor listed on Exhibit E attached hereto
and approved by the Bank to Purchase Mortgage Loans.
"Tangible Net Worth" shall mean total assets minus total liabilities MINUS the
sum of: goodwill, organization costs, receivables due from parties related
to this credit, and other assets as specified by Bank as unacceptable, PLUS
payables due to parties related to this credit, all measured in accordance
with GAAP.
"Termination Date" shall mean the first to occur of (i) the maturity date stated
in the Master Promissory Note, or (ii) the occurrence of an Event of
Default.
"Warehouse Clearing Account" shall mean that account at Bank on which the
Closing Checks will be drawn to fund, in whole or in part, the closing
and/or acquisition of Eligible Mortgage Loans.
All financial terms used herein shall have the meaning ascribed thereto in
accordance with generally accepted accounting principles.
2. PLEDGED LOANS
2.1. Maximum Line. The maximum Line of Credit under this Agreement shall not
exceed the sum of FIFTEEN MILLION DOLLARS ($15,000,000.00). Bank and
Borrower agree that $15,000,000.00 of the maximum $15,000,000.00 shall be
offered by the Bank on a committed basis, and that $0.00 of the maximum
$15,000,000.00 shall be offered by the Bank on an uncommitted basis.
Subject to the foregoing, the total amount of funds to be provided to the
Closing Agent on Borrower's behalf to assist in funding the origination of
an Eligible Mortgage Loan shall not exceed the Advance Amount, unless
otherwise agreed upon by Bank in writing. Bank shall have no obligation to
make any advance under this Line of Credit against the security of any
residential loan, the original principal amount of which exceeds five
hundred thousand dollars ($500,000). In no case shall Bank have any
obligation to make any Advance under this Line of Credit to the extent that
such action may, in the judgment of the Bank, violate the legal lending
limits applicable to Bank imposed by any applicable laws, rules,
regulations or interpretations thereof. Borrower is aware that Advances
made under the Line of Credit must be aggregated with other loans to
Borrower and certain affiliates of Borrower for purposes of calculating
Bank's legal lending limit. Borrower represents and warrants to Bank that
the Loans To One Borrower Certification submitted by it to Bank in
connection with its application for this financing arrangement is true,
complete and accurate in all material respects, and that Borrower does not
exceed Bank's loan to one borrower limits.
2.2. Loan Account. Borrower shall execute a Master Promissory Note in the amount
of the maximum Line of Credit ($15,000,000.00) and Bank shall maintain a
Loan Account for the Borrower which shall be debited to the extent of any
loans to or Advances for the account of Borrower made by Bank pursuant to
this Agreement. Borrower's Loan Account shall be credited with the proceeds
of the sale of Eligible Mortgage Loans to Qualified Investors which are
received in good funds by Bank, and with such other funds actually received
by Bank to reduce Borrower's indebtedness under the Line of Credit. Bank
shall render to Borrower a monthly statement of Borrower's Loan Account
established pursuant to this Agreement showing all debits and credits
thereto, which statement of account shall be considered correct and binding
upon Borrower unless Borrower should give to Bank, within seven (7) days
from receipt of such statement, written notice of any exceptions thereto,
each of which exception shall be specified in such notice. It is the
intention of the parties that Borrower's indebtedness under this Agreement
shall be evidenced by this Agreement and the Master Promissory Note.
2.3. Funding of Line. Bank will provide a Warehouse Clearing Account upon which
Borrower will draw funds either by check or by wire transfer in an amount
equal to the Advance Amount of the Eligible Mortgage Loan to be closed or
acquired in accordance with Bank's then-current funding procedures, which
procedures Bank may change from time to time at its sole discretion.
Advances under the Line of Credit will be made by the Bank (assuming all
conditions
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precedent thereto have been met or waived by the Bank) to cover the Closing
Check(s) given by Borrower to close or acquire the applicable Eligible
Mortgage Loans. The Bank will charge a warehouse fee of $45.00 for each
Advance under the Line of Credit funded via check. The Bank will charge a
warehouse fee of $175.00 for each Advance under the Line of Credit funded
via wire transfer. However, the Bank's obligation to fund Advances under
the Line of Credit to cover the Closing Check presented to Bank in respect
to any Eligible Mortgage Loan is subject to satisfaction of the following
conditions precedent:
2.3.1. The Borrower's maximum Line of Credit shall not be exceeded
2.3.2. There shall exist no condition or event constituting an Event of
Default as defined in Article 6 hereof or under the Master
Promissory Note
2.3.3. The warranties included in Article 3 hereof shall be true and
correct as though made at such time of presentment and Borrower
shall have performed, or caused to have been performed, all of its
covenants under this Agreement through such time
2.3.4. Borrower shall have furnished the following documents to Bank with
respect to each Eligible Mortgage Loan to be closed and funded
hereunder no later than the date the Eligible Mortgage Loan is
scheduled to be closed or acquired:
2.3.4.1. A copy of the Advance Request and Supplemental Closing
Instructions, completed in all material respects and
2.3.4.2. Such other documentation as to any Eligible Mortgage
Loan as the Bank may reasonably request.
2.3.5. Borrower shall deliver or have caused the Closing Agent to deliver
to the Bank the following documents with respect to the Eligible
Mortgage Loan closed and to be funded hereunder within two (2)
Business Days following the closing of such Eligible Mortgage
Loan:
2.3.5.1. The Advance Request and Supplemental Closing
Instructions on the Bank's then current form, completed
in all material respects and manually executed by both
the Borrower and the Closing Agent
2.3.5.2. An executed assignment in blank of the Mortgage,
recordable but unrecorded
2.3.5.3. A copy of the Lock pertaining to each Eligible Prime
Mortgage Loan
2.3.5.4. A copy of the Underwriter's approval pertaining to each
Eligible Sub-prime Mortgage Loan
2.3.5.5. A copy of the HUD-1 Settlement Statement
2.3.5.6. A Certified True Copy of the Mortgage
2.3.5.7. The original Mortgage Note manually executed by the
Mortgagor under the Eligible Mortgage Loan, endorsed in
blank, along with all addenda, riders, powers, and/or
other documents which together constitute the entire
negotiable Mortgage Note, plus a photocopy of the
original Mortgage Note along with all addenda, riders,
etc., and
2.3.5.8. Such other documentation as to any Eligible Mortgage
Loans as the Bank may have reasonably requested in
writing, including any of the same as may be required by
any Qualified Investor or any guarantor or purchaser of
such Eligible Mortgage Loans.
All documentation shall be satisfactory in form and substance to
Bank. All such documentation requiring the signature of the
Borrower shall have been signed by a duly authorized officer of
Borrower, and Bank shall be and it is hereby so authorized, to
rely upon any signature on any such document as having been
authorized. Bank may, in its sole and absolute discretion, agree
to and make an Advance to cover the Closing Check presented with
regard to an Eligible Mortgage Loan(s) regardless of whether all
of the documents required by Section 2.3.5. have been delivered to
Bank within two (2) Business Days after the Eligible Mortgage Loan
is closed if the requirements of Sections 2.3.1. through 2.3.4.
have been met provided, however, that Bank's determination to
waive the requirements of the delivery of the Advance Documents to
the Bank in accordance with Section 2.3.5. and to Advance funds
sufficient to cover the Closing Check issued to the Closing Agent
in respect to the particular Eligible Mortgage Loan(s) shall not
be deemed to be or construed as a waiver of such
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term or condition with respect to any other Eligible Mortgage Loan
or Loans, nor shall such operate as a waiver of Borrower's breach
of this Agreement by its failure to fulfill all conditions
precedent. In such event, notwithstanding Bank's decision to make
the Advance sufficient to cover the Closing Check, Bank still may,
in its sole and absolute discretion, declare an Event of Default
hereunder and take such steps or actions hereunder or under the
Master Promissory Note as are available, including, but not
limited to, refusing to make any further Advances under this
Agreement and/or accelerating the maturity of the Master
Promissory Note.
Notwithstanding the occurrence of Termination Date, the Bank, at
its sole and absolute discretion, may thereafter permit the
Borrower to draw funds hereunder in accordance with the terms,
conditions and provisions hereof. Any draws permitted by Bank
after the Termination Date shall not constitute an extension,
renewal or modification of the Line of Credit or the Termination
Date, the waiver by Bank of any Event of Default, or otherwise
obligate the Bank to permit subsequent draws hereunder.
2.4. Additional Documentation. Borrower covenants that it will promptly obtain
and deliver, or cause to be obtained and delivered any additional loan or
other documentation reasonably requested by Bank which is customary in the
mortgage banking business in order to make each Eligible Mortgage Loan
marketable. Upon demand by the Bank, the Borrower shall deliver to the Bank
any and all collateral pertaining to each Eligible Mortgage Loan.
2.5.Confirmation. Upon receipt of the documentation called for in subsection
2.3.5. above, Bank will review such documentation for adequacy and
accuracy. In the event Bank should not receive all of the documentation
required or requested with respect to the Eligible Mortgage Loan(s) within
two (2) days of the Closing of the particular Eligible Mortgage Loan,
Borrower covenants and agrees to deliver, or cause to be delivered, the
missing or necessary documents to the Bank as soon as reasonably practical
after receipt of notice of any document deficiency.
2.6. Repayment of Line of Credit. The entire principal amount of each individual
Advance under the Line of Credit, and all fees and interest accrued
thereon, shall be payable, on the earlier of:
2.6.1 FORTY-FIVE (45) DAYS from the Funding Date of the Eligible
Mortgage Loan, or
2.6.2. The Purchase Date for the Eligible Mortgage Loan(s), or
2.6.3. The earliest date on which the Eligible Mortgage Loan becomes past
due 60 days or more, or
2.6.4. The date the Borrower assigns, sells, transfers, conveys, or
commences foreclosure upon the Eligible Mortgage Loan closed or
acquired with respect thereto, or
2.6.5. Termination of this Agreement.
2.7. Interest on Line of Credit. Borrower agrees to pay interest from the
Funding Date to maturity of such Advance in accordance with Section 2.6.,
above. The Bank's base commercial rate of interest ("Base Rate") is
established from time to time by the Bank, each change in the Base Rate to
become effective, without notice to the undersigned, on the effective date
of each change in the Base Rate. Subject to the limitations hereinafter set
forth, the disbursed and unpaid principal balances of the indebtedness
hereby evidenced shall bear interest prior to maturity at a variable rate
per annum ("Warehouse Rate") which shall, from day to day, be equal to the
lesser of (a) the maximum effective variable contract rate of interest
("Maximum Rate") which Bank may from time to time lawfully charge, or (b) a
rate equal to THE MORTGAGE NOTE RATE. However, if the Mortgage Note Rate is
greater than the sum of the Base Rate plus two percent (2%) per annum, the
Warehouse Rate shall be equal to the sum of the Base Rate plus two percent
(2%) per annum, or if the Mortgage Note Rate is less than the sum of the
Base Rate minus three percent (3%) per annum, the Warehouse Rate shall be
equal to the sum of the Base Rate minus three percent (3%) per annum. It is
agreed that interest on the Master Promissory Note shall be calculated on
the basis of a 365 (366 in Leap year) day year unless calculation on that
basis would result in Bank receiving interest at a rate in excess of the
maximum rate of interest which Bank is permitted by law to contract for and
charge, in which case such indebtedness shall bear interest at such maximum
rate. The indebtedness shall also bear interest after maturity (whether by
demand, acceleration or otherwise) at the maximum rate of interest which
Bank is permitted by law to contract for and charge thereon.
2.8. Bank's Security Interest and Lien.
2.8.1. Grant of Security Interests. The Borrower hereby pledges, assigns,
conveys, mortgages, transfers and grants to Bank a security
interest in and to the following, and to the extent the documents,
instruments or other items evidencing and representing the
following have not been delivered to Borrower, Borrower hereby
covenants and agrees to deliver such documents, instruments or
other items (the "Collateral") to Bank:
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2.8.1.1. The Mortgage Note for or with respect to each Eligible
Mortgage Loan funded in whole or in part with an
Advance under this Line of Credit, and all of the
indebtedness evidenced by such Mortgage Notes
2.8.1.2. Any and all contract rights of Borrower under or with
respect to each Lock for an Eligible Mortgage Loan,
including, but not limited to, the right to collect and
retain the proceeds from the sale of any Eligible
Mortgage Loan to a Qualified Investor (or any other
purchaser should the Qualified Investor fail or refuse
to Purchase the Eligible Mortgage Loan), together with
any guarantees, security interests, escrows and
deposits, if any, securing payments thereof arising
from or under the contract and/or the Lock
2.8.1.3. All of its right, title and interest in and to the
Mortgages and other instruments securing the payment of
the indebtedness evidenced by the Mortgage Notes
including, but not limited to, all escrows included
thereunder and all servicing rights and proceeds from
the sale of servicing rights, (and Borrower hereby
subrogates the Bank to its position as lien holder to
the end that Bank may, at its election, exercise, if
necessary, in Borrower's name, all of the rights of the
beneficiary of said Mortgages and other similar
security instruments)
2.8.1.4. All proceeds from the sale or transfer of each Eligible
Mortgage Loan
2.8.1.5. All deposits of Borrower (whether general or special,
time or demand, provisional or final, or individual or
joint) maintained with or at Bank or any of its
affiliates, custodians or designees
2.8.1.6. All escrows, deposits, and other monies or
consideration received by or on behalf of Borrower with
respect to each Eligible Mortgage Loan funded, in whole
or in part with an Advance under this Line of Credit,
including, but not limited to, escrows for insurance,
taxes and interest and payments made under the Eligible
Mortgage Loan by the Mortgagor
2.8.1.7. All proceeds of any hazard insurance which may arise
from damage to or destruction of any property directly
or indirectly securing Borrower's indebtedness which
may arise under this Agreement
2.8.1.8. Borrower's right, title and interest in and to any
private mortgage insurance in effect with respect to
such Eligible Mortgage Loans and the proceeds thereof
2.8.1.9. Borrower's right, title and interest in and to any
hazard insurance, liability insurance and title
insurance pertaining to the residences encompassed by
the Eligible Mortgage Loans and proceeds thereof
2.8.1.10. All appraisals, surveys, insurance certificates,
termite reports and other loan documents pertaining to
the Eligible Mortgage Loans delivered to the Bank.
2.8.1.11. All general intangibles pertaining to the Eligible
Mortgage Loans delivered to the Bank
2.8.1.12. All of the Borrower's ledger and account cards,
computer tapes, disks and printouts, and books and
records of Borrower; and any and all other properties
and assets of Borrower of whatever nature, tangible or
intangible, wherever located and whether now or
hereafter existing relating to the Eligible Mortgage
Loans delivered to the Bank
whether now existing or hereafter acquired or created, whether
owned beneficially or of record and whether owned individually,
jointly or otherwise, together with any and all products and
proceeds thereof, all payments and other distributions with
respect thereto and any and all renewals, substitutions,
modifications and extensions of any and all of the foregoing (the
"Collateral"), as security for the full and timely payment and
satisfaction of all of the Borrower's obligations hereunder and
under the Master Promissory Note, or under any other note or
agreement with the Bank, in all cases as and when due. Items
released in writing by Bank from time to time from the lien of
this Agreement shall no longer be considered Collateral hereunder.
But this assignment is made for the purpose of securing an
indebtedness of the Borrower to the Bank, and it is a condition
hereof that in the event the Borrower should well and fully
perform all its duties, both direct and indirect, as obligor under
this Agreement and the Master Promissory Note heretofore executed,
together with any and all other obligations of Borrower, this
assignment shall be void. But in the event of any default by
Borrower in any obligation to the Bank or under any other
agreement or promissory note, then, and in such event, Bank shall
have all rights accorded Borrower under such documents, and Bank
may take and receive
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all payment under the Mortgage Note(s) and other Collateral
assigned hereby and any and all proceeds or product thereof, and
take any legal action in respect of such Collateral as the
Borrower might absent this assignment. This assignment constitutes
a pledge and creates and grants and Borrower hereby creates and
grants to Bank a security interest, under the terms of the Uniform
Commercial Code in the above described Collateral and all remedies
afforded by the Uniform Commercial Code for default are hereby
granted unto the Bank. Furthermore, the pledge created hereunder
may be perfected by the delivery of the Mortgage Notes to a third
party as bailee and failure of Bank to have physical possession
thereof shall not in such event invalidate this pledge or its
perfection, if such bailee is given notice of this assignment.
2.8.2 Collateral Assignments. Notwithstanding the security interest
granted by Borrower to Bank in the Collateral, Borrower
understands and agrees that should Bank request such in writing,
Borrower will execute and deliver to its Closing Agent(s) for
subsequent delivery to Bank, a separate Collateral Assignment of
Notes, Deeds of Trust/Mortgages and Security Agreement with
respect to each Eligible Mortgage Loan to be funded, in whole or
in part with an Advance or Advances hereunder. Borrower also will
execute and deliver with this Agreement a separate Collateral
Assignment of Contract Rights and Security Agreement with respect
to each Qualified Investor to which it will sell Eligible Mortgage
Loans funded, in whole or in part hereunder, and for each new
Qualified Investor with which Borrower contracts hereafter to sell
Eligible Mortgage Loans to be funded, in whole or in part
hereunder. Notwithstanding the fact that separate instruments will
be used, the security interests granted herein shall be in
addition to the security interests granted in each such document,
and not in substitution or cancellation thereof, so that Bank's
security interest in the Collateral shall be construed and
expanded to the fullest extent possible.
2.8.3. Collateral Documentation. Borrower covenants and agrees to deliver
to Bank such assignments, pledges, deeds, financing statements,
consents, bailments, and other instruments, documents and
agreements as Bank or its counsel may deem necessary or
appropriate to evidence, confirm, effect or perfect any security
interest granted or required to be granted under this Agreement,
the Master Promissory Note, or any other instrument or agreement
as may be acceptable to Bank. Borrower hereby irrevocably
authorizes the Bank in its discretion: (i) to file without the
signature of the Borrower any and all financing statements,
modifications and continuations in respect to the Collateral and
the transactions contemplated by this Agreement (ii) to sign any
such statement, modification or continuation on behalf of the
Borrower if the Bank deems such signature necessary or desirable
under applicable law and (iii) to file a carbon, photographic or
other reproduction of any financing statement or modification if
the Bank deems such filing necessary or desirable under applicable
law provided that so long as no Event of Default is then
continuing, the Bank shall accord the Borrower an opportunity to
review and sign any proposed financing statement or modification
(but not continuation), with the Bank exercising its authority
hereunder to sign on behalf of the Borrower if the Borrower has
not signed within a reasonable period of time (not to exceed 30
days) and provided further that the failure to send any such copy
for review or signature shall not affect the validity or
enforceability of any such signature and filing by the Bank. The
Borrower shall promptly reimburse the Bank for all costs and
expenses incurred in connection with the preparation and filing of
any such document, including, but not limited to, stamp taxes,
recording taxes, privilege taxes, and filing fees. The Bank shall
send a copy of any such filing to the Borrower provided, however,
that the failure to send that copy shall not affect the validity
or enforceability of any such filing. The Bank shall not be liable
for any mistake in or failure to file any financing statement,
modification or continuation.
2.8.4. Right of Setoff. Borrower acknowledges that in addition to the
Collateral which Borrower has pledged to Bank to secure its
obligations to the Bank pursuant to this Agreement, and any other
borrowings, Bank shall have such other or additional liens and
rights as may be available, including, but not limited to, the
right of setoff against all of Borrower's right, title and
interest in and to the balance of every deposit account of
Borrower at Bank, now or at anytime hereafter existing. Bank shall
have a right to offset any amounts owed by the Borrower under this
Agreement and/or the Master Promissory Note against amounts held
in every deposit account of the Borrower at the Bank. Borrower
acknowledges and agrees that in addition to such other rights as
Bank may have, and not by way of limitation, should Bank in good
faith ever deem itself to be insecure at any time in relation to
any obligations of Borrower to Bank, whether arising in connection
with this Agreement or otherwise, any and all obligations and
liabilities of Borrower to Bank shall become due and payable
forthwith without notice or demand and Borrower hereby expressly
authorizes Bank to apply any balance of deposits and any sums
credited by or due from Bank to Borrower in general account or
otherwise, to the payment of any and all obligations and
liabilities of Borrower to Bank.
2.8.5. Release of Security Interests and Liens. With respect to the
Eligible Mortgage Loans that are subject to this Agreement, Bank
shall, upon receipt in full of the entire Purchase Price and upon
the request of Borrower, execute and promptly deliver to Borrower
a security release certification certifying to Borrower that Bank
has released its security interest in and to the related Eligible
Mortgage Loans and any and all contract rights with
Page 7 of 23
8
respect to the related Lock. Borrower acknowledges and
understands, however, that any release under this section is not
intended to nor shall it be construed as a release of any security
interest Bank may have in the proceeds from the sale of such
Eligible Mortgage Loans, or of any other security interests Bank
may have pursuant hereto.
3. WARRANTIES, COVENANTS AND REPORTS OF BORROWER
3.1. Warranties and Affirmative Covenants of Borrower. While any obligation
hereunder remains unpaid, Borrower represents and warrants to, and
covenants with Bank:
3.1.1. Payment of Amounts Due. Borrower will pay the fees, interest and
principal on Advances and the debit balance, if any, of Borrower's
Loan Account and Master Promissory Note executed pursuant hereto
in accordance with the terms hereof and thereof, and will observe,
perform and comply with every covenant, term and condition herein
and therein expressed or implied on the part of Borrower to be
observed, performed or complied with.
3.1.2. Corporate Existence and Business. Borrower is duly organized,
qualified and in good standing under the laws of the State of
CALIFORNIA and in those states where it does business, and
Borrower will maintain and preserve its corporate existence,
rights and franchises in full force and effect.
3.1.3. Authorization. The execution of this Agreement and the
consummation of the transactions contemplated hereby have been
duly authorized by all requisite corporate action and this
Agreement, the Master Promissory Note, and all other documents to
be executed by Borrower in connection herewith and therewith are
valid and binding obligations of the Borrower enforceable against
Borrower in accordance with their respective terms.
3.1.4. Accounts and Reports. Borrower will maintain a standard system of
accounting in accordance with generally accepted accounting
principles and practices and will furnish to Bank any financial
reports or other information requested as normally prepared by the
Borrower. At reasonable times Bank may inspect and copy Borrower's
books and records which relate to Bank's collateral.
3.1.5. Adverse Changes. Borrower will promptly notify Bank of any
material adverse change in its financial condition, of the
occurrence of an Event of Default hereunder, or of the filing of
any suit or proceeding in which an adverse decision could have a
material adverse effect upon it or its business.
3.1.6. Known Defaults. Borrower is not knowingly in default in the
performance of any obligations to other financial institutions or
to Federal, State or Municipal authorities.
3.1.7. Use of Proceeds. Borrower will not request an Advance under the
Line of Credit or otherwise use or attempt to use the proceeds of
any such Advance other than to fund the origination or acquisition
of the specific Eligible Mortgage Loan for which Borrower requests
funding under the Line of Credit. In addition, Borrower will not
use or draw a Closing Check for any other purpose but to fund all
or some portion of the closing or acquisition of the Eligible
Mortgage Loan for which the documents required by Section 2.3.4.
have been provided to Bank, and no Closing Check shall be written
for an amount which exceeds the Advance Amount.
3.1.8. Qualified Closing Agent. Borrower will employ or engage only those
persons or entities as a Closing Agent for any Eligible Mortgage
Loan to be funded with an Advance under the Line of Credit as
shall not have been disapproved by Bank prior to the date the
Eligible Mortgage Loan is scheduled to close. Borrower represents
and warrants that as to each Closing Agent who is an attorney,
Borrower will have satisfied itself as to the character, standing,
integrity, and ability of such Closing Agent and, at a minimum,
will have in its possession an insured attorney closing letter or
similar certification for the proposed Closing Agent issued by a
reputable title company. In no event, however, shall a Closing
Agent be an employee, director, officer, shareholder or interest
holder of Borrower, or otherwise an affiliate of Borrower.
3.1.9. Standard Documentation. Borrower will use its best efforts to
ensure that the Closing Agent uses only such documentation as is
acceptable to FHA, VA or FNMA, or that of the Qualified Investor
which has issued a Lock to Purchase the Eligible Mortgage Loan. In
the event the Closing Agent proposes to use a nonconforming
document, Borrower will provide, or cause such Closing Agent to
provide, a copy of said documentation to Bank at least ten (10)
Business Days prior to the scheduled closing of such Eligible
Mortgage Loan. Notwithstanding the provision of such nonconforming
documentation to Bank, Borrower represents and warrants that the
use of such nonconforming documentation in connection with the
Eligible Mortgage Loan will not violate the Lock in respect
thereof, will not give the Qualified Investor the right to refuse
Page 8 of 23
9
to Purchase the Eligible Mortgage Loan for the Purchase Price, and
will not otherwise adversely affect the marketability of such
Eligible Mortgage Loan in the secondary mortgage market.
3.1.10. Possession of Eligible Mortgage Loan Documents. Prior to the time
Bank has received payment in full for any Advance to fund a
particular Eligible Mortgage Loan, Borrower will not request or
accept delivery of the original Mortgage Note, and if any such
documents are delivered to Borrower in error or otherwise,
Borrower will immediately notify Bank of such event by telephone
and cause such documents to be delivered as soon as practical to
Bank.
3.1.11. Net Worth, Liquidity, and Debt-to-Equity.
3.1.11.1 Borrower's Tangible Net Worth will at all times
remain above $1,000,000.00.
3.1.11.2 Combined Net Worth shall at all times meet or exceed
5% of Borrower's total liabilities.
3.1.11.3 Combined Net Worth shall at all times meet or exceed
$1,000,000.00.
3.1.11.4 Borrower's Liquidity when combined with the
Liquidity of all guarantors shall at all times meet
or exceed 5% of the Maximum Line amount.
3.2. Borrower's Covenants with Respect to All Mortgages. Borrower covenants with
respect to each Eligible Mortgage Loan to be funded hereunder that as of
the closing of each such Eligible Mortgage Loan:
3.2.1. Title Insurance. Such Eligible Mortgage Loan will have the form of
title insurance or title opinion required by FHA, VA, FNMA, GNMA,
FHLMC, or the Qualified Investor's requirements, whichever is
applicable.
3.2.2. Mortgages Will Comply With Locks. Such Eligible Mortgage Loan will
conform in all material respects with all requirements of the Lock
to Purchase it, and with customary standards and requirements for
purchase and sale by investors in the secondary market.
3.2.3. Validity and Enforceability. To the best of Borrower's knowledge,
each deed of trust note or mortgage note, promissory note or bond,
deed of trust, mortgage and similar instrument included in each
Eligible Mortgage Loan shall have been executed by a person
legally competent to execute such papers and shall be a legally
valid and enforceable obligation of said person. In addition each
mortgage note, promissory note or similar instrument will be a
negotiable instrument under the laws of the state having
jurisdiction over such note and the negotiability thereof, and the
endorsement of such note or instrument by Borrower, whether such
endorsement appears on the body of the note or is accomplished by
use of an allonge, is an effective endorsement of the note which
does not and will not adversely affect the negotiability of such
note or instrument.
3.2.4. Maintain Records of Eligible Mortgage Loans. Borrower will
maintain complete and accurate records and books of account
covering all collections, payments on and other proceeds of each
Eligible Mortgage Loan, and all payments from Qualified Investors
with respect to any such loans. Borrower will permit Bank to
inspect all the records and books and supporting data and to make
copies and extracts therefrom at its place of business during
ordinary business hours and upon request of Bank will furnish to
Bank any information with respect to any Eligible Mortgage Loan.
3.2.5. Maintain Security Interest of Bank. Borrower will furnish to Bank
such documents as Bank may at any time deem necessary or desirable
to perfect and maintain in perfected status Bank's security
interest in the Collateral hereunder, to enable Bank to enforce
any Eligible Mortgage Loan or Lock, or to enable Bank to make
direct sales and transmittals of Eligible Mortgage Loans to
Qualified Investors, and have the proceeds of such sales remitted
directly to Bank.
3.2.6. Fidelity Bond. Borrower will maintain fidelity bond coverage in an
amount at least equal to $300,000 per incident with a maximum
$15,000 deductible, and an errors and omissions insurance policy
in an amount at least equal to $300,000 per incident with a
maximum of $15,000 deductible, in form and coverage and with a
company satisfactory to Bank with respect to all officers,
directors, agents, employees of Borrower. Borrower agrees to name
Bank as direct loss payee with respect to both policies and/or
coverages. Borrower agrees to provide satisfactory evidence of
in-force policies upon request, including irrevocable designation
of loss payee.
Page 9 of 23
10
3.2.7. Cooperate with Bank. Borrower will cooperate at all times through
its officers, agents, employees and directors with all officers,
agents, employees, attorneys, audit representatives, and
accountants of the Bank with respect to this Agreement and all
actions contemplated or permitted hereunder.
3.2.8. Deliver Collateral. If at any time the value of the Collateral, as
determined by Bank with reference to objective secondary market
criteria such as, for example, the FHLMC posted rate, securing the
obligations of Borrower hereunder, shall be less than the amount
Advanced on such Eligible Mortgage Loan, Borrower shall, upon
demand of Bank, deliver to Bank additional collateral or other
Eligible Mortgage Loan documentation or related papers as may be
deemed necessary by Bank to meet said requirements and secure the
obligation of Borrower hereunder.
3.2.9. Notice of Cancellation. If any Lock which is part of the
Collateral pledged to Bank is canceled, or should a Qualified
Investor threaten to cancel any such Lock, Borrower will
immediately notify Bank of such cancellation or threat in writing.
3.3. Negative Covenants of Borrower. Without the prior written consent of the
Bank, which consent shall not be unreasonably withheld, and while any
obligation hereunder remains unpaid
3.3.1. Merger, Consolidation, Sale of Assets. Borrower will not enter
into any merger, consolidation, share exchange or similar
transaction or, except in the ordinary course of business, sell or
transfer all or a substantial part of its assets or earning power.
3.3.2. Change of Management. Borrower will not change its management or
substantially change its ownership.
3.3.3. Prepayment of Eligible Mortgage Loans. Borrower will not permit
any Mortgagor to prepay any installment of principal and interest
on any Eligible Mortgage Loan, unless such prepayments is remitted
directly to Bank to reduce Borrower's indebtedness arising under
this Agreement.
3.4. Reports to be Furnished by Borrower. While any obligation hereunder remains
unpaid, Borrower agrees to provide Bank with the following reports and
information on the following time basis:
3.4.1. To be provided annually, within 90 days of the fiscal year end of
Borrower:
- Audited financial statements of Borrower prepared in accordance
with GAAP.
3.4.2. To be provided quarterly, within 45 days of the end of Borrower's
fiscal quarter:
- Unaudited financial statements of Borrower, prepared in
accordance with GAAP.
4. LOCKS
Borrower agrees to have a Lock in its possession related to each Eligible Prime
Mortgage Loan to be originated or acquired hereunder, and to comply with all
Qualified Investor requirements in order to maintain each such Lock in full
force until the Purchase Date.
4.1. Compliance with Locks. Prior to funding any Advance requested under the
Line of Credit, Bank may require (i) evidence of a Lock with respect to the
Eligible Mortgage Loan to be funded by such Advance, and (ii) that it be
satisfied that Borrower can meet the requirements of each such Lock, and
(iii) that notice has been given to the Closing Agent of Bank's security
interest in the Collateral, and (iv) that the Eligible Mortgage Loans can
be and will be assigned to Qualified Investors directly by Bank, and (v)
that Bank will be entitled and able receive the Purchase Price therefor
under each Lock.
4.2. Sale of Eligible Mortgage Loans. With respect to each Eligible Mortgage
Loan, Borrower agrees that:
4.2.1. It will cooperate with Bank to ensure that the Eligible Mortgage
Loan is sold to the applicable or appropriate Qualified Investor
within the time provided in the Lock unless extended by mutual
agreement of which Bank is a party.
4.2.2. Bank shall have the right to deliver all Eligible Mortgage Loans
sold to Qualified Investors and to receive the proceeds from the
sale thereof, and Borrower shall provide all papers, documents and
instruments not in the possession of Bank required by the Lock,
and will take all acts necessary to comply with the requirements
of Qualified Investor within the relevant time period.
Page 10 of 23
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4.2.3. If an Eligible Mortgage Loan is not sold within the applicable
time limits provided in paragraphs 1 or 2 above, the Borrower
shall immediately reduce its indebtedness under this Agreement by
the amount of the Advance to fund the closing of the Eligible
Mortgage Loan affected, with applicable interest thereon, unless
Bank, in its sole and absolute discretion, should determine to
allow otherwise or to, for example, enter into a "workout"
situation with Borrower with respect to such Eligible Mortgage
Loan or Loans.
5. RESERVED
6. EVENTS OF DEFAULT: REMEDIES
6.1. Events of Default. Upon the occurrence of any of the following events, all
of the Borrower's liabilities hereunder and under the Master Promissory
Note shall, without further notice, at the sole option of the Bank, become
immediately due without demand for payment thereof: (a) the failure of any
obligor (which term shall include the Borrower, together with all
endorsers, sureties and guarantors of the note) to perform any agreement
hereunder or related to the loan evidenced by the Note (b) the filing of
any action for the appointment of a receiver for, the making of a general
assignment for the benefit of creditors by, or any other act of insolvency
of any obligor, however expressed or indicated (c) the entry of a
materially adverse judgment against any obligor (d) the filing of any
materially adverse lien against any property of any obligor (e) the taking
of possession of any substantial part of the property of any obligor at the
instance of any governmental authority (f) the dissolution, merger,
consolidation or reorganization or change in control of any obligor (g) the
reasonable determination by the Bank that a material adverse change has
occurred in the financial condition of any obligor (h) the assignment by
the undersigned of any equity or other right in any of the Collateral to
any person or entity other than Bank without the prior written consent of
Bank (i) the Bank deeming itself to be insecure or (j) the failure to make
any payment or any other default on any other indebtedness owing by the
undersigned to Bank.
6.2. Bank's Rights and Remedies Upon Default. Upon the occurrence of an Event of
Default or upon default in any payment of principal or interest when due or
at the time or on the terms provided in any instrument evidencing or
related to any indebtedness of Borrower arising hereunder or in connection
herewith, the indebtedness arising hereunder shall, at the absolute option
of Bank, become immediately due and payable, or upon the non-performance by
Borrower or any secondarily liable party of any of the agreements or
covenants contained herein or in any of the papers related to the
indebtedness arising hereunder or in connection herewith, or in case of any
depreciation in the value of said Collateral below the market value agreed
upon, the said indebtedness shall at the absolute option of the Bank become
immediately due and payable, and in any such event Bank shall have full
power and authority at any time or times thereafter to exercise all or any
one or more of the remedies and shall have all of the rights of a secured
party under the Uniform Commercial Code of Tennessee (Code), and is hereby
authorized immediately to sell the whole or any part of the Collateral for
the indebtedness evidenced hereby and by the Master Promissory Note, or any
substitute therefore or additions thereto, at any brokers' board or at
public or private sale, at the sole option of Bank, without notice of the
amounts due or claimed to be due, without demand for payment, without
advertisement and without notice of sale, each and all of which is hereby
expressly waived, except such notice as is required under said Code and to
apply the net proceeds of such sale after deduction of all expenses for
collection, sale or delivery, including, but not limited to, attorneys fees
and expenses, to the payment of the indebtedness to Bank specifically
secured hereby, returning the surplus, if any, to Borrower unless other
disposition thereof is required by said Code. Upon any sale by virtue
hereof, Bank may purchase, unless otherwise prohibited by said Code, the
whole or any part of the aforesaid Collateral discharged from any statutory
right of redemption, equity or redemption, exemption from execution, or
similar rights all of which are hereby expressly waived and released. Any
requirement of said Code for reasonable notice shall be met, if such notice
is mailed, postage prepaid, to Borrower at the address of Borrower as shown
on the records of Bank at least five (5) days prior to the time of the
sale, disposition or other event or thing giving rise to the requirement of
notice.
6.3. Deposits, Set-off, Etc. It is further agreed that any moneys or other
property at any time in the possession of Bank belonging to Borrower, and
any deposits, balance of deposits or other sums at any time credited by or
due from Bank to Borrower, may at all times, at the option of Bank, be held
and treated as collateral security for the payment of liability of Borrower
to Bank as provided hereunder and under the terms of the Master Promissory
Note, and Bank may, at its sole option and at any time or from time to time
after default, set off the amount due or to become due hereon against any
claim of Borrower against Bank. To effect these rights Borrower agrees,
upon request by Bank, immediately to endorse, sign and execute all
necessary instruments as Bank may request.
6.4. Exercise of Rights and Remedies. No delay or omission to exercise any
right, remedy or power shall impair the right, remedy or power nor shall be
construed to be a waiver of any Event of Default or an acquiescence
therein. No waiver of any Event of Default shall extend to any subsequent
Event of Default.
7. POWER OF ATTORNEY
Borrower shall execute a power of attorney substantially in the form attached as
Exhibit D.
Page 11 of 23
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8. TERMINATION
This Agreement shall terminate on the Termination Date, unless terminated
earlier due to a breach by Borrower provided, however, the indebtedness arising
under this Agreement shall mature as provided in Section 2.6. hereof.
Termination of this Agreement shall not affect the rights, liabilities, and
obligations of the parties with respect to Eligible Mortgage Loans funded prior
to or after termination, or with respect to any security therefore. At the
termination, Borrower shall pay to Bank in full all obligations which may have
arisen under this Agreement, specifically including the payment of the debit
balance of the Loan Account and the Master Promissory Note.
9. INDEMNITY
Borrower shall indemnify Bank and hold Bank harmless against each and every
cost, loss, or expense, including court costs and attorney's fees, arising from
any failure of Borrower to comply with any governmental or regulatory
requirements in connection with any Eligible Mortgage Loan.
10. MISCELLANEOUS
10.1. Place of Payment of Obligations. All sums payable to Bank hereunder shall
be paid in Memphis, Tennessee, at Bank's principal banking office, the
address of which is set forth above, or such other place as Bank may
designate.
10.2. Notices. All notices, requests, consents and demands shall be in writing
and shall be mailed by certified or registered mail, return receipt
requested, postage prepaid, to the addresses of Borrower and Bank,
respectively, at the addresses above set out.
10.3. Survival of Agreements. All covenants, agreements, representations and
warranties made herein shall survive the termination of this Agreement
with respect to all Eligible Mortgage Loans made hereunder prior to such
termination, until payment in full of Borrower's obligations hereunder
and under the Master Promissory Note. All statements contained in any
certificate or other instrument delivered by Borrower hereunder shall be
deemed to constitute representations and warranties made by Borrower.
10.4. Parties in Interest. All covenants and agreements contained in this
Agreement shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto.
10.5. Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof.
10.6. Governing Law. This Agreement shall be deemed a contract made under the
laws of Tennessee, and shall be construed and enforced in accordance with
and governed by the laws of Tennessee, except with respect to the rate of
interest on the Master Promissory Note or Loan Account, which shall be
governed by applicable provisions of federal law.
10.7. Counterparts. This Agreement may be executed simultaneously in several
counterparts, all of which together shall constitute one and the same
instrument.
10.8. Expenses of Enforcement. Borrower agrees to pay all reasonable attorneys'
fees, expenses and other costs and charges incurred in the execution of
the transaction described herein, including, but not limited to, the
documentation thereof, the collection of any indebtedness arising under
this Agreement, the enforcement of the Bank's rights hereunder, the
protection and preservation of any Collateral securing any indebtedness
hereunder, the perfection of any security interest or lien contemplated
hereby, and maintaining the perfected status of the same. Borrower's Loan
Account may be debited by the amount of such expenses the payment of
which shall be secured in the same manner as loans made hereunder.
IN WITNESS WHEREOF, the parties, through their authorized officers have
executed this Agreement effective as of the date set out above on this
_____ day of _________________, 20 ______.
Page 12 of 23
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FIRST TENNESSEE BANK DUXFORD FINANCIAL, INC. AND/OR BAYPORT
MORTGAGE, L. P.
BY: BY:
---------------------------- ---------------------------------
ITS: VICE PRESIDENT ITS:
---------------------------------
GUARANTORS:
--------------------------------------
--------------------------------------
--------------------------------------
--------------------------------------
Page 13 of 23
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EXHIBIT A
ADVANCE REQUEST and
SUPPLEMENTAL CLOSING INSTRUCTIONS
Duxford Financial, Inc. and/or Bayport Mortgage, L. P.
I. ADVANCE REQUEST
A. Borrower & Property Address B. Mortgage Loan description: Loan Number: __________________________
Loan Type: FHA/VA Jumbo Conventional Conforming Conventional Non-Conforming
________________________________________
Last Name First Initial Amt of Note: $_______________ For Conventional Non-Conforming Only:
________________________________________ Date of Note: ______________ Lien Position: 1st 2nd
Address Interest Rate: ______________ FICO Score:_______________________
________________________________________ Pymt. Term (Months) _________ Loan to Value Ratio: _____________
City ST Zip Investor:____________________ Debt Ratios: _______ / _______
The undersigned authorized representative of Duxford Financial, Inc. and/or
Bayport Mortgage, L. P. ("Mortgage Company") hereby requests an advance
under that certain Mortgage Warehouse Loan and Security Agreement (the
"Agreement"), between Mortgage Company and First Tennessee Bank, Memphis,
Tennessee (the "Bank") and hereby certifies each of the following: 1) all
of the information set forth above is true and correct, and 2) the property
which will be used to secure the above Mortgage Loan is one-to-four family
residential real property ready for immediate occupancy, and 3) the
mortgage loan is an Eligible Mortgage Loan as that term is defined within
the Agreement. Pursuant to the Agreement, the undersigned authorized
representative hereby 1) pledges, assigns, transfers and grants to Bank a
security interest in the Mortgage Loan described above and all related
Collateral as defined in the Agreement to secure the indebtedness and
obligations of the Mortgage Company to the Bank, and 2) agrees to hold all
documents related to the Mortgage Loan funded hereby in trust for and on
behalf of Bank until delivered to Bank in accordance with the Agreement,
and 3) hereby certifies that it has in its possession an insured closing
letter pertaining to the closing agent used to close this Mortgage Loan,
and 4) the closing agent is not in any way affiliated with either the
Mortgage Company or the borrower.
DUXFORD FINANCIAL, INC. AND/OR BAYPORT MORTGAGE, L. P.
By:____________________________________
Authorized Representative
- --------------------------------------------------------------------------------
MORTGAGE COMPANY'S SUPPLEMENTAL CLOSING INSTRUCTIONS
- --------------------------------------------------------------------------------
In addition to all other loan closing instructions, and superceding any
instructions to the contrary, Duxford Financial, Inc. and/or Bayport Mortgage,
L. P. hereby instructs the closing agent (whether attorney or title company) as
follows:
1. As Closing Agent in this transaction, you are hereby expressly authorized
by Duxford Financial, Inc. and/or Bayport Mortgage, L. P. to close the
loan described in Section I.A., above, (the "Mortgage Loan") as its agent
in the loan closing. However, if you do not agree to follow these
Supplemental Closing Instructions or will not sign this document, you are
not authorized to close the Mortgage Loan nor to accept the proceeds from
the Mortgage Loan.
2. Please be aware that First Tennessee Bank (the "Bank"), as warehouse
lender in this transaction, will have a first priority security interest
in the Mortgage Loan to be closed herewith. On behalf of the Bank,
Duxford Financial, Inc. and/or Bayport Mortgage, L. P. hereby instructs
you to hold the note evidencing the Mortgage Loan for the benefit of the
Bank, and to transmit same to the delivery address indicated below, and
to no other address except pursuant to written instructions delivered to
you by Bank.
3. After consummation of the loan closing, please sign this document
indicating that the loan described in 1.A. has been closed and that all
loan closing instructions have been followed.
4. Within 1 business day after settlement, please sign below and deliver
this document, AND the original note evidencing the Mortgage Loan, AND
such other documents as the Mortgage Company may direct you to deliver to
the address indicated below.
5. Submit the mortgage or deed of trust to the proper recording agent for
recording, thereby creating a valid lien on the property described in
Section 1.A., above, subject only to those encumbrances shown in Schedule
B of the title insurance binder.
6. The documents described in paragraph 4 above must be sent via overnight
courier as soon as reasonably practical after disbursement of the
Mortgage Loan but in no event later than the first business day after the
loan is disbursed. If for any reason you should be unable to provide
these documents by the second business day after the date the loan is
closed, or should you identify any problems with any of the documents,
you should then immediately contact the Bank's Vice President of Mortgage
Warehouse Lending at (888) 297-0222 and inform such person of the delay,
reasons therefor or problems identified.
Bank's Address: First Tennessee Bank Mortgage Co.'s Address Duxford Financial, Inc. and/or Bayport
Mortgage, L. P.
Mortgage Warehouse Lending In Trust For First Tennessee Bank
7640 Poplar, Suite 210 1300 Dove Street, Suite 200
Germantown, TN 38138 Newport Beach, CA 92660
- --------------------------------------------------------------------------------
CLOSING ATTORNEY OR TITLE COMPANY SIGNATURE
- --------------------------------------------------------------------------------
THE MORTGAGE LOAN FOR THE MORTGAGOR AND PROPERTY ADDRESS IN SECTION I.A., ABOVE,
HAS BEEN CLOSED AS INSTRUCTED.
_____________________________________________
Closing Agent / Title Company -- Printed Name
_____________________________________________ (______)___________________________________
Closing Agent / Title Company -- Signature Telephone Number
Page 14 of 23
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EXHIBIT B
MASTER PROMISSORY NOTE
$15,000,000.00 May 31, 2001
Memphis, Tennessee
FOR VALUE RECEIVED, the undersigned (jointly and severally if more than
one) promises to pay to the order of First Tennessee Bank, Memphis, Tennessee
("Bank"), or to the order of any subsequent holder hereof, in lawful money of
the United States of America, the principal sum of the lesser of (i)
$15,000,000.00, or (ii) the aggregate unpaid principal amount of all advances
pursuant to that certain Mortgage Warehouse Loan Agreement of even date herewith
("Agreement") between the undersigned and the Bank, together with interest
thereon at the rate hereinafter specified from the Funding Date of each advance.
The Bank's base commercial rate of interest ("Base Rate") is established from
time to time by the Bank, each change in the Base Rate to become effective,
without notice to the undersigned, on the effective date of each change in the
Base Rate. Subject to the limitations hereinafter set forth, the disbursed and
unpaid principal balances of the indebtedness hereby evidenced shall bear
interest prior to maturity at a variable rate per annum ("Warehouse Rate") which
shall, from day to day, be equal to the lesser of (a) the maximum effective
variable contract rate of interest ("Maximum Rate") which Bank may from time to
time lawfully charge, or (b) a rate equal to the Mortgage Note Rate. However, if
the Mortgage Note Rate is greater than the sum of the Base Rate plus two percent
(2%) per annum, the Warehouse Rate shall be equal to the sum of the Base Rate
plus two percent (2%) per annum, or if the Mortgage Note Rate is less than the
sum of the Base Rate minus three percent (3%) per annum, the Warehouse Rate
shall be equal to the sum of the Base Rate minus three percent (3%) per annum.
Interest shall be calculated on the basis of a 365 day (366 in Leap Year) year
unless calculations on that basis would result in Bank receiving interest at a
rate in excess of the maximum rate of interest which Bank is permitted by law to
contract for and charge, in which case the principal debt evidenced hereby shall
bear interest at such maximum rate.
Principal and interest as computed above shall be payable in the following
manner:
As to Principal and accrued interest, each advance hereunder, and
interest accrued thereon shall be payable on the earlier of:
(i) FORTY-FIVE (45) DAYS from the Advance Date of the
Eligible Mortgage Loan,
(ii) On the date of funding of the Purchase Price by any
Qualified Investor for the Purchase of an Eligible
Mortgage Loan which was funded by the advance, or
(iii) Termination of this Note.
Maturity. Notwithstanding the foregoing, the entire outstanding principal
balance hereunder together with all accrued but unpaid interest
shall be due and payable in full on 5/31/2002.
Any unpaid principal and interest accrued thereon shall also bear interest,
from the date of maturity as set forth above, (whether by demand, acceleration
or otherwise) until the unpaid advance is fully satisfied, at the maximum rate
of interest which Bank is permitted by law to contract for and charge on the
date hereof or such maximum rate so permitted on the maturity date hereof,
whichever is greater.
The Base Rate is one of several interest rate indices employed by the Bank.
The undersigned acknowledges that the Bank has made, and may hereafter make,
loans bearing interest at rates which are higher or lower than the Base Rate.
Any renewal or extension of the debt evidenced hereby shall bear interest
at the rate of interest set by Bank at that time, not to exceed the maximum rate
which Bank is permitted by law to contract for and charge either on the date
hereof or on the date of such renewal or extension, whichever is greater.
All installments, prepayments and payments of principal and interest shall
be applied first to fees, then to interest, and the balance to principal due
hereunder and are payable at Bank, 165 Madison, Memphis, Tennessee 38103, or
such other place or places as the holder hereof may from time to time designate
in writing, in lawful money of the United States of America which shall be legal
tender in payment of all debts and dues, public and private, at the time of
payment. This note and the indebtedness evidenced hereby are secured by an
assignment of all mortgages and deeds of trust together with an endorsement of
all notes evidencing Eligible Mortgage Loans under the Agreement, Commitments
from Qualified Investors to Purchase the Eligible Mortgage Loans, the proceeds
of such Eligible Mortgage Loans, and any accounts maintained by Borrower at
Bank.
Page 15 of 23
16
The undersigned hereby agree(s) to pay all reasonable expenses directly
related to the loan evidenced hereby incurred or to be incurred in its making,
servicing or collection, including without limitation reasonable attorney's
fees. The undersigned further agree to pay to Bank upon demand all reasonable
charges for services rendered or to be rendered, and reasonable expenses
incurred or to be incurred, to or on behalf of the undersigned in connection
with borrowing evidenced hereby including, but not limited to, fees of any
Custodian, provided that charges for such services rendered by officers or
employees of the Bank shall be limited to those rendered directly for the
inspecting and verification of collateral prior to the loan being made,
servicing and verifying the collateral securing said loan, and the collection of
said loan.
It is contemplated that the original principal sum evidenced hereby shall
be reduced from time to time, and that additional loans and advances may be made
in the future, which additional loans and/or advances shall be evidenced by this
Note and subject to its terms and conditions and shall not at any time exceed
the full amount hereof.
Upon the happening of any of the following events, all of the aforesaid
liabilities shall, without notice except as provided under the terms of the
Agreement, at the option of the Bank, become immediately due without demand for
payment thereof: (a) the failure of any Obligor (which term shall include the
undersigned makers, together with all endorsers, sureties and guarantors of this
Note) to perform any agreement hereunder or related to the loan evidenced hereby
(b) the filing of any action for the appointment of a receiver for, the making
of a general assignment for the benefit of creditors by, or any other act of
insolvency of any Obligor, however expressed or indicated (c) the entry of a
materially adverse judgment against any Obligor (d) the filing of any materially
adverse lien against any property of any obligor (e) the taking of possession of
any substantial part of the property of any Obligor at the instance of any
governmental authority (f) the dissolution, merger, consolidation or
reorganization of change in control of any Obligor (g) the reasonable
determination by the Bank that a material adverse change has occurred in the
financial condition of any Obligor (h) the assignment by the undersigned of any
equity or other right in any of the collateral without the written consent of
the Bank (i) the Bank deeming itself to be insecure or (j) the occurrence of any
event of default under the Agreement or the failure to make any payment or any
other default on any other indebtedness owing by the undersigned to Bank.
The undersigned shall have the privilege, at any time and from time to
time, of prepaying, in whole or in part, the then outstanding principal balance
hereunder, together with accrued interest thereon, without penalty or premium.
If this Note is placed in the hands of an attorney for collection, by suit
or otherwise, or to enforce its collection, or to protect the security for its
payments, the undersigned will pay all reasonable costs of collection and
litigation, together with a reasonable attorney's fee.
The makers, endorsers, sureties and guarantors hereof waive presentment,
demand, protest and notice or protest of demand and of dishonor and nonpayment
and expressly agree that this Note, or any payment or installment hereunder, may
be extended, modified or renewed from time to time, in whole or in part, without
limit as to the number of such extensions or modifications or the period or
periods thereof and without notice to them and without in any way affecting
their liability, and further expressly agree that any present or future security
for the indebtedness evidenced hereby or for any indebtedness due by the
undersigned to the holder hereof may be released or, after default, liquidated
from time to time, in whole or in part, without notice to them and without in
any way affecting their liability.
No delay on the part of the holder hereof in exercising any right shall
operate as a waiver of any such right.
This document and associated documents will be governed by and construed in
accordance with the laws of the State of Tennessee, except with respect to
interest which shall be governed by applicable provisions of federal law.
EXHIBIT ONLY
By: EXHIBIT ONLY
------------------------
Its: EXHIBIT ONLY
------------------------
Page 16 of 23
17
EXHIBIT C
BAILEE LETTER
Loan Name ________________
Loan Amount ______________
Dear Investor:
The mortgage notes and other documents enclosed herewith ("the Collateral") have
been assigned and pledged to First Tennessee Bank of Memphis, TN. (the "Bank")
to secure payment of all sums owing the Bank by DUXFORD FINANCIAL, INC. AND/OR
BAYPORT MORTGAGE, L. P. ("Borrower") arising under that certain Mortgage
Warehouse Loan and Security Agreement dated May 31, 2001, and certain related
security agreements.
The Mortgage Note(s), and all other documents relating thereto, whether now or
hereafter delivered to you, are to be held by you as a bailee in possession on
behalf of and for the benefit of the Bank, for the purpose of perfecting the
security interest of the Bank in such Mortgage Note(s), and subject to the
Bank's direction and control. It is our mutual understanding that the Mortgage
Note(s) constitute collateral securing the obligations of the Borrower to the
Bank and that all proceeds thereof should be promptly paid to the Bank for
application to such obligation. The Mortgage Note(s) held by you hereunder for
any period shall at all times be segregated from other property owned or held by
you.
In addition to the foregoing, (1) if the Mortgage Note(s) is/are accepted for
purchase by you, the applicable proceeds of such purchase are, within twenty-one
(21) calendar days after the date of delivery of this letter, to be wire
transferred using the following
WIRE TRANSFER INSTRUCTIONS:
FIRST TENNESSEE BANK / MEMPHIS, TENNESSEE
ABA #084000026
FOR CREDIT TO: FTB WAREHOUSE CLEARING ACCOUNT
ACCOUNT #100108253
FOR FINAL CREDIT TO: BRKR0032 / DUXFORD FINANCIAL, INC.
AND/OR BAYPORT MORTGAGE, L.P.
REF: {LOAN(S) BEING PURCHASED BY YOU}
to the Bank in immediately available funds at the Bank for credit to the account
of the Borrower, and (2) any Mortgage Note which is not accepted for purchase by
you should be returned via overnight delivery, within twenty-one (21) days after
the date of delivery of this letter, to:
FIRST TENNESSEE BANK
ATTN: MORTGAGE WAREHOUSE LENDING
7640 POPLAR AVE. SUITE 210
GERMANTOWN, TENNESSEE 38138
along with all other documents relating to such Mortgage Note(s), unless
otherwise directed by the Bank. IN NO EVENT SHOULD THE MORTGAGE NOTE(S) BE
DELIVERED TO ANY PARTY OTHER THAN THE BANK, OR OTHERWISE DEALT WITH BY YOU,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE BANK. The Mortgage Note(s) and related
documents have not been assigned or transferred by the Bank to any other party.
The Bank's security interest in the Mortgage Note(s) shall be deemed to have
been released only upon the receipt by the Bank of the full amount of cash
proceeds from the purchase of such Mortgage Note(s). The Bank's security
interest in the Mortgage Note(s) shall then terminate and be canceled without
further action upon Bank's receipt of said proceeds. You are not to honor any
requests or instructions from the Borrower relating to any Mortgage Note(s), or
any other documents relating thereto, unless you have received the prior written
consent of the Bank to such new or variant instructions, or until the Bank has
received the applicable proceeds from the sale of such Mortgage Note(s). If you
have any questions, please address your inquiries to the Bank's Vice President
of Mortgage Warehouse Lending, whose phone number is (888) 297-0222.
If the terms hereof are acceptable to you, please have an authorized officer of
your institution execute the enclosed copy of this letter in the space provided
below and promptly return such copy to the Bank at the above address.
Thank you for your cooperation with this matter.
FIRST TENNESSEE BANK
By: _____________________________
INVESTOR ACCEPTANCE:
ALL TERMS ACKNOWLEDGED, AGREED AND ACCEPTED THIS DATE:
By: _____________________________
Title: __________________________
Page 17 of 23
18
EXHIBIT D
POWER OF ATTORNEY
DUXFORD FINANCIAL, INC. AND/OR BAYPORT MORTGAGE, L. P. hereby
irrevocably appoints Bank's Vice President of Mortgage Warehouse
Lending, Robert A. Garrett, as its attorney-in-fact with full power of
substitution for, and on behalf of it, and in its name, to endorse or
to cancel the endorsement of any Mortgage Notes, checks, instruments or
other papers, including but not limited to depositing and withdrawing
funds from depository account number ______________ maintained at First
Tennessee Bank, Memphis, TN; to complete, execute, deliver and record
any assignment, mortgage, financing statement or other instrument; to
take all necessary and appropriate action its name with respect to any
Mortgage Loans and any commitments for resale of the Mortgage Loan and
the servicing of any Mortgages transferred to Bank pursuant to the
Mortgage Warehouse and Security Agreement executed MAY 31, 2001
including but not limited to selling the Mortgage Loans to an investor,
to commence, prosecute, settle, discontinue, defend or otherwise
dispose of any claim relating to any Mortgage Note, commitment,
Mortgage, and Loan, or any collateral hereunder and to sign Mortgage
Company's name wherever appropriate to any power granted by the
Mortgage Warehouse and Security Agreement executed MAY 31, 2001. Any
such use of this power need only be executed by one of the above named
individuals.
By: EXHIBIT ONLY
Its: EXHIBIT ONLY
STATE OF ___________________
COUNTY OF ___________________
Personally appeared before me, the undersigned authority in
and for the said county and state, on this _____ day of ______________,
200___, within my jurisdiction, the within named
________________________, who acknowledged that (he)(she) is
_______________________ of DUXFORD FINANCIAL, INC. AND/OR BAYPORT
MORTGAGE, L. P., a California Corporation, and that for and on behalf
of the said Corporation, and as its act and deed (he)(she) executed the
above and foregoing instrument, after first having been duly authorized
by said CORPORATION so to do.
----------------------------------
My Commission Expires: NOTARY PUBLIC
---------------------------
Page 18 of 23
19
EXHIBIT E
QUALIFIED INVESTORS
(To be provided by Borrower
and subject to Bank's approval.)
Page 19 of 23
20
EXHIBIT F
COMMITMENT LETTER
Thursday, July 19, 2001
Mark Carver
Duxford Financial, Inc. and/or Bayport Mortgage, L. P.
1300 Dove Street, Suite 200
Newport Beach, CA 92660
Re: Warehouse Facility Commitment Terms
Dear Mr. Carver,
First Tennessee Bank ("Bank") is pleased to make a warehouse line of credit
available to Duxford Financial, Inc. and/or Bayport Mortgage, L. P. ("Borrower")
based upon the following terms and in accordance with terms and conditions
stated within the Mortgage Warehouse Loan and Security Agreement ("Agreement")
pertaining to this facility. All terms contained within this letter ("Commitment
Letter") shall be binding and shall be considered to be part of the Agreement
upon mutual acceptance by all parties. This loan commitment shall expire 30 days
from the date of this letter unless accepted and executed prior to that date.
This commitment replaces all prior warehouse facility commitments made to
Duxford Financial, Inc. and/or Bayport Mortgage, L. P. by the Bank and is not in
addition to any such prior commitments.
The terms of this commitment are as follows:
Total Maximum Line Amount: $15,000,000.00
Committed Line: $15,000,000.00
Uncommitted Line: $0.00
Purpose: To fund Borrower's origination of single family
residential mortgage loans which meet all eligible
collateral criteria, as may be amended by Bank
from time to time.
Interest Rate: Equal to the Mortgage Note Rate, but no less than
the Rate Floor, and no more than the Rate Cap.
Rate Floor: Bank Base Rate minus 3.00%
Rate Cap: Bank Base Rate plus 2.00%
Fees: $45.00 per advance under the line. Each mortgage
loan must be funded with a separate advance made
payable to a title company or insured closing
attorney. Fee may include spot flood
certification.
Advance rate: The lesser of:
1. 100% of the net funding amount on the
HUD-1, or
2. The unpaid principal balance of the
mortgage loan being originated.
3. 99% of the Market Value of the mortgage
loan being funded.
Maximum Dwell: Forty-Five (45) days
Maximum Wet Period: 3 business days
Commitment Expiration: 5/31/2002
Eligible Collateral: See Exhibit G of the Mortgage Warehouse Loan and
Security Agreement.
Page 20 of 23
21
Maximum Loan Size: Loans in excess of $500,000.00 must be approved by
Bank prior to funding.
Guarantor(s): None
Financial Covenants: 1. $250,000.00 minimum net worth in Borrower at
all times,
2. Borrower and Guarantor(s) agree to maintain a
minimum combined net worth of $1,000,000.00
as described within the Agreement,
3. Combined net worth of Borrower and
Guarantor(s) to meet or exceed 5% of
Borrower's outstanding liabilities at all
times.
4. Borrower's Liquidity when combined with the
Liquidity of all guarantors shall at all
times meet or exceed 5% of the Maximum Line
amount.
Other Covenants: 1. Borrower agrees to maintain fidelity and E&O
coverage in force in an amount equal to at
least $300,000 per incident, with a maximum
deductible of $15,000.
2. Borrower agrees to provide Bank audited
financial statements prepared in accordance
with GAAP annually,
3. Borrower agrees to provide Bank unaudited
financial statements prepared in accordance
with GAAP quarterly,
4. Borrower agrees to provide Bank guarantors'
unaudited personal financial statements on
the Bank's then-current form annually,
5. Borrower agrees not to use or attempt to use
this warehouse facility to repurchase any
mortgage loan,
6. Various other covenants, representations, and
warranties as listed in the Mortgage
Warehouse Loan and Security Agreement.
Please indicate your acceptance of these terms by executing below. If you have
any questions or I may be of assistance in any way, please call.
Sincerely
Robert A. Garrett
Vice President -- Warehouse Lending
Agreed to and accepted this ______ day of _____________________, _____.
Duxford Financial, Inc. and/or Bayport Mortgage, L. P.
By: _________________________________
Its: _______________________________
Page 21 of 23
22
EXHIBIT G
ELIGIBLE MORTGAGE LOAN CRITERIA
Subject to change from time to time at the Bank's sole discretion, the following
loans will be considered eligible for warehousing under each Mortgage Warehouse
Loan and Security Agreement:
To be warehoused, each loan must:
A. be secured by one-to-four family residential real property, AND
B. be ready for immediate occupancy, AND
C. be located within one of the 48 contiguous United States, AND
D. be no more than 30 days old on the Advance Date.
1. Loans which conform to FHA, VA, FNMA, or FHLMC guidelines and certain other
loans covered by private mortgage insurance may always be warehoused,
subject to each warehouse line's maximum line of credit.
2. Conventional Non-conforming loans may also be warehoused, subject to each
warehouse line's maximum line of credit and subject to the following:
A. No more than 5% of a warehouse line may be used to warehouse loans
graded 5; AND
B. No more than 15% of a warehouse line may be used to warehouse the
combined total of all loans graded 4 or 5; AND
C. No more than 35% of a warehouse line may be used to warehouse the
combined total of all loans graded 3, 4 or 5; AND
D. No more than 85% of a warehouse line may be used to warehouse the
combined total of all loans graded 2, 3, 4 or 5; AND
E. Up to 100% of a warehouse line may be used to warehouse the combined
total of all loans graded 1, 2, 3, 4 or 5.
F. Loans which fall below the minimum grade 5 FICO criterion or which fall
above the maximum grade 5 CLTV criterion may not be warehoused.
3. All loans warehoused will be graded by the Bank in accordance with the
following "Table of Mortgage Loan Grades" (Table on next page):
Page 22 of 23
23
TABLE OF MORTGAGE LOAN GRADES
Combined Loan to Value Ratio
--------- --------- --------- --------- --------- --------- -------- ---------
100% 95% 90% 85% 80% 70% 60% 50%
or Less or Less or Less or Less or Less or Less or Less or Less
-------------------- --------- --------- --------- --------- --------- --------- -------- ---------
1 1 1 1 1 1 1 1
F FHA, VA, FNMA,
I FHLMC, or Loans
C covered by MI*
O -------------------- --------- --------- --------- --------- --------- --------- -------- ---------
720 or Above 2 2 2 1 1 1 1 1
C -------------------- --------- --------- --------- --------- --------- --------- -------- ---------
r 700 to 719 3 2 2 2 2 2 1 1
e -------------------- --------- --------- --------- --------- --------- --------- -------- ---------
d 670 to 699 3 3 2 2 2 2 2 2
i -------------------- --------- --------- --------- --------- --------- --------- -------- ---------
t 640 to 669 4 3 3 3 3 3 3 3
-------------------- --------- --------- --------- --------- --------- --------- -------- ---------
S 620 to 639 5 4 3 3 3 3 3 3
c -------------------- --------- --------- --------- --------- --------- --------- -------- ---------
o 600 to 619 5 5 4 4 4 4 4 4
r -------------------- --------- --------- --------- --------- --------- --------- -------- ---------
e 550 to 599 5 5 5 5 4 4 4 4
-------------------- --------- --------- --------- --------- --------- --------- -------- ---------
500 to 549 5 5 5 5 5 5 4 4
-------------------- --------- --------- --------- --------- --------- --------- -------- ---------
Below 500 Not Not Not Not Not Not Not Not
Allowed Allowed Allowed Allowed Allowed Allowed Allowed Allowed
-------------------- --------- --------- --------- --------- --------- --------- -------- ---------
* Non-conforming loans are considered Grade 1 if covered to 75% or less by
private mortgage insurance naming the lender as the insured. MI coverage
must be noted on the ARC and certificate must be faxed with the ARC to
qualify for this special grading.
4. Mortgage Loans which have been previously warehoused or which have been
re-purchased by the warehouse borrower are specifically not eligible for
warehousing.
Page 23 of 23