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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS
Aris Mortgage Holding Company, LLC Index to Consolidated Financial Statements (Unaudited)
Aris Mortgage Holding Company, LLC Index to Consolidated Financial Statements
As filed with the Securities and Exchange Commission on October 16, 2020
Registration No. 333-249235
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
AmeriHome, Inc.
(Exact name of registrant as specified in its charter)
Delaware (State or other jurisdiction of incorporation or organization) |
6162 (Primary Standard Industrial Classification Code Number) |
85-2732607 (I.R.S. Employer Identification Number) |
1 Baxter Way
Thousand Oaks, California 91362
Telephone: (888) 469-0810
(Address, Including Zip Code and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices)
James S. Furash
Chief Executive Officer
1 Baxter Way
Thousand Oaks, California 91362
Telephone: (888) 469-0810
(Name, Address, Including Zip Code and Telephone Number, Including Area Code, of Agent for Service)
Copies to: | ||
Perry J. Shwachman, Esq. Samir A. Gandhi, Esq. Robert A. Ryan, Esq. Sidley Austin LLP 787 Seventh Avenue New York, New York 10019 Telephone: (212) 839-5900 Facsimile: (212) 839-5599 |
Richard D. Truesdell, Jr., Esq. Pedro J. Bermeo, Esq. Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 Telephone: (212) 450-4000 Facsimile: (212) 701-5800 |
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer o | Non-accelerated filer ý |
Smaller reporting company o Emerging growth company ý |
If an emerging growth company, indicate by checkmark if the registrant has not elected to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. o
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Securities to be Registered |
Proposed Maximum Aggregate Offering Price(1)(2) |
Amount of Registration Fee(2) |
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Class A common stock, par value $0.01 per share |
$100,000,000 | $10,910(3) | ||
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The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.
AmeriHome, Inc., the registrant whose name appears on the cover of this registration statement, is a private company incorporated under the law of Delaware. In connection with the closing of this offering, AmeriHome, Inc. and Aris Mortgage Holding Company, LLC ("Aris Holding") will consummate the Transactions, as described in "Our Organizational Structure" in the prospectus included as part of this registration statement. As a result of the Transactions, AmeriHome, Inc. will be (i) a holding company, with its principal asset consisting of limited liability company interests of Aris Holding and (ii) the sole managing member of Aris Holding and will control the business and affairs of Aris Holding and its subsidiaries. Except as otherwise disclosed in the prospectus included in this registration statement, the consolidated historical financial statements and summary and selected historical consolidated financial data and other historical financial information included in this registration statement are those of Aris Holding and its subsidiaries, and do not give effect to the Transactions.
As used in this prospectus, unless the context otherwise indicates, any reference to "AmeriHome," "our Company," "the Company," "us," "we" and "our" refers, prior to the completion of the Transactions (as defined herein), to Aris Mortgage Holding Company, LLC, together with its consolidated subsidiaries (including AmeriHome Mortgage Company, LLC), and after the completion of the Transactions, including this offering, to AmeriHome, Inc., the issuer of the shares of Class A common stock offered hereby, together with its direct and indirect subsidiaries.
Neither we nor the underwriters have authorized anyone to provide any information or make any representations other than the information contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares of Class A common stock offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. You should assume the information contained in this prospectus and any free writing prospectus we and the underwriters authorize to be delivered to you is accurate only as of their respective dates or the date or dates specified in those documents. Our business, financial condition, results of operations and prospects may have changed since those dates.
For investors outside the United States: neither we nor any of the underwriters has done anything that would permit this offering or possession or distribution of this prospectus or the offer and sale of the shares of Class A common stock in any jurisdiction where action for that purpose is required, other than the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Class A common stock and the distribution of this prospectus outside the United States.
Unless otherwise indicated, all references in this prospectus to the number and percentages of shares of our common stock outstanding following the completion of this offering:
i
As used in this prospectus, unless the context otherwise requires:
ii
when the benefits of servicing the loans are expected to adequately compensate the servicer for performing the servicing.
iii
The data included elsewhere in this prospectus regarding the markets and industry in which we operate, including the size of certain markets and our position and the position of our competitors within these markets, are based on reports of government agencies, published industry sources and estimates based on our management's knowledge and experience in the markets in which we operate. Data regarding the industries in which we compete and our market position and market share within these industries are inherently imprecise and are subject to significant business, economic and competitive uncertainties beyond our control, but we believe that they generally indicate size, position and market share within these industries. Our own estimates have been based on information obtained from our trade and business organizations and other contacts in the markets in which we operate. We believe these estimates to be accurate as of the date of this prospectus. However, this information may prove to be inaccurate because of the method by which we obtained some of the data for the estimates or because this information cannot always be verified with complete certainty due to the limits on the availability and reliability of raw data, the voluntary nature of the data gathering process and other limitations and uncertainties. Third-party industry and general publications, research, surveys and studies generally state that the information contained therein has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe that each of these studies and publications is reliable, neither we nor any of the underwriters have independently verified any of the data from third-party sources. As a result, you should be aware that market, ranking and other similar industry data included elsewhere in this prospectus, and estimates and beliefs based on that data, may not be reliable and are subject to change based on various factors, including those discussed under "Risk Factors" and "Special Note Regarding Forward-Looking Statements." Except as otherwise specified, such data is derived from Inside Mortgage Finance, Mortgage Bankers Association, Fannie Mae, the U.S. Federal Reserve and the Federal Reserve Bank of St. Louis.
We own or have rights to trademarks or trade names that we use in conjunction with the operation of our business. Our name, logo and registered domain names are our proprietary service marks or trademarks. Each trademark, trade name or service mark by any other company appearing in this prospectus belongs to its holder. Solely for convenience, the trademarks, service marks, trade names and copyrights referred to in this prospectus are listed without the ©, ® and TM symbols, but we will assert, to the fullest extent under applicable law, our rights to these trademarks, service marks, trade names and copyrights.
PRESENTATION OF FINANCIAL INFORMATION
Except as otherwise disclosed in this prospectus, the consolidated historical financial statements and summary and selected historical consolidated financial data and other financial information included elsewhere in this prospectus are those of Aris Holding, together with its consolidated subsidiaries, and have been prepared in U.S. dollars in accordance with GAAP, except for the presentation of Adjusted After-Tax Net Income and Adjusted After-Tax ROAE, each a non-GAAP financial measure. This historical financial information does not give effect to the Transactions, including this offering.
Except as noted in this prospectus, the unaudited pro forma financial information of AmeriHome, Inc. presented in this prospectus has been derived from the application of pro forma adjustments to the historical consolidated financial statements of Aris Holding and its subsidiaries included elsewhere in this prospectus. These pro forma adjustments give effect to the Transactions as described in "Our Organizational Structure," including the consummation of this offering, as if all such transactions had occurred on January 1, 2019 in the case of the unaudited pro forma consolidated statement of income data, and as of December 31, 2019 and June 30, 2020, as applicable, in the case of the unaudited pro forma consolidated balance sheet data. See "Unaudited Pro Forma Consolidated Financial Information" for a complete description of the adjustments and assumptions underlying the pro forma financial information included in this prospectus.
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This summary highlights selected information contained elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our Class A common stock. You should read this entire prospectus carefully, including the matters discussed in the sections entitled "Risk Factors" beginning on page 30, "Management's Discussion and Analysis of Financial Condition and Results of Operations" beginning on page 99, and the consolidated financial statements and notes thereto and other financial information included elsewhere in this prospectus before making an investment decision. In this prospectus, we make certain forward-looking statements, including expectations relating to our future performance. These expectations reflect our management's view of our prospects and are subject to the risks described under "Risk Factors" and "Special Note Regarding Forward-Looking Statements." Our expectations of our future performance may change after the date of this prospectus and there is no guarantee that such expectations will prove to be accurate. In this prospectus, unless the context otherwise indicates, any reference to "AmeriHome," "our Company," "the Company," "us," "we" and "our" refers, prior to the consummation of the Transactions, including this offering, to Aris Mortgage Holding Company, LLC and its consolidated subsidiaries, and after the Transactions, to AmeriHome, Inc., the issuer of the shares of Class A common stock being offered hereby, together with its direct and indirect subsidiaries.
We are a leading U.S. residential mortgage producer and servicer focused on driving profitable growth across market environments. We were founded in 2013 and designed to optimize operational and financial excellence, instilling a business strategy and culture we refer to as the "AmeriHome Way," as detailed below. We have created a flexible and scalable platform with a modern purpose-built infrastructure, advanced data and analytics capabilities, all leveraging our management team's collective experience to achieve what we believe is a highly efficient cost structure to target profitability in all market environments. This has led to strong growth and performance, evidenced by 21 consecutive quarters of profitability while growing our production volume 187.4% from 2015 to LTM Q2 2020, positioning us as the third largest correspondent producer.
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Since our founding, we have grown steadily in our three different business segments: Correspondent, Consumer Direct and Servicing. We deliberately chose to enter these business segments based on a purchase origination orientation, ability to efficiently achieve scale, and the ongoing opportunities afforded by owning mortgage servicing rights all to achieve stability of earnings through varying economic cycles. Through our Correspondent channel, we primarily purchase and aggregate residential mortgages from trusted third-party originators, who we refer to as "correspondent sellers." Our Consumer Direct channel then originates mortgages directly with individual homeowners, primarily for refinancing opportunities with our existing servicing customers. Our Servicing segment allows us to retain the customer relationship from these originations while taking an asset management approach to achieve steady returns on the servicing.
The AmeriHome Way underpins everything we do, resulting in a highly scalable business that generates attractive returns across market cycles. We believe AmeriHome can change what it means to be a leading mortgage company built on the durability of our value proposition to our correspondent sellers and individual borrowers, a rate-agnostic asset management strategy, and a risk management-driven culture. We believe this will drive profitability and growth across market environments allowing us to best serve our correspondent sellers, borrowers, employees and shareholders.
Our partner-centric platform drives strong allegiance across a broad range of mortgage products and multiple production channels. We have client relationships with over 650 correspondent sellers, which include independent mortgage bankers, community and regional banks, and credit unions of all sizes. These relationships are supported by our value proposition of constant market presence, reliable pricing, and reduced execution times compared to competitors. This ultimately translates to better fulfillment timelines for our customers.
We emphasize automation, process-improvement, and data-driven decision making across the origination lifecycle. We prioritize speed, continuity, and cost efficiency in order to continuously improve both our timelines and efficiency. This infrastructure allows us to automate our compliance and quality control functions. We believe our data management and analytics lead to better risk-reward evaluations in our Correspondent segment and more effective pursuit of new customer acquisition opportunities in our Consumer Direct segment.
Our experienced and entrepreneurial team brings decades of experience from different organizations and platforms. They authored the AmeriHome Way to codify the principles which they saw driving a successful organization and team. Each tenet motivates the decisions we make every day, from how we treat our sellers and homeowners to how we manage risk across the organization.
We have a track record of consistent, prudent and profitable growth, having expanded our production volume from $18.7 billion in 2015 to $53.7 billion for the twelve months ended June 30, 2020 and our servicing portfolio from $18.9 billion to $87.9 billion as of June 30, 2020.
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The AmeriHome Way has enabled us to achieve stable and attractive return on equity and allowed our operating company to generate positive net income every month since achieving initial profitability in February 2015. For the twelve months ended December 31, 2019 and 2018 and the six months ended June 30, 2020, total net revenues were $418.7 million, $325.4 million and $442.0 million, respectively, and net income was $174.5 million, $105.0 million and $275.0 million, of which $71.1 million, $129.5 million and $39.9 million, respectively, consisted of net loan servicing revenue. Over the same time period, Adjusted After-Tax Net Income was $144.0 million, $89.3 million and $217.5 million, and Adjusted After-Tax ROAE was 17.7%, 12.4% and 44.3%, respectively. For a reconciliation of each of Adjusted After-Tax Net Income and Adjusted After-Tax ROAE to its most comparable GAAP measure, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial Measures."
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Overview
Our principal strategy is to source residential mortgage loans through multiple production channels and to sell the loans to third-party investors including the Agencies and others, or to securitize them, while generally retaining MSRs. We actively manage our MSR assets and act as master servicer, while outsourcing day-to-day operational servicing functions such as payment collection to subservicers.
AmeriHome Business Model Overview
Our business segments include two production channels and servicing:
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production opportunities as interest rates change, so that most often there is a balancing interaction between servicing and production revenues, as one rises and the other falls.
We are an approved seller/servicer for Fannie Mae and Freddie Mac. We are also an approved issuer of securities guaranteed by Ginnie Mae, an FHA-approved lender and a lender/servicer for the VA and the USDA. We are licensed to originate loans in 46 states and the District of Columbia. We are able to purchase and service loans in 49 states and the District of Columbia. Our national presence allows us to build new relationships across the country, growing our scale, and helps to limit geographical concentration in our MSR portfolio.
Production
Our mortgage production platform was designed to be scalable, low-cost and efficient, while minimizing risk. Our correspondent model and our disciplined strategy are designed to generate long-term outperformance versus the market. Our large network of correspondent sellers allows us to see a large percentage of the mortgage market. We had the opportunity to bid on 26% of the approximately $1.7 trillion of retail and wholesale mortgage loans originated in 2019. During the twelve months ended June 30, 2020, our 665 approved correspondent sellers provided us access to approximately $489 billion loans, representing approximately 22% of the total market. Over the same time period, our production volume totaled approximately $54 billion. Our growing presence in the Consumer Direct channel is designed to enable us to earn attractive margins while defending our MSR portfolio from heightened prepayment rates in a low interest rate environment by identifying mortgage loans that are likely to prepay and offering to refinance them at current rates.
Our growing presence in the Consumer Direct channel is designed to enable us to achieve attractive margins while maintaining the customer relationships we have fostered by owning MSRs. This retention or recapture of our portfolio has become increasingly important due to heightened prepayment rates in a low interest rate environment. We are able to retain an increasing share of our customers by identifying mortgage loans that are likely to prepay and offering to refinance them at current rates.
Our production volume predominantly consists of purchase originations (i.e., mortgages originated to purchase a property), which positions us well for future growth. In 2019, 62.8% of our production volume was purchase production, which tends to be more stable from year to year than refinance production, which is more heavily dependent on interest rates. From the first quarter of 2017 through June 30, 2020, purchase production has comprised an average of 65% of our total volume. Purchase production volume has increased from $12.0 billion in 2015 to $28.0 billion in 2019, averaging 68% of our total volume over that time period, despite fluctuations in refinance volume, which has been driven by changes in interest rates. Our strong purchase platform and forecasted growth in purchase volumes should support expansion in our Correspondent channel.
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Correspondent Channel
In our Correspondent channel, we purchase residential mortgage loans from a network of independent mortgage originators. We have chosen to pursue growth primarily through the Correspondent channel, which we think provides the most efficient and scalable access to the approximately $700.0 billion mortgage market, serviced by approximately 5,000 sellers. According to Inside Mortgage Finance, AmeriHome was the third largest correspondent producer in the country, with a volume of approximately $27 billion and a market share of approximately 8% for the six months ended June 30, 2020, up from a volume of $1.9 billion and a market share of 0.5% in 2014, respectively. Our market share has grown approximately 28% since 2017. Our Correspondent channel primarily consists of loans that are originated, underwritten and funded by our correspondent sellers and subsequently sold to AmeriHome. The sellers make representations and warranties as to the quality of loan underwriting and compliance with applicable laws and lending regulations, and agree to buy back loans that fail to meet appropriate standards. Before purchasing loans from our correspondent sellers, we review loans for compliance, documentation and loan data to ensure accuracy and salability into the secondary market. We conduct extensive diligence on each correspondent seller prior to making any purchases of loans, and focus on a group of top-tier correspondent sellers with solid financial performance and long track records in the industry. Once we purchase the loans, they are on boarded to our servicing system and pooled and certified to the respective Agency or investor. Our correspondent production represented 96.5% of our mortgage volume for the six months ended June 30, 2020, compared to 98.2% for the six months ended June 30, 2019 and 97.7% for the year ended December 31, 2019, compared to 98.1% for the year ended December 31, 2018.
We have a diversified correspondent base, with approximately 60% of our production acquired from sellers outside of the top 25. We offer our correspondent sellers a consistent bid for a full suite of Agency loan products along with flexible delivery options, including conventional, FHA, VA, and USDA loans. For the delegated underwriting option, the credit decision is made by our correspondent sellers, and the loans are purchased by AmeriHome only after a loan has been closed by the correspondent seller. These sellers make certain representations and warranties to AmeriHome as described above. For the non-delegated underwriting option, AmeriHome makes the credit decision for the seller, and then purchases the loan after the seller has closed it, subject to a reduced set of representations and warranties from the seller.
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While the majority of our current correspondent production is acquired from sellers who use the delegated underwriting option, our non-delegated channel is growing. We believe our non-delegated production line of business, where our profits margins are typically higher than for delegated business, represents a significant opportunity for growth and we continue to focus on expanding it further by solidifying our existing relationships and acquiring new non-delegated sellers. Our production volume is highly diversified with 35% government and 65% conventional loans as of June 30, 2020.
Consumer Direct Channel
Our Consumer Direct channel, which was launched in 2016, originates mortgages directly to an approximately $1.8 trillion homeowner market, ultimately selling the underlying mortgage and retaining the servicing rights. Currently, the majority of our consumer direct origination activity is refinancing our existing AmeriHome servicing customers. By proactively offering attractive refinancing terms to existing customers, we can minimize MSR portfolio attrition and build customer loyalty by improving their mortgage experience. These attractive refinance terms have also contributed to our Net Promoter Score of 78.
We have a dedicated in-house sales and fulfillment team that drives our Consumer Direct channel, targeting further origination revenue at what we believe to be attractive cash margins. We have doubled our sales and fulfillment headcount since January 2018. Our direct access to real-time data to identify target customers who would benefit from a refinance makes the mortgage recapture process more efficient than acquiring new customers from outside of our portfolio. Our Consumer Direct channel represented 3.5% and 1.8% of our mortgage production volume for the six months ended June 30, 2020 and 2019, respectively, and 2.3% and 1.9% for the years ended December 31, 2019 and 2018, respectively. Production has increased 2.5x since January 2018. Pull through adjusted lock volume for this platform totaled $1.1 billion and $0.4 billion for the six months ended June 30, 2020 and 2019, respectively, and $1.1 billion and $0.8 billion for years ended December 31, 2019 and 2018, respectively.
This Consumer Direct channel utilizes our call center and our origination websites to reach our approximately 400,000 existing servicing customers who may benefit from a new mortgage. Of these customers, approximately 66% would benefit from refinancing. Those existing relationships allow us to benefit from nominal incremental customer acquisition cost, as we save the vast majority of the advertising and marketing costs that would be associated with sourcing new customers. Over time, we
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have expanded our consumer direct platform to allow us to acquire customers whose loans we do not currently service, which represents a significant opportunity for the future growth for our originations business. We expect our funding volume and earnings to continue to improve over time as we build out this platform to facilitate the refinancing of our growing servicing portfolio and to fully enable the acquisition of new customers whose loans we do not currently service.
The chart below reflects the growth in our servicing portfolio, which we expect to continue to bolster our Consumer Direct channel:
Servicing
We service residential loans primarily for the GSEs (Fannie Mae and Freddie Mac) and Ginnie Mae, generally earning a contractual fee ranging from 25 to 56.5 basis points of outstanding unpaid
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principal balance, as well as ancillary income. Servicing mortgage loans involves the collection of principal and interest payments from customers, the administration of tax and insurance escrow accounts, and the collection of insurance claims, in each case on behalf of mortgage loan investors or mortgage loan guarantors, as well as the management of mortgage loans that are delinquent or in foreclosure or bankruptcy.
We take an asset management approach to servicing. This includes (i) hedging and interest rate risk management, (ii) portfolio surveillance and active portfolio management and (iii) the use of a third-party subservicer, who is subject to our ongoing oversight. Our real-time data surveillance of our MSR portfolio allows us to create in-house models to use in conjunction with third-party models to predict loan prepayments and credit losses, and to simulate interest rate scenarios to estimate cash flows and valuation changes. We further enhance our total return through effective oversight of our subservicing activities, which we believe increases cash collections, and operational efficiencies.
We outsource certain operational servicing functions to subservicers to better focus on key value-additive aspects of our servicing business, while avoiding the high fixed costs and capital requirements associated with operating a full servicing platform. In this way, we benefit from our subservicers' scale and efficiency, and achieve a more variable servicing cost structure. This allows us to consistently prioritize quality and value over volume. Our subservicing arrangements also reduce our operational risk, as our subservicers absorb the costs of any operational errors. Cenlar, a bank with decades of experience in managing mortgage loans, subservices approximately 99% our mortgage loans.
As of June 30, 2020, we serviced approximately 400,000 customers with an aggregate UPB of approximately $87.9 billion. During the year ended December 31, 2019, we added $37.8 billion UPB of loans to our MSR portfolio, which contributed approximately 49.9% of our total UPB as of December 31, 2019. During the six months ended June 30, 2020, we added $23.2 billion UPB of loans to our MSR portfolio, which contributed approximately 26.9% of our total UPB as of June 30, 2020. Our MSR portfolio is highly diversified with 41% government and 59% conventional underlying loans as of June 30, 2020.
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Technology, Data and Analytics
We have invested in our infrastructure and technology platform since inception to enable low-cost production and maximize operational efficiency. We have focused on data and analytics as the most critical and complex component of our foundation. We believe our proprietary systems are highly strategic, create competitive advantages and add significant value, including the ability to organize, understand, analyze, and audit large quantities of information quickly and efficiently. We have four key proprietary products that work in tandem to provide a stable and comprehensive data platform based on one consistent data source: Cronus (data management platform), Magnus (data warehouse), Aspen (loan pricing, hedging and pooling platform), and Nexus (daily profit-and-loss ("P&L") and hedge attribution platform). We created this proprietary technology ecosystem to ensure reporting consistency across business lines, run complex analyses in a flexible manner, and enable high levels of automation.
We also choose to outsource technology platforms based on the availability of satisfactory products in the market and whether doing so is more capital efficient than building technology in-house. For example, we worked directly with Ellie Mae to facilitate the development of their latest generation correspondent loan origination system, thus securing a contract that provides us access to the industry-leading technology at an efficient cost compared to the industry.
Large, Established and Growing Financial Market
We operate in one of the largest financial markets in the world. According to the Mortgage Bankers Association, there was approximately $10.7 trillion of residential mortgage debt outstanding in the United States as of December 31, 2019. Despite its large size, our market continues to grow. For the year 2019, total mortgage production volume was $2.2 trillion, representing approximately 30% growth over the prior year. Moreover, the mortgage origination market has averaged $2.0 trillion in annual originations since 2000. As of August 2020, the mortgage rate environment has resulted in a significant portion of mortgages being "in-the-money" to refinance. Even when this healthy supply of production diminishes, additional macroeconomic factors, independent of the rate environment, are expected to contribute to a steady increase in purchase volume over time.
Although overall market volume can fluctuate due to macroeconomic factors such as interest rates and refinancing activity, there has been a steady increase in purchase volume. Regardless of the interest rate environment, purchase volume growth is expected to continue given prevailing demographic trends. As an example, the average homeownership rate amongst millennials, the largest U.S. population group by generation, was only approximately 38% as of June 30, 2020 based on data from the U.S. Census Bureau. Based on historical figures provided by the Mortgage Bankers Association, purchase volume grew on a compound annual basis of 6.7% from 2009 to 2019. From 2020 to 2021, purchase volumes are expected to increase by 3.3% based on Fannie Mae forecasted estimates. We believe that we are especially well positioned to capitalize on the expected increase in purchase volume through our purchase-focused correspondent business, while our consumer direct platform will benefit from the overall growth in our servicing portfolio.
Fragmentation of the Mortgage Industry
Despite the size and attractive growth characteristics, the mortgage industry has become increasingly fragmented and diversified. Prior to the financial crisis, large retail U.S. banks traditionally held the majority of the market share in both mortgage originations and servicing. This trend reversed itself shortly after the global financial crisis, as heightened capital requirements and increased regulatory scrutiny precipitated a decrease in bank participation in the mortgage market and resulted in non-bank market participants seizing a significantly greater market share. The market share of mortgage originations produced by the top five banks (Wells Fargo, J.P. Morgan Chase, Bank of
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America, U.S. Bank, and Citi) declined from 60% for the year ended December 31, 2010 to 18% for the twelve month period ended June 30, 2020, according to Inside Mortgage Finance.
Most mortgage transactions start off at the local level, where we believe relationships and advice matter more than brand or scale. A majority of these relationships are between small independent mortgage bankers, realtors, builders and borrowers. Unlike other consumer-facing industries, leaders in the mortgage market do not hold significant market share. Our Correspondent channel allows us to capitalize on this fragmentation, by bringing our scale, efficiency and capital markets access to our large, diverse network of independent correspondent sellers nationwide. We believe there will be ongoing opportunities for our market-leading platform to increase our market share.
We believe the following characteristics of our business position us as a leading producer and servicer of residential mortgages in the United States and will allow us to continue to capture market opportunities in the future:
Track record of consistent and profitable growth
A core tenet of the AmeriHome Way is to achieve substantial growth without sacrificing profitability. We have generated positive net income at our operating company every month since achieving initial profitability in February 2015. Since then, our production volume has expanded from $18.7 billion in 2015 to $44.4 billion in 2019 and our revenue has grown at a compounded annual growth rate of 45.6%, reaching $418.7 million for the year ended December 31, 2019. Through a focus on disciplined growth, our top-line results have translated into healthy profits, as net income and return on average equity increased from $29.0 million and 15.7% for the year ended December 31, 2015, to $174.5 million and 20.8% for the year ended December 31, 2019. Since the first quarter of 2016, our quarterly TTM return on average equity has been consistent, at an average of 18.1% despite the changes in interest rate and the macroeconomic environment.
We are a market-leading independent mortgage company with complementary business segments
We are the third largest correspondent producer, having purchased over $43.0 billion of mortgage loans in 2019 through our active lending relationships across 47 states. As of June 30, 2020, we retained
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relationships with approximately 400,000 customers through our servicing portfolio. Our growing Consumer Direct channel allows us to extend the life of those relationships, as well as to add new customers to our platform. We believe our scale, and the operational efficiency that derives from it, is a sustainable competitive advantage for our business.
Our business pairs our targeted production strategy with an outsourced subservicing approach designed to minimize risk while maximizing profitability. We believe that the synergistic relationship between our Correspondent channel, Consumer Direct channel, and Servicing business that employs a subservicing strategy positions us to increase our scale without substantial expense growth, increasing our margins.
Purpose-built, automated, and scalable platform drives low costs and margin expansion
AmeriHome was built to avoid many of the risks and challenges faced by independent mortgage companies during the financial crisis, allowing us to thrive in any economic environment. Our management team's firsthand experience prior to AmeriHome with the limitations of legacy systems and the lack of adequate risk management has shaped our nimble, variable cost strategy that allows us to make business decisions that produce sustainable investment returns and avoid excessive overhead and undisciplined growth that leads to volatile results as market conditions change. We believe that our current platform can support production that is at least double our average volume in 2019. Specifically, we have prioritized our highly scalable Correspondent channel and the use of leading subservicers rather than building our own servicing infrastructure, while utilizing technology platforms that optimize flexibility and efficiency.
Our investments in our custom-designed technology suite support our low-cost strategy and maximize efficiency. We have best-in-class turnaround times to quickly purchase loans from correspondent sellers, propelled by highly automated processes developed through our proprietary data and analytics platform. We are able to analyze and price over $6.0 billion worth of loans on a daily basis with a median time from bid submission to pricing of approximately 3 minutes. We have a median time from file receipt to release of conditions of 4 days and a median time from file receipt to approval for purchase of 7 days.
The targeted outsourcing of select functions leverages our partners' marginal cost advantages and provides us with optimal operational flexibility while minimizing capital deployment. These various factors combine to drive a low cost platform that will allow us to profitably operate in various market conditions. If margins were to contract, we would be well-positioned to absorb such contraction with a cost to produce that we believe is substantially lower than that of correspondent peers, demonstrating the tangible benefits of our systems. The correspondent business is more scalable than other mortgage origination channels that rely on maintaining a brick-and-mortar retail presence, have high advertising costs, or require higher costs to produce each loan, positioning us for further growth without proportional expansion of headcount or operational costs.
Unique value proposition to support our continued success
We have built a diversified business platform capable of providing high quality service to both our correspondent sellers and our servicing customers throughout the mortgage life cycle. Maintaining strong relationships with our network of correspondent lenders supports our purchase production business, while delivering a high-quality servicing experience to our customers throughout their period of homeownership allows for us to acquire their future business through our Consumer Direct channel. We strive to consistently deliver value to both constituencies to maintain our leading position in correspondent production while increasing our returns on the initial purchase of a correspondent mortgage through our consumer direct refinancing efforts.
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We maintain strong, long-term relationships with our network of over 650 correspondent sellers that are often augmented by longstanding relationships between our sellers and the AmeriHome team. Approximately 90% of our correspondents transact with us every quarter, which we believe is among the highest monthly participation rates in the industry. The loyalty of our partners demonstrates the strength of our relationships and the benefits of partnering with AmeriHome.
Our main tenets to providing value to our correspondent sellers are:
Our platform was designed to grow and thrive in any market environment
We were built to succeed in any macroeconomic environment. We believe we are positioned to continue on a path of profitable growth regardless of prevailing market conditions, supported by our efficient operations, strong purchase-focused platform, emerging refinance and portfolio recapture strategy, servicing management and active management of MSRs. In highly competitive environments, our low cost model and selective purchase strategy allow us to maintain profitability despite margin decreases. In markets with less competition, our scalable platform and extensive correspondent network allow us to capture additional volume and expanded margins while maintaining our stringent quality controls.
Our MSR portfolio and its associated revenue mitigate fluctuations in our production business, providing revenue diversification and recurring cash flows. Our strength in purchase originations should also support our production business in any market environment, while our developing consumer direct platform should allow us to increase refinance and portfolio recapture rates. For the six months ended June 30, 2020 and the year ended December 31, 2019, our purchase volume was $11.8 billion and $27.9 billion, respectively, and our refinance volume was $16.1 billion and $16.5 billion, respectively.
Our platform is built to support future expansion in volume and product mix, allowing us to pivot efficiently should market conditions change. Our developing non-delegated channel will enhance our ability to react to the evolution of the mortgage and consumer finance markets.
Experienced, cohesive management team
Our senior management team has a compelling combination of financial, correspondent, secondary and risk management experience in both bank and non-bank mortgage lending environments. They have an average of 27 years of industry experience and a track record of generating financial and operational improvements. Many members of our senior management team have experience operating within larger, nationally regulated financial institutions. We have experienced zero turnover amongst our 11 founding employees, which serves as a testament to AmeriHome's strong team culture extending beyond the executive suite.
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Our relationships with Athene and Apollo create attractive investment opportunities
We believe our relationships with Athene, a leading retirement services company that issues, reinsures and acquires retirement savings products, and Apollo, a leading global alternative investment manager, position us to identify investment opportunities that are mutually beneficial. Athene and Apollo look to invest in a portfolio of asset origination platforms and investment teams across a variety of asset classes, of which we are one. These relationships also provide us with elevated access to market insight and investor interest in potential products or investment opportunities. As an asset originator, we are able to work collaboratively by both purchasing and investing with Athene and Apollo, and ultimately sell products that are mutually beneficial.
We collaborate in evaluating and developing production opportunities to further strengthen our business. In the last four years, we have produced over $1.5 billion of assets for Athene and Apollo, including whole loans and securitizations and believe this ongoing relationship will continue to be a strategic advantage for AmeriHome. While not exclusive, we believe our strategic relationship creates significant competitive advantages. Specifically, we can coordinate on product development, which enables us to incubate and launch new products or channels with the knowledge that there exists an initial source of funding or investor appetite. As of June 30, 2020, Athene had consolidated investments of $163.0 billion, of which residential mortgage loan assets represented $4.7 billion, and Apollo had total assets under management of $413.6 billion, including $300.4 billion of credit and credit-oriented assets under management and $47.4 billion of deployable investment capital.
Our Strategy for Profitable Growth
Our core business strategy involves generating attractive returns for our equity holders by producing mortgage loans through a low-cost platform and using gains from the sale of such mortgages to originate MSRs at attractive returns. Our objective is to further expand our leading positions in both residential mortgage production and servicing in the United States by growing our existing channels, opportunistically expanding into new channels and products and continuing to drive operational efficiencies.
Continue expansion of correspondent business by leveraging our strengths and adding relationships
We have grown our correspondent network from zero sellers in 2014 to over 650 as of June 30, 2020. Continuing to deliver on our strong value proposition will allow us to deepen our existing relationships while attracting additional high-quality loan sellers, expanding our Correspondent channel. Our current market share of correspondent production volumes for the twelve months ended June 30, 2020 is 6.7%, leaving ample room for significant expansion while maintaining price discipline and our high standards. Our scalable, low cost platform will allow us to achieve such growth in any market environment.
We estimate that we see approximately 26% of all correspondent loans in the industry nationwide that are offered out for bid on a daily basis and win only approximately 10% of the loans on which we bid because of our strict pricing parameters and return hurdles. We have chosen to foster growth through adding high quality counterparties to our network instead of sacrificing price selectivity. We can drive further growth by increasing penetration within our existing network of sellers through continued consistent, efficient execution. Our fulfillment platform currently has capacity to support substantial additional volume without meaningful incremental costs.
Maintaining a low cost infrastructure is critical to our growth strategy. It enables us to remain competitive in the sector during periods of contracting margins. We believe our efficient core infrastructure allows us to have a lower production cost per loan than almost all of our peers. Our average direct cost per loan of 21 basis points has decreased approximately 1.1% since 2018. Our low
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cost base positions us to expand this channel with minimal capital outlay or run-rate increase in expenses.
Continued growth and investment in our Consumer Direct channel
We continue to develop our Consumer Direct channel, launched in 2016, in order to grow our production revenue at attractive cash margins through recapture and new customer acquisition, as well as to defend our MSR portfolio from prepayment-related attrition. We aim to further advance our refinance strategy by capitalizing on our large and growing servicing customer base with low customer acquisition costs. Our significant investment in proprietary technology and data analytics allows us to efficiently identify customers who would benefit from a refinance. Sustained low interest rates will continue to drive heightened refinance activity that we aim to capture through efficient, real-time targeting of existing servicing customers. As we have continued to develop this channel to 2.3% of our 2019 production volume, its high profit margins have grown to contribute 15.8% of our net income.
In the future, we anticipate that our continued expansion into new customer acquisition will drive further growth in consumer direct originations. Our proprietary technology suite will augment our efforts to attract new customers through an optimized and focused outreach strategy.
Prudently manage growth in servicing
As of June 30, 2020, we serviced approximately 400,000 customers with an aggregate UPB of approximately $87.9 billion. For the six months ended June 30, 2020, we added approximately $23.2 billion UPB of net loans to our MSR portfolio. We currently see opportunities to expand our servicing business through the growth of existing origination channels, as well as potentially exploring MSR acquisitions through bulk or other channels if offered on attractive terms.
Our subservicing strategy and low overhead enable us to view our servicing business objectively. Because we do not bear the costs of a large servicing operation, we can actively manage our servicing assets to maximize profitability to our business and are willing to monetize MSRs. Since inception, we have opportunistically sold 34% of all of our originated MSRs, and have done so above carrying value. Our active hedging strategy allows us to lock in the initial MSR yield without bearing undue interest rate risk. Additionally, our operating servicing revenue has grown from $24.7 million for the year ended December 31, 2015 to $229.0 million for the year ended December 31, 2019.
Opportunistically evaluate new products and channels
The residential mortgage market is constantly evolving with technological innovation and changing investor appetite, creating demand for new products. We believe we can successfully expand upon the success of our existing channels, offer new products and target additional customers profitably and with acceptable levels of risk. In addition, our relationship with Athene and Apollo will allow us to evaluate and develop opportunities that may be mutually beneficial.
Our flexible, scalable platform will allow us to pivot efficiently should market conditions change through our Consumer Direct and non-delegated Correspondent channels. Our relationships with our approximately 400,000 servicing customers provide direct access to a substantial addressable market to launch new products with minimal incremental costs. Our Consumer Direct channel allows us to originate loans with close to zero customer acquisition and marketing cost, which will support any future business or product additions.
For example, our recent entrance into the non-delegated Correspondent channel provides the necessary framework for future expansion of our product suite to include additional mortgage-related and other consumer finance products. We believe our control of the underwriting process in
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non-delegated originations will lower the risk of launching new products, ensuring continued loan quality and high standards, even if we choose to expand into credit-sensitive products.
Continue to optimize business by focusing on operational efficiencies
As we continue to scale our business, it is imperative that we maintain the same operational discipline that has helped us minimize costs and produce successful returns over the years. We will continue to focus on maintaining what we believe to be a highly efficient cost structure through prudent operational management, utilization of our existing infrastructure, and investments in technology. This will make us more competitive in entering new products and markets, expanding our existing business in all margin and interest rate environments, and optimizing our return on capital in all interest rate environments.
COVID-19 Pandemic
The COVID-19 pandemic introduces unprecedented uncertainty in the economy, including the risk of a significant employment shock and recessionary conditions, with implications for the health and safety of our employees, borrower delinquency rates, servicing advances, origination volumes, the availability of financing, and our overall profitability and liquidity. There is also significant uncertainty related to the response of the federal, state and local governments as well as the Agencies and regulators such as the Federal Housing Finance Agency ("FHFA").
In response to the COVID-19 pandemic, we quickly implemented a number of initiatives to ensure the safety of our employees. Since late March 2020, more than 90% of our employees have been working from home, and they are not participating in travel or face-to-face meetings that are non-essential. To date, there have not been a material number of COVID-19 illnesses reported for members of the AmeriHome workforce, nor has there been a material impact to the observed productivity of our workforce in the aggregate.
We believe our business benefits from a strong financial profile that positions us well in the current environment. While the financial markets have demonstrated significant volatility due to the economic impacts of COVID-19, interest rates have fallen to historic lows, resulting in increased mortgage originations and favorable margins. Our flexible, scalable platform and technology-enabled infrastructure have enabled us to respond quickly to the increased market demand, resulting in record levels of purchase and origination volume for AmeriHome. However, the future extent and severity of economic impacts due to COVID-19 are as yet unknown and, as a result of these factors being outside our control, it is possible that our production volumes and margins may decrease in the future.
As a result of increased volatility in the financial markets and a vastly accelerated rate of policy changes emanating from government agencies, regulators, investors and business counterparties as a result of the COVID-19 emergency, we have undertaken some notable steps to position our platform for continued success. We have:
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In response to COVID-19, on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") was signed into law, allowing borrowers affected by COVID-19 to request temporary loan forbearance for federally backed mortgage loans. As of September 30, 2020, approximately 25,709 AmeriHome loans were enrolled in forbearance plans, which represents approximately 6.0% of the loans in our total servicing portfolio.
As a servicer, we are required to advance principal and interest to the investor for up to four months on GSE backed mortgages and longer on other government agency backed mortgages on behalf of borrowers who have entered a forbearance plan. We are able to utilize funds from prepayments and mortgage pay-offs from other borrowers to fund these principal and interest advances prior to remitting those funds to the agencies. To date, we have successfully utilized such prepayments and mortgage payoffs from other borrowers to fund principal and interest advances relating to forborne loans, and have not advanced material amounts of principal or interest associated with forbearances.
However, these advance requirements could become significant at higher levels of forbearance, and our obligation to advance tax and insurance payments that borrowers miss may become significant over time as well. Regardless, we believe we are very well-positioned in terms of our liquidity. As of August 31, 2020, we had $508 million of unrestricted cash and $10 million in undrawn lines of credit. These amounts represent material excess liquidity relative to our financial covenants and relative to the Company's historical levels (for example, as of December 31, 2019 unrestricted cash totaled approximately $94 million). Additionally, in August 2020, we closed a new $100 million servicing advance facility, and we are in ongoing discussions with our lending partners around additional advance financing to further supplement our liquidity should the need arise.
Although the forbearance activity noted above has not yet had a material impact on our cash flows, we expect servicing advances to grow over time and believe they could become material. Actual servicing advances will be driven by the number of borrowers entering into forbearance plans, the amount of time borrowers spend in the forbearance plans (most have the ability to extend forbearance plans for up to one year), and the level of successful resolution of forborne amounts at the end of forbearance periods, all of which will be impacted by the pace at which the economy recovers from the COVID-19 pandemic.
Protecting our cash position and maintaining sufficient liquidity is a top priority. We maintain diversified liquidity sources to allow us to fund our loan origination business, manage our day-to-day operations and protect us against foreseeable market risks. Consistent with our standard financing and liquidity risk management practices, we typically maintain material excess financing capacity relative to our origination volumes. Therefore, in 2020 we did not require any increases in financing capacity to accommodate our increased origination volume. We will continue to evaluate and pursue additional loan funding capacity to fund our origination volumes as needed.
Preliminary Estimated Financial Results as of and for the Three Months and the Nine Months Ended September 30, 2020
Our financial results for the three months and nine months ended September 30, 2020 are not yet complete and will not be available until after the completion of this offering. Accordingly, we are presenting certain preliminary estimated unaudited financial results as of and for the three months and nine months ended September 30, 2020. The unaudited estimated financial results set forth below are preliminary and subject to revision based upon the completion of our quarter-end financial closing processes as well as the related external review of the results of operations for the three months and the nine months ended September 30, 2020. Our estimated financial results are forward-looking
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statements based solely on information available to us as of the date of this prospectus. As a result, our actual results for the three months and the nine months ended September 30, 2020 may differ materially from the preliminary estimated financial results set forth below upon the completion of our financial closing procedures, final adjustments, and other developments that may arise prior to the time our financial results are finalized. You should not place undue reliance on these estimates. The information presented herein should not be considered a substitute for the financial information to be filed in our Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2020 once it becomes available. For additional information, see "Special Note Regarding Forward-Looking Statements" and "Risk Factors."
Our total production volume was $ billion in the third quarter of 2020, an increase of approximately % from production volume of $ billion in the second quarter of 2020. In our Correspondent channel, our production volume was $ billion in in the third quarter of 2020, an increase of % from production volume of $ billion in the second quarter of 2020. Our Correspondent channel represented % and % of our mortgage production volume for the three months and nine months ended September 30, 2020, respectively. In our Consumer Direct channel, we had $ billion in production volume for the third quarter, an increase of % from production volume of $ billion in the second quarter of 2020. Our Consumer Direct channel represented % and % of our mortgage production volume for the three months and nine months ended September 30, 2020, respectively.
As of September 30, 2020, we serviced approximately customers with an aggregate UPB of approximately $ billion. During the three months ended September 30, 2020, we added $ billion UPB of loans to our MSR portfolio, which contributed approximately % of our total UPB as of September 30, 2020. As of September 30, 2020, approximately 25,709 of our clients were on forbearance plans, representing approximately 6.0% of our total serviced client loans.
For the third quarter of 2020, based on preliminary results, our total net income was $ million, a decrease of approximately $ million from the prior quarter. Over the same period, Adjusted After-Tax Net Income was $ million and Adjusted After-Tax ROAE was %. For information on how we use these non-GAAP measures and a reconciliation of them to their most comparable GAAP measures, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial Measures" in addition to the reconciliation tables provided below.
The decrease in net income for the three months ended September 30, 2020, as compared to the three months ended June 30, 2020, was driven primarily by a reduction in net cash gains on loans sold during the period. Gain on sale margin decreased from % for the three months ended June 30, 2020 to % for the three months ended September 30, 2020. We believe that the level of gain on sale margin experienced during the third quarter of 2020 was the result of continued favorable market conditions and the low interest rate environment which led to increased demand for mortgages and capacity constraints in the industry. As of the date of this prospectus, we have seen favorable market conditions continue which has led to continued strong demand and origination volume. We do not know how long these favorable market conditions will continue going forward. There is no assurance that these results are indicative of our results in any future period.
Our preliminary estimated results contained in this prospectus have been prepared in good faith by, and are the responsibility of, management based upon our internal reporting for the three months and the nine months ended September 30, 2020. Ernst & Young LLP has not audited, reviewed, compiled or performed any procedures with respect to the following preliminary financial results. Accordingly, Ernst & Young LLP does not express an opinion or any other form of assurance with respect thereto.
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We have presented the following preliminary estimated results as of and for the three months and the nine months ended September 30, 2020:
|
September 30, | ||||||
---|---|---|---|---|---|---|---|
($ in millions)
|
2020 | 2019 | |||||
|
(unaudited) |
||||||
Cash and cash equivalents |
$ | $ | 81.5 | ||||
Total Debt |
$ | 2,224.6 | |||||
Warehouse borrowings |
$ | $ | 1,940.3 | ||||
Corporate plus MSR Debt |
$ | $ | 284.3 | ||||
Total equity |
$ | $ | 876.4 |
The following table presents a reconciliation of Adjusted After-Tax Net Income and Adjusted After-Tax ROAE to net income.
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For the Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
($ in millions)
|
2020 | 2019 | 2020 | 2019 | |||||||||
Net income (loss) |
$ | $ | 448.8 | $ | $ | 161.2 | |||||||
Limited partner related management expenses |
3.4 | 9.8 | |||||||||||
Equity-based compensation |
0 | 0.2 | |||||||||||
Adjusted Pre-Tax Net Income |
$ | $ | 462.4 | $ | $ | 171.2 | |||||||
Provision for income taxes |
108.3 | 40.1 | |||||||||||
Adjusted After-Tax Net Income(1) |
$ | $ | 354.1 | $ | $ | 131.1 | |||||||
Average equity value |
$ | $ | 1,051.2 | $ | $ | 808.8 | |||||||
Adjusted After-Tax ROAE(2) |
% | 44.9 | % | % | 21.6 | % |
For a more specific and thorough discussion on Adjusted After-Tax Net Income and Adjusted After-Tax ROAE, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial Measures."
Summary Risks Associated with Our Business
An investment in our Class A common stock involves numerous risks described in "Risk Factors" and elsewhere in this prospectus. You should carefully consider these risks before making a decision to invest in our common stock. Key risks include, but are not limited to, the following:
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Emerging Growth Company Status
We are an "emerging growth company," as defined in the JOBS Act and are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not "emerging growth companies," including, but not limited to: (1) presenting only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced "Management's Discussion and Analysis of Financial Condition and Results of Operations" disclosure in this prospectus; (2) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002; (3) having reduced disclosure obligations regarding executive compensation in our periodic reports and proxy or information statements; being exempt from the requirements to hold a non-binding advisory vote on executive compensation or seek stockholder approval of any golden parachute payments not previously approved; and (4) not being required to adopt certain accounting standards until those standards would otherwise apply to private companies.
Although we are still evaluating our options under the JOBS Act, we may take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us so long as we qualify as an "emerging growth company" and thus the level of information we provide may be different than that of other public companies. If we do take advantage of any of these exemptions, some investors may find our securities less attractive, which could result in a less active trading market for our Class A common stock, and the price of our Class A common stock may be more volatile. As an "emerging growth company" under the JOBS Act, we are permitted to delay the adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We are electing to take advantage of such extended transition period, and as a result, we will not comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to take advantage of the extended transition period for complying with new or revised accounting standards is irrevocable.
We could remain an "emerging growth company" until the earliest to occur of:
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AmeriHome, Inc., a Delaware corporation, was formed on August 6, 2020 and is the issuer of the Class A common stock offered by this prospectus. Prior to this offering and the Transactions, all of our business operations have been conducted through Aris Holding and its direct and indirect subsidiaries and the only owners of Aris Holding have been management and certain other employees and directors and A-A Mortgage.
We will consummate the following organizational and other transactions in connection with this offering:
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We collectively refer to the foregoing organizational transactions as the "Transactions." For a description of the terms of the Exchange Agreement, Tax Receivable Agreement, Registration Rights Agreement and Stockholders Agreement, see "Certain Relationships and Related Party Transactions."
Immediately following the consummation of the Transactions (including this offering):
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As the sole managing member of Aris Holding, we will operate and control all of the business and affairs of Aris Holding and through Aris Holding and its direct and indirect subsidiaries, conduct our business. Following the Transactions, including this offering, we will have the majority economic interest in Aris Holding and will control the management of Aris Holding as its sole managing member. As a result, we will consolidate Aris Holding and record a significant non-controlling interest in a consolidated entity in our consolidated financial statements for the economic interest in Aris Holding held directly or indirectly by the Existing Equity Owners.
Unless otherwise indicated, this prospectus assumes the shares of Class A common stock are offered at $ per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), assumes no exercise of the underwriters' option to purchase up to an additional shares of Class A common stock from us, excludes up to shares of Class A common stock issuable to senior management in connection with the settlement of awards granted under the Transaction Bonus Agreements described more fully in "Executive CompensationTransaction Bonus Agreements" and gives effect to the completion of the Transactions.
The diagram below depicts our organizational structure after giving effect to the Transactions, including this offering, assuming no exercise by the underwriters of their option to purchase additional shares of Class A common stock.
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For additional information regarding the Transactions, see "Our Organizational Structure."
AmeriHome, Inc. is a private company incorporated under the laws of Delaware. In connection with the closing of this offering, AmeriHome, Inc. and Aris Holding will consummate the Transactions, as described in "Our Organizational Structure." As a result of the Transactions, AmeriHome, Inc. will be
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(i) a holding company, with its principal asset consisting of limited liability company interests of Aris Holding and (ii) the sole managing member of Aris Holding and will control the business and affairs of Aris Holding and its subsidiaries. See "Our Organizational Structure" included elsewhere in this prospectus.
Our principal executive offices are located at 1 Baxter Way, Thousand Oaks, California 91362, and our telephone number is (888) 469-0810. Our Internet website address is www.amerihome.com, and the information contained on, or accessible from, or hyperlinked to, our website is not part of this prospectus by reference or otherwise.
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Class A Common Stock Offered By Us
shares of our Class A common stock (or shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock).
Underwriters' Option to Purchase Additional Shares of Class A Common Stock
We have granted the underwriters a 30-day option to purchase up to shares of Class A common stock from us at the initial public offering price less the underwriting discounts and commissions.
Class A Common Stock to be Outstanding After this Offering
shares of Class A common stock ( shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock).
Class B Common Stock to be Outstanding After this Offering
shares of Class B common stock ( shares of Class B common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock).
LLC Interests to be Held by Us Immediately After this Offering
LLC Interests ( LLC Interests if the underwriters exercise in full their option to purchase additional shares of Class A common stock).
LLC Interests to be Held by A-A Mortgage Immediately After this Offering
LLC Interests ( LLC Interests if the underwriters exercise in full their option to purchase additional shares of Class A common stock).
Ratio of Shares of Class A Common Stock to LLC Interests
Our amended and restated certificate of incorporation and the Aris Holding LLC Agreement will require that we and Aris Holding at all times maintain a one-to-one ratio between the number of shares of Class A common stock issued by us and the number of LLC Interests owned by us, except as otherwise determined by us.
Ratio of Shares of Class B Common Stock to LLC Interests
Our amended and restated certificate of incorporation and the Aris Holding LLC Agreement will require that we and Aris Holding at all times maintain a one-to-one ratio between the number of shares of Class B common stock owned by A-A Mortgage and its permitted transferees and the number of LLC Interests owned by A-A Mortgage and its permitted transferees, except as otherwise determined by us.
Permitted Holders of Shares of Class B Common Stock
Only A-A Mortgage and its permitted transferees of Class B common stock as described in this prospectus will be permitted to hold shares of our Class B common stock. Shares of Class B common stock are exchangable for shares of Class A common stock only together with an equal number of LLC Interests. See "Certain Relationships and Related Party TransactionsAris Holding LLC Agreement."
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Voting Rights
Upon the consummation of this offering, the holders of our Class A common stock will be entitled to one vote per share of Class A common stock, and the holders of shares of our Class B common stock will be entitled to ten votes per share of Class B common stock. Upon the date on which the shares of Class B common stock held by A-A Mortgage and its permitted transferees represent less than 10% of our outstanding shares of common stock, each share of Class B common stock will entitle its holder to one vote per share of Class B common stock.
Upon consummation of this offering, our board of directors will consist of directors. Under our Stockholders Agreement, A-A Mortgage has the right, but not the obligation, to nominate (a) a majority of our directors, as long as our controlling stockholder beneficially owns % or more of the combined voting power of our outstanding common stock, (b) % of our directors, as long as our controlling stockholder beneficially owns % or more, but less than % of the combined voting power of our outstanding common stock, (c) % of our directors, as long as our controlling stockholder beneficially owns % or more, but less than % of the combined voting power of our outstanding common stock, (d) % of our directors, as long as our controlling stockholder beneficially owns % or more, but less than % of the combined voting power of our outstanding common stock, (e) % of our directors, as long as our controlling stockholder beneficially owns % or more, but less than % of the combined voting power of our outstanding common stock. See "Certain Relationships and Related Party TransactionsStockholders Agreement."
Pursuant to our certificate of incorporation, neither Apollo nor any of its affiliates is required to present corporate opportunities to us.
Holders of shares of our Class A common stock and Class B common stock will vote together as a single class on all matters requiring approval by our common stockholders unless otherwise required by law.
Upon the consummation of this offering, and assuming no exercise of the underwriters' option to purchase additional shares of Class A common stock, holders of shares of our Class A common stock will hold approximately % of the combined voting power of our outstanding common stock and holders of shares of our Class B common stock will hold approximately % of the combined voting power of our outstanding common stock.
If the underwriters exercise in full their option to purchase an additional shares of Class A common stock, holders of our Class A common stock will hold approximately % of the combined voting power of our outstanding common stock and holders of our Class B common stock will hold approximately % of the combined voting power of our outstanding common stock.
For a description of the rights of the holders of our Class A common stock, see "Description of Capital StockClass A Common Stock."
Exchange Agreement
We, Aris Holding and A-A Mortgage will enter into the Exchange Agreement substantially concurrently with the consummation of this offering under which A-A Mortgage (or certain permitted transferees thereof including the Existing Equity Owners) will have the right, subject to the terms of the Exchange Agreement, to exchange its LLC Interests, together with a corresponding number of shares of Class B common stock, for newly-issued shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and other similar transactions, or, at our election (determined by a majority of the disinterested members of our board of directors or a committee of disinterested members of our board of directors), a cash payment. As a holder exchanges LLC Interests and Class B common stock for
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shares of Class A common stock, the number of LLC Interests held by AmeriHome Inc. will correspondingly increase as it acquires the exchanged LLC Interests, and a corresponding number of shares of Class B common stock are cancelled. In the event we elect to pay a holder cash in an exchange, we will cause Aris Holding to cancel the LLC Interests we acquire from such holder and the corresponding number of shares of Class B common stock we acquire will be cancelled by us. See "Certain Relationships and Related Party TransactionsExchange Agreement."
Tax Receivable Agreement
We will enter into a Tax Receivable Agreement with A-A Mortgage that will provide for the payment by us to A-A Mortgage (or certain permitted transferees thereof including the Existing Equity Owners) of 85% of the tax benefits, if any, that we are deemed to realize under certain circumstances as a result of (i) increases in tax basis resulting from exchanges or acquisitions of LLC Interests (including as part of the Transactions or under the Exchange Agreement) (ii) allocations that result from the application of the principles of Section 704(c) of the Code in respect of certain transactions described herein or future equity offerings that result in contributions to Aris Holding, and (iii) certain other tax benefits related to our entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. See "Certain Relationships and Related Party TransactionsTax Receivable Agreement."
Use of Proceeds
We estimate that the net proceeds to us from this offering will be approximately $ after deducting the underwriting discounts and commissions and our other estimated offering expenses (assuming an initial public offering price of $ per share, which is the mid-point of the estimated offering price range set forth on the cover page of this prospectus). If the underwriters exercise in full their option to purchase additional shares of Class A common stock from us, we estimate the net proceeds to us will be approximately $ .
We intend to use the net proceeds from this offering to purchase LLC Interests from the Existing Equity Owners at a price per unit equal to the initial public offering price per share of Class A common stock in this offering less the underwriting discounts and commissions and estimated offering expenses payable by us. For additional information, see "Use of Proceeds."
Listing
We have applied to list our Class A common stock on the NYSE under the symbol "AHM."
Conflict of Interest
Apollo Global Securities, LLC, an affiliate of Apollo, is an underwriter in this offering and is receiving a portion of the gross spread as an initial purchaser of the offering. Affiliates of Apollo beneficially own in excess of 10% of our issued and outstanding common stock. As a result, Apollo Global Securities, LLC is deemed to have a "conflict of interest" under FINRA Rule 5121, and this offering will be conducted in compliance with the requirements of Rule 5121. Pursuant to that rule, the appointment of a "qualified independent underwriter" is not required in connection with this offering as the members primarily responsible for managing the public offering do not have a conflict of interest, are not affiliates of any member that has a conflict of interest and meet the requirements of paragraph (f)(12)(E) of Rule 5121. Apollo Global Securities, LLC will not confirm sales of the securities to any account over which it exercises discretionary authority without the specific written approval of the account holder.
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Dividend Policy
We currently intend to retain all of our earnings, and therefore, we do not anticipate paying any cash dividends on our Class A common stock in the foreseeable future following the consummation of this offering. Holders of our Class B common stock are not entitled to participate in any dividends declared by our board of directors. Any determination to declare and pay cash dividends will be at the discretion of our board of directors and will depend on, among other things, our financial condition, results of operations, cash requirements, liquidity, contractual restrictions, general business conditions and such other factors as our board of directors deems relevant. In addition, our existing indebtedness may restrict our ability to pay dividends. For additional information, see "Dividend Policy."
Controlled Company
Following this offering, we will be a "controlled company" within the meaning of the corporate governance rules of the NYSE. We intend to rely upon the "controlled company" exception relating to the board of directors and committee independence requirements under the listing rules of the NYSE. Pursuant to this exception, we will be exempt from the rules that would otherwise require that our board of directors consist of a majority of independent directors and that our compensation committee and nominating and corporate governance committee be composed entirely of independent directors. See "ManagementControlled Company."
Registration Rights Agreement
We intend to enter into the Registration Rights Agreement with A-A Mortgage and certain limited partners of A-A Mortgage. The Registration Rights Agreement will provide A-A Mortgage with certain demand registration rights, including shelf registration rights, in respect of any of our Class A common stock held by them (upon conversion of Class B common stock and LLC Interests held by them), subject to certain conditions. In addition, in the event that we register additional Class A common stock for sale to the public following the completion of this offering, we will be required to give notice to A-A Mortgage and certain limited partners of A-A Mortgage of our intention to effect such a registration, and, subject to certain limitations, include Class A common stock held by them (upon conversion of Class B common stock and LLC Interests held by them) in such registration.
Stockholders Agreement
We intend to enter into the Stockholders Agreement with A-A Mortgage. The Stockholders Agreement will give our controlling stockholder the right to nominate a majority of our directors after the consummation of this offering as long as our controlling stockholder beneficially owns % or more of the combined voting power of our outstanding common stock and shall specify how our controlling stockholder's nominations rights shall decrease as our controlling stockholder's beneficial ownership of our common stock also decreases. See "ManagementBoard Composition." The Stockholders Agreement sets forth certain information rights granted to A-A Mortgage. It also specifies that we will not take certain significant actions specified therein without the prior consent of A-A Mortgage.
Common Stock Outstanding
The number of shares of common stock to be outstanding after this offering excludes: shares of Class A common stock that will be available for future issuance under our equity incentive plan, which will become effective on the date of this prospectus.
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Summary Historical Financial and Operating Data
The following table sets forth our predecessor Aris Mortgage Holding Company, LLC's summary historical financial and operating data as of the dates and for the periods indicated. The summary historical financial and operating data as of December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018 have been derived from our predecessor Aris Mortgage Holding Company, LLC's audited consolidated financial statements included elsewhere in this prospectus. The summary historical financial and operating data as of June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019 have been derived from our predecessor Aris Mortgage Holding Company, LLC's unaudited consolidated financial statements included elsewhere in this prospectus. See "Presentation of Financial Information."
The summary historical financial information is not necessarily indicative of the results that may be expected in any future period, and our results of operations for any interim period are not necessarily indicative of the results to be expected for the full year. The following summary historical financial and operating data should be read in conjunction with "Capitalization," "Selected Historical Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes appearing elsewhere in this prospectus. The following summary does not give effect to the Transactions.
Statement of Income Data
|
Six months ended June 30, |
Year ended December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(unaudited) |
(audited) |
|||||||||||
|
(Amounts in thousands) |
||||||||||||
Revenues |
|||||||||||||
Net gains on loans held for sale |
$ | 339,027 | $ | 84,497 | $ | 229,239 | $ | 82,376 | |||||
Net loan servicing revenue |
39,858 | 74,138 | 71,052 | 129,453 | |||||||||
Loan acquisition and origination revenue |
40,664 | 31,238 | 71,783 | 60,159 | |||||||||
Other income |
12,871 | 24,729 | 37,546 | 53,804 | |||||||||
Net interest income (expense) |
9,615 | 3,707 | 9,090 | (345 | ) | ||||||||
| | | | | | | | | | | | | |
Total net revenues |
442,035 | 218,309 | 418,710 | 325,447 | |||||||||
Expenses |
|||||||||||||
Compensation |
85,999 | 53,174 | 108,208 | 94,191 | |||||||||
Loan servicing |
37,294 | 26,141 | 60,103 | 58,748 | |||||||||
Loan acquisition and origination |
16,087 | 12,783 | 27,971 | 24,097 | |||||||||
Other expenses |
27,660 | 23,557 | 47,903 | 43,441 | |||||||||
| | | | | | | | | | | | | |
Total expenses |
167,040 | 115,655 | 244,185 | 220,477 | |||||||||
| | | | | | | | | | | | | |
Net income |
$ | 274,995 | $ | 102,654 | $ | 174,525 | $ | 104,970 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
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Balance Sheet Data
|
June 30, | December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(unaudited) |
(audited) |
|||||||||||
|
(Amounts in thousands) |
||||||||||||
Assets |
|||||||||||||
Cash |
$ | 501,374 | $ | 78,338 | $ | 93,581 | $ | 70,111 | |||||
Loans held for sale |
1,902,953 | 2,164,830 | 2,648,609 | 1,714,066 | |||||||||
Mortgage servicing rights |
736,657 | 747,168 | 893,193 | 754,940 | |||||||||
Servicing advances, net |
35,085 | 17,929 | 50,326 | 31,040 | |||||||||
Other assets |
897,680 | 392,373 | 525,524 | 298,934 | |||||||||
| | | | | | | | | | | | | |
Total assets |
$ | 4,073,749 | $ | 3,400,638 | $ | 4,211,233 | $ | 2,869,091 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Liabilities and member's equity |
|||||||||||||
Borrowings |
$ | 2,119,229 | $ | 2,269,536 | $ | 2,856,742 | $ | 1,870,595 | |||||
Other liabilities |
790,204 | 313,281 | 464,757 | 211,472 | |||||||||
| | | | | | | | | | | | | |
Total liabilities |
2,909,433 | 2,582,817 | 3,321,499 | 2,082,067 | |||||||||
Member's equity |
1,164,316 | 817,821 | 889,734 | 787,024 | |||||||||
| | | | | | | | | | | | | |
Total liabilities and member's equity |
$ | 4,073,749 | $ | 3,400,638 | $ | 4,211,233 | $ | 2,869,091 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Other Data
|
Six months ended June 30, | Year ended December 31, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
|
(unaudited) |
(audited) |
|
|
|
|||||||||||||||||
Corporate plus MSR Debt/Equity |
0.3x | 0.4x | 0.5x | 0.4x | 0.2x | 0.1x | 0.0x | |||||||||||||||
Total Debt/Equity |
1.9x | 2.8x | 3.3x | 2.4x | 2.0x | 2.2x | 2.2x |
Non-GAAP Financial Measures
|
Six months ended June 30, | Year ended December 31, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
|
(unaudited) |
(audited) |
|
|
|
|||||||||||||||||
|
(Amounts in thousands) |
|||||||||||||||||||||
Non-GAAP financial measures |
||||||||||||||||||||||
Adjusted After-Tax Net Income(1) |
$ | 217,544 | $ | 83,591 | $ | 143,977 | $ | 89,304 | $ | 80,868 | $ | 60,875 | $ | 25,031 | ||||||||
Adjusted After-Tax ROAE(2) |
44.3 | % | 21.3 | % | 17.7 | % | 12.4 | % | 13.3 | % | 14.2 | % | 13.7 | % |
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Any investment in our Class A common stock involves a high degree of risk. You should carefully consider the risks described below and all of the information contained in this prospectus before deciding whether to invest in our Class A common stock. The risks and uncertainties described below are not the only risks and uncertainties that we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also materially and adversely affect our business. If any of those risks actually occurs, our business, financial condition, cash flows, liquidity and results of operations would suffer. Consequently, the trading price of shares of our Class A common stock could decline and you could lose all or a portion of your investment. The risks discussed below also include forward-looking statements, and our actual results may differ substantially from those discussed in these forward-looking statements. See "Special Note Regarding Forward-Looking Statements" in this prospectus.
Risks Related to Our Business
General Business Risks
The current outbreak of the novel coronavirus ("COVID-19"), or the future outbreak of any other highly infectious or contagious diseases, has caused, and will continue to cause, disruption to our business, liquidity, financial condition and results of operations. Further, the spread of the COVID-19 outbreak has caused severe disruptions in the U.S. and global economy and financial markets and could potentially create widespread business continuity issues of an as yet unknown magnitude and duration.
In December 2019, COVID-19 was reported to have surfaced in Wuhan, China. COVID-19 has since spread to over 100 countries, including every state in the United States. On March 11, 2020 the World Health Organization declared COVID-19 a pandemic, and on March 13, 2020 the United States declared a national emergency with respect to COVID-19.
The outbreak of COVID-19 has severely impacted global economic activity and caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting travel. Many experts predict that the outbreak will trigger a period of global economic slowdown or a global recession. COVID-19 or another pandemic could have material and adverse effects on our ability to successfully operate due to, among other factors:
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and financing conditions which could affect our access to capital necessary to fund business operations or address maturing liabilities on a timely basis;
The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19. Nevertheless, COVID-19 presents material uncertainty which has negatively impacted our business liquidity, financial condition and results of operations.
Our business relies on our borrowing facilities to fund mortgage loans and otherwise operate our business. If one or more of such facilities are terminated, we may be unable to find replacement financing at commercially favorable terms, or at all, which could be detrimental to our business.
We currently fund substantially all of the MSRs and mortgage loans we close through borrowings under our borrowing facilities and with funds generated by our operations. Our borrowings are in turn generally repaid with the proceeds we receive from mortgage loan sales. We are currently, and may in the future continue to be, dependent upon a handful of lenders to provide the primary funding facilities for our loans. In the event that any of our loan funding facilities is terminated or is not renewed, or if the principal amount that may be drawn under our funding agreements that provide for immediate funding at closing were to significantly decrease, we may be unable to find replacement financing on commercially favorable terms, or at all, which could be detrimental to our business.
Our ability to refinance existing debt and borrow additional funds is affected by a variety of factors, including:
If we are unable to refinance our existing debt or borrow additional funds due to any of the foregoing or other factors, our ability to maintain or grow our business could be limited. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources."
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We may be required to repurchase mortgage loans or indemnify investors if we or our correspondent sellers breach representations and warranties.
When we sell loans, we are required to make customary representations and warranties about such loans to the loan purchaser. If a mortgage loan does not comply with the representations and warranties that we made with respect to it at the time of its sale, we could be required to repurchase the loan, replace it with a substitute loan and/or indemnify secondary market purchasers for losses.
As part of our correspondent production activities, we re-underwrite a percentage of the loans that we acquire, to ensure quality underwriting by our correspondent sellers, accurate third-party appraisals, and strict compliance with the representations and warranties that we require from our correspondent sellers and that are required from us by our investors. No assurance can be given that the re-underwriting of a sample population of loans will identify any and all underwriting and regulatory compliance issues related to such loans or to any of the other loans we acquire from correspondent sellers. In our retail origination activities, we underwrite each loan prior to funding and attempt to comply with applicable investor guidelines. However, no assurance can be given that such underwriting will result in all cases with loans that fully comply with such guidelines, and state or federal law.
In the event of a breach of any representations or warranties we make to purchasers, insurers or investors, we believe, based on our experience, that in a majority of cases, for correspondent originated loans acquired using the "delegated underwriting" option, we will have recourse to the correspondent seller that sold the mortgage loans to us and breached similar or other representations and warranties. Although we believe we will have the right to seek a recovery of related repurchase losses from that correspondent seller, we cannot assure you that this will always be the case. For correspondent loans where we do the underwriting, referred to as the "non-delegated underwriting" option, our ability to seek a recovery of repurchase and other losses from correspondent sellers is more limited.
In addition to the customary representations and warranties we make, the documents governing our securitized pools of loans and our contracts with certain purchasers of our whole loans contain additional provisions that require us to indemnify or repurchase the related loans under certain circumstances. While our contracts vary, they contain provisions that require us to repurchase loans if the borrower fails to make loan payments due to the purchaser on a timely basis in the first few months after we sell the loan. We have been and continue to be subject to repurchase claims from investors for various reasons, and will continue to be subject to such claims in the future. If we are required to indemnify or repurchase loans that we have sold or securitized, or will sell or securitize in the future, and this results in losses that exceed our reserve, such occurrence could have a material adverse effect on our business, financial condition and results of operations.
Our residential mortgage loan sale agreements may require us to repurchase or substitute loans or indemnify the purchaser against future losses in the event we breach a representation or warranty given to the loan purchaser or in the event of an early payment default on a mortgage loan. In some cases, the recourse available to the purchaser or insurer of our mortgage loan may be broader than those available to us against the originator or correspondent seller from whom we purchased the loan. If that purchaser or insurer enforces its remedies against us, we may not have the contractual ability to enforce remedies against the seller of that loan. In other cases, the correspondent seller may be unable or unwilling to repurchase a loan for which we do have contractual recourse. Regardless, the repurchased loan typically can only be financed at a steep discount to its repurchase price, if at all, and can generally be sold only at a discount to the unpaid principal balance, which in some cases can be significant. Significant repurchase activity on retail originated loans or on correspondent loans without offsetting recourse to a counterparty that we purchased the loan from could materially and adversely affect our business, financial condition, liquidity and results of operations.
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We are subject to counterparty risk and may be unable to seek indemnity from, or require our correspondent counterparties or sellers to repurchase mortgage loans if they breach representations and warranties, which could cause us to suffer losses.
When we purchase mortgage assets, our correspondent counterparty or seller typically makes customary representations and warranties to us about such assets. Our residential mortgage loan purchase agreements may entitle us to seek indemnity or demand repurchase or substitution of the loans in the event our counterparty breaches such a representation or warranty. However, there can be no assurance that our mortgage loan purchase agreements will contain appropriate representations and warranties, that we will be able to enforce our contractual right to demand repurchase or substitution, or that our counterparty will remain solvent or otherwise be willing and able to honor its obligations under our mortgage loan purchase agreements. Our inability to obtain indemnity or enforce repurchase obligations of counterparties and sellers for a significant number of loans could materially and adversely affect our business, financial condition, liquidity and results of operations.
We are required to make servicing advances that can be subject to delays in recovery or may not be recoverable in certain circumstances, which could adversely affect our business, financial condition, liquidity and results of operations.
During any period in which a borrower is not making payments, we are required under most of our servicing agreements in respect of our loans to advance our own funds to pass through scheduled principal and interest payments to security holders of the MBS or whole loans into which the loans are sold, pay property taxes and insurance premiums, legal expenses and other protective advances. We also advance funds under these agreements to maintain, repair and market real estate properties on behalf of investors. In certain situations, our contractual obligations may require us to make advances for which we may not be reimbursed. If a mortgage loan serviced by us is in default or becomes delinquent, the repayment to us of the advance may be delayed until the mortgage loan is repaid or refinanced or a liquidation occurs. When a relatively young MSR portfolio such as ours ages, it is expected that the percentage of delinquent loans will typically increase and the amount of advances that are required and become outstanding in connection with such loans will increase in the aggregate. This increase in advances could have a material adverse effect on our business, financial condition, liquidity and results of operations.
In response to COVID-19, on March 27, 2020, the CARES Act was signed into law, allowing borrowers affected by COVID-19 to request temporary loan forbearance for federally backed mortgage loans. Nevertheless, servicers of mortgage loans are contractually bound to advance monthly payments to investors, insurers and taxing authorities regardless of whether the borrower actually makes those payments. We expect, however, that such payments may continue to increase throughout the duration of the pandemic. While the GSEs recently issued guidance limiting the number of payments a servicer must advance in the case of a forbearance, we expect that a borrower who has experienced a loss of employment or a reduction of income may not repay the forborne payments at the end of the forbearance period. Additionally, we are prohibited from collecting certain servicing related fees, such as late fees, and initiating foreclosure proceedings. As of September 30, 2020, approximately 25,709 AmeriHome loans were enrolled in forbearance plans, which represents approximately 6.0% of the loans in our total servicing portfolio. We have so far successfully utilized other prepayments and mortgage payoffs to fund principal and interest advances relating to forborne loans, and have not advanced material amounts of principal or interest associated with forbearances. But, there is no assurance that we will be successful in doing so in the coming months and we will ultimately have to replace such funds to make payments in respect of such prepayments and mortgage payoffs. As a result, we may have to use our cash, including borrowings under our debt agreements, to make the payments required under our servicing operation.
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In addition, multiple forbearance programs, moratoria of foreclosure and eviction and other requirements to assist borrowers enduring financial hardship due to COVID-19 are being issued by states, agencies and regulators. These measures could stay in place for an extended period of time. If we are unable to comply with, or face allegations that we are in breach of, applicable laws, regulations or other requirements, we may face regulatory action, including fines, penalties, and restrictions on our business. In addition, we could face litigation and reputational damage.
Competition for mortgage assets may limit the availability of desirable originations, acquisitions and result in reduced risk-adjusted returns and adversely affect our business, financial condition, liquidity and results of operations.
We face substantial competition in originating and acquiring attractive assets, both in our loan origination activities and our correspondent production activities. The competition for mortgage loan assets may compress margins and reduce yields, making it difficult for us to acquire assets with attractive risk-adjusted returns. There can be no assurance that we will be able to successfully maintain returns, transition from assets producing lower returns into investments that produce better returns, or that we will not seek investments with greater risk to obtain the same level of returns. Any or all of these factors could cause the profitability of our operations to decline substantially and have a material adverse effect on our business, financial condition, liquidity and results of operations.
In addition, the financial services industry is undergoing rapid technological changes, with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial and lending institutions to better serve clients and reduce costs. We may not be able to effectively implement new technology-driven products and services as quickly as competitors or be successful in marketing these products and services to our correspondent sellers and consumers. Failure to successfully keep pace with technological change affecting the financial services industry could harm our ability to attract clients and adversely affect our results of operations, financial condition and liquidity.
Our profitability depends, in part, on our ability to continue to acquire our targeted mortgage assets at favorable prices. We compete with mortgage REITs, specialty finance companies, private funds, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, depository institutions, governmental bodies and other entities, many of which focus on acquiring mortgage assets. Many of our competitors also have competitive advantages over us, including size, financial strength, access to capital, cost of funds, federal pre-emption and higher risk tolerance. Competition may result in fewer acquisitions, higher prices, acceptance of greater risk, lower yields and a narrower spread of yields over our financing costs.
We may not be able to continue to grow our loan origination business or effectively manage significant increases in our loan production volume, both of which could negatively affect our reputation and business, financial condition and results of operations.
Our mortgage loan origination business consists of providing purchase money loans to homebuyers and refinancing existing loans. The origination of purchase money mortgage loans is greatly influenced by traditional business clients in the home buying process such as realtors and builders. As a result, our ability to secure relationships with such traditional business clients will influence our ability to grow our loan origination business. Our loan origination business also operates through third-party mortgage professionals who do business with us on a best efforts basis, i.e., they are not contractually obligated to do business with us. Further, our competitors also have relationships with these brokers and actively compete with us in our efforts to expand our broker networks. Accordingly, we may not be successful in maintaining our existing relationships or expanding our broker networks. Our Correspondent and Consumer Direct channel are also subject to overall market factors that can impact our ability to grow our loan production volume. For example, increased competition from new and existing market
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participants, reductions in the overall level of refinancing activity or slow growth in the level of new home purchase activity can impact our ability to continue to grow our loan production volumes, and we may be forced to accept lower margins in our respective businesses in order to continue to compete and keep our volume of activity consistent with past or projected levels. If we are unable to continue to grow our loan origination business, this could adversely affect our business, financial condition and results of operation.
On the other hand, we may experience significant growth in our mortgage loan volume and MSRs. If we do not effectively manage our growth, the quality of our services could suffer, which could negatively affect our reputation and business, financial condition and results of operations.
The industry in which we operate is highly competitive, and is likely to become more competitive, which could adversely affect us.
We operate in a highly competitive industry that could become even more competitive as a result of economic, legislative, regulatory and technological changes. Non-banks of various sizes and types are becoming increasingly competitive in the acquisition of newly originated mortgage loans and servicing rights. Many banks and large savings institutions have significantly greater resources or access to capital than we do, as well as a lower cost of funds. Additionally, some of our existing and potential competitors may decide to modify their business models to compete more directly with our correspondent production business. For example, non-bank loan servicers may try to leverage their servicing operations to develop or expand a correspondent production business. Since the withdrawal of a number of large participants from the mortgage markets following the financial crisis in 2007, non-bank participants have become more active in these markets. As more non-bank entities enter these markets, or if more of the large commercial banks decide to get aggressive in the mortgage space once again, our correspondent production activities may generate lower volumes and/or margins. Accordingly, our inability to compete successfully or a material decrease in profit margins resulting from increased competition could adversely affect our business, financial condition, liquidity and results of operations.
We depend on our ability to acquire loans and sell the resulting MBS in the secondary markets on favorable terms in our production activities. If our ability is to acquire and sell is impaired, this could subject us to increased risk of loss.
In our production activities, we acquire newly originated loans, including jumbo loans, from mortgage lenders and sell or securitize those loans to or through the Agencies or other third-party investors. We also sell the resulting securities into the MBS markets. However, there can be no assurance that we will continue to be successful in operating this business or that we will continue to be able to capitalize on these opportunities on favorable terms or at all. In particular, we have committed, and expect to continue to commit, capital and other resources to this operation. However, we may not be able to continue to source sufficient loan acquisition opportunities to justify the expenditure of such capital and other resources. In the event that we are unable to continue to source sufficient opportunities for this operation, there can be no assurance that we would be able to acquire such assets on favorable terms or at all, or that such loans, if acquired, would be profitable to us. In addition, we may be unable to finance the acquisition of these loans or may be unable to sell the resulting MBS in the secondary mortgage market on favorable terms or at all. We are also subject to the risk that the fair value of the acquired loans may decrease prior to their disposition either due to changes in market conditions, the delinquencies of our mortgage loans or a change in the condition of the underlying mortgage property. The occurrence of any one or more of these risks could adversely impact our business, financial condition, liquidity and results of operations.
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The success and growth of our production and servicing activities will depend, in part, upon our ability to adapt to and implement technological changes.
The production process and our servicing platform are becoming more dependent upon technological advancement and depends, in part, upon our ability to effectively interface with our mortgage lenders and other third parties. Maintaining, improving and becoming proficient with new technology may require us to make significant capital expenditures. To the extent we are dependent on any particular technology or technological solution, we may be harmed if such technology or technological solution becomes non-compliant with existing industry standards, fails to meet or exceed the capabilities of our competitors' equivalent technologies or technological solutions, becomes increasingly expensive to service, retain and update, becomes subject to third-party claims of intellectual property infringement, misappropriation or other violation, or malfunctions or functions in a way we did not anticipate that results in loan defects potentially requiring repurchase.
We also rely on third-party software products and services to operate our business. If our current software vendors become unable to continue providing services to us on acceptable terms, we may not be able to procure alternatives in a timely and efficient manner and on acceptable terms, or at all.
Additionally, new technologies and technological solutions are continually being released. We need to continue to develop and invest in our technological capabilities to remain competitive and our failure to do so could adversely affect our business, financial condition, liquidity and results of operations.
There is no assurance that we will be able to successfully adopt new technology as critical systems and applications become obsolete and better ones become available. Additionally, if we fail to respond to technological developments in a cost-effective manner, or fail to acquire, integrate or interface with third-party technologies effectively, we may experience disruptions in our operations, lose market share or incur substantial costs.
Our risk management efforts may not be effective.
We could incur substantial losses and our business operations could be disrupted if we are unable to effectively identify, manage, monitor, and mitigate financial risks, such as credit risk, interest rate risk, prepayment risk, liquidity risk and other market-related risks, as well as operational, tax and legal risks related to our business, assets and liabilities. We also are subject to various federal, state and local laws, regulations and rules that are not industry specific, including health and safety laws, environmental laws and other federal, state and local laws and other regulations and rules in the jurisdictions in which we operate. Our risk management policies, procedures and techniques may not be sufficient to identify all of the risks to which we are exposed, mitigate the risks we have identified or identify additional risks to which we may become subject in the future. Expansion of our business activities may also result in our being exposed to risks to which we have not previously been exposed or may increase our exposure to certain types of risks including risks related to our hedging transactions and strategy, as well as access to cash reserves, and we may not effectively identify, manage, monitor and mitigate these risks as our business activity changes or increases.
We could be harmed by misconduct or fraud that is difficult to detect.
We are exposed to risks relating to fraud and misconduct by our employees, contractors, subservicers, custodians, correspondent lenders, or other third parties with whom we have relationships. For example, employees could execute unauthorized transactions, use our assets improperly or without authorization, use confidential information for improper purposes or misreport or otherwise try to hide improper activities from us. This type of misconduct can be difficult to detect and if not prevented or detected could result in claims or enforcement actions against us or losses. In addition, such persons or entities may misrepresent facts about a mortgage loan, including the information contained in the loan
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application, property appraisal, title information and employment and income stated on the loan application. If any of this information was intentionally or negligently misrepresented and such misrepresentation was not detected prior to the acquisition or funding of the loan, the value of the loan could be significantly lower than expected. A mortgage loan subject to a material misrepresentation is typically unsalable or subject to repurchase if it is sold before detection of the misrepresentation. In addition, the persons and entities making a misrepresentation are often difficult to locate and it is often difficult to collect from them any monetary losses we have suffered. Our controls may not be completely effective in detecting this type of activity. Accordingly, such undetected instances of fraud may subject us to losses or regulatory sanctions, litigation, losses including those under our indemnification arrangements and seriously harm our reputation.
If we fail to maintain an effective system of internal controls, we may not be able to accurately determine our financial results or prevent fraud.
Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. We may in the future discover areas of our internal controls that need improvement. We cannot assure you that we will be successful in maintaining adequate control over our financial reporting and financial processes. Furthermore, as we continue to grow our business, our internal controls will become more complex, and we will require significantly more resources to ensure our internal controls remain effective. If we or our independent auditors discover a material weakness, the disclosure of that fact, even if quickly remedied, could result in a default and cross-defaults under our financing arrangements.
There is the risk that material weaknesses could be identified in the future and although we have been successful at remediating material weaknesses in the past, a risk exists that we may not successfully remediate future material weaknesses. Accordingly, our failure to maintain effective internal control over their business could result in financial risk and losses that would be reflected in our financial statements or otherwise have a material adverse effect on our business, financial condition, liquidity and results of operations.
Our business could suffer if we fail to attract and retain a highly skilled workforce, including our senior executives.
Our future success will depend on our ability to identify, hire, develop, motivate and retain highly qualified personnel for all areas of our organization, in particular skilled managers, loan servicers, debt default specialists, loan officers and underwriters. Trained and experienced personnel are in high demand and may be in short supply in some areas. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment. In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. We may not be able to attract, develop and maintain an adequate skilled workforce necessary to operate our businesses, and labor expenses may increase as a result of a shortage in the supply of qualified personnel. If we are unable to attract and retain such personnel, we may not be able to take advantage of acquisitions and other growth opportunities that may be presented to us, and this could materially affect our business, financial condition and results of operations.
The experience of our senior executives is a valuable asset to us. Our management team has significant experience in the residential mortgage origination and servicing industry. Changes to our senior executive team may occur, which could have an adverse effect on our business, financial condition and results of operations. We do not maintain and do not currently plan to obtain key life insurance policies on any of our senior managers.
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Cybersecurity risks, cyber incidents and technology failures may adversely affect our business by causing a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, all of which could negatively impact our business.
A cyber incident is considered to be any adverse event that threatens the confidentiality, integrity or availability of our information resources. These incidents may be an intentional attack or an unintentional event and could involve a bad actor gaining unauthorized access to our information systems for purposes of theft of certain personally identifiable information of consumers, misappropriating assets, stealing confidential information, corrupting data or causing operational disruption. The result of these incidents may include disrupted operations, misstated or unreliable financial data, liability for stolen assets or information, increased cybersecurity protection and insurance costs, litigation and harm to our reputation.
As our reliance on rapidly changing technology has increased, so have the risks posed to our information systems, both internal and those provided to us by third-party service providers. System disruptions and failures caused by fire, power loss, telecommunications outages, unauthorized intrusion, computer viruses and disabling devices, natural disasters and other similar events may interrupt or delay our ability to provide services to our customers.
Despite our efforts to ensure the integrity of our systems, our investment in significant physical and technological security measures, employee training, contractual precautions and business continuity plans, duplicated data repository and cloud based sites, and our implementation of policies and procedures designed to help mitigate cybersecurity risks and cyber intrusions, there can be no assurance that any such cyber intrusions will not occur or, if they do occur, that they will be adequately addressed. We also may not be able to anticipate or implement effective preventive measures against all security breaches, especially because the methods of attack change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources, including third parties such as persons involved with organized crime or associated with external service providers. We are also held accountable for the actions and inactions of third-party vendors regarding cybersecurity and other consumer-related matters which may not be covered by indemnification arrangements with our third-party vendors.
Any of the foregoing events could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, additional regulatory scrutiny, significant litigation exposure and harm to our reputation, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations.
Technology failures or terrorist attacks could damage our business operations and increase our costs, which could adversely affect our business, financial condition and results of operations.
The financial services industry as a whole is characterized by rapidly changing technologies. System disruptions and failures caused by fire, power loss, telecommunications failures, unauthorized intrusion, computer viruses and disabling devices, natural disasters and other similar events may interrupt or delay our ability to provide services to our borrowers and other business partners. Security breaches, acts of vandalism and developments in computer capabilities could result in a compromise or breach of the technology that we use to protect our information, our borrowers' personal information and transaction data. Despite our efforts to ensure the integrity of our systems, it is possible that we may not be able to anticipate or implement effective preventive measures against all security breaches, especially because the techniques used change frequently or are not recognized until launched, and because security attacks can originate from a wide variety of sources, including third parties such as persons involved with organized crime or associated with external service providers. Those parties may also attempt to fraudulently induce employees, customers or other users of our systems to disclose
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sensitive information in order to gain access to our data or that of our correspondent sellers or borrowers. These risks may increase in the future as we continue to increase our reliance on the internet and use of web-based product offerings and on the use of cybersecurity.
A successful penetration or circumvention of the security of our systems or a defect in the integrity of our systems or cybersecurity could cause serious negative consequences for our business, including significant disruption of our operations, misappropriation of our confidential information or that of our customers, or damage to our computers or operating systems and to those of our customers and counterparties. Any of the foregoing events could result in violations of applicable privacy and other laws, financial loss to us or to our customers, loss of confidence in our security measures, customer dissatisfaction, significant litigation exposure and harm to our reputation, all of which could adversely affect our business, financial condition and results of operations.
In addition, previous terrorist attacks have disrupted the U.S. financial markets, including the real estate capital markets, and negatively impacted the U.S. economy in general. Any future terrorist attacks, the anticipation of any such attacks, the consequences of any military or other response by the United States and its allies, and other armed conflicts could cause consumer confidence and spending to decrease or result in increased volatility in the United States and worldwide financial markets and economy. The economic impact of these events could also adversely affect the credit quality of some of our loans and investments and the properties underlying our interests.
We may suffer losses as a result of the adverse impact of any future attacks and these losses may adversely impact our performance. A prolonged economic slowdown, recession or declining real estate values could impair the performance of our investments and harm our financial condition and results of operations, increase our funding costs, limit our access to the capital markets or result in a decision by lenders not to extend credit to us. We cannot predict the severity of the effect that potential future armed conflicts and terrorist attacks would have on us. Losses resulting from these types of events may not be fully insurable.
Our vendor relationships subject us to a variety of risks.
We have significant vendors that, among other things, provide us with financial, technology and other services to support our mortgage loan servicing and origination businesses. With respect to our subservicing vendors engaged to perform activities required by servicing criteria, we have elected to take responsibility for assessing compliance with the applicable servicing criteria for the applicable vendor and are required to have procedures in place to provide reasonable assurance that the vendor's activities comply with servicing criteria applicable to the vendor, including but not limited to, monitoring compliance with our predetermined policies and procedures and monitoring the status of payment processing operations. If our current vendors were to stop providing services to us on acceptable terms, including as a result of one or more vendor bankruptcies due to poor economic conditions or other events, we may be unable to procure alternatives from other vendors in a timely and efficient manner and on acceptable terms, or at all. Further, we may incur significant costs to resolve any such disruptions in service and this could adversely affect our business, financial condition and results of operations. Additionally, in April 2012 the CFPB issued Bulletin 2012-03, as amended in 2016 by bulletin 2016-02, which states that supervised banks and non-banks could be held liable for actions of their service providers. As a result, we could be exposed to liability, CFPB enforcement actions or other administrative actions and/or penalties if the vendors with whom we do business violate consumer protection laws.
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Our failure to deal appropriately with various issues that may give rise to reputational risk, including legal and regulatory requirements, could cause harm to our business and adversely affect our business and financial condition and may negatively impact our reputation.
Maintaining our reputation is critical to attracting and retaining customers, trading counterparties, investors and employees. If we fail to deal with, or appear to fail to deal with, various issues that may give rise to reputational risk, we could significantly harm our business. Reputational risk could negatively affect our financial condition and business, strain our working relationships with regulators and government agencies, expose us to litigation and regulatory action, impact our ability to attract and retain customers, trading counterparties, investors and employees and adversely affect our business, financial condition, liquidity and results of operations.
Reputational risk from negative public opinion is inherent in our business and can result from a number of factors. Negative public opinion can result from our actual or alleged conduct in any number of activities, including lending and debt collection practices, corporate governance, and actions taken by government regulators and community organizations in response to those activities. Negative public opinion can also result from social media and media coverage, whether accurate or not. These factors could tarnish or otherwise strain our working relationships with regulators and government agencies, expose us to litigation and regulatory action, negatively affect our ability to attract and retain customers, trading and financing counterparties and employees and adversely affect our business, financial condition, liquidity and results of operations.
We may not be able to successfully operate our business or generate sufficient operating cash flows to pay our operating expenses and maintain our net worth.
There can be no assurance that we will be able to generate sufficient cash to pay our operating expenses. Our financial condition and results of operations depend on many factors subject to uncertainty, including: the availability of attractive risk-adjusted loan acquisition opportunities that satisfy our strategies; our success in identifying and consummating such acquisitions on favorable terms; the level and expected movement of home prices; the level and volatility of interest rates; readily accessible short-term and long-term financing on favorable terms; and conditions in the financial markets, real estate market and the economy.
Initiating new business activities or strategies or significantly expanding existing business activities or strategies may expose us to new risks and will increase our cost of doing business.
Initiating new business activities or strategies or significantly expanding existing business activities or strategies may expose us to new or increased financial, regulatory, reputational and other risks. Such innovations are important and necessary ways to grow our businesses and respond to changing circumstances in our industry; however, we cannot be certain that we will be able to manage the associated risks and compliance requirements effectively. Such risks include a lack of experienced management-level personnel, increased administrative burden, increased logistical problems common to large, expansive operations, increased credit and liquidity risk and increased regulatory scrutiny.
Furthermore, our efforts may not succeed and any revenues we earn from any new or expanded business initiative or strategy may not be sufficient to offset the initial and ongoing costs of that initiative, which would result in a loss with respect to that initiative, strategy or acquisition.
Changes in tax laws may adversely affect us.
The Tax Cuts and Jobs Act (the "TCJA"), enacted on December 22, 2017, significantly affected U.S. federal tax law, including by changing how the U.S. imposes tax on certain types of income of corporations and by reducing the U.S. federal corporate income tax rate to 21%. It also imposed new limitations on a number of tax benefits, including deductions for business interest, use of net operating loss carry forwards, taxation of foreign income, and the foreign tax credit, among others.
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It also imposed new limitations on deductions for mortgage interest, which may affect the demand for loans which we acquire and service. The CARES Act, enacted on March 27, 2020, in response to the COVID-19 pandemic, further altered U.S. federal tax law, including in respect of certain changes that were made by the TCJA, generally on a temporary basis. There can be no assurance that future tax law changes will not increase the rate of the corporate income tax significantly, impose new limitations on deductions, credits or other tax benefits, or make other changes that may adversely affect our business, cash flows or financial performance. In addition, the Internal Revenue Service (the "IRS") has yet to issue guidance on a number of important issues regarding the changes made by the TCJA and the CARES Act.
We are a holding company and our principal asset after completion of this offering will be our LLC Interests in Aris Holding, and accordingly we will be dependent upon distributions from Aris Holding to pay taxes and other expenses.
We are a holding company and, upon completion of the Transactions, including this offering, our principal asset will be our ownership of Aris Holding. See "Our Organizational Structure." We had no operations prior to this offering and have no independent means of generating revenue. As the sole managing member of Aris Holding, we intend to cause Aris Holding to make distributions to us in amounts sufficient to cover the taxes on our allocable share of the taxable income of Aris Holding, all applicable taxes payable by us, any payments we are obligated to make under the Tax Receivable Agreement and other costs or expenses. Distributions will generally be made on a pro rata basis between us and A-A Mortgage. However, certain laws and regulations may result in restrictions on Aris Holding's ability to make distributions to us or the ability of Aris Holding's subsidiaries to make distributions to it.
To the extent that we need funds and Aris Holding or its subsidiaries are restricted from making such distributions, we may not be able to obtain such funds on terms acceptable to us or at all and as a result could suffer an adverse effect on our liquidity and financial condition.
In certain circumstances, Aris Holding will be required to make distributions to us and A-A Mortgage and the distributions that Aris Holding will be required to make may be substantial and in excess of our tax liabilities and obligations under the Tax Receivable Agreement.
Aris Holding will be treated as a partnership for U.S. federal income tax purposes and, as such, will not be subject to U.S. federal income tax. Instead, taxable income will be allocated to holders of its LLC Interests, including us. We anticipate that, pursuant to the tax rules under the Code and the regulations thereunder, in many instances these allocations of taxable income will not be made on a pro rata basis. Notwithstanding that, pursuant to the Aris Holding LLC Agreement, Aris Holding will generally be required from time to time to make pro rata cash distributions, or tax distributions, to the holders of LLC Interests to help each of the holders of the LLC Interests to pay taxes on such holder's allocable share of taxable income of Aris Holding. As a result of potential non pro rata allocations of net taxable income allocable to us and A-A Mortgage and the favorable tax benefits that we anticipate receiving from this offering and certain related transactions, we expect that these tax distributions will be in amounts that exceed our tax liabilities and obligations to make payments under the Tax Receivable Agreement. To the extent, as currently expected, we do not distribute such cash balances as dividends on our Class A common stock and instead, for example, hold such cash balances or lend them to Aris Holding, the existing owners of Aris Holding would benefit from any value attributable to such accumulated cash balances as a result of their ownership of Class A common stock following an exchange of their LLC Interests and corresponding shares of Class B common stock.
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We will be required to pay A-A Mortgage (or certain permitted transferees thereof) for certain tax benefits that we may claim arising in connection with this offering and related transactions, and the amounts we may pay could be significant.
We expect that this offering and certain related transactions will produce tax benefits for us. We intend to use the net proceeds from this offering to purchase LLC Interests from the Existing Equity Owners as described in the "Use of Proceeds." Additionally, we may be required from time to time to acquire LLC Interests together with a corresponding number of shares of our Class B common stock in exchange for our Class A common stock, or, at our election, a cash payment, pursuant to the Exchange Agreement. We expect that basis adjustments resulting from these transactions, if they occur, will reduce the amount of income tax we would otherwise be required to pay in the future. Moreover, Section 704(c) of the Code and the U.S. Treasury regulations promulgated thereunder, require that items of income, gain, loss and deduction that are attributable to Aris Holding's directly and indirectly held property must be allocated among the members of Aris Holding to take into account the difference between the fair market value and the adjusted tax basis of such assets in certain circumstances. As a result, Aris Holding will be required to make certain special allocations of its items of income, gain, loss and deduction that are attributable to such assets. Certain of these allocations, like the increases in tax basis described above, are likely to reduce the amount of income tax we would otherwise be required to pay.
We will enter into a Tax Receivable Agreement with A-A Mortgage that will provide for the payment by us to A-A Mortgage (or certain permitted transferees thereof) of 85% of the tax benefits, if any, that we are deemed to realize under certain circumstances as a result of (i) increases in tax basis resulting from exchanges or acquisitions of LLC Interests and shares of Class B common stock (including as part of the Transactions or under the Exchange Agreement) (ii) allocations that result from the application of the principles of Section 704(c) of the Code in respect of certain transactions described herein or future equity offerings that result in contributions to Aris Holding, and (iii) certain other tax benefits related to our entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement. See "Certain Relationships and Related Party TransactionsTax Receivable Agreement." Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the Tax Receivable Agreement, we expect that the tax savings we will be deemed to realize associated with the tax benefits described above would aggregate approximately $ over years from the date of this offering based on the initial public offering price of $ per share of our Class A common stock (which is the midpoint of the estimated price range set forth on the cover page of this prospectus), and assuming all future exchanges would occur year after this offering. Under such scenario we would be required to pay the owners of LLC Interests approximately 85% of such amount, or $ , over the year period from the date of this offering. The actual amounts may materially differ from these hypothetical amounts, as potential future tax savings we will be deemed to realize, and Tax Receivable Agreement payments by us, will be calculated based in part on the market value of our Class A common stock at the time of purchase or exchange and the prevailing federal tax rates applicable to us over the life of the Tax Receivable Agreement (as well as the assumed combined state and local tax rate), and will generally be dependent on us generating sufficient future taxable income to realize the benefit. In addition, in the future we may make additional offerings and contribute the proceeds of such offerings to Aris Holding, which contributions could generate deemed savings of income taxes that would require us to make payments under the Tax Receivable Agreement. The payments under the Tax Receivable Agreement are not conditioned upon the ownership of us by A-A Mortgage (or certain permitted transferees thereof). See "Certain Relationships and Related Party TransactionsTax Receivable Agreement."
There may be a material negative effect on our liquidity if, as a result of timing discrepancies or otherwise, the payments under the Tax Receivable Agreement exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement or distributions to us by Aris
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Holding are not sufficient to permit us to make payments under the Tax Receivable Agreement after we have paid taxes. Furthermore, our obligations to make payments under the Tax Receivable Agreement could make us a less attractive target for an acquisition, particularly in the case of an acquirer that cannot use some or all of the tax benefits that are deemed realized under the Tax Receivable Agreement.
In certain cases, payments under the Tax Receivable Agreement to A-A Mortgage (or certain permitted transferees thereof) may be accelerated and/or significantly exceed the actual benefits we realize in respect of the tax attributes subject to the Tax Receivable Agreement.
The Tax Receivable Agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, or if, at any time, we elect an early termination of the Tax Receivable Agreement, our (or our successor's) obligations with respect to exchanged or acquired LLC Interests (whether exchanged or acquired before or after such transaction) would be based on certain assumptions, including that we (or our successor) would have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the Tax Receivable Agreement. As a result, we could be required to make payments under the Tax Receivable Agreement that are greater than or less than the percentage specified in the Tax Receivable Agreement of the actual benefits that we realize in respect of the tax attributes that are subject to the Tax Receivable Agreement. Also, if we elect to terminate the Tax Receivable Agreement early or in the event that we materially breach any of our material obligations under the Tax Receivable Agreement (such as our failure to make any payment within three months of when due, provided we have sufficient funds to make such payment), we would be required to make an immediate payment equal to the present value of the anticipated future tax benefits which upfront payment may be made years in advance of the actual realization of such future benefits (if any). In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity, as well as our attractiveness as a target for an acquisition. In addition, we may not be able to finance our obligations under the Tax Receivable Agreement.
Payments under the Tax Receivable Agreement will be based on the tax reporting positions that we determine. We will not be reimbursed for any payments previously made under the Tax Receivable Agreement, even if the tax benefits underlying such payment are disallowed (although future amounts otherwise payable under the Tax Receivable Agreement may be reduced as a result thereof). In addition, the actual state or local tax savings we realize may be different than the amount of such tax savings we are deemed to realize under the Tax Receivable Agreement, which will be based on an assumed combined state and local tax rate applied to our reduction in taxable income as determined for U.S. federal income tax purposes as a result of the Tax Receivable Agreement. As a result, in certain circumstances, payments could be made under the Tax Receivable Agreement in excess of the benefits that we actually realize in respect of the (i) increases in tax basis resulting from exchanges or acquisitions of LLC Interests and shares of Class B common stock (including as part of the Transactions or under the Exchange Agreement), (ii) allocations that result from the application of the principles of Section 704(c) of the Code in respect of certain transactions described herein or future equity offerings that result in contributions to Aris Holding, and (iii) certain other tax benefits related to our entering into the Tax Receivable Agreement, including tax benefits attributable to payments under the Tax Receivable Agreement.
If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the "1940 Act"), as a result of our ownership of Aris Holding, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations.
Under Sections 3(a)(1)(A) and (C) of the 1940 Act, a company generally will be deemed to be an "investment company" for purposes of the 1940 Act if (i) it is, or holds itself out as being, engaged
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primarily, or proposes to engage primarily, in the business of investing, reinvesting or trading in securities or (ii) it engages, or proposes to engage, in the business of investing, reinvesting, owning, holding or trading in securities and it owns or proposes to acquire investment securities having a value exceeding 40% of the value of its total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis. We do not believe that we are an "investment company," as such term is defined in either of those sections of the 1940 Act.
As the managing member of Aris Holding, we will control and operate Aris Holding. On that basis, we believe that our interest in Aris Holding is not an "investment security" as that term is used in the 1940 Act. However, if we were to cease participation in the management of Aris Holding, our interest in Aris Holding could be deemed an "investment security" for purposes of the 1940 Act.
We and Aris Holding intend to conduct our operations so that we will not be deemed an investment company. However, if we were to be deemed an investment company, restrictions imposed by the 1940 Act, including limitations on our capital structure and our ability to transact with affiliates, could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business, financial condition and results of operations.
Market Risks
Interest rate fluctuations could significantly decrease our results of operations and cash flows and the fair value of our assets.
Interest rates are highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations and other factors beyond our control. Due to the unprecedented events surrounding the COVID-19 pandemic along with the associated severe market dislocation, there is an increased degree of uncertainty and unpredictability concerning current interest rates, future interest rates and potential negative interest rates. Interest rate fluctuations present a variety of risks to our operations. Our primary interest rate exposures relate to the yield on our assets, their fair values and the financing cost of our debt, as well as to any derivative financial instruments that we utilize for hedging purposes. Decreasing interest rates may cause a large number of borrowers to refinance, which could result in the loss of future net servicing revenues with an associated write-downs of the related MSRs. In addition, significant savings in interest rate movement may impact our gains and losses from interest rate hedging arrangements and result in our need to change our hedging strategy. Any such scenario could have a material adverse effect on our business, results of operations and financial condition.
Changes in the level of interest rates also may affect our ability to acquire assets (including the purchase or origination of mortgage loans), the value of our assets (including our pipeline of mortgage loan commitments and our portfolio of MSRs) and any related hedging instruments, the value of newly originated or purchased loans, and our ability to realize gains from the disposition of assets. Changes in interest rates may also affect borrower default rates and may impact our ability to refinance or modify loans and/or to sell REO assets.
In addition, our business is materially affected by the monetary policies of the U.S. government and its agencies. We are particularly affected by the policies of the U.S. Federal Reserve, which influence interest rates and impact the size of the loan origination market. In 2017, the U.S. Federal Reserve ended its quantitative easing program and started its balance sheet reduction plan. The U.S. Federal Reserve's balance sheet consists of U.S. Treasuries and MBS issued by Fannie Mae, Freddie Mac and Ginnie Mae. To shrink its balance sheet prior to the COVID-19 pandemic, the U.S. Federal Reserve had slowed the pace of MBS purchases to a point at which natural runoff exceeded new purchases, resulting in a net reduction. Recently, in response to the COVID-19 pandemic, state and federal authorities have taken several actions to provide relief to those negatively affected by COVID-19, such as the CARES Act and the Federal Reserve's support of the financial markets. In
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particular, U.S. Federal Reserve announced programs to increase its purchase of certain MBS products in response to the COVID-19 pandemic's effect on the U.S. economy, and the market for MBS in particular. The Federal Reserve also reduced the target range for the federal funds rate to 0 to 0.25% and announced a policy change in August 2020 to the way it sets interest rates that will likely keep interest rates in the U.S. relatively low for an extended period of time. The results of this recent policy change by the U.S. Federal Reserve are unknown at this time, as is its duration, but could affect the liquidity of MBS in the future.
Hedging against interest rate exposure may materially and adversely affect our business, financial condition, liquidity and results of operations.
We pursue hedging strategies to reduce our exposure to changes in interest rates. However, while we enter into such transactions seeking to reduce interest rate risk, unanticipated changes in interest rates may result in poorer overall performance than if we had not engaged in any such hedging transactions, in addition to directly affecting the percentage of loan applications in the underwriting process that ultimately close. Interest rate hedging may fail to protect or could adversely affect us because, among other things, it may not fully eliminate interest rate risk, it could expose us to counterparty and default and cross-default risk that may result in greater losses or the loss of unrealized profits, and it will create additional expense. Generally, hedging activity requires the investment of capital and the amount of capital required often varies as interest rates and asset valuations change. Thus, hedging activity, while intended to limit losses, may materially and adversely affect our business, financial condition, liquidity and results of operations.
A prolonged economic slowdown, recession or declining real estate values could materially and adversely affect us.
Our business and earnings are sensitive to general business and economic conditions in the U.S. A downturn in economic conditions resulting in adverse changes in interest rates, inflation, the debt capital markets, unemployment rates, consumer and commercial bankruptcy filings, the general strength of national and local economies and other factors that negatively impact household incomes could decrease demand for our mortgage loan products as a result of a lower volume of housing purchases and reduced refinancings of mortgages and could lead to higher mortgage defaults and lower prices for our loans upon sale.
In addition, a weakening economy, high unemployment and declining real estate values may increase the likelihood that borrowers will become delinquent and ultimately default on their debt service obligations. Our cost to service increases when borrowers become delinquent. In the event of a default, we may incur additional costs, the size of which depends on a number of factors, including but not limited to the instruction of the loan investor, location and condition of the underlying property, the terms of the guarantee or insurance on the loan, the level of interest rates and the time it takes to liquidate the property.
We finance our assets with borrowings, which may materially and adversely affect the income derived from our assets.
We currently leverage and, to the extent available, we intend to continue to leverage our assets through borrowings, the level of which may vary based on the particular characteristics of our asset portfolio and on market conditions. We have financed certain of our assets through repurchase agreements, pursuant to which we sell mortgage loans to lenders (i.e., repurchase agreement counterparties) and receive cash from the lenders. The lenders are obligated to resell the same assets back to us at the end of the term of the transaction. Because the cash we receive from the lender when we initially sell the assets to the lender is less than our cost to acquire the assets as well as the fair value of those assets (this difference is referred to as the haircut), if the lender defaults on its
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obligation to resell the same assets back to us we could incur a loss on the transaction equal to the amount of the difference in asset value sold back to us reduced further by interest accrued on the financing (assuming there was no change in the fair value of the assets).
The value of our collateral may decrease, which could lead to our lenders initiating margin calls and requiring us to post additional collateral or repay a portion of our outstanding borrowings.
Repurchase agreements generally allow the counterparties, to varying degrees, to determine a new fair value of the collateral to reflect current market conditions which could also result from the underlying loan remaining on our warehouse for an extended period of time exposing us to changes in value and the potential for increased costs for our warehouse financings (including the ongoing availability of those credit lines). If a lender determines that the fair value of the collateral has decreased, it may initiate a margin call and require us to either post additional collateral to cover such decrease or repay a portion of the outstanding borrowing. Should this occur, and we are limited to adequate unrestricted cash to satisfy a margin call, we may be required to liquidate assets at a disadvantageous time, which could cause us to incur losses. In the event we are unable to satisfy a margin call, our counterparty may sell the collateral, which may result in significant losses to us and may trigger defaults or cross-defaults under our financing arrangements.
We also acquire certain assets, including MSRs, for which financing has historically been difficult to obtain. We currently leverage certain of our MSRs under secured financing arrangements. Our GSE MSRs are pledged to secure borrowings under loan and security agreements. Our Fannie Mae MSR financing facility has a variable rate interest with a balloon payment at maturity on August 22, 2021 and our Freddie Mac MSR financing facility has a term loan with a fixed rate that is amortizing with a maturity date of November 22, 2022, and a revolving loan with a fixed interest rate and permits draws through the next two years and a balloon payment by the maturity date on September 28, 2023. Each of the secured financing arrangements pursuant to which we finance MSRs is further subject to the terms of an acknowledgement agreement with the related GSE, pursuant to which our and the secured parties' rights are subordinate in all respects to the rights of the applicable GSE and subject to financial covenants similar to our financing arrangements. Accordingly, the exercise by any GSE of its rights under the applicable acknowledgment agreement, including at the direction of the secured parties and whether or not we are in breach of our financing arrangement, could result in the extinguishment of our and the secured parties' rights in the related collateral and result in significant losses to us.
We may in the future utilize other sources of borrowings, including term loans, bank credit facilities and structured financing arrangements, among others. The amount of leverage we employ varies depending on the asset class being financed, our available capital, our ability to obtain and access financing arrangements with lenders and the lenders' and rating agencies' estimate of, among other things, the stability of our asset portfolio's cash flow.
Our operations are dependent on access to our warehouse facilities, which are mostly uncommitted. If the lenders under these warehouse facilities terminate, or modify the terms of, these financing facilities, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.
We depend on short-term debt financing in the form of secured borrowings under warehouse facilities with financial institutions. These facilities are uncommitted, which means that any request we make to borrow funds under these facilities may be declined for any reason, even if at the time of the borrowing request we have then-outstanding borrowings that are less than the borrowing limits under these facilities. We may not be able to obtain additional financing under the warehouse facility when necessary, which could have a material adverse effect on our business, financial condition, results of operations and cash flows and exposing us to, among other things, liquidity risks which could adversely affect our profitability and operations.
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Our financing agreements contain financial and restrictive covenants that could adversely affect our financial condition and our ability to operate our businesses.
The lenders under our repurchase agreements require us and/or our subsidiaries to comply with various financial covenants, including those relating to tangible net worth, profitability and our ratio of total liabilities to tangible net worth. Our lenders also require us to maintain minimum amounts of cash or cash equivalents sufficient to maintain a specified liquidity position and maintain collateral having a market value sufficient to support the related borrowings. If we are unable to meet these financial covenants, our financial condition could deteriorate rapidly and could also result in a default or cross-defaults under our financing arrangements.
Our existing financing agreements also impose other financial and non-financial covenants and restrictions on us that impact our flexibility to determine our operating policies by limiting our ability to, among other things: incur certain types of indebtedness; grant liens; engage in consolidations and mergers and asset sales; make restricted payments and investments; and enter into transactions with affiliates. In our financing agreements, we agree to certain covenants and restrictions and we make representations about the assets sold or pledged under these agreements. We also agree to certain events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of financial and other covenants and/or certain representations and warranties, cross-defaults, servicer termination events, ratings downgrades, bankruptcy or insolvency proceedings, legal judgments against us, loss of licenses, loss of Agency, FHA, VA, and/or USDA approvals and other events of default and remedies customary for these types of agreements. If we default on our obligations under our financing arrangements, fail to comply with certain covenants and restrictions or breach our representations and are unable to cure, the lender may be able to terminate the transaction or its commitments, accelerate any amounts outstanding, repurchase the assets, and/or cease entering into any other financing arrangements with us, which could also result in defaults or cross-defaults in our financing arrangements.
Because our financing agreements typically contain cross-default provisions, a default that occurs under any one agreement could allow the lenders under our other agreements to also declare a default, thereby exposing us to a variety of lender remedies, such as those described above, and potential losses arising therefrom. In addition, defaults and cross-defaults under our financing arrangements could trigger a cross-defaults under our trading agreements, which could have a negative impact on our ability to enter into hedging transactions. Any losses that we incur on our financing agreements could have a material adverse effect on our business, financial condition, liquidity and results of operations.
Difficult conditions or disruptions in the MBS, mortgage, real estate and financial markets and the economy generally may adversely affect our business, financial condition, liquidity and results of operations.
Most of the Agency-eligible mortgage loans that we originate or acquire are delivered to the GSEs or Ginnie Mae to be pooled into Agency MBS or sold directly to the Agencies through the cash window or other third parties. Disruptions in the general MBS market have occurred in the past. Any significant disruption or period of illiquidity in the general MBS market would directly affect our liquidity because no existing alternative secondary market would likely be able to accommodate on a timely basis the volume of loans that we typically acquire and sell in any given period. Accordingly, if the MBS market experiences a period of illiquidity, we might be prevented from selling the loans that we acquire into the secondary market in a timely manner or at favorable prices or we may be required to repay a portion of the debt securing these assets, which could impact the availability and cost of financing arrangements and would likely result in a material adverse effect on our business, financial condition and results of operations.
The success of our business strategies and our results of operations are also materially affected by current conditions in the broader mortgage markets, the financial markets and the economy generally. Continuing concerns over factors including inflation, deflation, unemployment, personal and business
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income taxes, healthcare, energy costs, geopolitical issues, the availability and cost of credit, the mortgage markets and the real estate markets have contributed to increased volatility and unclear expectations for the economy and markets going forward. The mortgage markets have been and continue to be affected by changes in the lending landscape, defaults, credit losses and significant liquidity concerns. A destabilization of the real estate and mortgage markets or deterioration in these markets may adversely affect the performance and fair value of our assets, reduce our loan production volume, reduce the profitability of servicing mortgages or adversely affect our ability to sell mortgage loans that we acquire, either at a profit or at all. Any of the foregoing could materially and adversely affect our business, financial condition, liquidity and results of operations.
We are exposed to volatility in the London Inter-Bank Offered Rate ("LIBOR"), which can result in higher than market interest rates and may have a detrimental effect on our business.
The interest rate of our variable-rate indebtedness and the interest rate on the adjustable rate loans we originate and service is based on LIBOR. In July 2017, the U.K. Financial Conduct Authority announced that it intends to stop collecting LIBOR rates from banks after 2021. The announcement indicates that LIBOR will not continue to exist on the current basis. U.S.-dollar LIBOR is expected to be replaced with the Secured Overnight Financing Rate ("SOFR"), a new index calculated by reference to short-term repurchase agreements for U.S. Treasury securities. Although there have been a few issuances utilizing SOFR or the Sterling Over Night Index Average, an alternative reference rate that is based on transactions, it is unknown whether any of these alternative reference rates will attain market acceptance as replacements for LIBOR. There is currently no definitive successor reference rate to LIBOR and various industry organizations are still working to develop workable transition mechanisms. As part of this industry transition, we will be required to migrate any current adjustable rate loans we service to any such successor reference rate. Until a successor rate is determined, we cannot implement the transition away from LIBOR for the adjustable rate loans we service. As such, we are unable to predict the effect of any changes to LIBOR, the establishment and success of any alternative reference rates, or any other reforms to LIBOR or any replacement of LIBOR that may be enacted in the United States or elsewhere. Such changes, reforms or replacements relating to LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, derivatives or other financial instruments or extensions of credit held by us. LIBOR-related changes could affect our overall results of operations and financial condition.
We may not be able to raise the debt or equity capital required to finance our assets and grow our businesses.
The growth of our businesses requires continued access to debt and equity capital that may or may not be available on favorable terms, at the desired times or at all. In addition, we own certain assets, including MSRs, for which financing has historically been difficult to obtain. Our inability to continue to maintain debt financing for MSRs could require us to seek equity capital that may be more costly or unavailable to us.
We are also dependent on a limited number of banking institutions that extend us credit on terms that we have determined to be commercially reasonable. These banking institutions are subject to their own regulatory supervision, liquidity and capital requirements, risk management frameworks and risk thresholds and tolerances, any of which may materially and negatively impact their willingness to extend credit to us specifically or mortgage lenders and servicers generally. Such actions may increase our cost of capital and limit or otherwise eliminate our access to capital.
Our access to any debt or equity capital, including any equity contributions from our Parent, on favorable terms or at all is uncertain. Our inability to raise such capital or obtain such debt or equity financing on favorable terms or at all could materially and adversely impact our business, financial condition, liquidity and results of operations.
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We are subject to market risk and credit spreads, which may adversely affect income and cause realized and unrealized losses.
We are exposed to the credit markets and subject to the risk that we will incur losses due to adverse changes in credit spreads. Adverse changes to these spreads may occur due to changes in fiscal policy and the economic climate, the liquidity of a market or market segment, insolvency or financial distress of key market makers or participants, changes in market perceptions of credit worthiness and/or risk tolerance or the investor demand for our assets.
We are subject to risks associated with potential declines in our credit quality, credit quality related to specific loan originators or specific industries, and a general weakening in the economy, all of which are typically reflected through credit spreads. Credit spread is the additional yield on fixed income securities above the risk-free rate (typically referenced as the yield on U.S. Treasury securities) that market participants require to compensate them for assuming credit, liquidity and/or prepayment risks. Credit spreads vary (i.e. increase or decrease) in response to the market's perception of risk and liquidity in a specific issuer or specific sector and may be influenced by the credit ratings, and the reliability of those ratings, published by external rating agencies. A decline in the quality of our asset portfolio as a result of adverse economic conditions or otherwise could cause realized and unrealized losses on our assets.
An increase in credit spreads could have an adverse effect on the value of our asset portfolio by decreasing the fair values of the credit sensitive assets in our portfolio. Any such scenario could materially and adversely affect us.
We utilize derivative financial instruments, which could subject us to risk of loss.
We enter into a variety of hedging arrangements such as derivative contracts, to hedge the fair value of the MSR portfolio and minimize market rate risk although we cannot assure you that these hedging arrangements will protect the value of our MSR assets. We utilize derivative financial instruments for hedging purposes, which may include swap futures, options, "to be announced" contracts and futures. However, the prices of derivative financial instruments, including futures and options, are highly volatile. As a result, the cost of utilizing derivatives may reduce our income and liquidity, and the derivative instruments that we utilize may fail to effectively hedge our positions. We are also subject to credit risk with regard to the counterparties involved in the derivative transactions.
The use of derivative instruments is also subject to an increasing number of laws and regulations, including the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") and its implementing regulations. These laws and regulations are complex, compliance with them may be costly and time consuming, and our failure to comply with any of these laws and regulations could subject us to lawsuits or government actions and damage our reputation, which could materially and adversely affect our business, financial condition, liquidity and results of operations.
Regulatory Risks
We operate in a highly regulated industry with continually changing federal, state and local laws and regulations.
The mortgage industry is highly regulated, and we are required to comply with a wide array of federal, state and local laws and regulations that regulate, among other things, the manner in which we conduct our loan production and servicing businesses, including the fees that we may charge and the collection, use, retention, protection, disclosure and other processing of personal information. These regulations directly impact our business and require constant compliance, monitoring and internal and external audits. Both the scope of the laws and regulations and the intensity of the supervision to which our business is subject have increased over time in response to the financial crisis, as well as other factors, such as technological and market changes.
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The laws and regulations and judicial and administrative decisions relating to mortgage loans and consumer protection to which we are subject include, for example, those pertaining to real estate settlement procedures, equal credit opportunity, fair lending, fair credit reporting, truth in lending, fair debt collection practices, service members protections, unfair, deceptive and abusive acts and practices, federal and state advertising requirements, high-cost loans and predatory lending, compliance with net worth and financial statement delivery requirements, compliance with federal and state disclosure and licensing requirements, the establishment of maximum interest rates, finance charges and other charges, ability-to-repay and qualified mortgages, licensing of loan originators and other personnel, loan originator compensation, secured transactions, property valuations, insurance, servicing transfers, payment processing, escrow, communications with consumers, loss mitigation, debt collection, prompt payment crediting, periodic statements, foreclosure, bankruptcies, repossession and claims-handling procedures, disclosures related to and cancellation of private mortgage insurance, flood insurance, the reporting of loan application and origination data, and other trade practices.
In particular, various federal, state and local laws have been enacted that are designed to discourage predatory lending and servicing practices. The Home Ownership and Equity Protection Act of 1994 ("HOEPA") prohibits inclusion of certain provisions in residential loans that have mortgage rates or origination costs in excess of prescribed levels and requires that borrowers be given certain disclosures prior to origination. Some states have enacted, or may enact, similar laws or regulations, which in some cases impose restrictions and requirements greater than those in HOEPA. In addition, under the anti-predatory lending laws of some states, the origination of certain residential loans, including loans that are not classified as "high cost" loans under applicable law, must satisfy a net tangible benefits test with respect to the related borrower. This test may be highly subjective and open to interpretation. As a result, a court may determine that a residential loan, for example, does not meet the test even if the related originator reasonably believed that the test was satisfied. Failure of residential loan originators or servicers to comply with these laws, to the extent any of their residential loans are or become part of our mortgage-related assets, could subject us, as a servicer or, in the case of acquired loans, as an assignee or purchaser, to monetary penalties and could result in the borrowers rescinding the affected loans. Lawsuits have been brought in various states making claims against originators, servicers, assignees and purchasers of high cost loans for violations of state law. Named defendants in these cases have included numerous participants within the secondary mortgage market. If our loans are found to have been originated in violation of predatory or abusive lending laws, we could be subject to lawsuits or governmental actions, or we could be fined or incur losses.
We also must comply with federal, state and local laws related to data privacy and the handling of non-public personal financial information of our customers, including the recently enacted California Consumer Protection Act ("CCPA"), and we expect other states to enact legislation similar to the CCPA, which limit how companies can use customer data and impose obligations on companies in their management of such data. The service providers we use, including outside counsel retained to process foreclosures and bankruptcies, must also comply with some of these legal requirements. Changes to laws, regulations or regulatory policies or their interpretation or implementation and the continued heightening of regulatory requirements could affect us in substantial and unpredictable ways.
The influx of new laws, regulations, and other directives adopted by federal, state and local governments in response to the recent COVID-19 pandemic exemplifies the ever-changing and increasingly complex regulatory landscape in which we operate. While some regulatory reactions to COVID-19 relaxed certain compliance obligations, the forbearance requirements imposed on mortgage servicers in the recently passed CARES Act added new regulatory responsibilities. The GSEs and the FHFA, Ginnie Mae, the U.S. Department of Housing and Urban Development ("HUD"), state and local governments, various investors and others have also issued guidance relating to COVID-19. Future regulatory scrutiny and enforcement resulting from COVID-19 is unknown.
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Our failure to comply with applicable federal, state and local consumer protection and data privacy laws could lead to:
Furthermore, situations involving a potential violation of law or regulation, even if limited in scope, may give rise to numerous and overlapping investigations and proceedings, either by multiple federal and state agencies and officials in the United States. In addition, our failure, or the failure of our subservicers and correspondent sellers to comply with these laws and regulations may result in increased costs of doing business, reduced payments by borrowers, modification of the original terms of mortgage loans, permanent forgiveness of debt, delays in the foreclosure process, litigation, reputational damage, enforcement actions, and repurchase and indemnification obligations, which could affect our investor approval status and our ability to sell or service loans. Our failure to adequately supervise vendors and service providers may lead to significant liabilities, inclusive of assignee liabilities, as a result of the errors and omissions of those vendors and service providers.
As regulatory guidance and enforcement and the views of the CFPB, state attorneys general, the GSEs and other market participants evolve, we may need to modify further our loan origination processes and systems in order to adjust to evolution in the regulatory landscape and successfully operate our lending business. In such circumstances, if we are unable to make the necessary adjustments, our business and operations could be adversely affected.
Our failure to comply with the laws and regulations to which we are subject, whether actual or alleged, would expose us to fines, penalties or potential litigation liabilities, including costs, settlements and judgments, and also trigger defaults under our financing arrangements, any of which could have a material adverse effect on our business, liquidity, financial condition and results of operations.
The conduct of our correspondents could subject us to fines or penalties.
The failure of the mortgage lenders from whom loans were acquired through our correspondent production activities to comply with any applicable laws and regulations may result in these adverse consequences to us. We have in place a due diligence program designed to assess areas of risk with respect to these acquired loans, including, without limitation, compliance with underwriting guidelines and applicable laws or regulations, ongoing monitoring of the financial and loan performance of our counterparties, and effective quality control over our portfolio of loans that we acquire and service. However, we may not detect every violation of law or program guidelines by these mortgage lenders. Further, to the extent any correspondent seller or servicer with whom we do business fails to comply with applicable laws or regulations and any of their mortgage loans become part of our assets, it could subject us, as an assignee or purchaser of the related mortgage loans, to monetary penalties or other losses. In general, if any of our loans are found to have been originated, acquired or serviced by us or a third-party in violation of applicable laws or regulations, we could be subject to lawsuits or
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governmental actions, or we could be fined or incur losses. We may have contractual rights to seek indemnity for the breach of the representations and warranties made to us at the time we purchased the loan or enforce repurchase obligations, in each case from certain of these lenders and correspondent sellers and servicers. However, if any of these lenders, correspondent sellers or servicers are unable to fulfill their indemnity or repurchase obligations to us, our business, financial condition, liquidity and results of operations could be materially and adversely affected. In addition, many of the lenders and correspondent sellers from whom we acquire mortgage loans are relatively small and not well capitalized, and it is our expectation that some of them may become insolvent or otherwise incapable of honoring their representations and warranties and repurchase obligations in relation to mortgage loans that have been sold to us.
The CFPB is active in its monitoring of the residential mortgage origination and servicing sectors. Revised rules and regulations and enforcement of existing rules and regulations by the CFPB could result in increased compliance costs, enforcement actions, fines, penalties and the inherent reputational harm that results from such actions.
The CFPB has oversight of non-depository mortgage lending and servicing institutions and is empowered with broad supervision, rulemaking and examination authority to enforce laws involving consumer financial products and services and to ensure, among other things, that consumers receive clear and accurate disclosures regarding financial products and are protected from hidden fees and unfair, deceptive or abusive acts or practices. The CFPB has adopted a number of regulations under long-standing consumer financial protection laws and the Dodd-Frank Act, including rules regarding truth in lending, assessments of a borrower's ability to repay, home mortgage loan disclosure, home mortgage loan origination, fair credit reporting, fair debt collection practices, foreclosure protections, and mortgage servicing rules, including provisions regarding loss mitigation, prompt crediting of borrowers' accounts for payments received, delinquency and early intervention, prompt investigation of complaints by borrowers, periodic statement requirements, lender-placed insurance, requests for information and successors-in-interest to borrowers. The CFPB also periodically issues guidance documents, such as bulletins, setting forth informal guidance regarding compliance with these and other laws under its jurisdiction, and issues public enforcement actions, which provide additional guidance on its interpretation of these legal requirements.
The CFPB also has enforcement authority and can order, among other things, rescission or reformation of contracts, the refund of moneys or the return of real property, restitution, disgorgement or compensation for unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, limits on activities or functions, remediation of practices, external compliance monitoring and civil money penalties. The CFPB has made it clear that it expects non-bank entities to maintain an effective process for managing risks associated with third-party vendor relationships, including compliance-related risks. In connection with this vendor risk management process, we are expected to perform due diligence reviews of potential vendors, review vendors' policies and procedures and internal training materials to confirm compliance-related focus, include enforceable consequences in contracts with vendors regarding failure to comply with consumer protection requirements, and take prompt action, including terminating the relationship, in the event that vendors fail to meet our expectations. Through enforcement actions and guidance, the CFPB is also applying scrutiny to compensation payments to third-party providers for marketing services and may issue guidance that narrows the range of acceptable payments to third-party providers as part of marketing services agreements, lead generation agreements and other third-party marketer relationships.
In addition to its supervision and examination authority, the CFPB is authorized to conduct investigations to determine whether any person is engaging in, or has engaged in, conduct that violates federal consumer financial protection laws, and to initiate enforcement actions for such violations, regardless of its direct supervisory authority. Investigations may be conducted jointly with other regulators. The CFPB has the authority to impose monetary penalties for violations of applicable
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federal consumer financial laws, require remediation of practices and pursue administrative proceedings or litigation for violations of applicable federal consumer financial laws. The CFPB also has the authority to obtain cease and desist orders, orders for restitution or rescission of contracts and other kinds of affirmative relief and monetary penalties ranging from up to approximately $5,000 per day for ordinary violations of federal consumer financial laws to $25,000 per day for reckless violations and $1,000,000 per day for knowing violations.
The mortgage lending sector is currently relying for a significant portion of the mortgages originated on a temporary CFPB regulation, commonly called the "QM Patch," which permits mortgage lenders to comply with the CFPB's ability to repay requirements by relying on the fact that the mortgage is eligible for sale to Fannie Mae or Freddie Mac. Reliance on the QM Patch has become widespread due to the operational complexity and practical inability for many mortgage lenders to rely on other ways to show compliance with the ability to repay regulations. The QM Patch is scheduled to expire on January 10, 2021, or sooner if Fannie Mae and Freddie Mac exit FHFA conservatorship. On June 22, 2020, the CFPB issued a notice of proposed rulemaking to, among other things, amend the sunset date for these loans and revise the definition of a qualified mortgage. We cannot predict what final actions the CFPB will take and how it might affect us as well as other mortgage lenders.
Regulations promulgated under the Dodd-Frank Act or by the CFPB, uncertainty regarding changes in leadership or authority levels within the CFPB, and actions taken or not taken by the CFPB could continue to result in heightened federal and state regulation and oversight of our business activities, materially and adversely affect the manner in which we conduct our business, and increase costs and potential litigation associated with our business activities. Our failure to comply with the laws and regulations to which we are subject, whether actual or alleged, would expose us to fines, penalties or potential litigation liabilities, including costs, settlements and judgments, and also trigger defaults under our financing arrangements, any of which could have a material adverse effect on our business, liquidity, financial condition and results of operations.
Government responses to COVID-19, including the passage of the CARES Act, pose new and evolving compliance obligations on our business, and we may experience unfavorable changes in or failure to comply with existing or future regulations and laws adopted in response to COVID-19.
Due to the unprecedented impact on major sectors of the U.S. economy from COVID-19, numerous states and the federal government have adopted measures requiring mortgage servicers to work with consumers negatively impacted by COVID-19. The CARES Act imposes several new compliance obligations on our mortgage servicing activities, including, but not limited to mandatory forbearance offerings, altered credit reporting obligations, and moratoriums on foreclosure actions and late fee assessments. Many states have taken similar measures to provide mortgage payment and other relief to consumers, which create additional complexity around our mortgage servicing compliance activities. We cannot predict when or on what terms and conditions these measures will be lifted, which will depend on future legislative and regulatory developments in response to the COVID-19 pandemic.
The swift passage of the CARES Act increases the likelihood of unintended consequences from the legislation. An example of such unintended consequences is the liquidity pressure placed on mortgage servicers given our contractual obligation to continue to advance payments to investors on loans in forbearance where consumers are not making their typical monthly mortgage payments. Moreover, certain provisions of the CARES Act are subject to interpretation given the existing ambiguities in the legislation, which creates class action and other litigation risk.
Although much of the executive, legislative and regulatory action stemming from COVID-19 is focused on mortgage servicing, regulators are adjusting compliance obligations impacting our mortgage origination activities. Many states have adopted temporary measures allowing for otherwise prohibited remote mortgage loan origination activities. While these temporary measures allow us to continue to do
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business remotely, they impose notice, procedural, and other compliance obligations on our origination activity.
Federal, state, and local executive, legislative and regulatory responses to COVID-19 are rapidly evolving, not consistent in scope or application, and subject to change without advance notice. Such efforts may impose additional compliance obligations, which may negatively impact our mortgage origination and servicing business. Any additional legal or regulatory responses to COVID-19 may unfavorably restrict our business operations, alter our established business practices, and otherwise raise our compliance costs.
We are highly dependent on the GSEs and Ginnie Mae and the FHFA, as the conservator of the GSEs, and any changes in these entities or their current roles could materially and adversely affect our business, liquidity, financial condition and results of operations.
Our ability to generate revenues through mortgage loan sales depends to a significant degree on programs administered by the GSEs and Ginnie Mae and others that facilitate the issuance of MBS in the secondary market. The GSEs, Ginnie Mae and FHFA play a critical role in the mortgage industry and we have significant business relationships with them. Presently, almost all of the newly originated conventional conforming loans that we acquire from mortgage lenders through our correspondent production activities or our retail origination activities qualify under existing standards for inclusion in mortgage securities backed by the GSEs and Ginnie Mae or for purchase by a GSE directly through its cash window. We also derive other material financial benefits from these relationships, including the assumption of credit risk by the GSEs and Ginnie Mae on loans included in such mortgage securities in exchange for our payment of guarantee fees, our retention of such credit risk through structured transactions that lower our guarantee fees, and the ability to avoid certain loan inventory finance costs through streamlined loan funding and sale procedures to the Agencies and other third-party purchasers.
The disposition of the FHFA conservatorship of the GSEs continues to be debated between the U.S. Congress and the executive branch of the U.S. federal government, and could also be impacted by a forthcoming U.S. Supreme Court case regarding whether FHFA's structure is constitutional. In June 2018, the Trump Administration brought forth a new proposal to end government conservatorship, which would result in full privatization of the GSEs. In September 2019, the U.S. Department of the Treasury ("U.S. Treasury"), the FHFA and HUD released plans to reform the housing finance system. These agencies developed these plans in conjunction with one another and other government agencies, and include legislative and administrative reforms to achieve the following reform goals: (i) ending the conservatorships of the GSEs upon the completion of specified reforms; (ii) facilitating competition in the housing finance market; (iii) establishing regulation of the GSEs that safeguards their safety and soundness and minimizes the risks they pose to the financial stability of the United States; and (iv) providing that the federal government is properly compensated for any explicit or implicit support it provides to the GSEs or the secondary housing finance market. At this point, it remains unclear whether any of these legislative or regulatory reforms will be enacted or implemented. Any changes in laws and regulations affecting the relationship between the GSEs and the U.S. federal government could adversely affect our business and prospects. Although the U.S. Treasury has committed capital to the GSEs, these actions may not be adequate for their needs. If the GSEs are adversely affected by events such as ratings downgrades, inability to obtain necessary government funding, lack of success in resolving repurchase demands to lenders, foreclosure problems and delays and problems with mortgage insurers, they could suffer losses and fail to honor their guarantees and other obligations. Any discontinuation of, or significant reduction in, the operation of the GSEs or any significant adverse change in their capital structure, financial condition, activity levels in the primary or secondary mortgage markets or underwriting criteria could materially and adversely affect our business, liquidity, financial condition and results of operations. The roles of the GSEs could be significantly restructured, reduced or eliminated and the nature of the guarantees could be considerably limited relative to historical measurements. Elimination of the traditional roles of the GSEs, or any changes to the nature
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or extent of the guarantees provided by the GSEs or the fees, terms and guidelines that govern our selling and servicing relationships with them, such as increases in the guarantee fees we are required to pay, initiatives that increase the number of repurchase demands and/or the manner in which they are pursued, or possible limits on delivery volumes imposed upon us and other sellers/servicers, could also materially and adversely affect our business, including our ability to sell and securitize loans that we acquire through our correspondent production activities or our retail origination activities, and the performance, liquidity and market value of our assets. Moreover, any changes to the nature of the GSEs or their guarantee obligations could redefine what constitutes an Agency MBS and could have broad adverse implications for the market and our business, financial condition, liquidity and results of operations.
Our ability to generate revenues from newly originated loans that we acquire through our correspondent production activities and originated by our consumer direct line of business is also dependent on the fact that the Agencies have not historically focused on acquiring such loans directly from the smaller mortgage lenders with whom we have relationships, but have instead relied on banks and non-bank aggregators such as us to acquire, aggregate and securitize or otherwise sell loans from such lenders to investors in the secondary market. Certain of the Agencies have approved more of the smaller lenders that traditionally might not have qualified for such approvals, and more importantly are discussing programs where they would facilitate new or expanded options for a broad range of lenders to sell their servicing through executions other than whole loan sales to correspondent aggregators. In the future, the Agencies may continue to create initiatives, programs and technology that serve to discourage correspondent aggregators. To the extent that lenders choose to sell directly to the Agencies rather than through correspondent aggregators like us, this reduces the number of loans available for purchase in the correspondent business channel and could materially and adversely affect our business, financial condition, liquidity and results of operations.
We are required to have various Agency approvals and state licenses in order to conduct our business and there is no assurance we will be able to maintain those Agency approvals or state licenses or that changes in Agency guidelines or state licensing requirements will not materially and adversely affect our business, financial condition and results of operations.
We are subject to state mortgage lending, purchase and sale, loan servicing or debt collection licensing and regulatory requirements. Our failure to obtain any necessary licenses, comply with applicable licensing laws or satisfy the various requirements to maintain them over time could restrict our consumer direct business activities or loan purchase and sale or servicing activities, result in litigation, or civil and other monetary penalties, or criminal penalties, or cause us to default under certain of our lending arrangements, any of which could materially and adversely impact our business, financial condition, liquidity and results of operations.
Our lenders require us to maintain all FHA, VA and USDA approvals. We are also required to hold Agency approvals in order to sell mortgage loans to a particular Agency and/or service such mortgage loans on their behalf. Our failure to satisfy the various requirements necessary to maintain such Agency approvals over time would also substantially restrict our business activities and could adversely impact our results of operations and financial condition including defaults under our warehouse financings.
We are also required to follow specific guidelines that impact the way that we originate and service Agency loans. A significant change in these guidelines that has the effect of decreasing the fees we charge or requires us to expend additional resources in providing mortgage services could decrease our revenues or increase our costs, which could also adversely affect our business, financial condition and results of operations.
In addition, we are subject to periodic examinations by federal and state regulators, our lenders and the Agencies, which can result in increases in our administrative costs, the requirement to pay
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substantial penalties due to compliance errors or the loss of our licenses. Negative publicity or fines and penalties incurred in one jurisdiction may cause investigations or other actions by regulators in other jurisdictions and could adversely impact our business.
Finally, as part of these regulatory requirements, we are obligated to meet certain minimum financial standards that could have a negative impact on our ability to reinvest profits into growing the business. Building upon existing agency and state requirements, the Conference of State Bank Supervisors recently proposed a set of prudential standards for non-bank mortgage servicers and MSR investors. These standards set forth a framework for adoption by the state licensing agencies that, if actually adopted, would create significant additional regulatory burdens for us. Under the proposed guidelines, we would be subject to newly-created safety and soundness standards governing the sufficiency of our capital, liquidity, risk management practices, data integrity, corporate governance, and servicing transfer practices. The proposed guidelines also would create heightened standards to the extent we were designated a large and complex servicer, which could result in us having to create a "living will," similar to those required of large banks. Such standards could significantly alter the state regulatory regime currently governing our business operations and we would incur additional costs of complying with a safety and soundness regulatory regime similar to that of depository institutions.
If we are unable to comply with TRID rules, our business and operations could be materially and adversely affected.
The CFPB's TILA-RESPA Integrated Disclosure ("TRID") rules impose requirements on consumer facing disclosure rules and impose certain waiting periods to allow consumers time to shop for and consider the loan terms after receiving the required disclosures. If we fail to comply with the TRID rules, we may be unable to sell loans that we originate or purchase, or we may be required to sell such loans at a discount compared to other loans. We could also be subject to repurchase or indemnification claims from purchasers of such loans, including the GSEs.
Failure by us or our subservicers to comply with applicable laws and regulations may adversely affect our business.
Mortgage servicing is subject to extensive and evolving federal, state and local laws and regulations, with significant new legal requirements being implemented as a result of the COVID-19 pandemic. Mortgage servicers are contractually obligated to service the mortgage loans underlying mortgage servicing rights in compliance with such laws and regulations. Failure by us or any subservicer we currently engage or engage in the future to comply with such laws and regulations may result in a servicer termination event or an event of default of the servicer under the related servicing agreements. If a servicer termination event or event of default has occurred under a servicing agreement, we may be terminated as servicer (or we may be terminated as servicer under a servicing agreement related to an MSR prior to its transfer to us). As a result, we may not receive any compensation for the loss of the related MSR assets, possibly including the right to be reimbursed for any outstanding servicing advances as the related loans are brought current, modified, liquidated or charged off. In addition, our failure or our subservicers' failure to comply with applicable laws and regulations in connection with servicing mortgage loans underlying our MSRs, could possibly lead to civil and criminal liability, loss of licensing, damage to our reputation in the industry, fines and penalties and litigation, including class action lawsuits, or administrative enforcement actions. Any of these outcomes would have a material adverse effect on our operating results and may make it more difficult for us to originate additional mortgage servicing rights in the future.
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Our and our subservicers' servicing policies and procedures are subject to examination by our regulators, and the results of these examinations may be detrimental to our business.
As a loan servicer, we are examined for compliance with U.S. federal, state and local laws, rules and guidelines by numerous regulatory agencies. It is possible that any of these regulators will inquire about our servicing practices, policies or procedures, or those of our subservicers, and require us or our subservicers to revise them in the future. The occurrence of one or more of the foregoing events or a determination by any court or regulatory agency that our or our subservicers' servicing policies and procedures do not comply with applicable law could lead to downgrades by one or more rating agencies, a transfer of our servicing responsibilities, increased delinquencies on mortgage loans we service or any combination of these events. Such a determination could also require us to modify our servicing standards.
Regulatory changes that do not directly impact us may impact our competitors or potential competitors.
There are many financial services laws and regulations that do not apply to us directly, but which may impact our actual or potential competitors, particularly banks. Banking regulations, for example, currently serve to limit the amount of MSRs that banks may hold as a percentage of their assets overall. Changes in those regulations could cause an increase or decrease in the interest that banks have for MSR assets, resulting in changes to both their competitiveness in the areas of the mortgage industry that we operate in and the market value of MSRs overall. Significant regulatory changes that allow our competitors to compete more aggressively could potentially have a material adverse effect on our business, financial condition and results of operations.
Unlike competitors that are state or federally chartered banks, we are subject to certain licensing and operational requirements of states and other jurisdictions that result in substantial compliance costs, and our business would be adversely affected if we lose our licenses.
Because we are not a state or federally chartered depository institution, we do not benefit from exemptions from state mortgage lending, loan servicing or debt collection licensing and regulatory requirements. We must comply with state licensing requirements and varying compliance requirements in all states in which we operate and the District of Columbia, and regulatory changes may increase our costs through stricter licensing laws, disclosure laws or increased fees or may impose conditions to licensing that we or our personnel are unable to meet.
In most states in which we operate, a regulatory agency or agencies regulate and enforce laws relating to mortgage servicers and mortgage originators. Future state legislation and changes in existing regulation may significantly increase our compliance costs or reduce the amount of ancillary income we are entitled to collect from borrowers or otherwise. This could make our business cost-prohibitive in the affected state or states and could materially affect our business, financial condition and results of operations.
Our or our subservicers' inability to meet certain net worth and liquidity requirements imposed by the Agencies could have a material adverse effect on our business, financial condition and results of operation.
We and our subservicers are subject to minimum financial eligibility requirements for Agency mortgage sellers and servicers and MBS issuers, as applicable. These eligibility requirements set forth the current minimum financial requirements for mortgage sellers and servicers and MBS issuers to do business with the Agencies. These minimum financial requirements, which are described under "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources," include net worth, capital ratio and liquidity criteria that set a minimum level of capital needed to adequately absorb potential losses and a minimum amount of liquidity needed to service Agency mortgage loans and MBS and cover the associated financial obligations and risks. The financial and other terms and conditions of Agency approvals are subject to change. For example, we
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expect Ginnie Mae to raise its counterparty risk management standards as it noted in its recently released publication titled, "Ginnie Mae 2020: Roadmap for Sustaining Low-Cost Home Ownership." As described above, we and our subservicers could also become subject to new prudential standards recently proposed by the Conference of State Bank Supervisors.
In order to meet these minimum financial requirements, we and our subservicers are required to maintain cash and cash equivalents in amounts that may adversely affect our or their business, financial condition, liquidity and results of operations, and this could significantly impede us and our subservicers, as non-bank mortgage lenders, from growing our respective businesses and place us at a competitive disadvantage in relation to banks and certain other financial institutions. To the extent that such minimum financial requirements are not met, the Agencies may suspend or terminate Agency approval or certain agreements with us or our subservicers, which could cause us or our subservicers to default under our financing arrangements and/or have a material adverse effect on our business, financial condition, liquidity and results of operations. If the states adopt a comprehensive prudential safety and soundness regulatory regime, this could also have a material adverse impact on our business and results of operations.
Mortgage loan modification and refinance programs, future legislative action, and other actions and changes may materially and adversely affect the value of, and the returns on, the assets in which we invest.
The U.S. government, primarily through the Agencies, has established loan modification and refinance programs designed to provide homeowners with assistance in avoiding residential mortgage loan foreclosures. We can provide no assurance that we will be eligible to use any government programs or, if eligible, that we will be able to utilize them successfully. These programs, future U.S. federal, state or local legislative or regulatory actions that result in the modification of outstanding mortgage loans, as well as changes in the requirements necessary to qualify for modifications or refinancing mortgage loans with the GSEs or Ginnie Mae, may adversely affect the value of, and the returns on MSRs, residential mortgage loans, residential MBS, real estate-related securities and various other asset classes in which we invest, all of which could require us to repurchase loans, generally, and specifically from Ginnie Mae and the GSEs, which may result in a material adverse effect on our business and liquidity.
Private legal proceedings alleging failures to comply with applicable laws or regulatory requirements, and related costs, could adversely affect our financial condition and results of operations.
We are subject to various pending private legal proceedings challenging, among other things, whether certain of our loan origination and servicing practices and other aspects of our business comply with applicable laws and regulatory requirements. The outcome of any legal matter is never certain. In the future, we are likely to become subject to other private legal proceedings alleging failures to comply with applicable laws and regulations, including putative class actions, in the ordinary course of our business.
With respect to legal actions for impending or expected foreclosures, we may incur costs if we are required to, or if we elect to, execute or re-file documents or take other actions in our capacity as a servicer. We may incur increased litigation costs if the validity of a foreclosure action is challenged by a borrower or a class of borrowers. In addition, if a court rules that the lien of a homeowners association takes priority over the lien we service, we may incur legal liabilities and costs to defend such actions. If a court dismisses or overturns a foreclosure because of errors or deficiencies in the foreclosure process, we may have liability in our capacity as seller, servicer or otherwise to the loan owner, a borrower, title insurer or the purchaser of the property sold in foreclosure. These costs and liabilities may not be legally or otherwise reimbursable to us, particularly to the extent they relate to securitized mortgage loans or loans that we sell to the GSEs or other third parties. A significant increase in litigation costs and losses occurring from lawsuits could trigger a default or cross-defaults under our financing arrangements, which could have a material adverse effect on our liquidity, business, financial condition and results of operations.
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Residential mortgage foreclosure proceedings in certain states have been delayed due to lack of judicial resources and legislation.
Several states, including California and Nevada, have enacted Homeowner's Bill of Rights legislation to establish mandatory loss mitigation practices for homeowners which cause delays in foreclosure proceedings. It is possible that additional states could enact similar laws in the future. Delays in foreclosure proceedings could require us to delay the recovery of advances, which could materially affect our business, results of operations and liquidity and increase our need for capital.
When a mortgage loan we service is in foreclosure, we are generally required to continue to advance delinquent principal and interest to the securitization trust and to make advances for delinquent taxes and insurance and foreclosure costs and the upkeep of vacant property in foreclosure to the extent that we determine that such amounts are recoverable. These servicing advances are generally recovered when the delinquency is resolved. Regulatory actions that lengthen the foreclosure process will increase the amount of servicing advances that we are required to make, lengthen the time it takes for us to be reimbursed for such advances and increase the costs incurred during the foreclosure process.
The CARES Act temporarily paused all foreclosures, and the Agencies have further extended the pause on foreclosures. Many state governors also issued orders, directives, guidance or recommendations halting foreclosure activity including evictions. These measures will increase our operating costs, extend the time we advance for delinquent taxes and insurance and could delay our ability to seek reimbursement from the investor to recoup some or all of the advances. We cannot predict when or on what terms and conditions these measures will be lifted, which will depend on future legislative and regulatory developments in response to the COVID-19 pandemic.
Increased regulatory scrutiny and new laws and procedures could cause us to adopt additional compliance measures and incur additional compliance costs in connection with our foreclosure processes. We may incur legal and other costs responding to regulatory inquiries or any allegation that we improperly foreclosed on a borrower. We could also suffer reputational damage and could be fined or otherwise penalized if we are found to have breached regulatory requirements.
Regulatory agencies and consumer advocacy groups are becoming more aggressive in asserting claims that the practices of lenders and loan servicers result in a disparate impact on protected classes.
Antidiscrimination statutes, such as the Fair Housing Act and the Equal Credit Opportunity Act, prohibit creditors from discriminating against loan applicants and borrowers based on certain characteristics, such as race, sex, religion and national origin. The Fair Housing Act also expressly prohibits discrimination with respect to the purchase of mortgage loans. Various federal regulatory agencies and departments, including the U.S. Department of Justice and CFPB, take the position that these laws apply not only to intentional discrimination, but also to neutral practices that have a disparate impact on a group that shares a characteristic that a creditor may not consider in making credit decisions (i.e., creditor or servicing practices that have a disproportionate negative affect on a protected class of individuals).
These regulatory agencies, as well as consumer advocacy groups and plaintiffs' attorneys, are focusing greater attention on "disparate impact" claims. The U.S. Supreme Court recently confirmed that the "disparate impact" theory applies to cases brought under the FHA, while emphasizing that a causal relationship must be shown between a specific policy of the defendant and a discriminatory result that is not justified by a legitimate objective of the defendant. Although it is still unclear whether the theory applies under the Equal Credit Opportunity Act, regulatory agencies and private plaintiffs can be expected to continue to apply it to both the Fair Housing Act and the Equal Credit Opportunity Act in the context of home loan lending and servicing. To extent that the "disparate impact" theory
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continues to apply, we may be faced with significant administrative burdens in attempting to comply and potential liability for failures to comply.
Furthermore, many industry observers believe that the "ability to repay" rule issued by the CFPB, discussed above may have the unintended consequence of having a disparate impact on protected classes. Specifically, it is possible that lenders that make only qualified mortgages may be exposed to discrimination claims under a disparate impact theory.
In addition to reputational harm, violations of the Equal Credit Opportunity Act and the Fair Housing Act can result in actual damages, punitive damages, injunctive or equitable relief, attorneys' fees and civil money penalties.
Challenges to the MERS System could materially and adversely affect our business, results of operations and financial condition.
MERSCORP Holdings, Inc. is a wholly-owned subsidiary of Intercontinental Exchange, Inc. that maintains an electronic registry, referred to as the MERS System, which tracks servicing rights and ownership of home loans in the United States. Mortgage Electronic Registration Systems, Inc. ("MERS"), a wholly-owned subsidiary of MERSCORP Holdings, Inc., can serve as a nominee for the owner of a home loan and in that role initiate foreclosures or become the mortgagee of record for the loan in local land records. We have in the past and may continue to use MERS as a nominee. The MERS System is widely used by participants in the mortgage finance industry.
Several legal challenges in the courts and by governmental authorities have been made disputing MERS's legal standing to initiate foreclosures or act as nominee for lenders in mortgages and deeds of trust recorded in local land records. These challenges have focused public attention on MERS and on how home loans are recorded in local land records. Although most legal decisions have accepted MERS as mortgagee, these challenges could result in delays and additional costs in commencing, prosecuting and completing foreclosure proceedings, conducting foreclosure sales of mortgaged properties and submitting proofs of claim in consumer bankruptcy cases.
Risks Related to Our Mortgage Assets
Our acquisition of mortgage servicing rights exposes us to significant risks.
MSRs arise from contractual agreements between us and the investors (or their agents) in mortgage securities and mortgage loans that we service on their behalf. We generally create MSRs in connection with our sale of mortgage loans to the Agencies or others where we assume the obligation to service such loans on their behalf. We may also purchase MSRs from third-party sellers. All MSR capitalizations are recorded at fair value on our balance sheet. The determination of the fair value of MSRs requires our management to make numerous estimates and assumptions. Such estimates and assumptions include, without limitation, estimates of future cash flows associated with MSRs based upon assumptions involving interest rates as well as the prepayment rates, delinquencies and foreclosure rates of the underlying serviced mortgage loans. The ultimate realization of future cash flows from the MSRs may be materially different than the values of such MSRs as may be reflected in our consolidated balance sheet as of any particular date. The use of different estimates or assumptions in connection with the valuation of these assets could produce materially different fair values for such assets, which could have a material adverse effect on our business, financial condition, results of operations and cash flows. Accordingly, there may be material uncertainty about the fair value of any MSRs we acquire or hold.
Prepayment speeds significantly affect MSRs. Prepayment speed is the measurement of how quickly borrowers pay down the unpaid principal balance of their loans or how quickly loans are otherwise brought current, modified, liquidated or charged off. We base the value of MSRs on, among
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other things, our projection of the cash flows from the related mortgage loans. Our expectation of prepayment speeds is a significant assumption underlying those cash flow projections. If prepayment speed expectations increase significantly, the fair value of the MSRs could decline and we may be required to record a non-cash charge, which would have a negative impact on our financial results. Furthermore, a significant increase in prepayment speeds could materially reduce the ultimate cash flows we receive from MSRs, and we could ultimately receive substantially less than what we estimated when initially capitalizing such assets.
Moreover, delinquency rates also have a significant impact on the valuation of any MSRs. An increase in delinquencies generally results in lower revenue because typically we only collect servicing fees from Agencies or mortgage owners for performing loans. Our expectation of delinquencies is also a significant assumption underlying our cash flow projections. If delinquencies are significantly greater than we expect, the estimated fair value of the MSRs could be diminished. Increased delinquencies also typically translate into increased defaults and liquidations, and as an MSR owner we are also responsible for certain expenses and losses associated with the loans we service, particularly on loans sold to Ginnie Mae. A reduction in the fair value of the MSR or an increase in defaults and liquidations would adversely impact our business, financial condition, liquidity and results of operations.
Changes in interest rates are a key driver of the performance of MSRs. Historically, the fair value of MSRs has increased when interest rates rise and decreased when interest rates decline due to the effect those changes in interest rates have on prepayment estimates. We may pursue various hedging strategies to seek to reduce our exposure to adverse changes in fair value resulting from changes in interest rates. Our hedging activity will vary in scope based on the level and volatility of interest rates, the type of assets held and other changing market conditions. Interest rate hedging may fail to protect or could adversely affect us. To the extent we do not utilize derivative financial instruments to fully hedge against changes in fair value of MSRs or the derivatives we use in our hedging activities do not perform as expected, our business, financial condition, liquidity and results of operations would be more susceptible to volatility due to changes in the fair value of, or cash flows from, MSRs as interest rates change.
Furthermore, MSRs and the related servicing activities are subject to numerous federal, state and local laws and regulations and may be subject to various judicial and administrative decisions imposing various requirements and restrictions on our business. Our failure to comply, or the failure of our subservicer to comply, with the laws, rules or regulations to which we or they are subject by virtue of ownership of MSRs, whether actual or alleged, could expose us to fines, penalties or potential litigation liabilities, including costs, settlements and judgments, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations.
Our counterparties may terminate our servicing rights and subservicing contracts under which we conduct servicing activities.
The majority of the mortgage loans we service are serviced on behalf of the GSEs and Ginnie Mae. These entities establish the base service fee to compensate us for servicing loans as well as the assessment of fines and penalties that may be imposed upon us for failing to meet servicing standards.
As is standard in the industry, under the terms of our master servicing agreements with the GSEs, the GSEs have the right to terminate us as servicer of the loans we service on their behalf at any time and also have the right to cause us to sell the MSRs to a third party. In addition, failure to comply with servicing standards could result in termination of our agreements with the GSEs with little or no notice and without any compensation. If any of Fannie Mae, Freddie Mac or Ginnie Mae were to terminate us as a servicer, or increase our costs related to such servicing by way of additional fees, fines or penalties, such changes could have a material adverse effect on the revenue we derive from servicing activity, as well as the value of the related MSRs. These agreements, and other servicing agreements
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under which we service mortgage loans for non-GSE loan purchasers, also require that we service in accordance with GSE servicing guidelines and contain financial covenants. Under our subservicing contracts, the primary servicers for which we conduct subservicing activities have the right to terminate our subservicing rights with or without cause, with little notice and little to no compensation. If we were to have our servicing or subservicing rights terminated on a material portion of our servicing portfolio, this could adversely affect our business.
We may not be capable of adequately recapturing our MSR assets when borrowers refinance or obtain a new loan upon payoff.
We are not yet mature in our process of soliciting and serving borrowers in our servicing portfolio who are or may be obtaining a new loan, and there can be no assurance that we will effectively and efficiently protect our MSR assets from runoff now or in the future. We currently do not operate our Consumer Direct channel in all states for which we have loans in our MSR portfolio. We cannot guarantee that we will be successful in our efforts to obtain or maintain the required licenses and to effectively implement the operational infrastructure necessary to expand such operations in each relevant state. We do not currently originate purchase money loans at any significant scale in our Consumer Direct channel to the existing borrowers in our MSR portfolio or to other customers, nor do we offer in our Consumer Direct channel all of the loan programs that we purchase from other lenders in our Correspondent channel. Our failure to operate a mature retail lending operation with a full product menu and geographic footprint limits our ability to retain our existing customers and capitalize new MSRs of an attractive level, which results in increased costs to originate new loans in our portfolio. Our lack of capabilities related to recapturing our existing loans that are refinanced may adversely impact our business, financial condition, liquidity, and results of operations.
The failure of our subservicers to effectively service our portfolio of MSRs and mortgage loans would materially and adversely affect us.
We have contracted with Cenlar to provide us with mortgage loan servicing for approximately 99% of our portfolio of MSRs and mortgage loans. Such loan servicing activities include collecting principal, interest and escrow account payments, if any, with respect to mortgage loans, as well as managing loss mitigation, which may include, among other things, collection activities, loan workouts, modifications, foreclosures and short sales. The ability of our subservicers, especially Cenlar, to effectively service our portfolio of mortgage loans is critical to our success, particularly given our strategy in MSRs, the requirement to execute initiatives and programs focused on keeping borrowers in their homes; or in the case of nonperforming loans, effecting property liquidations in a timely, orderly and economically efficient manner. There are a number of factors out of our control that can negatively impact our subservicers' ability to effectively service our portfolio and to satisfy their contractual obligations to us. These include both intentional actions the subservicers take in running their businesses such as management of staffing levels and the number of customers serviced, and the occurrence of external events including but not limited to regulatory changes, enforcement actions, and natural disasters that may negatively impact the performance of our subservicers. The failure of our subservicers to effectively service our portfolio of MSRs and mortgage loans could result in ineligibility to sell loans to the Agencies, issue Agency MBS, and defaults and cross-defaults under our financing arrangements, all of which would adversely impact our business, financial condition, liquidity and results of operations.
A significant increase in delinquencies for the loans we service could have a material impact on our revenues, expenses and liquidity and on the valuation of our MSRs.
An increase in delinquencies will result in lower revenue for loans we service for the GSEs and Ginnie Mae because we only collect servicing fees from the GSEs and Ginnie Mae from payments made on the mortgage loans. Additionally, while increased delinquencies generate higher ancillary
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revenues, including late fees, these fees may not be collected until the related loan reinstates or in the event that the related loan is liquidated. In addition, an increase in delinquencies may result in certain other advances being made on behalf of delinquent loans, which may not be entirely reversible and would decrease the interest income we receive on cash held in collection and other accounts to the extent permitted under applicable requirements.
The costs of servicing portfolios of delinquent mortgage loans have been rising in recent years without a corresponding increase in servicing compensation. Executive initiatives such as the Home Affordable Modification Program (the "HAMP"), which is a part of the U.S. government's broader Home Affordability and Stability Plan, encourages loan modifications for borrowers under loans that are either already in default or are at risk of imminent default. The HAMP requires participating servicers to evaluate on a loan-by-loan basis whether a modification, the terms of which are established to achieve a desired debt-to-income ratio, would yield greater expected cash flow (using net present value analysis) than if the mortgage loan was permitted to be foreclosed upon. The deadline for new applications under HAMP was December 30, 2016. This program, as well as existing or future proposed legislation and/or governmental intervention designed to protect consumers, may have an adverse impact on servicers, by increasing costs and expenses of servicers while at the same time decreasing servicing cash flows adversely affecting collateral value. An increase in delinquencies will result in a higher cost to service due to the increased time and effort required by our subservicers to collect payments from delinquent borrowers, to protect against property foreclosures and an increase in interest expense as a result of an increase in our advancing obligations.
We base the price we pay for MSRs on, among other things, our projections of the cash flows from the related mortgage loans. Our expectation of delinquencies is a significant assumption underlying those cash flow projections. If delinquencies were significantly greater than expected, the estimated fair value of our MSRs could be diminished. If the estimated fair value of MSRs is reduced, we may not be able to satisfy minimum net worth covenants and borrowing conditions in our debt agreements and we could suffer a loss, which could trigger a default and cross-defaults under our other financing arrangements and trading agreements (impacting our ability to enter into hedging transactions) and the possible loss of our eligibility to sell loans to the Agencies or issue Agency MBS, all of which would likely have a material adverse effect on our business, financial condition and results of operations.
We are also subject to risks of borrower defaults and bankruptcies in cases where we might be required to repurchase loans sold with recourse or under representations and warranties. A borrower filing for bankruptcy during foreclosure would have the effect of staying the foreclosure and thereby delaying the foreclosure process, which may potentially result in a reduction or discharge of a borrower's mortgage debt. Even if we are successful in foreclosing on a loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us. For example, foreclosure may create a negative public perception of the related mortgaged property, resulting in a diminution of its value. Furthermore, any costs or delays involved in the foreclosure of the loan or a liquidation of the underlying property will further reduce the net proceeds and, thus, increase the loss. If these risks materialize, they could have a material adverse effect on our business, financial condition and results of operations. In addition, in the event of a default under any mortgage loan we have not sold, we will bear the risk of loss of principal to the extent of any deficiency between the value of the collateral and the principal and of the mortgage loan.
Our inability to promptly foreclose upon defaulted mortgage loans could increase our cost of doing business and/or diminish our expected cash flows.
Our ability to promptly foreclose upon defaulted mortgage loans and liquidate the underlying real property plays a critical role in our valuation of the assets which we acquire and our expected cash flows on such assets. There are a variety of factors that may inhibit our ability to foreclose upon a
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mortgage loan and liquidate the real property within the time frames we model as part of our valuation process or within the statutes of limitation under applicable state law. These factors include, without limitation: extended foreclosure timelines in states that require judicial foreclosure, including states where we hold high concentrations of mortgage loans, significant collateral documentation deficiencies, federal, state or local laws that are borrower friendly, including legislative action or initiatives designed to provide homeowners with assistance in avoiding residential mortgage loan foreclosures and that serve to delay the foreclosure process, HAMP and similar programs that may require specific procedures to be followed to explore the refinancing of a mortgage loan prior to the commencement of a foreclosure proceeding and declines in real estate values and sustained high levels of unemployment that increase the number of foreclosures and place additional pressure on the judicial and administrative systems.
A decline in the fair value of the real estate that we acquire, or that underlies the mortgage loans we own or service may result in reduced risk-adjusted returns or losses.
A substantial portion of our assets are measured at fair value. The fair value of the real estate that we own or that underlies mortgage loans that we own or service is subject to market conditions and requires the use of assumptions and complex analyses. Changes in the real estate market may adversely affect the fair value of the collateral and thereby lower the cash to be received from its liquidation. Depending on the investor and/or insurer or guarantor, we may suffer financial losses that increase when we or they receive less cash upon liquidation of the collateral for defaulted loans that we service. The same would apply to loans that we own. In addition, adverse changes in the real estate market increase the probability of default of the loans we own or service.
We are subject to certain risks associated with investing in real estate and real estate related assets, including risks of loss from adverse weather conditions and man-made or natural disasters, which may cause disruptions in our operations.
Weather conditions and man-made or natural disasters such as hurricanes, tornadoes, earthquakes, floods, droughts, fires and other environmental conditions can damage properties that we own or that collateralize loans we own or service. In addition, the properties where we conduct business could be adversely impacted. Future adverse weather conditions including "global warming" and man-made or natural disasters could also adversely impact the demand for, and value of, our assets, as well as the cost to service or manage such assets which includes the availability of our staff and employees, directly impact the value of our assets through damage, destruction or loss, and thereafter materially impact the availability or cost of insurance to protect against these events. Although we believe our properties collateralizing our assets or underlying our MSR assets are adequately covered by insurance in accordance with industry standards, we cannot predict at this time if we or our borrowers, and particularly borrowers located on the coasts, will be able to obtain appropriate coverage at a reasonable cost in the future. In addition, there is a risk that one or more of the insurers of property on which we held an interest may not be able to fulfill their obligations with respect to claims payments due to deterioration in its financial condition.
Certain types of losses, generally of a catastrophic nature, that result from events described above such as earthquakes, floods, hurricanes, tornados, terrorism or acts of war may also be uninsurable, not economically insurable or not required to be insured by borrowers or lenders based on industry standards. Inflation, changes in building codes and ordinances, environmental considerations and other factors, including terrorism or acts of war, also might make the insurance proceeds insufficient to repair or replace a property if it is damaged or destroyed. Under these circumstances, the insurance proceeds received might not be adequate to restore our economic position with respect to the affected real property. In addition, depending on the mortgage loan investor and the mortgage insurer or guarantor, we as servicer may be responsible for repairing uninsured damage to properties or incurring losses in
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connection with the loss in value of such damaged properties even when we do not own the loan we are servicing. For example, for loans insured by the FHA that go into default, we are responsible for delivering the underlying property in marketable condition to the FHA prior to obtaining proceeds from FHA insurance, regardless of whether or not any property damage is covered by property and casualty insurance. For properties where damage is not covered by property and casualty insurance, the requirement to either repair properties at our own expense or to forego FHA insurance proceeds may represent a significant financial obligation for us, especially in the event of a widespread natural disaster. FHA insurance does not cover significant property damage, regardless of the reason of the damage occurrence and whether or not the damage is covered by other insurance.
The aforementioned risk of property loss and the failure to recoup such losses through our insurance policies could have a material adverse effect on our business, financial condition and results of operations.
We may be adversely affected by concentration risks of various kinds that apply to our mortgage or MSR assets at any given time, as well as from unfavorable changes in the related geographic regions containing the properties that secure such assets.
Our mortgage and MSR assets are not subject to any geographic, diversification or concentration limitations except that we will be concentrated in mortgage-related assets. Accordingly, our mortgage and MSR assets may be concentrated by geography, investor, originator, insurer, loan program, property type and/or borrower, increasing the risk of loss to us if the particular concentration in our portfolio is subject to greater risks or is undergoing adverse developments. As of June 30, 2020, approximately 15.1% and 11.5% of our mortgage and MSR assets had underlying properties in Texas and California, respectively. We may be disproportionately affected by general risks such as natural disasters, including major hurricanes, tornadoes, wildfires, floods and earthquakes, severe or inclement weather and acts of terrorism should such developments occur in or near the markets in California or Texas in which such properties are located. In addition, adverse conditions in the areas where the properties securing or otherwise underlying our mortgage and MSR assets are located such as Texas, California and Florida (including business layoffs or downsizing, industry slowdowns, changing demographics, natural disasters and other factors) and local real estate conditions (such as oversupply or reduced demand) may have an adverse effect on the value of those assets. A material decline in the demand for real estate in these areas, regardless of the underlying cause, may materially and adversely affect us. Concentration or a lack of diversification can increase the correlation of non-performance and foreclosure risks among subsets of our mortgage and MSR assets, which could have a material adverse effect on our business, financial condition and results of operations.
Many of our mortgage assets may be illiquid and we may not be able to adjust our portfolio in response to changes in economic and other conditions.
Our MSRs, securities and mortgage loans that we acquire may be or become illiquid. It may also be difficult or impossible to obtain or validate third-party pricing on the assets that we purchase. Illiquid investments typically experience greater price volatility, as a ready market does not exist, or may cease to exist and such investments can be more difficult to value. Contractual restrictions on transfer or the illiquidity of our assets may make it difficult for us to sell such assets if the need or desire arises, which could impair our ability to satisfy margin calls or access capital for other purposes when needed. In addition, if we are required to liquidate all or a portion of our portfolio quickly, we may realize significantly less than the recorded value, or may not be able to obtain any liquidation proceeds at all, thus exposing us to a material or total loss.
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Fair values of our MSRs are estimates and the realization of reduced values from our recorded estimates may materially and adversely affect our financial results and credit availability.
The fair values of our MSRs are not readily determinable and the fair value at which our MSRs are recorded may differ from the values we ultimately realize. Ultimate realization of the fair value of our MSRs depends to a great extent on economic and other conditions that change during the time period over which it is held and are beyond our control. Further, fair value is only an estimate based on good faith judgment of the price at which an asset can be sold since transacted prices of MSRs can only be determined by negotiation between a willing buyer and seller. In certain cases, our estimation of the fair value of our MSRs includes inputs provided by third-party dealers and pricing services, and valuations of certain securities or other assets in which we invest are often difficult to obtain and are subject to judgments that may vary among market participants. Changes in the estimated fair values of those assets are directly charged or credited to earnings for the period. If we were to liquidate a particular asset, the realized value may be more than or less than the amount at which such asset was recorded. Accordingly, in either event, our financial condition could be materially and adversely affected by our determinations regarding the fair value of our MSRs, and such valuations may fluctuate over short periods of time.
We utilize analytical models and data in connection with the valuation of our assets, and any incorrect, misleading or incomplete information used in connection therewith would subject us to potential risks.
We rely heavily on models and data to value our assets, including analytical models (both proprietary models developed by us and those supplied by third parties) and information and data supplied by third parties, including Cenlar. Models and data are also used in connection with our potential acquisition of assets and the hedging of those acquisitions. Models are inherently imperfect predictors of actual results because they are based on historical data available to us and our assumptions about factors such as future mortgage loan demand, default rates, severity rates, home price trends and other factors that may overstate or understate future experience. Our models could produce unreliable results for a number of reasons, including the limitations of historical data to predict results due to unprecedented events or circumstances, invalid or incorrect assumptions underlying the models, the need for manual adjustments in response to rapid changes in economic conditions, incorrect coding of the models, incorrect data being used by the models or inappropriate application of a model to products or events outside of the model's intended use. In particular, models are less dependable when the economic environment is outside of historical experience.
In the event models and data prove to be incorrect, misleading or incomplete, any decisions made in reliance thereon expose us to potential risks. For example, by relying on incorrect models and data, especially valuation models, we may be induced to buy certain assets at prices that are too high, to sell certain other assets at prices that are too low or to miss favorable opportunities altogether. Similarly, any hedging based on faulty models and data may prove to be unsuccessful.
Liability relating to environmental matters may impact the fair value of properties that we may acquire or the properties underlying our assets.
Under various U.S. federal, state and local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances released on its property. These laws often impose liability without regard to whether the owner or operator was responsible for, or aware of, the release of such hazardous substances. The presence of hazardous substances may also adversely affect an owner's ability to sell real estate, borrow using the real estate as collateral or make debt payments to us. In addition, if we take title to a property, the presence of hazardous substances may adversely affect our ability to sell the property, and we may become liable to a governmental entity or to third parties for various fines, damages or remediation costs. Any of these liabilities or events
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may materially and adversely affect the fair value of the relevant asset and/or our business, financial condition, liquidity and results of operations.
We depend on the accuracy and completeness of information from and about borrowers, mortgage loans and the properties securing them, and any misrepresented information could adversely affect our business, financial condition and results of operations.
In connection with our correspondent and consumer direct activities, we may rely on information furnished by or on behalf of borrowers and/or our business counterparties including correspondent sellers. We also may rely on representations of borrowers and business counterparties as to the accuracy and completeness of that information, and upon the information and work product produced by appraisers, credit repositories, depository institutions and others, as well as the output of automated underwriting systems created by the GSEs and others. If any of this information or work product is intentionally or negligently misrepresented in connection with a mortgage loan and such misrepresentation is not detected prior to loan funding, the fair value of the loan may be significantly lower than expected. Our controls and processes may not have detected or may not detect all misrepresented information in our loan originations or acquisitions, or from our business counterparties. Any such misrepresented information could materially and adversely affect our business, financial condition and results of operations.
Our subservicers have limited liability and indemnity rights.
Our agreements with our subservicers, including Cenlar, provide that our subservicers will not assume any responsibility other than to provide the services specified in the applicable agreements. In addition, our subservicers will be, subject to certain exceptions, held harmless from, and indemnified by us against, certain liabilities on customary terms. As a result, to the extent we are damaged through certain actions or inactions of our subservicers, our recourse is limited and we may not be able to recover our losses in full or at all.
General Risk Factors
We will incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, we will incur significant legal, accounting, administrative and other costs and expenses that we have not previously incurred or have experience with as a private company. We will be subject to the reporting requirements of the Exchange Act which will require, among other things, that we file with the SEC annual, quarterly and current reports with respect to our business and financial condition. In addition, the Sarbanes-Oxley Act of 2002 (the "Sarbanes-Oxley Act") and rules subsequently implemented by the SEC and the NYSE impose numerous requirements on public companies, including establishment and maintenance of effective disclosure controls and procedures and internal control over financial reporting and corporate governance practices. Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted additional rules and regulations in these areas, such as mandatory "say on pay" voting requirements that will apply to us when we cease to be an emerging growth company. Shareholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and may impact the manner in which we operate our business in ways we cannot currently anticipate. Our management and other personnel will need to devote a substantial amount of time to compliance with these laws and regulations. These requirements have increased and will continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer
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liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers.
The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. We cannot predict or estimate the amount or timing of additional costs we may incur to respond to these requirements and appropriately training our employees and management. However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
We are an "emerging growth company," and the reduced disclosure requirements applicable to such companies could make our Class A common stock less attractive to investors.
We are an "emerging growth company," as defined in the JOBS Act enacted in April 2012, and may remain an "emerging growth company" until the last day of the year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenues equals or exceeds an amount specified by regulation (currently $1.07 billion) or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period. For as long as we remain an "emerging growth company," we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not "emerging growth companies." These exemptions include:
We have taken advantage of reduced reporting burdens in this prospectus. In particular, in this prospectus, we have provided only two years of audited financial statements of our predecessor and have not included all of the executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our Class A common stock less attractive if we rely on these exemptions. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards, delaying the adoption of these accounting standards until they would apply to private companies. We have elected to take advantage of this extended transition period and therefore will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We cannot predict if investors will find our Class A common stock less attractive because we may rely on these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.
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We will be a controlled company within the meaning of the NYSE rules and, as a result, will qualify for and will rely on exemptions from certain corporate governance requirements.
After the completion of this offering, our controlling stockholder will continue to control a majority of the voting power of our outstanding shares. As a result, we will be a controlled company within the meaning of the corporate governance standards of the NYSE. Under the NYSE rules, a controlled company may elect not to comply with certain corporate governance requirements of the NYSE, including the requirements that:
Following this offering, we intend to utilize these exemptions, including the exemption for a board of directors composed of a majority of independent directors. In addition, although we have adopted charters for our compensation committee and nominating and corporate governance committee and intend to conduct annual performance evaluations for these committees, neither of these committees will be composed entirely of independent directors immediately following the completion of this offering. The phase-in rules of the SEC and the NYSE with respect to the audit committee permit us to have an audit committee that has a majority of members that are independent within 90 days thereafter and all members that are independent within one year thereafter. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the .
We will be controlled by A-A Mortgage, an entity controlled by Apollo, whose interests may conflict with our interests and the interests of other stockholders.
After giving effect to the Transactions, A-A Mortgage, an entity controlled by Apollo, will hold % of our issued and outstanding Class B common stock after this offering and will represent approximately % of the combined voting power of our outstanding common stock after this offering (or approximately % if the underwriters exercise in full their option to purchase additional shares of Class A common stock). Upon consummation of this offering, on all matters submitted to a vote of our stockholders, our Class B common stock entitles its owners to ten votes per share, and our Class A common stock, which is the stock we are offering in this offering, entitles its owners to one vote per share. As a result, A-A Mortgage will be able to control any action requiring the general approval of our stockholders, including the election of our board of directors, the adoption of amendments to our certificate of incorporation and bylaws and the approval of any merger or sale of substantially all of our assets. So long as A-A Mortgage continues to directly or indirectly own a significant amount of our equity, even if such amount is less than a majority of the combined voting power of our common stock, A-A Mortgage will continue to be able to substantially influence the outcome of votes on all matters requiring approval by the stockholders, including our ability to enter into certain corporate transactions. The interests of A-A Mortgage could conflict with or differ from our interests or the interests of our other stockholders. For example, the concentration of ownership held by A-A Mortgage could delay, defer or prevent a change of control of our Company or impede a merger, takeover or other business combination that may otherwise be favorable for us.
In addition, because A-A Mortgage holds an interest in our business directly through Aris Holding, rather than through AmeriHome, Inc., A-A Mortgage may have conflicting interests with holders of
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shares of our Class A common stock. For example, A-A Mortgage may have different tax positions from us which could influence their decisions regarding whether and when to dispose of assets, whether and when to incur new or refinance existing indebtedness, especially in light of the existence of the Tax Receivable Agreement that we will enter in connection with this offering, and whether and when AmeriHome, Inc. should terminate the Tax Receivable Agreement and accelerate its obligations thereunder. In addition, the structuring of future transactions may take into consideration A-A Mortgage's tax or other considerations even where no similar benefit would accrue to us. See "Certain Relationships and Related Party TransactionsTax Receivable Agreement."
Our directors may have conflicts of interest because of their ownership of equity interests of, and their employment with, Apollo and our affiliates.
Certain of our directors hold ownership interests in affiliates of Apollo and/or ownership in and employment positions with its affiliates. Such interests in affiliates of Apollo by our directors could create, or appear to create, potential conflicts of interest when our directors are faced with decisions that could have different implications for us and for Apollo or its affiliates. We cannot assure you that any conflicts of interest will be resolved in our favor. For a further description of our relationship with affiliates of Apollo, see "Certain Relationships and Related Party Transactions."
Our certificate of incorporation will contain a provision renouncing our interest and expectancy in certain corporate opportunities.
Under our certificate of incorporation, none of Athene, Apollo, their respective affiliated funds, the companies owned by such funds, any affiliates of Athene, Apollo or any of their respective officers, directors, principals, partners, members, managers, employees, agents or other representatives will have any duty to refrain from engaging, directly or indirectly, in the same business activities, similar business activities or lines of business in which we operate. In addition, our certificate of incorporation provides that, to the fullest extent permitted by law, no officer or director of ours who is also an officer, director, principal, partner, member, manager, employee, agent or other representative of Athene, Apollo or their respective affiliates will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such individual directs a corporate opportunity to Athene, Apollo or their respective affiliates and representatives, instead of us, or does not communicate information regarding a corporate opportunity to us that such individual has directed to Athene, Apollo or their respective affiliates and representatives. For instance, a director of our company who also serves as a director, officer or employee of Athene, Apollo or any of their portfolio companies, funds or other affiliates may pursue certain acquisitions or other opportunities that may be complementary to our business and, as a result, such acquisition or other opportunities may not be available to us. Upon consummation of this offering, our board of directors will consist of members, of whom will be employees of Apollo. These potential conflicts of interest could have a material and adverse effect on our business, financial condition, results of operations or prospects if attractive corporate opportunities are allocated by any of Athene, Apollo to itself or its affiliated funds, the portfolio companies owned by such funds or any of their affiliates instead of to us. A description of our obligations related to corporate opportunities under our certificate of incorporation are more fully described in "Description of Capital StockCorporate Opportunity."
No public market for our stock currently exists, and an active public trading market may not develop or be sustained following this offering.
Prior to this offering, there has been no public market or active private market for our stock. Although our stock has been approved for listing on the NYSE, an active trading market may not develop following the completion of this offering or, if developed, may not be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price
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that you consider reasonable. The lack of an active market may also reduce the market price of your shares. An inactive market may also impair our ability to raise capital by selling stock and may impair our ability to acquire other companies or technologies by using our stock as consideration.
The initial public offering price for our stock will be determined through negotiations among us and the underwriters, and may not bear any relationship to the market price at which our stock will trade after this offering or to any other established criteria of the value of our business. See "Underwriting (Conflict of Interest)." The price of our stock that will prevail in the market after this offering may be higher or lower than the price you pay, depending on many factors, many of which are beyond our control and may not be related to our operating performance.
The disparity in the voting rights among the classes of our common stock and inability of the holders of our Class A common stock to influence decisions submitted to a vote of our stockholders may have an adverse effect on the price of our Class A common stock.
Holders of our Class A common stock and Class B common stock will vote together as a single class on almost all matters submitted to a vote of our stockholders. Shares of our Class A common stock and Class B common stock entitle the respective holders to identical non-economic rights, except that each share of our Class A common stock will entitle its holder to one vote on all matters to be voted on by stockholders generally, while each share of our Class B common stock will entitle its holder to ten votes on all matters to be voted on by stockholders generally. Upon the date on which the shares of Class B common stock held by A-A Mortgage and its permitted transferees represent less than 10% of our outstanding shares of common stock, each share of Class B common stock will entitle its holder to one vote per share of Class B common stock. See "Organizational StructureVoting Rights of the Class A Common Stock and Class B Common Stock." We intend to enter into the Stockholders Agreement with A-A Mortgage. The Stockholders Agreement will give our controlling stockholder the right to nominate a majority of our directors after the consummation of this offering as long as our controlling stockholder beneficially owns % or more of the combined voting power of our outstanding common stock and shall specify how our controlling stockholder's nominations rights shall decrease as our controlling stockholder's beneficial ownership of our common stock also decreases. See "ManagementBoard Composition." The Stockholders Agreement sets forth certain information rights granted to A-A Mortgage. It also specifies that we will not take certain significant actions specified therein without the prior consent of A-A Mortgage. The difference in voting rights could adversely affect the value of our Class A common stock to the extent that investors view, or any potential future purchaser of our company views, the superior voting rights and implicit control of the Class B common stock to have value.
If we fail to maintain an effective system of internal controls, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired.
As a public company, we will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act, and the rules and regulations of the NYSE. We expect that the requirements of these rules and regulations will increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming and costly and place significant strain on our personnel, systems and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures over financial reporting. We are continuing to develop and refine our disclosure controls, internal control over financial reporting and other procedures that are designed to ensure that information required to be disclosed by us in the reports that we will file with the SEC is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers.
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Our current controls and any new controls we develop may become inadequate because of growth in our business. Further, weaknesses in our internal controls may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial statements for prior financial reporting periods. Any failure to implement and maintain effective internal controls also could adversely affect the results of periodic management evaluations and annual independent registered public accounting firm attestation reports regarding the effectiveness of our internal control over financial reporting that we will be required to include in our periodic reports we will file with the SEC under Section 404 of the Sarbanes-Oxley Act once we cease to be an emerging growth company. Ineffective disclosure controls and procedures and internal control over financial reporting could also cause investors to lose confidence in our reported financial and other information, which would likely have a negative effect on the market price of our stock.
We have expended and anticipate we will continue to expend significant resources, and we expect to provide significant management oversight, to maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting. Any failure to maintain the adequacy of our internal controls, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and could materially impair our ability to operate our business and negatively impact our share price. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NYSE.
We are not currently required to comply with the SEC rules that implement Sections 302 and 404 of the Sarbanes-Oxley Act, and we are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with certain of these rules, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. To comply with the requirements of being a public company, we will need to undertake various actions, such as implementing new internal controls and procedures. Our independent registered public accounting firm is not required to formally attest to the effectiveness of our internal control over financial reporting until after we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the market price of our stock.
The preparation of our financial statements in conformity with GAAP, as codified by the Financial Accounting Standards Board ("FASB"), requires management to make estimates and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as described in "Management's Discussion and Analysis of Financial Condition and Results of OperationsCritical Accounting Policies," the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to fair value measurements, loans held for sale, IRLCs, mortgage servicing rights and liability for losses under representations and warranties. If our assumptions change or if actual circumstances differ from those in our assumptions, our results of operations may be adversely affected and may fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our stock.
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Our stock price may be volatile, and you may not be able to resell our Class A common stock at or above the price you paid.
Our stock price may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including:
These and other factors, many of which are beyond our control, may cause our operating results and the market price and demand for our common stock to fluctuate substantially. While we believe that operating results for any particular quarter are not necessarily a meaningful indication of future results, fluctuations in our quarterly operating results may negatively affect the market price and liquidity of our stock. In addition, in the past, when the market price of a stock has been volatile,
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holders of that stock have sometimes instituted securities class action litigation against the company that issued the stock. If any of our stockholders brought a lawsuit against us, we could incur substantial costs defending the lawsuit. Such a lawsuit could also divert the time and attention of our management from our business, which could significantly harm our profitability and reputation.
In addition, the stock markets, and the market for growth stocks in particular, have from time to time experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may significantly affect the market price of our Class A common stock, regardless of our actual operating performance. You may not realize any return on your investment in us and may lose some or all of your investment.
Securities analysts may not publish favorable research or reports about our business or may publish no information at all, which could cause our stock price or trading volume to decline.
The trading market for our Class A common stock will be influenced to some extent by the research and reports that industry or financial analysts publish about us and our business. We do not control these analysts. As a newly public company, we may be slow to attract research coverage and the analysts who publish information about our Class A common stock may have had relatively little experience with our company, which could affect their ability to accurately forecast our results and could make it more likely that we fail to meet their estimates. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us provide inaccurate or unfavorable research or issue an adverse opinion regarding our stock price, our stock price could decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports covering us, we could lose visibility in the market, which in turn could cause our stock price or trading volume to decline.
Because our initial public offering price is substantially higher than the as adjusted net tangible book value per share of our outstanding Class A common stock, new investors will incur immediate and substantial dilution.
The initial public offering price is substantially higher than the as adjusted net tangible book value per share of Class A common stock based on our total tangible assets, which consist of our total assets, reduced by the amount of our total liabilities, goodwill and intangible assets immediately following this offering. Therefore, if you purchase shares of Class A common stock in this offering, you will experience immediate and substantial dilution of approximately $ per share in as adjusted net tangible book value, the difference between the price you pay for our Class A common stock and its as adjusted net tangible book value per share after completion of this offering. Please read "Dilution" for more information on this calculation. Furthermore, any issuance of shares in connection with acquisitions by us, the exercise of stock options or otherwise would dilute the percentage ownership held by the investors who purchase shares of our Class A common stock in this offering.
We do not anticipate paying any cash dividends in the foreseeable future, and accordingly, stockholders must rely on stock appreciation for any return on their investment.
We do not currently anticipate declaring any cash dividends to holders of our Class A common stock in the foreseeable future. Consequently, investors must rely on sales of their Class A common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not invest in our Class A common stock.
Anti-takeover provisions contained in our certificate of incorporation could impair a takeover attempt.
Certain provisions in our certificate of incorporation are intended to have the effect of delaying or preventing a change in control or changes in our management. For example, our certificate of incorporation includes provisions that establish an advance notice procedure for stockholder resolutions to be brought before an annual meeting of our stockholders, including proposed nominations of
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persons for election to our board of directors. These provisions could delay or prevent hostile takeovers and changes in control or changes in our management, even if these events would be beneficial for our stockholders. For further information regarding the anti-takeover provisions, please see the section entitled "Description of Capital Stock."
Future sales, or the perception of future sales, of our Class A common stock may depress the price of our Class A common stock. In addition, a significant portion of our Class A common stock is restricted from immediate resale but may be sold into the market in the near future. This could cause the market price of our Class A common stock to drop significantly, even if our business is doing well.
If we sell, or any of our stockholders sells, a large number of shares of our Class A common stock, or if we issue a large number of shares in connection with future acquisitions, financings or other circumstances, the market price of our Class A common stock could decline significantly. Moreover, the perception in the public market that we or our stockholders might sell shares of our Class A common stock could depress the market price of those shares.
We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances or sales of our shares will have on the market price of such shares. Sales of substantial amounts of our Class A common stock, including sales by significant stockholders, and shares issued in connection with any additional acquisition, may adversely affect prevailing market prices for our Class A common stock. Possible sales also may make it more difficult for us to sell equity or equity-related securities in the future at a time and price we deem necessary or appropriate. See "Shares Eligible for Future Sale."
After this offering, we will have shares of Class A common stock outstanding. We, all of our directors, executive officers, and certain of our stockholders have agreed to a 180-day lock-up period (subject to certain exceptions) provided under agreements executed in connection with this offering. Certain of our stockholders are selling Class A common shares in this offering outside of these lockup restrictions. See "Principal Stockholders." In addition, any two of the four representatives of the underwriters of this offering, in their sole discretion, may release all or some portion of the Class A common stock subject to lock-up agreements at any time and for any reason. We also intend to file a Form S-8 under the Securities Act of 1933, as amended (the "Securities Act"), to register all Class A common stock that we may issue under our equity compensation plans. Moreover, A-A Mortgage, our controlling stockholder, has certain demand registration rights that could require us to file registration statements in connection with sales of our Class A common stock by such stockholder. See "Certain Relationships and Related Party TransactionsRegistration Rights Agreement." Such sales by such stockholder could be significant. Once we register these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements described in the "Underwriting (Conflict of Interest)" section of this prospectus. As restrictions on resale end, the market price of our Class A common stock could decline if the holders of currently restricted shares sell them or are perceived by the market as intending to sell them or are released from the restrictions of the lock-up agreements prior to their expiration, which may make it more difficult for you to sell your Class A common stock at a time and price that you deem appropriate.
Our amended and restated certificate of incorporation will designate a state or federal court located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders' ability to choose the judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation, which will become effective immediately prior to the completion of this offering, will provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf under Delaware law, (2) any action asserting a
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claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action arising pursuant to any provision of the Delaware General Corporation Law ("DGCL"), our amended and restated certificate of incorporation or bylaws, (4) any other action asserting a claim that is governed by the internal affairs doctrine, or (5) any other action asserting an "internal corporate claim," as defined in Section 115 of the DGCL, shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) in all cases subject to the court having jurisdiction over indispensable parties named as defendants. These exclusive-forum provisions do not apply to claims under the Securities Act or the Exchange Act.
To the extent that any such claims may be based upon federal law claims, Section 27 of the Exchange Act creates exclusive federal jurisdiction over all suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. However, our amended and restated certificate of incorporation, which will become effective immediately prior to the completion of this offering, contains a federal forum provision which provides that unless the Company consents in writing to the selection of an alternative forum, the federal district courts of the United States of America will be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act.
Any person or entity purchasing or otherwise acquiring any interest in any of our securities shall be deemed to have notice of and consented to this provision. This exclusive-forum provision may limit a stockholder's ability to bring a claim in a judicial forum of its choosing for disputes with us or our directors, officers or other employees, which may discourage lawsuits against us and our directors, officers and other employees and increase the costs to stockholders of bringing such a claim. If a court were to find the exclusive-forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could harm our results of operations.
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains certain "forward-looking statements," as that term is defined in the U.S. federal securities laws. These forward-looking statements include, but are not limited to, statements other than statements of historical facts contained in this prospectus, including among others, statements relating to our future financial performance, our business prospects and strategy, anticipated financial position, liquidity and capital needs, the industry in which we operate and other similar matters. Words such as "anticipates," "expects," "intends," "plans," "predicts," "believes," "seeks," "estimates," "could," "would," "will," "may," "can," "continue," "potential," "should" and the negative of these terms or other comparable terminology often identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from the results contemplated by the forward-looking statements, including the risks discussed in this prospectus. Factors, risks, and uncertainties that could cause actual outcomes and results to be materially different from those contemplated include, among others:
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80
Many of the important factors that will determine these results are beyond our ability to control or predict. You are cautioned not to put undue reliance on any forward-looking statements, which speak only as of the date of this prospectus. Except as otherwise required by law, we do not assume any obligation to publicly update or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this prospectus or to reflect the occurrence of unanticipated events. You should refer to the "Risk Factors" section of this prospectus for a discussion of other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements.
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AmeriHome, Inc., a Delaware corporation, was formed on August 6, 2020 and is the issuer of the Class A common stock offered by this prospectus. Prior to this offering and the Transactions (as defined below), all of our business operations have been conducted through Aris Holding and its direct and indirect subsidiaries and the only owners of Aris Holding are management and certain other employees and directors and A-A Mortgage.
Existing Organization
Aris Holding is treated as a partnership for U.S. federal income tax purposes and, as such is generally not subject to any U.S. federal entity-level income taxes. Taxable income or loss of Aris Holding is included in the U.S. federal income tax returns of Aris Holding's members. Prior to the consummation of this offering, the only members of Aris Holding were management and certain other employees and directors and A-A Mortgage.
Transactions
We will consummate the following organizational and other transactions in connection with this offering:
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We collectively refer to the foregoing organizational transactions as the "Transactions."
Organizational Structure Following this Offering
Immediately following the consummation of the Transactions (including this offering):
83
The diagram below depicts our organizational structure after giving effect to the Transactions, including this offering, assuming no exercise by the underwriters of their option to purchase additional shares of Class A common stock.
As the sole managing member of Aris Holding, we will operate and control all of the business and affairs of Aris Holding and, through Aris Holding and its direct and indirect subsidiaries, conduct our business. Following the Transactions and the consummation of this offering, we will record a significant non-controlling interest in our consolidated subsidiary, Aris Holding, relating to the ownership interest of A-A Mortgage. Accordingly, although AmeriHome, Inc. will have a minority economic interest in
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Aris Holding, it will control the management of Aris Holding as the sole managing member. As a result, AmeriHome, Inc. will consolidate Aris Holding and record a non-controlling interest in consolidated entity for the economic interest in Aris Holding held by A-A Mortgage.
Unless otherwise indicated, this prospectus assumes the shares of Class A common stock are offered at $ per share (the midpoint of the estimated price range set forth on the cover page of this prospectus), assumes no exercise of the underwriters' option to purchase up to an additional shares of Class A common stock from us, excludes up to shares of Class A common stock issuable to senior management in connection with the settlement of awards granted under the Transaction Bonus Agreements described more fully in "Executive CompensationTransaction Bonus Agreements" and gives effect to the completion of the Transactions.
Incorporation of AmeriHome, Inc.
AmeriHome, Inc., the issuer of the Class A common stock offered by this prospectus, was incorporated as a Delaware corporation on August 6, 2020. AmeriHome, Inc. has not engaged in any material business or other activities except in connection with its formation and the Transactions. The amended and restated certificate of incorporation of AmeriHome, Inc. that will become effective immediately prior to the consummation of this offering will, among other things, authorize two classes of common stock, Class A common stock and Class B common stock, each having the terms described in "Description of Capital Stock."
Following this offering, A-A Mortgage will hold a number of shares of our Class B common stock equal to the number of LLC Interests held by A-A Mortgage, each of which provides its holder with no economic rights but entitles the holder to ten votes on matters presented to AmeriHome, Inc.'s stockholders, as described in "Description of Capital StockClass B Common Stock." Upon the date on which the shares of Class B common stock held by A-A Mortgage and its permitted transferees represent less than 10% of our outstanding shares of common stock, each share of Class B common stock will entitle its holder to one vote per share of Class B common stock. Shares of our common stock will generally vote together as a single class on all matters submitted to a vote of our stockholders, except as otherwise required by applicable law.
Reclassification and Amendment and Restatement of the Aris Holding Limited Liability Company Agreement
Prior to or substantially concurrently with the consummation of this offering, the existing limited liability company agreement Aris Holding will be amended and restated to, among other things, recapitalize its capital structure by creating a single new class of limited liability company interests that we refer to as "LLC Interests." See "Certain Relationships and Related Party TransactionsAris Holding LLC Agreement."
Exchange Agreement
We, Aris Holding and A-A Mortgage will enter into the Exchange Agreement substantially concurrently with the consummation of this offering under which A-A Mortgage (or certain permitted transferees thereof including the Existing Equity Owners) will have the right, subject to the terms of the Exchange Agreement, to exchange its LLC Interests, together with a corresponding number of shares of Class B common stock, for newly-issued shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and other similar transactions, or, at our election (determined by a majority of the disinterested members of our board of directors or a committee of disinterested members of our board of directors), a cash payment. The Exchange Agreement will also provide that as a general matter A-A Mortgage (or such permitted transferee thereof) will not have the right to exchange LLC Interests if
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we determine that such exchange would be prohibited by law or regulation or would violate other agreements with us to which such owner may be subject, including the Aris Holding LLC Agreement. We may impose additional restrictions on exchange that we determine to be necessary or advisable so that Aris Holding is not treated as a "publicly traded partnership" for U.S. federal income tax purposes. As a holder exchanges LLC Interests and Class B common stock for shares of Class A common stock, the number of LLC Interests held by AmeriHome Inc. will correspondingly increase as it acquires the exchanged LLC Interests, and a corresponding number of shares of Class B common stock are cancelled. In the event we elect to pay a holder cash in an exchange, we will cause Aris Holding to cancel the LLC Interests we acquire from such holder and the corresponding number of shares of Class B common stock we acquire will be cancelled by us. See "Certain Relationships and Related Party TransactionsExchange Agreement."
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We estimate that the net proceeds to us from this offering will be approximately $ million after deducting the underwriting discounts and commissions and our other estimated offering expenses (assuming an initial public offering price of $ per share, which is the mid-point of the estimated offering price range set forth on the cover page of this prospectus). We estimate that the offering expenses (other than any underwriting discounts) will be approximately $ million.
We intend to use the net proceeds from this offering to purchase LLC Interests from the Existing Equity Owners at a price per unit equal to the initial public offering price per share of Class A common stock in this offering less the underwriting discounts and commissions and estimated offering expenses payable by us.
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) the amount of net proceeds to us from this offering by $ , assuming the number of shares of Class A common stock offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each 1,000,000 share increase (decrease) in the number of shares offered by us in this offering would increase (decrease) the net proceeds to us from this offering by approximately $ , assuming that the price per share for the offering remains at $ (which is the mid-point of the estimated price range set forth on the cover page of this prospectus), and after deducting the underwriting discount and estimated offering expenses payable by us.
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We currently intend to retain any future earnings and do not anticipate paying any cash dividends on our Class A common stock in the foreseeable future following the consummation of this offering. Holders of our Class B common stock are not entitled to participate in any dividends declared by our board of directors. Any determination to declare dividends will be made at the discretion of our board of directors and will depend on, among other factors, our financial condition, operating results, liquidity, capital requirements, general business conditions and other factors that our board of directors may deem relevant. Our ability to pay dividends on our Class A common stock may be limited by the terms of our existing indebtedness in certain circumstances and may be restricted by the terms of any future credit agreement or any future debt or preferred securities of ours or of our subsidiaries. See "Management's Discussion and Analysis of Financial Condition and Results of OperationsLiquidity and Capital Resources."
Subject to having available cash and subject to the limitations imposed by applicable law and contractual restrictions (including pursuant to our credit agreements), the Aris Holding LLC Agreement requires Aris Holding to make certain distributions to us and A-A Mortgage (or certain permitted transferees thereof including the Existing Equity Owners), on a pro rata basis, to facilitate their payment of taxes with respect to the income of Aris Holding that is allocated to us and A-A Mortgage (or certain permitted transferees thereof including the Existing Equity Owners). See "Related Party TransactionsAris Holding LLC Agreement." To the extent that the tax distributions we receive exceed the amount that we are actually required to pay taxes, tax receivable agreement payments and other expenses, we will not be required to distribute such excess cash. Our board of directors may, in its sole discretion, choose to use such excess cash for any purpose depending upon the facts and circumstances at the time of determination.
As part of the Transactions, Aris Holding will make a cash distribution to A-A Mortgage in an aggregate amount of $ . We refer to this distribution as the "Special Dividend."
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The following table sets forth our cash and capitalization as of June 30, 2020:
You should read this table in conjunction with "Use of Proceeds," "Selected Historical Consolidated Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and accompanying notes thereto included elsewhere in this prospectus.
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|
June 30, 2020 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Actual | Pro Forma | Pro Forma, As Adjusted |
|||||||
|
(Unaudited) |
|||||||||
|
(Dollars in thousands, except share and per share data) |
|||||||||
Cash and cash equivalents |
$ | 501,374 | ||||||||
| | | | | | | | | | |
Debt(1): |
||||||||||
Warehouse borrowings |
$ | 1,740,881 | ||||||||
Series 2019-GT1 Term Notes |
223,193 | |||||||||
Secured borrowings |
155,155 | |||||||||
| | | | | | | | | | |
Total debt |
2,119,229 | |||||||||
| | | | | | | | | | |
Capital: |
||||||||||
Class A common stock, $ par value; no shares authorized, issued and outstanding actual; shares authorized and shares issued and outstanding, as adjusted |
| |||||||||
Class B common stock, $ par value; no shares authorized, issued and outstanding actual; shares authorized and shares issued and outstanding, as adjusted |
| |||||||||
Additional paid-in capital |
| |||||||||
Accumulated income (deficit) |
661,348 | |||||||||
| | | | | | | | | | |
Member's equity |
502,968 | |||||||||
| | | | | | | | | | |
Total capital |
1,164,316 | |||||||||
| | | | | | | | | | |
Total capitalization |
$ | 3,283,545 | ||||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
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A-A Mortgage will own LLC Interests after the Transactions. Because A-A Mortgage does not own any Class A common stock or have any right to receive distributions from AmeriHome, Inc., we have presented dilution in pro forma net tangible book value per share both before and after this offering assuming that all of the holders of LLC Interests (other than AmeriHome, Inc.) had their LLC Interests exchanged for newly-issued shares of Class A common stock on a one-for-one basis and the transfer to the Company and cancellation for no consideration of all of their shares of Class B common stock (which are not entitled to receive distributions or dividends, whether cash or stock from AmeriHome, Inc.) in order to more meaningfully present the dilutive impact on the investors in this offering. We refer to the assumed exchange of all LLC Interests for shares of Class A common stock as described in the previous sentence as the "Assumed Exchange."
Dilution is the amount by which the offering price paid by the purchasers of the Class A common stock in this offering exceeds the pro forma net tangible book value per share of Class A common stock after the offering. Aris Holding's pro forma net tangible book value as of June 30, 2020 prior to this offering and after giving effect to the other Transactions and the Assumed Exchange was a deficit of $ . Pro forma net tangible book value per share prior to this offering is determined by subtracting our total liabilities from the total book value of our tangible assets and dividing the difference by the number of shares of Class A common stock deemed to be outstanding after giving effect to the Assumed Exchange.
If you invest in our Class A common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share and the pro forma net tangible book value per share of our Class A common stock after this offering.
After giving effect to (i) the Transactions, including the sale of shares of Class A common stock sold by us in this offering at an assumed initial public offering price of $ per share of Class A common stock, which is the mid-point of the estimated offering price range set forth on the cover page of this prospectus, and (ii) the Assumed Exchange, and after deducting the underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us and the application of the net proceeds therefrom as described in "Use of Proceeds," our as adjusted net tangible book value as of June 30, 2020 would have been $ , or $ per share of Class A common stock. This represents an immediate increase in as adjusted net tangible book value of $ per share of Class A common stock and an immediate dilution in as adjusted net tangible book value $ per share of Class A common stock to new investors who purchase Class A common stock in this offering. The following table illustrates this dilution to new investors on a per share basis:
Assumed initial public offering price per share of Class A common stock |
$ | |||
Net tangible book value per share as of June 30, 2020 |
$ | |||
Increase in net tangible book value per share attributable to new investors in this offering |
$ | |||
As adjusted net tangible book value per share after this offering |
$ | |||
Dilution of net tangible book value per share to new investors |
$ |
A $1.00 increase or decrease in the assumed initial public offering price of $ per share of Class A common stock, which is the mid-point of the price range set forth on the cover page of this prospectus, would increase or decrease total net tangible book value per share after this offering by $ per share of Class A common stock and dilution to new investors by $ per share of Class A common stock, assuming that the number of shares of Class A common stock offered by us set forth on the front cover of this prospectus remains the same, and after deducting the underwriting
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discounts and commissions in connection with this offering and estimated offering expenses payable by us.
The following table summarizes, as of June 30, 2020, on the as adjusted basis described above (including the Assumed Exchange), the total number of shares of Class A common stock purchased from us, the total consideration paid to us and the average price paid per share by the existing stockholders and by new investors purchasing shares from us in this offering, based on an assumed initial public offering price of $ per share of Class A common stock, which is the mid-point of the estimated offering price range set forth on the cover page of this prospectus, before deducting the underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us (amounts in thousands, except percentages and per share data):
|
Shares of Class A Common Stock Purchased |
|
|
|
||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Total Consideration | |
||||||||||||||
|
Average Price Per Share |
|||||||||||||||
|
Number | Percent | Amount | Percent | ||||||||||||
Existing stockholders |
% | % | $ | |||||||||||||
New investors |
||||||||||||||||
| | | | | | | | | | | | | | | | |
Total |
% | % | $ | |||||||||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
A $1.00 increase or decrease in the assumed initial public offering price of $ per share of Class A common stock, the mid-point of the estimated offering price range set forth on the cover page of this prospectus, would increase or decrease total consideration paid by new investors in the Class A common stock and total consideration paid by all holders of Class A common stock by $ million, assuming that the number of shares of Class A common stock offered by us set forth on the front cover of this prospectus remains the same, and after deducting the underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us.
An increase or decrease of 1,000,000 shares in the number of shares of Class A common stock offered by us would increase or decrease the total consideration paid to us by new investors in the Class A common stock and total consideration paid to us by all holders of Class A common stock by $ million, based on an assumed initial public offering price of $ per share, which is the mid-point of the estimated offering price range set forth on the cover page of this prospectus, and after deducting the underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us.
If the underwriters exercise in full their option to purchase additional shares of Class A common stock, the number of shares of Class A common stock held by existing stockholders after the completion of this offering will be , or % of the total number of shares of Class A common stock outstanding after this offering, and the number of shares of Class A common stock held by new investors will be , or % of the total number of shares of Class A common stock outstanding after this offering.
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SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA
The following table sets forth our predecessor Aris Holding's selected financial and operating data as of the dates and for the financial reporting periods indicated. The selected historical financial and operating data as of December 31, 2019 and 2018 and for the years ended December 31, 2019 and 2018 have been derived from our predecessor Aris Holding's audited consolidated financial statements included elsewhere in this prospectus. The selected historical financial and operating data as of June 30, 2020 and 2019 and for the six months ended June 30, 2020 and 2019 have been derived from our predecessor Aris Holding's unaudited consolidated financial statements included elsewhere in this prospectus. See "Presentation of Financial Information."
The selected historical financial information is not necessarily indicative of the results that may be expected in any future financial reporting period, and our results of operations for any interim financial reporting period are not necessarily indicative of the results to be expected for the full year. The following selected financial and operating data should be read in conjunction with "Capitalization," "Prospectus SummarySummary Historical Financial and Operating Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the consolidated financial statements and related notes appearing elsewhere in this prospectus.
Statement of Income Data
|
Six months ended June 30, |
Year ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Unaudited) |
(Audited) |
|||||||||||
|
(Amounts in thousands) |
||||||||||||
Revenues |
|||||||||||||
Net gains on loans held for sale |
$ | 339,027 | $ | 84,497 | $ | 229,239 | $ | 82,376 | |||||
Net loan servicing revenue |
39,858 | 74,138 | 71,052 | 129,453 | |||||||||
Loan acquisition and origination revenue |
40,664 | 31,238 | 71,783 | 60,159 | |||||||||
Other income |
12,871 | 24,729 | 37,546 | 53,804 | |||||||||
Net interest income (expense) |
9,615 | 3,707 | 9,090 | (345 | ) | ||||||||
| | | | | | | | | | | | | |
Total net revenues |
442,035 | 218,309 | 418,710 | 325,447 | |||||||||
Expenses |
|||||||||||||
Compensation |
85,999 | 53,174 | 108,208 | 94,191 | |||||||||
Loan servicing |
37,294 | 26,141 | 60,103 | 58,748 | |||||||||
Loan acquisition and origination |
16,087 | 12,783 | 27,971 | 24,097 | |||||||||
Other expenses |
27,660 | 23,557 | 47,903 | 43,441 | |||||||||
| | | | | | | | | | | | | |
Total expenses |
167,040 | 115,655 | 244,185 | 220,477 | |||||||||
| | | | | | | | | | | | | |
Net income |
$ | 274,995 | $ | 102,654 | $ | 174,525 | $ | 104,970 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
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Balance Sheet Data
|
June 30, | December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Unaudited) |
(Audited) |
|||||||||||
|
(Amounts in thousands) |
||||||||||||
Assets |
|||||||||||||
Cash |
$ | 501,374 | $ | 78,338 | $ | 93,581 | $ | 70,111 | |||||
Loans held for sale |
1,902,953 | 2,164,830 | 2,648,609 | 1,714,066 | |||||||||
Mortgage servicing rights |
736,657 | 747,168 | 893,193 | 754,940 | |||||||||
Servicing advances, net |
35,085 | 17,929 | 50,326 | 31,040 | |||||||||
Other assets |
897,680 | 392,373 | 525,524 | 298,934 | |||||||||
| | | | | | | | | | | | | |
Total assets |
$ | 4,073,749 | $ | 3,400,638 | $ | 4,211,233 | $ | 2,869,091 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Liabilities and member's equity |
|||||||||||||
Borrowings |
$ | 2,119,229 | $ | 2,269,536 | $ | 2,856,742 | $ | 1,870,595 | |||||
Other liabilities |
790,204 | 313,281 | 464,757 | 211,472 | |||||||||
| | | | | | | | | | | | | |
Total liabilities |
2,909,433 | 2,582,817 | 3,321,499 | 2,082,067 | |||||||||
Member's equity |
1,164,316 | 817,821 | 889,734 | 787,024 | |||||||||
| | | | | | | | | | | | | |
Total liabilities and member's equity |
$ | 4,073,749 | $ | 3,400,638 | $ | 4,211,233 | $ | 2,869,091 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Other Data
|
Six months ended June 30, | Year ended December 31, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
|
(unaudited) |
(audited) |
|
|
|
|||||||||||||||||
Corporate plus MSR Debt/Equity |
0.3x | 0.4x | 0.5x | 0.4x | 0.2x | 0.1x | 0.0x | |||||||||||||||
Total Debt/Equity |
1.9x | 2.8x | 3.3x | 2.4x | 2.0x | 2.2x | 2.2x |
Non-GAAP Financial Measures
|
Six months ended June 30, | Year ended December 31, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
|
(unaudited) |
(audited) |
|
|
|
|||||||||||||||||
|
(Amounts in thousands) |
|||||||||||||||||||||
Non-GAAP financial measures |
||||||||||||||||||||||
Adjusted After-Tax Net Income(1) |
$ | 217,544 | $ | 83,591 | $ | 143,977 | $ | 89,304 | $ | 80,868 | $ | 60,875 | $ | 25,031 | ||||||||
Adjusted After-Tax ROAE(2) |
44.3 | % | 21.3 | % | 17.7 | % | 12.4 | % | 13.3 | % | 14.2 | % | 13.7 | % |
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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
We have derived the unaudited pro forma consolidated statement of income for the six months ended June 30, 2020 and the year ended December 31, 2019 and the unaudited pro forma consolidated balance sheet as of June 30, 2020 set forth below by the application of pro forma adjustments to the consolidated financial statements of Aris Holding and its subsidiaries included elsewhere in this prospectus.
The unaudited pro forma consolidated statement of income for the six months ended June 30, 2020 and the year ended December 31, 2019 and the unaudited pro forma consolidated balance sheet as of June 30, 2020 present our consolidated results of operations and financial position to give pro forma effect to all of the reorganization transactions described in "Our Organizational Structure," the sale of shares in this offering (excluding shares issuable upon exercise of the underwriters' option to purchase additional shares), the issuance of the 2028 Senior Notes, the Special Dividend described in "Dividend Policy," the application of the net proceeds by us from this offering and the other transactions described elsewhere in this section, as if all such transactions had been completed as of January 1, 2019 with respect to the unaudited pro forma consolidated statement of income, and as of June 30, 2020, with respect to the unaudited pro forma consolidated balance sheet, as applicable. The unaudited pro forma consolidated financial information reflects pro forma adjustments that are described in the accompanying notes and are based on available information and certain assumptions we believe are reasonable, but are subject to change. We have made, in our opinion, all adjustments that are necessary to present fairly the pro forma consolidated financial data.
The pro forma adjustments principally give effect to the following items:
Except as otherwise indicated, the unaudited pro forma consolidated financial information presented assumes no exercise by the underwriters of their option to purchase additional shares of Class A common stock in this offering.
As a public company, we will be implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies. We expect to incur additional annual expenses related to these steps and, among other things, additional directors' and officers' liability insurance, director fees, reporting requirements of the SEC, transfer agent fees, hiring additional accounting, legal and administrative personnel, increased auditing and legal fees and similar expenses. We have not included any pro forma adjustments relating to these costs. AmeriHome, Inc. was formed on August 6, 2020 and will have no material assets or results of operations until the completion of this offering and therefore its historical financial information is not included in the unaudited pro forma consolidated financial information. See "Basis of Presentation" in our consolidated financial statements included elsewhere in this prospectus.
The unaudited pro forma consolidated financial information is presented for informational purposes only and should not be considered indicative of actual results of operations that would have been achieved had the Transactions, the Special Dividend, the issuance of the 2028 Senior Notes or this
95
offering been consummated on the dates indicated, and do not purport to be indicative of statements of financial condition data or results of operations as of any future date or for any future period. You should read our unaudited pro forma consolidated financial information and the accompanying notes in conjunction with all of the historical financial statements and related notes included elsewhere in this prospectus and the financial and other information included elsewhere in this prospectus, including information contained in "Risk Factors," "Use of Proceeds," "Capitalization," "Selected Historical Consolidated Financial Data" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
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AmeriHome, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Balance Sheet
as of June 30, 2020
|
Aris Mortgage Holding Company, LLC Actual |
Pro Forma Adjustments |
AmeriHome, Inc. Pro Forma |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
(Amounts in thousands) |
|||||||||
Assets |
||||||||||
Cash |
$ | 501,374 | (1) | |||||||
Restricted cash |
7,000 | |||||||||
Loans held for sale |
1,902,953 | |||||||||
Mortgage servicing rights |
736,657 | |||||||||
Derivative assets, net |
96,549 | |||||||||
Servicing advances, net |
35,085 | |||||||||
Accounts receivable |
45,492 | |||||||||
Fixed assets and software, net |
13,155 | |||||||||
Loans eligible for repurchase |
683,022 | |||||||||
Deferred tax asset |
| (2) | ||||||||
Other assets |
52,462 | |||||||||
| | | | | | | | | | |
Total assets |
$ | 4,073,749 | ||||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Liabilities and member's/stockholders' equity |
||||||||||
Liabilities: |
||||||||||
Warehouse borrowings |
$ | 1,740,881 | ||||||||
Notes payable |
368,380 | (3) | ||||||||
Other borrowings |
9,968 | |||||||||
Derivative liabilities, net |
16,200 | |||||||||
Liability for losses under representations and warranties |
14,307 | |||||||||
Liability for loans eligible for repurchase |
683,022 | |||||||||
Tax receivable agreement liability |
| (2) | ||||||||
Accounts payable and accrued expenses |
76,675 | (2) | ||||||||
| | | | | | | | | | |
Total liabilities |
2,909,433 | |||||||||
Member's/stockholders' equity: |
||||||||||
Class A units, units authorized, issued and outstanding as of June 30, 2020 |
499,855 | (4) | ||||||||
Member's equity attributable to Class T1 units and Class P1 units |
3,113 | (4) | ||||||||
Class A common stock, par value $ per share; no shares authorized, issued and outstanding, actual; shares authorized and shares issued and outstanding, as adjusted |
| (5) | ||||||||
Class B common stock, par value $ per share; no shares authorized, issued and outstanding, actual; shares authorized, issued and outstanding, as adjusted |
| (5) | ||||||||
Additional paid-in capital |
| (4)(6) | ||||||||
Accumulated income (deficit) |
661,348 | (4)(7) | ||||||||
Noncontrolling interest |
| (4) | ||||||||
Total member's/stockholders' equity |
1,164,316 | |||||||||
| | | | | | | | | | |
Total liabilities and member's/stockholders' equity |
$ | 4,073,749 | ||||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
97
Notes to the Unaudited Pro Forma Consolidated Balance Sheet
As described in "Our Organizational Structure" and "Certain Relationships and Related Party TransactionsTax Receivable Agreement," in connection with the completion of this offering, we will enter into a Tax Receivable Agreement with A-A Mortgage, which provides for the payment to A-A Mortgage (or certain permitted transferees thereof including the Existing Equity Owners) of 85% of the tax benefits, if any, that we realize as a result of the purchase of % of Aris Holding. The Tax Receivable Agreement will be recorded as a contingent liability, with amounts accrued when considered probable and reasonably estimable. We will record a liability of $ based on an estimate of the aggregate amount it will pay to A-A Mortgage under the Tax Receivable Agreement as a result of the Transactions. We will record a deferred tax asset of $ thousand, net of a valuation allowance of $ thousand, related to tax benefits from future deductions attributable to payments under the Tax Receivable Agreement as a result of the Transactions. Additionally, we will record a decrease to additional paid-in capital of $ thousand, which is equal to the difference between the increase in deferred tax assets and the increase in liabilities due to Existing Equity Owners under the Tax Receivable Agreement.
98
99
AmeriHome, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Income
Six Months Ended June 30, 2020
|
Aris Mortgage Holding Company, LLC Actual |
Pro Forma Adjustments |
AmeriHome, Inc. Pro Forma |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
(Amounts in thousands, except unit data) |
|||||||||
Revenues |
||||||||||
Net gains on loans held for sale |
$ | 339,027 | ||||||||
Net loan servicing revenue |
39,858 | |||||||||
Loan acquisition and origination fees |
40,664 | |||||||||
Other income |
12,871 | |||||||||
Net interest income (expense) |
||||||||||
Interest income |
38,892 | |||||||||
Interest expense |
(29,277 | ) | (1) | |||||||
| | | | | | | | | | |
Net interest income (expense) |
9,615 | |||||||||
| | | | | | | | | | |
Total net revenues |
442,035 | |||||||||
Expenses |
||||||||||
Compensation |
85,999 | (2) | ||||||||
Loan servicing |
37,294 | |||||||||
Loan acquisition and origination |
16,087 | |||||||||
Technology |
5,396 | |||||||||
Occupancy |
1,670 | |||||||||
Other expenses |
20,594 | (3) | ||||||||
| | | | | | | | | | |
Total expenses |
167,040 | |||||||||
| | | | | | | | | | |
Pre-tax income |
274,995 | |||||||||
Provision for income taxes |
| (4) | ||||||||
| | | | | | | | | | |
Net income attributable to controlling and noncontrolling interests |
274,995 | |||||||||
Net income attributable to noncontrolling interest |
| |||||||||
| | | | | | | | | | |
Net income attributable to controlling interest |
$ | 274,995 | ||||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Earnings per unit |
||||||||||
Basic |
||||||||||
Diluted |
||||||||||
Weighted average units outstanding |
||||||||||
Basic |
||||||||||
Diluted |
100
AmeriHome, Inc. and Subsidiaries
Unaudited Pro Forma Consolidated Statement of Income
Year Ended December 31, 2019
|
Aris Mortgage Holding Company, LLC Actual |
Pro Forma Adjustments |
AmeriHome, Inc. Pro Forma |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
|
(Amounts in thousands, except unit data) |
|||||||||
Revenues |
||||||||||
Net gains on loans held for sale |
$ | 229,239 | ||||||||
Net loan servicing revenue |
71,052 | |||||||||
Loan acquisition and origination fees |
71,783 | |||||||||
Other income |
37,546 | |||||||||
Net interest income (expense) |
||||||||||
Interest income |
70,090 | |||||||||
Interest expense |
(61,000 | ) | (1) | |||||||
| | | | | | | | | | |
Net interest income (expense) |
9,090 | |||||||||
| | | | | | | | | | |
Total net revenues |
418,710 | |||||||||
Expenses |
||||||||||
Compensation |
108,208 | (2) | ||||||||
Loan servicing |
60,103 | |||||||||
Loan acquisition and origination |
27,971 | |||||||||
Technology |
8,714 | |||||||||
Occupancy |
3,255 | |||||||||
Other expenses |
35,934 | (3) | ||||||||
| | | | | | | | | | |
Total expenses |
244,185 | |||||||||
| | | | | | | | | | |
Pre-tax income |
174,525 | |||||||||
Provision for income taxes |
| (4) | ||||||||
| | | | | | | | | | |
Net income attributable to controlling and noncontrolling interests |
174,525 | |||||||||
Net income attributable to noncontrolling interest |
| |||||||||
| | | | | | | | | | |
Net income attributable to controlling interest |
$ | 174,525 | ||||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Earnings per unit |
||||||||||
Basic |
||||||||||
Diluted |
||||||||||
Weighted average units outstanding |
||||||||||
Basic |
||||||||||
Diluted |
Notes to the Unaudited Pro Forma Consolidated Statements of Income
101
forma consolidated statement of income as such expense will be included in our consolidated statement of income following the Transactions.
102
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's discussion and analysis of our financial condition and results of operations should be read in conjunction with the sections "Prospectus SummarySummary Historical Financial and Operating Data," "Selected Historical Consolidated Financial Data," and our consolidated financial statements and notes thereto included elsewhere in this prospectus. The following discussion includes forward-looking statements that reflect our plans, estimates and assumptions and involves numerous risks and uncertainties, including, but not limited to, those described in the "Risk Factors" section of this prospectus. See "Special Note Regarding Forward-Looking Statements." Future results could differ significantly from the historical results presented in this section.
The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our financial condition and results of operations. The following discussion and analysis should be read in conjunction with other sections of this prospectus, the audited consolidated financial statements for the years ended December 31, 2019 and 2018, the unaudited consolidated financial statements for the six months ended June 30, 2020 and 2019, and the related notes attached thereto.
Overview
We are a leading U.S. non-bank producer and master servicer of residential mortgage loans. Our strategy is to utilize our production channels and technology to source mortgages, MSRs and other mortgage related assets at attractive prices and generate returns at or above our target in all market environments.
We are an approved seller/servicer for Fannie Mae and Freddie Mac. We are also an approved issuer of securities guaranteed by Ginnie Mae, an FHA-approved lender and a lender/servicer for the VA and the USDA. We are licensed to originate loans in 46 states and the District of Columbia. We are able to purchase and service loans in 49 states and the District of Columbia, either because we are properly licensed in such jurisdictions or exempt or otherwise not required to be licensed in such jurisdictions. Our national presence allows us to build new relationships across the country, growing our scale, and helps us to limit geographical concentration in our MSR portfolio.
Aris Mortgage Holding Company, LLC is a wholly-owned subsidiary of A-A Mortgage.
Key Factors Affecting Our Operating Results
Our business emphasizes automation and data-centric process improvement to prioritize speed, continuity and cost efficiency in our business in a quality-controlled operation, fully compliant with all regulatory requirements. We believe this approach translates into a highly efficient cost structure, a unique value proposition for our correspondent sellers and consumers and a driver of our profitability.
We generate revenue from two principal parts of our business, mortgage origination and mortgage loan servicing.
We purchase mortgage loans from correspondent sellers and originate mortgage loans. These loans are primarily originated as conforming mortgage loans to Agency standards. We generate revenue through gains received when pooling originated loans into MBS, selling whole loans to the GSEs or selling loans as whole loans to investors. This revenue is comprised of (i) the upfront cash derived from the difference between the price at which we purchase and sell a loan, (ii) the capitalization of the fair market value of the MSR generated by selling the loan on a "servicing-retained" basis, (iii) loan servicing fees, which are based on a contractual percentage of the outstanding principal balance of such loans and other ancillary income such as late fees and (iv) other income, which primarily consist of incentive fees from our warehouse lender and early payoff fees and early payment default fees.
103
We service mortgage loans for the GSEs and Ginnie Mae and earn a contractual fee ranging between 25 and 56.5 basis points of the outstanding principal balance as ancillary income of outstanding unpaid principal.
The volume of loan originations associated with home purchases is affected by broader economic factors such as the strength and stability of the overall economy, including the unemployment level and real estate values, and, to a lesser extent, by interest rate fluctuations. Refinance volumes, in particular, are impacted by interest rates. As interest rates decline, refinance volume tends to increase, while in an increasing interest rate environment, the refinancing volume tends to decrease. The fair value of our MSRs is also driven primarily by interest rates, which impact the likelihood of loan prepayments through refinancing. Through our origination channels, we try to recapture those loans and protect the value of our MSRs by being the originator of those refinanced loans.
There has been a long-term trend of falling interest rates, with intermittent periods of rate increases. More recently, there has been a falling interest rate environment in 2019 and during the first half of 2020. Recently the Federal Reserve announced that it expected interest rates to be low for a period of time in the future due to the economic conditions caused by the COVID-19 pandemic. In periods of rising interest rates, the fair value of the MSRs generally increases as prepayments decrease, and therefore the estimated life of the MSRs and related expected cash flows increase. In a declining interest rate environment, the fair value of MSRs generally decreases as prepayments increase and, therefore, the estimated life of the MSRs and related cash flows decrease. We actively manage our mortgage loans and MSRs though hedging and pricing activities.
Critical Accounting Policies
In accordance with GAAP, as codified by the FASB, we are required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Certain of these estimates significantly influence the portrayal of our financial condition and results of operations and require us to make difficult, subjective or complex judgments. Our critical accounting policies primarily relate to our fair value estimates.
Fair Value Measurements
We categorize assets measured at fair value in three levels based on the markets in which the assets are traded and the observability of the inputs used to measure fair value. These levels are summarized as follows:
|
|
June 30, 2020 | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
|
|
|
Percentage of | |||||||||
Level and description of assets measured at fair value
|
Carrying value of assets measured |
Total assets | Total member's equity |
|||||||||
|
|
(Amounts in thousands) |
||||||||||
Level 1: |
Quoted prices (unadjusted) in active markets for identical assets that are accessible at the measurement date |
$ | | | % | | % | |||||
Level 2: |
Inputs other than quoted prices included within Level 1 that are observable for the asset, either directly or indirectly |
1,603,869 | 40 | % | 138 | % | ||||||
Level 3: |
Unobservable inputs for the asset |
829,114 | 20 | % | 71 | % | ||||||
| | | | | | | | | | | | |
|
$ | 2,432,983 | 60 | % | 209 | % | ||||||
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Total assets |
$ | 4,073,749 | ||||||||||
Total member's equity |
$ | 1,164,316 |
104
Our consolidated balance sheet is substantially comprised of assets carried at fair value. At June 30, 2020, $2.4 billion, or 60%, of our total assets were carried at fair value. Of these assets, $829.1 million, or 20%, of our total assets were measured using Level 3 inputs. Changes in the inputs used to measure these assets can have significant effects on the amounts reported for these items including their reported balances and their effects on our income.
Loans Held for Sale
We carry the majority of our loans held for sale ("LHFS") at fair value and recognize changes in the fair value of such loans in current period income as a component of Net gains on loans held for sale. We categorize loans that are saleable into active markets as Level 2 fair value assets. We estimate the fair value of such loans using their quoted market price or market price equivalent. At June 30, 2020, we held $1.6 billion in loans categorized as Level 2 fair value assets. We categorize non-conforming loans as Level 3 fair value assets. At June 30, 2020, we held $2.8 million in loans categorized as Level 3 fair value assets.
Interest Rate Lock Commitments
Our estimate of the gains or losses we expect to realize upon the sale of loans we have contractually committed to fund or purchase is included as a component of Net gains on loans held for sale. We recognize a substantial portion of the gains or losses before we fund or purchase the loans as a result of these commitments. We recognize the fair value of interest rate lock commitments when we make the commitment to a correspondent seller or prospective borrower, and adjust the fair value of such IRLCs as the loan approaches the point of funding or purchase or when the transaction is canceled. We carry IRLCs as either derivative assets or derivative liabilities in our consolidated balance sheet. The fair value of an IRLC is transferred to Loans held for sale when the loan is funded or purchased.
Since an active, observable market for IRLCs does not exist, we measure the fair value of IRLCs using methods we believe market participants use in valuing IRLCs. We estimate the fair value of IRLCs based on observable Agency MBS and cash window prices, our estimate of the fair value of the MSRs we expect to receive in the sale of the loans, and the anticipated loan funding probability ("pull-through rate").
The fair value of MSRs and the pull-through rate are based on our estimates as these inputs are difficult to observe in the mortgage marketplace. Our estimate of the pull-through rate and the market interest rates are updated as the loans move through the funding or purchase process and as mortgage market interest rates change. Changes in these inputs can have significant effects on our estimate of the fair value of the IRLCs. Such changes in fair value of IRLCs are recorded as a component of our Net gains on loans held for sale in the period of the change. Typically, the financial effects of changes in these inputs are inversely correlated because increasing mortgage interest rates increases the fair value of MSRs and decreases the fair value of mortgage loans.
Mortgage Servicing Rights
MSRs represent the fair value of future net cash flows expected to be realized for performing servicing activities. We initially recognize MSRs at our estimate of the fair value of the contract to service the loans. Subsequent to initial measurement, we account for our MSRs using the fair value method. We record changes in fair value of MSRs in current period income as a component of Net loan servicing revenue.
As economic fundamentals influencing the underlying loans change, our estimate of the fair value of the related MSRs held by us will also change.
105
Liability for Losses Under Representations and Warranties
We maintain a liability for losses under representations and warranties at a level that we believe is sufficient to absorb estimated losses. The method we use to estimate the liability for losses under representations and warranties is based on the representations and warranties made to each investor and considers a combination of factors, including, but not limited to, estimated future defaults, loan repurchase rates, probability of reimbursement by correspondent seller, and the potential severity of loss in the event of default including any loss on sale or liquidation of repurchased loan. We record a provision for losses relating to such representations and warranties as part of our loan sale transactions. Upon loan sale, we recognize a liability for estimated losses under Liability for losses under representations and warranties in the consolidated balance sheet with an offsetting entry to Net gains on loans held for sale in the consolidated statement of income. We review the adequacy of our liability estimate on a periodic basis.
Our estimate of losses under representations and warranties requires considerable management judgment. The maintenance of our estimate is dependent on a combination of factors, including, but not limited to, economic conditions, such as unemployment rates, real estate values, and purchaser and insurer loss mitigation strategies, that may change over the lives of the underlying loans. As a result of these changes, we may be required to adjust our estimate of losses under representations and warranties.
Recently Issued Accounting Standards Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract and supersedes previous leasing standards. ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. In November 2019, the FASB deferred the effective date of the new leases standard for entities that are not public business entities. In June 2020, the FASB again deferred by one year the effective date of the new leases standard for certain entities that have not yet issued or made available for issuance financial statements reflecting adoption of the standard. Therefore, the amendments in ASU 2016-02 will be effective for our fiscal years beginning after December 15, 2021 and interim periods in the following fiscal year. We will adopt ASU 2016-02 effective January 1, 2022 using a modified retrospective transition approach. We are assessing the impact that the adoption of ASU 2016-02 will have to our consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326), which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. ASU 2016-13 will apply to: (i) loans, accounts receivable, trade receivables and other financial assets measured at amortized cost, (ii) loan commitments and certain other off-balance sheet credit exposures, (iii) debt securities and other financial assets measured at fair value through other comprehensive income, and (iv) beneficial interests in securitized financial assets. In November 2019, the FASB deferred the effective date of the new credit losses standard for entities that are not public business entities. Therefore, the amendments in ASU 2016-13 will be effective for our fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. We are assessing the impact that the adoption of ASU 2016-13 will have to our consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. Reference rate reform refers to the initiative aimed at
106
eliminating certain widely used reference rates, such as the London Interbank Offered Rate (LIBOR), and introducing new reference rates based on a larger and more liquid population of observable transactions. We expect to apply certain expedients under ASU 2020-04 to contract modifications that replace a reference rate and contemporaneous modifications of other terms related to the replacement of the reference rate. The amendments in ASU 2020-04 are effective upon issuance and allows application to contract changes as early as January 1, 2020. We are assessing the impact that the adoption of ASU 2020-04 will have to our consolidated financial statements.
Key Performance Indicators
The following is a summary of key variables and other factors we use to manage and assess the performance of our business:
|
Six months ended June 30, | Year ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Unaudited) |
(Audited) |
|||||||||||
|
(Dollars in thousands) |
||||||||||||
During the period: |
|||||||||||||
Loan production by channel: |
|||||||||||||
Correspondent |
$ | 26,925,189 | $ | 18,235,412 | $ | 43,366,105 | $ | 36,474,504 | |||||
Consumer Direct |
985,353 | 334,769 | 1,029,811 | 723,454 | |||||||||
| | | | | | | | | | | | | |
|
$ | 27,910,542 | $ | 18,570,181 | $ | 44,395,916 | $ | 37,197,958 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Loan production by purpose: |
|||||||||||||
Purchase |
42.2 | % | 72.8 | % | 62.8 | % | 79.1 | % | |||||
Refinance |
57.8 | % | 27.2 | % | 37.2 | % | 20.9 | % | |||||
Loan production by type: |
|||||||||||||
Conventional |
69.1 | % | 56.1 | % | 58.2 | % | 59.8 | % | |||||
Government |
30.7 | % | 43.8 | % | 41.6 | % | 39.7 | % | |||||
Other |
0.2 | % | 0.1 | % | 0.2 | % | 0.5 | % | |||||
Interest rate lock commitment volume |
$ | 31,746,288 | $ | 19,748,352 | $ | 46,049,678 | $ | 36,771,787 | |||||
Gain on sale margin (in basis points) |
123.1 | 61.1 | 67.9 | 41.0 | |||||||||
At period end: |
|||||||||||||
Number of correspondent sellers |
665 | 564 | 618 | 510 | |||||||||
MSR portfolio: |
|||||||||||||
Unpaid principal balance |
$ | 86,079,052 | 68,773,101 | $ | 75,765,221 | $ | 64,513,395 | ||||||
Carrying value ratio |
0.9 | % | 1.1 | % | 1.2 | % | 1.2 | % | |||||
Average FICO score |
720 | 715 | 713 | 717 | |||||||||
Weighted average servicing fee (in basis points) |
33.4 | 32.7 | 34.2 | 30.0 | |||||||||
Weighted average servicing multiple |
2.6 | 3.3 | 3.5 | 4.0 | |||||||||
Loans serviced: |
|||||||||||||
Current through 59 days delinquent |
$ | 83,175,524 | $ | 69,810,935 | $ | 76,694,381 | $ | 65,402,525 | |||||
60 days or more delinquent |
4,710,904 | 1,017,634 | 1,612,931 | 750,914 | |||||||||
| | | | | | | | | | | | | |
|
$ | 87,886,428 | $ | 70,828,569 | $ | 78,307,312 | $ | 66,153,439 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
60 days or more delinquent as a percentage of total loans serviced |
5.4 | % | 1.4 | % | 2.1 | % | 1.1 | % |
107
Results of Operations
Our results of operations are summarized below:
|
Six months ended June 30, | Year ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Amounts in thousands) |
||||||||||||
Revenues |
|||||||||||||
Net gains on loans held for sale |
$ | 339,027 | $ | 84,497 | $ | 229,239 | $ | 82,376 | |||||
Net loan servicing revenue |
39,858 | 74,138 | 71,052 | 129,453 | |||||||||
Loan acquisition and origination revenue |
40,664 | 31,238 | 71,783 | 60,159 | |||||||||
Other income |
12,871 | 24,729 | 37,546 | 53,804 | |||||||||
Net interest income (expense) |
9,615 | 3,707 | 9,090 | (345 | ) | ||||||||
| | | | | | | | | | | | | |
Total net revenues |
442,035 | 218,309 | 418,710 | 325,447 | |||||||||
Expenses |
|||||||||||||
Compensation |
85,999 | 53,174 | 108,208 | 94,191 | |||||||||
Loan servicing |
37,294 | 26,141 | 60,103 | 58,748 | |||||||||
Loan acquisition and origination |
16,087 | 12,783 | 27,971 | 24,097 | |||||||||
Other expenses |
27,660 | 23,557 | 47,903 | 43,441 | |||||||||
| | | | | | | | | | | | | |
Total expenses |
167,040 | 115,655 | 244,185 | 220,477 | |||||||||
| | | | | | | | | | | | | |
Net income |
$ | 274,995 | $ | 102,654 | $ | 174,525 | $ | 104,970 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Net income (loss) by segment |
|||||||||||||
Correspondent(1) |
$ | 208,739 | $ | 43,601 | $ | 116,985 | $ | 34,135 | |||||
Consumer Direct |
47,469 | 5,457 | 27,553 | (4,393 | ) | ||||||||
Servicing |
18,787 | 53,596 | 29,987 | 75,228 | |||||||||
| | | | | | | | | | | | | |
|
$ | 274,995 | $ | 102,654 | $ | 174,525 | $ | 104,970 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
During the six months ended June 30, 2020, we recorded net income of $275.0 million, an increase of $172.3 million, or 168%, compared to the same period in 2019. The increase was primarily due to an increase in net gains on loans held for sale and loan acquisition and origination revenue, partially offset by a decrease in net loan servicing revenue and an increase in compensation expense.
During the year ended December 31, 2019, we recorded net income of $174.5 million, an increase of $69.6 million, or 66%, compared to the same period in 2018. The increase was primarily due to an increase in net gains on loans held for sale and loan acquisition and origination revenue, partially offset by decreases in net loan servicing revenue and other income, and an increase in compensation expense.
Net Gains on Loans Held for Sale
Net gains on loans held for sale include both cash and non-cash items. We receive proceeds from loan sale transactions in both cash and MSRs. We also recognize a liability for our estimate of losses we expect to incur in the future as a result of claims against us in connection with representations and warranties that we made in such loan sale transactions. The representations and warranties require adherence to purchaser and insurer origination and underwriting guidelines, including, but not limited to, the validity of the lien securing the loan, property eligibility, borrower credit, income and asset requirements, and compliance with applicable federal, state and local law. In the event of a breach of our representations and warranties, we may be required to either repurchase the loans with identified defects or indemnify the investor or insurer against future credit losses.
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The following is a summary of net gains on loans held for sale included in income:
|
Six months ended June 30, | Year ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Unaudited) |
(Audited) |
|||||||||||
|
(Amounts in thousands) |
||||||||||||
Cash gain (loss): |
|||||||||||||
Loans |
$ | 45,712 | $ | (160,798 | ) | $ | (358,690 | ) | $ | (423,274 | ) | ||
Hedging activities |
(99,603 | ) | (56,232 | ) | (96,787 | ) | 55,066 | ||||||
| | | | | | | | | | | | | |
|
(53,891 | ) | (217,030 | ) | (455,477 | ) | (368,208 | ) | |||||
| | | | | | | | | | | | | |
Non-cash gain: |
|||||||||||||
Mortgage servicing rights capitalized upon sale of loans |
339,225 | 279,366 | 653,645 | 469,536 | |||||||||
Provision for losses relating to representations and warranties: |
|||||||||||||
Pursuant to loan sales |
(5,474 | ) | (2,991 | ) | (6,351 | ) | (6,121 | ) | |||||
Change in estimate |
(3,417 | ) | 3,654 | 5,620 | 3,861 | ||||||||
Change in fair value of loans and derivatives outstanding at period end: |
|||||||||||||
Interest rate lock commitments |
70,058 | 10,951 | 12,922 | (522 | ) | ||||||||
Loans held for sale |
7,341 | 10,004 | 8,264 | 9,236 | |||||||||
Hedging derivatives |
(14,815 | ) | 543 | 10,616 | (25,406 | ) | |||||||
| | | | | | | | | | | | | |
|
392,918 | 301,527 | 684,716 | 450,584 | |||||||||
| | | | | | | | | | | | | |
Net gains on loans held for sale |
$ | 339,027 | $ | 84,497 | $ | 229,239 | $ | 82,376 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
At period end: |
|||||||||||||
Loans held for sale |
$ | 1,902,953 | $ | 2,164,830 | $ | 2,648,609 | $ | 1,714,066 | |||||
Commitments to purchase and originate loans |
$ | 5,724,598 | $ | 2,032,668 | $ | 2,349,959 | $ | 1,175,013 |
During the six months ended June 30, 2020, our net gains on loans held for sale increased by $254.5 million, or 301%, compared to the same period in 2019. The increase was primarily due to a reduction in net cash losses on loans sold, which decreased by $163.1 million, or 75%, during the six months ended June 30, 2020, compared to the same period in 2019, as a result of increased volume opportunity and improved profit margins. The increase in net gains on loans held for sale was also due to an increase in non-cash gains from the recognition of MSRs on loans sold, which increased by $59.9 million, or 21%, during the six months ended June 30, 2020, compared to the same period in 2019.
During the six months ended June 30, 2020, we recognized a provision for repurchase losses relating to loan sales of $5.5 million, an increase of $2.5 million, or 83%, compared to the same period in 2019. We increased our estimated liability for losses under representations and warranties by $3.4 million during the six months ended June 30, 2020 as a result of an increase in expected delinquencies stemming from the effects of the COVID-19 pandemic. We decreased the liability for losses by $3.7 million during the six months ended June 30, 2019 as a result of better-than anticipated performance of our seasoned loan pools.
During the year ended December 31, 2019, we recognized net gains on loans held for sale of $229.2 million, an increase of $146.9 million, or 178%, compared to the same period in 2018. The increase reflects the effects of lower market interest rates which resulted in increased volume opportunity and improved profit margins.
During the year ended December 31, 2019, we recognized a provision for losses under representations and warranties of $6.4 million relating to loan sales, a decrease of $225,000, or 3%,
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compared to the same period in 2018. During the year ended December 31, 2019, we recorded a reduction in the liability for losses under representations and warranties of $5.8 million resulting from a change in estimate related to better-than anticipated performance of seasoned loan pools, an increase of $1.7 million, or 42%, compared to the same period in 2018.
The following is a summary of loan repurchase activity and the UPB of loans subject to representations and warranties:
|
Six months ended June 30, | Year ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Unaudited) |
(Audited) |
|||||||||||
|
(Amounts in thousands) |
||||||||||||
During the period: |
|||||||||||||
Indemnification activity: |
|||||||||||||
Loans indemnified, beginning of the period |
$ | 7,444 | $ | 3,565 | $ | 3,565 | $ | 2,836 | |||||
New indemnifications |
113 | 4,871 | 5,859 | 1,007 | |||||||||
Less: |
|||||||||||||
Indemnified loans paid off |
1,235 | | 767 | 278 | |||||||||
Indemnified loans for which the indemnification period expired |
3,533 | 217 | 1,213 | | |||||||||
| | | | | | | | | | | | | |
Loans indemnified, end of the period |
$ | 2,789 | $ | 8,219 | $ | 7,444 | $ | 3,565 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Repurchase activity: |
|||||||||||||
Total loans repurchased |
$ | 23,371 | $ | 15,807 | $ | 29,659 | $ | 23,295 | |||||
Repurchased loans resolved: |
|||||||||||||
Repurchased by correspondent sellers |
$ | 13,423 | $ | 7,347 | $ | 14,210 | $ | 15,748 | |||||
Repaid by borrowers or resold with defects resolved |
3,186 | 3,680 | 8,557 | 3,825 | |||||||||
| | | | | | | | | | | | | |
Total repurchased loans resolved during the period |
$ | 16,609 | $ | 11,027 | $ | 22,767 | $ | 19,573 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
At period end: |
|||||||||||||
Unpaid principal balance of loans subject to representations and warranties |
$ | 89,186,956 | $ | 71,395,673 | $ | 79,637,805 | $ | 61,591,290 | |||||
Liability for losses under representations and warranties |
$ | 14,307 | $ | 5,973 | $ | 6,588 | $ | 7,407 |
During the six months ended June 30, 2020, we repurchased loans totaling $23.4 million in UPB, an increase of $7.6 million, or 47.9%, compared to the same period in 2019. We recorded $1.2 million in net losses relating to repurchases against our liability for losses under representations and warranties during the six months ended June 30, 2020, an increase of $0.4 million, or 52%, compared to the same period in 2019.
During the year ended December 31, 2019, we repurchased loans totaling $29.7 million, an increase of $6.4 million, or 27.3%, compared to the same period in 2018. During the year ended December 31, 2019, we recorded $1.3 million in net losses relating to repurchases against our liability for representations and warranties, an increase of $733,000, or 120%, compared to the same period in 2018.
As the outstanding balance of loans we purchase and sell subject to representations and warranties increases and the loans sold continue to season, we expect that the level of repurchase activity may increase. Our representations and warranties are generally not subject to stated limits of exposure.
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However, we believe that, as of June 30, 2020, the UPB of loans sold by us represents the maximum exposure to repurchases related to representations and warranties.
Net Loan Servicing Revenue
Net loan servicing revenue includes fees we receive for servicing loans, which are based on a contractual percentage of the outstanding principal balance of such loans, and ancillary income such as late fees. Net loan servicing revenue also includes changes in fair value of MSRs due to the realization of expected cash flows and changes in valuation inputs, and the results of MSR hedging activities.
The following is a summary of net loan servicing revenue included in income:
|
Six months ended June 30, | Year ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Unaudited) |
(Audited) |
|||||||||||
|
(Amounts in thousands) |
||||||||||||
Loan servicing fees: |
|||||||||||||
Base fees |
$ | 131,264 | $ | 100,948 | $ | 221,209 | $ | 199,409 | |||||
Ancillary income |
5,751 | 4,443 | 10,172 | 8,897 | |||||||||
| | | | | | | | | | | | | |
|
137,015 | 105,391 | 231,381 | 208,306 | |||||||||
| | | | | | | | | | | | | |
Change in fair value of mortgage servicing rights |
(328,652 | ) | (106,547 | ) | (139,872 | ) | 75,312 | ||||||
Realization of expected cash flows of mortgage servicing rights |
(125,731 | ) | (75,049 | ) | (179,762 | ) | (111,983 | ) | |||||
Change in fair value of hedging derivatives |
358,164 | 151,675 | 161,640 | (37,131 | ) | ||||||||
Other |
(938 | ) | (1,332 | ) | (2,335 | ) | (5,051 | ) | |||||
| | | | | | | | | | | | | |
Net loan servicing revenue |
$ | 39,858 | $ | 74,138 | $ | 71,052 | $ | 129,453 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Average unpaid principal balance of MSR portfolio |
$ | 79,961,709 | $ | 65,789,475 | $ | 68,221,507 | $ | 67,257,855 |
Following is a summary of the UPB of loans serviced:
|
|
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
June 30, 2020 | 2019 | 2018 | |||||||
|
(Unaudited) |
(Audited) |
||||||||
|
(Amounts in thousands) |
|||||||||
Mortgage servicing rights: |
||||||||||
Loans purchased |
$ | 84,134,495 | $ | 74,490,711 | $ | 63,726,470 | ||||
Loans originated |
1,944,557 | 1,274,510 | 786,925 | |||||||
| | | | | | | | | | |
|
86,079,052 | 75,765,221 | 64,513,395 | |||||||
Loans held for sale |
1,807,376 | 2,542,091 | 1,640,044 | |||||||
| | | | | | | | | | |
Unpaid principal balance of loans serviced |
$ | 87,886,428 | $ | 78,307,312 | $ | 66,153,439 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
During the six months ended June 30, 2020, we recorded net loan servicing revenue of $39.9 million, a decrease of $34.3 million, or 46%, compared to the same period in 2019. The decrease was primarily due to an increase in fair value losses and amortization of expected cash flows relating to MSRs, net of hedging results, of $66.3 million, or 222%, as a result of an increase in prepayment speeds caused by sustained low interest rates. The decrease in net loan servicing revenue was partially offset by an increase in loan servicing fees of $31.6 million, or 30%, as a result of a 22% increase in
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our average servicing portfolio during the six months ended June 30, 2020, compared to the same period in 2019.
During the year ended December 31, 2019, we recorded net loan servicing revenue of $71.1 million, a decrease of $58.4 million, or 45%, compared to the same period in 2018. The decrease was primarily due to increased losses from changes in fair value and amortization of expected cash flows of MSRs resulting from the effect of lower interest rates, partially offset by increased gains from our hedging results during the year ended December 31, 2019.
Loan Acquisition and Origination Revenue
Loan acquisition and origination revenue includes fees we earn for purchasing and originating loans. These fees generally represent flat fees that we charge on a per-loan basis, which we recognize at the time the loans are funded. During the six months ended June 30, 2020, we recorded loan acquisition and origination revenue of $40.7 million, an increase of $9.4 million, or 30%, compared to the same period in 2019. The increase was primarily due to an increase in the volume of loans we produced.
During the year ended December 31, 2019, we recorded loan acquisition and origination revenue of $71.8 million, an increase of $11.6 million, or 19%, compared to the same period in 2018. The increase was primarily due to an increase in volume of loans we produced.
Other Income
Other income includes income that is dissimilar in nature to revenues we earn from loan sales and servicing activities, such as revenue from warehouse lender incentives and early payoff fees. During the six months ended June 30, 2020, we recognized other income of $12.9 million, a decrease of $11.9 million, or 50%, compared to the same period in 2019. The decrease was primarily due to a reduction in financing incentive fees of $11.9 million resulting from the conclusion of a warehouse lender's incentive program.
During the year ended December 31, 2019, we recognized other income of $37.5 million, a decrease of $16.3 million, or 30%, compared to the same period in 2018. The decrease was primarily due to a decrease of $28.5 million in financing incentive fees resulting from the conclusion of a warehouse lender's incentive program, partially offset by increases in early payoff fees over the same period.
Net Interest Income (Expense)
During the six months ended June 30, 2020, net interest income (expense) increased by $5.9 million, or 159%, compared to the same period in 2019. The increase was primarily due to a reduction in interest expense incurred due to lower interest rates during the six months ended June 30, 2020, compared to the same period in 2019.
During the year ended December 31, 2019, net interest income (expense) increased by $9.4 million, or 2,735%, compared to the same period in 2018. The increase was primarily due to a $9.4 million increase in interest income earned on loans held for sale as a result of an increase in average loan inventory.
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Compensation Expense
The following is a summary of compensation expense:
|
Six months ended June 30, |
Year ended December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Unaudited) |
(Audited) |
|||||||||||
|
(Amounts in thousands) |
||||||||||||
Salaries and wages |
$ | 32,013 | $ | 24,930 | $ | 52,524 | $ | 49,736 | |||||
Incentive compensation |
40,465 | 17,403 | 34,867 | 24,972 | |||||||||
Taxes and benefits |
13,516 | 10,698 | 20,632 | 18,835 | |||||||||
Equity-based compensation |
5 | 143 | 185 | 648 | |||||||||
| | | | | | | | | | | | | |
|
$ | 85,999 | $ | 53,174 | $ | 108,208 | $ | 94,191 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Employee head count(1): |
|||||||||||||
Average during the period |
731 | 617 | 646 | 616 | |||||||||
Period end |
793 | 664 | 691 | 603 |
During the six months ended June 30, 2020, we recognized compensation expense of $86.0 million, an increase of $32.8 million, or 62%, compared to the same period in 2019, due in part to a 19% increase in employee headcount resulting from growth in our production volumes and servicing portfolio. The increase in compensation expense was also partially the result of an increase in incentive compensation expense of $23.1 million, or 133%, for surpassing our performance goals during the six months ended June 30, 2020.
During the year ended December 31, 2019, we recognized compensation expense of $108.2 million, an increase of $14.0 million, or 15%, compared to the same period in 2018. The increase was primarily due to an increase in incentive compensation recognized during the year ended December 31, 2019 compared to the same period in 2018.
Loan Servicing Expense
During the six months ended June 30, 2020, we recognized loan servicing expense of $37.3 million, an increase of $11.2 million, or 43%, compared to the same period in 2019. The increase was primarily due to increased servicing fees paid to our subservicers as a result of the growth in our servicing portfolio.
During the year ended December 31, 2019, we recognized loan servicing expense of $60.1 million, an increase of $1.4 million, or 2%, compared to the same period in 2018. The increase was primarily due to increased servicing fees paid to our subservicers as a result of the growth in our servicing portfolio.
Loan Acquisition and Origination Expense
During the six months ended June 30, 2020, we recognized loan acquisition and origination expense of $16.1 million, an increase of $3.3 million, or 26%, compared to the same period in 2019. The increase in loan acquisition and origination expense was due to an increase in the volume of loans produced.
During the year ended December 31, 2019, we recognized loan acquisition and origination expense of $28.0 million, an increase of $3.9 million, or 16%, compared to the same period in 2018. The
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increase in loan acquisition and origination expense was due to an increase in the volume of loans produced.
Other Expenses
Other expenses include expenses that are dissimilar in nature to expenses we incur from our mortgage banking activities, including, but not limited to, technology, depreciation and amortization, marketing and advertising and professional fees. During the six months ended June 30, 2020, we recognized other expenses of $27.7 million, an increase of $4.1 million, or 17%, compared to the same period in 2019. The increase was primarily due to an increase in professional fees incurred during the six months ended June 30, 2020.
During the year ended December 31, 2019, we recognized other expenses of $47.9 million, an increase of $4.5 million, or 10%, compared to the same period in 2018. The increase was primarily due to an increase in depreciation and amortization expense resulting from the growth in our fixed assets and capitalized software, and an increase in professional fees.
Balance Sheet Analysis
The following is a summary of key balance sheet items:
|
|
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
June 30, 2020 | 2019 | 2018 | |||||||
|
(Unaudited) |
(Audited) |
||||||||
|
(Amounts in thousands) |
|||||||||
Assets |
||||||||||
Cash |
$ | 501,374 | $ | 93,581 | $ | 70,111 | ||||
Loans held for sale |
1,902,953 | 2,648,609 | 1,714,066 | |||||||
Mortgage servicing rights |
736,657 | 893,193 | 754,940 | |||||||
Servicing advances, net |
35,085 | 50,326 | 31,040 | |||||||
Loans eligible for repurchase |
683,022 | 382,703 | 139,889 | |||||||
Other assets |
214,658 | 142,821 | 159,045 | |||||||
| | | | | | | | | | |
Total assets |
$ | 4,073,749 | $ | 4,211,233 | $ | 2,869,091 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Liabilities and member's equity |
||||||||||
Borrowings |
$ | 2,119,229 | $ | 2,856,742 | $ | 1,870,595 | ||||
Liability for loans eligible for repurchase |
683,022 | 382,703 | 139,889 | |||||||
Other liabilities |
107,182 | 82,054 | 71,583 | |||||||
| | | | | | | | | | |
Total liabilities |
2,909,433 | 3,321,499 | 2,082,067 | |||||||
Member's equity |
1,164,316 | 889,734 | 787,024 | |||||||
| | | | | | | | | | |
Total liabilities and member's equity |
$ | 4,073,749 | $ | 4,211,233 | $ | 2,869,091 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Total assets decreased by $137.5 million, or 3%, to $4.1 billion from December 31, 2019 to June 30, 2020. The decrease was primarily due to a decrease of $745.7 million, or 28%, in our inventory of LHFS and a decrease of $156.5 million, or 18%, in MSRs during the six months ended June 30, 2020. Our cash balance increased by $407.8 million, or 436%, during the six months ended June 30, 2020, as part of our initiative to maintain excess liquidity due to the effects of the COVID-19 pandemic. Loans eligible for repurchase increased by $300.3 million, or 78%, during the six months ended June 30, 2020 due to an increase in the number of loans for which payment have not been made for 90 days as a result of the COVID-19 pandemic and the CARES Act forbearance requirements.
Total liabilities decreased by $412.1 million, or 12%, to $2.9 billion from December 31, 2019 to June 30, 2020. The decrease was primarily due to a decrease of $737.5 million, or 26%, in total
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borrowings, partially offset by an increase in our liability for loans eligible for repurchase during the six months ended June 30, 2020. Member's equity increased by $274.6 million, or 31%, to $1.2 billion from December 31, 2019 to June 30, 2020, primarily due to net income of $275.0 million recorded for the six months ended June 30, 2020.
Total assets increased by $1.3 billion, or 47%, to $4.2 billion from December 31, 2018 to December 31 2019. The increase was primarily due to an increase of $934.5 million, or 55%, in our inventory of loans held for sale. Total liabilities increased by $1.2 billion, or 60%, to $3.3 billion from December 31, 2018 to December 31, 2019. The increase was primarily due to an increase of $986.1 million, or 53%, in total borrowings to fund the growth in our inventory of loans held for sale and MSRs. Member's equity increased by $102.7 million, or 13%, to $889.7 million from December 31, 2018 to December 31, 2019 primarily due to net income of $174.5 million recorded for the year ended December 31, 2019, partially offset by $72.0 million in distributions to A-A Mortgage.
Cash Flows
The following is a summary of our cash flows:
|
Six months ended June 30, |
Year ended December 31, | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Unaudited) |
(Audited) |
|||||||||||
|
(Amounts in thousands) |
||||||||||||
Net cash flows provided by (used in): |
|||||||||||||
Operating activities |
$ | 973,661 | $ | (548,036 | ) | $ | (1,411,424 | ) | $ | (1,074,512 | ) | ||
Investing activities |
39,330 | 101,775 | 187,549 | 286,292 | |||||||||
Financing activities |
(607,573 | ) | 454,238 | 1,246,720 | 804,813 | ||||||||
| | | | | | | | | | | | | |
Net increase in cash and restricted cash during the period |
$ | 405,418 | $ | 7,977 | $ | 22,845 | $ | 16,593 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Our cash flows resulted in a net increase in cash and restricted cash of $405.4 million during the six months ended June 30, 2020, compared to $8.0 million during the same period in 2019. During the six months ended June 30, 2020, net cash provided from operating activities totaled $973.7 million primarily due to an increase in cash proceeds received from loan sales resulting from increased production volumes, partially offset by an increase in cash used to grow our inventory of loans held for sale. During the six months ended June 30, 2019, net cash used in operating activities totaled $548.0 million due to an increase in cash used to grow our inventory of loans held for sale, partially offset by cash proceeds received from loan sales during the period.
Net cash provided by investing activities during the six months ended June 30, 2020 totaled $39.3 million, a decrease of $62.4 million, or 61%, compared to the same period in 2019. The decrease in net cash provided by investing activities was primarily due to a decrease of $62.4 million in cash proceeds from MSR sales due to decreased MSR sale activity in 2020 compared to 2019.
Net cash used in financing activities totaled $607.6 million during the six months ended June 30, 2020, primarily due to an increase in cash used to pay down our outstanding borrowings. Net cash provided by financing activities totaled $454.2 million during the six months ended June 30, 2019, primarily due to an increase in proceeds from borrowings drawn to finance the growth in our inventory of loans held for sale and MSRs.
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Our cash flows resulted in a net increase in cash and restricted cash of $22.8 million and $16.6 million during the years ended December 31, 2019 and 2018, respectively. During the year ended December 31, 2019, net cash used in operating activities totaled $1.4 billion, an increase of $337.0 million, or 31%, compared to the same period in 2018. The net cash used in operating activities increased primarily due to an increase in cash used to grow our inventory of loans held for sale, partially offset by an increase in proceeds received from sales and payments from loans held for sale.
Net cash provided by investing activities during the year ended December 31, 2019 totaled $187.5 million, a decrease of $99.0 million or 34%, compared to the same period in 2018. The decrease in net cash provided by investing activities was primarily due to a decrease of $110.3 million in cash received from MSR sales due to decreased MSR sale activity in 2019 compared to 2018.
Net cash provided by financing activities during the year ended December 31, 2019 totaled $1.2 billion, an increase of $441.9 million, or 55%, compared to the same period in 2018. The net cash provided by financing activities increased primarily due to increased proceeds from borrowings drawn to finance the growth in our inventory of loans held for sale and MSRs.
Liquidity and Capital Resources
Our liquidity reflects our ability to meet our current obligations, fund new originations and purchases, and make investments as we identify them. Our primary sources of liquidity generally consist of cash flows from our business activities, equity contributions from our Parent and proceeds under our borrowing facilities. As of June 30, 2020, our cash balance totaled $501.4 million, of which approximately $461.4 million was in excess of our contractual liquidity requirements and available for general corporate purposes, and the total capacity of uncommitted funds under our warehouse facilities and revolving credit facilities totaled $2.9 billion and $175.0 million, respectively. We believe that our liquidity is sufficient to meet our current liquidity needs for the next twelve months.
Investors in A-A Mortgage have unfunded equity capital commitments to A-A Mortgage totaling $275.0 million. These funds are callable by A-A Mortgage from the investors at any time, but are expected to be extinguished in connection with the Transactions prior to the completion of this offering. We have historically used these funds to grow our MSR portfolio and to support general corporate purposes. As of June 30, 2020, approximately $503.0 million of equity capital contributions have been received from A-A Mortgage.
Our current leverage strategy focuses on the financing of our assets where we believe such borrowing is prudent, appropriate and available. Our borrowing activities are primarily in the form of warehouse borrowings and notes payable. Our warehouse borrowings represent the sales of loans to lenders together with agreements for us to repurchase such loans at a later date, when we sell the loans to investors.
Our warehouse borrowings generally provide for terms of approximately one year. As such, we expect to renew these borrowing facilities in advance of their maturity dates in order to secure our ongoing liquidity and access to capital or otherwise allow ourselves sufficient time to replace any necessary financing.
Our notes payable secured by MSRs have maturity dates ranging from one to five years.
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The following table presents the average outstanding, maximum and ending balances of our warehouse borrowings:
|
Six months ended June 30, |
Year ended December 31, |
|||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Unaudited) |
(Audited) |
|||||||||||
|
(Dollars in thousands) |
||||||||||||
Weighted average interest rate |
2.58 | % | 4.12 | % | 4.35 | % | 3.87 | % | |||||
Average balance |
1,977,313 | 1,250,653 | $ | 1,325,839 | $ | 1,333,045 | |||||||
Maximum daily balance |
2,746,151 | 1,947,688 | $ | 2,698,131 | $ | 1,874,837 | |||||||
Balance at end of the period(1) |
1,740,918 | 1,947,688 | $ | 2,453,247 | $ | 1,563,041 |
The differences between the average and maximum daily balances of our warehouse borrowings reflect the fluctuations throughout the period of our inventory as we fund and pool loans for sale.
Our notes payable consist of borrowings secured by MSRs relating to certain loans in our servicing portfolio, including revolving credit agreements and term notes.
In September 2018, we entered into an amendment to a revolving credit agreement secured by MSRs pursuant to which the outstanding balance of $75.0 million was converted into a term note with a principal amount of $75.0 million. The outstanding balance of the term note totaled $65.3 million and $68.3 million as of June 30, 2020 and December 31, 2019, respectively.
In August 2018, we, through AmeriHome GMSR Issuer Trust, entered into a structured finance transaction, pursuant to which we finance excess servicing spread relating to Ginnie Mae MSRs. In connection with this Ginnie Mae MSR Facility, the Trust issued to us a variable funding note ("VFN") with a maximum principal balance of $500.0 million and we, through the Trust, issued one series of term notes, (the "Series 2018-GT1 Term Notes"), with an aggregate principal amount of $155.0 million to certain qualified institutional buyers, including several limited partners in A-A Mortgage.
In November 2019, pursuant to the terms of the Ginnie Mae MSR facility, we, through the Trust, issued a new series of term notes, (the "Series 2019-GT1 Term Notes"), with an aggregate principal amount of $225.0 million to certain qualified institutional buyers, including several limited partners in A-A Mortgage. The proceeds from the issuance of the Series 2019-GT1 Term Notes were used to redeem all of the Series 2018-GT1 Term Notes.
In connection with the Ginnie Mae MSR Facility, we entered into a VFN Repurchase Agreement with a financial institution, pursuant to which we sold the VFN with an agreement to repurchase it at a later date. We and the financial institution are also counterparties under a repurchase agreement used for warehouse borrowings. The VFN Repurchase Agreement has a term of one year and provides for a maximum loan amount of $150.0 million. As of June 30, 2020, the maximum borrowings under the respective warehouse borrowing facility and the VFN Repurchase Agreement combined was $750.0 million. The outstanding balance of the VFN Repurchase Agreement (excluding unamortized debt issuance costs) totaled $10.0 million as of June 30, 2020 and December 31, 2019.
Our secured financing agreements contain margin call provisions that, upon notice from the applicable lender at its option, require us to transfer cash or, in some instances, additional collateral in an amount sufficient to eliminate any margin deficit. Upon notice from the applicable lender, we will generally be required to satisfy the margin call on the day of such notice or within one business day thereafter, depending on the timing of the notice. A margin deficit will generally result from any decline in the market value (as determined by the applicable lender) of the assets subject to the related financing agreement or surpassing aging limits on the pledged collateral.
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We are subject to liquidity and net worth requirements established by the GSEs for approved non-depository sellers/servicers and Ginnie Mae for approved single-family issuers, as summarized below:
As of June 30, 2020, we were in compliance in all material respects with the applicable Agency requirements.
Off-Balance Sheet Arrangements
As of June 30, 2020, we have not entered into any off-balance sheet arrangements.
Contractual Obligations
As of June 30, 2020, we had contractual obligations totaling $7.9 billion, comprised of borrowings, commitments to purchase and originate loans and facility leases.
The following summarizes our contractual obligations as of June 30, 2020:
|
Less than 1 year |
1 - 3 years | 3 - 5 years | More than 5 years |
Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(Amounts in thousands) |
|||||||||||||||
Commitments to purchase and originate loans |
$ | 5,724,598 | $ | | $ | | $ | | $ | 5,724,598 | ||||||
Short-term debt |
$ | 1,830,955 | | | | 1,830,955 | ||||||||||
Long-term debt |
$ | 6,302 | 59,013 | 225,000 | | 290,315 | ||||||||||
Interest on long-term debt |
$ | 3,565 | 5,032 | | | 8,597 | ||||||||||
Office leases |
$ | 4,165 | 12,184 | 6,147 | | 22,496 | ||||||||||
| | | | | | | | | | | | | | | | |
Total obligations |
$ | 7,569,585 | $ | 76,229 | $ | 231,147 | $ | | $ | 7,876,961 | ||||||
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Debt Obligations
As described further above in "Liquidity and Capital Resources," we currently finance certain of our assets through borrowings with major financial institution counterparties, primarily in the form of warehouse borrowings and notes payable. Under the terms of these agreements, we are required to comply with certain financial covenants and various non-financial covenants customary for transactions of this nature. As of June 30, 2020, we were in compliance in all material respects with these covenants.
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The agreements contain events of default (subject to certain materiality thresholds and grace periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross-defaults, guarantor defaults, Agency approval, material adverse changes, bankruptcy or insolvency proceedings and other events of default customary for these types of transactions. The remedies for such events of default are also customary for these types of transactions and include the acceleration of the principal amount outstanding under the agreements and the liquidation by our lenders of the loans or other collateral then subject to the agreements.
The following summarizes the contractual maturities for our borrowings as of June 30, 2020:
Counterparty
|
Outstanding indebtedness |
Facility size |
Committed facility |
Maturity date |
|||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
(Amounts in thousands) |
||||||||||||
Warehouse borrowings: |
|||||||||||||
Counterparty A |
$ | 502,747 | $ | 600,000 | $ | | 3/4/2021 | ||||||
Counterparty B |
$ | 87,805 | $ | 300,000 | $ | | 9/17/2020 | ||||||
Counterparty C |
$ | 242,328 | $ | 400,000 | $ | | 5/25/2021 | ||||||
Counterparty D |
$ | 475,323 | $ | 750,000 | $ | | (1) | ||||||
Counterparty E |
$ | 363,976 | $ | 495,000 | $ | | (1) | ||||||
Counterparty F |
$ | 1,125 | $ | 300,000 | $ | | 7/20/2020 | ||||||
Counterparty G |
$ | 67,614 | $ | 100,000 | $ | | 9/1/2020 | ||||||
Notes payable: |
|||||||||||||
Counterparty H |
$ | 51,000 | $ | 100,000 | $ | 100,000 | 8/23/2020 | ||||||
Counterparty I |
$ | 29,037 | $ | 75,000 | $ | 75,000 | 9/28/2023 | ||||||
Counterparty I |
$ | 65,315 | $ | | $ | | 11/22/2022 | ||||||
Qualified institutional buyers |
$ | 225,000 | $ | | $ | | 11/25/2024 | ||||||
Other borrowings: |
|||||||||||||
Counterparty J |
$ | 10,000 | $ | 150,000 | $ | 10,000 | 10/12/2021 | ||||||
Counterparty K |
$ | | $ | 10,000 | $ | 10,000 | 3/6/2021 |
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices, equity prices, real estate values and other market-based risks. The primary market risks that we are exposed to are interest rate risk, prepayment risk, credit risk and fair value risk.
Interest Rate and Fair Value Risks
Interest rate risk is highly sensitive to many factors, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors beyond our control. Changes in interest rates affect both the fair value of, and interest income we earn from, our mortgage-related investments and our derivative financial instruments. This effect is most pronounced with fixed-rate mortgage assets. In general, rising interest rates negatively affect the fair value of our IRLCs and inventory of loans held for sale and positively affect the fair value of MSRs.
Our operating results will depend, in part, on differences between the income from our investments and our financing costs. Presently our debt financing is based on a floating rate of interest calculated on a fixed spread over the relevant index, as determined by the particular financing arrangement.
We engage in interest rate risk management activities in an effort to reduce the variability of income caused by changes in interest rates. To manage this price risk resulting from interest rate risk,
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we use derivative financial instruments acquired with the intention of mitigating the risk that changes in market interest rates will result in unfavorable changes in the fair value of our IRLCs, inventory of loans held for sale and MSRs. We do not use derivative financial instruments for purposes other than in support of our risk management activities.
The following presents the effect of hypothetical changes in the fair value of MSRs caused by assumed immediate changes in interest rates that are used to determine fair value:
|
|
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
June 30, 2020 |
|||||||||
Mortgage servicing rights sensitivity analysis
|
2019 | 2018 | ||||||||
|
(Amounts in thousands) |
|||||||||
Fair value of mortgage servicing rights |
$ | 736,657 | $ | 893,193 | $ | 754,940 | ||||
Interest rate change: |
||||||||||
Decrease in fair value from 50 basis point adverse change |
$ | (71,982 | ) | $ | (148,306 | ) | $ | (84,887 | ) | |
Increase in fair value from 50 basis point favorable change |
$ | 142,940 | $ | 135,717 | $ | 63,091 |
Prepayment Risk
To the extent that the actual prepayment rate on the loans underlying MSRs differs from what we projected when we initially recognized the MSRs and when we measured fair value as of the end of each reporting period, the carrying value of our investment in MSRs will be affected. A decrease in the principal balances of the loans underlying MSRs or an increase in prepayment expectations is likely to decrease our fair value estimates of MSRs, which would likely result in a reduction to our net loan servicing revenue.
The following presents the effect of hypothetical changes in the fair value of MSRs caused by assumed immediate changes in prepayment speed that are used to determine fair value:
|
|
December 31, | ||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
June 30, 2020 |
|||||||||
Mortgage servicing rights sensitivity analysis
|
2019 | 2018 | ||||||||
|
(Amounts in thousands) |
|||||||||
Fair value of mortgage servicing rights |
$ | 736,657 | $ | 893,193 | $ | 754,940 | ||||
Prepayment speed change: |
||||||||||
Decrease in fair value from 1% conditional prepayment rate increase |
$ | (103,234 | ) | $ | (40,741 | ) | $ | (24,140 | ) | |
Increase in fair value from 1% conditional prepayment rate decrease |
$ | 116,608 | $ | 44,974 | $ | 26,230 |
Credit Risk
We are subject to credit risk in connection with our loan sales activities. Our loan sales are generally made with contractual representations and warranties, which, if breached, may require us to repurchase the loan or reimburse the investor for any losses incurred due to such breach. Thus, representation and warranty breaches effectively transfer credit risk from an investor or insurer back to us.
The amount of our liability for losses due to representations and warranties to the loans' investors is not limited. However, we believe that the current UPB of loans sold by us to date represents the maximum exposure to repurchases related to representations and warranties. We include a provision for potential losses due to the representations and warranties we make as part of our recognition of loan sales, based initially on our estimate of the fair value of such obligation. We review our loss experience relating to representations and warranties and adjust our liability estimate when necessary.
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As a servicer of loans insured or guaranteed by agencies of the U.S. government, we have credit risk to the extent that such insurance or guaranty does not cover the entirety of the credit losses that are incurred in association with those loans and for which the servicer is responsible.
In the event of developments affecting the credit performance of loans sold by us, including, but not limited to, a significant increase in unemployment or a significant deterioration in real estate values in markets where properties securing loans produced by us are located, defaults could increase and result in credit losses.
Non-GAAP Financial Measures
To provide investors with information in addition to our results as determined by GAAP, we disclose Adjusted After-Tax Net Income and Adjusted After-Tax ROAE as non-GAAP measures which management believes provide useful information to investors. These measures are not financial measures calculated in accordance with GAAP and should not be considered as a substitute for net income or total debt or any other operating performance measure calculated in accordance with GAAP, and may not be comparable to a similarly titled measure reported by other companies.
We define "Adjusted After-Tax Net Income" as tax-effected earnings before limited partner related management expenses and stock-based compensation expense, and the tax effects of those adjustments. We define "Adjusted After-Tax ROAE" as Adjusted After-Tax Net Income divided by our average equity value, accounting for the same adjustments as used to derive Adjusted After-Tax Net Income.
We believe that the presentation of Adjusted After-Tax Net Income and Adjusted After-Tax ROAE provides useful information to investors regarding our results of operations and financial condition because each measure assists both investors and management in analyzing and benchmarking the performance and value of our business. Adjusted After-Tax Net Income and Adjusted After-Tax ROAE provide indicators of performance that are not affected by certain one-time charges unrelated to operating performance. Accordingly, management believes that these measurements are useful for comparing general operating performance from period to period, and management relies on these measures for planning and forecasting of future periods. Additionally, these measures allow management to compare our results with those of other companies that have different financing and capital structures. However, other companies may define Adjusted After-Tax Net Income and Adjusted After-Tax ROAE differently, and as a result, our measures of Adjusted After-Tax Net Income and Adjusted After-Tax ROAE may not be directly comparable to those of other companies.
Although we use Adjusted After-Tax Net Income and Adjusted After-Tax ROAE as financial measures to assess the performance of our business, such use is limited because they do not include certain material costs necessary to operate our business. Adjusted After-Tax Net Income and Adjusted After-Tax ROAE should be considered in addition to, and not as a substitute for, net income (loss) and total debt in accordance with GAAP as measures of performance. Our presentation of Adjusted After-Tax Net Income and Adjusted After-Tax ROAE should not be construed as an indication that our future results will be unaffected by unusual or nonrecurring items.
Because of these limitations, Adjusted After-Tax Net Income and Adjusted After-Tax ROAE are not intended as alternatives to net income (loss) or total debt as an indicator of our operating performance or financial condition and should not be considered as measures of discretionary cash available to us to invest in the growth of our business or as measures of liquidity or cash that will be available to us to meet our obligations. We compensate for these limitations by using Adjusted After-Tax Net Income and Adjusted After-Tax ROAE along with other comparative tools, together with GAAP measurements, to assist in the evaluation of operating performance. See below for reconciliation of these non-GAAP measures to their most comparable GAAP measures. Additionally, our GAAP-based measures can be found in the consolidated financial statements and related notes included elsewhere in this prospectus.
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Reconciliation of Net Income to Adjusted After-Tax Net Income and Adjusted After-Tax ROAE
|
Six months ended June 30, | Year ended December 31, | ||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
2020 | 2019 | 2019 | 2018 | 2017 | 2016 | 2015 | |||||||||||||||
|
(unaudited) |
(audited) |
||||||||||||||||||||
|
(Amounts in thousands) |
|||||||||||||||||||||
Net income |
$ | 274,995 | $ | 102,654 | $ | 174,525 | $ | 104,970 | $ | 95,494 | $ | 73,244 | $ | 29,032 | ||||||||
Limited partner related management expenses |
9,108 | 6,403 | 13,376 | 11,418 | 11,653 | 7,122 | 3,546 | |||||||||||||||
Equity-based compensation |
5 | 143 | 185 | 648 | 677 | 801 | 797 | |||||||||||||||
Adjusted Pre-Tax Net Income |
$ | 284,108 | $ | 109,200 | $ | 188,086 | $ | 117,036 | $ | 107,824 | $ | 81,167 | $ | 33,375 | ||||||||
Provision for income taxes |
66,564 | 25,609 | 44,109 | 27,732 | 26,956 | 20,292 | 8,344 | |||||||||||||||
Adjusted After-Tax Net Income |
$ | 217,544 | $ | 83,591 | $ | 143,977 | $ | 89,304 | $ | 80,868 | $ | 60,875 | $ | 25,031 | ||||||||
Average equity value |
$ | 983,025 | $ | 785,058 | $ | 815,272 | $ | 719,069 | $ | 605,964 | $ | 429,589 | $ | 183,280 | ||||||||
Adjusted After-Tax ROAE |
44.3 | % | 21.3 | % | 17.7 | % | 12.4 | % | 13.3 | % | 14.2 | % | 13.7 | % |
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Company Overview
We are a non-bank financial services provider engaged in the business of purchasing mortgage loans from correspondent sellers, originating mortgage loans directly to consumers, and pooling and selling these loans in the secondary market. We generally retain the MSRs for these sold mortgage loans and subcontract the primary servicing function to unrelated third-party subservicers.
We are a leading U.S. non-bank producer and master servicer of residential mortgage loans. Our strategy is to utilize our production channels and technology to source mortgages, MSRs and other mortgage related assets at attractive prices and generate returns at or above our target in all market environments. Since our founding in 2013, our business has grown to become the 11th largest mortgage lender and the third largest correspondent producer according to Inside Mortgage Finance. By employing the AmeriHome Way, we have created a highly flexible and scalable platform that leverages a technology-enabled, purpose-built infrastructure and organization as well as our management team's collective experience, to achieve what we believe to be best-in-class performance, a highly efficient cost structure, and continued growth and profitability in all market environments.
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Our main strategic focus is acquiring mortgage-related assets through our correspondent activities, including MSRs. We acquire these assets largely by purchasing, pooling and selling newly originated residential mortgage loans and retaining the MSRs relating to such mortgage loans. Our correspondent line of business serves as an intermediary between mortgage lenders and the capital markets by purchasing, pooling, and reselling newly originated mortgage loans, and as a conduit for sourcing new MSRs. In the Consumer Direct channel, we focus on refinancing mortgage loans in our MSR portfolio. We believe these refinance activities will allow us to earn attractive cash margins, retain our existing customers and maintain or recapture the related MSR that otherwise may be captured by our competitors, especially in a declining interest rate environment and, thus, leveling out or reducing prepayment speeds of our MSR portfolio.
The AmeriHome Way has enabled us to achieve stable and attractive ROEs and allowed our operating company to generate positive net income every month since achieving initial profitability in February 2015. For the twelve months ended December 31, 2019 and 2018 and the six months ended June 30, 2020, total net revenues were $418.7 million, $325.4 million and $442.0 million, respectively, and net income was $174.5 million, $105.0 million and $275.0 million, of which $71.1 million, $129.5 million and $39.9 million, respectively, consisted of net loan servicing revenue. Over the same time period, Adjusted After-Tax Net Income was $144.0 million, $89.3 million and $217.5 million, and Adjusted After-Tax ROAE was 17.7%, 12.4% and 44.3%, respectively. For a reconciliation of each of Adjusted After-Tax Net Income and Adjusted After-Tax ROAE to its most comparable GAAP measure, see "Management's Discussion and Analysis of Financial Condition and Results of OperationsNon-GAAP Financial Measures." We have generated attractive returns over the past five years while continuing to grow steadily in our three different business segments: (i) Correspondent channel, (ii) Consumer Direct channel and (iii) Servicing.
Our experienced and entrepreneurial team has developed a lean business model that targets an attractive and consistent return on equity and has the requisite scale and flexibility to adapt to changing market conditions. We aim to produce mortgage related assets, including mortgage loans on a cost-effective basis with the goal of ultimately selling the underlying mortgages to the Agencies and other third-party investors in the secondary market, while retaining the associated MSRs. We also have a track record of consistent, prudent and profitable growth, having expanded our production volume
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from $18.7 billion in 2015 to $27.9 billion for the six months ended June 30, 2020 and our servicing portfolio from $18.9 billion to $87.9 billion as of June 30, 2020.
Our best-in-class platform drives strong customer retention through consistent and competitive pricing across a broad range of mortgage products and multiple production channels. We have client relationships with over 650 correspondent sellers, which include independent mortgage bankers, community and regional banks, and credit unions of all sizes. These relationships are supported by our compelling value proposition, which includes a constant market presence, reliable pricing and reduced execution times compared to competitors. This ultimately translates into improved funding timelines for the end-user (the mortgage customer), a streamlined process and reduced working capital requirements for our clients. Our ability to deliver on our core value proposition is evidenced by AmeriHome having grown since our founding to the 11th largest mortgage lender for the twelve months ended June 30, 2020, according to Inside Mortgage Finance.
We emphasize automation and process-improvement to prioritize speed, continuity, and cost efficiency in our business in a highly compliant, quality-controlled operation. We believe this translates into a highly efficient cost structure and a unique value proposition for our correspondent seller and consumer borrowers. Informed by extensive mortgage banking experience in bank-compliant settings, senior management established a robust risk management framework at AmeriHome's inception and continues to prioritize a compliance driven culture as a core tenet of the AmeriHome Way.
Overview
Our principal strategy is to source residential mortgage loans through multiple production channels and to sell the loans to third-party investors including the Agencies and others, or to securitize them, while generally retaining the MSRs. We actively manage our MSR assets and act as master servicer, while outsourcing day-to-day operational servicing functions such as payment collection to subservicers.
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AmeriHome Business Model Overview
Our business segments include two production channels and servicing:
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direct business to defend our MSR portfolio from attrition as customers refinance when interest rates fall.
We are an approved seller/servicer for Fannie Mae and Freddie Mac. We are also an approved issuer of securities guaranteed by Ginnie Mae, an FHA-approved lender and a lender/servicer for the VA and the USDA. We are licensed to originate loans in 46 states and the District of Columbia. We are able to purchase and service loans in 49 states and the District of Columbia. Our national presence allows us to build new relationships across the country, growing our scale, and helps to limit geographical concentration in our MSR portfolio.
We have invested in our infrastructure and technology platform since inception to enable low-cost production and maximize operational efficiency. We have focused on data and analytics as the most critical and complex component of our foundation. We believe our proprietary systems are highly strategic, create competitive advantages and add significant value, including the ability to organize, understand, analyze, and audit large quantities of information quickly and efficiently. We have four key proprietary products that work in tandem to provide a stable and comprehensive data platform based on one consistent data source: Cronus (data management platform), Magnus (data warehouse), Aspen (loan pricing, hedging and pooling platform), and Nexus (daily P&L and hedge attribution platform). We created this proprietary technology ecosystem to allow us to ensure reporting consistency across business lines, run complex analyses in a flexible manner, and enable high levels of automation.
We also choose to outsource technology platforms based on the availability of satisfactory products in the market and whether doing so is more capital efficient than building technology in-house. For example, we worked directly with Ellie Mae to facilitate the development of their latest generation correspondent loan origination system, thus securing a contract that provides us access to the industry-leading technology at an efficient cost compared to the industry.
Large, Established and Growing Financial Market
We operate in one of the largest financial markets in the world. According to the Mortgage Bankers Association, there was approximately $10.7 trillion of residential mortgage debt outstanding in the United States as of December 31, 2019. Despite its large size, our market continues to grow. For the year 2019, total mortgage production volume was $2.2 trillion, representing approximately 30% growth over the prior year. Moreover, the mortgage origination market has averaged $2.0 trillion in annual originations since 2000. As of August 2020, the mortgage rate environment has resulted in a significant portion of mortgages being "in-the-money" to refinance. Even when this healthy supply of production diminishes, additional macroeconomic factors, independent of the rate environment, are expected to contribute to a steady increase in purchase volume over time.
Although overall market volume can fluctuate due to macroeconomic factors such as interest rates and refinancing activity, there has been a steady increase in purchase volume. Regardless of the interest rate environment, purchase volume growth is expected to continue given prevailing demographic trends. As an example, the average homeownership rate amongst millennials, the largest U.S. population group by generation, was only approximately 38% as of June 30, 2020 based on data from the U.S. Census Bureau. Based on historical figures provided by the Mortgage Bankers Association, purchase volume grew on a compound annual basis of 6.7% from 2009 to 2019. From 2020 to 2021, purchase volumes are expected to increase by 3.3% based on Fannie Mae forecasted estimates. We believe that we are especially well positioned to capitalize on the expected increase in purchase volume through our purchase-focused correspondent business, while our consumer direct platform will benefit from the overall growth in our servicing portfolio.
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Fragmentation of the Mortgage Industry
Despite the size and attractive growth characteristics, the mortgage industry has become increasingly fragmented and diversified. Prior to the financial crisis, large retail U.S. banks traditionally held the majority of the market share in both mortgage originations and servicing. This trend reversed itself shortly after the global financial crisis, as heightened capital requirements and increased regulatory scrutiny precipitated a decrease in bank participation in the mortgage market and resulted in non-bank market participants seizing a significantly greater market share. The market share of mortgage originations produced by the top five banks (Wells Fargo, J.P. Morgan Chase, Bank of America, U.S. Bank, and Citi) declined from 60% for the year ended December 31, 2010 to 18% for the twelve month period ended June 30, 2020, according to Inside Mortgage Finance.
Most mortgage transactions start off at the local level, where we believe relationships and advice matter more than brand or scale. A majority of these relationships are between small independent mortgage bankers, realtors, builders and borrowers. Unlike other consumer-facing industries, leaders in the mortgage market do not hold significant market share. Our Correspondent channel allows us to capitalize on this fragmentation, by bringing our scale, efficiency and capital markets access to our large, diverse network of independent correspondent sellers nationwide. We believe there will be ongoing opportunities for our market-leading platform to increase our market share.
We believe the following characteristics of our business position us as a leading producer and servicer of residential mortgages in the United States and will allow us to continue to capture market opportunities in the future:
Track record of consistent and profitable growth
A core tenet of the AmeriHome Way is to achieve substantial growth without sacrificing profitability. We have generated positive net income at our operating company every month since achieving initial profitability in February 2015. Since then, our production volume has expanded from $18.7 billion in 2015 to $44.4 billion in 2019 and our revenue has grown at a compounded annual growth rate of 45.6%, reaching $418.7 million for the year ended December 31, 2019. Through a focus on disciplined growth, our top-line results have translated into healthy profits, as net income and return on average equity increased from $29.0 million and 15.7% for the year ended December 31, 2015, to $174.5 million and 20.8% for the year ended December 31, 2019. Since the first quarter of 2016, our quarterly TTM return on average equity has been consistent, at an average of 18.1% despite the changes in interest rate and the macroeconomic environment.
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We are a market-leading independent mortgage company with complementary business segments
We are the third largest correspondent producer, having purchased over $43.0 billion of mortgage loans in 2019 through our active lending relationships across 47 states. As of June 30, 2020, we retained relationships with approximately 400,000 customers through our servicing portfolio. Our growing Consumer Direct channel allows us to extend the life of those relationships, as well as to add new customers to our platform. We believe our scale, and the operational efficiency that derives from it, is a sustainable competitive advantage for our business.
Our business pairs our targeted production strategy with an outsourced subservicing approach designed to minimize risk while maximizing profitability. We believe that the synergistic relationship between our Correspondent channel, Consumer Direct channel, and Servicing business that employs a subservicing strategy positions us to increase our scale without substantial expense growth, increasing our margins.
Purpose-built, automated, and scalable platform drives low costs and margin expansion
AmeriHome was built to avoid many of the risks and challenges faced by independent mortgage companies during the financial crisis, allowing us to thrive in any economic environment. Our management team's firsthand experience prior to AmeriHome with the limitations of legacy systems and the lack of adequate risk management has shaped our nimble, variable cost strategy that allows us to make business decisions that produce sustainable investment returns and avoid excessive overhead and undisciplined growth that leads to volatile results as market conditions change. We believe that our current platform can support production that is at least double our average volume in 2019. Specifically, we have prioritized our highly scalable Correspondent channel and the use of leading subservicers rather than building our own servicing infrastructure, while utilizing technology platforms that optimize flexibility and efficiency.
Our investments in our custom-designed technology suite support our low-cost strategy and maximize efficiency. We have best-in-class turnaround times to quickly purchase loans from correspondent sellers, propelled by highly automated processes developed through our proprietary data and analytics platform. We are able to analyze and price over $6.0 billion worth of loans on a daily basis with a median time from bid submission to pricing of approximately 3 minutes. We have a median time from file receipt to release of conditions of 4 days and a median time from file receipt to approval for purchase of 7 days.
The targeted outsourcing of select functions leverages our partners' marginal cost advantages and provides us with optimal operational flexibility while minimizing capital deployment. These various factors combine to drive a low cost platform that will allow us to profitably operate in various market conditions. If margins were to contract, we would be well-positioned to absorb such contraction with a cost to produce that we believe is substantially lower than that of correspondent peers, demonstrating the tangible benefits of our systems. The correspondent business is more scalable than other mortgage origination channels that rely on maintaining a brick-and-mortar retail presence, have high advertising costs, or require higher costs to produce each loan, positioning us for further growth without proportional expansion of headcount or operational costs.
Unique value proposition to support our continued success
We have built a diversified business platform capable of providing high quality service to both our correspondent sellers and our servicing customers throughout the mortgage life cycle. Maintaining strong relationships with our network of correspondent lenders supports our purchase production business, while delivering a high-quality servicing experience to our customers throughout their period of homeownership allows for us to acquire their future business through our Consumer Direct channel. We strive to consistently deliver value to both constituencies to maintain our leading position in correspondent production while increasing our returns on the initial purchase of a correspondent mortgage through our consumer direct refinancing efforts.
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We maintain strong, long-term relationships with our network of over 650 correspondent sellers that are often augmented by longstanding relationships between our sellers and the AmeriHome team. Approximately 90% of our correspondents transact with us every quarter, which we believe is among the highest monthly participation rates in the industry. The loyalty of our partners demonstrates the strength of our relationships and the benefits of partnering with AmeriHome.
Our main tenets to providing value to our correspondent sellers are:
Our platform was designed to grow and thrive in any market environment
We were built to succeed in any macroeconomic environment. We believe we are positioned to continue on a path of profitable growth regardless of prevailing market conditions, supported by our efficient operations, strong purchase-focused platform, emerging refinance and portfolio recapture strategy, servicing management and active management of MSRs. In highly competitive environments, our low cost model and selective purchase strategy allow us to maintain profitability despite margin decreases. In markets with less competition, our scalable platform and extensive correspondent network allow us to capture additional volume and expanded margins while maintaining our stringent quality controls.
Our MSR portfolio and its associated revenue mitigate fluctuations in our production business, providing revenue diversification and recurring cash flows. Our strength in purchase originations should also support our production business in any market environment, while our developing consumer direct platform should allow us to increase refinance and portfolio recapture rates. For the six months ended June 30, 2020 and the year ended December 31, 2019, our purchase volume was $11.8 billion and $27.9 billion, respectively, and our refinance volume was $16.1 billion and $16.5 billion, respectively.
Our platform is built to support future expansion in volume and product mix, allowing us to pivot efficiently should market conditions change. Our developing non-delegated channel will enhance our ability to react to the evolution of the mortgage and consumer finance markets.
Experienced, cohesive management team
Our senior management team has a compelling combination of financial, correspondent, secondary and risk management experience in both bank and non-bank mortgage lending environments. They have an average of 27 years of industry experience and a track record of generating financial and operational improvements. We are led by our Chief Executive Officer, Jim Furash, who oversees all aspects of our business. Over 29 years, he has worked extensively in all areas of mortgage and commercial banking, including retail banking, risk management, commercial lending and capital markets. He also has over 15 years of direct-to-consumer financial services marketing experience. Our Chief Investment Officer, Josh Adler, has over 25 years of capital markets experience at large banking institutions. Our Chief Operating Officer, John Hedlund, has built and managed large correspondent
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lending platforms across his 32 year career. Our Chief Risk Officer, Mark Miller, has more than 35 years of mortgage risk management and lending experience, much of it at large banking institutions. Our Chief Financial Officer, Garrett Galati, has 17 years of capital markets and financial management experience in the mortgage industry. Our Chief Information Officer, David Andersen, has 19 years of trading, data management, quantitative analysis and technology experience in the mortgage industry. We have experienced zero turnover amongst our 11 founding employees, which serves as a testament to AmeriHome's strong team culture extending beyond the executive suite.
Our relationships with Athene and Apollo create attractive investment opportunities
We believe our relationships with Athene, a leading retirement services company that issues, reinsures and acquires retirement savings products, and Apollo, a leading global alternative investment manager, position us to identify investment opportunities that are mutually beneficial. Athene and Apollo look to invest in a portfolio of asset origination platforms and investment teams across a variety of asset classes, of which we are one. These relationships also provide us with elevated access to market insight and investor interest in potential products or investment opportunities. As an asset originator, we are able to work collaboratively by both purchasing and investing with Athene and Apollo, and ultimately sell products that are mutually beneficial.
We collaborate in evaluating and developing production opportunities to further strengthen our business. In the last four years, we have produced over $1.5 billion of assets for Athene and Apollo, including whole loans and securitizations and believe this ongoing relationship will continue to be a strategic advantage for AmeriHome. While not exclusive, we believe our strategic relationship creates significant competitive advantages. Specifically, we can coordinate on product development, which enables us to incubate and launch new products or channels with the knowledge that there exists an initial source of funding or investor appetite. As of June 30, 2020, Athene had consolidated investments of $163.0 billion, of which residential mortgage loan assets represented $4.7 billion, and Apollo had total assets under management of $413.6 billion, including $300.4 billion of credit and credit-oriented assets under management and $47.4 billion of deployable investment capital.
Our Strategy for Profitable Growth
Our core business strategy involves generating attractive returns for our equity holders by producing mortgage loans through a low-cost platform and using gains from the sale of such mortgages to originate MSRs at attractive returns. Our objective is to further expand our leading positions in both residential mortgage production and servicing in the United States by growing our existing channels, opportunistically expanding into new channels and products and continuing to drive operational efficiencies.
Continue expansion of correspondent business by leveraging our strengths and adding relationships
We have grown our correspondent network from zero sellers in 2014 to over 650 as of June 30, 2020. Continuing to deliver on our strong value proposition will allow us to deepen our existing relationships while attracting additional high-quality loan sellers, expanding our Correspondent channel. Our current market share of correspondent production volumes for the twelve months ended June 30, 2020 is approximately 8%, leaving ample room for significant expansion while maintaining price discipline and our high standards. Our scalable, low cost platform will allow us to achieve such growth in any market environment.
We estimate that we see approximately 26% of all correspondent loans in the industry nationwide that are offered out for bid on a daily basis and win only approximately 10% of the loans on which we bid because of our strict pricing parameters and return hurdles. We have chosen to foster growth through adding high quality counterparties to our network instead of sacrificing price selectivity. We can drive further growth by increasing penetration within our existing network of sellers through
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continued consistent, efficient execution. Our fulfillment platform currently has capacity to support substantial additional volume without meaningful incremental costs.
Maintaining a low cost infrastructure is critical to our growth strategy. It enables us to remain competitive in the sector during periods of contracting margins. We believe our efficient core infrastructure allows us to have a lower production cost per loan than almost all of our peers. Our average direct cost per loan of 21 basis points has decreased approximately 1.1% since 2018. Our low cost base positions us to expand this channel with minimal capital outlay or run-rate increase in expenses.
Continued growth and investment in our Consumer Direct channel
We continue to develop our Consumer Direct channel, launched in 2016, in order to grow our production revenue at attractive cash margins through recapture and new customer acquisition, as well as to defend our MSR portfolio from prepayment-related attrition. We aim to further advance our refinance strategy by capitalizing on our large and growing servicing customer base with low customer acquisition costs. Our significant investment in proprietary technology and data analytics allows us to efficiently identify customers who would benefit from a refinance. Sustained low interest rates will continue to drive heightened refinance activity that we aim to capture through efficient, real-time targeting of existing servicing customers. As we have continued to develop this channel to 2.3% of our 2019 production volume, its high profit margins have grown to contribute 15.8% of our net income.
In the future, we anticipate that our continued expansion into new customer acquisition will drive further growth in consumer direct originations. Our proprietary technology suite will augment our efforts to attract new customers through an optimized and focused outreach strategy.
Prudently manage growth in servicing
As of June 30, 2020, we serviced approximately 400,000 customers with an aggregate UPB of approximately $87.9 billion. For the six months ended June 30, 2020, we added approximately $23.2 billion UPB of net loans to our MSR portfolio. We currently see opportunities to expand our servicing business through the growth of existing origination channels, as well as potentially exploring MSR acquisitions through bulk or other channels if offered on attractive terms.
Our subservicing strategy and low overhead enable us to view our servicing business objectively. Because we do not bear the costs of a large servicing operation, we can actively manage our servicing assets to maximize profitability to our business and are willing to monetize MSRs. Since inception, we have opportunistically sold 34% of all of our originated MSRs, and have done so above carrying value. Our active hedging strategy allows us to lock in the initial MSR yield without bearing undue interest rate risk. Additionally, our operating servicing revenue has grown from $24.7 million for the year ended December 31, 2015 to $229.0 million for the year ended December 31, 2019.
Opportunistically evaluate new products and channels
The residential mortgage market is constantly evolving with technological innovation and changing investor appetite, creating demand for new products. We believe we can successfully expand upon the success of our existing channels, offer new products and target additional customers profitably and with acceptable levels of risk. In addition, our relationship with Athene and Apollo will allow us to evaluate and develop opportunities that may be mutually beneficial.
Our flexible, scalable platform will allow us to pivot efficiently should market conditions change through our Consumer Direct and non-delegated Correspondent channels. Our relationships with our approximately 400,000 servicing customers provide direct access to a substantial addressable market to launch new products with minimal incremental costs. Our Consumer Direct channel allows us to
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originate loans with close to zero customer acquisition and marketing cost, which will support any future business or product additions.
For example, our recent entrance into the non-delegated Correspondent channel provides the necessary framework for future expansion of our product suite to include additional mortgage-related and other consumer finance products. We believe our control of the underwriting process in non-delegated originations will lower the risk of launching new products, ensuring continued loan quality and high standards, even if we choose to expand into credit-sensitive products.
Continue to optimize business by focusing on operational efficiencies
As we continue to scale our business, it is imperative that we maintain the same operational discipline that has helped us minimize costs and produce successful returns over the years. We will continue to focus on maintaining what we believe to be a highly efficient cost structure through prudent operational management, utilization of our existing infrastructure, and investments in technology. This will make us more competitive in entering new products and markets, expanding our existing business in all margin and interest rate environments, and optimizing our return on capital in all interest rate environments.
Production
Our mortgage production platform was designed to be scalable, low-cost and efficient, while minimizing risk. We source residential mortgage loans through our two channels: Correspondent and Consumer Direct. Our correspondent model and our disciplined strategy are designed to generate long-term outperformance versus the market. Through low-cost correspondent production and consumer direct origination, we are able to consistently produce MSRs at attractive yields. Our large network of correspondent sellers allows us to see a large percentage of the mortgage market. We had the opportunity to bid on 26% of the $1.7 trillion of retail and wholesale mortgage loans originated in 2019. During the twelve months ended June 30, 2020, our 665 approved correspondent sellers provided us access to approximately $489 billion loans, representing approximately 22% of the total market. Over the same time period, our production volume totaled approximately $54 billion. Our growing presence in the Consumer Direct channel is designed to enable us to earn attractive margins while defending our MSR portfolio from heightened prepayment rates in a low interest rate environment by identifying mortgage loans that are likely to prepay and offering to refinance them at current rates.
Our production volume predominantly consists of purchase originations (i.e., mortgages originated to purchase a property), which positions us well for future growth. In 2019, 62.8% of our production volume was purchase production, which tends to be more stable from year to year than refinance production, which is more heavily dependent on interest rates. From the first quarter of 2017 through June 30, 2020, purchase production has comprised an average of 65% of our total volume. Purchase production volume has increased from $12.0 billion in 2015 to $28.0 billion in 2019, averaging 68% of our total volume over that time period, despite fluctuations in refinance volume, which has been driven by changes in interest rates. Our strong purchase platform and forecasted growth in purchase volumes should support expansion in our Correspondent channel.
We generate production revenue through gains achieved when pooling produced loans into securities known as mortgage backed securities or selling loans as whole-loans to various investors. This revenue is composed of upfront cash derived from the difference in price at which we purchase a loan and at which we sell the loan, as well as the capitalization of the fair market value of the MSR generated by selling the loan "servicing retained". We primarily produce conventional mortgage loans conforming to the underwriting standards of the GSEs (Fannie Mae and Freddie Mac), and
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government insured or guaranteed loans conforming to the underwriting standards of the FHA, VA and USDA.
We have an experienced Capital Markets team who actively manage the pricing, pooling and selling of loans into the secondary market, as well as all of the market risk management and hedging activities. We make forward lock commitments to purchase or produce loans at a specified price for settlement on a future date. During the time period between our commitment to price for a loan and the execution date when that loan is resold or securitized, we assume interest rate risk for that loan, which we hedge. The Capital Markets team leverages proprietary systems to enhance execution of loan sales and hedge against changes in market value that can be caused by changes in interest rates and various other market risks. A unique aspect of our capital markets platform is that one team manages both secondary execution and pricing at the time of purchase. This continuity allows us to optimize execution in our capital market activities.
We make both Mandatory and Best Efforts commitments to purchase loans. The majority of the forward lock commitments made by AmeriHome are on a mandatory basis, requiring the seller to make AmeriHome whole for hedging losses if the loans are not delivered against the forward commitments. In a Best Efforts commitment, AmeriHome is subject to market risk if a loan under such a commitment does not close and is therefore not sold to us. We employ proprietary predictive models to estimate the probability of a loan closing and efficiently manage market risk during the commitment period.
We utilize warehouse lending facilities from a number of different banks to fund originated or purchased loans until they are able to be sold. After we sell originated or purchased mortgage loans to secondary market investors, we retain substantially all of the MSRs on mortgage loans sold. The mortgage loans are typically sold within 30 days of origination or purchase in order both to mitigate credit risk and to minimize the capital required. Our warehouse facilities have an average gestation period of 12 days and an average pipeline lock up period of 16 days, which means they can be wound down quickly and in an orderly manner, even in an extreme stress environment.
The following is a summary of certain key variables and other factors we use to manage and assess the performance of our Correspondent and Consumer Direct businesses:
|
Six months ended June 30, | Year ended December 31, | |||||||||||
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|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Dollars in thousands) |
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During the period: |
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Loan production by channel: |
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Correspondent |
$ | 26,925,189 | $ | 18,235,412 | $ | 43,366,105 | $ | 36,474,504 | |||||
Consumer Direct |
985,353 | 334,769 | 1,029,811 | 723,454 | |||||||||
| | | | | | | | | | | | | |
|
$ | 27,910,542 | $ | 18,570,181 | $ | 44,395,916 | $ | 37,197,958 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Loan production by purpose: |
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Purchase |
42.2 | % | 72.8 | % | 62.8 | % | 79.1 | % | |||||
Refinance |
57.8 | % | 27.2 | % | 37.2 | % | 20.9 | % | |||||
Loan production by type: |
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Conventional |
69.1 | % | 56.1 | % | 58.2 | % | 59.8 | % | |||||
Government |
30.7 | % | 43.8 | % | 41.6 | % | 39.7 | % | |||||
Other |
0.2 | % | 0.1 | % | 0.2 | % | 0.5 | % | |||||
Interest rate lock commitment volume |
$ | 31,746,288 | $ | 19,748,352 | $ | 46,049,678 | $ | 36,771,787 | |||||
Gain on sale margin (in basis points) |
123.1 | 61.1 | 67.9 | 41.0 | |||||||||
At period end: |
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Number of correspondent sellers |
665 | 564 | 618 | 510 |
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Correspondent Channel
In our Correspondent channel, we purchase residential mortgage loans from a network of independent mortgage originators. We have chosen to pursue growth primarily through the Correspondent channel, which we think provides the most efficient and scalable access to the approximately $700.0 billion mortgage market, serviced by approximately 5,000 sellers. According to Inside Mortgage Finance, AmeriHome was the third largest correspondent producer in the country, with a volume of approximately $27 billion and a market share of approximately 8% for the six months ended June 30, 2020, up from a volume of $1.9 billion and a market share of 0.5% in 2014. Our market share has grown approximately 28% since 2017.
Our Correspondent channel primarily consists of loans that are originated, underwritten and funded by our correspondent sellers and subsequently sold to AmeriHome. The sellers make representations and warranties as to the quality of loan underwriting and compliance with applicable laws and lending regulations, and agree to buy back loans that fail to meet appropriate standards. Before purchasing loans from our correspondent sellers, we review loans for compliance, documentation and loan data to ensure accuracy and salability into the secondary market. We conduct extensive diligence on each correspondent seller and focus on a group of top-tier correspondent sellers with solid financial performance and long track records in the industry. Once we purchase the loans, they are on boarded to our servicing system and pooled and certified to the respective Agency or investor.
We have a diversified correspondent base, with approximately 60% of our production acquired from sellers outside of the top 25. We offer our correspondent sellers a consistent bid for a full suite of Agency loan products along with flexible delivery options, including conventional, FHA, VA, and USDA loans. For the delegated underwriting option, the credit decision is made by our correspondent sellers, and the loans are purchased by AmeriHome only after a loan has been closed by the correspondent seller. These sellers make certain representations and warranties to AmeriHome as described above. For the non-delegated underwriting option, AmeriHome makes the credit decision for the seller, and then purchases the loan after the seller has closed it subject to a reduced set of representations and warranties from the seller.
Our correspondent production represented 96.5% of our mortgage volume for the six months ended June 30, 2020, 97.7% for the year ended December 31, 2019 and 98.1% for the year ended December 31, 2018.
While the majority of our current correspondent production is acquired from sellers who use the delegated underwriting option, our non-delegated channel is growing. We believe our non-delegated production line of business, where our profits margins are typically higher than for delegated business, represents a significant opportunity for growth and we continue to focus on expanding it further by solidifying our existing relationships and acquiring new non-delegated sellers. Our production volume is highly diversified with 35% government and 65% conventional loans as of June 30, 2020.
Substantially all of the loans we purchase through our Correspondent channel line are Agency-eligible mortgage loans. Agency-eligible mortgage loans meet the guidelines of Fannie Mae, Freddie Mac or Ginnie Mae (whose loans are insured or guaranteed by government lending programs sponsored by the FHA, the VA or USDA). We sell mortgage loans mostly on a servicing-retained basis, but some are sold on a servicing-released basis as "whole loans" whereby we do not retain the related MSRs. In the future, we may securitize Agency-eligible loans, non-Agency loans, and/or jumbo mortgage loans in residential mortgage-backed securitization transactions.
We maintain our focus on risk management when expanding our network of correspondent sellers. Our internal salesforce identifies and attracts potential new sellers, which are then reviewed by a committee, with no decision-making power delegated to the salesperson. Our Correspondent channel
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drives the growth of our MSR portfolio, and MSR portfolio management is taken into account in determining our network of correspondent sellers and making credit decisions.
We utilize a three-pronged strategy to make credit decisions and approve new sellers. We believe in taking a holistic view of MSR risk and return, as we think this disciplined approach will generate long-term outperformance versus the market.
Consumer Direct Channel
Our Consumer Direct channel, which was launched in 2016, originates mortgages directly to an approximately $1.8 billion homeowner market, ultimately selling the underlying mortgage and retaining the servicing rights in most cases. Currently, the majority of our consumer direct origination activity is refinancing our existing AmeriHome servicing customers. By proactively offering attractive refinancing terms to existing borrowers, we can minimize MSR portfolio attrition and build customer loyalty by improving their mortgage experience. These attractive refinance terms have also contributed to our Net Promoter Score of 78.
We have a dedicated in-house sales and fulfillment team that drives our Consumer Direct channel, targeting further origination revenue at attractive cash margins. We have doubled our sales and fulfillment headcount since January 2018. We have automated systems through which Cenlar provides daily data on our servicing customers. Our significant investment in technology provides us direct access to real-time data that identifies identify target customers who would benefit from a refinance and allows us to approach customers efficiently. Our Consumer Direct channel represented 3.5%, 2.3% and 1.9% of our mortgage production volume for the six months ended June 30, 2020, and the years ended December 31, 2019 and 2018, respectively. Production has increased 2.5x since January 2018. Pull-through adjusted lock volume for this platform totaled $1.1 billion, $1.1 billion and $0.8 billion for the six months ended June 30, 2020 and for the years ended December 31, 2019 and 2018, respectively.
This Consumer Direct channel utilizes our call center and our origination website to reach our approximately 400,000 existing servicing customers who may benefit from a new mortgage. Of these customers, approximately 66% would benefit from refinancing. Those existing relationships allow us to benefit from nominal incremental customer acquisition cost, as we save the vast majority of the advertising and marketing costs that would be associated with sourcing new customers. Over time, we have expanded our consumer direct platform to allow us to acquire customers whose loans we do not currently service, which represents a significant opportunity for the future growth for our originations business. We expect our funding volume and earnings to continue to improve over time as we build out
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this platform to facilitate the refinancing of our growing servicing portfolio and to fully enable the acquisition of new customers whose loans we do not currently service.
Our Customer Direct channel is predominantly focused on Agency originations at this time, but in the future may offer non-Agency products as well. In-house underwriting capabilities provide expertise in credit management and ensuring compliance with the relevant underwriting guidelines. We also benefit from our robust data on existing servicing customers, such as historical payment history, financial profile, and other borrower characteristics.
Servicing
Overview
We service residential mortgages that we have acquired through our correspondent production or originated through our consumer direct lending channel, and for which we own the servicing rights. We service residential loans primarily for the GSEs (Fannie Mae and Freddie Mac) and Ginnie Mae, generally earning a contractual fee ranging from 25 to 56.5 basis points of outstanding unpaid principal balance, as well as ancillary income.
Servicing mortgage loans involves the collection of principal and interest payments from borrowers, the administration of tax and insurance escrow accounts, and the collection of insurance claims, in each case on behalf of mortgage loan investors or mortgage loan guarantors. Following the sale of a mortgage loan, loan servicers manage payments, delinquencies, and other administrative functions of mortgages for their own loans and/or those owned by third-party investors. Loan servicers earn fees on the mortgages they service, which is contractual revenue based on the UPB of the loans, as well as various types of other ancillary income. The net present value of the expected future cash flows from fees and ancillary income is capitalized on the mortgage servicer's balance sheet as MSRs. MSRs are carried at fair value and are subject to changes in valuation based on macroeconomic factors including interest rates. One key valuation input is the expected prepayment rate of the loans, which correlates with interest rates. As interest rates increase, MSR values generally increase in tandem as refinancing becomes less attractive and prepayment rates fall accordingly, extending the average life of the asset and increasing related expected cash flows. Mortgage servicing thereby functions as a natural hedge to mortgage originations, which generally decrease in a rising interest rate environment. In a falling rate environment, MSR valuations decrease as prepayment rates grow, but origination volumes are expected to grow as home financing becomes more affordable. We retain the servicing rights on the vast majority of the loans we originate.
We take an asset management approach to servicing. This includes (i) hedging and interest rate risk management, (ii) portfolio surveillance and active portfolio management and (iii) the use of a third-party subservicer, who is subject to our ongoing oversight. Our real-time data surveillance of our MSR portfolio allows us to create in-house models to use in conjunction with third-party models to predict loan prepayments and credit losses, and to simulate interest rate scenarios to estimate cash flows and valuation changes. We further enhance our total return through effective oversight of our subservicing activities, which we believe increases cash collection and operational efficiencies.
We outsource certain operational servicing functions to subservicers to better focus on key value-additive aspects of our servicing business, while avoiding the high fixed costs and capital requirements associated with operating a full servicing platform. In this way, we benefit from our subservicers' scale, and achieve a more variable servicing cost structure. This allows us to consistently prioritize quality and value over volume. Our subservicing arrangements also reduce our operational risk, as our subservicers absorb the costs of any operational errors. Cenlar, a bank with decades of experience in managing mortgage loans, subservices approximately 99% our mortgage loans.
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We aim to maintain a high-quality servicing portfolio of loans that have been properly underwritten to applicable investor guidelines. Ensuring the strength of our servicing portfolio begins with the selection of correspondent sellers who produce well underwritten loans to borrowers with the ability to repay them. As of June 30, 2020, our servicing customers had an average FICO score of 720 and approximately 5% of loans were 60 days or more delinquent. Our Ginnie Mae loans are insured or guaranteed by agencies of the U.S. government. While our Agency loan focus, whereby loans have been sold to others, insulates us from most of the credit risk in our servicing portfolio, delinquencies, foreclosures, and other results of underperformance can negatively impact our servicing revenue and MSR value, as well as requiring us to fund servicing advances.
The following is a summary of certain key variables and other factors we use to manage and assess the performance of our servicing business:
|
June 30, | December 31, | |||||||||||
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|
2020 | 2019 | 2019 | 2018 | |||||||||
|
(Dollars in thousands) |
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MSR Portfolio: |
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Unpaid principal balance |
$ | 86,079,052 | $ | 68,773,101 | $ | 75,765,221 | $ | 64,513,395 | |||||
Average FICO score |
720 | 715 | 713 | 717 | |||||||||
Carrying value ratio |
0.9% | 1.1% | 1.2% | 1.2% | |||||||||
Weighted average servicing fee (in basis points) |
33.4 | 32.7 | 34.2 | 30.0 | |||||||||
Weighted average servicing multiple |
2.6 | 3.3 | 3.5 | 4.0 | |||||||||
Loans serviced: |
|||||||||||||
Current through 59 days delinquent |
$ | 83,175,524 | $ | 69,810,935 | $ | 76,694,381 | $ | 65,402,525 | |||||
60 days or more delinquent |
4,710,904 | 1,017,634 | 1,612,931 | 750,914 | |||||||||
| | | | | | | | | | | | | |
|
$ | 87,886,428 | $ | 70,828,569 | $ | 78,307,312 | $ | 66,153,439 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
60 days or more delinquent as a percentage of total loans serviced |
5.4% | 1.4% | 2.1% | 1.1% |
Active Portfolio Management
We take a multi-faceted asset management approach to managing our MSRs, through which we aim to achieve a rate-neutral portfolio position. This includes (i) hedging and interest rate risk management, (ii) portfolio surveillance and active portfolio management and (iii) use of a subservicer, over whom we exercise ongoing oversight. Our active asset management strategy differentiates us from our peers, most of whom rely solely on the "macro hedge" intrinsic to combined origination and servicing businesses, and who do not actively hedge their portfolios.
We actively hedge MSRs in order to minimize market risk. Our real-time data surveillance of our MSR portfolio allows us to create in-house models to use in conjunction with third-party models to predict loan prepayments and credit losses, and to simulate interest rate scenarios to estimate cash flows and valuation changes. Finally, through effective oversight of our subservicing activities, we can further enhance our total return by increasing cash collections and operational efficiencies.
Retained servicing rights of loans we sell or securitize are also subject to interest rate risks, as falling rates tend to encourage loan payoffs due to borrower refinancing or the purchase of a new home, thus shortening the period of time a servicing fee is received and reducing MSR value. In contrast, rising rates tend to increase MSR values as borrowers are relatively less likely to refinance or purchase a new home, so that the life of the MSR asset and its associated cash flow continue for a longer period of time.
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Our Capital Markets team is responsible for valuation and risk management of the MSR portfolio. AmeriHome values MSRs created or retained through the purchase of whole loans through its implementation of an internal model tuned and calibrated to AmeriHome's view of MSR economic value. This model is used in our hedging activities, which seek to minimize market rate risk and the corresponding impact to our income statement. Historically, our active hedge strategy has successfully mitigated interest rate risk, resulting in a 0.2% average net change in the value of our MSRs due to market movement.
Outsourcing to Subservicers
We have chosen to operate our servicing business through the use of subservicers. We believe these arrangements allow us to benefit from our partners' expertise and infrastructure while maintaining our low-cost, capital light servicing platform. Additionally, our subservicing strategy frees us from supporting a large, people-intensive servicing business, allowing us to make business decisions based on marginal returns instead of meeting overhead requirements. Key benefits of our subservicing arrangements are as follows:
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We have a loan subservicing agreement with Cenlar, pursuant to which Cenlar provides subservicing for approximately 99% of our portfolio of mortgage loans and MSRs. Cenlar has been actively engaged in mortgage loan servicing and subservicing as its core business for more than 40 years. As a subservicer, Cenlar manages the ongoing, day-to-day servicing functions, including the collection of principal and interest payments from borrowers, the administration of tax and insurance escrow accounts, and the collection of insurance claims, in each case on behalf of mortgage loan investors or mortgage loan guarantors, as well as the management of mortgage loans that are delinquent or in foreclosure or bankruptcy.
Cenlar is a bank, and subject to significant governance requirements and regulatory oversight. Cenlar's internal audit function, quality control testing and risk management framework are subject to monitoring by the Office of the Comptroller of the Currency. In addition to Cenlar's internal and regulatory oversight, we employ both an operations-focused and a compliance-focused oversight regime that includes transaction level and entity level surveillance. We have automated daily monitoring in place, and also engage in asset reconciliation, custodial account reconciliation and loss monitoring review procedures to ensure Cenlar's operations meet our high standards.
We conduct monthly quality control reviews across all of Cenlar's subservicing functions, including call review and compliant monitoring to ensure courteous and accurate client communication and timely remediation of any customer concerns. The result is a three-dimensional outsourced oversight regime (Cenlar's own internal oversight, plus operations-focused oversight and consumer compliance-focused oversight from AmeriHome) that ensures operational issues are identified and remediated so that consumers are treated well and operations comply with industry standards.
Total subservicing compensation is established at levels that we believe are competitive with those charged by other primary subservicers and specialty subservicers. We also have an arrangement with LoanCare, LLC to provide subservicing for the remaining approximately 1% of our portfolio of mortgage loans that we service.
Technology
We take a differentiated approach to operations and our technological infrastructure, and are pragmatic when it comes to deciding whether to buy, lease, or build technology. Historically, from inception to today, when it comes to data-centric processes and analytics, we have focused on building in-house solutions. We have also chosen to outsource tech platforms where it's more capital efficient. However, when dealing with vendors, we strategically seek out competent vendors with a proven track record and solid technology to fulfill our more commoditized technology needs.
We have strategically developed proprietary technology that is critical and responsible for much of our success since inception, and has only been possible through the foundational expertise our employees possess. Since inception, we have understood that data is the core of our business, and the ability to organize, understand, analyze, and audit it will provide us the foundation from which a successful financial services business can be built.
Proprietary Technology
We have four notable proprietary products. Two of them, Cronus and Magnus, have been the backbone of AmeriHome's data-centric processing, reporting, and analytics since inception. Our proprietary technology allows us to process an average of approximately 7,700 loans (approximately $2.2 billion UPB) per day.
Cronus is a data management platform designed for working with highly structured data and managing data-centric processes. It is a SQL-based environment that provides enhanced tooling and support for keeping track of data, running processes that act on data, and managing inter-dependencies
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of data and processes. Cronus, as a platform, employs object and relational paradigms, but promotes, and in most cases requires, immutability to ensure a full representation of every piece of data that has ever been known and how it came to exist.
Cronus' event-based orchestration service is responsible for managing the automation of thousands of processes which include anything from data collection, internal and external service integration, report generation, and quantitative analysis. We have a team of engineers to support Cronus development, and have several quantitative analysts and traders that utilize the platform to manage their data and analytical needs.
Magnus is the data warehouse, which is based on a single agnostic data model, completely independent of any source system, which allows for maximum flexibility while ensuring reporting consistency across all aspects of the business, and minimizes downstream impacts on users, systems, and integrations from upstream application changes. Magnus is responsible for providing data that is used by all of our core processes, vendor integrations, reporting, and analytics, such as: (a) boarding loans to subservicers, (b) pooling and delivery to the Agencies, (c) fulfilling external party requests from regulators or auditors, (d) servicing valuation, (e) loan-level accounting and (f) model development.
Magnus inherently provides a full-representation of history for every data element, because it is built using the Cronus platform. Therefore, we turn to Magnus not only for daily operations, reporting, and analytics, but for understanding the behavior of data, and building better models. We have a team of engineers that support the ongoing development and maintenance of Magnus, as it is the single most valuable source of data at AmeriHome.
Two other notable proprietary products that represent our continued investment in technology are Nexus and Aspen.
Nexus is a P&L and hedge attribution system developed to report on daily economic P&L, and explain changes in hedge positions. Some of the fundamental objectives of Nexus include, but are not limited to, providing:
Like the rest of our data-centric systems, Nexus is built on top of Cronus.
Aspen is our Secondary Marketing Management System. The core functionality provided by Aspen is the valuation of loans, and the management of pool and trade data. Aspen is composed of a suite of stand-alone components that include, but are not limited to, (a) servicing valuation, (b) execution stack valuation, (c) pooling optimization, (d) fallout model, (e) hedge cost and mortgage option model, and (f) hedge model.
Aspen is a key component of our proprietary bulk-bid automation system that, when coupled with Cronus, allows Capital Markets to automatically consume data from correspondent sellers, run our full stack of analytics, and ultimately provide pricing to the desk within minutes of delivery of data.
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Third-Party Technology
The most notable third-party technology that we employ is the Encompass platform provided by Ellie Mae for both Correspondent Lending and Consumer Direct operations. Correspondent sellers interact with a web-based platform named Correspondent Connect, which is provided as part of the Encompass environment. Through Correspondent Connect, sellers can lock best efforts commitments, and delivery loan packages to AmeriHome.
Ellie Mae provides an additional platform named Investor Connect that allows our correspondent sellers that also use Encompass as their origination system to deliver loans to us without leaving their own environment, increasing efficiency for our sellers. Over 70% of our production comes from sellers that use Encompass as their origination platform.
Continuing to Invest in the Future
When we started AmeriHome our focus was on data and analytics, because we knew that was the most critical and complex component of our foundation, and was not something that we wanted to outsource. The company was founded by professionals that had deep understandings and backgrounds in Capital Markets, trading, quantitative and data analytics, artificial intelligence, building models, building data analytics platforms, data architecture, data engineering, and how to operationalize data. Cronus and Magnus have always been, and will remain to be the backbone of our data-centric environment and processes.
Now that we have matured as an organization, we have the additional resources that allow us to develop services that enable us to expose our expertise in new ways. A notable proprietary technology that we are currently building is named Haus. We consider Haus as AmeriHome's next-generation platform that will enable us to provide new services not only to various departments across AmeriHome, but also to our correspondent sellers and borrowers.
Haus will enable us to orchestrate more real-time analytics and services to drive down operational costs, increase data accuracy, decrease turn-times, decrease operational impacts of spikes in volume, and provide our clients and borrowers new light-weight and flexible functionality with rich feedback. Haus is a highly scalable, and flexible service-oriented architecture built using representational state transfer protocols.
Compliance and Oversight
We operate in a highly regulated environment that is subject to a patchwork of local, state and federal laws that have been developed over a period of many years, as well as investor requirements that can change with market conditions or as a result of other influences that are outside of our control. It is necessary for us to comply with applicable requirements from all of these sources, while at the same time remaining responsive to the needs of consumers and our business partners. Doing this requires constant surveillance of regulatory and industry changes, and the allocation of sufficient resources to effect the technological and process changes necessary to ensure compliance. Monitoring and testing programs must be implemented and constantly updated to provide an effective feedback loop so that we have timely visibility into compliance risks and failures, and so these can be effectively remediated once identified. It is not only our own people, processes, and technology that require oversight, it is our vendors as well. While vendors provide our company with critical capabilities and cost effective solutions for various aspects of our business, we often bear legal responsibility for their actions and compliance issues. It is our well designed Compliance Management Framework that allows to continually monitor internal and external operational processes as well as regulatory and market changes so that we embody a culture of ethics and compliance while remaining both competitive and profitable. AmeriHome has never engaged in predatory lending, nor has it facilitated such lending
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through the purchase of loans originated by others to consumers who did not have the ability to repay their loans.
Traditional Three Lines of Defense Model
Our organization employs a traditional three lines of defense model. Our first line of defense is our employees and managers within each line of business, who have primary responsibility for managing risks associated with day-to-day operations, and complying with changing regulations as required by their policies and procedures. They must ensure the adequacy of the preventive and detective controls that are currently in place, or work to improve and update them. Our second line of defense consists of several departments that are headed by our Chief Compliance Officer and other managers who report to the Chief Risk Officer. This group is responsible for change management, policies and procedures, cyber security, vendor management, and quality control testing of our servicing and loan origination/acquisition functions. Our third line of defense is our internal audit team, whose function it is to provide objective and independent assurance. The goal of our internal audit team is to assess whether the first and second lines of defense are operating effectively. It is charged with reporting to the board and audit committee, in addition to providing assurance to regulators and external auditors that the control environment is effective in design and operation.
Policies and Procedures, Governance
Our company's operations are governed by policies and procedures that are thoughtfully created, living documents that are continually updated to reflect the changing business and regulatory environment that we operate in. They ensure that the business operates according to standards that are up-to-date and that roles, responsibilities, and governance structures are well defined. An inventory and repository of the Company's many policies and procedures is maintained by the Compliance Department, and mandatory annual updates to these are enforced. Changes to credit policy on loan origination or acquisition are disseminated internally and externally by a dedicated group that stays current daily with the many industry and investor changes that continually occur. The Risk and Compliance Committee is the management committee primarily responsible for guiding the company's compliance and oversight functions, ensuring that relevant risks are identified and remediated, and that new business initiatives meet regulatory and industry standards. On at least an annual basis, the company conducts a Risk Assessment to identify areas of potential compliance risk that require additional focus and resources.
Quality Control Testing
Reliable and effective quality control programs are essential to ensuring the quality of the mortgage origination and servicing control environment and quality of the assets on our balance sheet. Quality control begins before a loan is closed and continues throughout the entire mortgage origination and servicing process. The purposes of our quality control program are to (i) monitor and evaluate the integrity of the loan origination, acquisition or servicing process, (ii) identify customer impacts and regulatory compliance issues, (iii) provide feedback about loan quality to our internal operations groups, our correspondent sellers, and our investors. We perform loan level and entity level reviews of our subservicers and have a variety of complex regulatory and investor guidelines we must adhere to.
Our loan origination quality control policy sets the framework to evaluate and monitor the overall quality of our mortgage production on a monthly basis. This spans the cycle from pre-funding (for Consumer Direct and non-delegated Correspondent channel loans) quality control reviews to post-closing (for Consumer Direct and both delegated and non-delegated Correspondent channel loans) quality control reviews, which are all managed independently of the operations teams. These reviews include procedures to ensure that sample selection of mortgage files complies with industry and investor standards. Results are reported to senior management in a timely manner at the Risk and
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Compliance Committee meeting, including a summary of critical components and trends. Finally, management remediation plans are required in response to material findings, with corrective action documented.
Our servicing oversight policy focuses primarily on oversight of our subservicing vendors and consists of: (i) an annual on-site review of each subservicer, (ii) monthly quality control file testing, (iii) consumer complaint testing and (iv) recorded call monitoring and calibrations.
Vendor Management
Vendor relationships present potential risks that must be properly managed on an ongoing basis. We have established a risk management framework that defines the requirements to ensure appropriate, risk-based oversight. All vendors are processed through the vendor management group, which is independent of the lines of business. Systems and personnel are in place to effectively execute and document compliance with the expected standards for vendor management. Each vendor is assigned one of four risk-levels (critical, high, medium or low) based on varying inherent and residual risk factors. While we are vigilant in our initial review and assessment of vendor relationships, we continue to oversee our vendors through periodic reviews of key vendor relationships, including exercising risk-based oversight of service providers' policies, procedures, internal controls, and training as needed to ensure appropriate oversight of compliance responsibilities.
Counterparty Oversight of Correspondent Sellers
We have an extensive application and vetting process that all correspondent sellers must go through before selling any loans to the Company. We have an experienced internal team that does
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background checks, financial analysis, and an assessment of the quality and quantity of the loans originated by prospective sellers. The final approval decision lies with a committee comprised of Executive Committee members that have final decision-making authority to approve additional correspondent sellers. Following a counterparty's initial approval, we maintain oversight of the relationship through quarterly review of financials and review of seller report cards that assess all dimensions of the seller relationship and the performance of the loans purchased from them. Once per month, Executive Committee members also review any sellers who are on our watch list and determine the future of our relationships with them. Sellers must go through a formal re-approval process once each year.
Information and Cybersecurity
We follow a five-prong framework to oversee our information and cybersecurity programs: identify, protect, detect, respond and recover. Within this framework, we have developed a cybersecurity incident response plan to respond to any major cyber or information security incidents. This plan is tested annually to ensure we are able to respond to any critical issues swiftly and effectively. We have a dedicated cybersecurity incident response team that responds to security and other serious service incidents, and have outside experts on retainer for quick assistance should an event occur. We are continually evaluating our current capabilities against industry standards to ensure our information assets are protected. A penetration test is performed once each year, and internal audit regularly examines the cybersecurity function to determine compliance with published policies and industry best practices. Employee and vendor access to systems are administered and controlled through commercial software designed to help limit access to only the needed data and applications. We deploy an extensive suite of software designed to surveil and protect our systems from intrusion or abuse. Our systems infrastructure is hosted at two synchronous Tier 1 data centers with a disaster recovery fail-over to Amazon Web Services.
Financing Activities
We currently finance our MSRs and mortgage loans purchased from correspondent sellers or originated by our Consumer Direct channel, in each case with money center banks and significant regional banks, which are generally documented in the form of master repurchase agreements and loan and security agreements (collectively, our "financing arrangements"). We utilize short-term financing to fund mortgage loans before they are sold to secondary investors or securitized, with an average gestation period of 12 days prior to sale. We employ longer-term funding to finance our MSR portfolio. Our conservative leverage strategy allows us to maintain significant excess capacity that can be called in periods of illiquidity or market dislocations. As of June 30, 2020, the LTV of our financing arrangements was 61.8% compared to available financing at 60-65% LTV. We currently have no corporate-level debt.
Under the terms of our financing arrangements, we are required to comply with certain financial covenants and various non-financial covenants customary for transactions of this nature. As of June 30, 2020, we were in compliance in all material respects with these covenants. The financing arrangements also contain events of default (subject to certain materiality thresholds and grace and cure periods), including payment defaults, breaches of covenants and/or certain representations and warranties, cross-defaults, failure to maintain Fannie Mae, Freddie Mac, FHA, VA and/or USDA approvals, material adverse changes to our business, bankruptcy or insolvency proceedings and other events of default customary for these types of transactions. The remedies for such events of default are also customary for these types of transactions and include the acceleration of the principal amount outstanding under the agreements and the liquidation by our lenders of the mortgage loans or other collateral then-subject to the agreements.
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As of June 30, 2020, our financing arrangements had the characteristics as described under the section "Management's Discussion and Analysis of Financial Condition and Results of OperationsDebt Obligations" on page 99.
Competition
We operate in a highly competitive industry that could become even more competitive as a result of economic, legislative, regulatory and technological changes. Non-banks of various sizes and types are becoming increasingly competitive in the acquisition of newly originated mortgage loans and servicing rights. Many banks and large savings institutions have significantly greater resources or access to capital than we do, as well as a lower cost of funds. Additionally, some of our existing and potential competitors may decide to modify their business models to compete more directly with our correspondent production business. For example, non-bank loan servicers may try to leverage their servicing operations to develop or expand a correspondent production business. Since the withdrawal of a number of large participants from the mortgage markets following the financial crisis beginning in 2007, non-bank participants have become more active in these markets. Recently, there have been a number of discussions in government and industry trade groups about changes to various enforcement practices that have served to discourage participation in mortgage lending and servicing (especially of government loans) by certain large banks. As more non-bank entities enter these markets, or if more of the large commercial banks or significant regional banks decide to become more active in the mortgage space once again, our correspondent production activities may generate lower volumes and/or margins.
In acquiring mortgage assets, we compete with specialty finance companies, private funds, mortgage real estate investment trusts ("REITs"), thrifts, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, governmental bodies and other entities which may also be focused on acquiring mortgage-related assets, and therefore may increase competition for the available supply of mortgage assets suitable for purchase. We may be disadvantaged when seeking to acquire mortgage assets because these competitors may be significantly larger than we are and have stronger financial positions and greater access to capital and other resources than we have and may have other advantages. These competitor advantages include the ability to obtain lower-cost financing, such as deposits, and economies of scale arising from their larger size. Some of our competitors may have higher risk tolerances or different risk assessments which could allow them to consider a wider variety of investments and funding strategies and to establish more relationships with sellers of mortgage assets than we can.
Because the availability of mortgage assets may fluctuate, the competition for assets and availability of financing arrangements may increase. Increased competition for assets may result in our accepting lower returns for acquisitions of mortgage loans and other assets or adversely influence our ability to bid for such assets at levels that allow us to profitably acquire such assets. An increase in the competition for funding by third-party lenders could adversely affect the availability and terms of financing.
Mortgage Banking Industry Overview
We operate in one of the largest financial markets in the world. According to the U.S. Federal Reserve, approximately $11.1 trillion of 1-4 family residential debt was outstanding as of September 30, 2019, representing a compounded annual increase rate of approximately 6.5% since December 31, 1980. In terms of number of single-family loans outstanding, the Urban Institute estimated there were 48 million such loans outstanding in the U.S. in 2018.
Despite its large size, the mortgage origination market continues to grow. For the year 2019, total mortgage origination volume was $2.3 trillion, representing approximately 31% growth over the prior year. Since 2009, annual mortgage volume has averaged $1.8 trillion. Fannie Mae is forecasting
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approximately $3.9 trillion and $2.6 trillion of 1-4 family originations in 2020 and 2021, respectively. Refinance volumes are expected to decrease in 2021, while purchase volumes are expected to remain strong over the same period. According to Fannie Mae, purchase and refinance volumes are anticipated to total approximately $1.4 trillion and $2.4 trillion in 2020, and $1.5 trillion and $1.1 trillion in 2021, respectively. Total origination volumes for 2020E are expected to reach a 10-year high driven by a surge in refinance volumes as rates dropped in a response to the COVID crisis. At the same time, purchase volumes did not drastically decline as the real estate market quickly adopted virtual home purchasing and electronic mortgage solutions. The chart below presents U.S. mortgage originations, with purchase and refinance volumes, from 2009A to 2021E.
Despite the size and attractive growth characteristics, our market has become increasingly fragmented. Prior to the financial crisis, large retail U.S. banks traditionally held the majority of the market share in both mortgage originations and servicing. This trend reversed beginning in 2010, as heightened capital requirements and increased regulatory scrutiny precipitated a decrease in bank participation in the mortgage market. The market share of mortgage originations produced by the top five banks (Wells Fargo, J.P. Morgan Chase, Bank of America, U.S. Bank, and Citi) declined from 60% for the twelve month period ended December 31, 2010 to 18% for the twelve month period ended June 30, 2020, according to Inside Mortgage Finance. The resulting fragmentation of the market has
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created significant opportunities for non-bank entities to enter and establish positions in the mortgage origination and servicing markets.
Mortgages are generally originated through two channels: retail and wholesale. Retail originations are underwritten and funded by a single entity through distributed retail outlets or direct to consumer channels that are often configured as call center type operations. Wholesale originations are produced through multiple parties, including a mortgage broker who sources the borrower and processes his/her application, and a wholesale lender who underwrites and funds the loan. In the correspondent channel, various sizes of originators make loans through their own wholesale and retail activities and subsequently sell the closed loans to a correspondent aggregator such as AmeriHome. The mortgage sellers are responsible for making representations and warranties that the loans meet applicable investor and regulatory standards, and the correspondent aggregator performs its own diligence on the loans and monitors their performance. The correspondent aggregator is not involved in the direct origination process and typically bears less regulatory risk compared with the consumer-facing party who originates the loans. In addition, for government insured or guaranteed loans it is the originator who is responsible for indemnifying the government Agency in the event a loan does not meet their underwriting guidelines, and not the aggregator.
Correspondent clients typically include small to midsized regional banks, credit unions, and independent mortgage bankers. Correspondent investors such as AmeriHome play a critical role in the mortgage ecosystem, allowing these participants to access the capital markets by acquiring, pooling, and selling or securitizing the loans they have purchased. In this way, the sellers benefit from the correspondent investor's scale, geographical diversification, capital markets infrastructure, institutional relationships, and ability to service loans, while correspondents are able to focus on the origination function.
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The chart below shows top 10 U.S. Correspondent channel non-bank mortgage producers by volume for the twelve month period ended March 31, 2020:
Regulation
We operate in a heavily regulated industry that is highly focused on consumer protection. Both the scope of the laws and regulations and the intensity of the supervision to which we are subject have increased in recent years, initially in response to the financial crisis, and more recently in light of other factors such as technological and market changes. Regulatory enforcement and fines have also increased across the financial services sector. We expect to continue to face regulatory scrutiny as an organization and as a participant in the mortgage sector.
Our business is subject to extensive oversight and regulation by federal, state and local governmental authorities, including the CFPB, HUD and various state agencies that license and conduct examinations of our loan servicing, origination and collection activities. From time to time, we also receive requests from federal, state and local agencies for records, documents and information relating to the policies, procedures and practices of our loan servicing, origination and collection activities. The GSEs, Ginnie Mae, and various investors and lenders also subject us to periodic reviews and audits.
The descriptions below summarize certain significant state and federal laws to which we are subject. The descriptions are qualified in their entirety by reference to the particular statutory or regulatory provisions summarized. They do not summarize all possible or proposed changes in current laws or regulations and are not intended to be a substitute for the related statues or regulatory provisions.
Federal, State and Local Laws and Regulations
We must comply with a large number of federal, state and local consumer protection laws and regulations including, among others:
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giving or accepting any fee, kickback or a thing of a thing of value for the referral of real estate settlement services;
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of consumer credit, requires certain disclosures and prohibits certain terms, such as mandatory arbitration if a dispute arises concerning the consumer credit product;
In addition to applicable federal laws and regulations governing our operations, our ability to originate and service loans in any particular state is subject to that state's laws, regulations and licensing requirements, which may differ from the laws, regulations and licensing requirements of other states. State laws often include fee limitations and disclosure and other requirements. Many states have adopted regulations that prohibit various forms of "predatory" lending and place obligations on lenders to substantiate that a client will derive a tangible benefit from the proposed home financing transaction and/or have the ability to repay the loan. Many of these laws are vague and subject to differing interpretation, which exposes us to additional risks.
On January 1, 2020, the CCPA took effect, directly impacting our California business operations and indirectly impacting our operations nationwide. Generally speaking, the CCPA provides consumers with new privacy rights such as the right to request deletion of their data, the right to receive data on record for them, and the right to know what categories of data (generally) are maintained about them. It also mandates new disclosures prior to, and at, the point of data collection and increases the privacy and security obligations of entities handling certain personal information of such consumers. The CCPA allows consumers to submit verifiable consumer requests regarding their personal information and requires our business to implement procedures to comply with such requests. The California Attorney General issued, and subsequently updated, proposed regulations to further define and clarify the CCPA. The impact of this law and its corresponding regulations, future enforcement activity and potential liability is unknown. At least two additional states have enacted similar laws to the CCPA and we expect more states to follow.
These laws and regulations apply to many facets of our business, including loan origination, loan servicing, default servicing and collections, use of credit reports, safeguarding of non-public personally identifiable information about our customers, foreclosure and claims handling, investment of and interest payments on escrow balances and escrow payment features, and mandate certain disclosures
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and notices to borrowers. These requirements can and do change as statutes and regulations are enacted, promulgated, amended, interpreted and enforced.
In response to COVID-19, the CARES Act imposes several new compliance obligations on our mortgage servicing activities, including, but not limited to mandatory forbearance offerings, altered credit reporting obligations, and moratoriums on foreclosure actions and late fee assessments. Many states have taken similar measures to provide mortgage payment and other relief to consumers, which create additional complexity around our mortgage servicing compliance activities. Federal, state, and local executive, legislative and regulatory responses to COVID-19 are rapidly evolving, not consistent in scope or application, and subject to change without advance notice.
Our failure to comply with applicable federal, state and local laws, regulations and licensing requirements could lead to, without limitation, any of the following:
Supervision and Enforcement
Since its formation, the CFPB has taken a very active role in the mortgage industry. The CFPB has rulemaking authority with respect to many of the federal consumer protection laws applicable to mortgage lenders and servicers, and its rulemaking and regulatory agenda relating to loan servicing and origination continues to evolve. The CFPB also has broad supervisory and enforcement powers with regard to non-depository financial institutions that engage in the origination and servicing of mortgage loans. The CFPB has conducted routine examinations of our business and will conduct future examinations.
As part of its enforcement authority, the CFPB can order, among other things, rescission or reformation of contracts, the refund of moneys or the return of real property, restitution, disgorgement or compensation for unjust enrichment, the payment of damages or other monetary relief, public notifications regarding violations, remediation of practices, external compliance monitoring and civil money penalties. The CFPB has been active in investigations and enforcement actions and has issued large civil money penalties since its inception to parties the CFPB determines violated the laws and regulations it enforces.
Individual states have also been active in the mortgage industry, as have other regulatory organizations such as the Multistate Mortgage Committee, a multistate coalition of various mortgage banking regulators. We also believe there has been a shift among certain regulators towards a broader view of the scope of regulatory oversight responsibilities with respect to mortgage lenders and servicers. In addition to their traditional focus on licensing and examination matters, certain regulators have
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begun to make observations, recommendations or demands with respect to areas such as corporate governance, safety and soundness and risk and compliance management.
In addition, we receive information requests and other inquiries, both formal and informal in nature, from our state regulators as part of their general regulatory oversight of our servicing and lending businesses. Some of our regulatory engagements arise from a complaint that the entity is investigating, although some are formal investigations, audits or proceedings.
The CFPB and state regulators have also increasingly focused on the use and adequacy of technology in the mortgage servicing industry. In 2016, the CFPB issued a special edition supervisory report that stressed the need for mortgage servicers to assess and make necessary improvements to their information technology systems to ensure compliance with the CFPB's mortgage servicing requirements. The New York Department of Financial Services (the "NYDFS") also issued Cybersecurity Requirements for Financial Services Companies, which took effect in 2017, and which required banks, insurance companies, and other financial services institutions regulated by the NYDFS to establish and maintain a cybersecurity program designed to protect consumers and ensure the safety and soundness of New York State's financial services industry.
New regulatory and legislative measures, or changes in enforcement practices, including those related to the technology we use, could, either individually or in the aggregate, require significant changes to our business practices, impose additional costs on us, limit our product offerings, limit our ability to efficiently pursue business opportunities, negatively impact asset values or reduce our revenues.
Licensing
Because we are not a depository institution, we must comply with state licensing requirements to conduct our business and we are licensed to originate loans in 46 states and the District of Columbia. We are able to purchase and service loans in 49 states and the District of Columbia, either because we are properly licensed in such jurisdictions or exempt or otherwise not required to be licensed in such jurisdictions.
Under the SAFE Act, all states have laws that require mortgage loan originators employed by non-depository institutions to be individually licensed to offer mortgage loan products. These licensing requirements require individual loan originators to register in a nationwide mortgage licensing system, submit application and background information to state regulators for a character and fitness review, submit to a criminal background check, complete a minimum of 20 hours of pre-licensing education, complete an annual minimum of eight hours of continuing education and successfully complete an examination. Upon issuance of a license, we become subject to regulatory oversight, supervision and enforcement activity to determine compliance with applicable law.
State Licensing, State Attorneys General and Other Matters
Because we are not a depository institution, we must comply with state licensing requirements to conduct our business, and we incur significant ongoing costs to comply with these licensing requirements. Our licensed entities are required to renew their licenses, typically on an annual basis, and to do so they must satisfy the license renewal requirements of each jurisdiction. This generally will include financial requirements such as providing audited financial statements or satisfying minimum net worth requirements and non-financial requirements such as satisfactorily completing examinations as to the licensee's compliance with applicable laws and regulations. Failure to satisfy any of the requirements to which our licensed entities are subject could result in a variety of regulatory actions such as a fine, a directive requiring a certain step to be taken, a prohibition or restriction on certain activities, a suspension of a license or ultimately a revocation of a license. Certain types of regulatory actions could result in a breach of representations, warranties and covenants, and potentially cross-
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defaults in our financing arrangements which could limit or prohibit our access to liquidity to operate our business.
Properties
Our headquarters are located in Thousand Oaks, CA. We have additional corporate facilities in Irvine, CA and Irving, TX. We also maintain satellite locations in the United States for certain correspondent lending sales executives to work remotely.
Employees
As of June 30, 2020, we had approximately 793 employees, including 736 full time employees, 55 contractors and 2 part time employees.
Legal Proceedings
We are not subject to any material legal proceedings.
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The following table sets forth information as of , 2020 regarding certain individuals who are expected to serve as our executive officers and directors of AmeriHome, Inc. upon completion of this offering:
NAME
|
AGE | POSITION | ||
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Executive Officers: | ||||
James S. Furash | 55 | Chief Executive Officer, Director | ||
Josh Adler | 50 | Chief Investment Officer | ||
John Hedlund | 58 | Chief Operating Officer | ||
Mark Miller | 64 | Chief Risk Officer | ||
Garrett Galati | 39 | Chief Financial Officer | ||
David Andersen | 42 | Chief Information Officer | ||
Non-Employee Directors: |
||||
Chairman of the Board | ||||
Director | ||||
Director | ||||
Director | ||||
Director | ||||
Director | ||||
Director | ||||
Director | ||||
Director |
The following are brief biographies describing the backgrounds of our executive officers and non-employee directors:
James S. Furash. Mr. Furash has served as our Chief Executive Officer since the Company's inception in 2013. Before his position at the Company, Mr. Furash was the Chief Executive Officer of Countrywide Bank from 1999 to 2006. Mr. Furash received his bachelor's degree in economics from University of Virginia and MBA at the Wharton Business School of the University of Pennsylvania. We believe Mr. Furash is qualified to serve as a member of our board of directors due to his significant business and leadership experience in the mortgage industry as well as his role as a co-founder of the Company.
Josh Adler. Mr. Adler has served as our Chief Investment Officer since the Company's inception in 2013. Prior to his role at AmeriHome, Mr. Adler was the Managing Director, Secondary Marketing at Countrywide and Bank of America from 1999 to 2012. Mr. Adler received his bachelor's degree in business administration and MBA at the University of Southern California.
John Hedlund. Mr. Hedlund has served as our Chief Operating Officer since the Company's inception in 2013. Prior to his role at AmeriHome, Mr. Hedlund built and managed large correspondent lending platforms, most recently as Executive Vice President of Correspondent Lending Operations at Bank of America from 2007 to 2013. Mr. Hedlund received his bachelor's degree in business administration from Simon Frazier University and MBA from Dalhousie University.
Mark Miller. Mr. Miller has served as our Chief Risk Officer since the Company's inception in 2013. Prior to his role at AmeriHome, Mr. Miller was the Operational Risk Executive and later Chief Credit Officer at Bank of America Home Loans from 2008 to 2013, where he was responsible for quality control of all underwriting functions and oversight of the correspondent lending operation
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during its existence. Mr. Miller received his bachelor of science degree in biochemistry at the University of California, Berkeley.
Garrett Galati. Mr. Galati has served as our Chief Financial Officer since 2019 and as our Director of Finance since the Company's inception in 2013. Prior to his role at AmeriHome, Mr. Galati worked for Countrywide and Bank of America in various roles including Senior Vice President in Legacy Asset Servicing, and First Vice President in Structured Finance from 2002 to 2013. Mr. Galati received his bachelor's degree in business economics from the University of California, Santa Barbara.
David Andersen. Mr. Andersen has served as our Chief Information Officer since 2019 and as our Senior Vice President of Business Operations since the Company's inception in 2013. Prior to his role at AmeriHome, Mr. Andersen worked for Countrywide and Bank of America in various roles including Executive Vice President in Trading, and Senior Vice President in Quantitative Implementation from 2001 to 2013. Mr. Andersen received his bachelor of science degree from the College of Business at Iowa State University.
Our business and affairs are managed under the direction of our board of directors. Our board of directors upon completion of this offering will consist of directors.
We intend to apply to list our Class A common stock on the NYSE. As affiliates of Apollo will continue to control more than 50% of the combined voting power of our outstanding common stock upon the completion of this offering, we will be considered a "controlled company" for the purposes of that exchange's rules and corporate governance standards. As a result, although the members of our audit committee are required to be independent (subject to a permitted "phase-in" period), we are not required to have a majority of our board of directors be independent, nor are we required to have a compensation committee with a written charter addressing the committee's purpose and responsibilities or an independent nominating function through a nominating and corporate governance committee or through our independent directors under the rules of NYSE. Accordingly, you will not have the same protections afforded to stockholders of companies that are subject to all of these corporate governance requirements. In the event that we cease to be a "controlled company" and our shares continue to be listed on NYSE, we will be required to comply with these provisions within the applicable transition periods. See "Risk FactorsWe will be a controlled company within the meaning of the NYSE rules and, as a result, will qualify for and will rely on exemptions from certain corporate governance requirements."
The rules of the NYSE and the SEC impose several requirements with respect to the independence of our directors. Our board of directors has evaluated the independence of its members based upon the rules of the NYSE and the SEC. For a director to be considered independent under those rules, our board of directors must affirmatively determine that the director does not have any material relationship with us that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. Applying these standards, our board of directors has determined that each of our directors other than is an independent director as defined under the rules of the NYSE applicable to members of our board of directors. In making this determination, our board of directors considered the relationships that each non-employee director has with us and all other facts and circumstances our board of directors deemed relevant in determining their independence.
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Limitations on Liability and Indemnification
Our certificate of incorporation contains provisions that limit the liability of our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our directors will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duties as directors, except liability for:
Our certificate of incorporation provides that we are required to indemnify our directors and officers to the fullest extent permitted by Delaware law. Our certificate of incorporation also provides that, subject to limited exceptions, we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding, and permits us to secure insurance on behalf of any current or former director or officer against any liability asserted against such person, whether or not we would have the power to indemnify such person against such liability under our certificate of incorporation or otherwise. We have entered and expect to continue to enter into agreements to indemnify our directors, executive officers and other employees as determined by our board of directors. With specified exceptions, these agreements provide for indemnification for related expenses including, among other things, attorneys' fees, judgments, fines and settlement amounts incurred by any of these individuals in any action or proceeding. We believe that these provisions of our certificate of incorporation and indemnification agreements are necessary to attract and retain qualified persons as directors and officers. We also maintain directors' and officers' liability insurance.
The limitation of liability and indemnification provisions in our certificate of incorporation may discourage stockholders from bringing a lawsuit against our directors and officers for breach of their fiduciary duty. They may also reduce the likelihood of derivative litigation against our directors and officers, even though an action, if successful, might benefit us and our stockholders. Further, a stockholder's investment may be adversely affected to the extent that we pay the costs of settlement and damage.
Our board of directors will consist of members upon completion of this offering. Each director is to hold office until his or her successor is duly elected and qualified or until his or her earlier death, resignation or removal. The authorized number of each class of directors may be increased or decreased by our board of directors in accordance with our certificate of incorporation. At any meeting of the board of directors, except as otherwise required by law, a majority of the total number of directors then in office will constitute a quorum for all purposes.
Under our Stockholders Agreement, A-A Mortgage has the right, but not the obligation, to nominate (a) a majority of our directors, as long as our controlling stockholder beneficially owns % or more of the combined voting power of our outstanding common stock, (b) % of our directors, as long as our controlling stockholder beneficially owns % or more, but less than % of the combined voting power of our outstanding common stock, (c) % of our directors, as long as our controlling stockholder beneficially owns % or more, but less than % of the combined voting power of our outstanding common stock, (d) % of our directors, as long as our controlling stockholder beneficially
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owns % or more, but less than % of the combined voting power of our outstanding common stock, (e) % of our directors, as long as our controlling stockholder beneficially owns % or more, but less than % of the combined voting power of our outstanding common stock. See "Certain Relationships and Related Party TransactionsStockholders Agreement."
Audit Committee
Our audit committee oversees our corporate accounting and financial reporting process. The primary responsibilities of this committee include:
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Our audit committee will be comprised of , , and . will serve as the chairperson of the audit committee. We believe that and will qualify as independent directors according to the rules and regulations of the SEC and the listing rules of the NYSE with respect to audit committee membership. Not later than the first anniversary of the effectiveness of the registration statement, all members of the audit committee will be independent.
We also believe that will qualify as an "audit committee financial expert," as such term is defined in the rules and regulations of the SEC. Our board of directors has approved a written charter under which the audit committee will operate. Upon the effectiveness of the registration statement of which this prospectus forms a part, a copy of the charter of our audit committee will be available on our principal corporate website at www.amerihome.com. The information contained on, or accessible from, or hyperlinked to, our website is not part of this prospectus by reference or otherwise.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee will assist our board of directors in identifying individuals qualified to become executive officers and members of our board of directors consistent with criteria established by our board of directors and in developing our corporate governance principles. We intend that our nominating and corporate governance committee will also perform the following functions:
The nominating and corporate governance committee also recommends directors eligible to serve on all committees of our board of directors. The nominating and corporate governance committee also reviews and evaluates all stockholder director nominees.
Our nominating and corporate governance committee will be comprised of , , and . will serve as the chairperson of the nominating and corporate governance committee. Upon the effectiveness of the registration statement of which this prospectus forms a part, a copy of the charter of our nominating and corporate governance committee will be available on our principal corporate website at www.amerihome.com. The information contained on, or accessible from, or hyperlinked to, our website is not part of this prospectus by reference or otherwise.
Compensation Committee
The primary responsibilities of our compensation committee will be to administer the compensation program and employee benefit plans and practices for our executive officers and members of the board of directors. We intend that our compensation committee will review and either approve, on behalf of the board of directors, or recommend to the board of directors for approval, (i) annual salaries, bonuses and other compensation for our executive officers, and (ii) individual equity
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awards for our employees and executive officers. We intend that our compensation committee will also oversee our compensation policies and practices more generally. The committee will periodically report to the board of directors.
We intend that our compensation committee will also perform the following functions related to executive compensation:
In deciding upon the appropriate level of compensation for our executive officers, the compensation committee regularly reviews our compensation programs relative to our strategic objectives and emerging market practice and other changing business and market conditions. In addition, the compensation committee also takes into consideration the recommendations of our chief executive officer concerning compensation actions for our other executive officers.
Our compensation committee will be comprised of , , and . will serve as the chairperson of the compensation committee. In connection with this offering, our compensation committee will review its charter and role to ensure it is aligned with our status as a publicly traded company and our compensation philosophy and objectives. Upon the effectiveness of the registration statement of which this prospectus forms a part, a copy of the charter of our compensation committee will be available on our principal corporate website at www.amerihome.com. The information contained on, or accessible from, or hyperlinked to, our website is not part of this prospectus by reference or otherwise.
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Compensation Committee Interlocks and Insider Participation
None of the members of our Compensation Committee will be a person who is or has been an officer or employee of us or any of our subsidiaries. In addition, none of our executive officers will serve or has served as a member of the compensation committee or other board committee performing equivalent functions (or in the absence of any such committee, the entire board of directors) of any entity that has one or more executive officers that will serve on our Compensation Committee.
We have adopted a code of conduct applicable to our principal executive, financial and accounting officers and all persons performing similar functions. Upon the effectiveness of the registration statement of which this prospectus forms a part, our code of conduct will be available on our principal corporate website at www.amerihome.com. The information contained on, or accessible from, or hyperlinked to, our website is not part of this prospectus by reference or otherwise.
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The following is a discussion and analysis of compensation arrangements of our named executive officers. This discussion contains forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion. As an "emerging growth company" as defined in the JOBS Act, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled back disclosure requirements applicable to emerging growth companies.
Overview
Our current executive compensation program is intended to align executive compensation with our business objectives and to enable us to attract, retain and reward executive officers who contribute to our long-term success. The compensation paid or awarded to our executive officers is generally based on the assessment of each individual's performance compared against the business objectives established for the fiscal year as well as our historical compensation practices. In the case of new hire executive officers, their compensation is primarily determined based on the negotiations of the parties as well as our historical compensation practices. For 2019, the material elements of our executive compensation program were base salary and annual cash bonuses. Our named executive officers also hold equity awards in Aris Holding in the form of profits interests.
We expect that our executive compensation program will evolve to reflect our status as a newly publicly-traded company, while still supporting our overall business and compensation objectives.
This section provides a discussion of the compensation paid or awarded to our Chief Executive Officer and our two other most highly compensated executive officers as of December 31, 2019. We refer to these individuals as our "named executive officers." For 2019, our named executive officers were:
Compensation of Named Executive Officers
Base Salary
Base salaries are intended to provide a level of compensation sufficient to attract and retain an effective management team, when considered in combination with the other components of our executive compensation program. The relative levels of base salary for our named executive officers are designed to reflect each executive officer's scope of responsibility and accountability with us. Please see the "Salary" column in the 2019 Summary Compensation Table for the base salary amounts received by each named executive officer in 2019.
Annual Cash Bonuses
Historically, we have provided our senior leadership team with short-term incentive compensation through our annual cash bonus plan. Annual bonus compensation holds executives accountable, rewards the executives based on actual business results and helps create a "pay for performance" culture. Our annual cash bonus program provides cash incentive award opportunities for the achievement of performance goals established by our board of directors at the beginning of each fiscal year.
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The payment of awards under the 2019 annual cash bonus program applicable to the named executive officers was subject to a qualitative assessment of the attainment of a number of goals relating to our performance. Specifically, as approved by the board of directors, the 2019 annual cash program was payable based on goals relating to .
Early in 2019, the board of directors established the bonus targets for Messrs. Furash, Adler, and Hedlund in the annual bonus program, as follows: . Based on our 2019 performance, the board of directors awarded payouts under our annual cash bonus program equal to % of the target opportunity.
Under our annual cash bonus plan, a portion of the cash bonus is paid immediately following the applicable performance year and the remaining portion is paid in one-third annual installments, subject to the named executive officer's continued service. The deferred portion of the 2019 annual cash bonuses equaled $ for Mr. Furash, $ for Mr. Adler and $ for Mr. Hedlund and, as of December 31, 2019, Messrs. Furash, Adler and Hedlund held outstanding deferred cash bonus accounts with respect to the 2017 and 2018 bonus years in the amounts of $ , $ , and $ , respectively.
Please see the "Non-Equity Incentive Compensation" column in the 2019 Summary Compensation Table for the amount of annual bonuses paid to the named executive officers with respect to 2019, excluding the portion that will be paid in future years based on continued service.
Profits Interests
Our controlling stockholder believes that members of senior management should hold a personally significant interest in the equity of the company to align their interests and the interests of our stakeholders. As described below, our controlling stockholder implemented its management investment philosophy by establishing a "profits interest program." "Profits interest programs" are common practice in portfolio companies of private equity firms and allow participants to share in increases in the equity value of the company. Profits interests have what is called a "participation threshold" based on the value assigned to a Class A Unit at the time of the profits interest grant. The profits interests only share in equity appreciation above the participation threshold. This places the profits interests in a secondary position to the Class A Units in that in any event in which the equity is valued and paid out, holders of the profits interests are paid only if an amount at least equal to the participation threshold has first been allocated to the Class A Units. The Class A Units and profits interests share equally in valuation amounts, if any, above the participation threshold.
Our named executive officers hold both time-based and performance-based profits interests. The performance-based profits interests, or Class P1 Units, vest based on the achievement of certain specified internal rates of return hurdles. The time-based profits interests, or Class T1 Units, vested on annual basis over six years, subject to the participant's continued employment through the applicable vesting date. As of December 31, 2019, all outstanding Class T1 Units were fully vested. Unvested profits interests are forfeited upon the first to occur of a sale of the company or a liquidation of the company, the tenth anniversary of the grant date, or the participant's termination of employment (other than to the extent any are eligible to vest as a result of participant's termination due to death or disability). In connection with this offering, the board of directors of Aris Holding expects to waive the internal rate of return vesting condition associated with the Class P1 Units. In addition, effective upon the consummation of this offering, the Class P1 Units and Class T1 Units will be adjusted and converted into Class A common stock, with the number of shares received intended to preserve the economic value of the profits interests.
Please see the "Outstanding Equity Awards at 2019 Fiscal Year-End" for a summary of the unvested profits interests held by each of our named executive officers as of December 31, 2019.
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2019 Summary Compensation Table
The following table shows information regarding the compensation of our named executive officers for services performed in the year ended December 31, 2019.
Name and Principal Position
|
Year | Salary(1) | Bonus | Non-Equity Incentive Plan Compensation(2) |
All Other Compensation(3) | Total | ||||||||||||
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James Furash |
2019 | $ | $ | $ | $ | $ | ||||||||||||
Chief Executive Officer |
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Josh Adler |
2019 | |||||||||||||||||
Chief Investment Officer |
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John Hedlund |
2019 | |||||||||||||||||
Chief Operating Officer |
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Outstanding Equity Awards at 2019 Fiscal Year-End
The following table presents information regarding the outstanding equity awards held by each of the named executive officers as of December 31, 2019. None of the named executive officers held any outstanding stock options, restricted stock or other equity awards as of that date. In addition, as of December 31, 2019, all Class T1 Units were fully vested and are excluded from this table.
Name
|
Grant Date | Equity Incentive Plan Awards: Number of Units That Have Not Vested(1) |
Equity Incentive Plan Awards: Market Value of Units That Have Not Vested |
|||||||
---|---|---|---|---|---|---|---|---|---|---|
James Furash |
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Josh Adler |
||||||||||
John Hedlund |
Additional Narrative Disclosure
Profits Interests
As described above, the unvested Class P Units are forfeited upon the first to occur of a sale of the company or a liquidation of the company, the tenth anniversary of the grant date, or the participant's termination of employment, excluding any Class P Units that vest based on the achievement of specified internal rate of return hurdles in connection with the sale of the company or a liquidation event. This offering will not constitute a sale of the company or liquidation event under the terms of the profits interest agreements. As noted above, in connection with this offering, the board of directors of Aris Holding expects to waive the internal rate of return vesting condition associated with the Class P1 Units. In addition, effective upon the consummation of this offering, the Class P1 Units and Class T1 Units will be adjusted and converted into Class A common stock, with the number of shares received intended to preserve the economic value of the profits interests.
401(k) Plan
We maintain a qualified 401(k) savings plan which allows participants to defer up to % of cash compensation up to the maximum amount allowed under IRS guidelines. We may make discretionary matching and profit sharing contributions to the plan. In 2019, we matched up to % of employee elective deferrals that did not exceed $ per employee and did not make any profit sharing contributions. Participants are always vested in their contributions to the plan. Participants vest in their company matching and profit sharing contributions under a -year graded vesting schedule.
2020 Transaction Bonuses
Aris Holding expects to enter into transaction bonus agreements (the "Transaction Bonus Agreements") with certain key employees, including each of the named executive officers, in order to
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recognize their significant contributions and to encourage their continued attention and dedication during the consummation of a potential transaction. The material terms of the Transaction Bonus Agreements are expected to be as follows:
The Transaction Bonus Agreements provide for a transaction bonus in connection with the first to occur of a third-party sale of Aris Holding or an initial public offering of Aris Holding or a holding company which holds Aris Holding's membership interests (the "Bonus Trigger"), which must generally occur before March 31, 2021 (or, in the event of a third-party sale, a definitive agreement for such sale is signed prior to such date). Under the Transaction Bonus Agreement, an employee is generally required to be employed in good standing through the date of the Bonus Trigger to receive the transaction bonus, but may remain entitled to the transaction bonus if his or her employment is terminated without cause or due to his or her death or disability prior to the date of the offering. The employee must also execute a release of claims in favor of Aris Holding and its affiliates to receive the transaction bonus. In addition, each employee is subject to certain restrictive covenants, including provisions relating to non-competition and non-solicitation of customers and employees (in each case, for one year after a termination of employment), as well as non-disparagement and non-disclosure of confidential information.
The amount of the transaction bonus for each employee is denominated as a specified percentage of the proceeds upon a Bonus Trigger (as calculated under the Transaction Bonus Agreement) which in the case of this offering would be based on our implied value based on the initial price of Class A common stock sold to the public in this offering. Upon the offering, the transaction bonus will be paid no later than 60 days following the offering, but in all events in calendar year 2021. Aris Holding may elect to settle the transaction bonus in cash or equity securities (or a combination of both) of Aris Holding or a holding company which holds Aris Holding's membership interests. The specified percentage of the proceeds payable to the named executive officers are as follows: Mr. Furash, %; Mr. Adler, %; and Mr. Hedlund, %.
Equity Compensation Plans
2020 Omnibus Incentive Plan
In connection with this offering, our board of directors and our current stockholders are expected to approve the 2020 Plan, to be effective prior to the completion of this offering.
The purposes of the 2020 Plan are to align the interests of our stockholders and those eligible for awards, to attract and retain officers, directors, employees, and other service providers, and to encourage them to act in our long-term best interests. Our 2020 Plan provides for the grant of incentive stock options (within the meaning of Section 422 of the Code), nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units, other stock awards, and performance awards. Officers, directors, employees, consultants, agents and independent contractors who provide services to us (or are prospectively expected to provide service to us) or to any affiliate of ours are eligible to receive such awards. The material terms of the 2020 Plan are expected to be as follows:
Stock Subject to the Plan
The number of shares of Class A common stock reserved for issuance under the 2020 Plan is plus an annual increase added on the first day of each fiscal year, beginning with the fiscal year ending and continuing until, and including, the fiscal year ending . The annual increase will be equal to an amount equal to the lesser of % of the shares of our common stock issued and outstanding on the last day of the preceding fiscal year or such other amount determined by our board of directors. To the extent an equity award granted under the 2020 Plan (other than any substitute award) expires or otherwise terminates without having been exercised or paid in full, or is settled in cash, the shares subject to such award granted under the 2020 Plan will become available for
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future grant under the 2020 Plan. In addition, shares subject to an award under the 2020 Plan will be made available for issuance under the 2020 Plan if such shares (or, if applicable, such units) are (x) shares that were subject to an option or stock-settled stock appreciation right to the extent not issued or delivered due to the net settlement or net exercise of such option or stock-settled stock appreciation right or (y) shares (or such units) delivered to or withheld by the Company or one its affiliates to pay the withholding taxes related to an outstanding award. The number of shares available under the 2020 Plan will not be reduced by the number of shares of Class A common stock granted in substitution of outstanding profits interests in Aris Holding.
Director Compensation Limit
The aggregate value of cash compensation paid and the grant date fair value of equity awards granted during any fiscal year to any non-employee director will not exceed $ , determined without regard to any distributions of deferred compensation in accordance with any deferred compensation arrangement of the Company or any of its affiliates; provided, however, for the first calendar year in which the non-employee director joins the board of directors, the limit set forth in this sentence will be multiplied by two.
Plan Administration
Our compensation committee will administer the 2020 Plan. Our board of directors has the authority to amend and modify the plan, subject to any stockholder approval required by law or stock exchange rules. Subject to the terms of the 2020 Plan, our compensation committee will have the authority to determine the eligibility for awards and the terms, conditions, and restrictions, including vesting terms, the number of shares subject to an award, and any performance goals applicable to grants made under the 2020 Plan. The compensation committee also will have the authority, subject to the terms of the 2020 Plan, to construe and interpret the 2020 Plan and awards, and amend outstanding awards at any time.
Stock Options and Stock Appreciation Rights
Our compensation committee may grant incentive stock options, nonstatutory stock options, and stock appreciation rights under the 2020 Plan, provided that incentive stock options are granted only to employees. The exercise price of stock options and stock appreciation rights under the 2020 Plan will be fixed by the compensation committee, but must equal at least 100% of the fair market value of our common stock on the date of grant. The term of an option or stock appreciation right may not exceed ten years, but an incentive stock option held by an employee who owns more than 10% of all of our classes of stock, or of certain of our affiliates, may not have a term in excess of five years and must have an exercise price of at least 110% of the fair market value of our common stock on the grant date. Subject to the provisions of the 2020 Plan, the compensation committee will determine the remaining terms of the options and stock appreciation rights (e.g., vesting). Upon a participant's termination of service, the participant may exercise his or her option or stock appreciation right, to the extent vested (unless the compensation committee permits otherwise), as specified in the award agreement. The 2020 Plan permits the repricing of options and stock appreciation rights without stockholder approval.
Stock Awards
Our compensation committee will decide at the time of grant whether an award will be in the form of restricted stock, restricted stock units, or other stock award. The compensation committee will determine the number of shares subject to the award, vesting, and the nature of any performance measures. Unless otherwise specified in the award agreement, the recipient of restricted stock will have voting rights and be entitled to receive dividends with respect to his or her shares of restricted stock,
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provided that (i) a distribution with respect to shares of common stock, other than a regular cash dividend, and (ii) a regular cash dividend with respect to shares of common stock that are subject to performance-based vesting conditions, in each case, will be deposited with us and will be subject to the same restrictions as the underlying shares of common stock. The recipient of restricted stock units will not have voting rights, but his or her award agreement may provide for the receipt of dividend equivalents, provided that any dividend equivalents with respect to restricted stock units that are subject to performance-based vesting conditions will be subject to the same restrictions as the underlying restricted stock units. Our compensation committee may grant other stock awards that are based on or related to shares of our common stock, such as awards of shares of common stock granted as a bonus and not subject to any vesting conditions, deferred stock units, stock purchase rights, and shares of our common stock issued in lieu of our obligations to pay cash under any compensatory plan or arrangement.
Performance Awards
Our compensation committee will determine the value of any performance award, the vesting and nature of the performance measures, and whether the award is denominated or settled in cash or in shares of our common stock. The performance goals applicable to a particular award will be determined by our compensation committee at the time of grant. Any dividends or dividend equivalents with respect to a performance award will be subject to the same performance-based vesting restrictions as such performance award.
Transferability of Awards
The 2020 Plan does not allow awards to be transferred other than by will or the laws of inheritance following the participant's death, and options may be exercised, during the lifetime of the participant, only by the participant or his or her legal representative or similar person. However, an award agreement may permit a participant to assign an award to a family member by gift or pursuant to a domestic relations order, or to a trust or similar entity established for estate planning purposes. To the extent permitted by us, a participant may also designate a beneficiary who will receive outstanding awards upon the participant's death.
Certain Adjustments
If any change is made in our common stock subject to the 2020 Plan, or subject to any award agreement under the 2020 Plan, without the receipt of consideration by us, such as through a stock split, stock dividend, extraordinary distribution, recapitalization, combination of shares, exchange of shares or other similar transaction, appropriate adjustments will be made in the number, class, and price of shares subject to each outstanding award and the numerical share limits contained in the plan.
Change in Control
Subject to the terms of the applicable award agreement, upon a "change in control" (as defined in the 2020 Plan), our board of directors may, in its discretion, determine whether some or all outstanding options and stock appreciation rights will become exercisable in full or in part, whether the restriction period and performance period applicable to some or all outstanding restricted stock awards and restricted stock unit awards will lapse in full or in part and whether the performance measures applicable to some or all outstanding awards will be deemed to be satisfied. Our board of directors may further require that shares of stock of the corporation resulting from such a change in control, or a parent corporation thereof, or other property be substituted for some or all of our shares of common stock subject to an outstanding award and that any outstanding awards, in whole or in part, be surrendered to us by the holder and be immediately cancelled by us in exchange for a cash payment,
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shares of capital stock of the corporation resulting from or succeeding us, other property or a combination of cash, such shares of stock or other property.
Clawback
Awards granted under the 2020 Plan and any cash payment or shares of our common stock delivered pursuant to an award granted under the 2020 Plan are subject to forfeiture, recovery, or other action pursuant to the applicable award agreement or any clawback or recoupment policy that we may adopt.
Plan Termination and Amendment
Our board of directors has the authority to amend, suspend, or terminate the 2020 Plan, subject to stockholder approval with respect to any amendment that seeks to modify the non-employee director compensation limit or the prohibition on repricing, each as described above, or as required by law, rule or regulation, including any applicable stock exchange rules. In addition, no amendment may materially impair the rights of a holder of an outstanding award without the consent of such holder. Our 2020 Plan will terminate on the ten-year anniversary of its approval by our board of directors unless we terminate it earlier.
Employee Stock Purchase Plan
In connection with this offering, our board of directors and our current stockholders are expected to approve the AmeriHome, Inc. Employee Share Purchase Plan (the "ESPP") to be effective upon the completion of this offering.
Generally, all of our employees (including those of our participating affiliates, other than those affiliates excluded from participation by our board of directors or compensation committee) are eligible to participate in the ESPP. The ESPP permits employees to purchase our common stock through payroll deductions during -month offering periods. The compensation committee retains the discretion to change the duration of future offering periods, subject to applicable limitations under the Code. Subject to applicable Code limitations, participants may authorize payroll deductions of a specific percentage of compensation of up to 15%, with such deductions being accumulated for -month purchase periods beginning on the first business day of each offering period and ending on the last business day of each offering period, although the compensation committee retains the discretion to change the duration of future purchase periods, subject to the limitations under the Code. The compensation committee also has discretion to permit participants to make contributions through means other than payroll deductions.
Under the terms of the ESPP, the purchase price per share with respect to an offering period will equal the lesser of (i) 85% of the fair market value of a share of our common stock on the first business day of such offering period and (ii) 85% of the fair market value of a share of our common stock on the last business day of such offering period, although the compensation committee has discretion to change the purchase price with respect to future offering periods, subject to the terms of the ESPP. No employee may participate in an offering period if the employee owns 5% or more of the total combined voting power or value of our stock or the stock of any of our subsidiaries. Except as otherwise determined by the compensation committee with respect to future offering periods, no participant may purchase more than shares of our common stock during any offering period.
Subject to adjustment for stock splits, stock dividends or other changes in our capital stock, shares of our common stock have been reserved for issuance under the ESPP. Subject to the adjustment provisions contained in the ESPP, the maximum number of shares of our common stock available under the ESPP will automatically increase on the first trading day in January of each calendar year, commencing , by an amount equal to the lesser of % of the shares of our
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common stock issued and outstanding on December 31 of the immediately preceding calendar year, shares, or such other amount determined by our board of directors.
Under the terms of the ESPP, in the event of the proposed dissolution or liquidation of the Company, any offering period then in progress will terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless otherwise provided by the board of directors, and the board of directors may either provide for the purchase of shares as of the date on which such offering period terminates or return to each participant the payroll deductions credited to such participant's account. In the event of a proposed sale of all or substantially all of the assets of the Company, change in control of the Company or the merger of the Company with or into another corporation, each outstanding option under the ESPP will be assumed or a substantially similar option substituted by the successor corporation or a parent or subsidiary of the successor corporation, unless the board of directors determines, in the exercise of its sole discretion, that in lieu of such assumption or substitution to either terminate all outstanding options and return to each participant the amounts credited to such participant's account or to provide for the offering period in progress to end on a date prior to the consummation of such sale, change in control or merger.
The ESPP will be administered by the compensation committee or a designee of the compensation committee. The ESPP may be amended by our board of directors or the compensation committee but may not be amended without prior stockholder approval to the extent required by Section 423 of the Code. The ESPP shall continue in effect until the earlier of (i) the termination of the ESPP by our board of directors or the compensation committee pursuant to the terms of the ESPP and (ii) the ten-year anniversary of the effective date of the ESPP, with no new offering periods commencing on or after such ten-year anniversary.
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During 2019, none of our directors received compensation for their service on our board of directors. In connection with this offering, we expect to adopt a formal non-employee director compensation program.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following is a description of certain relationships and transactions that exist or have existed or that we have entered into with our directors, executive officers, or stockholders who are known to us to beneficially own more than five percent of our voting securities and their affiliates and immediate family members.
Related Party Transaction Policy
We have established a written related party transaction policy that provides procedures for the review of transactions in excess of $120,000 in any year between us and any covered person having a direct or indirect material interest with certain exceptions. Covered persons include any director, executive officer, director nominee or stockholders known to us to beneficially own 5% or more of our voting securities or any affiliates and immediate family members of the foregoing. Any such related party transactions shall require advance approval by a majority of our independent directors or by our audit committee.
In connection with the Transactions, we will engage in certain transactions with certain of our directors, executive officers and other persons and entities which are or will become holders of 5% or more of our voting securities upon the consummation of the Transactions. These transactions are described in "Our Organizational Structure."
Other Related Party Agreements
Our relationship with Athene and Apollo position us to identify investment opportunities that are mutually beneficial. Athene and Apollo look to invest in a portfolio of asset origination platforms and investment teams across a variety of asset classes, of which we are one. These relationships also provide us with elevated access to market insight and investor interest in potential products or investment opportunities. As an asset originator, we are able to work collaboratively by both purchasing and investing with Athene and Apollo and ultimately sell products that are mutually beneficial. Additionally, Apollo, on behalf of its clients, including Athene, may bid for and purchase loans from us from time to time, and Apollo and Athene may provide financing to us in connection with our purchase of MSRs and other mortgage assets.
Athene
Athene holds a significant investment in us through its investment in A-A Mortgage. We sold loans to subsidiaries of Athene totaling $169.4 million, $410.6 million, $722.0 million, and $57.3 million in UPB during the six months ended June 30, 2020 and during the years ended December 31, 2019, 2018 and 2017, respectively. We service loans sold to subsidiaries of Athene totaling $530.9 million, $1.0 billion, $780.7 million and $93.9 million in UPB as of June 30, 2020, and December 31, 2019, 2018 and 2017, respectively. The fair value of these MSRs totaled $2.6 million, $6.7 million, $7.6 million and $0.779 million as of June 30, 2020, and December 31, 2019, 2018 and 2017, respectively. We collected servicing fees from Athene in an amount of $1.2 million, $2.1 million, $1.1 million and $0.219 million for the six months ended June 30, 2020 and the years ended December 31, 2019, 2018 and 2017, respectively.
A-A Mortgage
We sold loans to Acele Residential Mortgage Trust ("Acele"), a Delaware statutory trust administered by the special limited partner of A-A Mortgage, totaling $21.3 million, $15.0 million, $19.2 million and $11.4 million in UPB during the six months ended June 30, 2020, and during the years ended December 31, 2019, 2018 and 2017, respectively. We service loans sold to Acele totaling
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$49.7 million, $34.9 million, $32.4 million and $14.5 million in UPB as of June 30, 2020, and as of December 31, 2019, 2018 and 2017, respectively. The fair value of these MSRs totaled $0.263 million, $0.277 million, $0.345 million and $0.149 million as of June 30, 2020, and as of December 31, 2019, 2018 and 2017, respectively. We collected servicing fees from Acele in an amount of $47,000, $83,000, $65,000 and $31,000 for the six months ended June 30, 2020, and for the years ended December 31, 2019, 2018 and 2017, respectively.
We pay a monitoring fee to the special limited partner of A-A Mortgage for professional services rendered. The fee is calculated and payable quarterly in arrears at an annual rate of 1.5% and is based on our ending equity as of each calendar quarter end, measured in accordance with GAAP. We recognized monitoring fees expense of $8.0 million, $12.5 million, $11.1 million and $9.8 million for the six months ended June 30, 2020, and for the years ended December 31, 2019, 2018 and 2017, respectively.
In August 2018, we, through AmeriHome GMSR Issuer Trust (the "Trust"), issued a series of term notes (the "Series 2018 Term Notes"), including $125.0 million to certain limited partners in A-A Mortgage. We paid approximately $8.8 million in aggregate interest payments to such related parties over the life of the Series 2018 Term Notes. In November 2019, we, through the Trust, paid off the Series 2018 Term Notes using proceeds from the issuance of an additional series of term notes (the "Series 2019 Term Notes"), with such issuance of Series 2019 Term Notes including $175.0 million to certain limited partners in A-A Mortgage. As of June 30, 2020, the outstanding balance of the Series 2019 Term Notes issued to such related parties totaled $175.0 million and we had paid approximately $4.7 million in interest payments to such related parties.
2028 Senior Notes
On , 2020, AmeriHome Mortage Company, LLC and AmeriHome Finance Corp., wholly-owned direct or indirect subsidiaries of Aris Holding, co-issued $ million in aggregate principal amount of senior notes due 2028 (the "2028 Senior Notes") to certain affiliates of Apollo and Athene. For a description of the 2028 Senior Notes, see "Description of Certain IndebtednessSenior Notes."
We intend to use the net proceeds from this offering to purchase LLC Interests from the Existing Equity Owners as described in the "Use of Proceeds." Additionally, we may be required from time to time to acquire LLC Interests together with a corresponding number of shares of our Class B common stock in exchange for our Class A common stock, or, at our election, a cash payment, pursuant to the Exchange Agreement. Aris Holding intends to have an election under Section 754 of the Code in effect for taxable years in which acquisitions or exchanges of LLC Interests and Class B common stock occur, including with respect to the use of the net proceeds from this offering to purchase LLC Interests and Class B common stock. Pursuant to the election under Section 754 of the Code, transfers and exchanges of LLC Interests and Class B common stock are expected to result in an increase in the tax basis of tangible and intangible assets of Aris Holding. When we acquire LLC Interests and Class B common stock from the Existing Equity Owners, we expect that both the existing basis and the anticipated basis adjustments under Section 754 of the Code will increase (for tax purposes) our depreciation and amortization deductions and therefore reduce the amount of income tax we would otherwise be required to pay in the future. This existing and increased tax basis may also decrease gain (or increase loss) on future dispositions of certain assets to the extent tax basis is allocated to those assets. Moreover, Section 704(c) of the Code, and the U.S. Treasury regulations promulgated thereunder, require that items of income, gain, loss and deduction that are attributable to Aris Holding's directly and indirectly held property must be allocated among the members of Aris Holding to take into account the difference between the fair market value and the adjusted tax basis of such assets in certain circumstances. As a result, Aris Holding will be required to make certain special
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allocations of its items of income, gain, loss and deduction that are attributable to such assets. Certain of these allocations, like the increases in tax basis described above, are likely to reduce the amount of income tax we would otherwise be required to pay.
Under the Tax Receivable Agreement, we generally expect to retain the benefit of approximately 15% of the applicable tax savings after our payment obligations below are taken into account, and we generally will be required to pay to A-A Mortgage (or certain permitted transferees thereof including the Existing Equity Owners) approximately 85% of the applicable savings, if any, in income tax that we are deemed to realize (using the actual U.S. federal income tax rate and an assumed combined state and local income tax rate) as a result of (1) increases in tax basis resulting from exchanges or acquisitions of LLC Interests (including as part of the Transactions or under the Exchange Agreement) and shares of Class B common stock (2) allocations that result from the application of the principles of Section 704(c) of the Code in respect of certain transactions described herein or future equity offerings that result in contributions to Aris Holding, (3) tax benefits related to imputed interest, and (4) payments under the Tax Receivable Agreement.
For purposes of calculating the income tax savings we are deemed to realize under the Tax Receivable Agreement, we will calculate the U.S. federal income tax savings using the actual applicable U.S. federal income tax rate and will calculate the state and local income tax savings using % for the assumed combined state and local rate, which represents an approximation of our combined state and local income tax rate, net of federal income tax benefit. Furthermore, we will calculate the state and local income tax savings by applying this % rate to the reduction in our taxable income, as determined for U.S. federal income tax purposes, as a result of the tax attributes subject to the Tax Receivable Agreement. The term of the Tax Receivable Agreement will commence upon the completion of this offering and will continue until all such tax benefits have been utilized or expired, unless we exercise our rights to terminate the Tax Receivable Agreement or payments under the Tax Receivable Agreement are accelerated in the event that we materially breach any of our material obligations under the Tax Receivable Agreement (as described below). Under the terms of the Tax Receivable Agreement, we may exercise our right to terminate the Tax Receivable Agreement in exchange for an early termination payment in an amount based on the present value of the anticipated future tax benefits (calculated with certain assumptions). The actual existing tax basis and increase in tax basis, as well as the amount and timing of any payments under this agreement, will vary depending upon a number of factors, including the timing of exchanges by the holders of LLC Interests, the price of our Class A common stock at the time of the exchange, whether such exchanges are taxable, the amount and timing of the taxable income we generate in the future, the federal tax rate then applicable and the portion of our payments under the Tax Receivable Agreement constituting imputed interest.
The payment obligation under the Tax Receivable Agreement is an obligation of AmeriHome, Inc., not Aris Holding, and we expect that the payments we will be required to make under the Tax Receivable Agreement will be substantial. Assuming no material changes in the relevant tax law and that we earn sufficient taxable income to realize all tax benefits that are subject to the Tax Receivable Agreement, we expect that the tax savings we will be deemed to realize associated with the tax benefits described above would aggregate approximately $ over years from the date of this offering based on the initial public offering price of $ per share of our Class A common stock (the midpoint of the estimated price range set forth on the cover page of this prospectus) and assuming all future exchanges would occur year after this offering. Under such scenario we would be required to pay the owners of LLC Interests approximately 85% of such amount, or $ , over the year period from the date of this offering. The actual amounts may materially differ from these hypothetical amounts, as potential future tax savings we will be deemed to realize, and Tax Receivable Agreement payments by us, will be calculated based in part on the market value of our Class A common stock at the time of purchase or exchange and the prevailing federal tax rates applicable to us over the life of the Tax Receivable Agreement (as well as the assumed combined state and local tax rate), and will generally be dependent on us generating sufficient future taxable income to realize the
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benefit (subject to the exceptions described below). In addition, in the future we may make additional offerings and contribute the proceeds of such offerings to Aris Holding, which contributions could generate deemed savings of income taxes that would require us to make payments under the Tax Receivable Agreement. Payments under the Tax Receivable Agreement are not conditioned upon the ownership of us by A-A Mortgage (and certain permitted transferees thereof).
In addition, if any subsequent disallowance of tax basis or other benefits were so determined by the IRS, we would not be reimbursed for any payments previously made under the Tax Receivable Agreement (although we would reduce future amounts otherwise payable under the Tax Receivable Agreement). In addition, the actual state or local tax savings we realize may be different than the amount of such tax savings we are deemed to realize under the Tax Receivable Agreement, which will be based on an assumed combined state and local tax rate applied to our reduction in taxable income as determined for U.S. federal income tax purposes as a result of the tax attributes subject to the Tax Receivable Agreement. As a result, payments could be made under the Tax Receivable Agreement in excess of the tax savings that we actually realize in respect of the attributes to which the Tax Receivable Agreement relates.
The Tax Receivable Agreement provides that (1) in the event that we materially breach any of our material obligations under the agreement, whether as a result of failure to make any payment within three months of when due (provided we have sufficient funds to make such payment), failure to honor any other material obligation required thereunder or by operation of law as a result of the rejection of the Tax Receivable Agreement in a bankruptcy or otherwise or (2) if, at any time, we elect an early termination of the Tax Receivable Agreement, our (or our successor's) obligations under the Tax Receivable Agreement (with respect to all LLC Interests, whether or not LLC Interests together with a corresponding number of shares of Class B common stock have been exchanged or acquired before or after such transaction) would accelerate and become payable in a lump sum amount equal to the present value of the anticipated future tax benefits calculated based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the tax deductions, tax basis and other tax attributes subject to the Tax Receivable Agreement.
Additionally, the Tax Receivable Agreement provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, our (or our successor's) tax savings under the agreement for each taxable year after any such event would be based on certain assumptions, including that we would have sufficient taxable income to fully utilize the deductions arising from the tax deductions, tax basis and other tax attributes subject to the Tax Receivable Agreement. Furthermore, the Tax Receivable Agreement will determine the tax savings by excluding certain tax attributes that we obtain the use of after the closing date of this offering as a result of acquiring other entities to the extent such tax attributes are the subject of tax receivable agreements that we enter into in connection with such acquisitions.
As a result of the foregoing, (1) we could be required to make payments under the Tax Receivable Agreement that are greater than or less than the specified percentage of the actual tax savings we realize in respect of the tax attributes subject to the Tax Receivable Agreement and (2) if we materially breach a material obligation under the Tax Receivable Agreement or if we elect to terminate the Tax Receivable Agreement early, we would be required to make an immediate lump sum payment equal to the present value of the anticipated future tax savings, which payment may be made significantly in advance of the actual realization of such future tax savings. In these situations, our obligations under the Tax Receivable Agreement could have a substantial negative impact on our liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, other forms of business combinations or other changes of control. There can be no assurance that we will be able to fund or finance our obligations under the Tax Receivable Agreement. If we were to elect to terminate the Tax Receivable Agreement immediately after this offering, based on the initial public offering price of $ per share of our Class A common stock (the midpoint of the estimated price range set forth
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on the cover page of this prospectus), and a discount rate equal to , we estimate that we would be required to pay $ in the aggregate under the Tax Receivable Agreement.
Subject to the discussion above regarding the acceleration of payments under the Tax Receivable Agreement, payments under the Tax Receivable Agreement, if any, will generally be made on an annual basis to the extent we have sufficient taxable income to utilize the increased depreciation and amortization charges and other tax attributes subject to the Tax Receivable Agreement. The availability of sufficient taxable income to utilize the increased depreciation and amortization expense and other tax attributes will not be determined until such time as the financial results for the year in question are known and tax estimates prepared. We expect to make payments under the Tax Receivable Agreement, to the extent they are required, within days after our federal income tax return is filed for each fiscal year. Interest on such payments will begin to accrue at a rate equal to from the due date (without extensions) of such tax return.
The impact that the Tax Receivable Agreement will have on our consolidated financial statements will be the establishment of a liability, which will be increased upon the exchanges of LLC Interests and shares of Class B common stock for our Class A common stock, representing approximately 85% of the estimated future tax savings we will be deemed to realize, if any, relating to the existing and increased tax basis associated with the LLC Interests and other tax attributes we receive as a result of the acquisition or exchange of LLC Interests and shares of Class B common stock as described above. Because the amount and timing of any payments will vary based on a number of factors (including the timing of future exchanges, the price of our Class A common stock at the time of any exchange, whether such exchanges are taxable and the amount and timing of our income), depending upon the outcome of these factors, we may be obligated to make substantial payments pursuant to the Tax Receivable Agreement. In light of the numerous factors affecting our obligation to make such payments, however, the timing and amount of any such actual payments are not certain at this time. Decisions made by our controlling stockholder in the course of running our business, such as with respect to mergers, asset sales, other forms of business combinations or other changes in control, may influence the timing and amount of payments that are received by A-A Mortgage (or certain permitted transferees thereof) under the Tax Receivable Agreement. For example, the earlier disposition of assets following an exchange will generally accelerate payments under the Tax Receivable Agreement and increase the present value of such payments.
Because of our structure, our ability to make payments under the Tax Receivable Agreement is dependent on the ability of Aris Holding to make distributions to us. The ability of Aris Holding to make such distributions will be subject to, among other things, restrictions in our debt documents and the applicable provisions of Delaware law that may limit the amount of funds available for distribution to its members. To the extent that we are unable to make payments under the Tax Receivable Agreement for any reason, such payments will be deferred and will accrue interest at a rate equal to until paid (although a rate equal to will apply if the inability to make payments under the Tax Receivable Agreement is due to limitations imposed on us or any of our subsidiaries by a debt agreement in effect on the date of this prospectus).
In connection with the consummation of the Transactions, we and A-A Mortgage will enter into Aris Holding's Second Amended and Restated Limited Liability Company Agreement, which we refer to as the Aris Holding LLC Agreement.
Appointment as Managing Member. Under the Aris Holding LLC Agreement, we will become a member and the sole manager of Aris Holding. As the sole manager, we will be able to control all of the day-to-day business affairs and decision-making of Aris Holding without the approval of any other member. As such, we, through our officers and directors, will be responsible for all operational and administrative decisions of Aris Holding and daily management of Aris Holding's business. Pursuant to
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the terms of the Aris Holding LLC Agreement, we cannot be removed or replaced as the sole manager of Aris Holding except by our resignation, which may be given at any time by written notice to the members.
Compensation, Fees and Expenses. We will not be entitled to compensation for our services as the manager of Aris Holding.
Distributions. The Aris Holding LLC Agreement will require "tax distributions," as that term is used in the agreement to be made by Aris Holding to its members on a pro rata basis, except to the extent such distributions would render Aris Holding insolvent or are otherwise prohibited by law or any of our current or future debt agreements. Tax distributions will be made on a quarterly basis, to each member of Aris Holding on a pro rata basis including us, based on an assumed tax rate that will generally be equal to the highest effective marginal combined U.S. federal, state and local income tax rate applicable to an individual residing in New York, New York taking into account the non-deductibility of certain expenses and the character of tax items. The Aris Holding LLC Agreement will also allow for cash distributions to be made by Aris Holding (subject to our sole discretion as the sole manager of Aris Holding) to its members on a pro rata basis out of "distributable cash," as that term is defined in the agreement. We expect Aris Holding may make distributions out of distributable cash periodically and as necessary to enable us to cover our operating expenses and other obligations, including our tax liability and obligations under the Tax Receivable Agreement, except to the extent such distributions would render Aris Holding insolvent or are otherwise prohibited by law or any of our current or future debt agreements.
Transfer Restrictions. The Aris Holding LLC Agreement generally does not permit transfers of LLC Interests by members, except for transfers to permitted transferees, transfers pursuant to the drag-along right described below and other limited exceptions. The Aris Holding LLC Agreement may impose additional restrictions on transfers that are necessary or advisable so that Aris Holding is not treated as a "publicly-traded partnership" for U.S. federal income tax purposes. In the event of a permitted transfer under the Aris Holding LLC Agreement, such member will be required to simultaneously transfer shares of Class B common stock to such transferee equal to the number of LLC Interests that were transferred to such transferee in such permitted transfer.
The Aris Holding LLC Agreement provides that, in the event that our board of directors and our stockholders approve a Qualified Transaction (as defined below), each member of Aris Holding agrees to sell all of its LLC Interests to the acquirer or its designee in such Qualified Transaction for an amount of consideration per LLC Interest equal to the amount of consideration to be received per share of Class A common stock in such Qualified Transaction, and otherwise on the same terms and conditions that apply to the Class A common stock in such Qualified Transaction (such right, a "drag-along right"). A "Qualified Transaction" means any merger, consolidation or other business combination of AmeriHome, Inc., whether effectuated through one transaction or series of related transactions (including a tender offer followed by a merger in which holders of Class A common stock receive the same consideration per share paid in the tender offer), unless, following such transaction, all or substantially all of the holders of the voting power of all outstanding classes of common stock and any series of preferred stock issued by AmeriHome, Inc. that are generally entitled to vote in the election of directors prior to such transaction or series of transactions, continue to hold a majority of the voting power of the surviving entity (or its parent) resulting from such transaction or series of transactions in substantially the same proportions as immediately prior to such transaction or series of transactions.
Except for certain exceptions, any transferee of LLC Interests must assume, by operation of law or executing a joinder to the Aris Holding LLC Agreement, all of the obligations of a transferring member with respect to the transferred units, and such transferee shall be bound by any limitations and obligations under the Aris Holding LLC Agreement even if the transferee is not admitted as a member
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of Aris Holding. A member shall remain as a member with all rights and obligations until the transferee is accepted as substitute member in accordance with the Aris Holding LLC Agreement.
Ratio of Shares of Class A common stock and Class B common stock to LLC Interests. Except as otherwise determined by us, the Aris Holding LLC Agreement will require that we and Aris Holding at all times maintain a one-to-one ratio between (a) the number of shares of Class A common stock issued by us and the number of LLC Interests owned by us and (b) the number of shares of Class B common stock owned by A-A Mortgage and its permitted transferees and the number of LLC Interests owned by A-A Mortgage and its permitted transferees. This ratio requirement disregards (x) shares of our Class A common stock under unvested options issued by us, (y) treasury stock, and (z) preferred stock or other debt or equity securities (including warrants, options or rights) issued by us that are convertible into or exercisable or exchangeable for shares of Class A common stock, except to the extent we have contributed the net proceeds from such other securities, including any exercise or purchase price payable upon conversion, exercise or exchange thereof, to the equity capital of Aris Holding. If we issue, transfer or deliver from treasury stock or repurchase shares of Class A common stock in a transaction not contemplated by the Aris Holding LLC Agreement, we as manager of Aris Holding have the authority to take all actions such that, after giving effect to all such issuances, transfers, deliveries or repurchases, the number of outstanding LLC Interests we own equals, on a one-for-one basis, the number of outstanding shares of Class A common stock. If we issue, transfer or deliver from treasury stock or repurchase or redeem any of our preferred stock in a transaction not contemplated by the Aris Holding LLC Agreement, we as manager have the authority to take all actions such that, after giving effect to all such issuances, transfers, deliveries repurchases or redemptions, we hold (in the case of any issuance, transfer or delivery) or cease to hold (in the case of any repurchase or redemption) equity interests in Aris Holding which (in our good faith determination) are in the aggregate substantially equivalent to our preferred stock so issued, transferred, delivered, repurchased or redeemed.
Issuance of LLC Interests upon Exercise of Options or Issuance of Other Equity Compensation. Upon the exercise of options issued by us (as opposed to options issued by Aris Holding), or the issuance of other types of equity compensation by us (such as the issuance of restricted or non-restricted stock, payment of bonuses in stock or settlement of stock appreciation rights in stock), we will have the right to acquire from Aris Holding a number of LLC Interests equal to the number of our shares of Class A common stock being issued in connection with the exercise of such options or issuance of other types of equity compensation. When we issue shares of Class A common stock in settlement of stock options granted to persons that are not officers or employees of Aris Holding or its subsidiaries, we will make, or be deemed to make, a capital contribution in Aris Holding equal to the aggregate value of such shares of Class A common stock and Aris Holding will issue to us a number of LLC Interests equal to the number of shares we issued. When we issue shares of Class A common stock in settlement of stock options granted to persons that are officers or employees of Aris Holding or its subsidiaries, then we will be deemed to have sold directly to the person exercising such award a portion of the value of each share of Class A common stock equal to the exercise price per share, and we will be deemed to have sold directly to Aris Holding (or the applicable subsidiary of Aris Holding) the difference between the exercise price and market price per share for each such share of Class A common stock. In cases where we grant other types of equity compensation to employees of Aris Holding or its subsidiaries, on each applicable vesting date we will be deemed to have sold to Aris Holding (or such subsidiary) the number of vested shares at a price equal to the market price per share, Aris Holding (or such subsidiary) will deliver the shares to the applicable person, and we will be deemed to have made a capital contribution in Aris Holding equal to the purchase price for such shares in exchange for an equal number of LLC Interests.
Dissolution. The Aris Holding LLC Agreement will provide that the consent of AmeriHome, Inc. as the managing member of Aris Holding and members holding a majority of the voting units will be
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required to voluntarily dissolve Aris Holding. In addition to a voluntary dissolution, Aris Holding will be dissolved upon the entry of a decree of judicial dissolution or other circumstances in accordance with Delaware law. Upon a dissolution event, the proceeds of a liquidation will be distributed in the following order: (1) first, to pay the expenses of winding up Aris Holding; (2) second, to pay debts and liabilities owed to creditors of Aris Holding, other than members; and (3) third, to the members pro-rata in accordance with their respective percentage ownership interests in Aris Holding (as determined based on the number of LLC Interests held by a member relative to the aggregate number of all outstanding LLC Interests).
Confidentiality. We, as manager, and each member agree to maintain the confidentiality of Aris Holding's confidential information. This obligation excludes information independently obtained or developed by the members, information that is in the public domain or otherwise disclosed to a member, in either such case not in violation of a confidentiality obligation of the Aris Holding LLC Agreement or approved for release by written authorization of certain officers of either AmeriHome, Inc. or Aris Holding.
Indemnification. The Aris Holding LLC Agreement will provide for indemnification of the manager, members and officers of Aris Holding and their respective subsidiaries or affiliates.
Amendments. In addition to certain other requirements, our consent, as manager, and the consent of members holding a majority of the LLC Interests then outstanding and entitled to vote (excluding LLC Interests held directly or indirectly by us) will generally be required to amend or modify the Aris Holding LLC Agreement.
We, Aris Holding and A-A Mortgage will enter into the Exchange Agreement substantially concurrently with the consummation of this offering under which A-A Mortgage (or certain permitted transferees thereof including the Existing Equity Owners) will have the right, subject to the terms of the Exchange Agreement, to exchange its LLC Interests, together with a corresponding number of shares of Class B common stock, for newly-issued shares of our Class A common stock on a one-for-one basis, subject to customary conversion rate adjustments for stock splits, stock dividends, reclassifications and other similar transactions, or, at our election (determined by a majority of the disinterested members of our board of directors or a committee of disinterested members of our board of directors), a cash payment per LLC Interest equal to the volume weighted average price for a share of Class A common stock for each of the three consecutive full trading days ending on and including the last full trading day immediately prior to the related date of the exchange.
The Exchange Agreement will also provide that as a general matter A-A Mortgage (or such permitted transferee thereof) will not have the right to exchange LLC Interest if we determine that such exchange would be prohibited by law or regulation or would violate other agreements with us to which such owner may be subject, including the Aris Holding LLC Agreement. We may also impose additional restrictions on exchanges that we determine to be necessary or advisable so that Aris Holding is not treated as a "publicly traded partnership" for U.S. federal income tax purposes. As a holder exchanges LLC Interests and Class B common stock for shares of Class A common stock, the number of LLC Interests held by AmeriHome Inc. will correspondingly increase as it acquires the exchanged LLC Interests, and a corresponding number of shares of Class B common stock are cancelled. In the event we elect to pay a holder cash in an exchange, we will cause Aris Holding to cancel the LLC Interests we acquire from such holder and the corresponding number of shares of Class B common stock we acquire will be cancelled by us.
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In connection with this offering we intend to enter into the Registration Rights Agreement with A-A Mortgage and certain limited partners of A-A Mortgage. The Registration Rights Agreement will provide A-A Mortgage with certain demand registration rights, including shelf registration rights, in respect of any of our Class A common stock held by them (upon conversion of Class B common stock and LLC Interests held by them), subject to certain conditions. In addition, in the event that we register additional Class A common stock for sale to the public following the completion of this offering, we will be required to give notice to A-A Mortgage and certain limited partners of A-A Mortgage of our intention to effect such a registration, and, subject to certain limitations, include Class A common stock held by them (upon conversion of Class B common stock and LLC Interests held by them) in such registration. All expenses of registration under the Registration Rights Agreement, including the legal fees of counsel chosen by stockholders participating in a registration, will be paid by us. The registration rights granted in the Registration Rights Agreement are subject to customary restrictions including blackout periods and, if a registration is underwritten, any limitations on the number of shares to be included in the underwritten offering as reasonably advised by the managing underwriter or underwriters. The Registration Rights Agreement also contains customary indemnification and contribution provisions. The Registration Rights Agreement is governed by New York law.
Prior to the consummation of this offering, we intend to enter into the Stockholders Agreement with A-A Mortgage. The Stockholders Agreement will give our controlling stockholder the right to nominate a majority of our directors after the consummation of this offering as long as our controlling stockholder beneficially owns % or more of the combined voting power of our outstanding common stock and shall specify how our controlling stockholder's nominations rights shall decrease as our controlling stockholder's beneficial ownership of our common stock also decreases. See "ManagementBoard Composition." The Stockholders Agreement sets forth certain information rights granted to A-A Mortgage. It also specifies that we will not take certain significant actions specified therein without the prior consent of A-A Mortgage. Such specified actions include, but are not limited to:
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The following table sets forth information as of , 2020 regarding the beneficial ownership of our Class A common stock and Class B common stock, (i) after giving effect to the Transactions, but excluding this offering, and (ii) as adjusted to give effect to this offering, for: (1) each person or group who is known by us to own beneficially more than 5% of our outstanding shares of Class A common stock or our Class B common stock (including any securities convertible or exchangeable within 60 days into Class A common stock or Class B common stock, as applicable), (2) each of our named executive officers, (3) each of our directors, (4) all of our current executive officers, directors and director nominees as a group and (5) our controlling stockholder.
As described in "Our Organizational Structure" and "Certain Relationships and Related Party Transactions," each LLC Interest (other than LLC Interests held by us) together with a corresponding number of shares of Class B common stock is exchangeable from time to time at each holder's options for newly-issued shares of our Class A common stock on a one-for-one basis in accordance with the Exchange Agreement. A-A Mortgage may, subject to certain exceptions, exercise such exchange rights for as long as their LLC Interests remain outstanding. See "Certain Relationships and Related Party TransactionsExchange Agreement." In connection with this offering, we will issue to A-A Mortgage one share of Class B common stock for each LLC Interest A-A Mortgage will own. As a result, the number of shares of Class B common stock listed in the table below correlates to the number of LLC Interests A-A Mortgage will own immediately after the Transactions. The table below assumes the shares of Class A common stock are offered at $ per share (the midpoint of the estimated price range set forth on the cover page of this prospectus). See "Our Organizational Structure." Following the completion of this offering, an affiliate of Apollo Global Management, Inc. will control A-A Mortgage.
The number of shares beneficially owned by each stockholder as described in this prospectus is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options, or other rights, including the redemption right described above with respect to each LLC Interest, held by such person that are currently exercisable or will become exercisable within 60 days of , 2020, are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. The percentage ownership of each individual or entity after giving effect to the Transactions and before this offering is computed on the basis of shares of our Class A common stock outstanding and shares of our Class B common stock outstanding. The percentage ownership of each individual or entity after the Transactions and after this offering is computed on the basis of shares of our Class A common stock outstanding and shares of our Class B common stock outstanding.
To our knowledge, each person named in the table below has sole voting and investment power with respect to all of the shares of Class A common stock and Class B common stock, except as otherwise set forth in the notes to the table and pursuant to applicable community property laws. Unless otherwise indicated in the table or footnotes below, the address for each officer and director listed in the table is 1 Baxter Way, Thousand Oaks, California 91362.
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The following table assumes the underwriters' option to purchase additional shares is not exercised.
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Class A Common Stock Beneficially Owned (on a fully exchanged and converted basis)(1) |
Class B Common Stock Beneficially Owned (on a fully exchanged and converted basis)(1) |
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Before this Offering | After this Offering | Before this Offering | After this Offering | Combined Voting Power After this Offering |
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Name and Address of Beneficial Owner
|
Number | Percentage | Number | Percentage | Number | Percentage | Number | Percentage | ||||||||||||||||||||
A-A Mortgage Opportunities, L.P.(2) |
% | % | % | % | % | |||||||||||||||||||||||
Directors and Named Executive Officers |
||||||||||||||||||||||||||||
James S. Furash |
% | % | % | % | % | |||||||||||||||||||||||
Josh Adler |
% | % | % | % | % | |||||||||||||||||||||||
John Hedlund |
% | % | % | % | % | |||||||||||||||||||||||
Mark Miller |
% | % | % | % | % | |||||||||||||||||||||||
Garrett Galati |
% | % | % | % | % | |||||||||||||||||||||||
David Andersen |
% | % | % | % | % | |||||||||||||||||||||||
|
% | % | % | % | % | |||||||||||||||||||||||
|
% | % | % | % | % | |||||||||||||||||||||||
|
% | % | % | % | % | |||||||||||||||||||||||
All directors and executive officers as a group (9 persons) |
% | % | % | % | % |
The following table assumes the underwriters' option to purchase additional shares is exercised in full.
|
Class A Common Stock Beneficially Owned (on a fully exchanged and converted basis)(1) |
Class B Common Stock Beneficially Owned (on a fully exchanged and converted basis)(1) |
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Before this Offering | After this Offering | Before this Offering | After this Offering | Combined Voting Power After this Offering |
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Name and Address of Beneficial Owner
|
Number | Percentage | Number | Percentage | Number | Percentage | Number | Percentage | ||||||||||||||||||||
A-A Mortgage Opportunities, L.P.(2) |
% | % | % | % | % | |||||||||||||||||||||||
Directors and Named Executive Officers |
||||||||||||||||||||||||||||
James S. Furash |
% | % | % | % | % | |||||||||||||||||||||||
Josh Adler |
% | % | % | % | % | |||||||||||||||||||||||
John Hedlund |
% | % | % | % | % | |||||||||||||||||||||||
Mark Miller |
% | % | % | % | % | |||||||||||||||||||||||
Garrett Galati |
% | % | % | % | % | |||||||||||||||||||||||
David Andersen |
% | % | % | % | % | |||||||||||||||||||||||
|
% | % | % | % | % | |||||||||||||||||||||||
|
% | % | % | % | % | |||||||||||||||||||||||
|
% | % | % | % | % | |||||||||||||||||||||||
All directors and executive officers as a group (9 persons) |
% | % | % | % | % |
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This section contains a description of our capital stock and the material provisions of our certificate of incorporation and bylaws that will be in effect upon the completion of this offering and is qualified by reference to the forms of our certificate of incorporation and our bylaws filed as exhibits to the registration statement relating to this prospectus, and by the applicable provisions of Delaware law. The descriptions of our common stock and preferred stock reflect changes to our capital structure that will occur immediately prior to the effectiveness of the registration statement of which this prospectus forms a part. For more information concerning the Transactions, see "Our Organizational Structure."
General
Immediately prior to the effectiveness of the registration statement of which this prospectus forms a part, our certificate of incorporation will authorize shares of Class A common stock, par value $0.001 per share, shares of Class B common stock, par value $0.001 per share and shares of undesignated preferred stock, par value $0.001 per share, the rights, preferences and privileges of which may be designated from time to time by our board of directors.
The number of shares of common stock to be outstanding after this offering excludes shares of Class A common stock that will be available for future issuance under our equity incentive plan, which will become effective on the date of this prospectus. There are currently no outstanding shares of our preferred stock.
Class A Common Stock
Dividend Rights
Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding shares of our Class A common stock are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and only then at the times and in the amounts that our board of directors may determine. See "Dividend Policy" for more information.
Voting Rights
The holders of our Class A common stock are entitled to one vote per share. Stockholders do not have the ability to cumulate votes for the election of directors. Our certificate of incorporation and bylaws that will be in effect immediately prior to the effectiveness of the registration statement of which this prospectus forms a part will provide for a classified board of directors consisting of three classes of approximately equal size, each serving staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms.
Upon consummation of this offering, our board of directors will consist of directors.
Pursuant to our certificate of incorporation, neither Apollo nor any of its affiliates is required to present corporate opportunities to us.
No Preemptive or Similar Rights
Our Class A common stock is not entitled to preemptive rights and is not subject to redemption or sinking fund provisions.
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Right to Receive Liquidation Distributions
Upon our liquidation, dissolution or winding-up, the assets legally available for distribution to our stockholders would be distributable ratably among the holders of our Class A common stock and any participating preferred stock outstanding at that time, subject to prior satisfaction of all outstanding debt and liabilities and the preferential rights of and the payment of liquidation preferences, if any, on any outstanding shares of preferred stock.
Class B Common Stock
Dividend Rights
The holders of outstanding shares of Class B common stock do not have any right to receive dividends. See "Dividend Policy" for more information.
Voting Rights
Upon consummation of this offering, the holders of our Class B common stock are entitled to ten votes per share. Upon the date on which the shares of Class B common stock held by A-A Mortgage and its permitted transferees represent less than 10% of our outstanding shares of common stock, each share of Class B common stock will entitle its holder to one vote per share of Class B common stock. Stockholders do not have the ability to cumulate votes for the election of directors. Our certificate of incorporation and bylaws that will be in effect immediately prior to the effectiveness of the registration statement of which this prospectus forms a part will provide for a classified board of directors consisting of three classes of approximately equal size, each serving staggered three-year terms. Only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms.
Upon consummation of this offering, our board of directors will consist of directors. Under our Stockholders Agreement, A-A Mortgage has the right, but not the obligation, to nominate (a) a majority of our directors, as long as our controlling stockholder beneficially owns % or more of the combined voting power of our outstanding common stock, (b) % of our directors, as long as our controlling stockholder beneficially owns % or more, but less than % of the combined voting power of our outstanding common stock, (c) % of our directors, as long as our controlling stockholder beneficially owns % or more, but less than % of the combined voting power of our outstanding common stock, (d) % of our directors, as long as our controlling stockholder beneficially owns % or more, but less than % of the combined voting power of our outstanding common stock, (e) % of our directors, as long as our controlling stockholder beneficially owns % or more, but less than % of the combined voting power of our outstanding common stock. See "Certain Relationships and Related Party TransactionsStockholders Agreement."
Pursuant to our certificate of incorporation, neither Apollo nor any of its affiliates is required to present corporate opportunities to us.
No Preemptive or Similar Rights
Our Class B common stock is not entitled to preemptive rights and is not subject to redemption or sinking fund provisions.
Right to Receive Liquidation Distributions
The holders of outstanding shares of Class B common stock do not have any right to receive a distribution upon our liquidation, dissolution or winding-up.
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Combined Voting Power of Class A Common Stock and Class B Common Stock
Holders of shares of our Class A common stock and Class B common stock will vote together as a single class on all matters requiring approval by our common stockholders unless otherwise required by law.
Upon the consummation of this offering, and assuming no exercise of the underwriters' option to purchase additional shares of Class A common stock, holders of shares of our Class A common stock will hold approximately % of the combined voting power of our outstanding common stock and holders of shares of our Class B common stock will hold approximately % of the combined voting power of our outstanding common stock.
If the underwriters exercise in full their option to purchase an additional shares of Class A common stock, holders of our Class A common stock will hold approximately % of the combined voting power of our outstanding common stock and holders of our Class B common stock will hold approximately % of the combined voting power of our outstanding common stock.
Preferred Stock
Pursuant to our certificate of incorporation that will become effective immediately prior to the effectiveness of the registration statement of which this prospectus forms a part, our board of directors will be authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series and to fix the designation, powers, preferences and rights of the shares of each series and any of its qualifications, limitations or restrictions, in each case without further vote or action by our stockholders. Our board of directors can also increase or decrease the number of shares of any series of preferred stock, but not below the number of shares of that series then outstanding, without any further vote or action by our stockholders. Our board of directors may authorize the issuance of preferred stock with voting or conversion rights that could adversely affect the voting power or other rights of the holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change in our control and might adversely affect the market price of our Class A common stock and the voting and other rights of the holders of our Class A common stock. We have no current plan to issue any shares of preferred stock.
Anti-Takeover Provisions
The provisions of the DGCL, our certificate of incorporation and our bylaws to be in effect following this offering could have the effect of delaying, deferring or discouraging another person from acquiring control of our company. These provisions, which are summarized below, are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and encourage persons seeking to acquire control of our company to first negotiate with our board of directors. We believe that the benefits of increased protection of our potential ability to negotiate with an unfriendly or unsolicited acquirer outweigh the disadvantages of discouraging a proposal to acquire us because negotiation of these proposals could result in an improvement of their terms.
Section 203 of the DGCL
We are subject to the provisions of Section 203 of the DGCL regulating corporate takeovers. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a three-year period following the date that this stockholder becomes an interested stockholder, unless the business combination is approved in a
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prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:
Section 203 defines a business combination to include:
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Certificate of Incorporation and Bylaw Provisions
Our certificate of incorporation and our bylaws will include a number of provisions that may have the effect of deterring hostile takeovers, or delaying or preventing changes in control of our management team or changes in our board of directors or our governance or policy, including the following:
Board Vacancies
Our certificate of incorporation and bylaws will authorize generally only our board of directors to fill vacant directorships resulting from any cause or created by the expansion of our board of directors. In addition, the number of directors constituting our board of directors may be set only by resolution adopted by a majority vote of our entire board of directors. These provisions prevent a stockholder from increasing the size of our board of directors and gaining control of our board of directors by filling the resulting vacancies with its own nominees.
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Classified Board
Our certificate of incorporation and bylaws will provide that our board of directors is classified into three classes of directors. The existence of a classified board of directors could delay a successful tender offeror from obtaining majority control of our board of directors, and the prospect of that delay might deter a potential offeror. See "Management" for additional information.
Directors Removed Only for Cause
Our certificate of incorporation will provide that stockholders may remove directors only for cause.
Supermajority Requirements for Amendments of Our Certificate of Incorporation and Bylaws
Our certificate of incorporation will further provide that the affirmative vote of holders of at least two-thirds of the voting power of our outstanding common stock will be required to amend certain provisions of our certificate of incorporation, including provisions relating to the classified board, the size of the board of directors, removal of directors, special meetings, actions by written consent and designation of our preferred stock. The affirmative vote of holders of at least two-thirds of the voting power of our outstanding common stock will be required to amend or repeal our bylaws, although our bylaws may be amended by a simple majority vote of our board of directors.
Stockholder Action; Special Meetings of Stockholders
Our certificate of incorporation will provide that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders. As a result, holders of our capital stock would not be able to amend our bylaws or remove directors without holding a meeting of our stockholders called in accordance with our bylaws. Our certificate of incorporation and our bylaws will provide that special meetings of our stockholders may be called only by a majority of our board of directors, the chairperson of our board of directors, our chief executive officer, our president or the lead independent director, thus prohibiting a stockholder from calling a special meeting. These provisions might delay the ability of our stockholders to force consideration of a proposal or for stockholders to take any action, including the removal of directors.
Advance Notice Requirements for Stockholder Proposals and Director Nominations
Our bylaws will provide advance notice procedures for stockholders seeking to bring business before our annual meeting of stockholders or to nominate candidates for election as directors at our annual meeting of stockholders. To be timely, a stockholder's notice generally must be delivered to us not later than the close of business on the 90th day nor earlier than the close of business on the 120th day prior to the first anniversary of the preceding year's annual meeting of stockholders. Our bylaws also will specify certain requirements regarding the form and content of a stockholder's notice. With respect to nominations of persons for election to our board of directors, the notice shall provide information about the nominee, including, among other things, name, age, address, principal occupation, ownership of our capital stock and whether they meet applicable independence requirements. With respect to the proposal of other business to be considered by our stockholders at an annual meeting, the notice shall provide a brief description of the business desired to be brought before the meeting, the text of the proposal or business, the reasons for conducting such business at the meeting and any material interest in such business by such stockholder and any beneficial owners and associated persons on whose behalf the notice is made, or the proposing persons. In addition, a stockholder's notice must set forth certain information related to the proposing persons, including, among other things:
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These provisions may preclude our stockholders from bringing matters before our annual meeting of stockholders or from making nominations for directors at our annual meeting of stockholders. We expect that these provisions might also discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer's own slate of directors or otherwise attempting to obtain control of our company.
No Cumulative Voting
The DGCL provides that stockholders are not entitled to the right to cumulate votes in the election of directors unless a corporation's certificate of incorporation provides otherwise. Our certificate of incorporation and bylaws will not provide for cumulative voting.
Issuance of Undesignated Preferred Stock
We anticipate that after the filing of our certificate of incorporation, our board will have the authority, without further action by the stockholders, to issue up to shares of undesignated preferred stock with rights and preferences, including voting rights, designated from time to time by our board of directors. The existence of authorized but unissued shares of preferred stock enables our board of directors to render more difficult or to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise.
Exclusive Forum
Our certificate of incorporation will provide that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws, (4) any other action asserting a claim that is governed by the internal affairs doctrine shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) or (5) any other action asserting an "internal corporate claim," as defined in Section 115 of the Delaware General Corporation Law, in all cases subject to the court having jurisdiction over indispensable parties named as defendants. Our certificate of incorporation will also provide that, unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Any person or entity purchasing or otherwise acquiring any interest in our securities shall be deemed to have notice of and consented to this provision. Although we believe these provisions benefit us by providing increased consistency in the application of Delaware law for the specified types of actions and proceedings, the provisions may have the effect of discouraging lawsuits against us or our directors and officers.
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Corporate Opportunity
Under Delaware law, officers and directors generally have an obligation to present to the corporation they serve business opportunities which the corporation is financially able to undertake and which falls within the corporation's business line and are of practical advantage to the corporation, or in which the corporation has an actual or expectant interest. A corollary of this general rule is that when a business opportunity comes to an officer or director that is not one in which the corporation has an actual or expectant interest, the officer is generally not obligated to present it to the corporation. Certain of our officers and directors may serve as officers, directors or fiduciaries of other entities and, therefore, may have legal obligations relating to presenting available business opportunities to us and to other entities. Potential conflicts of interest may arise when our officers and directors learn of business opportunities (e.g., the opportunity to acquire an asset or portfolio of assets, to make a specific investment, to effect a sale transaction, etc.) that would be of material advantage to us and to one or more other entities of which they serve as officers, directors or other fiduciaries.
Section 122(17) of the DGCL permits a corporation to renounce, in advance, in its certificate of incorporation or by action of its board of directors, any interest or expectancy of a corporation in certain classes or categories of business opportunities. Where business opportunities are so renounced, certain of our officers and directors will not be obligated to present any such business opportunities to us. Our certificate of incorporation provides that, to the fullest extent permitted by law, no officer or director of ours who is also an officer, director, principal, partner, member, manager, employee, agent, or other representative of Athene, Apollo or their respective affiliates will be liable to us or our stockholders for breach of any fiduciary duty by reason of the fact that any such individual directs a corporate opportunity to Athene, Apollo or their respective affiliates and representatives, as applicable, instead of us, or does not communicate information regarding a corporate opportunity to us that such individual has directed to Athene, Apollo or their respective affiliates and representatives, as applicable. As of the date of this prospectus, this provision of our certificate of incorporation relates only to the directors nominated by Athene or Apollo.
Transfer Agent and Registrar
Upon the completion of this offering, the transfer agent and registrar for our Class A common stock will be Computershare Trust Company, N.A.. The transfer agent's address is 150 Royall Street, Canton, Massachusetts 02021, and its telephone number is (800) 962-4284.
Exchange Listing
We have applied to list our Class A common stock on the NYSE under the symbol "AHM."
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DESCRIPTION OF CERTAIN INDEBTEDNESS
Senior Notes
AmeriHome Mortgage Company, LLC ("AHMC") and AmeriHome Finance Corp., a subsidiary of AHMC, are the co-issuers of $ million in aggregate principal amount of senior notes due 2028 (the "2028 Senior Notes"). The 2028 Senior Notes mature on , 2028. Interest on the 2028 Senior Notes accrues at % per annum and is paid semi-annually, in arrears, on and of each year, from , 2021.
On or after , 2023, the issuers may redeem some or all of the 2028 Senior Notes at a price equal to % of the principal amount thereof, plus accrued and unpaid interest, which redemption price shall decrease (i) after , 2023, to % of the principal amount thereof, plus accrued and unpaid interest, (ii) after , 2024, to % of the principal amount thereof, plus accrued and unpaid interest and (iii) after , 2025, to par, plus accrued and unpaid interest. In addition, prior to , 2023, the issuers may redeem the 2028 Senior Notes at their option, in whole at any time or in part from time to time, at a redemption price equal to 100% of the principal amount of the 2028 Senior Notes redeemed, plus a "make-whole" premium and accrued and unpaid interest. In addition, at any time and from time to time on or prior to , 2023, the issuers may redeem in the aggregate up to 40% of the original aggregate principal amount of the 2028 Senior Notes in an aggregate amount equal to the net cash proceeds of one or more equity offerings at a redemption price equal to %, plus accrued and unpaid interest.
The issuers' obligations under the 2028 Senior Notes are fully and unconditionally guaranteed, jointly and severally, by direct or indirect wholly-owned domestic restricted subsidiaries of AHMC, subject to certain exceptions.
The indenture governing the 2028 Senior Notes, among other things, limits the ability of AHMC and its restricted subsidiaries to, among other things: (i) incur or guarantee additional indebtedness; (ii) pay dividends or distributions on, or redeem or repurchase, capital stock and make other restricted payments; (iii) make certain investments; (iv) consummate certain asset sales; (v) engage in certain transactions with affiliates; (vi) grant or assume certain liens; and (vii) consolidate, merge or transfer all or substantially all of their assets. These covenants are subject to a number of important qualifications and exceptions. Additionally, upon the occurrence of specified change of control events, each holder will have the right to require the issuers to repurchase all or any part of such holder's 2028 Senior Notes at a purchase price in cash equal to 101%.
The indenture governing the 2028 Senior Notes also provides for customary events of default.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our Class A common stock. Future sales of substantial amounts of our Class A common stock in the public market, or the perception that such sales may occur, could adversely affect the prevailing market price of our Class A common stock and could impair our ability to raise capital through the sale of our equity securities. See "Risk FactorsGeneral Risk FactorsFuture sales, or the perception of future sales, of our Class A common stock may depress the price of our Class A common stock." No prediction can be made as to the effect, if any, of future sales of shares, or the availability of shares for future sales, will have on the market price of our Class A common stock prevailing from time to time.
Upon the consummation of this offering, we will have outstanding an aggregate of approximately shares of Class A common stock.
The shares of our Class A common stock sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except that any shares of such class acquired by our affiliates, as that term is defined under Rule 144 of the Securities Act, may be sold only in compliance with the limitations described below. Restricted securities may be sold in the public market only if registered or if they qualify for an exemption from registration, generally under Rules 144 or 701 under the Securities Act, which we summarize below. Certain of our shares of Class A common stock will be subject to lock-up agreements described below.
In addition, upon the consummation of this offering, our controlling stockholder will beneficially own shares of our Class B common stock. Any of our currently issued and outstanding capital stock that may be held by our controlling stockholder would be "restricted securities," as defined in Rule 144. As a result, absent registration under the Securities Act or compliance with Rule 144 thereunder or an exemption therefrom, these shares of common stock will not be freely transferable to the public. However, prior to the completion of this offering, we expect to enter into a registration rights agreement with our controlling stockholder that requires us to register under the Securities Act the resale of shares of our Class A common stock (upon conversion of Class B common stock and LLC Interests held by them), subject to the lock-up agreements described below. See "Certain Relationships and Related Party TransactionsRegistration Rights Agreement." Such securities registered under any registration statement will be available for sale in the open market unless restrictions apply.
In general, under Rule 144, beginning 90 days after the date of this prospectus, and subject to the lock-up agreements described below, a person who is not our affiliate and has not been our affiliate at any time during the preceding three months will be entitled to sell any Class A common stock that such person has beneficially owned for at least six months, including the holding period of any prior owner other than one of our affiliates, without regard to volume limitations subject only to the availability of current public information about us (which requirement will cease to apply after such person has beneficially owned such shares for at least 12 months).
Approximately shares of our outstanding Class A common stock that are not subject to the lock-up agreements described below will be eligible for sale under Rule 144 immediately upon the consummation of this offering.
Without giving effect to any lock-up agreements, beginning 90 days after the date of this prospectus, our affiliates who have beneficially owned our Class A common stock for at least six
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months, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell within any three-month period a number of shares that does not exceed the greater of:
Sales under Rule 144 by our affiliates are also subject to manner of sale provisions and notice requirements and to the availability of current public information about us.
In general, under Rule 701 as currently in effect, any of our employees, directors, officers, consultants or advisers who purchase shares from us in connection with a compensatory stock or option plan or other written agreement before the effective date of this offering is entitled to sell such shares 90 days after the effective date of this offering in reliance on Rule 144, in the case of affiliates, without having to comply with the holding period requirements of Rule 144 and, in the case of non-affiliates, without having to comply with the public information or holding period requirements of Rule 144. However, all or substantially all Rule 701 shares are subject to lock-up agreements as described below.
180-Day Lock-up
We and each of our directors, executive officers, controlling stockholder and substantially all other stockholders, who will collectively beneficially own shares of our Class A common stock following this offering (or shares of Class A common stock if the underwriters exercise in full their option to purchase additional shares of Class A common stock), have agreed that, without the prior written consent of any two of the four representatives of the underwriters, we and they will not, subject to limited exceptions, directly or indirectly sell or dispose of any shares of Class A common stock or any securities convertible into or exchangeable or exercisable for our Class A common stock for a period of 180 days after the date of this prospectus. The lock-up restrictions and specified exceptions are described in more detail under "Underwriting (Conflict of Interest)."
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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
TO NON-U.S. HOLDERS OF OUR CLASS A COMMON STOCK
The following is a summary of material U.S. federal income tax consequences of the purchase, ownership and disposition of shares of our Class A common stock as of the date hereof. Except where noted, this summary deals only with Class A common stock that was acquired in this offering and that is held as a capital asset by a non-U.S. holder (as defined below).
A "non-U.S. holder" means a beneficial owner of shares of our Class A common stock (other than an entity treated as a partnership for U.S. federal income tax purposes) that is not, for U.S. federal income tax purposes, any of the following:
This summary is based upon provisions of the Code, and regulations, rulings and judicial decisions as of the date hereof. Those authorities may be changed, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those summarized below. This summary does not address all aspects of U.S. federal income taxes and does not deal with foreign, state, local or other tax considerations that may be relevant to non-U.S. holders in light of their particular circumstances. In addition, it does not represent a detailed description of the U.S. federal income tax consequences applicable to you if you are subject to special treatment under the U.S. federal income tax laws (including if you are a U.S. expatriate, foreign pension fund, "controlled foreign corporation," "passive foreign investment company" or a partnership or other pass-through entity for U.S. federal income tax purposes). We cannot assure you that a change in law will not alter significantly the tax considerations that we describe in this summary.
If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) holds shares of our Class A common stock, the tax treatment of a partner and the partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partnership or a partner of a partnership holding our Class A common stock, you should consult your tax advisors.
If you are considering the purchase of our Class A common stock, you should consult your own tax advisors concerning the particular U.S. federal income tax consequences to you of the purchase, ownership and disposition of our Class A common stock, as well as the consequences to you arising under other U.S. federal tax laws and the tax laws of any state, local or other taxing jurisdiction.
Dividends
We do not anticipate paying any cash dividends to holders of our Class A common stock in the foreseeable future. See "Dividend Policy." If we make a distribution of cash or other property (other than certain pro rata distributions of our stock) in respect of shares of our Class A common stock, the distribution generally will be treated as a dividend for U.S. federal income tax purposes to the extent it is paid from our current or accumulated earnings and profits, as determined under U.S. federal income
193
tax principles. Any portion of a distribution that exceeds our current and accumulated earnings and profits generally will be treated first as a tax-free return of capital, causing a reduction in the adjusted tax basis of a non-U.S. holder's Class A common stock, and to the extent the amount of the distribution exceeds a non-U.S. holder's adjusted tax basis in shares of our Class A common stock, the excess will be treated as gain from the disposition of shares of our Class A common stock (the tax treatment of which is discussed below under "Gain on Disposition of Class A Common Stock").
Dividends paid to a non-U.S. holder generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. However, dividends that are effectively connected with the conduct of a trade or business by the non-U.S. holder within the United States (and, if required by an applicable income tax treaty, are attributable to a U.S. permanent establishment) are not subject to the withholding tax, provided certain certification and disclosure requirements are satisfied. Instead, such dividends are subject to U.S. federal income tax on a net income basis in the same manner as if the non-U.S. holder were a United States person as defined under the Code. Any such effectively connected dividends received by a foreign corporation may be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
A non-U.S. holder who wishes to claim the benefit of an applicable treaty rate and avoid backup withholding, as discussed below, for dividends will be required (a) to provide the applicable withholding agent with a properly executed IRS Form W-8BEN or Form W-8BEN-E (or other applicable form) certifying under penalty of perjury that such holder is not a United States person as defined under the Code and is eligible for treaty benefits or (b) if our Class A common stock is held through certain foreign intermediaries, to satisfy the relevant certification requirements of applicable U.S. Treasury regulations. Special certification and other requirements apply to certain non-U.S. holders that are pass-through entities rather than corporations or individuals.
A non-U.S. holder eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
Gain on Disposition of Class A Common Stock
Subject to the discussion of backup withholding and FATCA below, any gain realized by a non-U.S. holder on the sale or other disposition of our Class A common stock generally will not be subject to U.S. federal income tax unless:
A non-U.S. holder described in the first bullet point immediately above will be subject to tax on the gain derived from the sale or other disposition in the same manner as if the non-U.S. holder were a United States person as defined under the Code. In addition, if any non-U.S. holder described in the first bullet point immediately above is a foreign corporation, the gain realized by such non-U.S. holder may be subject to an additional "branch profits tax" at a 30% rate or such lower rate as may be specified by an applicable income tax treaty. An individual non-U.S. holder described in the second bullet point immediately above will be subject to a 30% (or such lower rate as may be specified by an applicable income tax treaty) tax on the gain derived from the sale or other disposition, which gain may
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be offset by U.S. source capital losses even though the individual is not considered a resident of the United States.
Generally, a corporation is a "United States real property holding corporation" if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests and its other assets used or held for use in a trade or business (all as determined for U.S. federal income tax purposes). Although there can be no assurances in this regard, we believe we have not been and are not currently a U.S. real property holding corporation for U.S. federal income tax purposes, and we do not anticipate being a U.S. real property holding corporation in the future. If we are or become a "United States real property holding corporation," however, so long as our Class A common stock is regularly traded on an established securities market during the calendar year in which the sale or other disposition occurs, only a non-U.S. holder who holds or held (at any time during the shorter of the five-year period preceding the date of disposition or the holder's holding period) more than 5% of our Class A common stock will be subject to U.S. federal income tax on the sale or other disposition of our Class A common stock.
Information Reporting and Backup Withholding
Distributions paid to a non-U.S. holder and the amount of any tax withheld with respect to such distributions generally will be reported to the IRS. Copies of the information returns reporting such distributions and any withholding may also be made available to the tax authorities in the country in which the non-U.S. holder resides under the provisions of an applicable income tax treaty.
A non-U.S. holder will not be subject to backup withholding on dividends received if such holder certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that such holder is a United States person as defined under the Code), or such holder otherwise establishes an exemption.
Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale or other disposition of our Class A common stock made within the United States or conducted through certain U.S.-related financial intermediaries, unless the beneficial owner certifies under penalty of perjury that it is a non-U.S. holder (and the payor does not have actual knowledge or reason to know that the beneficial owner is a United States person as defined under the Code), or such owner otherwise establishes an exemption.
Backup withholding is not an additional tax and any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a non-U.S. holder's U.S. federal income tax liability provided the required information is timely furnished to the IRS.
Additional Withholding Requirements Under FATCA
Pursuant to sections 1471 through 1474 of the Code, commonly known as the Foreign Account Tax Compliance Act ("FATCA"), a 30% withholding tax may be imposed on certain payments to you or to certain foreign financial institutions, investment funds and other non-U.S. persons receiving payments on your behalf if you or such persons are subject to, and fail to comply with, certain information reporting requirements. Such payments will include U.S.-source dividends and the gross proceeds from the sale or other disposition of stock that can produce U.S.-source dividends.
Payments of dividends that you receive in respect of shares of our Class A common stock could be affected by this withholding if you are subject to FATCA information reporting requirements and fail to comply with them or if you hold shares of our Class A common stock through a non-U.S. person (e.g., a foreign bank or broker) that fails to comply with these requirements (even if payments to you would not otherwise have been subject to FATCA withholding). Proposed Treasury regulations, the preamble to which states that taxpayers may rely upon until final regulations are issued, eliminate
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withholding on payments of gross proceeds. An intergovernmental agreement between the United States and your country of residence (or the country of residence of the non-U.S. person receiving payments on your behalf) may modify the requirements described above. You should consult your own tax advisors regarding the relevant U.S. law and other official guidance on FATCA withholding.
If a dividend payment is both subject to withholding under FATCA and subject to the withholding tax discussed above under "Dividends," the withholding under FATCA may be credited against, and therefore reduce, such other withholding tax. You should consult your own tax advisors regarding these requirements and whether they may be relevant to your ownership and disposition of our Class A common stock.
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UNDERWRITING (CONFLICT OF INTEREST)
Under the terms and subject to the conditions contained in an underwriting agreement dated , 2020, we have agreed to sell to the underwriters named below, for whom Credit Suisse Securities (USA) LLC, Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC and Wells Fargo Securities, LLC are acting as representatives, the following respective numbers of shares of Class A common stock:
Underwriter
|
Number of Shares |
|||
---|---|---|---|---|
Credit Suisse Securities (USA) LLC |
||||
Goldman Sachs & Co. LLC |
||||
J.P. Morgan Securities LLC |
||||
Wells Fargo Securities, LLC |
||||
Barclays Capital Inc. |
||||
BofA Securities, Inc. |
||||
Citigroup Global Markets Inc. |
||||
RBC Capital Markets, LLC |
||||
UBS Securities LLC |
||||
Apollo Global Securities, LLC |
||||
Houlihan Lokey Capital, Inc. |
||||
Siebert Williams Shank & Co., LLC |
||||
| | | | |
Total |
||||
| | | | |
| | | | |
| | | | |
The underwriting agreement provides that the underwriters are obligated to purchase all the shares of Class A common stock in the offering if any are purchased, other than those shares covered by the option to purchase additional shares described below. The underwriting agreement also provides that if an underwriter defaults the purchase commitments of non-defaulting underwriters may be increased or the offering may be terminated.
We have agreed to indemnify the underwriters and certain of their controlling persons against certain liabilities, including liabilities under the Securities Act, and to contribute to payments that the underwriters may be required to make in respect of those liabilities.
We have granted to the underwriters a 30-day option to purchase on a pro rata basis up to additional shares at the initial public offering price less the underwriting discounts and commissions. The option may be exercised only to cover any option to purchase additional shares of Class A common stock.
The underwriters propose to offer the shares of Class A common stock initially at the public offering price on the cover page of this prospectus and to selling group members at that price less a selling concession of $ per share. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters' right to reject any order in whole or in part. The underwriters and selling group members may allow a discount of $ per share on sales to other broker/dealers. After the initial public offering the representatives may change the public offering price and concession and discount to broker/dealers.
The following table summarizes the compensation and estimated expenses we will pay (assuming both no exercise and full exercise of the underwriters' option to purchase additional shares):
|
Per Share | Total | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
No Exercise | Full Exercise | No Exercise | Full Exercise | |||||||||
Underwriting discounts and commissions paid by us |
$ | $ | $ | $ | |||||||||
Expenses payable by us |
$ | $ | $ | $ |
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We have also agreed to reimburse the underwriters for up to $ for their FINRA counsel fee. In accordance with FINRA Rule 5110, this reimbursed fee is deemed underwriting compensation for this offering.
We have agreed that we will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, or file with the Securities and Exchange Commission a registration statement under the Securities Act relating to, any shares of our Class A common stock or any securities convertible into or exchangeable or exercisable for any shares of our Class A common stock, or publicly disclose the intention to make any offer, sale, pledge, disposition or filing, without the prior written consent of any two of the four representatives of the underwriters for a period of 180 days after the date of this prospectus.
Our officers, directors, controlling stockholder and holders of substantially all of our common stock have agreed that they will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exchangeable or exercisable for any shares of our Class A common stock, enter into a transaction that would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of our common stock, whether any of these transactions are to be settled by delivery of our common stock or other securities, in cash or otherwise, or publicly disclose the intention to make any offer, sale, pledge or disposition, or to enter into any transaction, swap, hedge or other arrangement, without, in each case, the prior written consent of any two of the four representatives of the underwriters for a period of 180 days after the date of this prospectus.
We have applied to list the shares of Class A common stock on NYSE, under the symbol "AHM".
Prior to this offering, there has been no public market for our Class A common stock. The initial public offering price was determined by negotiations among us and the representatives and will not necessarily reflect the market price of the Class A common stock following this offering. The principal factors that were considered in determining the initial public offering price included:
We cannot assure you that the initial public offering price will correspond to the price at which the Class A common stock will trade in the public market subsequent to this offering or that an active trading market for the Class A common stock will develop and continue after this offering.
In connection with the offering the underwriters may engage in stabilizing transactions, over-allotment transactions, syndicate covering transactions and penalty bids.
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position, the number of shares involved is greater than the number of shares in the option to purchase additional shares. The underwriters may close out any covered short position by either exercising their option to purchase additional shares and/or purchasing shares in the open market.
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our Class A common stock or preventing or retarding a decline in the market price of the Class A common stock. As a result the price of our Class A common stock may be higher than the price that might otherwise exist in the open market. These transactions may be effected on the NYSE or otherwise and, if commenced, may be discontinued at any time.
A prospectus in electronic format may be made available on the web sites maintained by one or more of the underwriters, or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet distributions on the same basis as other allocations.
Conflicts of Interest
The underwriters and their respective affiliates are full-service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their respective affiliates have, from time to time, performed, and may in the future perform, various financial advisory and investment banking services for us, for which they received or will receive customary fees and expenses.
In addition, in the ordinary course of their business activities, the underwriters and their affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers. These investments and securities activities may involve securities and/or instruments of ours or our affiliates. The underwriters and their affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or financial instruments and may hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
Apollo Global Securities, LLC, an affiliate of Apollo, is an underwriter in this offering and is receiving a portion of the gross spread as an initial purchaser of the offering. Affiliates of Apollo beneficially own in excess of 10% of our issued and outstanding common stock. As a result, Apollo
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Global Securities, LLC is deemed to have a "conflict of interest" under FINRA Rule 5121, and this offering will be conducted in compliance with the requirements of Rule 5121. Pursuant to that rule, the appointment of a "qualified independent underwriter" is not required in connection with this offering as the members primarily responsible for managing the public offering do not have a conflict of interest, are not affiliates of any member that has a conflict of interest and meet the requirements of paragraph (f)(12)(E) of Rule 5121. Apollo Global Securities, LLC will not confirm sales of the securities to any account over which it exercises discretionary authority without the specific written approval of the account holder.
Selling Restrictions
Other than in the United States, no action has been taken by us or the underwriters that would permit a public offering of the securities offered by this prospectus in any jurisdiction where action for that purpose is required. The securities offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such securities be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Notice to Prospective Investors in the European Economic Area and United Kingdom
In relation to each Member State of the European Economic Area and the United Kingdom (each a "Relevant State"), no shares have been offered or will be offered pursuant to the offering to the public in that Relevant State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant State or, where appropriate, approved in another Relevant State and notified to the competent authority in that Relevant State, all in accordance with the Prospectus Regulation, except that it may make an offer to the public in that Relevant State of any Shares at any time under the following exemptions under the Prospectus Regulation:
provided, that no such offer of shares referred to above shall result in a requirement for us or any underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 13 of the Prospectus Regulation.
For the purposes of this provision, the expression an "offer of shares to the public" in relation to any shares in any Relevant Member State means the communication in any Relevant State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression "Prospectus Regulation" means Regulation (EU) 2017/1129.
We have not authorized and do not authorize the making of any offer of shares through any financial intermediary on their behalf, other than offers made by the underwriters with a view to the final placement of the shares as contemplated in this prospectus. Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of the shares on behalf of us or the underwriters.
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Notice to Prospective Investors in the Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority ("DFSA"). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
Notice to Prospective Investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission ("ASIC"), in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001 (the "Corporations Act"), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons (the "Exempt Investors") who are "sophisticated investors" (within the meaning of section 708(8) of the Corporations Act), "professional investors" (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Notice to Prospective Investors in Switzerland
This document is not intended to constitute an offer or solicitation to purchase or invest in the shares described herein. The shares may not be publicly offered, directly or indirectly, in Switzerland within the meaning of the Swiss Financial Services Act ("FinSA") and will not be listed or admitted to trading on the SIX Swiss Exchange or on any trading venue (exchange or multilateral trading facility) in Switzerland. Neither this document nor any other offering or marketing material relating to the shares constitutes a prospectus as such term is understood pursuant to the FinSA, and neither this document nor any other offering or marketing material relating to the shares may be publicly distributed or otherwise made publicly available in Switzerland.
Notice to Prospective Investors in the United Kingdom
This prospectus is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(e) of the Prospectus Regulation
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that are also (i) investment professionals falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the "Order") or (ii) high net worth entities, and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as a "relevant person"). The shares are only available to, and any invitation, offer or agreement to purchase or otherwise acquire such shares will be engaged in only with, relevant persons.
This prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other persons in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this document or any of its contents.
Notice to Prospective Investors in France
Neither this prospectus nor any other offering material relating to the shares described in this prospectus has been submitted to the clearance procedures of the Autorité des Marchés Financiers or by the competent authority of another member state of the European Economic Area and notified to the Autorité des Marchés Financiers. The shares have not been offered or sold and will not be offered or sold, directly or indirectly, to the public in France. Neither this prospectus nor any other offering material relating to the shares has been or will be:
The shares may be resold directly or indirectly, only in compliance with Articles L.411-1, L.411-2, L.412-1 and L.621-8 through L.621-8-3 of the French Code monétaire et financier.
Notice to Prospective Investors in Hong Kong
The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong), or (ii) to "professional investors" within the meaning of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a "prospectus" within the meaning of the Companies Ordinance (Cap. 32, Laws of Hong Kong) and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to "professional investors" within the meaning
202
of the Securities and Futures Ordinance (Cap. 571, Laws of Hong Kong) and any rules made thereunder.
Notice to Prospective Investors in Japan
The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, "Japanese Person" shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the "SFA"), (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
Notice to Prospective Investors in Canada
(A) Resale Restrictions
The distribution of shares in Canada is being made only in the provinces of Ontario, Quebec, Alberta and British Columbia on a private placement basis exempt from the requirement that we prepare and file a prospectus with the securities regulatory authorities in each province where trades of these securities are made. Any resale of the shares in Canada must be made under applicable securities laws which may vary depending on the relevant jurisdiction, and which may require resales to be made
203
under available statutory exemptions or under a discretionary exemption granted by the applicable Canadian securities regulatory authority. Purchasers are advised to seek legal advice prior to any resale of the securities.
(B) Representations of Canadian Purchasers
By purchasing shares in Canada and accepting delivery of a purchase confirmation, a purchaser is representing to us and the dealer from whom the purchase confirmation is received that:
(C) Conflicts of Interest
Canadian purchasers are hereby notified that the underwriters are relying on the exemption set out in section 3A.3 or 3A.4, if applicable, of National Instrument 33-105Underwriting Conflicts from having to provide certain conflict of interest disclosure in this document.
(D) Statutory Rights of Action
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if the offering memorandum (including any amendment thereto) such as this document contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser's province or territory. The purchaser of these securities in Canada should refer to any applicable provisions of the securities legislation of the purchaser's province or territory for particulars of these rights or consult with a legal advisor.
(E) Enforcement of Legal Rights
All of our directors and officers as well as the experts named herein may be located outside of Canada and, as a result, it may not be possible for Canadian purchasers to effect service of process within Canada upon us or those persons. All or a substantial portion of our assets and the assets of those persons may be located outside of Canada and, as a result, it may not be possible to satisfy a judgment against us or those persons in Canada or to enforce a judgment obtained in Canadian courts against us or those persons outside of Canada.
(F) Taxation and Eligibility for Investment
Canadian purchasers of shares should consult their own legal and tax advisors with respect to the tax consequences of an investment in the shares in their particular circumstances and about the eligibility of the shares for investment by the purchaser under relevant Canadian legislation.
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The validity of our Class A common stock offered by this prospectus will be passed upon for us by Sidley Austin LLP, New York, New York. Certain legal matters in connection with this offering will be passed upon for the underwriters by Davis Polk & Wardwell LLP, New York, New York.
The consolidated financial statements of Aris Mortgage Holding Company, LLC at December 31, 2019 and 2018, and for each of the two years ended December 31, 2019, and the balance sheet of AmeriHome, Inc. at September 30, 2020 appearing in this Prospectus and Registration Statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports thereon appearing elsewhere herein, and are included in reliance upon such reports given on the authority of such firm as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 with respect to the shares of Class A common stock being sold in this offering. This prospectus constitutes a part of that registration statement. This prospectus does not contain all the information set forth in the registration statement and the exhibits and schedules to the registration statement, because some parts have been omitted in accordance with the rules and regulations of the SEC. For further information with respect to us and our shares of Class A common stock being sold in this offering, you should refer to the registration statement and the exhibits and schedules filed as part of the registration statement. If a contract or document has been filed as an exhibit to the registration statement, we refer you to the copy of the contract or document that has been filed. Each statement in this prospectus relating to a contract or document filed as an exhibit is qualified in all respects by the filed exhibit.
We are not currently subject to the informational requirements of the Exchange Act. As a result of this offering, we will become subject to the informational requirements of the Exchange Act and, in accordance therewith, will file reports and other information with the SEC. The SEC also maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information that we file electronically with the SEC. Our Internet website address is www.amerihome.com, and the information contained on, or accessible from, or hyperlinked to, our website is not part of this prospectus by reference or otherwise.
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INDEX TO FINANCIAL STATEMENTS
ARIS MORTGAGE HOLDING COMPANY, LLC
Audited Consolidated Financial Statements |
||||
Report of Independent Registered Public Accounting Firm |
F-63 | |||
Balance Sheet as of September 30, 2020 |
F-64 | |||
Notes to Balance Sheet as of September 30, 2020 |
F-65 |
F-1
Aris Mortgage Holding Company, LLC
Index to Consolidated Financial Statements (Unaudited)
F-2
Aris Mortgage Holding Company, LLC
Consolidated Balance Sheet
|
June 30, 2020 |
December 31, 2019 |
|||||
---|---|---|---|---|---|---|---|
|
(Unaudited) |
|
|||||
|
(Amounts in thousands) |
||||||
Assets |
|||||||
Cash |
$ | 501,374 | $ | 93,581 | |||
Restricted cash |
7,000 | 9,375 | |||||
Loans held for sale (includes $1,599,777 and $2,347,930 at fair value) |
1,902,953 | 2,648,609 | |||||
Mortgage servicing rights |
736,657 | 893,193 | |||||
Derivative assets, net |
96,549 | 21,128 | |||||
Servicing advances, net |
35,085 | 50,326 | |||||
Accounts receivable (includes valuation allowance of $795 and $698) |
45,492 | 33,459 | |||||
Fixed assets and software, net |
13,155 | 14,518 | |||||
Loans eligible for repurchase |
683,022 | 382,703 | |||||
Other assets |
52,462 | 64,341 | |||||
| | | | | | | |
Total assets |
$ | 4,073,749 | $ | 4,211,233 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Liabilities and member's equity |
|||||||
Warehouse borrowings |
$ | 1,740,881 | $ | 2,453,152 | |||
Notes payable |
368,380 | 387,627 | |||||
Other borrowings |
9,968 | 15,963 | |||||
Derivative liabilities, net |
16,200 | 11,256 | |||||
Liability for losses under representations and warranties |
14,307 | 6,588 | |||||
Liability for loans eligible for repurchase |
683,022 | 382,703 | |||||
Accounts payable and accrued expenses |
76,675 | 64,210 | |||||
| | | | | | | |
Total liabilities |
2,909,433 | 3,321,499 | |||||
| | | | | | | |
Commitments and contingencies (Note 14) |
|||||||
Member's equity |
1,164,316 | 889,734 | |||||
| | | | | | | |
Total liabilities and member's equity |
$ | 4,073,749 | $ | 4,211,233 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-3
Aris Mortgage Holding Company, LLC
Consolidated Statement of Income (Unaudited)
|
Six months ended June 30, | ||||||
---|---|---|---|---|---|---|---|
|
2020 | 2019 | |||||
|
(Amounts in thousands) |
||||||
Revenues |
|||||||
Net gains on loans held for sale |
$ | 339,027 | $ | 84,497 | |||
Net loan servicing revenue |
39,858 | 74,138 | |||||
Loan acquisition and origination fees |
40,664 | 31,238 | |||||
Other income |
12,871 | 24,729 | |||||
Net interest income (expense) |
|||||||
Interest income |
38,892 | 30,011 | |||||
Interest expense |
(29,277 | ) | (26,304 | ) | |||
| | | | | | | |
Net interest income |
9,615 | 3,707 | |||||
| | | | | | | |
Total net revenues |
442,035 | 218,309 | |||||
| | | | | | | |
Expenses |
|||||||
Compensation |
85,999 | 53,174 | |||||
Loan servicing |
37,294 | 26,141 | |||||
Loan acquisition and origination |
16,087 | 12,783 | |||||
Technology |
5,396 | 4,086 | |||||
Occupancy |
1,670 | 1,610 | |||||
Other expenses |
20,594 | 17,861 | |||||
| | | | | | | |
Total expenses |
167,040 | 115,655 | |||||
| | | | | | | |
Net income |
$ | 274,995 | $ | 102,654 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-4
Aris Mortgage Holding Company, LLC
Consolidated Statement of Changes in Member's Equity (Unaudited)
|
Six months ended June 30, | ||||||
---|---|---|---|---|---|---|---|
|
2020 | 2019 | |||||
|
(Amounts in thousands) |
||||||
Balance, beginning of the period |
$ | 889,734 | $ | 787,024 | |||
Equity-based compensation |
5 | 143 | |||||
Distributions |
(418 | ) | (72,000 | ) | |||
Net income |
274,995 | 102,654 | |||||
| | | | | | | |
Balance, end of the period |
$ | 1,164,316 | $ | 817,821 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-5
Aris Mortgage Holding Company, LLC
Consolidated Statement of Cash Flows (Unaudited)
|
Six Months ended June 30, | ||||||
---|---|---|---|---|---|---|---|
|
2020 | 2019 | |||||
|
(Amounts in thousands) |
||||||
Cash flows from operating activities |
|||||||
Net income |
$ | 274,995 | $ | 102,654 | |||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|||||||
Mortgage servicing rights capitalized upon sale of loans |
(339,225 | ) | (279,366 | ) | |||
Change in fair value and impairment of loans held for sale |
(7,341 | ) | (10,004 | ) | |||
Change in fair value of mortgage servicing rights |
454,383 | 181,596 | |||||
(Gain) loss on sale and interest income on certain securitization transactions |
(963 | ) | 190 | ||||
Change in lability for losses under representations and warranties |
8,920 | (645 | ) | ||||
Change in fair value of derivatives |
(75,159 | ) | (11,460 | ) | |||
Equity-based compensation |
5 | 143 | |||||
Amortization of debt issuance costs |
385 | 455 | |||||
Depreciation and amortization |
2,566 | 2,760 | |||||
Loss on sale of mortgage servicing rights |
938 | 1,332 | |||||
Purchases and originations of loans |
(29,024,979 | ) | (19,379,641 | ) | |||
Early buyouts of loans from Ginnie Mae securities |
(244,555 | ) | (136,965 | ) | |||
Proceeds from sales and payments from loans held for sale |
29,873,987 | 18,934,546 | |||||
Net settlement of options contracts |
1,043 | 1,303 | |||||
Change in counterparty margin |
3,639 | 7,632 | |||||
Net changes in: |
|||||||
Servicing advances |
12,465 | 12,073 | |||||
Accounts receivable |
(8,948 | ) | 13,352 | ||||
Other assets |
29,979 | 10,108 | |||||
Accounts payable and accrued expenses |
11,526 | 1,901 | |||||
| | | | | | | |
Net cash provided by (used in) operating activities |
973,661 | (548,036 | ) | ||||
| | | | | | | |
Cash flows from investing activities |
|||||||
Purchases of fixed assets and software |
(1,190 | ) | (1,101 | ) | |||
Proceeds from sales of mortgage servicing rights |
40,520 | 102,876 | |||||
| | | | | | | |
Net cash provided by investing activities |
39,330 | 101,775 | |||||
| | | | | | | |
Cash flows from financing activities |
|||||||
Proceeds from warehouse borrowings |
30,680,873 | 21,472,874 | |||||
Repayment of warehouse borrowings |
(31,393,202 | ) | (21,088,227 | ) | |||
Proceeds from notes payable |
230,500 | 195,100 | |||||
Repayment of notes payable |
(250,010 | ) | (176,718 | ) | |||
Proceeds from other borrowings |
139,723 | 148,258 | |||||
Repayment of other borrowings |
(15,000 | ) | (25,000 | ) | |||
Payment of debt issuance costs |
(39 | ) | (49 | ) | |||
Distributions |
(418 | ) | (72,000 | ) | |||
| | | | | | | |
Net cash (used in) provided by financing activities |
(607,573 | ) | 454,238 | ||||
| | | | | | | |
Net increase in cash and restricted cash |
405,418 | 7,977 | |||||
Cash and restricted cash, beginning of the period |
102,956 | 80,111 | |||||
| | | | | | | |
Cash and restricted cash, end of the period |
$ | 508,374 | $ | 88,088 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
At period end: |
|||||||
Cash |
$ | 501,374 | $ | 78,338 | |||
Restricted cash |
7,000 | 9,750 | |||||
| | | | | | | |
|
$ | 508,374 | $ | 88,088 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Supplemental cash flow information |
|||||||
Cash paid for interest |
$ | 32,153 | $ | 27,154 | |||
Non-cash financing activities: |
|||||||
Transfers of mortgage-backed securities in settlement of secured borrowings |
$ | 129,639 | $ | 127,871 | |||
Payments from loans held for sale in partial settlement of secured borrowings |
$ | 140 | $ | 72 |
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-6
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited)
NOTE 1. ORGANIZATION AND BUSINESS
Aris Mortgage Holding Company, LLC ("Aris") is a wholly-owned subsidiary of A-A Mortgage Opportunities, L.P. ("A-A Mortgage"). Aris acquired its principal subsidiary, AmeriHome Mortgage Company, LLC ("AmeriHome") in 2014. The term "the Company" as used herein may refer to Aris individually, Aris and its subsidiaries, or certain of Aris' subsidiaries or affiliates.
The Company's ongoing central operations include purchasing residential mortgage loans from third-party originators, originating residential mortgage loans directly to consumers, and pooling and selling these loans in the secondary market. The Company generally retains the servicing rights to the loans it sells and subcontracts the servicing to third-party subservicers.
The Company is an approved seller/servicer for the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"), each of which is a government-sponsored enterprise ("GSE"). The Company is also an approved issuer of securities guaranteed by the Government National Mortgage Association ("Ginnie Mae"), a lender for the Federal Housing Administration ("FHA"), a part of the U.S. Department of Housing and Urban Development ("HUD"), and a lender/servicer for the U.S. Department of Veterans Affairs ("VA") and the U.S. Department of Agriculture ("USDA"). Each of Fannie Mae, Freddie Mac, Ginnie Mae, FHA, HUD, VA and USDA are herein referred to as an "Agency" and collectively as the "Agencies." The Company is licensed to originate loans in 46 states and the District of Columbia. The Company is able to purchase and service loans in 49 states and the District of Columbia, either because it is properly licensed in such jurisdictions or exempt or otherwise not required to be licensed in such jurisdictions.
NOTE 2. BASIS OF PRESENTATION
Interim Financial Reporting
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim reporting, as codified by the Financial Accounting Standards Board ("FASB") Accounting Standards Codification. These interim period consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements as of and for the year ended December 31, 2019. Certain prior period amounts have been reclassified to conform to the current period presentation.
The accompanying consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, income and cash flows of the Company for the interim periods but are not necessarily indicative of income to be anticipated for the full year ending December 31, 2020. The accompanying consolidated financial statements include the assets and liabilities of Aris and its subsidiaries. Intercompany accounts and transactions have been eliminated.
Use of Estimates
In accordance with GAAP, management is required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions include, but are not limited to, those related to the valuation of loans held for sale ("LHFS"), mortgage servicing rights ("MSRs") and interest rate lock commitments ("IRLCs"), and the estimation of assets and liabilities associated with loan repurchases and related indemnifications. These estimates and assumptions are based on the best available information, however, actual results could differ from those estimates.
F-7
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 2. BASIS OF PRESENTATION (Continued)
Recently Issued Accounting Standards Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract and supersedes previous leasing standards. ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. In November 2019, the FASB deferred the effective date of the new leases standard for entities that are not public business entities. In June 2020, in response to the effects of the COVID-19 pandemic, the FASB deferred by one year the effective date of the new leases standard for certain entities that have not yet issued or made available for issuance financial statements reflecting adoption of the standard. Therefore, the amendments in ASU 2016-02 will be effective for the Company's fiscal years beginning after December 15, 2021 and interim periods in the following fiscal year. The Company will adopt ASU 2016-02 effective January 1, 2022 using a modified retrospective transition approach. The Company is assessing the impact that the adoption of ASU 2016-02 will have to its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326), which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. ASU 2016-13 will apply to: (1) loans, accounts receivable, trade receivables and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income, and (4) beneficial interests in securitized financial assets. In November 2019, the FASB deferred the effective date of the new credit losses standard for entities that are not public business entities. As such, the amendments in ASU 2016-13 will be effective for the Company's fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company is assessing the impact that the adoption of ASU 2016-13 will have to its consolidated financial statements.
In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions affected by reference rate reform. Reference rate reform refers to the initiative aimed at eliminating certain widely used reference rates, such as the London Interbank Offered Rate (LIBOR), and introducing new reference rates based on a larger and more liquid population of observable transactions. The Company expects to apply certain expedients under ASU 2020-04 to contract modifications that replace a reference rate and contemporaneous modifications of other terms related to the replacement of the reference rate. The amendments in ASU 2020-04 are effective upon issuance and allows application to contract changes as early as January 1, 2020. The Company is assessing the impact that the adoption of ASU 2020-04 will have to its consolidated financial statements.
NOTE 3. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal market at the measurement date under current market conditions regardless of whether that price is directly observable or estimated using another valuation technique.
F-8
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 3. FAIR VALUE MEASUREMENTS (Continued)
Applicable accounting guidance specifies a hierarchy of valuation techniques based on whether the inputs to those techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. The hierarchy is broken down into three general levels:
Level 1 inputsQuoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2 inputsInputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company.
Level 3 inputsUnobservable inputs, reflecting the Company's assumptions about the factors market participants would use in pricing an asset or liability based on the best information available at the measurement date, are used when quoted prices or observable inputs are unavailable.
The following is a summary of the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis:
|
June 30, 2020 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
|
(Amounts in thousands) |
||||||||||||
Assets |
|||||||||||||
Loans held for sale |
$ | | $ | 1,596,938 | $ | 2,839 | $ | 1,599,777 | |||||
Mortgage servicing rights |
| | 736,657 | 736,657 | |||||||||
Interest rate lock commitments(1) |
| | 89,618 | 89,618 | |||||||||
Other derivative assets |
| 6,931 | | 6,931 | |||||||||
| | | | | | | | | | | | | |
|
$ | | $ | 1,603,869 | $ | 829,114 | $ | 2,432,983 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Liabilities |
|||||||||||||
Interest rate lock commitments(1) |
$ | | $ | | $ | 548 | $ | 548 | |||||
Other derivative liabilities |
| 15,652 | | 15,652 | |||||||||
| | | | | | | | | | | | | |
|
$ | | $ | 15,652 | $ | 548 | $ | 16,200 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-9
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 3. FAIR VALUE MEASUREMENTS (Continued)
|
December 31, 2019 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
|
(Amounts in thousands) |
||||||||||||
Assets |
|||||||||||||
Loans held for sale |
$ | | $ | 2,302,503 | $ | 45,427 | $ | 2,347,930 | |||||
Mortgage servicing rights |
| | 893,193 | 893,193 | |||||||||
Interest rate lock commitments(1) |
| | 19,273 | 19,273 | |||||||||
Other derivative assets |
| 1,855 | | 1,855 | |||||||||
| | | | | | | | | | | | | |
|
$ | | $ | 2,304,358 | $ | 957,893 | $ | 3,262,251 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Liabilities |
|||||||||||||
Interest rate lock commitments(1) |
$ | | $ | | $ | 261 | $ | 261 | |||||
Other derivative liabilities |
| 10,995 | | 10,995 | |||||||||
| | | | | | | | | | | | | |
|
$ | | $ | 10,995 | $ | 261 | $ | 11,256 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
The activity related to assets and liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3 assets and liabilities) is summarized below:
|
Six months ended June 30, 2020 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Loans held for sale |
Mortgage servicing rights |
Net interest rate lock commitments(1) |
|||||||
|
(Amounts in thousands) |
|||||||||
Fair value, beginning of the period |
$ | 45,427 | $ | 893,193 | $ | 19,012 | ||||
Purchases |
56,622 | | ||||||||
Sales and payments |
(97,857 | ) | (41,378 | ) | ||||||
Mortgage servicing rights capitalized upon sale of loans |
339,225 | |||||||||
Interest rate lock commitments issued, net |
7,735,642 | |||||||||
Transfers from Level 2 to Level 3 |
2,458 | |||||||||
Transfers from Level 3 to Level 2 |
(3,665 | ) | ||||||||
Settlement of interest rate lock commitments upon acquisition or origination of loans held for sale |
(7,680,392 | ) | ||||||||
Change in fair value |
(146 | ) | (328,652 | ) | 14,808 | |||||
Realization of expected cash flows |
(125,731 | ) | ||||||||
| | | | | | | | | | |
Fair value, end of the period |
$ | 2,839 | $ | 736,657 | $ | 89,070 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Unrealized gains (losses) included in income related to assets held at period end |
$ | 287 | $ | (292,668 | ) | $ | 89,070 |
F-10
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 3. FAIR VALUE MEASUREMENTS (Continued)
|
Six months ended June 30, 2019 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Loans held for sale |
Mortgage servicing rights |
Net interest rate lock commitments(1) |
|||||||
|
(Amounts in thousands) |
|||||||||
Fair value, beginning of the period |
$ | 27,792 | $ | 754,940 | $ | 6,090 | ||||
Purchases |
16,440 | | ||||||||
Sales and payments |
(38,471 | ) | (105,542 | ) | ||||||
Mortgage servicing rights capitalized upon sale of loans |
279,366 | |||||||||
Interest rate lock commitments issued, net |
6,461,163 | |||||||||
Transfers from Level 2 to Level 3 |
408 | |||||||||
Transfers from Level 3 to Level 2 |
(769 | ) | ||||||||
Settlement of interest rate lock commitments upon acquisition or origination of loans held for sale |
(6,453,726 | ) | ||||||||
Change in fair value |
(316 | ) | (106,547 | ) | 3,514 | |||||
Realization of expected cash flows |
(75,049 | ) | ||||||||
| | | | | | | | | | |
Fair value, end of the period |
$ | 5,084 | $ | 747,168 | $ | 17,041 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Unrealized (losses) gains included in income related to assets held at period end |
$ | (113 | ) | $ | (117,826 | ) | $ | 17,041 |
The following is a summary of the difference between the aggregate fair value and the aggregate unpaid principal balance ("UPB") of LHFS for which the fair value option has been elected:
|
June 30, 2020 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Fair value | Unpaid principal balance |
Difference | |||||||
|
(Amounts in thousands) |
|||||||||
Loans held for sale: |
||||||||||
Current through 89 days delinquent |
$ | 1,599,091 | $ | 1,502,665 | $ | 96,426 | ||||
90 days or more delinquent |
686 | 799 | (113 | ) | ||||||
| | | | | | | | | | |
|
$ | 1,599,777 | $ | 1,503,464 | $ | 96,313 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
|
December 31, 2019 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Fair value | Unpaid principal balance |
Difference | |||||||
|
(Amounts in thousands) |
|||||||||
Loans held for sale: |
||||||||||
Current through 89 days delinquent |
$ | 2,347,471 | $ | 2,240,135 | $ | 107,336 | ||||
90 days or more delinquent |
459 | 473 | (14 | ) | ||||||
| | | | | | | | | | |
|
$ | 2,347,930 | $ | 2,240,608 | $ | 107,322 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-11
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 3. FAIR VALUE MEASUREMENTS (Continued)
Valuation Techniques and Unobservable Inputs
The following is a description of the valuation techniques used to measure assets and liabilities reported at fair value on a recurring basis:
Loans Held for Sale
The majority of LHFS reported at fair value are saleable into active markets and are, therefore, measured based on valuation techniques using Level 2 inputs, such as their quoted market or contracted selling price or market price equivalent. These loans include government-insured or guaranteed and Agency-conforming LHFS. Non-Agency LHFS are measured based on valuation techniques using Level 3 inputs.
Certain of these LHFS may become non-saleable into active markets due to the identification of a defect. The Company measures such non-saleable loans based on valuation techniques using Level 3 inputs.
Mortgage Servicing Rights
MSRs are measured based on valuation techniques using Level 3 inputs. The Company uses a discounted cash flow model that incorporates assumptions that market participants would use in estimating the fair value of servicing rights, including, but not limited to, option adjusted spread, conditional prepayment rate, servicing fee rate and cost to service.
Derivative Financial Instruments
IRLCs are measured based on valuation techniques using Level 3 inputs, such as loan type, underlying loan amount, note rate, loan program and expected settlement date. These measurements are adjusted at loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. The base value is then adjusted for the anticipated loan funding probability ("Pull-through rate"). The Pull-through rate and servicing fee multiple are unobservable inputs based on historical experience.
The Company's hedging instruments consist of forward purchase and sales contracts, Treasury futures and options, Eurodollar futures, and swap futures. Forward purchase and sales contracts are measured based on valuation techniques using Level 2 inputs, such as quoted market or contracted selling price or market price equivalent. Treasury futures and options, Eurodollar futures, and swap futures are measured based on valuation techniques using Level 1 inputs from exchange-provided daily settlement quotes.
F-12
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 3. FAIR VALUE MEASUREMENTS (Continued)
The following is a summary of the key unobservable inputs used in the valuation of Level 3 assets and liabilities:
|
|
June 30, 2020 | ||||||
---|---|---|---|---|---|---|---|---|
Asset/liability
|
Key inputs | Range | Weighted average |
|||||
Mortgage servicing rights |
Option adjusted spread (in basis points) | 22 - 137 | 90 | |||||
|
Conditional prepayment rate(1) | 14.1% - 33.0% | 24.8 | % | ||||
|
Servicing fee rate (in basis points) | 25.0 - 56.5 | 33.4 | |||||
|
Cost to service | $82 - $89 | $ | 85 | ||||
Loans held for sale |
Whole loan spread to TBA price (in basis points) | (5.65) - (4.57) | (5.35 | ) | ||||
Interest rate lock commitments |
Servicing fee multiple | 2.7 - 5.4 | 4.0 | |||||
|
Pull-through rate | 74% - 100% | 85 | % |
|
|
December 31, 2019 | ||||||
---|---|---|---|---|---|---|---|---|
Asset/liability
|
Key inputs | Range | Weighted average |
|||||
Mortgage servicing rights |
Option adjusted spread (in basis points) | 121 - 453 | 228 | |||||
|
Conditional prepayment rate(1) | 11.2% - 23.9% | 18.0 | % | ||||
|
Servicing fee rate (in basis points) | 25.0 - 56.5 | 34.2 | |||||
|
Cost to service | $81 - $87 | $ | 84 | ||||
Loans held for sale |
Whole loan spread to TBA price (in basis points) | (2.40) - (0.18) | (1.40 | ) | ||||
Interest rate lock commitments |
Servicing fee multiple | 3.0 - 5.3 | 4.1 | |||||
|
Pull-through rate | 50% - 100% | 83 | % |
NOTE 4. LOANS HELD FOR SALE
The following is a summary of loans held for sale by type:
|
June 30, 2020 |
December 31, 2019 |
|||||
---|---|---|---|---|---|---|---|
|
(Amounts in thousands) |
||||||
Government-insured or guaranteed |
$ | 1,244,019 | $ | 1,671,166 | |||
Agency-conforming |
658,023 | 935,278 | |||||
Non-Agency |
911 | 42,165 | |||||
| | | | | | | |
|
$ | 1,902,953 | $ | 2,648,609 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
F-13
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 5. MORTGAGE SERVICING RIGHTS
The Company generally retains MSRs from loan sales and measures them at fair value. The Company receives loan servicing fees, net of subservicing costs, based on the UPB of the underlying loans. Loan servicing fees are collected from payments made by borrowers. The Company may receive other remuneration from rights to various borrower-contracted fees, such as late charges, collateral reconveyance charges and non-sufficient funds fees. The Company is generally entitled to retain the interest earned on funds held pending remittance related to its collection of borrower principal, interest, tax and insurance payments.
The following is a summary of the UPB of loans included in the Company's MSR portfolio by investor:
Investor
|
June 30, 2020 |
December 31, 2019 |
|||||
---|---|---|---|---|---|---|---|
|
(Dollars in thousands) |
||||||
Fannie Mae and Freddie Mac |
$ | 49,195,606 | $ | 37,378,402 | |||
Ginnie Mae |
35,297,596 | 36,544,549 | |||||
Private investors |
1,585,850 | 1,842,270 | |||||
| | | | | | | |
|
$ | 86,079,052 | $ | 75,765,221 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Weighted average interest rate |
4.10 | % | 4.39 | % | |||
Custodial funds managed by the Company's subservicers(1) |
$ | 1,718,582 | $ | 1,181,742 |
The following is a summary of the UPB of loans included in the Company's MSR portfolio by geographical distribution:
State
|
June 30, 2020 |
December 31, 2019 |
|||||
---|---|---|---|---|---|---|---|
|
(Amounts in thousands) |
||||||
Texas |
$ | 12,903,322 | $ | 10,889,255 | |||
California |
9,898,152 | 8,288,003 | |||||
Florida |
7,026,587 | 6,857,757 | |||||
Georgia |
4,322,390 | 4,059,126 | |||||
New Jersey |
3,507,825 | 3,042,623 | |||||
Other |
48,420,776 | 42,628,457 | |||||
| | | | | | | |
|
$ | 86,079,052 | $ | 75,765,221 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
F-14
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 5. MORTGAGE SERVICING RIGHTS (Continued)
The following is a summary of the UPB of loans included in the Company's MSR portfolio by year of origination:
Year of origination
|
June 30, 2020 |
December 31, 2019 |
|||||
---|---|---|---|---|---|---|---|
|
(Amounts in thousands) |
||||||
2020 |
$ | 23,194,050 | $ | | |||
2019 |
36,581,107 | 37,769,155 | |||||
2018 |
14,201,345 | 21,455,293 | |||||
2017 |
7,222,405 | 10,511,381 | |||||
Prior to 2017 |
4,880,145 | 6,029,392 | |||||
| | | | | | | |
|
$ | 86,079,052 | $ | 75,765,221 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
On March 3, 2020, the Company completed one bulk sale of MSRs and related servicing advances totaling $4.9 billion in UPB of loans underlying mortgage-backed securities guaranteed by Ginnie Mae. The aggregate sales price of this transaction was $42.9 million. At the time of the sale, the Company recognized $12.1 million in receivables for holdbacks pending fulfillment of all servicing transfer and document delivery requirements. As of June 30, 2020, the Company reported the remaining receivable amount related to this sale of $858 thousand in Accounts receivable in the consolidated balance sheet.
The following presents the effect of hypothetical changes in the fair value of MSRs caused by assumed immediate changes in interest rates, discount rates, and prepayment speeds that are used to determine fair value:
Mortgage servicing rights sensitivity analysis
|
June 30, 2020 |
December 31, 2019 |
|||||
---|---|---|---|---|---|---|---|
|
(Amounts in thousands) |
||||||
Fair value of mortgage servicing rights |
$ | 736,657 | $ | 893,193 | |||
Interest rate change: |
|||||||
Decrease in fair value from 50 basis point adverse change |
$ | (71,982 | ) | $ | (148,306 | ) | |
Increase in fair value from 50 basis point favorable change |
$ | 142,940 | $ | 135,717 | |||
Discount rate change: |
|||||||
Decrease in fair value from 50 basis point increase |
$ | (15,358 | ) | $ | (17,954 | ) | |
Increase in fair value from 50 basis point decrease |
$ | 16,046 | $ | 18,701 | |||
Prepayment speed change: |
|||||||
Decrease in fair value from 1% conditional prepayment rate increase |
$ | (103,234 | ) | $ | (40,741 | ) | |
Increase in fair value from 1% conditional prepayment rate decrease |
$ | 116,608 | $ | 44,974 |
Sensitivities are hypothetical changes in fair value and cannot be extrapolated because the relationship of changes in assumptions to changes in fair value may not be linear. In addition, the effect of a variation in a particular assumption is calculated without changing any other assumption, whereas a change in one factor may result in changes to another. Accordingly, no assurance can be given that actual results would be consistent with the results of these estimates. As a result, actual future changes in MSR values may differ significantly from those reported.
F-15
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments to manage exposure to interest rate risk for IRLCs it makes to purchase and originate loans at specified interest rates, and its inventory of LHFS and MSRs. The Company has elected to present net derivative asset and liability positions, and cash collateral obtained from or posted to its counterparties, when subject to a master netting arrangement that is legally enforceable on all counterparties in the event of default. IRLCs are not subject to a master netting arrangement.
The following is a summary of the derivative assets and liabilities recorded in the consolidated balance sheet, including the ending positions after considering master netting arrangements and financial instruments or cash pledged:
|
June 30, 2020 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
|
Fair value | ||||||||
|
Notional amount |
Derivative assets |
Derivative liabilities |
|||||||
|
(Amounts in thousands) |
|||||||||
Interest rate lock commitments |
$ | 5,724,598 | $ | 89,618 | $ | 548 | ||||
Forward purchase contracts |
$ | 6,996,273 | 39,497 | 367 | ||||||
Forward sales contracts |
$ | 11,776,495 | 1,517 | 42,114 | ||||||
Futures contracts |
$ | 468,891,000 | | | ||||||
Margin |
(660 | ) | 6,594 | |||||||
| | | | | | | | | | |
Derivatives before netting |
129,972 | 49,623 | ||||||||
Netting |
(33,423 | ) | (33,423 | ) | ||||||
| | | | | | | | | | |
|
$ | 96,549 | $ | 16,200 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Collateral received from counterparties, net |
$ | 7,254 |
|
December 31, 2019 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
|
Fair value | ||||||||
|
Notional amount |
Derivative assets |
Derivative liabilities |
|||||||
|
(Amounts in thousands) |
|||||||||
Interest rate lock commitments |
$ | 2,349,959 | $ | 19,273 | $ | 261 | ||||
Forward purchase contracts |
$ | 4,741,336 | 5,862 | 1,640 | ||||||
Forward sales contracts |
$ | 7,177,451 | 3,381 | 13,816 | ||||||
Put options on interest rate futures purchase contracts |
$ | 200,000 | 422 | | ||||||
Call options on interest rate futures purchase contracts |
$ | 100,000 | 266 | | ||||||
Futures contracts |
$ | 129,294,100 | | | ||||||
Margin |
| 3,615 | ||||||||
| | | | | | | | | | |
Derivatives before netting |
29,204 | 19,332 | ||||||||
Netting |
(8,076 | ) | (8,076 | ) | ||||||
| | | | | | | | | | |
|
$ | 21,128 | $ | 11,256 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Collateral received from counterparties, net |
$ | 3,615 |
F-16
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
Credit risk related to derivatives arises when amounts receivable from a counterparty exceed those payable to the same counterparty. The Company mitigates credit risk by requiring counterparties to provide collateral to the Company when the counterparties' unsecured loss positions exceed certain negotiated limits.
The following is a summary of derivative assets and liabilities and related netting amounts:
|
June 30, 2020 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Gross amount of recognized assets (liabilities) |
Gross offset | Net assets (liabilities) |
|||||||
|
(Amounts in thousands) |
|||||||||
Derivatives subject to master netting arrangements: |
||||||||||
Assets: |
||||||||||
Forward purchase contracts |
$ | 38,274 | $ | (18,584 | ) | $ | 19,690 | |||
Forward sales contracts |
$ | 756 | $ | (14,839 | ) | $ | (14,083 | ) | ||
Margin |
$ | (660 | ) | $ | | $ | (660 | ) | ||
Liabilities: |
||||||||||
Forward purchase contracts |
$ | (354 | ) | $ | 18,584 | $ | 18,230 | |||
Forward sales contracts |
$ | (30,458 | ) | $ | 14,839 | $ | (15,619 | ) | ||
Margin |
$ | (6,594 | ) | $ | | $ | (6,594 | ) | ||
Derivatives not subject to master netting arrangements: |
||||||||||
Assets: |
||||||||||
Interest rate lock commitments |
$ | 89,618 | $ | | $ | 89,618 | ||||
Forward purchase contracts |
$ | 1,223 | $ | | $ | 1,223 | ||||
Forward sales contracts |
$ | 761 | $ | | $ | 761 | ||||
Liabilities: |
||||||||||
Interest rate lock commitments |
$ | (548 | ) | $ | | $ | (548 | ) | ||
Forward purchase contracts |
$ | (13 | ) | $ | | $ | (13 | ) | ||
Forward sales contracts |
$ | (11,656 | ) | $ | | $ | (11,656 | ) | ||
Total derivatives: |
||||||||||
Assets |
$ | 129,972 | $ | (33,423 | ) | $ | 96,549 | |||
Liabilities |
$ | (49,623 | ) | $ | 33,423 | $ | (16,200 | ) |
F-17
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
|
December 31, 2019 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Gross amount of recognized assets (liabilities) |
Gross offset | Net assets (liabilities) |
|||||||
|
(Amounts in thousands) |
|||||||||
Derivatives subject to master netting arrangements: |
||||||||||
Assets: |
||||||||||
Forward purchase contracts |
$ | 5,244 | $ | (4,274 | ) | $ | 970 | |||
Forward sales contracts |
$ | 3,341 | $ | (3,802 | ) | $ | (461 | ) | ||
Liabilities: |
||||||||||
Forward purchase contracts |
$ | (1,640 | ) | $ | 4,274 | $ | 2,634 | |||
Forward sales contracts |
$ | (13,269 | ) | $ | 3,802 | $ | (9,467 | ) | ||
Margin |
$ | (3,615 | ) | $ | | $ | (3,615 | ) | ||
Derivatives not subject to master netting arrangements: |
||||||||||
Assets: |
||||||||||
Interest rate lock commitments |
$ | 19,273 | $ | | $ | 19,273 | ||||
Forward purchase contracts |
$ | 618 | $ | | $ | 618 | ||||
Forward sales contracts |
$ | 40 | $ | | $ | 40 | ||||
Options contracts |
$ | 688 | $ | | $ | 688 | ||||
Liabilities: |
||||||||||
Interest rate lock commitments |
$ | (261 | ) | $ | | $ | (261 | ) | ||
Forward sales contracts |
$ | (547 | ) | $ | | $ | (547 | ) | ||
Total derivatives: |
||||||||||
Assets |
$ | 29,204 | $ | (8,076 | ) | $ | 21,128 | |||
Liabilities |
$ | (19,332 | ) | $ | 8,076 | $ | (11,256 | ) |
The following is a summary of net gains (losses) on derivatives included in income:
|
Six months ended June 30, |
||||||
---|---|---|---|---|---|---|---|
|
2020 | 2019 | |||||
|
(Amounts in thousands) |
||||||
Losses on derivatives included in Net gains on loans held for sale: |
|||||||
Interest rate lock commitments |
$ | 70,058 | $ | 10,951 | |||
Forward contracts |
(131,483 | ) | (62,612 | ) | |||
Options contracts |
(38 | ) | (321 | ) | |||
Futures contracts |
17,103 | 7,244 | |||||
| | | | | | | |
|
$ | (44,360 | ) | $ | (44,738 | ) | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Gains on derivatives included in Net loan servicing revenue: |
|||||||
Forward contracts |
$ | 116,153 | $ | 14,881 | |||
Options contracts |
(1,025 | ) | (6,668 | ) | |||
Futures contracts |
243,036 | 143,462 | |||||
| | | | | | | |
|
$ | 358,164 | $ | 151,675 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
F-18
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 7. BORROWINGS
The Company uses a variety of financing arrangements including loan sales under repurchase agreements (warehouse borrowings) and secured term facilities (notes payable). These financing arrangements contain various covenants, including financial covenants, governing the Company's tangible net worth, leverage ratio, liquidity and profitability. The Company's failure to comply with any of these covenants could result in an event of default, subject to a cure period, under one or more borrowing agreements, pursuant to which all or a portion of the amounts borrowed may become immediately due and payable. The Company was in compliance with all financial covenants as of and for the six months ended June 30, 2020 and as of December 31, 2019.
Warehouse Borrowings
The Company finances the acquisition of loans through the use of repurchase agreements. Repurchase agreements operate as financings under which the Company transfers loans to secure borrowings. The borrowing amounts are based on the attributes of the collateralized loans and are defined in the repurchase agreement of each warehouse lender. The Company retains beneficial ownership of the transferred loans and will receive the loans from the lender upon full repayment of the borrowing. The repurchase agreements may require the Company to transfer additional assets to the lender in the event the estimated fair value of the existing transferred loans declines.
As of June 30, 2020, the Company had access to approximately $2.9 billion in uncommitted warehouse funding, of which approximately $1.7 billion was drawn. As of December 31, 2019, the Company had access to approximately $3.4 billion in uncommitted warehouse funding, of which approximately $2.5 billion was drawn.
The following is a summary of financial information relating to borrowings under warehouse facilities:
|
Six months ended June 30, | ||||||
---|---|---|---|---|---|---|---|
|
2020 | 2019 | |||||
|
(Dollars in thousands) |
||||||
Weighted average interest rate(1) |
2.58 | % | 4.12 | % | |||
Average balance |
$ | 1,977,313 | $ | 1,250,653 | |||
Interest expense(1) |
$ | 25,433 | $ | 25,553 | |||
Maximum daily amount outstanding |
$ | 2,746,151 | $ | 1,947,688 |
F-19
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 7. BORROWINGS (Continued)
|
June 30, 2020 |
December 31, 2019 |
|||||
---|---|---|---|---|---|---|---|
|
(Dollars in thousands) |
||||||
Carrying value of warehouse borrowings(1) |
$ | 1,740,918 | $ | 2,453,247 | |||
Weighted average interest rate |
1.82 | % | 3.42 | % | |||
Additional borrowing capacity |
$ | 1,204,082 | $ | 896,753 | |||
Restricted cash on deposit with counterparties |
$ | 7,000 | $ | 9,375 | |||
Fair value of loans held for sale securing warehouse borrowings |
$ | 1,880,434 | $ | 2,616,870 |
The following is a summary of maturities of outstanding advances under repurchase agreements:
Remaining maturity at June 30, 2020
|
Balance | |||
---|---|---|---|---|
|
(Amounts in thousands) |
|||
Within 30 days |
$ | 462 | ||
31 to 90 days |
1,740,456 | |||
| | | | |
|
1,740,918 | |||
Debt issuance costs |
(37 | ) | ||
| | | | |
Total warehouse borrowings |
$ | 1,740,881 | ||
| | | | |
| | | | |
| | | | |
Notes Payable
The following is a summary of outstanding balances related to borrowings under the secured term facilities:
|
June 30, 2020 |
December 31, 2019 |
|||||
---|---|---|---|---|---|---|---|
|
(Amounts in thousands) |
||||||
Term notes to qualified institutional buyers |
$ | 225,000 | $ | 225,000 | |||
Term loan |
65,315 | 68,325 | |||||
Revolving credit agreements |
80,037 | 96,537 | |||||
| | | | | | | |
|
370,352 | 389,862 | |||||
Debt issuance costs |
(1,972 | ) | (2,235 | ) | |||
| | | | | | | |
Total notes payable |
$ | 368,380 | $ | 387,627 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Term Notes
In August 2018, the Company, through AmeriHome GMSR Issuer Trust ("the Trust"), entered into a structured finance transaction, pursuant to which the Company may finance excess servicing spread relating to Ginnie Mae MSRs (the "Ginnie Mae MSR Facility"). In connection with the Ginnie Mae MSR Facility, the Trust issued to the Company a variable funding note (the "VFN") with a maximum principal balance of $500.0 million and the Company, through the Trust, issued one series of
F-20
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 7. BORROWINGS (Continued)
term notes, Series 2018-GT1 Term Notes, with an aggregate principal amount of $155.0 million to certain qualified institutional buyers, including several limited partners in A-A Mortgage.
In November 2019, pursuant to the terms of the Ginnie Mae MSR Facility, the Company, through the Trust, issued a new series of term notes, Series 2019-GT1 Term Notes, to certain qualified institutional buyers, including several limited partners in A-A Mortgage. The Series 2019-GT1 Term Notes consist of $192.9 million of Class A Term Notes, bearing interest at a per annum rate of 4.18%, and $32.1 million of Class B Term Notes, bearing interest at a per annum rate of 4.68%. Each Class of the Series 2019-GT1 Term Notes matures on November 25, 2024 unless extended by the Company pursuant to an optional extension to November 25, 2026. Proceeds from the issuance of the Series 2019-GT1 Term Notes were used to redeem all of the Series 2018-GT1 Term Notes. As of June 30, 2020, the fair value of MSRs pledged to secure the VFN and the Series 2019-GT1 Term Notes totaled $349.7 million.
Revolving Credit Agreements
As of June 30, 2020, the outstanding balance of the revolving credit agreements (excluding unamortized debt issuance costs) and the fair value of MSRs pledged to secure them totaled $80.0 million and $165.1 million, respectively. As of December 31, 2019, the outstanding balance of the revolving credit agreements (excluding unamortized debt issuance costs) and the fair value of MSRs pledged to secure them totaled $96.5 million and $205.4 million, respectively.
Other Borrowings
In connection with the Ginnie Mae MSR Facility, the Company entered into a repurchase agreement (the "VFN Repurchase Agreement") with a financial institution, pursuant to which the Company sold the VFN with an agreement to repurchase it at a later date. The Company and the financial institution are also counterparties under a repurchase agreement used for warehouse borrowings. The VFN Repurchase Agreement has a term of one year and provides for a maximum loan amount of $150.0 million. The maximum borrowings under the respective warehouse borrowing facility and the VFN Repurchase Agreement combined are $750.0 million. The outstanding balance of the VFN Repurchase Agreement (excluding unamortized debt issuance costs) totaled $10.0 million as of June 30, 2020 and December 31, 2019, and is included in Other borrowings in the consolidated balance sheet.
In March 2020, the Company entered into a loan agreement pursuant to which the lender agreed to make revolving loans in an amount not to exceed $10.0 million. The proceeds of the loans are to be used solely for working capital in the Company's ordinary course of business. The loan agreement matures on March 6, 2021 and bears interest at a per annum rate of interest equal to the greater of the prime rate or an alternate base rate, as defined in the loan agreement. As of June 30, 2020, the loan had been fully repaid.
Proceeds from transfers of loans that did not qualify as sales totaled $6.0 million at December 31, 2019. The Company did not have proceeds from transfers of loans that did not qualify as loan sales as of June 30, 2020. These transfers are accounted for as secured borrowings and included in Other borrowings in the consolidated balance sheet.
F-21
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 8. LIABILITY FOR LOSSES UNDER REPRESENTATIONS AND WARRANTIES
The activity in the Company's liability for losses under representations and warranties is summarized below:
|
Six months ended June 30, |
||||||
---|---|---|---|---|---|---|---|
|
2020 | 2019 | |||||
|
(Amounts in thousands) |
||||||
Balance, beginning of the period |
$ | 6,588 | $ | 7,407 | |||
Provision for repurchase losses |
5,474 | 2,991 | |||||
Change in estimate of liability for losses under representations and warranties |
3,417 | (3,654 | ) | ||||
Repurchase losses |
(1,172 | ) | (771 | ) | |||
| | | | | | | |
Balance, end of the period |
$ | 14,307 | $ | 5,973 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The UPB of loans subject to losses under representations and warranties totaled $89.2 billion and $71.4 billion as of June 30, 2020 and 2019, respectively.
NOTE 9. NET GAINS ON LOANS HELD FOR SALE
The following is a summary of net gains on loans held for sale included in income:
|
Six months ended June 30, |
||||||
---|---|---|---|---|---|---|---|
|
2020 | 2019 | |||||
|
(Amounts in thousands) |
||||||
Net proceeds from sale of loans(1) |
$ | 45,712 | $ | (160,798 | ) | ||
Mortgage servicing rights capitalized upon sale of loans |
339,225 | 279,366 | |||||
Provision for and change in estimate of liability for losses under representations and warranties |
(8,891 | ) | 663 | ||||
Change in fair value of loans held for sale |
7,341 | 10,004 | |||||
Change in fair value of derivatives: |
|||||||
Unrealized gain on derivatives |
55,243 | 11,494 | |||||
Realized loss on derivatives |
(99,603 | ) | (56,232 | ) | |||
| | | | | | | |
|
(44,360 | ) | (44,738 | ) | |||
| | | | | | | |
Net gains on loans held for sale |
$ | 339,027 | $ | 84,497 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
F-22
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 10. NET LOAN SERVICING REVENUE
The following is a summary of net loan servicing revenue included in income:
|
Six months ended June 30, |
||||||
---|---|---|---|---|---|---|---|
|
2020 | 2019 | |||||
|
(Amounts in thousands) |
||||||
Loan servicing fees: |
|||||||
Base fees |
$ | 131,264 | $ | 100,948 | |||
Ancillary income |
5,751 | 4,443 | |||||
| | | | | | | |
|
137,015 | 105,391 | |||||
| | | | | | | |
Change in fair value of mortgage servicing rights |
(328,652 | ) | (106,547 | ) | |||
Realization of expected cash flows of mortgage servicing rights |
(125,731 | ) | (75,049 | ) | |||
| | | | | | | |
|
(454,383 | ) | (181,596 | ) | |||
| | | | | | | |
Loss on sale of mortgage servicing rights |
(938 | ) | (1,332 | ) | |||
Change in fair value of derivatives: |
|||||||
Unrealized (loss) gain on derivatives |
19,916 | (34 | ) | ||||
Realized gain on derivatives |
338,248 | 151,709 | |||||
| | | | | | | |
|
358,164 | 151,675 | |||||
| | | | | | | |
Net loan servicing revenue |
$ | 39,858 | $ | 74,138 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
NOTE 11. OTHER INCOME
The following is a summary of other income:
|
Six months ended June 30, |
||||||
---|---|---|---|---|---|---|---|
|
2020 | 2019 | |||||
|
(Amounts in thousands) |
||||||
Early payoff fees |
$ | 8,455 | $ | 8,935 | |||
Early payment default fees |
2,326 | 2,073 | |||||
Incentive fees from warehouse lenders(1) |
| 11,893 | |||||
Other |
2,090 | 1,828 | |||||
| | | | | | | |
Other income |
$ | 12,871 | $ | 24,729 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
NOTE 12. RELATED PARTY TRANSACTIONS
The Company sold loans to several limited partners in A-A Mortgage totaling $169.4 million in UPB during the six months ended June 30, 2020. In connection with these loan sales, the Company
F-23
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 12. RELATED PARTY TRANSACTIONS (Continued)
recognized gains of $1.9 million during the same period, which were included in Net gains on loans held for sale in the consolidated statement of income. The Company did not sell any loans to these limited partners during the six months ended June 30, 2019. The Company serviced loans sold to these limited partners totaling $530.9 million and $1.0 billion in UPB as of June 30, 2020 and December 31, 2019, respectively. The fair value of these MSRs totaled $2.6 million and $6.7 million as of June 30, 2020 and December 31, 2019, respectively.
In March 2020, the Company entered into a conveyance agreement with a limited partner in A-A Mortgage, pursuant to which the limited partner conveyed to the Company certain residential mortgage loans that the Company had previously sold to the limited partner. The loans conveyed to the Company totaled approximately $515.3 million in UPB. The Company subsequently sold the loans to a third party investor and delivered the sales proceeds to the limited partner, in accordance with the terms of the conveyance agreement. In exchange for facilitating the sale to the third party investor, the limited partner paid the Company a fee of approximately $650 thousand, which included reimbursement of transaction costs incurred by the Company. The Company recorded the $650 thousand as a component of Other income in the consolidated statement of income.
The Company sold loans to an entity administered by the special limited partner of A-A Mortgage totaling $21.3 million in UPB during the six months ended June 30, 2020. In connection with these loan sales, the Company recognized gains of $270 thousand during the same period, which were included in Net gains on loans held for sale in the consolidated statement of income. The Company did not sell any loans to this entity during the six months ended June 30, 2019. The Company serviced loans sold to this entity totaling $49.7 million and $34.9 million in UPB as of June 30, 2020 and December 31, 2019, respectively. The fair value of these MSRs totaled $263 thousand and $277 thousand as of June 30, 2020 and December 31, 2019, respectively.
The Company pays a monitoring fee to the special limited partner of A-A Mortgage for professional services rendered. The fee is calculated and payable quarterly in arrears at an annual rate of 1.5% and is based on the Company's ending equity as of each calendar quarter end, measured in accordance with GAAP. The Company recognized monitoring fees expense of $8.0 million and $5.9 million for the six months ended June 30, 2020 and 2019, respectively. The Company reported payables related to these monitoring fees totaling $4.4 million and $3.1 million as of June 30, 2020 and 2019, respectively.
In August 2018, the Company, through the Trust, issued the Series 2018-GT1 Term Notes to certain qualified institutional buyers, including certain limited partners in A-A Mortgage. As of December 31, 2018, the outstanding balance of the Series 2018-GT1 Term Notes totaled $155.0 million. In November 2019, the Company, through the Trust, issued the Series 2019-GT1 Term Notes, including $175.0 million to certain limited partners in A-A Mortgage and an entity administered by a subsidiary of the parent of the special limited partner of A-A Mortgage. As of June 30, 2020, the outstanding balance of the Series 2019-GT1 Term Notes issued to such related parties totaled $175.0 million.
NOTE 13. SEGMENT INFORMATION
The Company operates in three segments: Correspondent, Consumer Direct, and Servicing. These segments were identified based on how the chief operating decision maker evaluates and assesses the Company's operating results.
F-24
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 13. SEGMENT INFORMATION (Continued)
The Correspondent lending segment generates revenues by performing loan acquisition and sale activities. The Consumer Direct lending segment generates revenues by performing loan origination and sale activities. These segments also earn interest income on loans held pending sale or securitization. Direct operating expenses incurred in connection with these activities are included in these segments. Corporate overhead expenses are included in the Correspondent segment.
The Servicing segment generates revenues by performing loan servicing activities. Servicing segment revenues are also derived from the execution and management of early buyout transactions, including gains recognized upon subsequent sales.
The following is a summary of financial information by segment:
|
Six months ended June 30, 2020 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Correspondent | Consumer Direct | Servicing | Total | |||||||||
|
(Amounts in thousands) |
||||||||||||
Revenues |
|||||||||||||
Net gains on loans held for sale |
$ | 255,031 | $ | 70,886 | $ | 13,110 | $ | 339,027 | |||||
Net loan servicing revenue |
| | 39,858 | 39,858 | |||||||||
Loan acquisition and origination fees |
39,924 | 740 | | 40,664 | |||||||||
Other income |
1,916 | | 10,955 | 12,871 | |||||||||
Net interest income (expense) |
|||||||||||||
Interest income |
29,872 | 1,670 | 7,350 | 38,892 | |||||||||
Interest expense |
(19,318 | ) | (1,023 | ) | (8,936 | ) | (29,277 | ) | |||||
| | | | | | | | | | | | | |
Net interest income (expense) |
10,554 | 647 | (1,586 | ) | 9,615 | ||||||||
| | | | | | | | | | | | | |
Total net revenues |
307,425 | 72,273 | 62,337 | 442,035 | |||||||||
Expenses |
98,686 | 24,804 | 43,550 | 167,040 | |||||||||
| | | | | | | | | | | | | |
Net income |
$ | 208,739 | $ | 47,469 | $ | 18,787 | $ | 274,995 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Segment assets at period end |
$ | 1,518,745 | $ | 249,659 | $ | 2,305,345 | $ | 4,073,749 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-25
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 13. SEGMENT INFORMATION (Continued)
|
Six months ended June 30, 2019 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Correspondent | Consumer Direct | Servicing | Total | |||||||||
|
(Amounts in thousands) |
||||||||||||
Revenues |
|||||||||||||
Net gains on loans held for sale |
$ | 65,909 | $ | 17,424 | $ | 1,163 | $ | 84,496 | |||||
Net loan servicing revenue |
| | 74,138 | 74,138 | |||||||||
Loan acquisition and origination fees |
30,509 | 729 | | 31,238 | |||||||||
Other income |
13,669 | | 11,061 | 24,730 | |||||||||
Net interest income (expense) |
|||||||||||||
Interest income |
26,819 | 770 | 2,422 | 30,011 | |||||||||
Interest expense |
(22,025 | ) | (635 | ) | (3,644 | ) | (26,304 | ) | |||||
| | | | | | | | | | | | | |
Net interest income (expense) |
4,794 | 135 | (1,222 | ) | 3,707 | ||||||||
| | | | | | | | | | | | | |
Total net revenues |
114,881 | 18,288 | 85,140 | 218,309 | |||||||||
Expenses |
71,280 | 12,831 | 31,544 | 115,655 | |||||||||
| | | | | | | | | | | | | |
Net income |
$ | 43,601 | $ | 5,457 | $ | 53,596 | $ | 102,654 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Segment assets at period end |
$ | 2,073,240 | $ | 63,548 | $ | 1,263,850 | $ | 3,400,638 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
NOTE 14. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office space at multiple locations under noncancelable agreements through August 2026. The Company recognized rent expense of $1.5 million for each of the six months ended June 30, 2020 and 2019. Rent expense is included in Occupancy expense in the consolidated statement of income.
Future minimum rental payments under the lease agreements in the aggregate and for the following five years are as follows:
Twelve months ending June 30,
|
Future minimum lease payments |
|||
---|---|---|---|---|
|
(Amounts in thousands) |
|||
2021 |
$ | 4,165 | ||
2022 |
4,589 | |||
2023 |
4,563 | |||
2024 |
3,033 | |||
2025 |
2,669 | |||
Thereafter |
3,479 | |||
| | | | |
|
$ | 22,498 | ||
| | | | |
| | | | |
| | | | |
F-26
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Unaudited) (Continued)
NOTE 14. COMMITMENTS AND CONTINGENCIES (Continued)
Litigation
In the ordinary course of business, the Company may be subject to litigation. Management does not believe that any potential, threatened or pending litigation to which it is a party will have a material adverse effect on the Company's liquidity, financial condition or results of operations.
Risks and Uncertainties
In the ordinary course of business, companies in the mortgage banking industry encounter certain economic and regulatory risks. Economic risks include interest rate risk, credit risk and market risk. For additional information about the Company's exposure to economic and regulatory risks, refer to the discussion of risks and uncertainties under Note 15. Commitments and Contingencies in the Company's audited consolidated financial statements as of and for the year ended December 31, 2019.
NOTE 15. CAPITAL REQUIREMENTS
The Company is required to maintain specified levels of capital to remain in good standing with the Agencies. These capital requirements generally are tied to the UPB of loans included in the Company's servicing portfolio or loan production volume during the period.
The Agencies' capital requirements are summarized below:
|
June 30, 2020 | December 31, 2019 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Agency
|
Adjusted net worth(1) |
Required net worth |
Adjusted net worth(1) |
Required net worth |
|||||||||
|
(Amounts in thousands) |
||||||||||||
Fannie Mae and Freddie Mac |
$ | 1,166,298 | $ | 217,698 | $ | 889,679 | $ | 191,913 | |||||
Ginnie Mae |
$ | 1,166,298 | $ | 141,571 | $ | 889,679 | $ | 141,976 | |||||
HUD |
$ | 1,166,298 | $ | 2,500 | $ | 889,679 | $ | 2,500 |
Noncompliance with an Agency's capital requirements can result in the respective Agency taking various remedial actions up to, and including, removing the Company's ability to sell loans to and service loans on behalf of the respective Agency. The Company had capital in excess of the Agencies' requirements at June 30, 2020 and December 31, 2019.
NOTE 16. SUBSEQUENT EVENTS
The Company has evaluated all events and transactions through September 14, 2020, which is the date the Company issued the consolidated financial statements and noted the following:
F-27
Report of Independent Registered Public Accounting Firm
To the Member and the Board of Managers of Aris Mortgage Holding Company, LLC
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Aris Mortgage Holding Company, LLC (the Company) as of December 31, 2019 and 2018, the related consolidated statements of income, changes in member's equity and cash flows for each of the two years in the period ended December 31, 2019, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ Ernst & Young LLP
We
have served as the Company's auditor since 2018.
Los Angeles, California
March 16, 2020
F-28
Aris Mortgage Holding Company, LLC
Index to Consolidated Financial Statements
F-29
Aris Mortgage Holding Company, LLC
Consolidated Balance Sheet
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Assets |
|||||||
Cash |
$ | 93,581 | $ | 70,111 | |||
Restricted cash |
9,375 | 10,000 | |||||
Loans held for sale (includes $2,347,930 and $1,618,074 at fair value) |
2,648,609 | 1,714,066 | |||||
Mortgage servicing rights |
893,193 | 754,940 | |||||
Derivative assets, net |
21,128 | 13,095 | |||||
Servicing advances, net |
50,326 | 31,040 | |||||
Accounts receivable (includes valuation allowance of $698 and $1,173) |
33,459 | 68,320 | |||||
Fixed assets and software, net |
14,518 | 17,589 | |||||
Loans eligible for repurchase |
382,703 | 139,889 | |||||
Other assets |
64,341 | 50,041 | |||||
| | | | | | | |
Total assets |
$ | 4,211,233 | $ | 2,869,091 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Liabilities and member's equity |
|||||||
Warehouse borrowings |
$ | 2,453,152 | $ | 1,562,836 | |||
Notes payable |
387,627 | 283,899 | |||||
Other borrowings |
15,963 | 23,860 | |||||
Derivative liabilities, net |
11,256 | 10,449 | |||||
Liability for losses under representations and warranties |
6,588 | 7,407 | |||||
Liability for loans eligible for repurchase |
382,703 | 139,889 | |||||
Accounts payable and accrued expenses |
64,210 | 53,727 | |||||
| | | | | | | |
Total liabilities |
3,321,499 | 2,082,067 | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Commitments and contingencies (Note 15) |
|||||||
Member's equity |
889,734 | 787,024 | |||||
| | | | | | | |
Total liabilities and member's equity |
$ | 4,211,233 | $ | 2,869,091 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
F-30
Aris Mortgage Holding Company, LLC
Consolidated Statement of Income
|
Year ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Revenues |
|||||||
Net gains on loans held for sale |
$ | 229,239 | $ | 82,376 | |||
Net loan servicing revenue |
71,052 | 129,453 | |||||
Loan acquisition and origination fees |
71,783 | 60,159 | |||||
Other income |
37,546 | 53,804 | |||||
| | | | | | | |
Net interest income (expense) |
|||||||
Interest income |
70,090 | 60,689 | |||||
Interest expense |
(61,000 | ) | (61,034 | ) | |||
| | | | | | | |
Net interest income (expense) |
9,090 | (345 | ) | ||||
| | | | | | | |
Total net revenues |
418,710 | 325,447 | |||||
Expenses |
|||||||
Compensation |
108,208 | 94,191 | |||||
Loan servicing |
60,103 | 58,748 | |||||
Loan acquisition and origination |
27,971 | 24,097 | |||||
Technology |
8,714 | 8,876 | |||||
Occupancy |
3,255 | 2,875 | |||||
Other expenses |
35,934 | 31,690 | |||||
| | | | | | | |
Total expenses |
244,185 | 220,477 | |||||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Net income |
$ | 174,525 | $ | 104,970 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
F-31
Aris Mortgage Holding Company, LLC
Consolidated Statement of Changes in Member's Equity
|
Year ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Balance, beginning of the year |
$ | 787,024 | $ | 681,406 | |||
Equity-based compensation |
185 | 648 | |||||
Distributions |
(72,000 | ) | | ||||
Net income |
174,525 | 104,970 | |||||
| | | | | | | |
Balance, end of the year |
$ | 889,734 | $ | 787,024 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
F-32
Aris Mortgage Holding Company, LLC
Consolidated Statement of Cash Flows
|
Year ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Cash flows from operating activities |
|||||||
Net income |
$ | 174,525 | $ | 104,970 | |||
Adjustments to reconcile net income to net cash used in operating activities: |
|||||||
Mortgage servicing rights capitalized upon sale of loans |
(653,645 | ) | (469,536 | ) | |||
Change in fair value and impairment of loans held for sale |
(8,264 | ) | (9,236 | ) | |||
Change in fair value of mortgage servicing rights |
319,634 | 36,671 | |||||
Loss on sale and interest income on certain securitization transactions |
1,132 | 1,301 | |||||
Change in liability for losses under representations and warranties |
667 | 2,464 | |||||
Change in fair value of derivatives |
(23,283 | ) | 19,034 | ||||
Equity-based compensation |
185 | 648 | |||||
Amortization of debt issuance costs |
945 | 1,436 | |||||
Depreciation and amortization |
5,431 | 5,053 | |||||
Loss on sale of mortgage servicing rights |
2,539 | 4,847 | |||||
Purchases and originations of loans |
(46,189,369 | ) | (38,686,066 | ) | |||
Early buyouts of loans from Ginnie Mae securities |
(437,720 | ) | (199,131 | ) | |||
Proceeds from sales and payments from loans held for sale |
45,338,714 | 38,141,324 | |||||
Net settlement of options contracts |
1,362 | (521 | ) | ||||
Change in counterparty margin |
14,695 | (13,879 | ) | ||||
Net changes in: |
|||||||
Servicing advances |
(22,116 | ) | (5,965 | ) | |||
Accounts receivable |
45,713 | (25,550 | ) | ||||
Other assets |
9,615 | 5,613 | |||||
Accounts payable and accrued expenses |
7,816 | 12,011 | |||||
| | | | | | | |
Net cash used in operating activities |
(1,411,424 | ) | (1,074,512 | ) | |||
| | | | | | | |
Cash flows from investing activities |
|||||||
Purchases of fixed assets and software |
(2,336 | ) | (13,912 | ) | |||
Proceeds from sales of mortgage servicing rights |
189,885 | 300,204 | |||||
| | | | | | | |
Net cash provided by investing activities |
187,549 | 286,292 | |||||
| | | | | | | |
Cash flows from financing activities |
|||||||
Proceeds from warehouse borrowings |
48,918,938 | 41,230,134 | |||||
Repayment of warehouse borrowings |
(48,028,733 | ) | (40,826,241 | ) | |||
Proceeds from notes payable |
614,881 | 878,170 | |||||
Repayment of notes payable |
(509,679 | ) | (691,968 | ) | |||
Proceeds from other borrowings |
350,635 | 329,269 | |||||
Repayment of other borrowings |
(25,000 | ) | (47,956 | ) | |||
Proceeds from borrowings from related parties |
| 201,000 | |||||
Repayment of borrowings from related parties |
| (264,589 | ) | ||||
Payment of debt issuance costs |
(2,322 | ) | (3,006 | ) | |||
Distributions |
(72,000 | ) | | ||||
| | | | | | | |
Net cash provided by financing activities |
1,246,720 | 804,813 | |||||
| | | | | | | |
Net increase in cash and restricted cash |
22,845 | 16,593 | |||||
Cash and restricted cash, beginning of the year |
80,111 | 63,518 | |||||
| | | | | | | |
Cash and restricted cash, end of the year |
$ | 102,956 | $ | 80,111 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
At year end: |
|||||||
Cash |
$ | 93,581 | $ | 70,111 | |||
Restricted cash |
9,375 | 10,000 | |||||
| | | | | | | |
|
$ | 102,956 | $ | 80,111 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Supplemental cash flow information |
|||||||
Cash paid for interest |
$ | 60,496 | $ | 59,395 | |||
Non-cash financing activities: |
|||||||
Transfers of mortgage-backed securities in settlement of secured borrowings |
$ | 334,449 | $ | 278,055 | |||
Payments from loans held for sale in partial settlement of secured borrowings |
$ | 204 | $ | 210 |
The accompanying notes are an integral part of these consolidated financial statements.
F-33
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements
NOTE 1. ORGANIZATION AND BUSINESS
Aris Mortgage Holding Company, LLC ("Aris") is a wholly-owned subsidiary of A-A Mortgage Opportunities, L.P. ("A-A Mortgage"). Aris acquired its principal subsidiary, AmeriHome Mortgage Company, LLC ("AmeriHome") in 2014. The term "the Company" as used herein may refer to Aris individually, Aris and its subsidiaries, or certain of Aris' subsidiaries or affiliates.
The Company's ongoing central operations include purchasing residential mortgage loans from third-party originators, originating residential mortgage loans directly to consumers, and pooling and selling these loans in the secondary market. The Company generally retains the servicing rights to the loans it sells and subcontracts the servicing to third-party subservicers.
The Company is an approved seller/servicer for the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac"), each of which is a government-sponsored enterprise ("GSE"). The Company is also an approved issuer of securities guaranteed by the Government National Mortgage Association ("Ginnie Mae"), a lender for the Federal Housing Administration ("FHA"), a part of the U.S. Department of Housing and Urban Development ("HUD"), and a lender/servicer for the U.S. Department of Veterans Affairs ("VA") and the U.S. Department of Agriculture ("USDA"). Each of Fannie Mae, Freddie Mac, Ginnie Mae, FHA, HUD, VA and USDA are herein referred to as an "Agency" and collectively as the "Agencies." The Company is licensed to originate loans in 46 states and the District of Columbia. The Company is able to purchase and service loans in 49 states and the District of Columbia, either because it is properly licensed in such jurisdictions or exempt or otherwise not required to be licensed in such jurisdictions.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP"), as codified in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC").
The accompanying consolidated financial statements include the accounts of Aris and other entities in which Aris has a controlling financial interest, including AmeriHome, Aris Mortgage Company, LLC, and Aris Mortgage Intermediate Holding Company, LLC. Upon Aris' acquisition of AmeriHome in 2014, Aris Mortgage Company, LLC suspended its primary operations and transferred all of its employees to AmeriHome. Aris Mortgage Intermediate Holding Company, LLC functions as a holding company with an ownership interest in AmeriHome.
The accompanying consolidated financial statements also include the assets and liabilities of AHMC Holding I LLC and AmeriHome GMSR Issuer Trust (the "Trust"), each a variable interest entity ("VIE") of which AmeriHome is the primary beneficiary. AmeriHome is deemed to be the primary beneficiary of the VIEs because it has both the power to direct the activities that most significantly impact the VIEs and holds variable interests that could potentially be significant to the VIEs. Intercompany accounts and transactions have been eliminated.
Use of Estimates
In accordance with GAAP, management is required to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates and assumptions include, but are not limited to, those related to the valuation of loans held for sale
F-34
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
("LHFS"), mortgage servicing rights ("MSRs"), and interest rate lock commitments ("IRLCs"), and the estimation of assets and liabilities associated with loan repurchases and related indemnifications. These estimates and assumptions are based on the best available information, however, actual results could differ from those estimates.
Fair Value Measurements
The Company categorizes assets and liabilities at fair value based on a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. Fair value measurements are based on quoted market prices, when available, or, when not available, on industry standard models that use market-based inputs or independently-sourced parameters, including, but not limited to, yield curves, interest rates, volatilities and credit curves. In addition to market information, these models incorporate transaction details, such as the maturity of the instruments. Valuation adjustments may be made to ensure that financial instruments are reported at fair value.
Cash and Restricted Cash
Cash consists of cash balances held at depository institutions. Cash balances that have restrictions as to the Company's ability to withdraw funds are considered restricted cash. Restricted cash represents deposits that serve as collateral for certain warehouse borrowing agreements.
Loans Held for Sale
The Company reports LHFS at either fair value or the lower of cost or fair value. The Company has elected to report LHFS purchased from third-party originators or originated directly to consumers at fair value to more timely reflect the Company's performance. Fair value changes in these loans are reported in current period income as a component of Net gains on loans held for sale. The Company reports LHFS repurchased from investors at the lower of cost or fair value. For LHFS reported at the lower of cost or fair value, the amount by which cost exceeds fair value is accounted for as a valuation allowance. Changes in the valuation allowance are included in Net gains on loans held for sale in the consolidated statement of income. Gains or losses on the transfer of LHFS are included in Net gains on loans held for sale in the consolidated statement of income.
The Company recognizes a transfer of loans as a sale when it surrenders control over the transferred loans. Control is considered to be surrendered when the transferred loans have been legally isolated from the Company, the transferee has the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred loans, and the Company does not maintain effective control over the transferred loans through either an agreement that entitles and obligates the Company to repurchase or redeem the loans before their maturity or the ability to unilaterally cause the holder to return specific loans. If the transfer of loans qualifies as a sale, the Company derecognizes such loans and records the gain or loss on the transfer date. If the transfer of loans does not qualify as a sale, the transfer is treated as a secured borrowing.
Interest income on LHFS is recognized from acquisition date to settlement date and is presented separately from the changes in fair value of LHFS. Recognition of interest income is suspended and the accrued unpaid interest receivable is reversed against interest income when loans become 90 days
F-35
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
delinquent or when recovery of income and principal becomes doubtful. Loans return to accrual status when the principal and interest become current and it is probable that the amounts are fully collectible.
Mortgage Servicing Rights
When the Company sells loans in the secondary market, it typically retains the right to service the loans. At the time of sale, a servicing right asset is capitalized when the benefits of servicing are deemed to be greater than adequate compensation for performing the servicing activities. MSRs represent the then current fair value of future net cash flows expected to be realized for performing servicing activities. The Company has elected to subsequently measure MSRs at fair value and report changes in fair value in current period income as a component of Net loan servicing revenue.
The Company derecognizes MSRs when substantially all of the risks and rewards of ownership are irrevocably passed to the transferee and any protection provisions retained by the Company are minor and can be reasonably estimated. Protection provisions are considered to be minor if the obligation under such provisions is estimated to be no more than 10 percent of the sales price and the Company retains the risk of prepayment for no more than 120 days. The Company derecognizes MSRs on the date on which title passes and recognizes a gain or loss in current period income equal to the difference between the carrying value of the transferred MSRs and the value of the assets received as consideration. The Company records a liability for retained protection provisions that can be reasonably estimated. Gains or losses on sales of MSRs, net of retained protection provisions, are included in Net loan servicing revenue in the consolidated statement of income.
Derivative Financial Instruments
The Company records derivative financial instruments at fair value as either assets or liabilities in the consolidated balance sheet. The Company enters into commitments with third-party originators to purchase loans at a future date. Additionally, the Company may enter into commitments that relate to the origination of loans. These loan commitments, described as IRLCs, are accounted for as derivative financial instruments. The fair value of IRLCs is determined based on secondary market prices for the underlying loans and estimated servicing value with similar coupons, maturities and credit quality, adjusted for the anticipated loan funding probability ("pull-through rate"). The fair value of IRLCs is subject to change primarily due to changes in interest rates and the estimated pull-through rate. The Company economically hedges the changes in fair value associated with changes in interest rates generally by utilizing forward sale commitments and interest rate futures. The hedging instruments are typically entered into at the time the IRLCs are made and are accounted for as derivative financial instruments. The Company uses loans that have been or will be purchased or originated to satisfy its forward sale commitments.
Additionally, the Company enters into other derivative financial instruments to economically hedge its MSR portfolio. The fair value of these hedging instruments is subject to change primarily due to changes in interest rates. The fair value of the Company's derivative financial instruments is included in Derivative assets and Derivative liabilities in the consolidated balance sheet. Changes in fair value of derivative financial instruments hedging IRLCs and LHFS at fair value are included in Net gains on loans held for sale in the consolidated statement of income. Changes in fair value of derivative financial instruments hedging MSRs are included in Net loan servicing revenue in the consolidated statement of income.
F-36
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
The Company has elected to net derivative asset and liability positions, and cash collateral obtained from or posted to its counterparties, when they are subject to a legally enforceable master netting arrangement.
Servicing Advances
In accordance with its contractual loan servicing obligations, the Company is required to advance funds to or on behalf of investors when borrowers do not make payments. The Company advances property taxes and insurance premiums for borrowers who have insufficient funds in escrow accounts, plus any other costs to preserve properties. The Company may also advance funds to maintain, repair, and market foreclosed real estate properties. The Company is entitled to recover all or a portion of the advances from borrowers of reinstated and performing loans from the proceeds of liquidated properties or from the investors of charged-off loans. The Company periodically reviews servicing advances for collectibility and provides a valuation allowance for amounts estimated to be uncollectible. Servicing advances are charged-off when they are deemed to be uncollectible.
Accounts Receivable
Accounts receivable consists primarily of holdback amounts related to MSR sales, lender incentive fees receivable related to a certain consumer credit relief lending arrangement, and short-term customer and trade receivables. Accounts receivable are presented net of an allowance for losses, which is increased by a provision for losses and reduced by charge-offs, net of recoveries. The Company records a provision for losses for all receivable balances that are more than 90 days past due or on an as-needed basis in order to maintain an allowance for losses at a level considered adequate to cover probable losses inherent in the portfolio. Provisions for losses are included as a component of Other expenses in the consolidated statement of income.
Fixed Assets and Software
Fixed assets and software is comprised of furniture, fixtures, hardware, equipment, leasehold improvements, and computer software purchased or developed for internal use. Furniture, fixtures, hardware, equipment, and leasehold improvements are stated at historical cost less accumulated depreciation and amortization. Depreciation or amortization begins when the asset is available for its intended use and is computed using the straight line method over the estimated useful life of the asset, which ranges from 3 to 10 years. The Company capitalizes certain consulting and payroll costs related to computer software acquired or developed for internal use. Once the software is ready for its intended use, the Company amortizes the capitalized costs on a straight line basis over three years.
The Company periodically assesses long-lived assets for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable. If management identifies an indicator of impairment, it assesses recoverability by comparing the carrying amount of the asset to the sum of the undiscounted cash flows expected to result from the use and eventual disposal of the asset. An impairment loss is recognized when the carrying amount is not recoverable and is measured as the excess of carrying amount over fair value.
F-37
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans Eligible for Repurchase
The terms of the Ginnie Mae MBS program provide the Company (as servicer) with the unilateral right but not the obligation to repurchase previously transferred loans if the borrower makes no payments for three consecutive months. When loans meet Ginnie Mae's specified delinquency criteria and are eligible for repurchase, the Company regains control of the loans and accounts for them as if they had been repurchased. The Company recognizes loans eligible for repurchase at fair value and records a corresponding liability in the consolidated balance sheet. The Company subsequently carries such loans eligible for repurchase at the lower of cost or fair value, determined on an aggregate basis.
Upon recognizing loans eligible for repurchase, the Company does not change the accounting for the MSRs related to the previously sold loans. The costs to carry the loans eligible for repurchase, including net financing costs, interest losses and other servicing expenses, are incorporated into the valuation of the associated MSRs and, therefore, reflected in Net loan servicing revenue in the consolidated statement of income.
Borrowings
The Company has multiple borrowing facilities in the form of loan sales under repurchase agreements (warehouse borrowings), notes payable secured by MSRs, and term loans. The carrying value of these borrowings is based on the amount of cash received. Accrued interest on such borrowings is recorded separately as a component of Accounts payable and accrued expenses in the consolidated balance sheet.
The costs of establishing the borrowing facilities are recognized as deferred charges and reported as a direct deduction from the respective borrowing and amortized to Interest expense using the straight line method over the term of the facility, which materially approximates the effective yield method.
Proceeds from transfers of loans that do not satisfy the conditions for sale accounting are accounted for as secured borrowings.
Liability for Losses Under Representations and Warranties
The Company sells loans in the secondary market to investors, including the GSEs, and issues MBS through the GSEs and Ginnie Mae. When the Company sells loans or issues securities, it makes specific representations and warranties to the purchasers or investors about various characteristics of each loan, such as compliance with origination and underwriting guidelines. In the event of a breach of any representations and warranties, the Company may be required to either repurchase the loans with the identified defects or indemnify the investor or insurer.
The Company maintains a liability for losses under representations and warranties at a level sufficient to absorb estimated losses. The method used to estimate the liability for losses under representations and warranties is a function of the representations and warranties made to each investor and considers a combination of factors, including, but not limited to, estimated future defaults, loan repurchase rates, and the potential severity of loss in the event of defaults including any loss on sale or liquidation of the repurchased loan. The Company records a provision for losses relating to such representations and warranties as part of its loan sale transactions. Upon loan sale, the Company recognizes a liability for estimated losses under Liability for losses under representations and warranties in
F-38
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
the consolidated balance sheet with an offsetting entry to Net gains on loans held for sale in the consolidated statement of income.
The Company periodically evaluates the adequacy of the liability for losses under representations and warranties. The Company adjusts the liability based on factors or events that have a material impact on the representations and warranties for loans, such as changes in actual or expected future delinquencies, investor loan audit practices, "loss given default" expectations, or investor representations and warranties relief criteria. Such adjustments, including the impact of any changes in estimates, are recorded in Net gains on loans held for sale in the consolidated statement of income.
In the event of a breach of any representations and warranties made to purchasers or investors, the Company believes, based on historical experience, that if it acquired the loan from a third-party originator that breached similar or other representations and warranties, it will have the right to seek a recovery of related repurchase losses from that third-party originator.
Loan Servicing Fees
The Company receives loan servicing fees and other ancillary remuneration for servicing loans. Loan servicing fees are based on a contractual percentage of the outstanding principal balance and recognized as revenue when earned, net of guarantee fees paid by the Company to the GSEs and Ginnie Mae. Loan servicing fees are earned only when interest is collected from borrowers. Late charges and other miscellaneous fees are also recognized as revenue upon collection of payments from the borrowers.
Loan Acquisition and Origination Fees
Loan acquisition and origination fees consist of fees earned by the Company for purchasing and originating loans. The fees generally represent flat, per-loan fee amounts and are recognized at the time the loans are purchased or originated.
Other Income
Other income consists of income that is dissimilar in nature to revenues the Company earns from its ongoing central operations. Other income includes lender incentive fees earned under a certain consumer credit relief lending arrangement and early payoff ("EPO") and early payment default ("EPD") fees from third-party originators.
Equity-Based Compensation
In 2015, the Company issued a profit units plan that provides for grants of non-voting equity interests to certain employees of AmeriHome. These equity-based awards consist of time-based units and performance-based units. The Company determines the cost of the awards based on the grant date fair value of the awards. The cost related to time-based units is amortized using the straight line method over the applicable time vesting periods. The cost related to performance-based units is amortized using the straight line method over the forecasted performance period. The Company has elected to recognize forfeitures as they occur.
F-39
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes
The Company is a wholly-owned limited liability company and is treated as a partnership for federal and state income purposes. The income and deductions of the Company are reported on its member's return. The Company has not recorded a liability for federal or state income taxes as such taxes, if any, are the responsibility of its members. However, the Company is subject to certain state franchise taxes. The accrued franchise tax is included in Accounts payable and accrued expenses and is not material to the consolidated balance sheet.
The Company recognizes assets or liabilities for uncertain tax positions by recognizing the financial statement effects of a tax position only when it is more likely than not that the position will be sustained upon examination.
There were no uncertain tax positions recognized by the Company as of December 31, 2019 and 2018. This is not expected to change significantly during the next twelve months. Tax year 2015 is the earliest tax year open to examination by the major tax jurisdictions to which the Company is subject. There were no tax years under examination by the major tax jurisdictions as of December 31, 2019 and 2018.
Custodial Accounts
The Company has a fiduciary responsibility for servicing accounts related to borrower escrow funds and custodial funds due to investors. These funds are maintained in segregated bank accounts for the benefit of the investors. These accounts are not recorded in the consolidated balance sheet.
Recent Accounting Developments
Newly Adopted Accounting Standards
In May 2014, the FASB issued Accounting Standards Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 became effective January 1, 2019 for the Company. As the Company's revenues are not in the scope of ASU 2014-09, the new revenue recognition guidance did not impact the timing and measurement of the Company's revenues. As a result, the Company did not retrospectively adjust any prior period results due to the standard becoming effective.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), which requires a statement of cash flows to report the change during the reporting period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash or restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. Accordingly, the Company retrospectively changed the presentation of its consolidated statements of cash flows to conform to the requirements of ASU 2016-18.
F-40
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (Continued)
Recently Issued Accounting Standards Not Yet Adopted
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract and supersedes previous leasing standards. ASU 2016-02 requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether the lease is effectively a financed purchase of the leased asset by the lessee. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. In November 2019, the FASB deferred the effective date of the new leases standard for entities that are not public business entities. As such, the amendments in ASU 2016-02 will be effective for the Company's fiscal years beginning after December 15, 2020 and interim periods in the following fiscal year. The Company will adopt ASU 2016-02 effective January 1, 2021 using a modified retrospective transition approach. The Company is assessing the impact that the adoption of ASU 2016-02 will have to its consolidated financial statements.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments Credit Losses (Topic 326), which introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. ASU 2016-13 will apply to: (1) loans, accounts receivable, trade receivables and other financial assets measured at amortized cost, (2) loan commitments and certain other off-balance sheet credit exposures, (3) debt securities and other financial assets measured at fair value through other comprehensive income, and (4) beneficial interests in securitized financial assets. In November 2019, the FASB deferred the effective date of the new credit losses standard for entities that are not public business entities. As such, the amendments in ASU 2016-13 will be effective for the Company's fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The Company is assessing the impact that the adoption of ASU 2016-13 will have to its consolidated financial statements.
NOTE 3. FAIR VALUE MEASUREMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal market at the measurement date under current market conditions regardless of whether that price is directly observable or estimated using another valuation technique.
Applicable accounting guidance specifies a hierarchy of valuation techniques based on whether the inputs to those techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. The hierarchy is broken down into three general levels:
Level 1 inputsQuoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date.
Level 2 inputsInputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Observable inputs are inputs that other market participants would use in pricing an asset or liability and are developed based on market data obtained from sources independent of the Company.
F-41
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 3. FAIR VALUE MEASUREMENTS (Continued)
Level 3 inputsUnobservable inputs, reflecting the Company's assumptions about the factors market participants would use in pricing an asset or liability based on the best information available at the measurement date, are used when quoted prices or observable inputs are unavailable.
The following is a summary of the fair value hierarchy of assets and liabilities measured at fair value on a recurring basis:
|
December 31, 2019 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
|
(Amounts in thousands) |
||||||||||||
Assets |
|||||||||||||
Loans held for sale |
$ | | $ | 2,302,503 | $ | 45,427 | $ | 2,347,930 | |||||
Mortgage servicing rights |
| | 893,193 | 893,193 | |||||||||
Interest rate lock commitments(1) |
| | 19,273 | 19,273 | |||||||||
Other derivative assets |
| 1,855 | | 1,855 | |||||||||
| | | | | | | | | | | | | |
|
$ | | $ | 2,304,358 | $ | 957,893 | $ | 3,262,251 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Liabilities |
|||||||||||||
Interest rate lock commitments(1) |
$ | | $ | | $ | 261 | $ | 261 | |||||
Other derivative liabilities |
| 10,995 | | 10,995 | |||||||||
| | | | | | | | | | | | | |
|
$ | | $ | 10,995 | $ | 261 | $ | 11,256 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
|
December 31, 2018 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Level 1 | Level 2 | Level 3 | Total | |||||||||
|
(Amounts in thousands) |
||||||||||||
Assets |
|||||||||||||
Loans held for sale |
$ | | $ | 1,590,282 | $ | 27,792 | $ | 1,618,074 | |||||
| | | | | | | | | | | | | |
Mortgage servicing rights |
| | 754,940 | 754,940 | |||||||||
| | | | | | | | | | | | | |
Interest rate lock commitments(1) |
| | 6,544 | 6,544 | |||||||||
| | | | | | | | | | | | | |
Other derivative assets |
| 6,551 | | 6,551 | |||||||||
| | | | | | | | | | | | | |
|
$ | | $ | 1,596,833 | $ | 789,276 | $ | 2,386,109 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Liabilities |
|||||||||||||
Interest rate lock commitments(1) |
$ | | $ | | $ | 454 | $ | 454 | |||||
| | | | | | | | | | | | | |
Other derivative liabilities |
| 9,995 | | 9,995 | |||||||||
| | | | | | | | | | | | | |
|
$ | | $ | 9,995 | $ | 454 | $ | 10,449 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-42
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 3. FAIR VALUE MEASUREMENTS (Continued)
The activity related to assets and liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3 assets and liabilities) is summarized below:
|
Year ended December 31, 2019 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Loans held for sale |
Mortgage servicing rights |
Net interest rate lock commitments(1) |
|||||||
|
(Amounts in thousands) |
|||||||||
Balance, beginning of the year |
$ | 27,792 | $ | 754,940 | $ | 6,090 | ||||
Purchases |
80,034 | |||||||||
Sales and payments |
(64,565 | ) | (195,758 | ) | ||||||
Mortgage servicing rights capitalized upon sale of loans |
653,645 | |||||||||
Interest rate lock commitments issued, net |
13,887,829 | |||||||||
Transfers from Level 2 to Level 3 |
3,707 | |||||||||
Transfers from Level 3 to Level 2: |
||||||||||
Change in salability of loans held for sale |
(952 | ) | ||||||||
Settlement of interest rate lock commitments upon acquisition or origination of loans held for sale |
(13,880,001 | ) | ||||||||
Change in fair value |
(589 | ) | (139,872 | ) | 5,094 | |||||
Realization of expected cash flows |
(179,762 | ) | ||||||||
| | | | | | | | | | |
Balance, end of the year |
$ | 45,427 | $ | 893,193 | $ | 19,012 | ||||
| | | | | | | | | | |
Unrealized gains (losses) included in income related to assets held at year end |
$ | 196 | $ | (113,864 | ) | $ | 19,012 |
F-43
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 3. FAIR VALUE MEASUREMENTS (Continued)
|
Year ended December 31, 2018 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Loans held for sale | Mortgage servicing rights |
Net interest rate lock commitments(1) |
|||||||
|
(Amounts in thousands) |
|||||||||
Balance, beginning of the year |
$ | 2,318 | $ | 647,127 | $ | 6,612 | ||||
Purchases |
200,771 | |||||||||
Sales and payments |
(176,467 | ) | (325,052 | ) | ||||||
Mortgage servicing rights capitalized upon sale of loans |
469,536 | |||||||||
Interest rate lock commitments issued, net |
12,371,295 | |||||||||
Transfers from Level 2 to Level 3 |
2,152 | |||||||||
Transfers from Level 3 to Level 2: |
||||||||||
Change in salability of loans held for sale |
(1,374 | ) | ||||||||
Settlement of interest rate lock commitments upon acquisition or origination of loans held for sale |
(12,370,277 | ) | ||||||||
Change in fair value |
392 | 75,312 | (1,540 | ) | ||||||
Realization of expected cash flows |
(111,983 | ) | ||||||||
| | | | | | | | | | |
Balance, end of the year |
$ | 27,792 | $ | 754,940 | $ | 6,090 | ||||
| | | | | | | | | | |
Unrealized gains included in income related to assets held at year end |
$ | 422 | $ | 14,325 | $ | 6,090 |
The following is a summary of the difference between the aggregate fair value and the aggregate unpaid principal balance ("UPB") of LHFS for which the fair value option has been elected:
|
December 31, 2019 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Fair value | Unpaid principal balance |
Difference | |||||||
|
(Amounts in thousands) |
|||||||||
Loans held for sale: |
||||||||||
Current through 89 days delinquent |
$ | 2,347,471 | $ | 2,240,135 | $ | 107,336 | ||||
90 days or more delinquent |
459 | 473 | (14 | ) | ||||||
| | | | | | | | | | |
|
$ | 2,347,930 | $ | 2,240,608 | $ | 107,322 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
|
December 31, 2018 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Fair value | Unpaid principal balance |
Difference | |||||||
|
(Amounts in thousands) |
|||||||||
Loans held for sale: |
||||||||||
Current through 89 days delinquent |
$ | 1,617,274 | $ | 1,543,001 | $ | 74,273 | ||||
90 days or more delinquent |
800 | 828 | (28 | ) | ||||||
| | | | | | | | | | |
|
$ | 1,618,074 | $ | 1,543,829 | $ | 74,245 | ||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
F-44
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 3. FAIR VALUE MEASUREMENTS (Continued)
Valuation Techniques and Unobservable Inputs
The following is a description of the valuation techniques used to measure assets and liabilities reported at fair value on a recurring basis:
Loans Held for Sale
The majority of LHFS reported at fair value are saleable into active markets and are, therefore, measured based on valuation techniques using Level 2 inputs, such as their quoted market or contracted selling price or market price equivalent. These loans include government-insured or guaranteed and Agency-conforming LHFS. Non-Agency LHFS are measured based on valuation techniques using Level 3 inputs.
Certain of these LHFS may become non-saleable into active markets due to the identification of a defect. The Company measures such non-saleable loans based on valuation techniques using Level 3 inputs.
Mortgage Servicing Rights
MSRs are measured based on valuation techniques using Level 3 inputs. The Company uses a discounted cash flow model that incorporates assumptions that market participants would use in estimating the fair value of servicing rights, including, but not limited to, prepayment speeds, discount rate, and cost to service.
Derivative Financial Instruments
IRLCs are measured based on valuation techniques using Level 3 inputs, such as loan type, underlying loan amount, note rate, loan program and expected settlement date. These measurements are adjusted at loan level to consider the servicing release premium and loan pricing adjustments specific to each loan. The base value is then adjusted for the anticipated pull-through rate. The pull-through rate and servicing fee multiple are unobservable inputs based on historical experience.
The Company's hedging instruments consist of forward purchase and sales contracts, Treasury futures and options, Eurodollar futures, and swap futures. These hedging instruments are measured based on valuation techniques using Level 2 inputs. Forward purchase and sales contracts are measured based on their quoted market or contracted selling price or market price equivalent. Treasury futures and options, Eurodollar futures, and swap futures are measured based on exchange-provided daily settlement quotes.
F-45
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 3. FAIR VALUE MEASUREMENTS (Continued)
The following is a summary of the key unobservable inputs used in the valuation of Level 3 assets and liabilities:
|
|
December 31, 2019 | ||||||
---|---|---|---|---|---|---|---|---|
Asset/liability
|
Key inputs | Range | Weighted average |
|||||
Mortgage servicing rights |
Option adjusted spread (in basis points) | 121 - 453 | 228 | |||||
|
Conditional prepayment rate(1) | 11.2% - 23.9% | 18.0 | % | ||||
|
Servicing fee rate (in basis points) | 25.0 - 56.5 | 34.2 | |||||
|
Cost to service | $81 - $87 | $ | 84 | ||||
Loans held for sale |
Whole loan spread to TBA price (in basis points) | (2.40) - (0.18) | (1.40 | ) | ||||
Interest rate lock commitments |
Servicing fee multiple | 3.0 - 5.3 | 4.1 | |||||
|
pull-through rate | 50% - 100% | 83 | % |
|
|
December 31, 2018 | ||||||
---|---|---|---|---|---|---|---|---|
Asset/liability
|
Key inputs | Range | Weighted average |
|||||
Mortgage servicing rights |
Option adjusted spread (in basis points) | 226 - 354 | 332 | |||||
|
Conditional prepayment rate(1) | 9.5% - 18.6% | 14.3 | % | ||||
|
Servicing fee rate (in basis points) | 20.0 - 56.5 | 30.0 | |||||
|
Cost to service | $95 - $101 | $ | 98 | ||||
Loans held for sale |
Whole loan spread to TBA price (in basis points) | (0.93) - (0.58) | (0.79 | ) | ||||
Interest rate lock commitments |
Servicing fee multiple | 1.9 - 5.1 | 3.7 | |||||
|
pull-through rate | 76% - 100% | 95 | % |
NOTE 4. LOANS HELD FOR SALE
The following is a summary of loans held for sale by type:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Government-insured or guaranteed |
$ | 1,671,166 | $ | 821,574 | |||
Agency-conforming |
935,278 | 865,517 | |||||
Non-Agency |
42,165 | 26,975 | |||||
| | | | | | | |
|
$ | 2,648,609 | $ | 1,714,066 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
F-46
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 5. MORTGAGE SERVICING RIGHTS
The Company generally retains MSRs from loan sales and measures them at fair value. The Company receives loan servicing fees, net of subservicing costs, based on the UPB of the underlying loans. Loan servicing fees are collected from payments made by borrowers. The Company may receive other remuneration from rights to various borrower-contracted fees, such as late charges, collateral reconveyance charges, and non-sufficient funds fees. The Company is generally entitled to retain the interest earned on funds held pending remittance related to its collection of borrower principal, interest, tax and insurance payments.
The following is a summary of the UPB of loans included in the Company's MSR portfolio by investor:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Dollars in thousands) |
||||||
Fannie Mae and Freddie Mac |
$ | 37,378,402 | $ | 37,617,887 | |||
Ginnie Mae |
36,544,549 | 25,487,545 | |||||
Private investors |
1,842,270 | 1,407,963 | |||||
| | | | | | | |
|
$ | 75,765,221 | $ | 64,513,395 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Weighted average interest rate |
4.39 | % | 4.39 | % | |||
Custodial funds managed by subservicers(1) |
$ | 1,181,742 | $ | 615,843 |
The following is a summary of the UPB of loans included in the Company's MSR portfolio by geographical distribution:
State
|
December 31, 2019 | State
|
December 31, 2018 | ||||||
---|---|---|---|---|---|---|---|---|---|
|
(Amounts in thousands) |
|
(Amounts in thousands) |
||||||
Texas |
$ | 10,889,255 | California |
$ | 12,691,771 | ||||
California |
8,288,003 | Texas |
6,435,674 | ||||||
Florida |
6,857,757 | Florida |
5,063,270 | ||||||
Georgia |
4,059,126 | Georgia |
2,950,001 | ||||||
New Jersey |
3,042,623 | Arizona |
2,786,237 | ||||||
Other |
42,628,457 | Other |
34,586,442 | ||||||
| | | | | | | | | |
|
$ | 75,765,221 | $ | 64,513,395 | |||||
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
F-47
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 5. MORTGAGE SERVICING RIGHTS (Continued)
The following is a summary of the UPB of loans included in the Company's MSR portfolio by year of origination:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
Year of origination
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
2019 |
$ | 37,769,155 | $ | | |||
2018 |
21,455,293 | 28,815,298 | |||||
2017 |
10,511,381 | 22,178,143 | |||||
2016 |
3,028,577 | 7,648,862 | |||||
Prior to 2016 |
3,000,815 | 5,871,092 | |||||
| | | | | | | |
|
$ | 75,765,221 | $ | 64,513,395 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
During the year ended December 31, 2019, the Company completed two bulk sales of MSRs and related servicing advances with an aggregate sales price of $195.8 million. The UPB of loans underlying these sales totaled $17.3 billion. The Company initially recognized $11.7 million in receivables related to these sales, the majority of which were attributable to holdbacks pending servicing transfers. As of December 31, 2019, the Company reported the remaining receivable amount related to these sales of $5.9 million in Accounts receivable in the consolidated balance sheet.
During the year ended December 31, 2018, the Company completed four bulk sales of MSRs and related servicing advances with an aggregate sales of price of $325.1 million. The UPB of loans underlying these sales totaled $24.4 billion. The Company initially recognized $107.8 million in receivables related to these sales, the majority of which were attributable to holdbacks pending servicing transfers. As of December 31, 2018, the Company reported the remaining receivable amount related to these sales of $22.7 million in Accounts receivable in the consolidated balance sheet.
The following presents the effect of hypothetical changes in the fair value of MSRs caused by assumed immediate changes in interest rates, discount rates, and prepayment speeds that are used to determine fair value:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
Mortgage servicing rights sensitivity analysis
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Fair value of mortgage servicing rights |
$ | 893,193 | $ | 754,940 | |||
Interest rate change: |
|||||||
Decrease in fair value from 50 basis point adverse change |
$ | (148,306 | ) | $ | (84,887 | ) | |
Increase in fair value from 50 basis point favorable change |
$ | 135,717 | $ | 63,091 | |||
Discount rate change: |
|||||||
Decrease in fair value from 50 basis point increase |
$ | (17,954 | ) | $ | (13,817 | ) | |
Increase in fair value from 50 basis point decrease |
$ | 18,701 | $ | 14,328 | |||
Prepayment speed change: |
|||||||
Decrease in fair value from 1% conditional prepayment rate increase |
$ | (40,741 | ) | $ | (24,140 | ) | |
Increase in fair value from 1% conditional prepayment rate decrease |
$ | 44,974 | $ | 26,230 |
Sensitivities are hypothetical changes in fair value and cannot be extrapolated because the relationship of changes in assumptions to changes in fair value may not be linear. In addition, the
F-48
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 5. MORTGAGE SERVICING RIGHTS (Continued)
effect of a variation in a particular assumption is calculated without changing any other assumption, whereas a change in one factor may result in changes to another. Accordingly, no assurance can be given that actual results would be consistent with the results of these estimates. As a result, actual future changes in MSR values may differ significantly from those reported.
NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS
The Company uses derivative financial instruments to manage exposure to interest rate risk for IRLCs it makes to purchase and originate loans at specified interest rates, and its inventory of LHFS and MSRs. The Company has elected to present net derivative asset and liability positions, and cash collateral obtained from or posted to its counterparties, when subject to a master netting arrangement that is legally enforceable on all counterparties in the event of default. IRLCs are not subject to a master netting arrangement.
The following is a summary of the derivative financial instruments recorded in the consolidated balance sheet, including the amount of derivative positions after considering master netting arrangements and financial instruments or cash pledged:
|
December 31, 2019 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
|
Fair value | ||||||||
|
Notional amount |
Derivative assets |
Derivative liabilities |
|||||||
|
(Amounts in thousands) |
|||||||||
Interest rate lock commitments |
$ | 2,349,959 | $ | 19,273 | $ | 261 | ||||
Forward purchase contracts |
$ | 4,741,336 | 5,862 | 1,640 | ||||||
Forward sales contracts |
$ | 7,177,451 | 3,381 | 13,816 | ||||||
Put options on interest rate futures purchase contracts |
$ | 200,000 | 422 | | ||||||
Call options on interest rate futures purchase contracts |
$ | 100,000 | 266 | | ||||||
Futures contracts |
$ | 129,294,100 | | | ||||||
Margin |
| 3,615 | ||||||||
| | | | | | | | | | |
Derivatives before netting |
29,204 | 19,332 | ||||||||
Netting |
(8,076 | ) | (8,076 | ) | ||||||
| | | | | | | | | | |
|
$ | 21,128 | $ | 11,256 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Collateral received from counterparties, net |
$ | 3,615 |
F-49
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
|
December 31, 2018 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
|
Fair value | ||||||||
|
Notional amount |
Derivative assets |
Derivative liabilities |
|||||||
|
(Amounts in thousands) |
|||||||||
Interest rate lock commitments |
$ | 1,175,013 | $ | 6,544 | $ | 454 | ||||
Forward purchase contracts |
$ | 2,486,164 | 10,719 | 257 | ||||||
Forward sales contracts |
$ | 4,876,246 | 1,034 | 29,517 | ||||||
Put options on interest rate futures purchase contracts |
$ | 400,000 | 469 | | ||||||
Call options on interest rate futures purchase contracts |
$ | 230,000 | 3,028 | | ||||||
Futures contracts |
$ | 59,324,500 | | | ||||||
Margin |
530 | (10,550 | ) | |||||||
| | | | | | | | | | |
Derivatives before netting |
22,324 | 19,678 | ||||||||
Netting |
(9,229 | ) | (9,229 | ) | ||||||
| | | | | | | | | | |
|
$ | 13,095 | $ | 10,449 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
Collateral paid to counterparties, net |
$ | 11,080 |
Credit risk related to derivatives arises when amounts receivable from a counterparty exceed those payable to the same counterparty. The Company mitigates credit risk by requiring counterparties to provide collateral to the Company when the counterparties' unsecured loss positions exceed certain negotiated limits.
F-50
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
The following is a summary of derivative assets and liabilities and related netting amounts:
|
December 31, 2019 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Gross amount of recognized assets (liabilities) |
Gross offset |
Net assets (liabilities) |
|||||||
|
(Amounts in thousands) |
|||||||||
Derivatives subject to master netting arrangements: |
||||||||||
Assets: |
||||||||||
Forward purchase contracts |
$ | 5,244 | $ | (4,274 | ) | $ | 970 | |||
Forward sales contracts |
$ | 3,341 | $ | (3,802 | ) | $ | (461 | ) | ||
Margin |
$ | | $ | | $ | | ||||
Liabilities: |
||||||||||
Forward purchase contracts |
$ | (1,640 | ) | $ | 4,274 | $ | 2,634 | |||
Forward sales contracts |
$ | (13,269 | ) | $ | 3,802 | $ | (9,467 | ) | ||
Margin |
$ | (3,615 | ) | $ | | $ | (3,615 | ) | ||
Derivatives not subject to master netting arrangements: |
||||||||||
Assets: |
||||||||||
Interest rate lock commitments |
$ | 19,273 | $ | | $ | 19,273 | ||||
Forward purchase contracts |
$ | 618 | $ | | $ | 618 | ||||
Forward sales contracts |
$ | 40 | $ | | $ | 40 | ||||
Options contracts |
$ | 688 | $ | | $ | 688 | ||||
Liabilities: |
||||||||||
Interest rate lock commitments |
$ | (261 | ) | $ | | $ | (261 | ) | ||
Forward sales contracts |
$ | (547 | ) | $ | | $ | (547 | ) | ||
Total derivatives: |
||||||||||
Assets |
$ | 29,204 | $ | (8,076 | ) | $ | 21,128 | |||
Liabilities |
$ | (19,332 | ) | $ | 8,076 | $ | (11,256 | ) |
F-51
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 6. DERIVATIVE FINANCIAL INSTRUMENTS (Continued)
|
December 31, 2018 | |||||||||
---|---|---|---|---|---|---|---|---|---|---|
|
Gross amount of recognized assets (liabilities) |
Gross offset |
Net assets (liabilities) |
|||||||
|
(Amounts in thousands) |
|||||||||
Derivatives subject to master netting arrangements: |
||||||||||
Assets: |
||||||||||
Forward purchase contracts |
$ | 10,719 | $ | (5,816 | ) | $ | 4,903 | |||
Forward sales contracts |
$ | 1,034 | $ | (3,413 | ) | $ | (2,379 | ) | ||
Margin |
$ | 530 | $ | | $ | 530 | ||||
Liabilities: |
||||||||||
Forward purchase contracts |
$ | (257 | ) | $ | 5,816 | $ | 5,559 | |||
Forward sales contracts |
$ | (25,690 | ) | $ | 3,413 | $ | (22,277 | ) | ||
Margin |
$ | 10,550 | $ | | $ | 10,550 | ||||
Derivatives not subject to master netting arrangements: |
||||||||||
Assets: |
||||||||||
Interest rate lock commitments |
$ | 6,544 | $ | | $ | 6,544 | ||||
Options contracts |
$ | 3,497 | $ | | $ | 3,497 | ||||
Liabilities: |
||||||||||
Interest rate lock commitments |
$ | (454 | ) | $ | | $ | (454 | ) | ||
Forward sales contracts |
$ | (3,827 | ) | $ | | $ | (3,827 | ) | ||
Total derivatives: |
||||||||||
Assets |
$ | 22,324 | $ | (9,229 | ) | $ | 13,095 | |||
Liabilities |
$ | (19,678 | ) | $ | 9,229 | $ | (10,449 | ) |
The following is a summary of net gains (losses) on derivatives included in income:
|
Year ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
(Losses) gains on derivatives included in Net gains on loans held for sale: |
|||||||
Interest rate lock commitments |
$ | 12,922 | $ | (522 | ) | ||
Forward contracts |
(91,795 | ) | 31,145 | ||||
Options contracts |
(682 | ) | (167 | ) | |||
Futures contracts |
6,306 | (1,318 | ) | ||||
| | | | | | | |
|
$ | (73,249 | ) | $ | 29,138 | ||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Gains (losses) on derivatives included in Net loan servicing revenue: |
|||||||
Forward contracts |
$ | 18,842 | $ | (9,692 | ) | ||
Options contracts |
(11,415 | ) | (2,724 | ) | |||
Futures contracts |
154,213 | (24,715 | ) | ||||
| | | | | | | |
|
$ | 161,640 | $ | (37,131 | ) | ||
| | | | | | | |
| | | | | | | |
| | | | | | | |
F-52
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 7. FIXED ASSETS AND SOFTWARE
The following is a summary of the Company's fixed assets and software:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Furniture, fixtures and equipment |
$ | 8,715 | $ | 8,762 | |||
Capitalized software |
5,926 | 5,323 | |||||
Leasehold improvements |
13,469 | 12,429 | |||||
| | | | | | | |
|
28,110 | 26,514 | |||||
Accumulated depreciation and amortization(1) |
(13,592 | ) | (8,925 | ) | |||
| | | | | | | |
Fixed assets and software, net |
$ | 14,518 | $ | 17,589 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
Depreciation and amortization expense related to fixed assets and software totaled $5.4 million and $5.0 million for the years ended December 31, 2019 and 2018, respectively.
NOTE 8. BORROWINGS
The Company has multiple borrowing facilities in the form of asset sales under repurchase agreements (warehouse borrowings) and notes payable secured by MSRs. These borrowing facilities contain various covenants, including financial covenants, governing the Company's tangible net worth, leverage ratio, liquidity and profitability. The Company's failure to comply with any of these covenants could result in an event of default, subject to a cure period, under one or more borrowing agreements pursuant to which all or any portion of the borrowing amounts may become immediately due and payable. The Company was in compliance with all financial covenants as of and for the years ended December 31, 2019 and 2018.
Warehouse Borrowings
The Company finances the acquisition of loans through the use of repurchase agreements. Repurchase agreements operate as financings under which the Company transfers loans to secure borrowings. The borrowing amounts are based on the attributes of the collateralized loans and are defined in the repurchase agreement of each warehouse lender. The Company retains beneficial ownership of the transferred loans and will receive the loans from the lender upon full repayment of the borrowing. The repurchase agreements may require the Company to transfer additional assets to the lender in the event the estimated fair value of the existing transferred loans declines.
F-53
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 8. BORROWINGS (Continued)
The following is a summary of financial information relating to warehouse borrowings under repurchase agreements:
|
Year ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Dollars in thousands) |
||||||
Weighted average interest rate(1) |
4.35 | % | 3.87 | % | |||
Average balance |
$ | 1,325,839 | $ | 1,333,045 | |||
Interest expense(1) |
$ | 57,661 | $ | 51,645 | |||
Maximum daily amount outstanding |
$ | 2,698,131 | $ | 1,874,837 |
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Dollars in thousands) |
||||||
Carrying value of warehouse borrowings(1) |
$ | 2,453,247 | $ | 1,563,041 | |||
Weighted average interest rate |
3.42 | % | 4.22 | % | |||
Additional borrowing capacity |
$ | 896,753 | $ | 1,536,959 | |||
Restricted cash on deposit with counterparties |
$ | 9,375 | $ | 10,000 | |||
Fair value of loans held for sale securing warehouse borrowings |
$ | 2,616,870 | $ | 1,661,450 |
The following is a summary of maturities of outstanding advances under repurchase agreements:
Remaining maturity at December 31, 2019
|
Balance | |||
---|---|---|---|---|
|
(Amounts in thousands) |
|||
Within 30 days |
$ | 61,017 | ||
31 to 90 days |
2,392,230 | |||
| | | | |
|
2,453,247 | |||
Debt issuance costs |
(95 | ) | ||
| | | | |
Total warehouse borrowings |
$ | 2,453,152 | ||
| | | | |
| | | | |
| | | | |
F-54
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 8. BORROWINGS (Continued)
Notes Payable
The Company is a party to multiple notes payable secured by MSRs, as summarized below:
|
December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Term notes to qualified institutional buyers |
$ | 225,000 | $ | 155,000 | |||
Term loan |
68,325 | 74,104 | |||||
Revolving credit agreements |
96,537 | 57,100 | |||||
| | | | | | | |
|
389,862 | 286,204 | |||||
Debt issuance costs |
(2,235 | ) | (2,305 | ) | |||
| | | | | | | |
Total notes payable |
$ | 387,627 | $ | 283,899 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
In August 2018, the Company, through the Trust, entered into a structured finance transaction, pursuant to which the Company may finance excess servicing spread relating to Ginnie Mae MSRs (the "Ginnie Mae MSR Facility"). In connection with the Ginnie Mae MSR Facility, the Trust issued to the Company a variable funding note (the "VFN") with a maximum principal balance of $500.0 million and the Company, through the Trust, issued one series of term notes, Series 2018-GT1 Term Notes, with an aggregate principal amount of $155.0 million to certain qualified institutional buyers, including several limited partners in A-A Mortgage.
In November 2019, pursuant to the terms of the Ginnie Mae MSR Facility, the Company, through the Trust, issued a new series of term notes, Series 2019-GT1 Term Notes, with an aggregate principal amount of $225.0 million to certain qualified institutional buyers, including several limited partners in A-A Mortgage. The proceeds from the issuance of the Series 2019-GT1 Term Notes were used to redeem all of the Series 2018-GT1 Term Notes. As of December 31, 2019, the fair value of MSRs pledged to secure the VFN and the Series 2019-GT1 Term Notes totaled $480.5 million.
In September 2018, the Company entered into an amendment to a revolving credit agreement secured by MSRs pursuant to which the outstanding balance was converted into a term loan. As of December 31, 2019, the remaining balance of the term loan and the fair value of MSRs pledged to secure the term loan totaled $68.3 million and $105.1 million, respectively.
As of December 31, 2019, the outstanding balance of the revolving credit agreements (excluding unamortized debt issuance costs) and the fair value of MSRs pledged to secure them totaled $96.5 million and $205.4 million, respectively. As of December 31, 2018, the outstanding balance of the revolving credit agreements (excluding unamortized debt issuance costs) and the fair value of MSRs pledged to secure them totaled $57.1 million and $253.0 million, respectively.
Other Borrowings
In connection with the Ginnie Mae MSR Facility, the Company entered into a repurchase agreement (the "VFN Repurchase Agreement") with a financial institution, pursuant to which the Company sold the VFN with an agreement to repurchase it at a later date. The Company and the financial institution are also counterparties under a repurchase agreement used for warehouse borrowings. The VFN Repurchase Agreement has a term of one year and provides for a maximum loan
F-55
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 8. BORROWINGS (Continued)
amount of $150.0 million. The maximum borrowings under the respective warehouse borrowing facility and the VFN Repurchase Agreement combined are $450.0 million. The outstanding balance of the VFN Repurchase Agreement (excluding unamortized debt issuance costs) totaled $10.0 million as of December 31, 2019 and 2018, and is included in Other borrowings in the consolidated balance sheet.
Proceeds from transfers of loans that did not qualify as sales totaled $6.0 million and $13.9 million at December 31, 2019 and 2018, respectively. These transfers are accounted for as secured borrowings and included in Other borrowings in the consolidated balance sheet.
NOTE 9. LIABILITY FOR LOSSES UNDER REPRESENTATIONS AND WARRANTIES
The activity in the Company's liability for losses under representations and warranties is summarized below:
|
Year ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Balance, beginning of the year |
$ | 7,407 | $ | 5,556 | |||
Provision for repurchase losses(1) |
6,351 | 6,576 | |||||
Change in estimate of liability for losses under representations and warranties(2) |
(5,824 | ) | (4,112 | ) | |||
Repurchase losses |
(1,346 | ) | (613 | ) | |||
| | | | | | | |
Balance, end of the year |
$ | 6,588 | $ | 7,407 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
The UPB of loans subject to losses under representations and warranties totaled $79.6 billion and $61.6 billion as of December 31, 2019 and 2018, respectively.
F-56
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 10. NET GAINS ON LOANS HELD FOR SALE
The following is a summary of net gains on loans held for sale included in income:
|
Year ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Net proceeds from sale of loans(1) |
$ | (358,690 | ) | $ | (423,274 | ) | |
Mortgage servicing rights capitalized upon sale of loans |
653,645 | 469,536 | |||||
Change in estimate of liability for losses under representations and warranties |
(731 | ) | (2,260 | ) | |||
Change in fair value of loans held for sale |
8,264 | 9,236 | |||||
Change in fair value of derivatives: |
|||||||
Unrealized gain (loss) on derivatives |
23,538 | (25,928 | ) | ||||
Realized (loss) gain on derivatives |
(96,787 | ) | 55,066 | ||||
| | | | | | | |
|
(73,249 | ) | 29,138 | ||||
| | | | | | | |
Net gains on loans held for sale |
$ | 229,239 | $ | 82,376 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
NOTE 11. NET LOAN SERVICING REVENUE
The following is a summary of net loan servicing revenue included in income:
|
Year ended December 31, | ||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Loan servicing fees: |
|||||||
Base fees |
$ | 221,209 | $ | 199,409 | |||
Ancillary income |
10,172 | 8,897 | |||||
| | | | | | | |
|
231,381 | 208,306 | |||||
| | | | | | | |
Change in fair value of mortgage servicing rights |
(139,872 | ) | 75,312 | ||||
Realization of expected cash flows of mortgage servicing rights |
(179,762 | ) | (111,983 | ) | |||
| | | | | | | |
|
(319,634 | ) | (36,671 | ) | |||
| | | | | | | |
Loss on sale of mortgage servicing rights |
(2,539 | ) | (4,847 | ) | |||
Change in estimate of liability for losses under representations and warranties |
204 | (204 | ) | ||||
Change in fair value of derivatives: |
|||||||
Unrealized (loss) gain on derivatives |
(255 | ) | 6,894 | ||||
Realized gain (loss) on derivatives |
161,895 | (44,025 | ) | ||||
| | | | | | | |
|
161,640 | (37,131 | ) | ||||
| | | | | | | |
Net loan servicing revenue |
$ | 71,052 | $ | 129,453 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
F-57
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 12. OTHER INCOME
The following is a summary of other income:
|
Year ended December 31, |
||||||
---|---|---|---|---|---|---|---|
|
2019 | 2018 | |||||
|
(Amounts in thousands) |
||||||
Incentive fees from warehouse lenders(1) |
$ | 10,682 | $ | 39,185 | |||
Early payoff fees |
18,782 | 9,885 | |||||
Early payment default fees |
4,052 | 2,897 | |||||
Other |
4,030 | 1,837 | |||||
| | | | | | | |
Other income |
$ | 37,546 | $ | 53,804 | |||
| | | | | | | |
| | | | | | | |
| | | | | | | |
NOTE 13. RELATED PARTY TRANSACTIONS
Operating Activities
Athene Holding Ltd. ("AHL") is the parent company of several limited partners in A-A Mortgage. The Company sold loans to subsidiaries of AHL totaling $410.6 million and $722.0 million in UPB during the years ended December 31, 2019 and 2018, respectively. In connection with these loan sales, the Company recognized gains of $3.1 million during the year ended December 31, 2019 and losses of $2.0 million during the year ended December 31, 2018, which were included in Net gains on loans held for sale in the consolidated statement of income. The Company services loans sold to subsidiaries of AHL totaling $1.0 billion and $780.7 million in UPB as of December 31, 2019 and December 31, 2018, respectively. The fair value of these MSRs totaled $6.7 million and $7.6 million as of December 31, 2019 and December 31, 2018, respectively.
Acele Residential Mortgage Trust ("Acele") is administered by the special limited partner of A-A Mortgage. The Company sold loans to Acele totaling $15.0 million and $19.2 million in UPB during the years ended December 31, 2019 and 2018 respectively. In connection with these loan sales, the Company recognized gains of $122 thousand during the year ended December 31, 2019 and losses of $155 thousand during the year ended December 31, 2018, which were included in Net gains on loans held for sale in the consolidated statement of income. The Company services loans sold to Acele totaling $34.9 million and $32.4 million in UPB as of December 31, 2019 and 2018, respectively. The fair value of these MSRs totaled $277,000 and $345,000 as of December 31, 2019 and December 31, 2018, respectively.
The Company pays a monitoring fee to the special limited partner of A-A Mortgage for professional services rendered. The fee is calculated and payable quarterly in arrears at an annual rate of 1.5% and is based on the Company's ending equity as of each calendar quarter end, measured in accordance with GAAP. The Company recognized monitoring fees expense of $12.5 million and $11.1 million for the years ended December 31, 2019 and 2018, respectively. The Company reported payables related to these monitoring fees totaling $3.3 million and $3.0 million as of December 31, 2019 and 2018, respectively.
F-58
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 13. RELATED PARTY TRANSACTIONS (Continued)
In August 2018, the Company, through the Trust, issued the Series 2018-GT1 Term Notes to certain qualified institutional buyers, including certain limited partners in A-A Mortgage. As of December 31, 2018, the outstanding balance of the Series 2018-GT1 Term Notes totaled $155.0 million. In November 2019, the Company, through the Trust, issued the Series 2019-GT1 Term Notes, including $175.0 million to certain limited partners in A-A Mortgage and an entity administered by a subsidiary of Apollo Global Management, LLC, the parent of the special limited partner of A-A Mortgage. As of December 31, 2019, the outstanding balance of the Series 2019-GT1 Term Notes issued to such related parties totaled $175.0 million.
NOTE 14. SEGMENT INFORMATION
The Company operates in three segments: Correspondent, Consumer Direct and Servicing. These segments were identified based on how the chief operating decision maker evaluates and assesses the Company's operating results.
The Correspondent segment generates revenues by performing loan acquisition and sale activities. The Consumer Direct segment generates revenues by performing loan origination and sale activities. These segments also earn interest income on loans held pending sale or securitization. Direct operating expenses incurred in connection with these activities are included in these segments. Corporate overhead expenses are included in the Correspondent segment.
The Servicing segment generates revenues by performing loan servicing activities. Servicing segment revenues are also derived from the execution and management of early buyout transactions, including gains recognized upon subsequent sales.
The following is a summary of financial information by segment:
|
Year ended December 31, 2019 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Correspondent | Consumer Direct |
Servicing | Total | |||||||||
|
(Amounts in thousands) |
||||||||||||
Revenues |
|||||||||||||
Net gains on loans held for sale |
$ | 164,829 | $ | 55,521 | $ | 8,889 | $ | 229,239 | |||||
Net loan servicing revenue |
| | 71,052 | 71,052 | |||||||||
Loan acquisition and origination fees |
69,938 | 1,845 | | 71,783 | |||||||||
Other income |
14,517 | | 23,029 | 37,546 | |||||||||
Net interest income (expense) |
|||||||||||||
Interest income |
60,275 | 2,086 | 7,729 | 70,090 | |||||||||
Interest expense |
(49,078 | ) | (1,669 | ) | (10,253 | ) | (61,000 | ) | |||||
| | | | | | | | | | | | | |
Net interest income (expense) |
11,197 | 417 | (2,524 | ) | 9,090 | ||||||||
| | | | | | | | | | | | | |
Total net revenues |
260,481 | 57,783 | 100,446 | 418,711 | |||||||||
Expenses |
143,496 | 30,230 | 70,459 | 244,185 | |||||||||
| | | | | | | | | | | | | |
Net income |
$ | 116,985 | $ | 27,553 | $ | 29,987 | $ | 174,525 | |||||
| | | | | | | | | | | | | |
Segment assets at year end |
$ | 2,361,298 | $ | 146,562 | $ | 1,703,373 | $ | 4,211,233 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
F-59
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 14. SEGMENT INFORMATION (Continued)
|
Year ended December 31, 2018 | ||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
|
Correspondent | Consumer Direct |
Servicing | Total | |||||||||
|
(Amounts in thousands) |
||||||||||||
Revenues |
|||||||||||||
Net gains on loans held for sale |
$ | 56,471 | $ | 19,550 | $ | 6,355 | $ | 82,376 | |||||
Net loan servicing revenue |
| | 129,453 | 129,453 | |||||||||
Loan acquisition and origination fees |
57,857 | 2,302 | | 60,159 | |||||||||
Other income |
40,784 | | 13,020 | 53,804 | |||||||||
| | | | | | | | | | | | | |
Net interest income (expense) |
|||||||||||||
Interest income |
55,828 | 1,886 | 2,975 | 60,689 | |||||||||
Interest expense |
(48,021 | ) | (1,482 | ) | (11,531 | ) | (61,034 | ) | |||||
| | | | | | | | | | | | | |
Net interest income (expense) |
7,807 | 404 | (8,556 | ) | (345 | ) | |||||||
| | | | | | | | | | | | | |
Total net revenues |
162,919 | 22,256 | 140,272 | 325,447 | |||||||||
Expenses |
128,784 | 26,649 | 65,044 | 220,477 | |||||||||
| | | | | | | | | | | | | |
Net income |
$ | 34,135 | $ | (4,393 | ) | $ | 75,228 | $ | 104,970 | ||||
| | | | | | | | | | | | | |
Segment assets at year end |
$ | 1,718,680 | $ | 49,370 | $ | 1,101,041 | $ | 2,869,091 | |||||
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
NOTE 15. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases office space at multiple locations under noncancelable agreements through August 2026. The Company recognized rent expense of $3.0 million and $2.6 million for the years ended December 31, 2019 and 2018, respectively. Rent expense is included in Occupancy expense in the consolidated statement of income.
Future minimum rental payments under the lease agreements in the aggregate and for the following five years are as follows:
Twelve months ending December 31,
|
Future minimum lease payments |
|||
---|---|---|---|---|
|
(Amounts in thousands) |
|||
2020 |
$ | 3,853 | ||
2021 |
4,526 | |||
2022 |
4,646 | |||
2023 |
3,941 | |||
2024 |
2,635 | |||
Thereafter |
4,940 | |||
| | | | |
|
$ | 24,541 | ||
| | | | |
| | | | |
| | | | |
F-60
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 15. COMMITMENTS AND CONTINGENCIES (Continued)
Litigation
In the ordinary course of business, the Company may be subject to litigation. Management does not believe that any potential, threatened, or pending litigation to which it is a party will have a material adverse effect on the Company's liquidity, financial condition, or results of operations.
Risks and Uncertainties
In the normal course of business, companies in the mortgage banking industry encounter certain economic, and regulatory risks. Economic risks include interest rate risk, credit risk and market risk.
The Company is subject to interest rate risk in ways that cannot be predicted with certainty but which would generally include liquidity drain due to cash losses in MSR hedge positions, reduced gain on sale margins and decreased production volume in a rising interest rate environment, and reduced MSR valuation and yield in a falling rate environment.
Credit risk is the risk of default, primarily in the Company's MSR portfolio that results from borrowers' inability or unwillingness to make contractually required payments. The Company absorbs a portion of these credit losses (along with the investors, if any, in such loans) and, in addition, experiences a drain on liquidity associated with the requirement to advance to investors the delinquent payments on certain mortgages.
Market risk reflects changes in the liquidity of the secondary loan and MSR markets, which impact the value of MSRs and loans that are either held for sale or are subject to commitments to purchase.
Compliance and regulatory risks include administrative enforcement actions and/or civil or criminal liability resulting from the Company's failure to comply with the laws and regulations applicable to the Company's business.
The mortgage industry is generally exposed to risks arising out of uncertainty in the regulatory environment, interest rates, collateral valuations, and conditions in the economy and housing market. A deterioration of the mortgage markets may reduce the Company's loan production volume, gain on sale margins, and servicing profitability, or may adversely affect the Company's ability to sell MSRs or loans originated or acquired. In addition, a deterioration of the mortgage markets will adversely impact the financial stability of certain third-party originators with whom the Company does business. This will reduce the Company's ability to enforce representation and warranty claims it has against such originators so that the Company itself must absorb the losses associated with those claims.
NOTE 16. CONCENTRATIONS
The Company maintains all of its cash with major financial institutions. At times, cash balances may be in excess of the amounts insured by the Federal Deposit Insurance Corporation.
Substantially all of the Company's revenue is derived from mortgage banking activities. Mortgage banking activities are cyclical and are affected by the cost and availability of long-term funds. Mortgage banking activities and the Company's revenue can be adversely affected during periods of high interest rates and/or limited money supply. The reduction of mortgage banking activities and fees generated from such activities could have a material adverse effect on the financial condition and results of operations of the Company.
F-61
Aris Mortgage Holding Company, LLC
Notes to Consolidated Financial Statements (Continued)
NOTE 16. CONCENTRATIONS (Continued)
The Company acquires residential mortgage loans and generates revenues from the sale of these loans. Although management closely monitors market conditions, such activity is sensitive to fluctuations in prevailing interest rates and the real estate markets. Downturns in economic conditions of the real estate markets served by the Company or significant increases in interest rates could have a material adverse impact on the Company's financial condition and results of operations.
The Company is licensed to originate loans in 46 states and the District of Columbia, and able to purchase and service loans in 49 states and the District of Columbia. During the year ended December 31, 2019, the Company had significant loan acquisitions (minimum 5% of total acquisitions) in Texas (16%), California (11%), Florida (8%), and Georgia (5%). During the year ended December 31, 2018, the Company had significant loan acquisitions (minimum 5% of total acquisitions) in California (15%), Texas (10%), Florida (10%), and Georgia (6%).
NOTE 17. CAPITAL REQUIREMENTS
The Company is required to maintain specified levels of capital to remain in good standing with the Agencies. These capital requirements generally are tied to the UPB of loans included in the Company's servicing portfolio or loan production volume during the period.
The Agencies' capital requirements are summarized below:
|
December 31, 2019 | December 31, 2018 | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Agency
|
Adjusted net worth(1) |
Required net worth |
Adjusted net worth(1) |
Required net worth |
|||||||||
|
(Amounts in thousands) |
||||||||||||
Fannie Mae and Freddie Mac |
$ | 889,679 | $ | 191,913 | $ | 785,612 | $ | 163,783 | |||||
Ginnie Mae |
$ | 889,679 | $ | 141,976 | $ | 785,612 | $ | 111,644 | |||||
HUD |
$ | 889,679 | $ | 2,500 | $ | 785,612 | $ | 2,500 |
Noncompliance with an Agency's capital requirements can result in the respective Agency taking various remedial actions up to, and including, removing the Company's ability to sell loans to and service loans on behalf of the respective Agency. The Company had capital in excess of the Agencies' requirements at December 31, 2019 and 2018.
NOTE 18. SUBSEQUENT EVENTS
The Company has evaluated all events and transactions through March 16, 2020, which is the date the Company issued the consolidated financial statements, and noted the following:
F-62
Report of Independent Registered Public Accounting Firm
The Board of Directors of AmeriHome, Inc.
We have audited the accompanying balance sheet of AmeriHome, Inc. as of September 30, 2020. This balance sheet is the responsibility of the Company's management. Our responsibility is to express an opinion on this balance sheet based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the balance sheet is free of material misstatement. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the balance sheet, assessing the accounting principles used and significant estimates made by management, and evaluating the overall presentation of the balance sheet. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all material respects, the financial position of AmeriHome, Inc. at September 30, 2020, in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
We have served as the Company's auditor since 2020.
Los
Angeles, California
October 1, 2020
F-63
|
September 30, 2020 | |||
---|---|---|---|---|
Assets |
||||
Cash |
$ | 10 | ||
Total assets |
$ | 10 | ||
| | | | |
| | | | |
| | | | |
Commitments and contingencies (Note 4) |
||||
Stockholder's equity |
||||
Common stock, par value $0.01 per share, 1,000 shares authorized, issued and outstanding |
$ | 10 | ||
| | | | |
Total stockholder's equity |
$ | 10 | ||
| | | | |
| | | | |
| | | | |
The accompanying notes are an integral part of the balance sheet.
F-64
AmeriHome, Inc.
Notes to Balance Sheet
NOTE 1. ORGANIZATION
AmeriHome, Inc. (the "Company") was incorporated under the laws of Delaware on August 6, 2020. Pursuant to a reorganization into a holding company structure, the Company will be (i) a holding company, with its principal asset consisting of limited liability company interests of Aris Mortgage Holding Company, LLC ("Aris Holding") and (ii) the sole managing member of Aris Holding and will control the business and affairs of Aris Holding and its subsidiaries.
Aris Holding is a wholly-owned subsidiary of A-A Mortgage Opportunities, L.P. ("A-A Mortgage").
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The balance sheet has been prepared in accordance with accounting principles generally accepted in the United States, as codified in the Financial Accounting Standards Board Accounting Standards Codification. Statements of income, changes in stockholder's equity and cash flows have not been presented as the Company has not engaged in any business or other activities except in connection with its formation. The initial costs to incorporate the Company have been incurred by A-A Mortgage.
Cash
Cash consists of cash balances at depository institutions. Cash is carried at fair value, which approximates carrying value.
Income Taxes
The Company is treated as a subchapter C corporation and, therefore, is subject to both federal and state income taxes. Aris Holding continues to be recognized as a limited liability company, a pass-through entity for income tax purposes.
NOTE 3. STOCKHOLDER'S EQUITY
On August 6, 2020, the Company was authorized to issue 1,000 shares of common stock, par value of $0.01 per share. On September 30, 2020, the Company issued 1,000 shares of $10.00, all of which are owned by A-A Mortgage.
NOTE 4. COMMITMENTS AND CONTINGENCIES
In the ordinary course of business, the Company may be subject to various legal, regulatory and/or administrative proceedings. There are currently no such proceedings to which the Company is a party.
In the normal course of business, the Company may enter into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements cannot be determined as these indemnities relate to future claims that may be made against the Company, but which have not yet occurred. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
NOTE 5. SUBSEQUENT EVENTS
The Company has evaluated all events and transactions through the date the audited balance sheet was issued, and determined that no subsequent events have occurred during such period that would require disclosure in this report or would be required to be recognized on the balance sheet as of September 30, 2020.
F-65
Shares
AmeriHome, Inc.
Class A Common Stock
Prospectus
Joint Book-Running Managers
Credit Suisse
Goldman Sachs & Co. LLC
J.P. Morgan
Wells Fargo Securities
Barclays
BofA Securities
Citigroup
RBC Capital Markets
UBS Investment Bank
Co-Managers
Apollo Global Securities
Houlihan Lokey
Siebert William Shanks
Through and including , 2020 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table itemizes the expenses incurred by us in connection with the issuance and registration of the securities being registered hereunder (excluding the underwriters' discount and commission). All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the NYSE listing fee.
|
Amount to be paid |
|||
---|---|---|---|---|
SEC registration fee |
$ | 10,910 | ||
FINRA filing fee |
15,500 | |||
NYSE listing fee |
* | |||
Legal fees and expenses |
* | |||
Accounting fees and expenses |
* | |||
Printing and engraving expenses |
* | |||
Transfer agent and registrar fees |
* | |||
Miscellaneous fees and expenses |
* | |||
| | | | |
Total |
$ | * | ||
| | | | |
| | | | |
| | | | |
We will bear all of the expenses shown above.
Item 14. Indemnification of Directors and Officers.
Section 102 of the Delaware General Corporation Law permits a corporation to eliminate the personal liability of its directors for monetary damages for a breach of fiduciary duty as a director, except where the director breached his or her duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Upon completion of this offering, our certificate of incorporation will provide that none of our directors shall be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the Delaware General Corporation Law prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.
Section 145 of the Delaware General Corporation Law provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation and certain other persons serving at the request of the corporation in related capacities against expenses (including attorneys' fees), judgments, fines and amounts paid in settlements actually and reasonably incurred by the person in connection with an action, suit or proceeding to which he or she is or is threatened to be made a party by reason of such position, if such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation, no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
II-1
Upon the completion of this offering, our certificate of incorporation will provide that we will indemnify each person who was or is a party or is threatened to be made a party or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of us) by reason of the fact that he or she is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (all such persons being referred to as an "Indemnitee"), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our certificate of incorporation also provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, our director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys' fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses. Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys' fees) actually and reasonably incurred by him or her or on his or her behalf in connection therewith. If we do not assume the defense, expenses must be advanced to an Indemnitee under certain circumstances.
We plan to enter into indemnification agreements with each of our executive officers and directors. In general, these agreements provide that we will indemnify the director or executive officer to the fullest extent permitted by law for claims arising in his or her capacity as a director or executive officer of our company or in connection with their service at our request for another corporation or entity. The indemnification agreements also provide for procedures that will apply in the event that a director or executive officer makes a claim for indemnification and establish certain presumptions that are favorable to the director or executive officer.
We maintain a general liability insurance policy that covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers.
The underwriting agreement we will enter into in connection with the offering of common stock being registered hereby provides that the underwriters will indemnify, under certain conditions, our directors and officers (as well as certain other persons) against certain liabilities arising in connection with such offering.
Insofar as the forgoing provisions permit indemnification of directors, executive officers, or persons controlling us for liability arising under the Securities Act, we have been informed that, in the opinion of the Securities and Exchange Commission, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
II-2
Item 15. Recent Sales of Unregistered Securities.
On August 6, 2020, AmeriHome, Inc. issued 1,000 shares of common stock, par value $0.01 per share to A-A Mortgage in exchange for $10, which shares will be cancelled upon the filing of our amended and restated certificate of incorporation and the consummation of the Transactions. The issuance was exempt from registration under Section 4(a)(2) of the Securities Act, as a transaction by an issuer not involving any public offering.
On , 2020, AmeriHome Mortage Company, LLC and AmeriHome Finance Corp., wholly-owned direct or indirect subsidiaries of Aris Holding, co-issued $ million in aggregate principal amount of senior notes due 2028 to certain institutional accredited investors. No underwriter was involved in the transaction. The issuance was exempt from registration under Section 4(a)(2) of the Securities Act, as a transaction by an issuer not involving any public offering.
Item 16. Financial Statements and Exhibits.
(A) Financial Statements. See Index to Financial Statements.
(B) Exhibits.
Exhibit Number |
Description of Exhibit | ||
---|---|---|---|
1.1 | * | Form of Underwriting Agreement relating to the Class A common stock | |
3.1 |
# |
Certificate of Incorporation of AmeriHome, Inc. |
|
3.2 |
* |
Form of Amended and Restated Certificate of Incorporation of AmeriHome, Inc. |
|
3.3 |
# |
Bylaws of AmeriHome, Inc. |
|
3.4 |
* |
Form of Amended and Restated Bylaws of AmeriHome, Inc. |
|
4.1 |
Certain instruments defining the rights of holders of long-term debt securities of the registrant and its subsidiaries are omitted pursuant to Item 601(b)(4)(iii) of Regulation S-K. The registrant hereby undertakes to furnish to the SEC, upon request, copies of any such instruments. |
||
5.1 |
* |
Opinion of Sidley Austin LLP regarding the validity of the shares of Class A common stock |
|
10.1 |
Form of Second Amended and Restated Limited Liability Company Agreement of Aris Mortgage Holding Company, LLC |
||
10.2 |
# |
Form of Exchange Agreement |
|
10.3 |
Form of Tax Receivable Agreement |
||
10.4 |
# |
Form of Registration Rights Agreement |
|
10.5 |
# |
Form of Stockholders Agreement |
|
10.6 |
* |
Form of Indemnification Agreement |
|
10.7 |
* |
2020 Equity Incentive Plan, to be effective upon completion of this offering |
|
10.8 |
+ |
Credit and Security Agreement, dated August 26, 2016, between AmeriHome Mortgage Company, LLC as borrower and NexBank SSB as lender. |
|
10.9 |
+ |
First Amendment to Credit and Security Agreement, dated June 8, 2017, between AmeriHome Mortgage Company, LLC as borrower and NexBank SSB as lender. |
|
10.10 |
+ |
Second Amendment to Credit and Security Agreement, dated February 23, 2018, between AmeriHome Mortgage Company, LLC as borrower and NexBank SSB as lender. |
II-3
II-4
II-5
Exhibit Number |
Description of Exhibit | ||
---|---|---|---|
10.46 | + | Amendment No. 1 to Master Repurchase Agreement, dated May 10, 2019, between Wells Fargo bank, N.A., as buyer and AmeriHome Mortgage Company, LLC, as seller. | |
10.47 |
+ |
Loan Agreement, dated March 6, 2020, by and between Western Alliance Bank and AmeriHome Mortgage Company, LLC. |
|
21.1 |
# |
Subsidiaries of the registrant |
|
23.1 |
* |
Consent of Sidley Austin LLP (included in the opinion filed as Exhibit 5.1 hereto) |
|
23.2 |
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm |
||
23.3 |
* |
Consent to be Named as a Director Nominee ( ) |
|
23.4 |
* |
Consent to be Named as a Director Nominee ( ) |
|
23.5 |
* |
Consent to be Named as a Director Nominee ( ) |
|
23.6 |
* |
Consent to be Named as a Director Nominee ( ) |
|
23.7 |
* |
Consent to be Named as a Director Nominee ( ) |
|
23.8 |
* |
Consent to be Named as a Director Nominee ( ) |
|
23.9 |
* |
Consent to be Named as a Director Nominee ( ) |
|
23.10 |
* |
Consent to be Named as a Director Nominee ( ) |
|
23.11 |
* |
Consent to be Named as a Director Nominee ( ) |
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
II-6
The undersigned registrant hereby further undertakes that:
II-7
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized in the City of Thousand Oaks, State of California, on this 16th day of October, 2020.
AmeriHome, Inc. | ||||||
BY: |
/s/ GARRETT GALATI |
|||||
NAME: | Garrett Galati | |||||
TITLE: | Chief Financial Officer |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE
|
TITLE
|
DATE
|
||
---|---|---|---|---|
/s/ JAMES S. FURASH James S. Furash |
Chief Executive Officer and Director (principal executive officer) | October 16, 2020 | ||
/s/ GARRETT GALATI Garrett Galati |
Chief Financial Officer (principal financial and accounting officer) |
October 16, 2020 |
II-8
SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
of
ARIS MORTGAGE HOLDING COMPANY, LLC
dated as of [], 2020
TABLE OF CONTENTS
|
Page |
|
|
Article I |
|
|
|
GENERAL DEFINITIONS |
|
|
|
1.1 Definitions |
2 |
1.2 Interpretation |
11 |
|
|
Article II |
|
|
|
ORGANIZATION |
|
|
|
2.1 Formation |
11 |
2.2 Name |
11 |
2.3 Purposes |
12 |
2.4 Duration |
12 |
2.5 Registered Office and Registered Agent; Principal Office |
12 |
2.6 No State-Law Partnership |
12 |
|
|
Article III |
|
|
|
MEMBERS |
|
|
|
3.1 Members |
12 |
3.2 Units |
13 |
3.3 Recapitalization; IPO Common Unit Contributions; IPO Unit Purchases |
13 |
3.4 Authorization and Issuance of Additional Units |
14 |
3.5 Repurchase or Redemption of shares of Class A Common Stock |
15 |
3.6 Certificates Representing Units; Lost, Stolen or Destroyed Certificates; Registration and Transfer of Units |
16 |
3.7 Negative Capital Accounts |
17 |
3.8 No Withdrawal |
17 |
3.9 Loans From Members |
17 |
3.10 Corporate Stock Option Plans and Equity Plans |
17 |
3.11 Dividend Reinvestment Plan, Cash Option Purchase Plan, Stock Incentive Plan or Other Plan |
19 |
TABLE OF CONTENTS
(continued)
|
Page |
|
|
Article IV |
|
|
|
DISTRIBUTIONS |
|
|
|
4.1 Distributions |
19 |
|
|
Article V |
|
|
|
CAPITAL ACCOUNTS; ALLOCATIONS; TAX MATTERS |
|
|
|
5.1 Capital Accounts |
21 |
5.2 Allocations |
22 |
5.3 Regulatory Allocations |
22 |
5.4 Final Allocations |
24 |
5.5 Tax Allocations |
24 |
5.6 Indemnification and Reimbursement for Payments on Behalf of a Member |
25 |
|
|
Article VI |
|
|
|
MANAGEMENT |
|
|
|
6.1 Authority of Manager; Officer Delegation |
26 |
6.2 Actions of the Manager |
26 |
6.3 Resignation; No Removal |
26 |
6.4 Vacancies |
27 |
6.5 Transactions Between the Company and the Manager |
27 |
6.6 Reimbursement for Expenses |
27 |
6.7 Delegation of Authority |
27 |
6.8 Limitation of Liability of Manager |
28 |
6.9 Investment Company Act |
29 |
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Article VII |
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RIGHTS, POWERS AND OBLIGATIONS OF MEMBERS |
|
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7.1 Limitation of Liability and Duties of Members |
29 |
7.2 Lack of Authority |
30 |
TABLE OF CONTENTS
(continued)
|
Page |
7.3 No Right of Partition |
30 |
7.4 Indemnification |
30 |
7.5 Inspection Rights |
31 |
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Article VIII |
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BOOKS, RECORDS, ACCOUNTING AND REPORTS, AFFIRMATIVE COVENANTS |
|
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8.1 Records and Accounting |
32 |
8.2 Fiscal Year |
32 |
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Article IX |
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TAX MATTERS |
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|
|
9.1 Preparation of Tax Returns |
32 |
9.2 Tax Elections |
33 |
9.3 Tax Controversies |
33 |
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Article X |
|
|
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RESTRICTIONS ON TRANSFER OF UNITS; CERTAIN TRANSACTIONS |
|
|
|
10.1 Transfers by Members |
34 |
10.2 Permitted Transfers |
34 |
10.3 Restricted Units Legend |
35 |
10.4 Transfer |
35 |
10.5 Assignees Rights |
36 |
10.6 Assignors Rights and Obligations |
36 |
10.7 Overriding Provisions |
36 |
10.8 Spousal Consent |
37 |
10.9 [Drag-Along Rights |
38 |
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Article XI |
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ADMISSION OF MEMBERS |
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11.1 Substituted Members |
39 |
TABLE OF CONTENTS
(continued)
|
Page |
11.2 Additional Members |
39 |
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Article XII |
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WITHDRAWAL AND RESIGNATION; TERMINATION OF RIGHTS |
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12.1 Withdrawal and Resignation of Members |
39 |
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Article XIII |
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DISSOLUTION AND LIQUIDATION |
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13.1 Dissolution |
40 |
13.2 Winding Up |
40 |
13.3 Deferment; Distribution in Kind |
41 |
13.4 Cancellation of Certificate |
41 |
13.5 Reasonable Time for Winding Up |
41 |
13.6 Return of Capital |
42 |
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Article XIV |
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MISCELLANEOUS PROVISIONS |
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|
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14.1 Power of Attorney |
42 |
14.2 Confidentiality |
42 |
14.3 Amendments |
43 |
14.4 Title to Company Assets |
44 |
14.5 Addresses and Notices |
44 |
14.6 Binding Effect; Intended Beneficiaries |
45 |
14.7 Creditors |
45 |
14.8 Waiver |
45 |
14.9 Counterparts |
46 |
14.10 Applicable Law |
46 |
14.11 Severability |
46 |
14.12 Further Action |
46 |
14.13 Execution and Delivery by Electronic Signature and Electronic Transmission |
46 |
TABLE OF CONTENTS
(continued)
14.14 Right of Offset |
47 |
14.15 Entire Agreement |
47 |
14.16 Remedies |
47 |
14.17 Descriptive Headings; Interpretation |
47 |
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Schedule I Pre-IPO Members |
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Schedule II Schedule of Members |
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Exhibit A Form of Joinder |
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Exhibit B-1 Form of Agreement and Consent of Spouse |
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Exhibit B-2 Form of Spouses Confirmation of Separate Property |
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SECOND AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
of Aris Mortgage Holding Company, LLC
a Delaware Limited Liability Company
THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this Agreement) is made and entered into as of [], 2020 (the Effective Date), by and among Aris Mortgage Holding Company, LLC, a Delaware limited liability company (the Company) and any Person who is currently a member of the Company and any other Person who shall hereafter execute this Agreement as a Member of the Company (any such current members and any such other Person being herein referred to individually as a Member and collectively as the Members).
PRELIMINARY STATEMENTS
WHEREAS, the Company has heretofore filed a Certificate of Formation with the Secretary of State of the State of Delaware to organize the Company under and pursuant to the Delaware Limited Liability Company Act;
WHEREAS, A-A Mortgage Opportunities, L.P., a Delaware limited partnership (A-A Mortgage), entered into that certain Limited Liability Company Agreement of the Company, dated as of September 18, 2013 (the Original Agreement), as the sole member of the Company, which was amended and restated in its entirety by the Amended and Restated Limited Liability Company Agreement of the Company, dated as of March 6, 2014 (as amended from time to time, the First A&R LLC Agreement), which A-A Mortgage and the other parties listed on Schedule I hereto executed in their capacity as members (including pursuant to consents and joinders thereto) (such members other than A-A Mortgage listed on Schedule I, the Pre-IPO Profits Units Holders, and together with A-A Mortgage, the Pre-IPO Members); and
WHEREAS, prior to the date hereof, A-A Mortgage holds Original Common Units (as defined herein) and the Pre-IPO Profits Units Holders each hold Original Profits Units (as defined herein);
WHEREAS, the Pre-IPO Members desire to have AmeriHome, Inc., a Delaware corporation (PubCo), effect an initial public offering (the IPO) of shares of its Class A common stock, par value $0.01, (the Class A Common Stock);
WHEREAS, in connection with the IPO, the Pre-IPO Members desire to convert all of the Original Units into Common Units (the Recapitalization);
WHEREAS, following the Recapitalization, A-A Mortgage will contribute $100,000 to PubCo in exchange for a certain number of shares of Class B Common Stock and, in connection therewith, A-A Mortgage will appoint PubCo as the Manager of the Company;
WHEREAS, following the Recapitalization, the Pre-IPO Profits Units Holders shall contribute all of the Common Units received in connection with the recapitalization of the
Original Profits Units to PubCo in exchange for an equal number of shares of Class A Common Stock;
WHEREAS, PubCo may issue additional shares of Class A Common Stock in connection with the IPO as a result of the exercise by the underwriters of their over-allotment option (the Over-Allotment Option) and, if the Over-Allotment Option is exercised in whole or in part, A-A Mortgage shall distribute to the Selling Members an additional number of Common Units equal to the number of shares purchased by the underwriters from PubCo in connection with such exercise and any additional net proceeds (the Over-Allotment Option Net Proceeds) shall be used by the PubCo to purchase additional Common Units from the Selling Members; and
WHEREAS, in connection with the foregoing, the Pre-IPO Members desire to continue the Company without dissolution and amend and restate the First A&R LLC Agreement in its entirety as of the Effective Date to reflect, among other thing, (i) the Recapitalization and such other reorganizational transactions in connection with the IPO, (ii) the addition of PubCo as a Member and its designation as the sole Manager of the Company and (iii) the other rights and obligations of the Members, the Company, the Manager and PubCo, in each case, as provided and agreed upon in the terms of this Agreement as of the Effective Date, at which time the First A&R LLC Agreement shall be superseded entirely by this Agreement and shall be of no further force or effect.
NOW, THEREFORE, in consideration of the mutual promises and agreements made herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
GENERAL DEFINITIONS
1.1 Definitions. As used in this Agreement, the following terms shall each have the meanings set forth in this Article I, (unless the context otherwise requires).
A-A Mortgage has the meaning specified in the Preliminary Statements.
Act means the Delaware Limited Liability Company Act, as it may be amended from time to time, and any successor to such Act.
Additional Member has the meaning specified in Section 11.2.
Adjusted Capital Account Deficit means, with respect to the Capital Account of any Member as of the end of any Taxable Year, the amount by which the balance in such Capital Account is less than zero. For this purpose, such Members Capital Account balance shall be:
(a) reduced for any items described in Treasury Regulation Section 1.704- 1(b)(2)(ii)(d)(4), (5), and (6); and
(b) increased for any amount such Member is obligated to contribute or is treated as being obligated to contribute to the Company pursuant to Treasury Regulation Section 1.704-1(b)(2)(ii)(c) (relating to partner liabilities to a partnership) or 1.704-2(g)(1) and 1.704-2(i) (relating to minimum gain).
Admission Date has the meaning specified in Section 10.6.
Affiliate (and, with a correlative meaning, Affiliated) means, when used with reference to a specific Person (or when not referring to a specific Person shall mean an Affiliate of a Member), any Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is under common control with such specific Person. Athene Holding Ltd. and its subsidiaries shall be deemed Affiliates of the Company and A-A Mortgage Opportunities, L.P.
Agreement has the meaning specified in the Preamble.
Approved Qualified Transaction has the meaning specified in Section 10.9(a).
Assignee means a Person to whom a Unit has been transferred but who has not become a Member pursuant to Article XI.
Assumed Tax Liability means, with respect to any Member, an amount equal to the excess of (i) the product of (A) the Distribution Tax Rate multiplied by (B) the estimated or actual cumulative taxable income or gain of the Company, as determined for federal income tax purposes, allocated to such Member for full or partial Fiscal Years commencing on or after the closing date of the IPO, less prior losses of the Company allocated to such Member for full or partial Fiscal Years commencing on or after the closing date of the IPO, in each case, as determined by the Manager and to the extent such prior losses are available to reduce such income over (ii) the sum of the cumulative Tax Distributions made to such Member after the closing date of the IPO pursuant to Sections 4.1(b)(i), 4.1(b)(ii) and 4.1(b)(iii); provided that, in the case of PubCo, such Assumed Tax Liability (x) shall be computed without regard to any increases to the tax basis of the Companys property pursuant to Sections 734(b) or 743(b) of the Code and (y) to the extent permitted under the Credit Agreements, shall in no event be less than an amount that will enable the PubCo to meet both its tax obligations and its obligations pursuant to the Tax Receivable Agreement for the relevant Taxable Year; provided further that, in the case of each Member, and for the avoidance of doubt, such Assumed Tax Liability shall take into account any allocations under Section 704(c) of the Code (including reverse 704(c) allocations) to the Member.
Base Rate means, on any date, a variable rate per annum equal to the rate of interest most recently published by The Wall Street Journal as the prime rate at large U.S. money center banks.
Book Value means, with respect to any property of the Company, the Companys adjusted basis for U.S. federal income tax purposes, adjusted from time to time to reflect the adjustments required or permitted by Treasury Regulation Section 1.704-1(b)(2)(iv)(d)-(g).
Capital Account means the Capital Account maintained for each Member pursuant to Section 5.1 of this Agreement.
Capital Contribution means, with respect to any Member, the amount of any cash, cash equivalents, promissory obligations or the Fair Market Value of other property that such Member (or such Members predecessor) contributes (or is deemed to contribute) to the Company pursuant to Article III hereof.
Cash Exchange Payment has the meaning specified in the Exchange Agreement.
Certificate of Formation means the Certificate of Formation of the Company described in Section 2.1.
Class A Common Stock has the meaning specified in the Preliminary Statements.
Class B Common Stock means the Class B common stock, par value $0.01 per share, of PubCo.
Code means the Internal Revenue Code of 1986, as amended from time to time.
Common Unit means a Unit designated as a Common Unit and having the rights and obligations specified with respect to the Common Units in this Agreement.
Common Unitholder means a Member who is the registered holder of Common Units.
Company has the meaning specified in the Preamble.
Confidential Information has the meaning set forth in Section 14.2(a).
Credit Agreements means any promissory note, mortgage, loan agreement, indenture or similar instrument or agreement to which the Company or any of its Subsidiaries is or becomes a borrower, as such instruments or agreements may be amended, restated, supplemented or otherwise modified from time to time and including any one or more refinancing or replacements thereof, in whole or in part, with any other debt facility or debt.
Discount has the meaning set forth in Section 6.6.
Distributable Cash means, as of any relevant date on which a determination is being made by the Manager regarding a potential distribution pursuant to Section 4.1(a), the amount of cash that could be distributed by the Company for such purposes in accordance with the Credit Agreements (and without otherwise violating any applicable provisions of any of the Credit Agreements).
Distribution means each distribution made by the Company to a Member with respect to such Members Units, whether in cash, property or securities of the Company and
whether by liquidating distribution or otherwise; provided, however, that none of the following shall be a Distribution: (a) any recapitalization that does not result in the distribution of cash or property to Members or any exchange of securities of the Company, and any subdivision (by Unit split or otherwise) or any combination (by reverse Unit split or otherwise) of any outstanding Units or (b) any other payment made by the Company to a Member that is not properly treated as a distribution for purposes of Sections 731, 732, or 733 or other applicable provisions of the Code.
Distribution Tax Rate means a rate equal to the highest effective marginal combined federal, state and local income tax rate applicable to individual taxpayers residing in New York City, taking into account the character of the relevant tax items (e.g., ordinary or capital) and the deductibility of state and local income taxes for federal income tax purposes (but only to the extent such taxes are deductible under the Code), as reasonably determined by the Manager.
Drag-Along Amount has the meaning set forth in Section 10.9(b).
Drag-Along Notice has the meaning set forth in Section 10.9(b).
Drag-Along Right has the meaning set forth in Section 10.9(a).
Drag Price has the meaning set forth in Section 10.9(a).
Effective Date has the meaning specified in the Preamble.
Equity Plan means any stock or equity purchase plan, restricted stock or equity plan or other similar equity compensation plan now or hereafter adopted by the Company or PubCo.
Equity Securities means (a) Units or other equity interests in the Company or any Subsidiary of the Company (including other classes or groups thereof having such relative rights, powers and duties as may from time to time be established by the Manager pursuant to the provisions of this Agreement, including rights, powers and/or duties senior to existing classes and groups of Units and other equity interests in the Company or any Subsidiary of the Company), (b) obligations, evidences of indebtedness or other securities or interests convertible or exchangeable into Units or other equity interests in the Company or any Subsidiary of the Company, and (c) warrants, options or other rights to purchase or otherwise acquire Units or other equity interests in the Company or any Subsidiary of the Company.
Event of Withdrawal means the bankruptcy or dissolution of a Member or the occurrence of any other event that terminates the continued membership of a Member in the Company. Event of Withdrawal shall not include an event that (a) terminates the existence of a Member for income tax purposes (including, without limitation, (i) a change in entity classification of a Member under Treasury Regulation Section 301.7701-3, (ii) a sale of assets by, or liquidation of, a Member pursuant to an election under Code Sections 336 or 338, or (iii) merger, severance, or allocation within a trust or among sub-trusts of a trust that is a Member) but that (b) does not terminate the existence of such Member under applicable state law (or, in
the case of a trust that is a Member, does not terminate the trusteeship of the fiduciaries under such trust with respect to all the Units of such trust that is a Member).
Exchange Agreement means the Exchange Agreement dated on or about the date hereof, by and among the Company, PubCo and the other parties thereto.
Exchanging Holder has the meaning specified in the Exchange Agreement.
Fair Market Value of a specific asset of the Company will mean the amount which the Company would receive in an all-cash sale of such asset in an arms-length transaction with a willing unaffiliated third party, with neither party having any compulsion to buy or sell, consummated on the day immediately preceding the date on which the event occurred which necessitated the determination of the Fair Market Value (and after giving effect to any transfer taxes payable in connection with such sale), as such amount is determined by the Manager (or, if pursuant to Section 13.2, the Liquidators) in its good faith judgment using all factors, information and data it deems to be pertinent.
FINRA means the Financial Industry Regulatory Authority.
First A&R LLC Agreement has the meaning specified in the Preliminary Statements.
Fiscal Period means any interim accounting period within a Taxable Year established by the Manager and which is permitted or required by Section 706 of the Code.
Fiscal Year means the Companys annual accounting period established pursuant to Section 8.2.
Governmental Entity means any Federal, state, county, city, local or foreign governmental, administrative or regulatory authority, commission, committee, agency or body (including any court, tribunal or arbitral body and any self-regulating authority such as FINRA).
Indemnified Person has the meaning specified in Section 7.4(a).
IPO has the meaning specified in the Preliminary Statements.
IPO Common Unit Contributions has the meaning specified in Section 3.3(b).
IPO Common Unit Purchases has the meaning specified in Section 3.3(c).
IPO Unit Purchase Agreements means those certain common unit purchase agreements, dated as of the Effective Date, by and between PubCo and the Selling Members.
Investment Company Act means the U.S. Investment Company Act of 1940, as amended from time to time.
Joinder means a joinder to this Agreement, in form and substance substantially similar to Exhibit A hereto.
Law means all laws, statutes, ordinances, rules and regulations of any Governmental Entity.
Liquidator has the meaning specified in Section 13.2.
LLC Employee means an employee of, or other service provider (including, without limitation, any management member whether or not treated as an employee for the purposes of U.S. federal income tax) to, the Company or any of its Subsidiaries, in each case acting in such capacity.
Losses means items of loss or deduction of the Company determined according to Section 5.1(b).
Manager has the meaning specified in Section 6.1(a).
Market Price means, with respect to a share of Class A Common Stock as of a specified date, the last sale price per share of Class A Common Stock, regular way, or if no such sale took place on such day, the average of the closing bid and asked prices per share of Class A Common Stock, regular way, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the Stock Exchange or, if the Class A Common Stock is not listed or admitted to trading on the Stock Exchange, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which the Class A Common Stock is listed or admitted to trading or, if the Class A Common Stock is not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if the Class A Common Stock is not quoted by any such system, the average of the closing bid and asked prices as furnished by a professional market maker making a market in shares of Class A Common Stock selected by the PubCo Board or, in the event that no trading price is available for the shares of Class A Common Stock, the fair market value of a share of Class A Common Stock, as determined in good faith by the PubCo Board.
Member means, as of any date of determination, (a) each of the members named on the Schedule of Members and (b) any Person admitted to the Company as a Substituted Member or Additional Member in accordance with Article XI, but in each case only so long as such Person is shown on the Companys books and records as the owner of one or more Units, each in its capacity as a member of the Company.
Minimum Gain means partnership minimum gain determined pursuant to Treasury Regulation Section 1.704-2(d).
Net Loss means, with respect to a Fiscal Year, the excess if any, of Losses for such Fiscal Year over Profits for such Fiscal Year (excluding Profits and Losses specially allocated pursuant to Section 5.3 and Section 5.4).
Net Profit means, with respect to a Fiscal Year, the excess if any, of Profits for such Fiscal Year over Losses for such Fiscal Year (excluding Profits and Losses specially allocated pursuant to Section 5.3 and Section 5.4).
Officer has the meaning set forth in Section 6.1(b).
Optionee means a Person to whom a stock option is granted under any Stock Option Plan.
Other Agreements has the meaning specified in Section 10.4.
Original Agreement has the meaning specified in the Preliminary Statements.
Original Common Units means the Class A Units as defined in the First A&R LLC Agreement.
Original Profits Units means the Class P1 Units and Class T1 Units, each as defined in the First A&R LLC Agreement.
Original Units means the Original Common Units and the Original Profits Units, collectively.
Over-Allotment Common Unit Purchase has the meaning specified in Section 3.3(c).
Over-Allotment Option has the meaning specified in the Preliminary Statements.
Over-Allotment Option Net Proceeds has the meaning specified in the Preliminary Statements.
Partnership Representative has the meaning set forth in Section 9.3.
Percentage Interest means, as among an individual class of Units and with respect to a Member at a particular time, such Members percentage interest in the Company determined by dividing the number of such Members Units of such class by the total number of Units of all Members of such class at such time. The Percentage Interest of each Member shall be calculated to the fourth decimal place.
Permitted Transfer has the meaning specified in Section 10.2.
Permitted Transferee has the meaning specified in Section 10.2.
Person shall be construed in its broadest sense and means and includes a natural person, general partnership, limited partnership, corporation, limited liability company,
limited liability partnership, joint venture, trust, business trust, governmental agency, cooperative, association, individual or other entity, and the heirs, executors, administrations, legal representatives, successors and assigns of such person, as the context may require.
Pre-IPO Members has the meaning set forth in the Preliminary Statements.
Pre-IPO Profits Units Holders has the meaning set forth in the Preliminary Statements.
Pro rata, pro rata portion, according to their interests, ratably, proportionately, proportional, in proportion to, based on the number of Units held, based upon the percentage of Units held, based upon the number of Units outstanding, and other terms with similar meanings, when used in the context of a number of Units of the Company relative to other Units, means as amongst an individual class of Units, pro rata based upon the number of such Units within such class of Units.
Profits means items of income and gain of the Company determined according to Section 5.1(b).
PubCo has the meaning specified in the Preliminary Statements.
PubCo Board means the board of directors of PubCo.
Qualified Transaction means any merger, consolidation or other business combination of PubCo, whether effectuated through one transaction or series of related transactions (including a tender offer followed by a merger in which holders of Class A Common Stock receive the same consideration per share paid in the tender offer), unless, following such transaction, all or substantially all of the holders of the voting power of all outstanding classes of Common Stock and any series of preferred stock issued by PubCo that are generally entitled to vote in the election of directors prior to such transaction or series of transactions, continue to hold a majority of the voting power of the surviving entity (or its parent) resulting from such transaction or series of transactions in substantially the same proportions as immediately prior to such transaction or series of transactions.
Quarterly Tax Distribution has the meaning set forth in Section 4.1(b)(i).
Recapitalization has the meaning specified in the Preliminary Statements.
Registration Rights Agreement means that certain registration rights agreement, dated as of the Effective Date, by and among PubCo and the other Persons party thereto (together with any joinder thereto from time to time by any successor or assign to any party to such agreement) (as it may be amended from time to time in accordance with its terms).
Regulatory Allocations has the meaning set forth in Section 5.3(f).
Required Member has the meaning set forth in Section 10.9(a).
Revised Partnership Audit Provisions means Section 1101 of Title XI (Revenue Provisions Related to Tax Compliance) of the Bipartisan Budget Act of 2015, H.R. 1314, Public Law Number 114-74.
Schedule of Members has the meaning specified in Section 3.1(b).
Securities Act means the Securities Act of 1933, as amended.
Selling Members has the meaning specified in the Preliminary Statements.
Share Settlement has the meaning specified in the Exchange Agreement.
Stock Exchange means the New York Stock Exchange.
Stock Option Plan means any stock option plan now or hereafter adopted by the Company or by PubCo, including the [[] Plan].
Stockholders Agreement means that certain stockholders agreement, dated as of the Effective Date, by and among PubCo and the other Persons party thereto (as it may be amended from time to time in accordance with its terms).
Subsidiary means, with respect to any Person, any other Person the majority of whose equity securities or voting securities are directly or indirectly owned or controlled by such Person.
Substituted Member means a Person that is admitted as a Member to the Company pursuant to Section 11.1.
Tax Distributions has the meaning set forth in Section 4.1(b)(i).
Tax Receivable Agreement means that certain tax receivable agreement, dated as the date of the Effective Date, by and among PubCo and each other party thereto, together with any joinder thereto from time to time by any successor or assign to any party to such agreement, as it may be amended from time to time in accordance with its terms.
Taxable Year means the Companys accounting period for U.S. federal income tax purposes determined pursuant to Section 9.2.
Trading Day means a day on which the Stock Exchange or such other principal United States securities exchange on which the Class A Common Stock is listed or admitted to trading is open for the transaction of business (unless such trading shall have been suspended for the entire day).
Transfer (and, with a correlative meaning, Transferred and Transferring) means any sale, transfer, assignment, redemption, pledge, encumbrance or other disposition of (whether directly or indirectly, whether with or without consideration and whether voluntarily or involuntarily or by operation of Law) (a) any interest (legal or beneficial) in any Equity
Securities or (b) any equity or other interest (legal or beneficial) in any Member if substantially all of the assets of such Member consist solely of Units.
Treasury Regulations means the regulations promulgated by the U.S. Treasury Department pursuant to the Code.
Units means the fractional interest of a Member in Profits, Losses and Distributions of the Company, and otherwise having the rights and obligations specified with respect to Units in this Agreement; provided, however, that any class or group of Units issued shall have the relative rights, powers and duties set forth in this Agreement applicable to such class or group of Units.
Unvested Corporate Shares means shares of Class A Common Stock issuable pursuant to awards granted under the PubCo [[] Plan] that are not Vested Corporate Shares.
Value means (a) for any Stock Option Plan, the Market Price for the Trading Day immediately preceding the date of exercise of a stock option under such Stock Option Plan and (b) for any Equity Plan other than a Stock Option Plan, the Market Price for the Trading Day immediately preceding the Vesting Date.
Vested Corporate Shares means the shares of Class A Common Stock issued pursuant to awards granted under the PubCo [[] Plan] that are vested pursuant to the terms thereof or any award or similar agreement relating thereto.
Vesting Date has the meaning set forth in Section 3.10(c)(ii).
1.2 Interpretation. Each definition in this Agreement includes the singular and the plural, and reference to the neuter gender includes the masculine and feminine where appropriate. References to any statute or Treasury Regulations mean such statute or regulations as amended at the time and include any successor legislation or regulations. The headings to the Articles and Sections are for convenience of reference and shall not affect the meaning or interpretation of this Agreement. Except as otherwise stated, reference to Articles, Sections and Schedules mean the Articles, Sections and Schedules of this Agreement. The Schedules are hereby incorporated by reference into and shall be deemed a part of this Agreement.
ARTICLE II
ORGANIZATION
2.1 Formation. The Company has been organized as a Delaware limited liability company under and pursuant to the Act by the filing of a Certificate of Formation with the Office of the Secretary of State of Delaware as required by the Act. In the event of a conflict between the terms of this Agreement and the Certificate of Formation, the terms of the Certificate of Formation shall prevail.
2.2 Name. The name of the Company is Aris Mortgage Holding Company, LLC. The Manager in its sole discretion may change the name of the Company at any time and from
time to time. To the extent permitted by the Act, the Company may conduct its business under one or more assumed names deemed advisable by the Manager.
2.3 Purposes. The purposes of the Company are to engage in any activity and/or business for which limited liability companies may be formed under the Act. The Company shall possess and, subject to the limitations herein expressed, may exercise, all powers necessary, convenient or incidental to the conduct, promotion or attainment of its business, purposes or activities to the fullest extent provided by the Act.
2.4 Duration. The Company shall continue in existence until it is dissolved and its affairs wound up in accordance with the Act or this Agreement.
2.5 Registered Office and Registered Agent; Principal Office.
(a) The registered office of the Company required by the Act to be maintained in the State of Delaware shall be the initial registered office named in the Certificate of Formation or such other office (which need not be a place of business of the Company) as the Manager may designate from time to time in the manner provided by the Act.
(b) The registered agent of the Company in the State of Delaware shall be the initial registered agent named in the Certificate of Formation or such other Person or Persons as the Manager may designate in the manner provided by the Act.
(c) The principal office of the Company shall be at 1 Baxter Way, Thousand Oaks, California 91326, or at such place as the Manager may designate from time to time, which need not be in the State of Delaware, and the Company shall maintain records there for inspection as required by the Act. The Company may have such other offices as the Manager may designate from time to time.
2.6 No State-Law Partnership. No provisions of this Agreement (including, without limitation, the provisions of Article VIII) shall be deemed or construed to constitute the Company a partnership (including, without limitation, a limited partnership) or joint venture, or any Member or Manager a partner or joint venturer of or with any other Member or Manager, for any purposes other than federal and state tax purposes.
ARTICLE III
MEMBERS
3.1 Members.
(a) On the Effective Date and concurrently with the IPO Common Unit Contributions and the IPO Common Unit Purchases, PubCo shall be automatically admitted to the Company as a Member.
(b) The Company shall maintain a schedule setting forth: (i) the name and address of each Member; (ii) the aggregate number of outstanding Units and the number and class of Units held by each Member; (iii) the aggregate amount of cash Capital Contributions
that has been made by the Members with respect to their Units; and (iv) the Fair Market Value of any property other than cash contributed by the Members with respect to their Units (including, if applicable, a description and the amount of any liability assumed by the Company or to which contributed property is subject) (such schedule, the Schedule of Members). The Schedule of Members shall be the definitive record of ownership of each Unit of the Company and all relevant information with respect to each Member. The Company shall be entitled to recognize the exclusive right of a Person registered on its records as the owner of Units for all purposes and shall not be bound to recognize any equitable or other claim to or interest in Units on the part of any other Person, whether or not it shall have express or other notice thereof, except as otherwise provided by the Act.
(c) No Member shall be required or, except as approved by the Manager pursuant to Section 6.1 and in accordance with the other provisions of this Agreement, permitted to (i) loan any money or property to the Company, (ii) borrow any money or property from the Company or (iii) make any additional Capital Contributions.
3.2 Units.
(a) Interests in the Company shall be represented by Units, or such other securities of the Company, in each case as the Manager may establish in its discretion in accordance with the terms and subject to the restrictions hereof. At the Effective Date, the Units will be comprised of a single class of Common Units.
(b) Subject to Section 3.4(a), the Manager may (i) issue additional Common Units at any time in its sole discretion and (ii) create one or more classes or series of Units or preferred Units solely to the extent such new class or series of Units or preferred Units are substantially economically equivalent to a class of common or other stock of PubCo or class or series of preferred stock of PubCo, respectively; provided, that as long as there are any Members (other than PubCo and its Subsidiaries) (i) no such new class or series of Units may deprive such Members of, or dilute or reduce, the allocations and distributions they would have received, and the other rights and benefits to which they would have been entitled, in respect of their Units if such new class or series of Units had not been created and (ii) no such new class or series of Units may be issued, in each case, except to the extent (and solely to the extent) the Company actually receives cash in an aggregate amount, or other property with a Fair Market Value in an aggregate amount, equal to the aggregate distributions that would be made in respect of such new class or series of Units if the Company were liquidated immediately after the issuance of such new class or series of Units.
(c) Subject to Sections 14.3(b) and Section 14.3(c), the Manager may amend this Agreement, without the consent of any Member or any other Person, in connection with the creation and issuance of such classes or series of Units, pursuant to Sections 3.2(b), 3.4(a) or 3.10.
3.3 Recapitalization; IPO Common Unit Contributions; IPO Common Unit Purchases.
(a) In order to effect the Recapitalization, the number of Original Units that were issued and outstanding and held by the Pre-IPO Members prior to the Effective Date as set forth opposite the respective Pre-IPO Member in Schedule I are hereby converted, as of the Effective Date and after giving effect to such conversion, the IPO Common Unit Contributions and the IPO Common Unit Purchases, into the number of Common Units set forth opposite the name of the respective Member on the Schedule of Members attached hereto as Schedule II (provided, for the avoidance of doubt, that the number of Common Units set forth on Schedule II is net of any Common Units transferred or contributed pursuant to the IPO Common Unit Contributions and the IPO Common Unit Purchases as described below), and such Common Units are hereby issued and outstanding as of the Effective Date.
(b) In connection with the Recapitalization, A-A Mortgage will contribute $100,000 to PubCo in exchange for PubCos issuance to A-A Mortgage of a number of shares of Class B Common Stock equal to the number of Common Units to be held by A-A Mortgage after giving effect to the Recapitalization, the IPO Common Unit Purchases and, if applicable, the Over-Allotment Common Unit Purchase. In connection therewith, A-A Mortgage will appoint PubCo as the Manager of the Company.
(c) Immediately following the Recapitalization, each Pre-IPO Profits Units Holder shall contribute all of the Common Units received by such Pre-IPO Profits Units Holder in connection with the recapitalization of the Original Profits Units to PubCo in exchange for one share of Class A Common Stock per Common Unit so contributed (such contributions, collectively, the IPO Common Unit Contributions).
(d) Following the Recapitalization and immediately following the consummation of the IPO, A-A Mortgage shall distribute [] Common Units to the Selling Members and PubCo will purchase all of such distributed Common Units from each of the Selling Members pursuant to the IPO Unit Purchase Agreements (such purchases, collectively, the IPO Common Unit Purchases). In addition, to the extent the underwriters in the IPO exercise the Over-Allotment Option in whole or in part, upon any exercise of the Over-Allotment Option, A-A Mortgage shall distribute a number of Common Units to the Selling Members equal to the number of shares of Class A Common Stock issued by PubCo in connection with such exercise of the Over-Allotment Option and PubCo will purchase all of such Common Units from the Selling Members pursuant to the IPO Unit Purchase Agreements (the Over-Allotment Common Unit Purchase). The Over-Allotment Common Unit Purchase, if applicable, shall be reflected on the Schedule of Members.
3.4 Authorization and Issuance of Additional Units.
(a) The Company shall undertake all actions, including an issuance, reclassification, distribution, division or recapitalization, with respect to the Common Units, to maintain at all times a one-to-one ratio between the number of Common Units owned by PubCo and the number of outstanding shares of Class A Common Stock, disregarding, for purposes of maintaining the one-to-one ratio, (i) Unvested Corporate Shares, (ii) treasury stock or (iii) preferred stock or other debt or equity securities (including warrants, options or rights) issued by PubCo that are convertible into or exercisable or exchangeable for Class A Common Stock (except to the extent the net proceeds from such other securities, including any exercise or purchase price payable upon conversion, exercise or exchange thereof, has been contributed by
PubCo to the equity capital of the Company). In the event PubCo issues, transfers or delivers from treasury stock or repurchases Class A Common Stock in a transaction not contemplated in this Agreement, the Manager shall take all actions such that, after giving effect to all such issuances, transfers, deliveries or repurchases, the number of outstanding Common Units owned by PubCo will equal on a one-for-one basis the number of outstanding shares of Class A Common Stock. In the event PubCo issues, transfers or delivers from treasury stock or repurchases or redeems PubCos preferred stock in a transaction not contemplated in this Agreement, the Manager shall have the authority to take all actions such that, after giving effect to all such issuances, transfers, deliveries, repurchases or redemptions, PubCo holds (in the case of any issuance, transfer or delivery) or ceases to hold (in the case of any purchase or redemption) equity interests in the Company which (in the good faith determination by the Manager) are in the aggregate substantially equivalent to the outstanding preferred stock of PubCo so issued, transferred, delivered, repurchased or redeemed. PubCo shall, concurrently with any action taken by the Company pursuant to the requirements of this Section 3.4, contribute the net proceeds (if any) received by PubCo in respect of the events which gave rise to the Companys obligation to undertake any action pursuant to the requirements of this Section 3.4 to the equity capital of the Company. The Company shall not undertake any subdivision (by any Common Unit split, Common Unit distribution, reclassification, recapitalization or similar event) or combination (by reverse Common Unit split, reclassification, recapitalization or similar event) of the Common Units that is not accompanied by an identical subdivision or combination of Class A Common Stock to maintain at all times a one-to-one ratio between the number of Common Units owned by PubCo and the number of outstanding shares of Class A Common Stock, unless such action is necessary to maintain at all times a one-to-one ratio between the number of Common Units owned by PubCo and the number of outstanding shares of Class A Common Stock as contemplated by the first sentence of this Section 3.4(a).
(b) The Company shall only be permitted to issue additional Units or other Equity Securities in the Company to the Persons and on the terms and conditions provided for in Section 3.2, this Section 3.4, Section 3.10 and Section 3.11. Subject to the foregoing, the Manager may cause the Company to issue additional Common Units authorized under this Agreement at such times and upon such terms as the Manager shall determine and the Manager shall amend this Agreement as necessary in connection with the issuance of additional Common Units and admission of additional Members under this Section 3.4 without the requirement of any consent or acknowledgement of any other Member.
(c) At any time an Exchanging Holder exchanges Common Units for a Cash Exchange Payment from PubCo pursuant to the Exchange Agreement, the Company shall cancel such Common Units upon receipt by PubCo from such Exchanging Holder (provided, that, for the avoidance of doubt, this Section 3.4(c) shall not apply in the case of any exchanges effectuated pursuant to a Share Settlement under the Exchange Agreement).
3.5 Repurchase or Redemption of shares of Class A Common Stock. Except as otherwise determined by the Manager in connection with the use of cash or other assets held by PubCo, if at any time, any shares of Class A Common Stock are repurchased or redeemed (whether by exercise of a put or call, automatically or by means of another arrangement) by PubCo for cash, then the Manager shall cause the Company, immediately prior to such repurchase or redemption of Class A Common Stock, to redeem a corresponding number of
Common Units held (directly or indirectly) by PubCo, at an aggregate redemption price equal to the aggregate purchase or redemption price of the shares of Class A Common Stock being repurchased or redeemed by PubCo (plus any expenses related thereto) and upon such other terms as are the same for the shares of Class A Common Stock being repurchased or redeemed by PubCo; provided, if PubCo uses funds received from distributions from the Company or the net proceeds from an issuance of Class A Common Stock to fund such repurchase or redemption, then the Company shall cancel a corresponding number of Common Units held (directly or indirectly) by PubCo for no consideration. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make any repurchase or redemption if such repurchase or redemption would violate any applicable Law.
3.6 Certificates Representing Units; Lost, Stolen or Destroyed Certificates; Registration and Transfer of Units.
(a) Units shall not be certificated unless otherwise determined by the Manager. If the Manager determines that one or more Units shall be certificated, each such certificate shall be signed by or in the name of the Company, by the Chief Executive Officer, Chief Financial Officer, General Counsel, Secretary or any other officer designated by the Manager, representing the number of Units held by such holder. Such certificate shall be in such form (and shall contain such legends) as the Manager may determine. Any or all of such signatures on any certificate representing one or more Units may be a facsimile, engraved or printed, to the extent permitted by applicable Law. No Units shall be treated as a security within the meaning of Article 8 of the Uniform Commercial Code unless all Units then outstanding are certificated; notwithstanding anything to the contrary herein, including Section 14.3, the Manager is authorized to amend this Agreement in order for the Company to opt-in to the provisions of Article 8 of the Uniform Commercial Code without the consent or approval of any Member of any other Person.
(b) If Units are certificated, the Manager may direct that a new certificate representing one or more Units be issued in place of any certificate theretofore issued by the Company alleged to have been lost, stolen or destroyed, upon delivery to the Manager of an affidavit of the owner or owners of such certificate, setting forth such allegation. The Manager may require the owner of such lost, stolen or destroyed certificate, or such owners legal representative, to give the Company a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of any such new certificate.
(c) To the extent Units are certificated, upon surrender to the Company or the transfer agent of the Company, if any, of a certificate for one or more Units, duly endorsed or accompanied by appropriate evidence of succession, assignment or authority to transfer, in compliance with the provisions hereof, the Company shall issue a new certificate representing one or more Units to the Person entitled thereto, cancel the old certificate and record the transaction upon its books. Subject to the provisions of this Agreement, the Manager may prescribe such additional rules and regulations as it may deem appropriate relating to the issue, Transfer and registration of Units.
3.7 Negative Capital Accounts. No Member shall be required to pay to any other Member or the Company any deficit or negative balance which may exist from time to time in such Members Capital Account (including upon and after dissolution of the Company).
3.8 No Withdrawal. No Person shall be entitled to withdraw any part of such Persons Capital Contribution or Capital Account or to receive any Distribution from the Company, except as expressly provided in this Agreement.
3.9 Loans From Members. Loans by Members to the Company shall not be considered Capital Contributions. Subject to the provisions of Section 3.1(c), the amount of any such advances shall be a debt of the Company to such Member and shall be payable or collectible in accordance with the terms and conditions upon which such advances are made.
3.10 Corporate Stock Option Plans and Equity Plans.
(a) Options Granted to Persons other than LLC Employees. If at any time or from time to time, in connection with any Stock Option Plan, a stock option granted over shares of Class A Common Stock to a Person other than an LLC Employee is duly exercised:
(i) PubCo shall, as soon as practicable after such exercise, make a Capital Contribution to the Company in an amount equal to the exercise price paid to PubCo by such exercising Person in connection with the exercise of such stock option.
(ii) Notwithstanding the amount of the Capital Contribution actually made pursuant to Section 3.10(a)(i), PubCo shall be deemed to have contributed to the Company as a Capital Contribution, in lieu of the Capital Contribution actually made and in consideration of additional Common Units, an amount equal to the Value of a share of Class A Common Stock as of the date of such exercise multiplied by the number of shares of Class A Common Stock then being issued by PubCo in connection with the exercise of such stock option.
(iii) PubCo shall receive in exchange for such Capital Contributions (as deemed made under Section 3.10(a)(ii)), a number of Common Units equal to the number of shares of Class A Common Stock for which such option was exercised.
(b) Options Granted to LLC Employees. If at any time or from time to time, in connection with any Stock Option Plan, a stock option granted over shares of Class A Common Stock to an LLC Employee is duly exercised:
(i) PubCo shall sell to the Optionee, and the Optionee shall purchase from PubCo, for a cash price per share equal to the Value of a share of Class A Common Stock at the time of the exercise, the number of shares of Class A Common Stock equal to the quotient of (x) the exercise price payable by the Optionee in connection with the exercise of such stock option divided by (y) the Value of a share of Class A Common Stock at the time of such exercise.
(ii) PubCo shall sell to the Company (or if the Optionee is an employee of, or other service provider to, a Subsidiary, PubCo shall sell to such
Subsidiary), and the Company (or such Subsidiary, as applicable) shall purchase from PubCo, a number of shares of Class A Common Stock equal to the difference between (x) the number of shares of Class A Common Stock as to which such stock option is being exercised minus (y) the number of shares of Class A Common Stock sold pursuant to Section 3.10(b)(i) hereof. The purchase price per share of Class A Common Stock for such sale of shares of Class A Common Stock to the Company (or such Subsidiary) shall be the Value of a share of Class A Common Stock as of the date of exercise of such stock option.
(iii) The Company shall transfer to the Optionee (or if the Optionee is an employee of, or other service provider to, a Subsidiary, the Subsidiary shall transfer to the Optionee) at no additional cost to such LLC Employee and as additional compensation (and not a distribution) to such LLC Employee, the number of shares of Class A Common Stock described in Section 3.10(b)(ii).
(iv) PubCo shall, as soon as practicable after such exercise, make a Capital Contribution to the Company in an amount equal to all proceeds received (from whatever source, but excluding any payment in respect of payroll taxes or other withholdings) by PubCo in connection with the exercise of such stock option. PubCo shall receive for such Capital Contribution, a number of Common Units equal to the number of shares of Class A Common Stock for which such option was exercised.
(c) Restricted Stock Granted to LLC Employees. If at any time or from time to time, in connection with any Equity Plan (other than a Stock Option Plan), any shares of Class A Common Stock are issued to an LLC Employee (including any shares of Class A Common Stock that are subject to forfeiture in the event such LLC Employee terminates his or her employment with the Company or any Subsidiary) in consideration for services performed for the Company or any Subsidiary:
(i) PubCo shall issue such number of shares of Class A Common Stock as are to be issued to such LLC Employee in accordance with the Equity Plan;
(ii) On the date (such date, the Vesting Date) that the Value of such shares is includible in taxable income of such LLC Employee, the following events will be deemed to have occurred: (1) PubCo shall be deemed to have sold such shares of Class A Common Stock to the Company (or if such LLC Employee is an employee of, or other service provider to, a Subsidiary, to such Subsidiary) for a purchase price equal to the Value of such shares of Class A Common Stock, (2) the Company (or such Subsidiary) shall be deemed to have delivered such shares of Class A Common Stock to such LLC Employee, (3) PubCo shall be deemed to have contributed the purchase price for such shares of Class A Common Stock to the Company as a Capital Contribution, and (4) in the case where such LLC Employee is an employee of a Subsidiary, the Company shall be deemed to have contributed such amount to the capital of the Subsidiary; and
(iii) The Company shall issue to PubCo on the Vesting Date a number of Common Units equal to the number of shares of Class A Common Stock issued under
Section 3.10(c)(i) in consideration for a Capital Contribution that PubCo is deemed to make to the Company pursuant to clause (3) of Section 3.10(c)(ii) above.
(d) Future Stock Incentive Plans. Nothing in this Agreement shall be construed or applied to preclude or restrain PubCo from adopting, modifying or terminating stock incentive plans for the benefit of employees, directors or other business associates of PubCo, the Company or any of their respective Affiliates. The Members acknowledge and agree that, in the event that any such plan is adopted, modified or terminated by PubCo, amendments to this Section 3.10 may become necessary or advisable and that any approval or consent to any such amendments requested by PubCo shall be deemed granted by the Manager and the Members, as applicable, without the requirement of any further consent or acknowledgement of any other Member.
(e) Anti-dilution adjustments. For all purposes of this Section 3.10, the number of shares of Class A Common Stock and the corresponding number of Common Units shall be determined after giving effect to all anti-dilution or similar adjustments that are applicable, as of the date of exercise or vesting, to the option, warrant, restricted stock or other equity interest that is being exercised or becomes vested under the applicable Stock Option Plan or other Equity Plan and applicable award or grant documentation.
3.11 Dividend Reinvestment Plan, Cash Option Purchase Plan, Stock Incentive Plan or Other Plan. Except as may otherwise be provided in this Article III, all amounts received or deemed received by PubCo in respect of any dividend reinvestment plan, cash option purchase plan, stock incentive or other stock or subscription plan or agreement, either (a) shall be utilized by PubCo to effect open market purchases of shares of Class A Common Stock, or (b) if PubCo elects instead to issue new shares of Class A Common Stock with respect to such amounts, shall be contributed by PubCo to the Company in exchange for additional Common Units. Upon such contribution, the Company will issue to PubCo a number of Common Units equal to the number of new shares of Class A Common Stock so issued.
ARTICLE IV
DISTRIBUTIONS
4.1 Distributions.
(a) Distributable Cash; Other Distributions. To the extent permitted by applicable Law and hereunder, Distributions to Members may be declared by the Manager out of Distributable Cash or other funds or property legally available therefor in such amounts and on such terms (including the payment dates of such Distributions) as the Manager shall determine using such record date as the Manager may designate; such Distributions shall be made to the Members as of the close of business on such record date on a pro rata basis in accordance with each Members Percentage Interest (other than, for the avoidance of doubt, any distributions made pursuant to Section 4.1(b)(v)) as of the close of business on such record date; provided, however, that the Manager shall have the obligation to make Distributions as set forth in Sections 4.1(b) and 13.2; and provided further that, notwithstanding any other provision herein to the contrary, no Distributions shall be made to any Member to the extent such Distribution would
render the Company insolvent. For purposes of the foregoing sentence, insolvency means the inability of the Company to meet its payment obligations when due. Promptly following the designation of a record date and the declaration of a Distribution pursuant to this Section 4.1(a), the Manager shall give notice to each Member of the record date, the amount and the terms of the Distribution and the payment date thereof. In furtherance of the foregoing, it is intended that the Manager shall, to the extent permitted by applicable Law and hereunder, have the right in its sole discretion to make Distributions to the Members pursuant to this Section 4.1(a) in such amounts as shall enable PubCo to pay dividends or to meet its obligations, including its obligations pursuant to the Tax Receivable Agreement (to the extent such obligations are not otherwise able to be satisfied as a result of Tax Distributions required to be made pursuant to Section 4.1(b)).
(b) Tax Distributions.
(i) With respect to each Fiscal Year or portion thereof ending after the closing date of the IPO, the Company shall, to the extent permitted by applicable Law, make cash distributions (Tax Distributions) to each Member in accordance with, and to the extent of, such Members Assumed Tax Liability. Tax Distributions pursuant to this Section 4.1(b)(i) shall be estimated by the Company on a quarterly basis and, to the extent feasible, shall be distributed to the Members (together with a statement showing the calculation of such Tax Distribution and an estimate of the Companys net taxable income allocable to each Member for such period) on a quarterly basis on April 15th, June 15th, September 15th and January 15th (of the succeeding year) (or such other dates for which individuals are required to make quarterly estimated tax payments for U.S. federal income tax purposes) (each, a Quarterly Tax Distribution); provided, that the foregoing shall not restrict the Company from making a Tax Distribution on any other date. Quarterly Tax Distributions shall take into account the estimated taxable income or loss of the Company for the Fiscal Year through the end of the relevant quarterly period. A final accounting for Tax Distributions shall be made for each Fiscal Year after the allocation of the Companys actual net taxable income or loss has been determined and any shortfall in the amount of Tax Distributions a Member received for such Fiscal Year based on such final accounting shall promptly be distributed to such Member. For the avoidance of doubt, any excess Tax Distributions a Member receives with respect to any Fiscal Year shall reduce future Tax Distributions otherwise required to be made to such Member with respect to any subsequent Fiscal Year.
(ii) To the extent a Member otherwise would be entitled to receive less than its Percentage Interest of the aggregate Tax Distributions to be paid pursuant to this Section 4.1(b) (other than any distributions made pursuant to Section 4.1(b)(v)) on any given date, the Tax Distributions to such Member shall be increased to ensure that all Distributions made pursuant to this Section 4.1(b) are made pro rata in accordance with the Members respective Percentage Interests. If, on the date of a Tax Distribution, there are insufficient funds on hand to distribute to the Members the full amount of the Tax Distributions to which such Members are otherwise entitled, Distributions pursuant to this Section 4.1(b) shall be made to the Members to the extent of available funds in accordance with their Percentage Interests and the Company shall make future Tax
Distributions as soon as funds become available sufficient to pay the remaining portion of the Tax Distributions to which such Members are otherwise entitled.
(iii) In the event of any audit by, or similar event with, a taxing authority that affects the calculation of any Members Assumed Tax Liability for any Taxable Year (other than an audit conducted pursuant to the Revised Partnership Audit Provisions for which no election is made pursuant to Section 6226 thereof and the Treasury Regulations promulgated thereunder), or in the event the Company files an amended tax return, each Members Assumed Tax Liability with respect to such year shall be recalculated by giving effect to such event (for the avoidance of doubt, taking into account interest or penalties). Any shortfall in the amount of Tax Distributions the Members and former Members received for the relevant Taxable Years based on such recalculated Assumed Tax Liability promptly shall be distributed to such Members and the successors of such former Members, except, for the avoidance of doubt, to the extent Distributions were made to such Members and former Members pursuant to Section 4.1(a) and this Section 4.1(b) in the relevant Taxable Years sufficient to cover such shortfall.
(iv) Notwithstanding the foregoing, Tax Distributions pursuant to this Section 4.1(b) for periods ending after the closing date of the IPO (other than, for the avoidance of doubt, any distributions made pursuant to Section 4.1(b)(v)), if any, shall be made to a Member only to the extent all previous Tax Distributions to such Member pursuant to Section 4.1(b) with respect to such Fiscal Year are less than the Tax Distributions such Member otherwise would have been entitled to receive with respect to such Fiscal Year pursuant to this Section 4.1(b).
(v) Notwithstanding the foregoing and anything to the contrary in this Agreement, for the avoidance of doubt, the provisions of this Section 4.1 shall be effective for the portion of the Fiscal Year beginning on the day after the closing date of the IPO, and no further distributions shall be made after the date hereof pursuant to Section 5.9(a) of the First A&R LLC Agreement in respect of the portion of the Fiscal Year that ends on the closing date of the IPO.
ARTICLE V
CAPITAL ACCOUNTS; ALLOCATIONS; TAX MATTERS
5.1 Capital Accounts.
(a) The Company shall maintain a separate Capital Account for each Member according to the rules of Treasury Regulation Section 1.704-1(b)(2)(iv). For this purpose, the Company may (in the discretion of the Manager), upon the occurrence of the events specified in Treasury Regulation Section 1.704-1(b)(2)(iv)(f), increase or decrease the Capital Accounts in accordance with the rules of such Treasury Regulation and Treasury Regulation Section 1.704-1(b)(2)(iv)(g) to reflect a revaluation of the Companys property.
(b) For purposes of computing the amount of any item of income, gain, loss or deduction with respect to the Company to be allocated pursuant to this Article V and to be reflected in the Capital Accounts of the Members, the determination, recognition and classification of any such item shall be the same as its determination, recognition and classification for U.S. federal income tax purposes (including any method of depreciation, cost recovery or amortization used for this purpose); provided, however, that:
(i) The computation of all items of income, gain, loss and deduction shall include those items described in Sections 705(a)(l)(B) or 705(a)(2)(B) of the Code and Treasury Regulation Section 1.704-1(b)(2)(iv)(i), without regard to the fact that such items are not includible in gross income or are not deductible for U.S. federal income tax purposes.
(ii) If the Book Value of any property of the Company is adjusted pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(e) or (f), the amount of such adjustment shall be taken into account as gain or loss from the disposition of such property.
(iii) Items of income, gain, loss or deduction attributable to the disposition of property of the Company having a Book Value that differs from its adjusted basis for tax purposes shall be computed by reference to the Book Value of such property.
(iv) Items of depreciation, amortization and other cost recovery deductions with respect to property of the Company having a Book Value that differs from its adjusted basis for tax purposes shall be computed by reference to the propertys Book Value in accordance with Treasury Regulation Section 1.704-1(b)(2)(iv)(g).
(v) To the extent an adjustment to the adjusted tax basis of any asset of the Company pursuant to Sections 732(d), 734(b) or 743(b) of the Code is required, pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis).
5.2 Allocations. Except as otherwise provided in Section 5.3 and Section 5.4, Net Profits and Net Losses for any Fiscal Year or Fiscal Period shall be allocated among the Capital Accounts of the Members pro rata in accordance with their respective Percentage Interests.
5.3 Regulatory Allocations.
(a) Losses attributable to partner nonrecourse debt (as defined in Treasury Regulation Section 1.704-2(b)(4)) shall be allocated in the manner required by Treasury Regulation Section 1.704-2(i). If there is a net decrease during a Taxable Year in partner nonrecourse debt minimum gain (as defined in Treasury Regulation Section 1.704-2(i)(3)), Profits for such Taxable Year (and, if necessary, for subsequent Taxable Years) shall be allocated to the Members in the amounts and of such character as determined according to Treasury Regulation Section 1.704-2(i)(4).
(b) Nonrecourse deductions (as determined according to Treasury Regulation Section 1.704-2(b)(1)) for any Taxable Year shall be allocated pro rata among the Members in accordance with their Percentage Interests. Except as otherwise provided in Section 5.3(a), if there is a net decrease in the Minimum Gain during any Taxable Year, each Member shall be allocated Profits for such Taxable Year (and, if necessary, for subsequent Taxable Years) in the amounts and of such character as determined according to Treasury Regulation Section 1.704-2(f). This Section 5.3(b) is intended to be a minimum gain chargeback provision that complies with the requirements of Treasury Regulation Section 1.704-2(f), and shall be interpreted in a manner consistent therewith.
(c) If any Member that unexpectedly receives an adjustment, allocation or Distribution described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6) has an Adjusted Capital Account Deficit as of the end of any Taxable Year, computed after the application of Sections 5.3(a) and 5.3(b) but before the application of any other provision of this Article V, then Profits for such Taxable Year shall be allocated to such Member in proportion to, and to the extent of, such Adjusted Capital Account Deficit. This Section 5.3(c) is intended to be a qualified income offset provision as described in Treasury Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted in a manner consistent therewith.
(d) If the allocation of Net Losses to a Member as provided in Section 5.2 would create or increase an Adjusted Capital Account Deficit, there shall be allocated to such Member only that amount of Losses as will not create or increase an Adjusted Capital Account Deficit. The Net Losses that would, absent the application of the preceding sentence, otherwise be allocated to such Member shall be allocated to the other Members in accordance with their relative Percentage Interests, subject to this Section 5.3(d).
(e) Profits and Losses described in Section 5.1(b)(v) shall be allocated in a manner consistent with the manner that the adjustments to the Capital Accounts are required to be made pursuant to Treasury Regulation Section 1.704-1(b)(2)(iv)(j), (k) and (m).
(f) The allocations set forth in Section 5.3(a) through and including Section 5.3(e) (the Regulatory Allocations) are intended to comply with certain requirements of Treasury Regulation Sections 1.704-1(b) and 1.704-2. The Regulatory Allocations may not be consistent with the manner in which the Members intend to allocate Profit and Loss of the Company or make Distributions. Accordingly, notwithstanding the other provisions of this Article V, but subject to the Regulatory Allocations, income, gain, deduction and loss with respect to the Company shall be reallocated among the Members so as to eliminate the effect of the Regulatory Allocations and thereby cause the respective Capital Accounts of the Members to be in the amounts (or as close thereto as possible) they would have been if Profit and Loss (and such other items of income, gain, deduction and loss) had been allocated without reference to the Regulatory Allocations. In general, the Members anticipate that this will be accomplished by specially allocating other Profit and Loss (and such other items of income, gain, deduction and loss) among the Members so that the net amount of the Regulatory Allocations and such special allocations to each such Member is zero. In addition, if in any Fiscal Year or Fiscal Period there is a decrease in partnership minimum gain, or in partner nonrecourse debt minimum gain, and application of the minimum gain chargeback requirements set forth in Section 5.3(a) or Section 5.3(b) would cause a distortion in the economic arrangement among the Members, the Members
may, if they do not expect that the Company will have sufficient other income to correct such distortion, request the Internal Revenue Service to waive either or both of such minimum gain chargeback requirements. If such request is granted, this Agreement shall be applied in such instance as if it did not contain such minimum gain chargeback requirement.
5.4 Final Allocations. Notwithstanding any contrary provision in this Agreement except Section 5.3, the Manager shall make appropriate adjustments to allocations of Profits and Losses to (or, if necessary, allocate items of gross income, gain, loss or deduction of the Company among) the Members upon the liquidation of the Company (within the meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g)), the transfer of substantially all the Units (whether by sale or exchange or merger) or sale of all or substantially all the assets of the Company, such that, to the maximum extent possible, the Capital Accounts of the Members are proportionate to their Percentage Interests. In each case, such adjustments or allocations shall occur, to the maximum extent possible, in the Fiscal Year of the event requiring such adjustments or allocations.
5.5 Tax Allocations.
(a) The income, gains, losses, deductions and credits of the Company will be allocated, for federal, state and local income tax purposes, among the Members in accordance with the allocation of such income, gains, losses, deductions and credits among the Members for computing their Capital Accounts; provided that if any such allocation is not permitted by the Code or other applicable Law, the Companys subsequent income, gains, losses, deductions and credits will be allocated among the Members so as to reflect as nearly as possible the allocation set forth herein in computing their Capital Accounts.
(b) Items of taxable income, gain, loss and deduction of the Company with respect to any property contributed to the capital of the Company after the date hereof shall be allocated among the Members in accordance with Section 704(c) of the Code so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its Book Value using the traditional method set forth in Treasury Regulation Section 1.704-3(b).
(c) If the Book Value of any asset of the Company is adjusted pursuant to Section 5.1(b), including adjustments to the Book Value of any asset of the Company in connection with the execution of this Agreement, subsequent allocations of items of taxable income, gain, loss and deduction with respect to such asset shall take account of any variation between the adjusted basis of such asset for federal income tax purposes and its Book Value using the traditional method set forth in Treasury Regulation Section 1.704-3(b).
(d) Allocations of tax credits, tax credit recapture, and any items related thereto shall be allocated to the Members as determined by the Manager taking into account the principles of Treasury Regulation Section 1.704-1(b)(4)(ii).
(e) For purposes of determining a Members share of the Companys excess nonrecourse liabilities within the meaning of Treasury Regulation Section 1.752-3(a)(3), each Members interest in income and gain shall be determined pursuant to any proper method, as
reasonably determined by the Manager; provided, that each year the Manager shall use its reasonable best efforts (using in all instances any proper method, including without limitation the additional method described in Treasury Regulation Section 1.752-3(a)(3)) to allocate a sufficient amount of the excess nonrecourse liabilities to those Members who would have at the end of the applicable Taxable Year, but for such allocation, taxable income due to the deemed distribution of money to such Member pursuant to Section 752(b) of the Code that is in excess of such Members adjusted tax basis in its Units.
(f) Allocations pursuant to this Section 5.5 are solely for purposes of federal, state and local taxes and shall not affect, or in any way be taken into account in computing, any Members Capital Account or share of Profits, Losses, Distributions or other items of the Company pursuant to any provision of this Agreement.
5.6 Indemnification and Reimbursement for Payments on Behalf of a Member. [If the Company is obligated to pay any amount to a Governmental Entity (or otherwise makes a payment to a Governmental Entity) that is specifically attributable to a Member or a Members status as such (including federal income taxes, additions to tax, interest and penalties as a result of obligations of the Company pursuant to the Revised Partnership Audit Provisions, federal withholding taxes, state personal property taxes and state unincorporated business taxes, but excluding payments such as payroll taxes, withholding taxes, benefits or professional association fees and the like required to be made or made voluntarily by the Company on behalf of any Member based upon such Members status as an employee of the Company), then such Member shall indemnify the Company in full for the entire amount paid (including interest, penalties and related expenses).] The Manager may offset Distributions to which a Member is otherwise entitled under this Agreement against such Members obligation to indemnify the Company under this Section 5.6. A Members obligation to make payments to the Company under this Section 5.6 shall survive the transfer or termination of any Members interest in any Units of the Company, the termination of this Agreement and the dissolution, liquidation, winding up and termination of the Company. In the event that the Company has been terminated prior to the date such payment is due, such Member shall make such payment to the Manager (or its designee), which shall distribute such funds in accordance with this Agreement. The Company may pursue and enforce all rights and remedies it may have against each Member under this Section 5.6, including instituting a lawsuit to collect such contribution with interest calculated at a rate per annum equal to the sum of the Base Rate plus 300 basis points (but not in excess of the highest rate per annum permitted by Law). Each Member hereby agrees to furnish to the Company such information and forms as required or reasonably requested in order to comply with any Laws and regulations governing withholding of tax or in order to claim any reduced rate of, or exemption from, withholding to which the Member is legally entitled. The Company may withhold any amount that it reasonably determines is required to be withheld from any amount otherwise payable to any Member hereunder, and any such withheld amount shall be deemed to have been paid to such Member for purposes of this Agreement.
ARTICLE VI
MANAGEMENT
6.1 Authority of Manager; Officer Delegation.
(a) Except for situations in which the approval of any Member(s) is specifically required by this Agreement, (i) all management powers over the business and affairs of the Company shall be exclusively vested in PubCo, as the sole managing member of the Company (PubCo, in such capacity, the Manager), (ii) the Manager shall conduct, direct and exercise full control over all activities of the Company and (iii) no other Member shall have any right, authority or power to vote, consent or approve any matter, whether under the Delaware Act, this Agreement or otherwise. The Manager shall be the manager of the Company for the purposes of the Delaware Act. Except as otherwise expressly provided for herein and subject to the other provisions of this Agreement, the Members hereby consent to the exercise by the Manager of all such powers and rights conferred on the Members by the Delaware Act with respect to the management and control of the Company. Any vacancies in the position of Manager shall be filled in accordance with Section 6.4.
(b) Without limiting the authority of the Manager to act on behalf of the Company, the day-to-day business and operations of the Company shall be overseen and implemented by officers of the Company (each, an Officer and collectively, the Officers), subject to the limitations imposed by the Manager. An Officer may, but need not, be a Member. Each Officer shall be appointed by the Manager and shall hold office until his or her successor shall be duly designated and shall qualify or until his or her death or until he or she shall resign or shall have been removed in the manner hereinafter provided. Any one Person may hold more than one office. Subject to the other provisions of this Agreement (including in Section 6.7 below), the salaries or other compensation, if any, of the Officers of the Company shall be fixed from time to time by the Manager. The authority and responsibility of the Officers shall be limited to such duties as the Manager may, from time to time, delegate to them. Unless the Manager decides otherwise, if the title is one commonly used for officers of a business corporation formed under the General Corporation Law of the State of Delaware, the assignment of such title shall constitute the delegation to such person of the authorities and duties that are normally associated with that office. All Officers shall be, and shall be deemed to be, officers and employees of the Company. An Officer may also perform one or more roles as an officer of the Manager. Any Officer may be removed at any time, with or without cause, by the Manager.
(c) Subject to the other provisions of this Agreement, the Manager shall have the power and authority to effectuate the sale, lease, transfer, exchange or other disposition of any, all or substantially all of the assets of the Company (including the exercise or grant of any conversion, option, privilege or subscription right or any other right available in connection with any assets at any time held by the Company) or the merger, consolidation, conversion, division, reorganization or other combination of the Company with or into another entity, for the avoidance of doubt, without the prior consent of any Member or any other Person being required.
6.2 Actions of the Manager. The Manager may act through any Officer or through any other Person or Persons to whom authority and duties have been delegated pursuant to Section 6.7.
6.3 Resignation; No Removal. The Manager may resign at any time by giving written notice to the Members. Unless otherwise specified in the notice, the resignation shall take effect upon receipt thereof by the Members, and the acceptance of the resignation shall not be
necessary to make it effective. For the avoidance of doubt, the Members have no right under this Agreement to remove or replace the Manager.
6.4 Vacancies. Vacancies in the position of Manager occurring for any reason shall be filled by PubCo (or, if PubCo has ceased to exist without any successor or assign, then by the holders of a majority in interest of the voting capital stock of PubCo immediately prior to such cessation). For the avoidance of doubt, the Members (other than PubCo) have no right under this Agreement to fill any vacancy in the position of Manager.
6.5 Transactions Between the Company and the Manager. The Manager may cause the Company to contract and deal with the Manager, or any Affiliate of the Manager, provided, that such contracts and dealings (other than contracts and dealings between the Company and its Subsidiaries) are on terms comparable to and competitive with those available to the Company from others dealing at arms length or are approved by the Members and otherwise are permitted by the Credit Agreements; provided that the foregoing shall in no way limit the Managers rights under Sections 3.2, 3.4, 3.5 or 3.10. The Members hereby approve each of the contracts or agreements between or among the Manager, the Company and their respective Affiliates entered into on or prior to the date of this Agreement in accordance with the First A&R LLC Agreement or that the board of managers of the Company or the PubCo Board has approved in connection with the Recapitalization or the IPO as of the date of this Agreement.
6.6 Reimbursement for Expenses. The Manager shall not be compensated for its services as Manager of the Company except as expressly provided in this Agreement. The Members acknowledge and agree that, upon consummation of the IPO, the Managers Class A Common Stock will be publicly traded and, therefore, the Manager will have access to the public capital markets and that such status and the services performed by the Manager will inure to the benefit of the Company and all Members; therefore, the Manager shall be reimbursed by the Company for any reasonable out-of-pocket expenses incurred on behalf of the Company, including without limitation all fees, expenses and costs of being a public company (including without limitation public reporting obligations, proxy statements, stockholder meetings, Stock Exchange fees, transfer agent fees, legal fees, SEC and FINRA filing fees and offering expenses) and maintaining its corporate existence. To the extent practicable, expenses incurred by the Manager on behalf of or for the benefit of the Company shall be billed directly to and paid by the Company and, if and to the extent any reimbursements to the Manager or any of its Affiliates by the Company pursuant to this Section 6.6 constitute gross income to such Person (as opposed to the repayment of advances made by such Person on behalf of the Company), such amounts shall be treated as guaranteed payments within the meaning of Section 707(c) of the Code and shall not be treated as distributions for purposes of computing the Members Capital Accounts. Notwithstanding the foregoing, the Company shall not bear any income tax obligations of the Manager or any payments made pursuant to the Tax Receivable Agreement.
6.7 Delegation of Authority. The Manager (a) may, from time to time, delegate to one or more Persons such authority and duties as the Manager may deem advisable, and (b) may assign titles (including, without limitation, chief executive officer, president, chief financial officer, chief operating officer, general counsel, senior vice president, vice president, secretary, assistant secretary, treasurer or assistant treasurer) and delegate certain authority and duties to such Persons which may be amended, restated or otherwise modified from time to time. Any
number of titles may be held by the same individual. The salaries or other compensation, if any, of such agents of the Company shall be fixed from time to time by the Manager, subject to the other provisions in this Agreement.
6.8 Limitation of Liability of Manager.
(a) Except as otherwise provided herein or in an agreement entered into by such Person and the Company, neither the Manager nor any of the Managers Affiliates or Managers officers, employees or other agents shall be liable to the Company, to any Member that is not the Manager or to any other Person bound by this Agreement for any act or omission performed or omitted by the Manager in its capacity as the sole managing member of the Company pursuant to authority granted to the Manager by this Agreement (including the Manager or its designee in its capacity as the Partnership Representative); provided, however, that, except as otherwise provided herein, such limitation of liability shall not apply to the extent the act or omission was attributable to the Managers gross negligence, willful misconduct, fraud or knowing violation of Law or for any present or future material breaches of any representations, warranties or covenants by the Manager or its Affiliates contained herein or in the Other Agreements with the Company. The Manager may exercise any of the powers granted to it by this Agreement and perform any of the duties imposed upon it hereunder either directly or by or through its agents, and shall not be responsible for any misconduct or negligence on the part of any such agent (so long as such agent was selected in good faith and with reasonable care). The Manager shall be entitled to rely upon the advice of legal counsel, independent public accountants and other experts, including financial advisors, and any act of or failure to act by the Manager in good faith reliance on such advice shall in no event subject the Manager to liability to the Company or any Member that is not the Manager.
(b) To the fullest extent permitted by applicable Law, whenever this Agreement or any other agreement contemplated herein provides that the Manager shall act in a manner which is, or provide terms which are, fair and reasonable to the Company or any Member that is not the Manager, the Manager shall determine such appropriate action or provide such terms considering, in each case, the relative interests of each party to such agreement, transaction or situation and the benefits and burdens relating to such interests, any customary or accepted industry practices, and any applicable United States generally accepted accounting practices or principles, notwithstanding any other provision of this Agreement or in any agreement contemplated herein or applicable provisions of Law or equity or otherwise.
(c) To the fullest extent permitted by applicable Law and notwithstanding any other provision of this Agreement or in any agreement contemplated herein or applicable provisions of Law or equity or otherwise, whenever in this Agreement or any other agreement contemplated herein, the Manager is permitted or required to take any action or to make a decision in its sole discretion or discretion, with complete discretion or under a grant of similar authority or latitude, the Manager shall be entitled to consider such interests and factors as it desires, including its own interests, and shall have no duty or obligation to give any consideration to any interest of or factors affecting the Company, other Members or any other Person.
(d) To the fullest extent permitted by applicable Law and notwithstanding any other provision of this Agreement or in any agreement contemplated herein or applicable provisions of law or equity or otherwise, whenever in this Agreement the Manager is permitted or required to take any action or to make a decision in its good faith or under another express standard, the Manager shall act under such express standard and shall not be subject to any other or different standards imposed by this Agreement or any other agreement contemplated herein, notwithstanding any provision of this Agreement or duty otherwise, existing at Law or in equity, and, notwithstanding anything contained herein to the contrary, so long as the Manager acts in good faith or in accordance with such other express standard, the resolution, action or terms so made, taken or provided by the Manager shall not constitute a breach of this Agreement or impose liability upon the Manager or any of the Managers Affiliates and shall be deemed approved by all Members.
6.9 Investment Company Act. The Manager shall use its best efforts to ensure that the Company shall not be subject to registration as an investment company pursuant to the Investment Company Act.
ARTICLE VII
RIGHTS, POWERS AND OBLIGATIONS OF MEMBERS
7.1 Limitation of Liability and Duties of Members.
(a) Except as provided in this Agreement or in the Act, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company and no Member or Manager shall be obligated personally for any such debts, obligations, contracts or liabilities of the Company solely by reason of being a Member or the Manager (except to the extent and under the circumstances set forth in any non-waivable provision of the Act). Notwithstanding anything contained herein to the contrary, to the fullest extent permitted by applicable Law, the failure of the Company to observe any formalities or requirements relating to the exercise of its powers or management of its business and affairs under this Agreement or the Act shall not be grounds for imposing personal liability on the Members for liabilities of the Company.
(b) In accordance with the Act and the laws of the State of Delaware, a Member may, under certain circumstances, be required to return amounts previously distributed to such Member. It is the intent of the Members that no Distribution to any Member pursuant to Article IV or Article XIII shall be deemed a return of money or other property paid or distributed in violation of the Act. The payment of any such money or Distribution of any such property to a Member shall be deemed to be a compromise within the meaning of Section 18-502(b) of the Act, and, to the fullest extent permitted by Law, any Member receiving any such money or property shall not be required to return any such money or property to the Company or any other Person, unless such distribution was made by the Company to its Members in clerical error. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Member is obligated to make any such payment, such obligation shall be the obligation of such Member and not of any other Member.
(c) To the fullest extent permitted by applicable Law, including Section 18-1101(c) of the Act, and notwithstanding any other provision of this Agreement (but subject, and without limitation, to Section 6.8 with respect to the Manager) or in any agreement contemplated herein or applicable provisions of Law or equity or otherwise, the parties hereto hereby agree that to the extent that any Member (other than the Manager in its capacity as such) (or any Members Affiliate or any manager, managing member, general partner, director, officer, employee, agent, fiduciary or trustee of any Member or of any Affiliate of a Member) has duties (including fiduciary duties) to the Company, to the Manager, to another Member, to any Person who acquires an interest in a Unit or to any other Person bound by this Agreement, all such duties (including fiduciary duties) are hereby eliminated, to the fullest extent permitted by law, and replaced with the duties or standards expressly set forth herein, if any; provided, however, that the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing. The elimination of duties (including fiduciary duties) to the Company, the Manager, each of the Members, each other Person who acquires an interest in a Unit and each other Person bound by this Agreement and replacement thereof with the duties or standards expressly set forth herein, if any, are approved by the Company, the Manager, each of the Members, each other Person who acquires an interest in a Unit and each other Person bound by this Agreement.
7.2 Lack of Authority. No Member, other than the Manager or a duly appointed Officer, in each case in its capacity as such, has the authority or power to act for or on behalf of the Company, to do any act that would be binding on the Company or to make any expenditure on behalf of the Company. The Members hereby consent to the exercise by the Manager of the powers conferred on them by Law and this Agreement.
7.3 No Right of Partition. No Member, other than the Manager, shall have the right to seek or obtain partition by court decree or operation of Law of any property of the Company, or the right to own or use particular or individual assets of the Company.
7.4 Indemnification.
(a) Subject to Section 5.6, the Company hereby agrees to indemnify and hold harmless any Person (each an Indemnified Person) to the fullest extent permitted under applicable Law, as the same now exists or may hereafter be amended, substituted or replaced (but, to the fullest extent permitted by law, in the case of any such amendment, substitution or replacement only to the extent that such amendment, substitution or replacement permits the Company to provide broader indemnification rights than the Company is providing immediately prior to such amendment), against all expenses, liabilities and losses (including attorneys fees, judgments, fines, excise taxes or penalties) reasonably incurred or suffered by such Person (or one or more of such Persons Affiliates) by reason of the fact that such Person is or was a Member or an Affiliate thereof (other than as a result of an ownership interest in PubCo) or is or was serving as the Manager or a director, officer, employee or other agent of the Manager, or a director, manager, Officer, employee or other agent of the Company or is or was serving at the request of the Company as a manager, officer, director, principal, member, employee or agent of another corporation, partnership, joint venture, limited liability company, trust or other enterprise or is or was serving as the Partnership Representative; provided, however, that no Indemnified Person shall be indemnified for any expenses, liabilities and losses suffered that are attributable to such Indemnified Persons or its Affiliates willful misconduct or knowing violation of Law or
for any present or future breaches of any representations, warranties or covenants by such Indemnified Person or its Affiliates contained herein or in Other Agreements with the Company. Reasonable expenses, including out-of-pocket attorneys fees, incurred by any such Indemnified Person in defending a proceeding shall be paid by the Company in advance of the final disposition of such proceeding, including any appeal therefrom, upon receipt of an undertaking by or on behalf of such Indemnified Person to repay such amount if it shall ultimately be determined that such Indemnified Person is not entitled to be indemnified by the Company.
(b) The right to indemnification and the advancement of expenses conferred in this Section 7.4 shall not be exclusive of any other right which any Person may have or hereafter acquire under any statute, agreement, bylaw, action by the Manager or otherwise.
(c) The Company shall maintain directors and officers liability insurance, or substantially equivalent insurance, at its expense, to protect any Indemnified Person against any expense, liability or loss described in Section 7.4(a) whether or not the Company would have the power to indemnify such Indemnified Person against such expense, liability or loss under the provisions of this Section 7.4. The Company shall use its commercially reasonable efforts to purchase and maintain property, casualty and liability insurance in types and at levels customary for companies of similar size engaged in similar lines of business, as determined in good faith by the Manager, and the Company shall use its commercially reasonable efforts to purchase directors and officers liability insurance (including employment practices coverage) with a carrier and in an amount determined necessary or desirable as determined in good faith by the Manager.
(d) The indemnification and advancement of expenses provided for in this Section 7.4 shall be provided out of and to the extent of Company assets only. No Member (unless such Member otherwise agrees in writing or is found in a non-appealable decision by a court of competent jurisdiction to have personal liability on account thereof) shall have personal liability on account thereof or shall be required to make additional Capital Contributions to help satisfy such indemnity of the Company. The Company (i) shall be the primary indemnitor of first resort for such Indemnified Person pursuant to this Section 7.4 and (ii) shall be fully responsible for the advancement of all expenses and the payment of all damages or liabilities with respect to such Indemnified Person which are addressed by this Section 7.4.
(e) If this Section 7.4 or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify and hold harmless each Indemnified Person pursuant to this Section 7.4 to the fullest extent permitted by any applicable portion of this Section 7.4 that shall not have been invalidated and to the fullest extent permitted by applicable Law.
7.5 Inspection Rights. The Company shall permit each Member and each of its designated representatives at such Members sole cost and expense to examine the books and records of the Company or any of its Subsidiaries at the principal office of the Company or such other location as the Manager shall reasonably approve during normal business hours and upon reasonable notice for any purpose reasonably related to such Members Units.
ARTICLE VIII
BOOKS, RECORDS, ACCOUNTING AND REPORTS, AFFIRMATIVE COVENANTS
8.1 Records and Accounting. The Company shall keep, or cause to be kept, appropriate books and records with respect to the Companys business, including all books and records necessary to provide any information, lists and copies of documents required pursuant to applicable Laws. All matters concerning (a) the determination of the relative amount of allocations and Distributions among the Members pursuant to Article IV and Article V and (b) accounting procedures and determinations, and other determinations not specifically and expressly provided for by the terms of this Agreement, shall be determined by the Manager, whose determination shall be final and conclusive as to all of the Members absent manifest clerical error.
8.2 Fiscal Year. The Fiscal Year of the Company shall end on December 31 of each year or such other date as may be established by the Manager.
ARTICLE IX
TAX MATTERS
9.1 Preparation of Tax Returns and Positions.
(a) The Members intend that the Company shall be treated as a partnership for U.S. federal, state and local income tax purposes, and not as a publicly traded partnership within the meaning of Section 7704 of the Code, and agree to take (or refrain from taking) such actions as may be necessary to receive and maintain such treatment and refrain from taking any actions inconsistent thereof.
(b) The Manager shall arrange for the preparation and timely filing of all tax returns required to be filed by the Company. The Company shall use reasonable best efforts to (i) furnish, within ninety (90) days of the close of each Taxable Year, to each Member a completed IRS Schedule K-1 (and any comparable state income tax form) and such other information as is reasonably requested by such Member relating to the Company that is necessary for such Member to comply with its tax reporting obligations (provided, however, that if the Company is unable to deliver a completed IRS Schedule K-1 by March 30 following the close of the Taxable Year, the Company shall use its reasonable best efforts to provide a requesting Member with a good faith estimate of such information) and (ii) furnish, as soon as reasonably possible after the close of each of the Companys first three quarters of each Taxable Year, such information concerning the Company as is reasonably required to enable the Member to calculate and pay estimated taxes. Subject to the terms and conditions of this Agreement and except as otherwise provided in this Agreement, in its capacity as Partnership Representative, PubCo (or its designee) shall have the authority to prepare (or cause to be prepared) the tax returns of the Company using such permissible methods and elections as it determines in its reasonable discretion, including without limitation the use of any permissible method under Section 706 of the Code for purposes of determining the varying Units of its Members. Each Member agrees that such Member shall not, except as otherwise required by applicable Law, treat, on such
Members separate income tax returns, any item of income, gain, loss, deduction or credit relating to such Members interest in the Company in a manner inconsistent with the treatment of such item by the Company as reflected in the IRS Schedule K-1 or other information statement furnished by the Company to such Member pursuant to this Section 9.1(b).
9.2 Tax Elections. The Taxable Year shall be the Fiscal Year set forth in Section 8.2, unless otherwise required by Section 706 of the Code. The Manager shall cause the Company and each of its Subsidiaries that is treated as a partnership for U.S. federal income tax purposes to have in effect an election pursuant to Section 754 of the Code (or any similar provisions of applicable state, local or foreign tax Law) effective for the Taxable Year that includes the date hereof and all future Taxable Years. The Manager shall take commercially reasonable efforts to cause each Person in which the Company owns a direct or indirect equity interest (other than a Subsidiary) that is so treated as a partnership to have in effect any such election for each Taxable Year. Each Member will upon request supply any information reasonably necessary to give proper effect to any such elections.
9.3 Tax Controversies. The Manager shall cause the Company to take all necessary actions required by Law to designate PubCo (or its designee) as the tax matters partner of the Company within the meaning of Section 6231 of the Code (as in effect prior to repeal of such section pursuant to the Revised Partnership Audit Provisions) with respect any Taxable Year beginning on or before December 31, 2017. The Manager shall further cause the Company to take all necessary actions required by Law to designate PubCo (or its designee) as the partnership representative of the Company as provided in Section 6223(a) of the Code with respect to any Taxable Year of the Company beginning after December 31, 2017 (the tax matters partner and the partnership representative, collectively, the Partnership Representative). The Company and the Members shall cooperate fully with each other and shall use reasonable best efforts to cause PubCo (or its designee) to become the Partnership Representative with respect to any taxable period of the Company with respect to which the statute of limitations has not yet expired (and causing any tax matters partner, partnership representative or designated individual designated prior to the Effective Date to resign, be revoked or replaced, as applicable), including (as applicable) by filing certifications pursuant to Treasury Regulation Section 301.6231(a)(7)-1(d) and completing IRS Form 8979 or any other form or certificate required pursuant to Treasury Regulation Section 301.6223-1(e)(1). The Partnership Representative may exercise any authority granted to it under the Code. Each Member agrees to cooperate with the Partnership Representative and to use commercially reasonable efforts to do or refrain from doing any or all things requested by the Partnership Representative (including paying any and all resulting taxes, additions to tax, penalties and interest in a timely fashion) in connection with any examination of the Companys affairs by any federal, state, or local tax authorities, including resulting administrative and judicial proceedings. The Partnership Representative may retain, at the Companys expense, such outside counsel, accountants and other professional consultants as it may reasonably deem necessary in the course of fulfilling its obligations as the Partnership Representative. The Partnership Representative is authorized and required to represent the Company (at the Companys expense) in connection with all examinations of the Companys affairs by tax authorities, including any resulting administrative and judicial proceedings, and to expend Company funds for professional services reasonably incurred in connection therewith. [Without limiting the generality of the foregoing, with respect to any audit or other proceeding, the Partnership Representative shall be entitled to
cause the Company (and any of its Subsidiaries) to make any available elections pursuant to Section 6226 of the Code (and similar provisions of state, local and other Law), and the Members shall cooperate to the extent reasonably requested by the Company in connection therewith.] The Company shall reimburse the Partnership Representative for all reasonable out-of-pocket expenses incurred by the Partnership Representative, including reasonable fees of any outside counsel, accountants and other professional consultants, in carrying out its duties as the Partnership Representative. The provisions of this Section 9.3 shall survive the transfer or termination of any Members interest in any Units of the Company, the termination of this Agreement and the termination of the Company, and shall remain binding on each Member for the period of time necessary to resolve all tax matters relating to the Company, and shall be subject to the provisions of the Tax Receivable Agreement, as applicable.
ARTICLE X
RESTRICTIONS ON TRANSFER OF UNITS; CERTAIN TRANSACTIONS
10.1 Transfers by Members. No holder of Units shall Transfer any interest in any Units, except Transfers (a) pursuant to and in accordance with Sections 10.2 and 10.9 or (b) approved in advance and in writing by the Manager, in the case of Transfers by any Member other than the Manager, or (c) in the case of Transfers by the Manager, to any Person who succeeds to the Manager in accordance with Section 6.4. Notwithstanding the foregoing, Transfer shall not include (i) an event that terminates the existence of a Member for income tax purposes (including, without limitation, a change in entity classification of a Member under Treasury Regulation Section 301.7701-3, a sale of assets by, or liquidation of, a Member pursuant to an election under Sections 336 or 338 of the Code, or merger, severance, or allocation within a trust or among sub-trusts of a trust that is a Member), but that does not terminate the existence of such Member under applicable state Law (or, in the case of a trust that is a Member, does not terminate the trusteeship of the fiduciaries under such trust with respect to all the Units of such trust that is a Member) or (ii) any indirect Transfer of Units held by the Manager by virtue of any Transfer of Equity Securities in PubCo.
10.2 Permitted Transfers. The restrictions contained in Section 10.1 shall not apply to any Transfer (each, a Permitted Transfer and each transferee, a Permitted Transferee) in connection with: (a)(i) an Exchange pursuant to the terms of the Exchange Agreement (as defined therein) or (ii) a Transfer by a Member to PubCo or any of its Subsidiaries; (b) a Transfer by any Member to such Members spouse, any lineal ascendants or descendants or trusts or other entities in which such Member or Members spouse, lineal ascendants or descendants are the sole beneficial owners; (c) a Transfer to a partner, shareholder, member or Affiliate of such Member (which may include special purpose investment vehicles wholly owned by one or more Affiliated investment funds but shall not include portfolio companies) or (d) a Transfer of Units to a reinsurance counterparty of any Member (or Affiliate of such Member) that is an Affiliate of Athene Holding Ltd. to hold in a funds withheld account or modified coinsurance account established by such reinsurance counterparty for the purpose of maintaining assets supporting business ceded or retroceded to such Member (or Affiliate of such Member), or a Transfer of Units from any Member that is a reinsurance counterparty of any Member (or Affiliate of such Member) that is an Affiliate of Athene Holding Ltd. to such Member (or Affiliate of such Member); provided, however, that (A) the restrictions contained in this
Agreement will continue to apply to Units after any Permitted Transfer of such Units, and (B) in the case of the foregoing clauses (b), (c) and (d), the Permitted Transferees of the Units so Transferred shall agree in writing to be bound by the provisions of this Agreement and, the transferor will deliver a written notice to the Company and the Members, which notice will disclose in reasonable detail the identity of the proposed transferee. In the case of a Permitted Transfer of any Common Units, the transferring Member shall be required to transfer an equal number of shares of Class B Common Stock corresponding to the proportion of such Members Common Units that were transferred in the transaction to such Permitted Transferee. All Permitted Transfers are subject to the additional limitations set forth in Section 10.7(b).
10.3 Restricted Units Legend. The Units have not been registered under the Securities Act and, therefore, in addition to the other restrictions on Transfer contained in this Agreement, cannot be sold unless subsequently registered under the Securities Act or if an exemption from such registration is then available with respect to such sale. To the extent such Units have been certificated, each certificate evidencing Units and each certificate issued in exchange for or upon the Transfer of any Units shall be stamped or otherwise imprinted with a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED ON [], 2020, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER SPECIFIED IN THE SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF ARIS MORTGAGE HOLDING COMPANY, LLC, AS IT MAY BE AMENDED, RESTATED, AMENDED AND RESTATED, OR OTHERWISE MODIFIED FROM TIME TO TIME, AND ARIS MORTGAGE HOLDING COMPANY, LLC RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITIES UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO ANY TRANSFER. A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY ARIS MORTGAGE HOLDING COMPANY, LLC TO THE HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE.
The Company shall imprint such legend on certificates (if any) evidencing Units. The legend set forth above shall be removed from the certificates (if any) evidencing any Units which cease to be Units in accordance with the definition thereof.
10.4 Transfer. Prior to Transferring any Units, the Transferring holder of Units shall cause the prospective Permitted Transferee to be bound by this Agreement and any other agreements executed by the holders of Units and relating to such Units in the aggregate to which the transferor was a party (collectively, the Other Agreements) by executing and delivering to the Company counterparts of this Agreement and any applicable Other Agreements.
10.5 Assignees Rights.
(a) The Transfer of a Unit in accordance with this Agreement shall be effective as of the date of such Transfer (assuming compliance with all of the conditions to such Transfer set forth herein), and such Transfer shall be shown on the books and records of the Company. Profits, Losses and other items of the Company shall be allocated between the transferor and the transferee according to Section 706 of the Code, using any permissible method as determined in the reasonable discretion of the Manager. Distributions made before the effective date of such Transfer shall be paid to the transferor, and Distributions made on or after such date shall be paid to the Assignee.
(b) Unless and until an Assignee becomes a Member pursuant to Article XI, the Assignee shall not be entitled to any of the rights granted to a Member hereunder or under applicable Law, other than the rights granted specifically to Assignees pursuant to this Agreement; provided, however, that, without relieving the Transferring Member from any such limitations or obligations as more fully described in Section 10.6, such Assignee shall be bound by any limitations and obligations of a Member contained herein by which a Member would be bound on account of the Assignees Units (including the obligation to make Capital Contributions on account of such Units).
10.6 Assignors Rights and Obligations. Any Member who shall Transfer any Unit in a manner in accordance with this Agreement shall cease to be a Member with respect to such Units and shall no longer have any rights or privileges, or, except as set forth in this Section 10.6, duties, liabilities or obligations, of a Member with respect to such Units or other interest (it being understood, however, that the applicable provisions of Sections 6.8 and 7.4 shall continue to inure to such Persons benefit), except that unless and until the Assignee (if not already a Member) is admitted as a Substituted Member in accordance with the provisions of Article XI (the Admission Date), (i) such Transferring Member shall retain all of the duties, liabilities and obligations of a Member with respect to such Units, and (ii) the Manager may, in its sole discretion, reinstate all or any portion of the rights and privileges of such Member with respect to such Units for any period of time prior to the Admission Date. Nothing contained herein shall relieve any Member who Transfers any Units in the Company from any liability of such Member to the Company with respect to such Units that may exist as of the Admission Date or that is otherwise specified in the Delaware Act or for any liability to the Company or any other Person for any materially false statement made by such Member (in its capacity as such) or for any present or future breaches of any representations, warranties or covenants by such Member (in its capacity as such) contained herein or in the Other Agreements with the Company.
10.7 Overriding Provisions.
(a) Any Transfer or attempted Transfer of any Units in violation of this Agreement or the Exchange Agreement (including any prohibited indirect Transfers) shall be, to the fullest extent permitted by applicable law, null and void ab initio, and the provisions of Sections 10.5 and 10.6 shall not apply to any such Transfers. For the avoidance of doubt, any Person to whom a Transfer is made or attempted in violation of this Agreement or the Exchange Agreement shall not become a Member and shall not have any other rights in or with respect to any rights of a Member of the Company with respect to the applicable Units. The approval of
any Transfer in any one or more instances shall not limit or waive the requirement for such approval in any other or future instance. The Manager shall promptly amend the Schedule of Members to reflect any Permitted Transfer pursuant to this Article X.
(b) Notwithstanding anything contained herein to the contrary (including, for the avoidance of doubt, the provisions of Section 10.1), in no event shall any Member Transfer any Units to the extent such Transfer would:
(i) result in the violation of the Securities Act, or any other applicable federal, state or foreign Laws;
(ii) result in the violation of the Exchange Agreement;
(iii) cause an assignment under the Investment Company Act;
(iv) in the reasonable determination of the Manager, be a violation of or a default (or an event that, with notice or the lapse of time or both, would constitute a default) under, or result in an acceleration of any obligation under any Credit Agreement to which the Company or the Manager is a party; provided that the payee or creditor to whom the Company or the Manager owes such obligation is not an Affiliate of the Company or the Manager;
(v) be a Transfer to a Person who is not legally competent or who has not achieved his or her majority of age under applicable Law (excluding trusts for the benefit of minors); or
(vi) cause the Company to be treated as a publicly traded partnership or to be taxed as a corporation pursuant to Section 7704 of the Code or any successor provision thereto under the Code.
(c) Notwithstanding anything contained herein to the contrary, in no event shall any Member that is not a United States person within the meaning of Section 7701(a)(30) of the Code Transfer any Units, unless such Member and the transferee have delivered to the Company, in respect of the relevant Transfer, written evidence that all required withholding under Section 1446(f) of the Code will have been done and duly remitted to the applicable taxing authority or duly executed certifications (prepared in accordance with the applicable Treasury Regulations or other authorities) of an exemption from such withholding.
10.8 Spousal Consent. In connection with the execution and delivery of this Agreement, any Member who is a natural person will deliver to the Company an executed consent from such Members spouse (if any) in the form of Exhibit B-1 attached hereto or a Members spouse confirmation of separate property in the form of Exhibit B-2 attached hereto. If, at any time subsequent to the date of this Agreement such Member becomes legally married (whether in the first instance or to a different spouse), such Member shall cause his or her spouse to execute and deliver to the Company a consent in the form of Exhibit B-1 or Exhibit B-2 attached hereto. Such Members non-delivery to the Company of an executed consent in the form of Exhibit B-1 or Exhibit B-2 at any time shall constitute such Members continuing representation and warranty that such Member is not legally married as of such date.
10.9 Drag-Along Rights.
(a) In the event that the PubCo Board and the holders of a majority of the voting power of all outstanding capital stock of PubCo approve a Qualified Transaction (the Approved Qualified Transaction), each Member (each, a Required Member) agrees to Transfer all of such Required Members Units in connection with such Approved Qualified Transaction (the Drag-Along Right) for an amount of consideration per Unit equal (before taking into account any rights such Required Member may have under the Tax Receivable Agreement) to the amount of consideration to be received per share of Class A Common Stock by the holders thereof (the Drag Price), and otherwise with respect to such Units on the same terms and conditions as apply to the shares of Class A Common Stock in such Approved Qualified Transaction, with such modifications as are appropriate, as determined in good faith by the Manager, to reflect the fact that Units rather than shares of Class A Common Stock will be Transferred in the first instance by such Member. Such Transfer shall be structured in the sole discretion of the Manager and, without limitation to any other structure, the Manager will use its reasonable best efforts expeditiously and in good faith to take all such actions and do all such things as are necessary or desirable to enable and permit the Members to participate in such Approved Qualified Transaction to the same extent or on an economically equivalent basis as the holders of shares of Class A Common Stock without discrimination; provided that, without limiting the generality of this sentence, the Manager will use its reasonable best efforts expeditiously and in good faith to ensure that such Members may participate in each such Approved Qualified Transaction without being required to have their Common Units and shares of Class B Common Stock redeemed (or, if so required, to ensure that any such redemption shall be effective only upon, and shall be conditional upon, the closing of such Approved Qualified Transaction, or, as applicable, to the extent necessary to exchange the number of Common Units being repurchased).
(b) PubCo shall send written notice (the Drag-Along Notice) to the Company and the Required Members at least thirty (30) days prior to the closing of the Approved Qualified Transaction notifying them that such Required Members will be required to sell all (but not less than all) of their Units in such sale (the Drag-Along Amount), and setting forth (i) a copy of the written proposal or agreement pursuant to which the Approved Qualified Transaction will be effected, (ii) the Drag Price, (iii) the terms and conditions of transfer and payment and (iv) the date and location of and procedures for selling the Units. In the event that the information set forth in the Drag-Along Notice changes from that set forth in the initial Drag-Along Notice, a subsequent Drag-Along Notice shall be delivered by PubCo no less than seven (7) days prior to the closing of the Approved Qualified Transaction. Notwithstanding the foregoing, to the extent that any of the foregoing information to be included in the Drag-Along Notice is publicly available, PubCo shall not be required to include such information in the Drag-Along Notice or deliver a subsequent Drag-Along Notice. Each Required Member shall thereafter be obligated to sell their Units on the terms set forth in the Drag-Along Notice.
(c) Upon receipt of a Drag-Along Notice, each Required Member receiving such notice shall be obligated to sell all of its Units in the Approved Qualified Transaction as contemplated by the Drag-Along Notice for the Drag Price, on the terms and conditions described in this Section 10.9, including by executing any document containing customary representations, warranties and agreements with respect to itself and its ownership of the Units or
shares of Class A Common Stock, as applicable, as requested by the Manager in connection with the Approved Qualified Transaction, which representations, warranties, indemnities and agreements shall be substantially the same as those contained in any letter of transmittal to be executed by the holders of Class A Common Stock with such modifications as are appropriate, as determined in good faith by the Manager, to reflect the fact that Units rather than shares of Class A Common Stock will be transferred by such Required Member. The Company and each Member shall cooperate in good faith in connection with the consummation of the Approved Qualified Transaction.
ARTICLE XI
ADMISSION OF MEMBERS
11.1 Substituted Members. Subject to the provisions of Article X hereof, in connection with the Permitted Transfer of a Unit hereunder, the Permitted Transferee shall become a Substituted Member on the effective date of such Transfer, which effective date shall not be earlier than the date of compliance with the conditions to such Transfer, and such admission shall be shown on the books and records of the Company, including the Schedule of Members.
11.2 Additional Members. Subject to the provisions of Article X hereof, any Person that is not a Member as of the Effective Date may be admitted to the Company as an additional Member (any such Person, an Additional Member) only upon furnishing to the Manager (a) duly executed Joinder and counterparts to any applicable Other Agreements and (b) such other documents or instruments as may be reasonably necessary or appropriate to effect such Persons admission as a Member (including entering into such documents as may reasonably be requested by the Manager). Such admission shall become effective on the date on which the Manager determines in its sole discretion that such conditions have been satisfied and when any such admission is shown on the books and records of the Company, including the Schedule of Members.
ARTICLE XII
WITHDRAWAL AND RESIGNATION; TERMINATION OF RIGHTS
12.1 Withdrawal and Resignation of Members. Except in the event of Transfers pursuant to Section 10.6 and the Managers right to resign pursuant to Section 6.3, no Member shall have the power or right to withdraw or otherwise resign as a Member from the Company prior to the dissolution and winding up of the Company pursuant to Article XIII. Any Member, however, that attempts to withdraw or otherwise resign as a Member from the Company without the prior written consent of the Manager upon or following the dissolution and winding up of the Company pursuant to Article XIII, but prior to such Member receiving the full amount of Distributions from the Company to which such Member is entitled pursuant to Article XIII, shall be liable to the Company for all damages (including all lost profits and special, indirect and consequential damages) directly or indirectly caused by the withdrawal or resignation of such Member. Upon a Transfer of all of a Members Units in a Transfer permitted by this Agreement, subject to the provisions of Section 10.6, such Member shall cease to be a Member.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
13.1 Dissolution. The Company shall not be dissolved by the admission of Additional Members or Substituted Members or the attempted withdrawal, removal, dissolution, bankruptcy or resignation of a Member. The Company shall dissolve, and its affairs shall be wound up, upon:
(a) the decision of the Manager together with the written approval of the Common Unitholders holding a majority of the Common Units to dissolve the Company (excluding for purposes of such calculation PubCo and all Common Units held directly or indirectly by it);
(b) a dissolution of the Company under Section 18-801(4) of the Delaware Act, unless the Company is continued without dissolution pursuant thereto; or
(c) the entry of a decree of judicial dissolution of the Company under Section 18-802 of the Delaware Act;
Except as otherwise set forth in this Article XIII, the Company is intended to have perpetual existence. An Event of Withdrawal shall not in and of itself cause a dissolution of the Company and the Company shall continue in existence subject to the terms and conditions of this Agreement.
13.2 Winding Up. Subject to Section 13.5, on dissolution of the Company, the Manager shall act as liquidating trustee or may appoint one or more Persons as liquidating trustee (each such Person, a Liquidator). The Liquidators shall proceed diligently to wind up the affairs of the Company and make final distributions as provided herein and in the Delaware Act. The costs of liquidation shall be borne as an expense of the Company. Until final distribution, the Liquidators shall, to the fullest extent permitted by applicable Law, continue to operate the properties of the Company with all of the power and authority of the Manager. The steps to be accomplished by the Liquidators are as follows:
(a) as promptly as possible after dissolution and again after final liquidation, the Liquidators shall cause a proper accounting to be made by a recognized firm of certified public accountants of the Companys assets, liabilities and operations through the last day of the calendar month in which the dissolution occurs or the final liquidation is completed, as applicable;
(b) the Liquidators shall pay, satisfy or discharge from the Companys funds, or otherwise make adequate provision for payment and discharge thereof (including, without limitation, the establishment of a cash fund for contingent, conditional and unmatured liabilities in such amount and for such term as the liquidators may reasonably determine) the following: first, all of the debts, liabilities and obligations of the Company owed to creditors other than the Members in satisfaction of the liabilities of the Company (whether by payment or the making of reasonable provision for payment thereof), including all expenses incurred in connection with the liquidations; and second, all of the debts, liabilities and obligations of the Company owed to the
Members (other than any payments or distributions owed to such Members in their capacity as Members pursuant to this Agreement); and
(c) following any payments pursuant to the foregoing Section 13.2(b), all remaining assets of the Company shall be distributed to the Members in accordance with Section 4.1(a) by the end of the Taxable Year during which the liquidation of the Company occurs (or, if later, by ninety (90) days after the date of the liquidation).
The distribution of cash and/or property to the Members in accordance with the provisions of this Section 13.2 and Section 13.3 below shall constitute a complete return to the Members of their Capital Contributions, a complete distribution to the Members of their interest in the Company and all of the Companys property and shall constitute a compromise to which all Members have consented within the meaning of the Delaware Act. To the extent that a Member returns funds to the Company, it has no claim against any other Member for those funds.
13.3 Deferment; Distribution in Kind. Notwithstanding the provisions of Section 14.2, but subject to the order of priorities set forth therein, if upon dissolution of the Company the Liquidators determine that an immediate sale of part or all of the Companys assets would be impractical or would cause undue loss (or would otherwise not be beneficial) to the Members, the Liquidators may, in their sole discretion and the fullest extent permitted by applicable Law, defer for a reasonable time the liquidation of any assets except those necessary to satisfy the Companys liabilities (other than loans to the Company by any Member(s)) and reserves. Subject to the order of priorities set forth in Section 13.2, the Liquidators may, in their sole discretion, distribute to the Members, in lieu of cash, either (a) all or any portion of such remaining assets in-kind of the Company in accordance with the provisions of Section 13.2(c), (b) as tenants in common and in accordance with the provisions of Section 13.2(c), undivided interests in all or any portion of such assets of the Company or (c) a combination of the foregoing. Any such Distributions in-kind shall be subject to (y) such conditions relating to the disposition and management of such assets as the Liquidators deem reasonable and equitable and (z) the terms and conditions of any agreements governing such assets (or the operation thereof or the holders thereof) at such time. Any assets of the Company distributed in kind will first be written up or down to their Fair Market Value, thus creating Profit or Loss (if any), which shall be allocated in accordance with Article V. The Liquidators shall determine the Fair Market Value of any property distributed.
13.4 Cancellation of Certificate. On completion of the winding up of the Company as provided herein, the Manager (or such other Person or Persons as the Delaware Act may require or permit) shall file a certificate of cancellation of the Certificate of Formation with the Secretary of State of Delaware, cancel any other filings made pursuant to this Agreement that should be canceled and take such other actions as may be necessary to terminate the existence of the Company. The Company shall continue in existence for all purposes of this Agreement until it is terminated pursuant to this Section 13.4.
13.5 Reasonable Time for Winding Up. A reasonable time shall be allowed for the orderly winding up of the business and affairs of the Company and the liquidation of its assets pursuant to Sections 13.2 and 13.3 in order to minimize any losses otherwise attendant upon such winding up.
13.6 Return of Capital. The Liquidators shall not be personally liable for the return of Capital Contributions or any portion thereof to the Members (it being understood that any such return shall be made solely from assets of the Company).
ARTICLE XIV
MISCELLANEOUS PROVISIONS
14.1 Power of Attorney.
(a) Each Member hereby constitutes and appoints the Manager (or the Liquidator, if applicable) with full power of substitution, as his or her true and lawful agent and attorney-in-fact, with full power and authority in his, her or its name, place and stead, to:
(i) execute, swear to, acknowledge, deliver, file and record in the appropriate public offices (A) this Agreement, all certificates and other instruments and all amendments thereof which the Manager deems appropriate or necessary to form, qualify, or continue the qualification of, the Company as a limited liability company in the State of Delaware and in all other jurisdictions in which the Company may conduct business or own property; (B) all instruments which the Manager deems appropriate or necessary to reflect any amendment, change, modification or restatement of this Agreement in accordance with its terms; (C) all conveyances and other instruments or documents which the Manager deems appropriate or necessary to reflect the dissolution, winding up and termination of the Company pursuant to the terms of this Agreement, including a certificate of cancellation; and (D) all instruments relating to the admission, substitution or resignation of any Member pursuant to Article XI or Article XII; and
(ii) sign, execute, swear to and acknowledge all ballots, consents, approvals, waivers, certificates and other instruments appropriate or necessary, in the reasonable judgment of the Manager, to evidence, confirm or ratify any vote, consent, approval, agreement or other action which is made or given by the Members hereunder or is consistent with the terms of this Agreement, in the reasonable judgment of the Manager, to effectuate the terms of this Agreement.
(b) The foregoing power of attorney is irrevocable and coupled with an interest, and shall survive the death, disability, incapacity, dissolution, bankruptcy, insolvency or termination of any Member and the transfer of all or any portion of his, her or its Units and shall extend to such Members heirs, successors, assigns and personal representatives.
14.2 Confidentiality.
(a) Each of the Members (other than PubCo) agrees to hold the Companys Confidential Information in confidence and may not disclose or use such information except as otherwise authorized separately in writing by the Manager. Confidential Information as used herein includes all non-public information concerning the Company or its Subsidiaries including, but not limited to, ideas, financial product structuring, business strategies, innovations and materials, all aspects of the Companys business plan, proposed operation and products, corporate structure, financial and organizational information, analyses, proposed partners,
software code and system and product designs, employees and their identities, equity ownership, the methods and means by which the Company plans to conduct its business, all trade secrets, trademarks, tradenames and all intellectual property associated with the Companys business. With respect to each Member, Confidential Information does not include information or material that: (a) is rightfully in the possession of such Member at the time of disclosure by the Company; (b) before or after it has been disclosed to such Member by the Company, becomes part of public knowledge, not as a result of any action or inaction of such Member in violation of this Agreement; (c) is approved for release by written authorization of the Chief Executive Officer, Chief Financial Officer or General Counsel of the Company or of PubCo, or any other officer designated by the Manager; (d) is disclosed to such Member or their representatives by a third party not, to the knowledge of such Member, in violation of any obligation of confidentiality owed to the Company with respect to such information; or (e) is or becomes independently developed by such Member or their respective representatives without use of or reference to the Confidential Information.
(b) Solely to the extent it is reasonably necessary or appropriate to fulfill its obligations or to exercise its rights under this Agreement, each of the Members may disclose Confidential Information to its Subsidiaries, Affiliates, partners, directors, officers, employees, counsel, advisers, consultants, outside contractors and other agents, on the condition that such Persons keep the Confidential Information confidential to the same extent as such Member is required to keep the Confidential Information confidential; provided, that such Member shall remain liable with respect to any breach of this Section 14.2 by any such Subsidiaries, Affiliates, partners, directors, officers, employees, counsel, advisers, consultants, outside contractors and other agents (as if such Persons were party to this Agreement for purposes of this Section 14.2).
(c) Notwithstanding Section 14.2(a) or Section 14.2(b), each of the Members may disclose Confidential Information (i) to the extent that such Member is required by Law (by oral questions, interrogatories, request for information or documents, subpoena, civil investigative demand or similar process) to disclose any of the Confidential Information, (ii) for purposes of reporting to its stockholders and direct and indirect equity holders (each of whom are bound by customary confidentiality obligations) the performance of the Company and its Subsidiaries and for purposes of including applicable information in its financial statements to the extent required by applicable Law or applicable accounting standards; or (iii) to any bona fide prospective purchaser of the equity or assets of a Member, or the Common Units held by such Member (provided, in each case, that such Member determines in good faith that such prospective purchaser would be a Permitted Transferee), or a prospective merger partner of such Member (provided, that (i) such Persons will be informed by such Member of the confidential nature of such information and shall agree in writing to keep such information confidential in accordance with the contents of this Agreement and (ii) each Member will be liable for any breaches of this Section 14.2 by any such Persons (as if such Persons were party to this Agreement for purposes of this Section 14.2)). Notwithstanding any of the foregoing, nothing in this Section 14.2 will restrict in any manner the ability of PubCo to comply with its disclosure obligations under Law, and the extent to which any Confidential Information is necessary or desirable to disclose.
14.3 Amendments. Except as otherwise contemplated by this Agreement, this Agreement may be amended or modified upon the written consent of the Manager, together with
the written consent of the holders of a majority of the Common Units then outstanding (excluding all Common Units held directly or indirectly by PubCo). Notwithstanding the foregoing, no amendment or modification:
(a) to this Section 14.3 may be made without the prior written consent of the Manager and each of the Members;
(b) to any of the terms and conditions of this Agreement which terms and conditions expressly require the approval or action of certain Persons may be made without obtaining the consent of the requisite number or specified percentage of such Persons who are entitled to approve or take action on such matter; and
(c) to any of the terms and conditions of this Agreement which would (A) reduce the amounts distributable to a Member pursuant to Article IV and Article XIII in a manner that is not pro rata with respect to all Members, (B) increase the liabilities of such Member hereunder, (C) otherwise materially and adversely affect a holder of Units (with respect to such Units) in a manner materially disproportionate to any other holder of Units of the same class or series (with respect to such Units) (other than amendments, modifications and waivers necessary to implement the provisions of Article XI) or (D) materially and adversely affect the rights of any Member under Section 3.4, Section 3.5, Section 7.1, Section 7.4, or Article X, shall be effective against such affected Member or holder of Units, as the case may be, without the prior written consent of such Member or holder of Units, as the case may be.
Notwithstanding any of the foregoing, the Manager may make any amendment (i) of an administrative nature that is necessary in order to implement the substantive provisions hereof, without the consent of any other Member; provided, that any such amendment does not adversely change the rights of the Members hereunder in any respect, or (ii) to reflect any changes to the Class A Common Stock or Class B Common Stock or the issuance of any other capital stock of PubCo.
14.4 Title to Company Assets. Company assets shall be owned by the Company as an entity, and no Member, individually or collectively, shall have any ownership interest in such assets of the Company or any portion thereof. The Company shall hold title to all of its property in the name of the Company and not in the name of any Member. All assets of the Company shall be recorded as the property of the Company on its books and records, irrespective of the name in which legal title to such assets is held. The Companys credit and assets shall be used solely for the benefit of the Company, and no asset of the Company shall be transferred or encumbered for, or in payment of, any individual obligation of any Member.
14.5 Addresses and Notices. All notices and other communications to be given to any party hereunder shall be sufficiently given for all purposes hereunder if in writing and delivered by hand, courier or overnight delivery service, or when received in the form of an electronic transmission (receipt confirmation requested), and shall be directed to the address set forth below, or at such address or to the attention of such other person as the recipient party has specified by prior written notice to the Company or the sending party or, with respect to any Member, at such address as indicated by the Companys records.
To the Company:
Aris Mortgage Holding Company, LLC
c/o AmeriHome, Inc.
1 Baxter Way
Thousand Oaks, California 91362
Attn: [·]
Email: [·]
with a copy (which copy shall not constitute notice) to:
Sidley Austin LLP
787 Seventh Avenue
New York, New York 10019
Attn: Perry J. Schwachman, Samir A. Gandhi, Robert A. Ryan
E-mail: pshwachman@sidley.com; sgandhi@sidley.com; rryan@sidley.com
To PubCo:
AmeriHome, Inc.
1 Baxter Way
Thousand Oaks, California 91362
Attn: [·]
Email: [·]
with a copy (which copy shall not constitute notice) to:
Sidley Austin LLP
787 Seventh Avenue
New York, New York 10019
Attn: Perry J. Schwachman, Samir A. Gandhi, Robert A. Ryan
E-mail: pshwachman@sidley.com; sgandhi@sidley.com; rryan@sidley.com
14.6 Binding Effect; Intended Beneficiaries. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their heirs, executors, administrators, successors, legal representatives and permitted assigns.
14.7 Creditors. None of the provisions of this Agreement shall be for the benefit of or enforceable by any creditors of the Company or any of its Affiliates, and no creditor who makes a loan to the Company or any of its Affiliates may have or acquire (except pursuant to the terms of a separate agreement executed by the Company in favor of such creditor) at any time as a result of making the loan any direct or indirect interest in Profits, Losses, Distributions, capital or property of the Company other than as a secured creditor; provided, that, for the avoidance of doubt, this Section 14.7 shall not apply to any Member or the Manager who is also a creditor of the Company with respect to such Member or Managers rights under this Agreement or interests in the Company arising from their status as a Member or Manager.
14.8 Waiver. No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy
consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement or condition.
14.9 Counterparts. This Agreement may be executed in separate counterparts, each of which will be an original and all of which together shall constitute one and the same agreement binding on all the parties hereto.
14.10 Applicable Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. Any suit, dispute, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement shall be heard in the state or federal courts of the State of Delaware, and the parties hereby consent to the exclusive jurisdiction of such court (and of the appropriate appellate courts) in any such suit, action or proceeding and waives any objection to venue laid therein. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, PROCESS IN ANY SUCH SUIT, ACTION OR PROCEEDING MAY BE SERVED ON ANY PARTY ANYWHERE IN THE WORLD, WHETHER WITHIN OR WITHOUT THE JURISDICTION OF ANY SUCH COURT (INCLUDING BY PREPAID CERTIFIED MAIL WITH A VALIDATED PROOF OF MAILING RECEIPT) AND SHALL HAVE THE SAME LEGAL FORCE AND EFFECT AS IF SERVED UPON SUCH PARTY PERSONALLY WITHIN THE STATE OF DELAWARE. WITHOUT LIMITING THE FOREGOING, TO THE FULLEST EXTENT PERMITTED BY LAW, THE PARTIES AGREE THAT SERVICE OF PROCESS UPON SUCH PARTY AT THE ADDRESS REFERRED TO IN SECTION 14.5 (INCLUDING BY PREPAID CERTIFIED MAIL WITH A VALIDATED PROOF OF MAILING RECEIPT), TOGETHER WITH WRITTEN NOTICE OF SUCH SERVICE TO SUCH PARTY, SHALL BE DEEMED EFFECTIVE SERVICE OF PROCESS UPON SUCH PARTY.
14.11 Severability. Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable Law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable Law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or the effectiveness or validity of any provision in any other jurisdiction, and this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
14.12 Further Action. The parties shall execute and deliver all documents, provide all information and take or refrain from taking such actions as may be necessary or appropriate to achieve the purposes of this Agreement.
14.13 Execution and Delivery by Electronic Signature and Electronic Transmission. This Agreement and any signed agreement or instrument entered into in connection with this Agreement or contemplated hereby or entered into by the Company in accordance herewith, and any amendments hereto or thereto, to the extent signed and delivered by means of an electronic signature and/or electronic transmission, including by a facsimile machine or via email, shall be treated in all manner and respects as an original agreement or instrument and shall be considered
to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of electronic signature or electronic transmission to execute and/or deliver a document or the fact that any signature or agreement or instrument was transmitted or communicated through such electronic transmission as a defense to the formation of a contract and each such party forever waives any such defense.
14.14 Right of Offset. Whenever the Company or PubCo is to pay any sum (other than pursuant to Article IV) to any Member, any amounts that such Member owes to the Company or PubCo which are not the subject of a good faith dispute may be deducted from that sum before payment. For the avoidance of doubt, the distribution of Units to PubCo shall not be subject to this Section 14.14.
14.15 Entire Agreement. This Agreement, those documents expressly referred to herein (including the Stockholders Agreement, the Registration Rights Agreement, the Exchange Agreement and the Tax Receivable Agreement), any indemnity agreements entered into in connection with the First A&R LLC Agreement with any member of the board of directors at that time and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. For the avoidance of doubt, the First A&R LLC Agreement is superseded by this Agreement as of the Effective Date and shall be of no further force and effect thereafter.
14.16 Remedies. Each Member shall have all rights and remedies set forth in this Agreement and all rights and remedies which such Person has been granted at any time under any other agreement or contract and all of the rights which such Person has under any Law. Any Person having any rights under any provision of this Agreement or any other agreements contemplated hereby shall be entitled to enforce such rights specifically (without posting a bond or other security), to recover damages by reason of any breach of any provision of this Agreement and to exercise all other rights granted by Law.
14.17 Descriptive Headings; Interpretation. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a substantive part of this Agreement. Whenever required by the context, any pronoun used in this Agreement shall include the corresponding masculine, feminine or neuter forms, and the singular form of nouns, pronouns and verbs shall include the plural and vice versa. The use of the word including in this Agreement shall be by way of example rather than by limitation. Reference to any agreement, document or instrument means such agreement, document or instrument as amended or otherwise modified from time to time in accordance with the terms thereof, and if applicable hereof. Without limiting the generality of the immediately preceding sentence, no amendment or other modification to any agreement, document or instrument that requires the consent of any Person pursuant to the terms of this Agreement or any other agreement will be given effect hereunder unless such Person has consented in writing to such amendment or modification. Wherever required by the context, references to a Fiscal Year shall refer to a portion thereof. The
use of the words or, either and any shall not be exclusive. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the dates set below their names, to be effective on the date first above written.
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ARIS MORTGAGE HOLDING COMPANY, LLC | |
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James Furash |
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Chief Executive Officer |
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MEMBERS | |
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A-A MORTGAGE OPPORTUNITIES, L.P. | |
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A-A Mortgage Opportunities Corp., |
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its general partner |
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James Furash |
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Chief Executive Officer |
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AMERIHOME, INC. | |
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James Furash |
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Chief Executive Officer |
SIGNATURE PAGE TO SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF ARIS MORTGAGE HOLDING COMPANY, LLC
Exhibit A
FORM OF JOINDER AGREEMENT
This JOINDER AGREEMENT, dated as of , 20 (this Joinder), is delivered pursuant to that certain Second Amended and Restated Limited Liability Company Agreement, dated as of [·], 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the LLC Agreement) of Aris Mortgage Holding Company, LLC, a Delaware limited liability company (the Company), by and among the Company, AmeriHome, Inc., a Delaware corporation and the managing member of the Company (PubCo), and each of the Members from time to time party thereto. Capitalized terms used but not otherwise defined herein have the respective meanings set forth in the LLC Agreement.
1. Joinder to the LLC Agreement. Upon the execution of this Joinder by the undersigned and delivery hereof to PubCo, the undersigned hereby is admitted as and hereafter will be a Member under the LLC Agreement and a party thereto, with all the rights, privileges and responsibilities of a Member thereunder. The undersigned hereby agrees that it shall comply with and be fully bound by the terms of the LLC Agreement as if it had been a signatory thereto as of the date thereof.
2. Incorporation by Reference. All terms and conditions of the LLC Agreement are hereby incorporated by reference in this Joinder as if set forth herein in full.
3. Address. All notices under the LLC Agreement to the undersigned shall be direct to:
[Name]
[Address]
[City, State, Zip Code]
Attn:
Facsimile:
E-mail:
IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Joinder as of the day and year first above written.
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Exhibit B-1
FORM OF AGREEMENT AND CONSENT OF SPOUSE
The undersigned spouse of (the Member), a party to that certain Second Amended and Restated Limited Liability Company Agreement, dated as of [·], 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the Agreement) of Aris Mortgage Holding Company, LLC, a Delaware limited liability company (the Company), by and among the Company, AmeriHome, Inc., a Delaware corporation and the managing member of the Company, and each of the Members from time to time party thereto (capitalized terms used but not otherwise defined herein have the respective meanings set forth in the Agreement), acknowledges on his or her own behalf that:
I have read the Agreement and understand its contents. I acknowledge and understand that under the Agreement, any interest I may have, community property or otherwise, in the Units owned by the Member is subject to the terms of the Agreement which include certain restrictions on Transfer.
I hereby consent to and approve the Agreement. I agree that said Units and any interest I may have, community property or otherwise, in such Units are subject to the provisions of the Agreement and that I will take no action at any time to hinder operation of the Agreement on said Units or any interest I may have, community property or otherwise, in said Units.
I hereby acknowledge that the meaning and legal consequences of the Agreement have been explained fully to me and are understood by me, and that I am signing this Agreement and consent without any duress and of free will.
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Exhibit B-2
FORM OF SPOUSES CONFIRMATION OF SEPARATE PROPERTY
I, the undersigned, the spouse of (the Member), who is a party to that certain Second Amended and Restated Limited Liability Company Agreement, dated as of [·], 2020 (as amended, restated, amended and restated, supplemented or otherwise modified from time to time, the Agreement) of Aris Mortgage Holding Company, LLC, a Delaware limited liability company (the Company), by and among the Company, AmeriHome, Inc., a Delaware corporation and the managing member of the Company, and each of the Members from time to time party thereto (capitalized terms used but not otherwise defined herein have the respective meanings set forth in the Agreement), acknowledge and confirm on that the Units owned by said Member are the sole and separate property of said Member, and I hereby disclaim any interest in same.
I hereby acknowledge that the meaning and legal consequences of this Members spouses confirmation of separate property have been fully explained to me and are understood by me, and that I am signing this Members spouses confirmation of separate property without any duress and of free will.
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TAX RECEIVABLE AGREEMENT
among
AMERIHOME, INC.,
and
THE PERSONS NAMED HEREIN
Dated as of [·]
TABLE OF CONTENTS
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ARTICLE I DEFINITIONS |
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Section 1.1 |
Definitions |
5 |
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ARTICLE II DETERMINATION OF CERTAIN REALIZED TAX BENEFIT |
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Section 2.1 |
Basis Adjustment |
12 |
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Section 2.2 |
Tax Benefit Schedule |
12 |
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Section 2.3 |
Procedures, Amendments |
13 |
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ARTICLE III TAX BENEFIT PAYMENTS |
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Section 3.1 |
Payments |
14 |
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Section 3.2 |
No Duplicative Payments |
15 |
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Section 3.3 |
Pro Rata Payments; Limited Taxable Income; Excess Payments |
15 |
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ARTICLE IV TERMINATION |
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Section 4.1 |
Early Termination and Breach of Agreement |
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Section 4.2 |
Early Termination Notice |
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Section 4.3 |
Payment upon Early Termination |
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ARTICLE V SUBORDINATION AND LATE PAYMENTS |
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Section 5.1 |
Subordination |
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Section 5.2 |
Late Payments by the Corporate Taxpayer |
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ARTICLE VI NO DISPUTES; CONSISTENCY; COOPERATION |
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Section 6.1 |
Participation in the Corporate Taxpayers and Aris LLCs Tax Matters |
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Section 6.2 |
Consistency |
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Section 6.3 |
Cooperation |
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ARTICLE VII MISCELLANEOUS |
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Section 7.1 |
Notices |
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Section 7.2 |
Counterparts |
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Section 7.3 |
Entire Agreement; No Third Party Beneficiaries |
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Section 7.4 |
Governing Law |
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Section 7.5 |
Severability |
21 |
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Section 7.6 |
Successors; Assignment; Amendments; Waivers |
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Section 7.7 |
Titles and Subtitles |
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Section 7.8 |
Resolution of Disputes |
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Section 7.9 |
Reconciliation |
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Section 7.10 |
Withholding |
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Section 7.11 |
Admission of the Corporate Taxpayer into a Consolidated Group; Transfers of Corporate Assets |
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Section 7.12 |
Confidentiality |
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Section 7.13 |
LLC Agreement |
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Section 7.14 |
Change in Law |
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TAX RECEIVABLE AGREEMENT
This TAX RECEIVABLE AGREEMENT (this Agreement), dated as of [], 2020, is hereby entered into by and among AmeriHome, Inc., a Delaware corporation (the Corporate Taxpayer), and each of the persons from time to time party hereto (the TRA Parties).
RECITALS
WHEREAS, the TRA Parties hold member interests (the LLC Interests) in Aris Mortgage Holding Company, LLC, a Delaware limited liability company (Aris LLC), which is classified as a partnership for United States federal income tax purposes;
WHEREAS, the Corporate Taxpayer, which is classified as an association taxable as a corporation for United States federal income tax purposes, is the managing member of Aris LLC, and will hold LLC Interests;
WHEREAS, in connection with the IPO (as defined below) the Corporate Taxpayer will use the net proceeds from the IPO to purchase LLC Interests in Aris LLC from certain holders of such LLC Interests pursuant to those certain unit purchase agreements, dated and effective as of [·], by and between such holders (the Sellers) and the Corporate Taxpayer (the Unit Purchase Agreements);
WHEREAS, the LLC Interests together with corresponding shares of Class B common stock of the Corporate Taxpayer held or to be held from time to time by the TRA Parties may be exchanged from time to time for Class A common stock of the Corporate Taxpayer (the Class A Shares), or, at the election of the Corporate Taxpayer, a cash payment, in each case subject to the provisions of the LLC Agreement and the Exchange Agreement (each transfer of LLC Interests described in this Recital and the immediately preceding Recital, an Exchange);
WHEREAS, Aris LLC and each of its direct and indirect Subsidiaries treated as a partnership for United States federal income tax purposes currently have and will have in effect an election under Section 754 of the United States Internal Revenue Code of 1986, as amended (the Code), for each Taxable Year in which an Exchange occurs;
WHEREAS, the income, gain, loss, expense, deduction and other Tax items of the Corporate Taxpayer may be affected by (i) Basis Adjustments, (ii) Section 704(c) Benefits and (iii) Imputed Interest; and
WHEREAS, the parties to this Agreement desire to make certain arrangements with respect to the effect of the Basis Adjustments, Section 704(c) Benefits and Imputed Interest on the liability for Taxes of the Corporate Taxpayer.
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, the terms set forth in this Article I shall have the following meanings (such meanings to be equally applicable to both the singular and plural forms of the terms defined).
Actual Tax Liability means, with respect to any Taxable Year, the actual liability for U.S. federal income Taxes of (i) the Corporate Taxpayer and (ii) without duplication, Aris LLC, but only with respect to U.S. federal income Taxes imposed on Aris LLC and allocable to the Corporate Taxpayer (or to the other members of the consolidated group of which the Corporate Taxpayer is the parent) for such Taxable Year; provided, that the actual liability for Taxes described in clauses (i) and (ii) shall be calculated assuming the deductions of (and other impacts of) state and local taxes are excluded for U.S. federal income Tax purposes.
Advance Payment is defined in Section 3.1(b) of this Agreement.
Affiliate means, with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person.
Agreed Rate means a per annum rate of LIBOR plus 100 basis points.
Agreement is defined in the Preamble of this Agreement.
Amended Schedule is defined in Section 2.3(b) of this Agreement.
Aris LLC is defined in the Recitals of this Agreement.
Attributable is defined in Section 3.1(b) of this Agreement.
Basis Adjustment means the adjustment to the tax basis of a Reference Asset under Sections 732, 734(b), 755 and 1012 of the Code, the Treasury Regulations promulgated thereunder and Rev. Rul. 99-6, 1991-1 CB 432 (in situations where, as a result of one or more Exchanges, Aris LLC becomes an entity that is disregarded as separate from its owner for United States federal income tax purposes) or under Sections 734(b), 743(b), 754 and 755 of the Code and the Treasury Regulations promulgated thereunder (in situations where, following an Exchange, Aris LLC remains in existence as an entity for United States federal income tax purposes) and, in each case, comparable sections of state and local tax laws, as a result of an Exchange and the payments made pursuant to this Agreement (to the extent permitted by law).
A Beneficial Owner of a security is a Person who directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares: (i) voting power, which includes the power to vote, or to direct the voting of, such security and/or (ii) investment power, which includes the power to dispose of, or to direct the disposition of, such security. The terms Beneficially Own and Beneficial Ownership shall have correlative meanings.
Board means the Board of Directors of the Corporate Taxpayer (or any committee of the Board validly authorized to act on behalf of the Board).
Business Day means a day, other than Saturday, Sunday or other day on which banks located in New York City, New York are authorized or required by law to close.
Change of Control means the occurrence of any of the following events:
(i) any Person or any group of Persons acting together which would constitute a group for purposes of Section 13(d) of the Securities and Exchange Act of 1934, or any successor provisions thereto, excluding (x) a corporation or other entity owned, directly or indirectly, by the stockholders of the Corporate Taxpayer in substantially the same proportions as their ownership of stock in the Corporate Taxpayer and (y) any TRA Party or any of their Affiliates, who is, or becomes the Beneficial Owner, directly or indirectly, of securities of the Corporate Taxpayer representing more than 50% of the combined voting power of the Corporate Taxpayers then outstanding voting securities; or
(ii) the following individuals cease for any reason to constitute a majority of the number of directors of the Corporate Taxpayer then serving: individuals who, on the IPO Date, constitute the Board and any new director whose appointment or election by the Board or nomination for election by the Corporate Taxpayers shareholders was approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors on the IPO Date or whose appointment, election or nomination for election was previously so approved or recommended by the directors referred to in this clause (ii); or
(iii) there is consummated a merger or consolidation of the Corporate Taxpayer with any other corporation or other entity, and, immediately after the consummation of such merger or consolidation, either (x) the Board immediately prior to the merger or consolidation does not constitute at least a majority of the board of directors of the company surviving the merger or consolidation or, if the surviving company is a Subsidiary, the ultimate parent thereof, or (y) the voting securities of the Corporate Taxpayer immediately prior to such merger or consolidation do not continue to represent or are not converted or exchanged into more than 50% of the combined voting power of the then outstanding voting securities of the Person resulting from such merger or consolidation or, if the surviving company is a Subsidiary, the ultimate parent thereof; or
(iv) the shareholders of the Corporate Taxpayer approve a plan of complete liquidation or dissolution of the Corporate Taxpayer or there is consummated an agreement or series of related agreements for the sale, lease or other disposition, directly or indirectly, by the Corporate Taxpayer of all or substantially all of the Corporate Taxpayers assets, other than such sale or other disposition by the Corporate Taxpayer of all or substantially all of the Corporate Taxpayers assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by shareholders of the Corporate Taxpayer in substantially the same
proportions as their ownership of the Corporate Taxpayer immediately prior to such sale.
Notwithstanding the foregoing, except with respect to clause (ii) and clause (iii)(x) above, a Change of Control shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately following which the record holders of the shares of the Corporate Taxpayer immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in, and own substantially all of the shares of, an entity which owns all or substantially all of the assets of the Corporate Taxpayer immediately following such transaction or series of transactions.
Class A Shares is defined in the Recitals of this Agreement.
Code is defined in the Recitals of this Agreement.
Combined State Tax Rate means five (5) percent.
Control means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.
Corporate Taxpayer is defined in the Preamble of this Agreement.
Corporate Taxpayer Return means the U.S. federal income Tax Return of the Corporate Taxpayer filed with respect to Taxes of any Taxable Year.
Cumulative Net Realized Tax Benefit for a Taxable Year means the cumulative amount of Realized Tax Benefits for all Taxable Years of the Corporate Taxpayer, up to and including such Taxable Year, net of the cumulative amount of Realized Tax Detriments for the same period. The Realized Tax Benefit and Realized Tax Detriment for each Taxable Year shall be determined based on the most recent Tax Benefit Schedules or Amended Schedules, if any, in existence at the time of such determination.
Default Rate means a per annum rate of LIBOR plus 500 basis points.
Determination shall have the meaning ascribed to such term in Section 1313(a) of the Code, or any other event (including the execution of IRS Form 870-AD) that finally and conclusively establishes the amount of any liability for Tax and shall also include the acquiescence of the Corporate Taxpayer to the amount of any assessed liability for Tax.
Dispute has the meaning set forth in Section 7.8(a) of this Agreement.
Early Termination Date means the date of an Early Termination Notice for purposes of determining the Early Termination Payment.
Early Termination Effective Date is defined in Section 4.2 of this Agreement.
Early Termination Notice is defined in Section 4.2 of this Agreement.
Early Termination Schedule is defined in Section 4.2 of this Agreement.
Early Termination Payment is defined in Section 4.3(b) of this Agreement.
Early Termination Rate means a per annum rate of the lesser of (i) 6.5%, compounded annually, and (ii) LIBOR plus 100 basis points.
Exchange is defined in the Recitals of this Agreement.
Exchange Agreement means the Exchange Agreement, dated as of [] among the Corporate Taxpayer, Aris LLC and the holders of LLC Interests party thereto, as amended from time to time.
Exchange Date means the date of any Exchange.
Exchange Notice shall have the meaning set forth in the Exchange Agreement.
Exchange Basis Schedule is defined in Section 2.1 of this Agreement.
Expert is defined in Section 7.9 of this Agreement.
Hypothetical Tax Liability means, with respect to any Taxable Year, the liability for U.S. federal income Taxes of (i) the Corporate Taxpayer and (ii) without duplication, Aris LLC, but only with respect to U.S. federal income Taxes imposed on Aris LLC and allocable to the Corporate Taxpayer (or to the other members of the consolidated group of which the Corporate Taxpayer is the parent), in each case using the same methods, elections, conventions, U.S. federal income tax rate and similar practices used on the relevant Corporate Taxpayer Return, but (i) using the Non-Stepped Up Tax Basis, (ii) without taking into account any Section 704(c) Benefits, and (iii) excluding any deduction attributable to Imputed Interest for the Taxable Year. Hypothetical Tax Liability shall be determined (i) without taking into account the carryover or carryback of any Tax item or attribute (or portions thereof) that is available for use because of any Basis Adjustments, any Section 704(c) Benefits and any Imputed Interest, and (ii) assuming, solely for purposes of calculating the liability for U.S. federal income Taxes, in order to prevent double counting, that the deductions of (and other impacts of) state and local taxes are excluded for U.S. federal income Tax purposes.
Imputed Interest in respect of a TRA Party shall mean any interest imputed under Section 1272, 1274 or 483 or other provision of the Code with respect to the Corporate Taxpayers payment obligations in respect of such TRA Party under this Agreement.
Interest Amount is defined in Section 3.1(b) of this Agreement.
IPO means the initial public offering of Class A Shares by the Corporate Taxpayer.
IPO Date means the closing date of the IPO.
IRS means the United States Internal Revenue Service.
LIBOR means during any period, an interest rate per annum equal to the one-year LIBOR reported, on the date two days prior to the first day of such period, on the Telerate Page 3750 (or if such screen shall cease to be publicly available, as reported on Reuters Screen page LIBOR01 or by any other publicly available source of such market rate) for London interbank offered rates for United States dollar deposits for such period; provided, however, that if at any time a majority of the Corporate Taxpayers then-outstanding repurchase or warehouse agreements or other financing arrangements providing for the financing of mortgage loans, discontinue the use of LIBOR in determining pricing or interest rates and apply an alternative benchmark rate (such agreements that have discontinued the use of LIBOR, the discontinued agreements), then, during any period, all references in this Agreement to LIBOR shall automatically and without further action by any party refer to the sum of (1) the alternative benchmark rate applied in such period in the majority of the discontinued agreements (the successor benchmark) and (2) the weighted average mathematical spread adjustment (which may be zero, negative or positive and shall be determined based on the aggregate principal amount of financing provided under each such discontinued agreement, whether utilized or unutilized at the time that successor benchmark is adopted) applied to such successor benchmark in the discontinued agreements.
LLC Agreement means the Limited Liability Company Agreement of Aris LLC, as amended from time to time.
LLC Interests is defined in the Recitals of this Agreement.
Market Value shall mean the closing price of the Class A Shares on the applicable Exchange Date on the national securities exchange or interdealer quotation system on which such Class A Shares are then traded or listed, as reported by the Wall Street Journal; provided, that if the closing price is not reported by the Wall Street Journal for the applicable Exchange Date, then the Market Value shall mean the closing price of the Class A Shares on the Business Day immediately preceding such Exchange Date on the national securities exchange or interdealer quotation system on which such Class A Shares are then traded or listed, as reported by the Wall Street Journal; provided, further, that if the Class A Shares are not then listed on a national securities exchange or interdealer quotation system, Market Value shall mean the cash consideration paid for Class A Shares, or the fair market value of the other property delivered for Class A Shares, as determined by the Board in good faith.
Material Objection Notice has the meaning set forth in Section 4.2 of this Agreement.
Net Tax Benefit is defined in Section 3.1(b) of this Agreement.
Non-Party Member means each Person that owns, whether directly or indirectly, LLC Interests in Aris LLC who is not a party hereto, in each case, as of the date of this Agreement.
Non-Stepped Up Tax Basis means, with respect to any Reference Asset at any time, the Tax basis that such asset would have had at such time if no Basis Adjustments had been made.
Objection Notice has the meaning set forth in Section 2.3(a) of this Agreement.
Person means any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity or other entity.
Realized Tax Benefit means, for a Taxable Year, the sum of (i) the excess, if any, of the Hypothetical Tax Liability over the Actual Tax Liability and (ii) the State Tax Benefit. If all or a portion of the actual liability for such Taxes for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Benefit unless and until there has been a Determination.
Realized Tax Detriment means, for a Taxable Year, the sum of (i) the excess, if any, of the Actual Tax Liability over the Hypothetical Tax Liability and (ii) the State Tax Detriment. If all or a portion of the actual liability for such Taxes for the Taxable Year arises as a result of an audit by a Taxing Authority of any Taxable Year, such liability shall not be included in determining the Realized Tax Detriment unless and until there has been a Determination.
Reconciliation Dispute has the meaning set forth in Section 7.9 of this Agreement.
Reconciliation Procedures has the meaning set forth in Section 2.3(a) of this Agreement.
Reference Asset means an asset that is held by Aris LLC, or by any of its direct or indirect Subsidiaries treated as a partnership or disregarded entity (but only if such indirect Subsidiaries are held only through Subsidiaries treated as partnerships or disregarded entities) for purposes of the applicable Tax. A Reference Asset also includes any asset that is substituted basis property under Section 7701(a)(42) of the Code with respect to a Reference Asset.
Schedule means any of the following: (i) an Exchange Basis Schedule, (ii) a Tax Benefit Schedule, or (iii) the Early Termination Schedule.
Section 704(c) Benefits means the disproportionate allocation of tax items of income, gain, deduction and loss to, or away from, the Corporate Taxpayer pursuant to Section 704(c) of the Code in respect of any difference between the fair market value and the tax basis of the Reference Assets to the extent such disproportionate allocation arises from any contribution (or deemed contribution) to Aris LLC in connection with the IPO or any future equity offering by the Corporate Taxpayer in which cash proceeds from such offering are contributed to Aris LLC. For the avoidance of doubt, such amount would include disproportionate allocations (if any) of tax items of income and gain to a TRA Party and away from the Corporate Taxpayer.
Sellers is defined in the Recitals of this Agreement.
Senior Obligations is defined in Section 5.1 of this Agreement.
State Tax Benefit means, for a Taxable Year, the excess, if any, of the Hypothetical Tax Liability over the Actual Tax Liability; provided that, for purposes of determining the State Tax Benefit, each of the Hypothetical Tax Liability and the Actual Tax Liability shall be calculated using the Combined State Tax Rate instead of the rates applicable for U.S. federal income tax purposes.
State Tax Detriment means, for a Taxable Year, the excess, if any, of the Actual Tax Liability over the Hypothetical Tax Liability; provided that, for purposes of determining the State Tax Detriment, each of the Actual Tax Liability and the Hypothetical Tax Liability shall be calculated using the Combined State Tax Rate instead of the rates applicable for U.S. federal income tax purposes.
Subsidiaries means, with respect to any Person, as of any date of determination, any other Person as to which such Person, owns, directly or indirectly, or otherwise controls more than 50% of the voting power or other similar interests or the sole general partner interest or managing member or similar interest of such Person.
Tax Benefit Payment is defined in Section 3.1(b) of this Agreement.
Tax Benefit Schedule is defined in Section 2.2 of this Agreement.
Tax Receivable Agreement shall mean this Agreement.
Tax Return means any return, declaration, report or similar statement required to be filed with respect to Taxes (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax.
Taxable Year means a taxable year of the Corporate Taxpayer as defined in Section 441(b) of the Code or comparable section of state or local tax law, as applicable (and, therefore, for the avoidance of doubt, may include a period of less than 12 months for which a Tax Return is made), ending on or after the IPO Date.
Taxes means any and all United States federal taxes, assessments or similar charges that are based on or measured with respect to net income or profits, and any interest related to such Tax.
Taxing Authority shall mean any domestic, federal, national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising any taxing authority or any other authority exercising Tax regulatory authority.
TRA Party is defined in the Preamble of this Agreement.
Treasury Regulations means the final, temporary and proposed regulations under the Code promulgated from time to time (including corresponding provisions and succeeding provisions) as in effect for the relevant taxable period.
Unit Purchase Agreements is defined in the Recitals of this Agreement.
Valuation Assumptions shall mean, as of an Early Termination Date, the assumptions that in each Taxable Year ending on or after such Early Termination Date, (1) the Corporate Taxpayer will have taxable income sufficient to fully utilize (i) the deductions arising from the Basis Adjustments, the Section 704(c) Benefits and the Imputed Interest during such Taxable Year or future Taxable Years (including, for the avoidance of doubt, Basis Adjustments, the Section
704(c) Benefits and Imputed Interest that would result from future Tax Benefit Payments that would be paid in accordance with the Valuation Assumptions) in which such deductions would become available and (ii) any net operating loss, excess interest deduction, or credit carryovers or carrybacks (or similar items with respect to carryover or carrybacks) generated by deductions arising from Basis Adjustments, Section 704(c) Benefits or Imputed Interest that are available as of the date of such Early Termination Date, (2) the United States federal income tax rates that will be in effect for each such Taxable Year will be those specified for each such Taxable Year by the Code and other law as in effect on the Early Termination Date, (3) all taxable income of the Corporate Taxpayer will be subject to the maximum applicable tax rate for U.S. federal income tax purposes throughout the relevant period, (4) any non-amortizable assets will be disposed of on the fifteenth anniversary of the applicable Basis Adjustment in a fully taxable transaction for U.S. federal income tax purposes; provided, that in the event of a Change of Control, such non-amortizable assets shall be deemed disposed of at the time of sale of the relevant asset (if earlier than such fifteenth anniversary), and (5) if, at the Early Termination Date, there are LLC Interests that have not been Exchanged, then each such LLC Interest shall be deemed to be Exchanged for the Market Value of the Class A Shares and the amount of cash that would be transferred if the Exchange occurred on the Early Termination Date.
ARTICLE II
DETERMINATION OF CERTAIN REALIZED TAX BENEFIT
Section 2.1 Basis Adjustment. Within ninety (90) calendar days after the filing of the U.S. federal income Tax Return of the Corporate Taxpayer for each Taxable Year in which any Exchange has been effected by any TRA Party (including the Taxable Year in which the IPO occurs), the Corporate Taxpayer shall deliver to such TRA Party a schedule (the Exchange Basis Schedule) that shows, in reasonable detail necessary to perform the calculations required by this Agreement, including (i) the Non-Stepped Up Tax Basis of the Reference Assets in respect of such TRA Party as of each applicable Exchange Date, (ii) the Basis Adjustment with respect to the Reference Assets in respect of such TRA Party as a result of the Exchanges effected in such Taxable Year by such TRA Party, calculated (x) in the aggregate, (y) solely with respect to Exchanges by such TRA Party, and (z) in the case of a Basis Adjustment under Section 734(b) of the Code solely with respect to the amount that is available to the Corporate Taxpayer in such Taxable Year, (iii) the period (or periods) over which the Reference Assets in respect of such TRA Party are amortizable and/or depreciable, and (iv) the period (or periods) over which each Basis Adjustment in respect of such TRA Party is amortizable and/or depreciable. Upon the request of a TRA Party, the Corporate Taxpayer shall also provide projections of the yearly amount of Section 704(c) Benefits with respect to such TRA Party.
Section 2.2 Tax Benefit Schedule.
(a) Tax Benefit Schedule. Within ninety (90) calendar days after the filing of the U.S. federal income Tax Return of the Corporate Taxpayer for any Taxable Year in which there is a Realized Tax Benefit or Realized Tax Detriment a portion of which is Attributable to a TRA Party, the Corporate Taxpayer shall provide to such TRA Party a schedule showing, in reasonable detail, the calculation of the Tax Benefit Payment for such Taxable Year and the calculation of the Realized Tax Benefit and Realized Tax Detriment and components thereof (a Tax Benefit
Schedule). Each Tax Benefit Schedule will become final as provided in Section 2.3(a) and may be amended as provided in Section 2.3(b) (subject to the procedures set forth in Section 2.3(b)).
(b) Applicable Principles. The Realized Tax Benefit or Realized Tax Detriment for each Taxable Year is intended to measure the decrease or increase in the actual liability for taxes of the Corporate Taxpayer for such Taxable Year attributable to the Basis Adjustments, Section 704(c) Benefits and Imputed Interest, determined using a with and without methodology. For purposes of calculating the Realized Tax Benefit or Realized Tax Detriment for any period, carryovers or carrybacks of any Tax item attributable to the Basis Adjustments, Section 704(c) Benefits and Imputed Interest shall be considered to be subject to the rules of the Code and the Treasury Regulations, as applicable, governing the use, limitation and expiration of carryovers or carrybacks of the relevant type. If a carryover or carryback of any Tax item includes a portion that is attributable to the Basis Adjustment, Section 704(c) Benefits or Imputed Interest and another portion that is not, such respective portions shall be considered to be used in accordance with the with and without methodology. The parties agree that (i) all Tax Benefit Payments and other payments under this Agreement (to the extent permitted by law and other than amounts accounted for as interest under the Code) will (A) be treated as subsequent upward purchase price adjustments that give rise to further Basis Adjustments to Reference Assets for the Corporate Taxpayer and (B) have the effect of creating additional Basis Adjustments to Reference Assets for the Corporate Taxpayer in the year of payment, and (ii) as a result, such additional Basis Adjustments will be incorporated into the current year calculation and into future year calculations, as appropriate.
Section 2.3 Procedures, Amendments.
(a) Procedure. Every time the Corporate Taxpayer delivers to a TRA Party an applicable Schedule under this Agreement, including any Amended Schedule delivered pursuant to Section 2.3(b), and any Early Termination Schedule or amended Early Termination Schedule, the Corporate Taxpayer shall also (x) deliver to such TRA Party schedules, valuation reports, if any, and work papers, as determined by the Corporate Taxpayer or requested by such TRA Party, providing reasonable detail regarding the preparation of the Schedule and (y) allow such TRA Party reasonable access, at no cost, to the appropriate representatives at the Corporate Taxpayer, as determined by the Corporate Taxpayer or requested by such TRA Party, in connection with a review of such Schedule. Without limiting the application of the preceding sentence, each time the Corporate Taxpayer delivers to a TRA Party a Tax Benefit Schedule, in addition to the Tax Benefit Schedule duly completed, the Corporate Taxpayer shall deliver to such TRA Party the Corporate Taxpayer Return, the reasonably detailed calculation by the Corporate Taxpayer of the applicable Hypothetical Tax Liability, the reasonably detailed calculation by the Corporate Taxpayer of the applicable Actual Tax Liability, as well as any other work papers as determined by the Corporate Taxpayer or requested by such TRA Party, provided that the Corporate Taxpayer shall be entitled to redact any information that it reasonably believes is unnecessary for purposes of determining the items in the applicable Schedule or amendment thereto. An applicable Schedule or amendment thereto shall become final and binding on all parties thirty (30) calendar days after the first date on which such TRA Party has received the applicable Schedule or amendment thereto unless such TRA Party (i) within thirty (30) calendar days after receiving an applicable Schedule or amendment thereto, provides the Corporate Taxpayer with notice of a material objection to such Schedule (Objection Notice) made in good faith or (ii) provides a written waiver of such right of any Objection Notice within the period described in clause (i) above, in which case such
Schedule or amendment thereto becomes binding on the date the waiver is received by the Corporate Taxpayer. If the Corporate Taxpayer and any objecting TRA Party, for any reason, are unable to successfully resolve the issues raised in the Objection Notice within thirty (30) calendar days after receipt by the Corporate Taxpayer of an Objection Notice, the Corporate Taxpayer and such TRA Party shall employ the reconciliation procedures as described in Section 7.9 of this Agreement (the Reconciliation Procedures).
(b) Amended Schedule. The applicable Schedule for any Taxable Year may be amended from time to time by the Corporate Taxpayer (i) in connection with a Determination affecting such Schedule, (ii) to correct inaccuracies in the Schedule identified after the date the Schedule was provided to a TRA Party, (iii) to comply with the Experts determination under the Reconciliation Procedures, (iv) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to a carryback or carryforward of a loss or other tax item to such Taxable Year, (v) to reflect a change in the Realized Tax Benefit or Realized Tax Detriment for such Taxable Year attributable to an amended Tax Return filed for such Taxable Year, or (vi) to adjust an applicable Exchange Basis Schedule to take into account payments made pursuant to this Agreement (any such Schedule, an Amended Schedule). The Corporate Taxpayer shall provide an Amended Schedule to each TRA Party within ninety (90) calendar days of the occurrence of an event referenced in clauses (i) through (vi) of the preceding sentence.
ARTICLE III
TAX BENEFIT PAYMENTS
Section 3.1 Payments.
(a) Payments. Within five (5) calendar days after a Tax Benefit Schedule delivered to a TRA Party becomes final in accordance with Section 2.3(a), the Corporate Taxpayer shall pay such TRA Party for such Taxable Year an amount equal to the excess, if any, of (i) the Tax Benefit Payment in respect of such TRA Party for such Taxable Year determined pursuant to Section 3.1(b) over (ii) the aggregate amount of Advance Payments previously made to such TRA Party under this Section 3.1(a) in respect of such Taxable Year. In addition, the Corporate Taxpayer may, at its sole election, make Advance Payments to the TRA Parties in respect of a Taxable Year; provided that, if the Corporate Taxpayer makes Advance Payments, it shall make Advance Payments to all parties eligible to receive payments under this Agreement in proportion to their respective amount of anticipated remaining payments under this Agreement in respect of such Taxable Year. Each such Tax Benefit Payment or such Advance Payment shall be made by wire transfer of immediately available funds to the bank account previously designated by such TRA Party to the Corporate Taxpayer or as otherwise agreed by the Corporate Taxpayer and such TRA Party. For the avoidance of doubt, no Tax Benefit Payment shall be made in respect of estimated tax payments, including, without limitation, federal estimated income tax payments.
(b) A Tax Benefit Payment in respect of a TRA Party for a Taxable Year means an amount, not less than zero, equal to the sum of the portion of the Net Tax Benefit Attributable to such TRA Party and the Interest Amount with respect thereto. A Net Tax Benefit is Attributable to a TRA Party to the extent that it is derived from any Basis Adjustment or any Imputed Interest that is attributable to the LLC Interests acquired by the Corporate Taxpayer in an Exchange
undertaken by or with respect to such TRA Party. The Net Tax Benefit arising out of a Section 704(c) Benefit will be Attributable to a TRA Party based on the proportion of items of taxable income, gain, deduction or loss allocated away from or to such TRA Party. For the avoidance of doubt, for Tax purposes, the Interest Amount shall not be treated as interest but instead shall be treated as additional consideration for the acquisition of LLC Interests in Exchanges unless otherwise required by law. The Net Tax Benefit for a Taxable Year shall be an amount equal to the excess, if any, of 85% of the Cumulative Net Realized Tax Benefit as of the end of such Taxable Year, over the total amount of payments previously made under Section 3.1(a) of this Agreement (excluding payments attributable to Interest Amounts); provided, for the avoidance of doubt, that no TRA Party shall be required to return any portion of any previously made Tax Benefit Payment or Advance Payment. The Interest Amount in respect of a TRA Party shall equal the interest on the amount of the unpaid Net Tax Benefit Attributable to such TRA Party for a Taxable Year, which interest shall accrue on any unpaid Net Tax Benefit from and after the due date (without extensions) for filing the Corporate Taxpayer Return for such Taxable Year, calculated at the Agreed Rate, until the date such unpaid amounts are paid. Advance Payments in respect of a TRA Party for a Taxable Year means the payments made by the Corporate Taxpayer to such TRA Party as an advance of such TRA Partys anticipated Tax Benefit Payment for such Taxable Year. Notwithstanding the foregoing, for each Taxable Year ending on or after the date of a Change of Control, all Tax Benefit Payments, whether paid with respect to the LLC Interests that were Exchanged (i) prior to the date of such Change of Control or (ii) on or after the date of such Change of Control, shall be calculated by utilizing Valuation Assumptions (1) and (4), substituting in each case the terms the date of a Change of Control for an Early Termination Date. Notwithstanding anything to the contrary in this Agreement, after any lump-sum payment under Article IV of this Agreement in respect of present or future Tax attributes subject to this Tax Receivable Agreement, the Tax Benefit Payment, Net Tax Benefit and components thereof shall be calculated without taking into account any such attributes with respect to which such a lump sum payment has been made or any such lump-sum payment.
Section 3.2 No Duplicative Payments. It is intended that the provisions of this Agreement will not result in duplicative payment of any amount (including interest) required under this Agreement. The provisions of this Agreement shall be construed in the appropriate manner to ensure such intentions are realized
Section 3.3 Pro Rata Payments; Limited Taxable Income; Excess Payments.
(a) Notwithstanding anything in Section 3.1 to the contrary, to the extent that the aggregate amount of the Corporate Taxpayers tax benefit from the reduction in Tax liability as a result of the Basis Adjustments, Section 704(c) Benefits or Imputed Interest is limited in a particular Taxable Year because the Corporate Taxpayer does not have sufficient taxable income to fully utilize available deductions and other attributes, the limitation on the tax benefit for the Corporate Taxpayer shall be allocated among the TRA Parties eligible for payments under this Agreement in proportion to the respective amounts of Tax Benefit Payments that would have been determined under this Agreement if the Corporate Taxpayer had sufficient taxable income so that there were no such limitation.
(b) After taking into account Section 3.3(a), if for any reason the Corporate Taxpayer does not fully satisfy its payment obligations to make all Tax Benefit Payments due under this
Agreement in respect of a particular Taxable Year, then the Corporate Taxpayer and the TRA Parties agree that (i) the Corporate Taxpayer shall pay the same proportion of each Tax Benefit Payment due to each TRA Party due a payment under this Agreement in respect of such Taxable Year, without favoring one obligation over the other, and (ii) no Tax Benefit Payment shall be made in respect of any Taxable Year until all Tax Benefit Payments in respect of prior Taxable Years have been made in full.
(c) To the extent the Corporate Taxpayer makes a payment to a TRA Party in respect of a particular Taxable Year under Section 3.1(a) of this Agreement (taking into account Section 3.3(a) and (b), but excluding payments attributable to Interest Amounts) in an amount in excess of the amount of such payment that should have been made to such TRA Party in respect of such Taxable Year, then (i) such TRA Party shall not receive further payments under Section 3.1(a) until such TRA Party has foregone an amount of payments equal to such excess and (ii) the Corporate Taxpayer shall pay the amount of such TRA Partys foregone payments to the other TRA Parties in a manner such that each of the other TRA Parties, to the maximum extent possible, shall have received aggregate payments under Section 3.1(a) of this Agreement (taking into account Section 3.3(a) and (b) of this Agreement but excluding payments attributable to Interest Amounts) in the amount it would have received if there had been no excess payment to such TRA Party.
ARTICLE IV
TERMINATION
Section 4.1 Early Termination and Breach of Agreement.
(a) Unless terminated earlier pursuant to Section 4.1(b) or Section 4.1(c), this Agreement will terminate when there is no further potential for a Tax Benefit Payment pursuant to this Agreement. Tax Benefit Payments under this Agreement are not conditioned on any TRA Party retaining an interest in the Corporate Taxpayer or Aris LLC (or any successor thereto).
(b) The Corporate Taxpayer may terminate this Agreement with respect to all amounts payable to the TRA Parties and with respect to all of the LLC Interests held by the TRA Parties at any time by paying to each TRA Party the Early Termination Payment in respect of such TRA Party; provided, however, that this Agreement shall only terminate pursuant to this Section 4.1(b) upon the receipt of the Early Termination Payment by all TRA Parties; provided, further, that the Corporate Taxpayer may terminate this Agreement pursuant to this Section 4.1(b) with respect to some or all of the amounts payable to less than all of the TRA Parties, if the Corporate Taxpayer and such TRA Parties agree in writing to do so; and provided, further that the Corporate Taxpayer may withdraw any notice to execute its termination rights under this Section 4.1(b) prior to the time at which an Early Termination Payment has been paid. Upon payment of the Early Termination Payment by the Corporate Taxpayer in accordance with this Section 4.1(b), the Corporate Taxpayer shall not have any further payment obligations under this Agreement, other than for any (a) Tax Benefit Payment agreed to by the Corporate Taxpayer, on one hand, and the TRA Party, on the other, as due and payable but unpaid as of the Early Termination Notice and (b) Tax Benefit Payment due for the Taxable Year ending with or including the date of the Early Termination Notice (except to the extent that the amount described in clause (b) is included in the
Early Termination Payment). If an Exchange by a TRA Party occurs after the Corporate Taxpayer makes the Early Termination Payment to such TRA Party pursuant to this Section 4.1(b), the Corporate Taxpayer shall have no obligations under this Agreement with respect to such Exchange.
(c) In the event that the Corporate Taxpayer breaches any of its material obligations under this Agreement, whether as a result of failure to make any payment within three (3) months of the date on which such payment is due, failure to honor any other material obligation required hereunder or by operation of law as a result of the rejection of this Agreement in a case commenced under the Bankruptcy Code or otherwise, then all obligations hereunder shall be accelerated and such obligations shall be calculated as if an Early Termination Notice had been delivered on the date of such breach and shall include (without duplication), but not be limited to, (1) the Early Termination Payments calculated as if an Early Termination Notice had been delivered on the date of such breach, (2) any Tax Benefit Payment in respect of a TRA Party agreed to by the Corporate Taxpayer and such TRA Party as due and payable but unpaid as of the date of such breach, and (3) any Tax Benefit Payment in respect of any TRA Party due for the Taxable Year ending with or including the date of such breach; provided that procedures similar to the procedures of Section 4.2 shall apply with respect to the determination of the amount payable by the Corporate Taxpayer pursuant to this sentence. Notwithstanding the foregoing, in the event that the Corporate Taxpayer breaches this Agreement, each TRA Party shall be entitled to elect to receive the amounts set forth in clauses (1), (2) and (3) above or to seek specific performance of the terms hereof. The parties agree that the failure to make any payment due pursuant to this Agreement within three (3) months of the date such payment is due shall be deemed to be a breach of a material obligation under this Agreement for all purposes of this Agreement, and that it will not be considered to be a breach of a material obligation under this Agreement to make a payment due pursuant to this Agreement within three months of the date such payment is due. Notwithstanding anything in this Agreement to the contrary, it shall not be a breach of this Agreement if the Corporate Taxpayer fails to make any Tax Benefit Payment when due to the extent that the Corporate Taxpayer has insufficient funds to make such payment despite using reasonable best efforts to obtain funds to make such payment (including by causing Aris LLC or any other Subsidiaries to distribute or lend funds for such payment and access any revolving credit facilities or other sources of available credit to fund any such amounts); provided that the interest provisions of Section 5.2 shall apply to such late payment; provided further that, solely with respect to a Tax Benefit Payment, if the Corporate Taxpayer does not have sufficient cash to make such payment as a result of limitations imposed by existing credit agreements to which Aris LLC is a party, which limitations are effective as of the date of this Agreement, Section 5.2 shall apply, but the Default Rate shall be replaced by the Agreed Rate.
Section 4.2 Early Termination Notice. If the Corporate Taxpayer chooses to exercise its right of early termination under Section 4.1 above, the Corporate Taxpayer shall deliver to each TRA Party with respect to whom such right of early termination is being exercised notice of such intention to exercise such right (Early Termination Notice) and a schedule (the Early Termination Schedule) specifying the Corporate Taxpayers intention to exercise such right and showing in reasonable detail the calculation of the Early Termination Payment(s) due to each such TRA Party. Each Early Termination Schedule shall become final and binding on all parties thirty (30) calendar days after the first date on which the TRA Party has received such Schedule or amendment thereto unless such TRA Party (i) within thirty (30) calendar days after receiving the
Early Termination Schedule or any amendment thereto, provides the Corporate Taxpayer with notice of a material objection to such Schedule made in good faith (Material Objection Notice) or (ii) provides a written waiver of such right of a Material Objection Notice within the period described in clause (i) above, in which case such Schedule becomes binding on the date the waiver is received by the Corporate Taxpayer (such thirty (30) calendar day date as modified, if at all by clauses (i) or (ii), the Early Termination Effective Date). If the Corporate Taxpayer and a TRA Party, for any reason, are unable to successfully resolve the issues raised in such notice within thirty (30) calendar days after receipt by the Corporate Taxpayer of the Material Objection Notice, the Corporate Taxpayer and such TRA Party shall employ the Reconciliation Procedures in which case such Schedule becomes binding ten (10) days after the conclusion of the Reconciliation Procedures.
Section 4.3 Payment upon Early Termination.
(a) Within three (3) calendar days after an Early Termination Effective Date, the Corporate Taxpayer shall pay to each TRA Party with respect to whom such termination has just occurred an amount equal to the Early Termination Payment with respect to such TRA Party. Such payment shall be made by wire transfer of immediately available funds to a bank account or accounts designated by such TRA Party or as otherwise agreed by the Corporate Taxpayer and such TRA Party.
(b) Early Termination Payment in respect of a TRA Party shall equal the present value, discounted at the Early Termination Rate (using a mid-year convention) as of the applicable Early Termination Effective Date, of all Tax Benefit Payments in respect of such TRA Party that would be required to be paid by the Corporate Taxpayer to such TRA Party beginning from the Early Termination Date and assuming that the Valuation Assumptions in respect of such TRA Party are applied. If for any reason the Corporate Taxpayer does not fully satisfy its payment obligations due under this Agreement in respect of a particular Taxable Year, then the Corporate Taxpayer and the TRA Parties agree that (i) no Early Termination Payment shall be made until all Tax Benefit Payments under Section 3.1 in respect of the current Taxable Year and all prior Taxable Years have been made in full, (ii) no Early Termination Payments shall be made until all Early Termination Payments made pursuant to earlier-provided Early Termination Notices have been made in full, and (iii) if the Corporate Taxpayer does not pay all Early Termination Payments in respect of Early Termination Notices given in the same calendar year, the total amount paid shall be allocated pro-rata based on the outstanding Early Termination Payments due.
ARTICLE V
SUBORDINATION AND LATE PAYMENTS
Section 5.1 Subordination. Notwithstanding any other provision of this Agreement to the contrary, any Tax Benefit Payment, Early Termination Payment or any other payment required to be made by the Corporate Taxpayer to the TRA Parties under this Agreement shall rank subordinate and junior in right of payment to any principal, interest or other amounts due and payable in respect of any obligations in respect of indebtedness for borrowed money of the Corporate Taxpayer and its Subsidiaries (such obligations, Senior Obligations) and shall rank pari passu with all current or future unsecured obligations of the Corporate Taxpayer that are not
Senior Obligations. For the avoidance of doubt, any amounts owed by the Corporate Taxpayer under this Agreement are not Senior Obligations.
Section 5.2 Late Payments by the Corporate Taxpayer. The amount of all or any portion of any Tax Benefit Payment, Early Termination Payment or other payment under this Agreement not made to the TRA Parties when due under the terms of this Agreement shall be payable together with any interest thereon, computed at the Default Rate and commencing from the date on which such Tax Benefit Payment, Early Termination Payment or other payment was due and payable.
ARTICLE VI
NO DISPUTES; CONSISTENCY; COOPERATION
Section 6.1 Participation in the Corporate Taxpayers and Aris LLCs Tax Matters. Except as otherwise provided herein, the Corporate Taxpayer shall have full responsibility for, and sole discretion over, all Tax matters concerning the Corporate Taxpayer and Aris LLC, including without limitation the preparation, filing or amending of any Tax Return and defending, contesting or settling any issue pertaining to Taxes. Notwithstanding the foregoing, the Corporate Taxpayer shall notify a TRA Party of, and (to the extent permitted by law or regulation) will use its best efforts to keep such TRA Party reasonably informed with respect to, the portion of any audit of the Corporate Taxpayer and Aris LLC by a Taxing Authority the outcome of which is reasonably expected to affect the rights and obligations of such TRA Party under this Agreement, and shall use its best efforts to provide to each such TRA Party reasonable opportunity to provide information and other input to the Corporate Taxpayer, Aris LLC and their respective advisors concerning the conduct of any such portion of such audit; provided, however, that the Corporate Taxpayer and Aris LLC shall not be required to take any action that is inconsistent with any provision of the LLC Agreement.
Section 6.2 Consistency. The Corporate Taxpayer and the TRA Parties agree to report and cause to be reported for all purposes, including federal, state and local tax purposes and financial reporting purposes, all tax-related items (including, without limitation, the Basis Adjustments and each Tax Benefit Payment) in a manner consistent with that specified by the Corporate Taxpayer in any Schedule required to be provided by or on behalf of the Corporate Taxpayer under this Agreement unless otherwise required by law.
Section 6.3 Cooperation. Each of the Corporate Taxpayer and the TRA Parties shall (a) furnish to the other party in a timely manner such information, documents and other materials as the other party may reasonably request for purposes of making any determination or computation necessary or appropriate under this Agreement, preparing any Tax Return or contesting or defending any audit, examination or controversy with any Taxing Authority, (b) make itself available to the other party and its representatives to provide explanations of documents and materials and such other information as the other party or its representatives may reasonably request in connection with any of the matters described in clause (a) above, and (c) reasonably cooperate in connection with any such matter, and the Corporate Taxpayer shall reimburse each such TRA Party for any reasonable third-party costs and expenses incurred pursuant to this Section.
ARTICLE VII
MISCELLANEOUS
Section 7.1 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be deemed duly given and received (a) on the date of delivery if delivered personally, or by facsimile or email with confirmation of transmission by the transmitting equipment or (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice:
If to the Corporate Taxpayer, to:
[·]
with a copy (which shall not constitute notice to the Corporate Taxpayer) to:
[·]
If to a TRA Party, to:
The address, fax number and email address set forth in the joinder agreement to the Exchange Agreement.
Any party may change its address, fax number or email by giving the other party written notice of its new address, fax number or email in the manner set forth above.
Section 7.2 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties, it being understood that all parties need not sign the same counterpart. Delivery of an executed signature page to this Agreement by facsimile transmission shall be as effective as delivery of a manually signed counterpart of this Agreement.
Section 7.3 Entire Agreement; No Third Party Beneficiaries. This Agreement constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. This Agreement shall be binding upon and inure solely to the benefit of each party hereto and their respective successors and permitted assigns, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement; provided, however, that each Non-Party Member and their respective successors and assigns are intended beneficiaries of Section 7.3 and Section 7.6, with the right to enforce such provisions against the Corporate Taxpayer as though such Non-Party Members (and their respective successors and assigns) were parties hereto.
Section 7.4 Governing Law. This Agreement shall be governed by, and construed in accordance with, the law of the State of Delaware, without regard to the conflicts of laws principles thereof that would mandate the application of the laws of another jurisdiction.
Section 7.5 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible.
Section 7.6 Successors; Assignment; Amendments; Waivers.
(a) Each TRA Party and each Non-Party Member may assign any of its rights under this Agreement in whole or in part to any Person as long as such transferee has executed and delivered, or, in connection with such transfer, executes and delivers, a joinder to this Agreement, in the form of Exhibit A or such other form mutually agreed by the parties, agreeing to become a TRA Party for all purposes of this Agreement, except as otherwise provided in such joinder.
(b) No provision of this Agreement may be amended or waived unless such amendment or waiver is approved in writing by the Corporate Taxpayer and each of the TRA Parties. Notwithstanding anything to the contrary in this Agreement (including this Section 7.6), the execution and delivery of a joinder to this Agreement pursuant to Section 7.6(a) shall not require the consent of the Corporate Taxpayer or any of the TRA Parties.
(c) All of the terms and provisions of this Agreement shall be binding upon, shall inure to the benefit of and shall be enforceable by the parties hereto and their respective successors, assigns, heirs, executors, administrators and legal representatives. The Corporate Taxpayer shall require and cause any direct or indirect successor (whether by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Corporate Taxpayer, by written agreement, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Corporate Taxpayer would be required to perform if no such succession had taken place.
Section 7.7 Titles and Subtitles. The titles of the sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement.
Section 7.8 Resolution of Disputes.
(a) Any and all disputes which are not governed by Section 7.9 and cannot be settled amicably, including any ancillary claims of any party, arising out of, relating to or in connection with the validity, negotiation, execution, interpretation, performance or nonperformance of this Agreement (including the validity, scope and enforceability of this arbitration provision) (each a Dispute) shall be finally settled by arbitration conducted by a single arbitrator in New York in accordance with the then-existing Rules of Arbitration of the International Chamber of Commerce. If the parties to the Dispute fail to agree on the selection of an arbitrator within ten (10) calendar days of the receipt of the request for arbitration, the International Chamber of Commerce shall
make the appointment. The arbitrator shall be a lawyer admitted to the practice of law in the State of New York and shall conduct the proceedings in the English language. Performance under this Agreement shall continue if reasonably possible during any arbitration proceedings.
(b) Notwithstanding the provisions of paragraph (a), the Corporate Taxpayer may bring an action or special proceeding in any court of competent jurisdiction for the purpose of compelling a party to arbitrate, seeking temporary or preliminary relief in aid of an arbitration hereunder, and/or enforcing an arbitration award and, for the purposes of this paragraph (b), the TRA Party (i) expressly consents to the application of paragraph (c) of this Section 7.8 to any such action or proceeding, (ii) agrees that proof shall not be required that monetary damages for breach of the provisions of this Agreement would be difficult to calculate and that remedies at law would be inadequate, and (iii) irrevocably appoints the Corporate Taxpayer as agent of the TRA Party for service of process in connection with any such action or proceeding and agrees that service of process upon such agent, who shall promptly advise the TRA Party of any such service of process, shall be deemed in every respect effective service of process upon the TRA Party in any such action or proceeding.
(c) (i) EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF COURTS LOCATED IN NEW YORK, NEW YORK FOR THE PURPOSE OF ANY JUDICIAL PROCEEDING BROUGHT IN ACCORDANCE WITH THE PROVISIONS OF THIS SECTION 7.8, OR ANY JUDICIAL PROCEEDING ANCILLARY TO AN ARBITRATION OR CONTEMPLATED ARBITRATION ARISING OUT OF OR RELATING TO OR CONCERNING THIS AGREEMENT. Such ancillary judicial proceedings include any suit, action or proceeding to compel arbitration, to obtain temporary or preliminary judicial relief in aid of arbitration, or to confirm an arbitration award. The parties acknowledge that the for a designated by this paragraph (c) have a reasonable relation to this Agreement, and to the parties relationship with one another; and
(ii) The parties hereby waive, to the fullest extent permitted by applicable law, any objection which they now or hereafter may have to personal jurisdiction or to the laying of venue of any such ancillary suit, action or proceeding brought in any court referred to in the preceding paragraph of this Section 7.8 and such parties agree not to plead or claim the same.
Section 7.9 Reconciliation. In the event that the Corporate Taxpayer and a TRA Party are unable to resolve a disagreement with respect to the matters governed by Sections 2.3, 3.1, 4.2 or 6.2 within the relevant period designated in this Agreement (Reconciliation Dispute), the Reconciliation Dispute shall be submitted for determination to a nationally recognized expert (the Expert) in the particular area of disagreement mutually acceptable to both parties. The Expert shall be a partner or principal in a nationally recognized accounting or law firm, and unless the Corporate Taxpayer and such TRA Party agree otherwise, the Expert shall not, and the firm that employs the Expert shall not, have any material relationship with the Corporate Taxpayer or such TRA Party or other actual or potential conflict of interest. If the Corporate Taxpayer and the TRA Party are unable to agree on an Expert within fifteen (15) calendar days of receipt by the respondent(s) of written notice of a Reconciliation Dispute, the Expert shall be appointed by the International Chamber of Commerce Centre for Expertise. The Expert shall resolve any matter relating to the Exchange Basis Schedule or an amendment thereto or the Early Termination Schedule or an amendment thereto within thirty (30) calendar days and shall resolve any matter
relating to a Tax Benefit Schedule or an amendment thereto within fifteen (15) calendar days or as soon thereafter as is reasonably practicable, in each case after the matter has been submitted to the Expert for resolution. Notwithstanding the preceding sentence, if the matter is not resolved before any payment that is the subject of a disagreement would be due (in the absence of such disagreement) or any Tax Return reflecting the subject of a disagreement is due, the undisputed amount shall be paid on the date prescribed by this Agreement and such Tax Return may be filed as prepared by the Corporate Taxpayer, subject to adjustment or amendment upon resolution. The costs and expenses relating to the engagement of such Expert or amending any Tax Return shall be borne by the Corporate Taxpayer except as provided in the next sentence. The Corporate Taxpayer and the TRA Party shall bear their own costs and expenses of such proceeding, unless (i) the Expert adopts the TRA Partys position, in which case the Corporate Taxpayer shall reimburse the TRA Party for any reasonable out-of-pocket costs and expenses in such proceeding, or (ii) the Expert adopts the Corporate Taxpayers position, in which case the TRA Party shall reimburse the Corporate Taxpayer for any reasonable out-of-pocket costs and expenses in such proceeding. Any dispute as to whether a dispute is a Reconciliation Dispute within the meaning of this Section 7.9 shall be decided by the Expert. The Expert shall finally determine any Reconciliation Dispute and the determinations of the Expert pursuant to this Section 7.9 shall be binding on the Corporate Taxpayer and the TRA Party and may be entered and enforced in any court having jurisdiction.
Section 7.10 Withholding. The Corporate Taxpayer shall be entitled to deduct and withhold from any payment payable pursuant to this Agreement such amounts as the Corporate Taxpayer is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law. To the extent that amounts are so withheld and paid over to the appropriate Taxing Authority by the Corporate Taxpayer, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Person in respect of whom such withholding was made.
Section 7.11 Admission of the Corporate Taxpayer into a Consolidated Group; Transfers of Corporate Assets.
(a) If the Corporate Taxpayer is or becomes a member of an affiliated or consolidated group of corporations that files a consolidated income Tax Return pursuant to Sections 1501 et seq. of the Code or any corresponding provisions of state or local law, then: (i) the provisions of this Agreement shall be applied with respect to the group as a whole; and (ii) Tax Benefit Payments, Early Termination Payments and other applicable items hereunder shall be computed with reference to the consolidated taxable income of the group as a whole.
(b) If any entity that is obligated to make a Tax Benefit Payment or Early Termination Payment hereunder transfers one or more assets to a corporation (or a Person classified as a corporation for United States federal income tax purposes) with which such entity does not file a consolidated Tax Return pursuant to Section 1501 of the Code, such entity, for purposes of calculating the amount of any Tax Benefit Payment or Early Termination Payment (e.g., calculating the gross income of the entity and determining the Realized Tax Benefit of such entity) due hereunder, shall be treated as having disposed of such asset in a fully taxable transaction on the date of such contribution. The consideration deemed to be received by such entity shall be equal to the gross fair market value of the contributed asset. For purposes of this Section 7.11, a
transfer of a partnership interest shall be treated as a transfer of the transferring partners share of each of the assets and liabilities of that partnership allocated to such partner.
Section 7.12 Confidentiality.
(a) Each TRA Party and each of their assignees acknowledge and agree that the information of the Corporate Taxpayer is confidential and, except in the course of performing any duties as necessary for the Corporate Taxpayer and its Affiliates, as required by law or legal process or to enforce the terms of this Agreement, such person shall keep and retain in the strictest confidence and not disclose to any Person any confidential matters, acquired pursuant to this Agreement, of the Corporate Taxpayer and its Affiliates and successors, concerning Aris LLC and its Affiliates and successors or the TRA Parties, learned by the TRA Parties heretofore or hereafter. This Section 7.12 shall not apply to (i) any information that has been made publicly available by the Corporate Taxpayer or any of its Affiliates, becomes public knowledge (except as a result of an act of the TRA Party in violation of this Agreement) or is generally known to the business community and (ii) the disclosure of information to the extent necessary for the TRA Party to prepare and file its Tax Returns, to respond to any inquiries regarding the same from any Taxing Authority or to prosecute or defend any action, proceeding or audit by any Taxing Authority with respect to such returns. Notwithstanding anything to the contrary herein, each TRA Party and each of their assignees (and each employee, representative or other agent of such TRA Party or its assignees, as applicable) may disclose to any and all Persons, without limitation of any kind, the tax treatment and tax structure of the Corporate Taxpayer, Aris LLC and their Affiliates, and any of their transactions, and all materials of any kind (including opinions or other tax analyses) that are provided to such TRA Party relating to such tax treatment and tax structure.
(b) If a TRA Party or an assignee commits a breach, or threatens to commit a breach, of any of the provisions of this Section 7.12, the Corporate Taxpayer shall have the right and remedy to have the provisions of this Section 7.12 specifically enforced by injunctive relief or otherwise by any court of competent jurisdiction without the need to post any bond or other security, it being acknowledged and agreed that any such breach or threatened breach shall cause irreparable injury to the Corporate Taxpayer or any of its Subsidiaries or the TRA Parties and the accounts and funds managed by the Corporate Taxpayer and that money damages alone shall not provide an adequate remedy to such Persons. Such rights and remedies shall be in addition to, and not in lieu of, any other rights and remedies available at law or in equity.
Section 7.13 LLC Agreement. This Agreement shall be treated as part of the limited liability company agreement of Aris LLC as described in Section 761(c) of the Code and Sections 1.704-1(b)(2)(ii)(h) and 1.761-1(c) of the Treasury Regulations.
Section 7.14 Change in Law. Notwithstanding anything herein to the contrary, if, in connection with an actual or proposed change in law, a TRA Party reasonably believes that the existence of this Agreement could cause income (other than income arising from receipt of a payment under this Agreement) recognized by such TRA Party (or direct or indirect equity holders in such TRA Party) upon an Exchange to be treated as ordinary income rather than capital gain (or otherwise taxed at ordinary income rates) for U.S. federal income tax purposes or would have other material adverse tax consequences to the Corporate Taxpayer or such TRA Party or any direct or indirect owner of such TRA Party, then at the election of such TRA Party and to the extent
specified by such TRA Party, this Agreement (i) shall cease to have further effect with respect to such TRA Party, (ii) shall not apply to an Exchange occurring after a date specified by such TRA Party, or (iii) shall otherwise be amended in a manner determined by such TRA Party; provided, that such amendment shall not result in an increase in payments under this Agreement to such TRA Party at any time as compared to the amounts and times of payments that would have been due to such TRA Party in the absence of such amendment.
[The remainder of this page is intentionally blank]
IN WITNESS WHEREOF, the Corporate Taxpayer and each of the TRA Parties have duly executed this Agreement as of the date first written above.
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Exhibit A Form of Joinder
This JOINDER (this Joinder) to the Tax Receivable Agreement (as defined below), dated as of [·], by and among AmeriHome, Inc., a Delaware corporation (together with its Subsidiaries the Corporate Taxpayer), and (Permitted Transferee).
WHEREAS, on [·], Permitted Transferee acquired (the Acquisition) [LLC Interests and the corresponding shares of Class B common stock] [the right to receive any and all payments that may become due and payable under the Tax Receivable Agreement with respect to LLC Interests that were previously Exchanged and are described in greater detail in Annex A to this Joinder] (collectively, Interests and, together with all other interests hereinafter acquired by the Permitted Transferee from Transferor, the Acquired Interests) from (Transferor); and
WHEREAS, Transferor, in connection with the Acquisition, has required Permitted Transferee to execute and deliver this Joinder pursuant to Section 7.6(a) or Section 7.6(b) of the Tax Receivable Agreement, dated as of [·], by and among the Corporate Taxpayer and the TRA Parties (as defined therein) (the Tax Receivable Agreement).
NOW, THEREFORE, in consideration of the foregoing and the respective covenants and agreements set forth herein, and intending to be legally bound hereby, the parties hereto agree as follows:
Section 1.01 Definitions. To the extent capitalized words used in this Joinder are not defined in this Joinder, such words shall have the respective meanings set forth in the Tax Receivable Agreement.
Section 1.02 Joinder. Permitted Transferee hereby acknowledges and agrees to become TRA Party, for all purposes, of the Tax Receivable Agreement.
Section 1.03 Notice. Any notice, request, consent, claim, demand, approval, waiver or other communication hereunder to Permitted Transferee shall be delivered or sent to Permitted Transferee at the address set forth on the signature page hereto in accordance with Section 7.1 of the Tax Receivable Agreement.
Section 1.04 Governing Law. This Joinder shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to the conflicts of laws principals thereof that would mandate the application of the laws of another jurisdiction.
IN WITNESS WHEREOF, this Joinder has been duly executed and delivered by Permitted Transferee as of the date first above written.
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CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
EXECUTION VERSION
CREDIT AND SECURITY AGREEMENT
between
AMERIHOME MORTGAGE COMPANY, LLC
as Borrower
and
NEXBANK SSB
as Lender
DATED AS OF AUGUST 26, 2016
TABLE OF CONTENTS
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Page | |
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Section 1 Definitions |
1 | |
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Section 1.1 |
Definitions |
1 |
Section 1.2 |
Accounting Matters |
19 |
Section 1.3 |
ERISA Matters |
19 |
Section 1.4 |
Other Definitional Provisions |
19 |
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Section 2 Borrowings |
20 | |
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Section 2.1 |
Borrowings |
20 |
Section 2.2 |
General Provisions Regarding Interest; Etc. |
21 |
Section 2.3 |
Reserved |
21 |
Section 2.4 |
Use of Proceeds |
21 |
Section 2.5 |
Extension of Termination Date |
22 |
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Section 3 Payments |
22 | |
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Section 3.1 |
Method of Payment |
22 |
Section 3.2 |
Prepayments |
22 |
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Section 4 Security |
23 | |
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Section 4.1 |
Grant of Security Interest |
23 |
Section 4.2 |
Limited Pledge of Servicing |
26 |
Section 4.3 |
Substitution or Removal of Collateral |
26 |
Section 4.4 |
Lender Requires Acknowledgment Agreements |
27 |
Section 4.5 |
Further Assurances Concerning Collateral |
27 |
Section 4.6 |
Financing Statements Filing Authorization |
27 |
Section 4.7 |
Borrower Remains Liable |
27 |
Section 4.8 |
Rights after Occurrence of Default |
27 |
Section 4.9 |
Attorney-In-Fact Appointment |
28 |
Section 4.10 |
Periodic Valuations of Agency Servicing Rights |
28 |
Section 4.11 |
Collections in General |
29 |
Section 4.12 |
Setoff |
30 |
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Section 5 Conditions Precedent |
30 | |
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Section 5.1 |
Initial Extension of Credit |
30 |
Section 5.2 |
All Extensions of Credit |
32 |
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Section 6 Representations and Warranties |
32 | |
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Section 6.1 |
Entity Existence |
32 |
Section 6.2 |
Financial Statements; Etc. |
32 |
Credit and Security Agreement
Section 6.3 |
Action; No Breach |
33 |
Section 6.4 |
Operation of Business |
33 |
Section 6.5 |
Litigation and Judgments |
33 |
Section 6.6 |
Rights in Properties; Liens |
33 |
Section 6.7 |
Enforceability |
34 |
Section 6.8 |
Approvals |
34 |
Section 6.9 |
Taxes |
34 |
Section 6.10 |
Use of Proceeds; Margin Securities |
34 |
Section 6.11 |
ERISA |
34 |
Section 6.12 |
Disclosure |
35 |
Section 6.13 |
Subsidiaries |
35 |
Section 6.14 |
Agreements |
35 |
Section 6.15 |
Compliance with Laws |
36 |
Section 6.16 |
Regulated Entities |
36 |
Section 6.17 |
Environmental Matters |
36 |
Section 6.18 |
Membership and Standing |
37 |
Section 6.19 |
Foreign Assets Control Regulations and Anti-Money Laundering |
37 |
Section 6.20 |
Patriot Act |
37 |
Section 6.21 |
Nature of Business |
37 |
Section 6.22 |
Special Representations Concerning Collateral |
38 |
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Section 7 Affirmative Covenants |
39 | |
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Section 7.1 |
Reporting Requirements |
39 |
Section 7.2 |
Maintenance of Existence; Conduct of Business |
42 |
Section 7.3 |
Maintenance of Properties |
43 |
Section 7.4 |
Taxes and Claims |
43 |
Section 7.5 |
Insurance |
43 |
Section 7.6 |
Inspection Rights |
43 |
Section 7.7 |
Keeping Books and Records |
43 |
Section 7.8 |
Compliance with Laws |
43 |
Section 7.9 |
Compliance with Agreements |
43 |
Section 7.10 |
Further Assurances |
44 |
Section 7.11 |
ERISA |
44 |
Section 7.12 |
Servicer Side Letter |
44 |
Section 7.13 |
Reserved |
44 |
Section 7.14 |
Provide Quarterly Servicing Appraisals |
44 |
Section 7.15 |
Special Affirmative Covenants Concerning Collateral |
44 |
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Section 8 Negative Covenants |
45 | |
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Section 8.1 |
Reserved |
45 |
Section 8.2 |
Limitation on Liens |
46 |
Section 8.3 |
Mergers |
46 |
Section 8.4 |
Restricted Payments |
46 |
Section 8.5 |
Reserved |
46 |
Section 8.6 |
Transactions With Affiliates |
46 |
Section 8.7 |
Disposition of Assets |
46 |
Section 8.8 |
Change in Location |
46 |
Section 8.9 |
Reserved |
46 |
Section 8.10 |
Nature of Business |
47 |
Section 8.11 |
Environmental Protection |
47 |
Section 8.12 |
Accounting |
47 |
Section 8.13 |
No Negative Pledge |
47 |
Section 8.14 |
Reserved |
47 |
Section 8.15 |
Reserved |
47 |
Section 8.16 |
OFAC |
47 |
Section 8.17 |
Reserved |
47 |
Section 8.18 |
Conditional Repurchase, Indemnity or Other Recourse Obligations |
47 |
Section 8.19 |
Special Negative Covenants Concerning Collateral |
47 |
Section 8.20 |
Termination of Servicing Agreements or Agency Servicing Rights |
48 |
Section 8.21 |
No Amendments |
48 |
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Section 9 Financial Covenants |
48 | |
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Section 9.1 |
Minimum Tangible Net Worth |
48 |
Section 9.2 |
Minimum Liquidity |
48 |
Section 9.3 |
Debt Service Coverage Ratio |
48 |
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Section 10 Default |
48 | |
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Section 10.1 |
Events of Default |
48 |
Section 10.2 |
Remedies Upon Default |
51 |
Section 10.3 |
Application of Funds |
52 |
Section 10.4 |
Performance by Lender |
52 |
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Section 11 Miscellaneous |
52 | |
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Section 11.1 |
Expenses |
52 |
Section 11.2 |
INDEMNIFICATION |
52 |
Section 11.3 |
Limitation of Liability |
53 |
Section 11.4 |
No Duty |
53 |
Section 11.5 |
Lender Not Fiduciary |
54 |
Section 11.6 |
Equitable Relief |
54 |
Section 11.7 |
No Waiver; Cumulative Remedies |
54 |
Section 11.8 |
Successors and Assigns |
54 |
Section 11.9 |
Survival |
54 |
Section 11.10 |
Amendment |
54 |
Section 11.11 |
Notices |
54 |
Section 11.12 |
GOVERNING LAW; VENUE; SERVICE OF PROCESS |
55 |
Section 11.13 |
Counterparts |
55 |
Section 11.14 |
Severability |
55 |
Section 11.15 |
Headings |
55 |
Section 11.16 |
Participations; Etc. |
55 |
Section 11.17 |
Construction |
56 |
Section 11.18 |
Independence of Covenants |
56 |
Section 11.19 |
WAIVER OF JURY TRIAL |
56 |
Section 11.20 |
Additional Interest Provision |
56 |
Section 11.21 |
Ceiling Election |
57 |
Section 11.22 |
USA Patriot Act Notice |
58 |
Section 11.23 |
NOTICE OF FINAL AGREEMENT |
58 |
Section 11.24 |
CONFIDENTIALITY |
58 |
INDEX TO EXHIBITS
Exhibit |
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Description of Exhibit |
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Section |
A |
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Borrowing Base Report |
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1.1 |
B |
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Compliance Certificate |
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1.1 |
C |
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Revolving Credit Note |
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1.1 and 2.1 |
INDEX TO SCHEDULES
Schedule |
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Description of Schedule |
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Section |
4.1(a) |
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Pledged Agency Servicing Rights Schedule 4.1(a) |
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4.1(a) |
4.1(b) |
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Pledged Servicing Receivables |
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4.1(b) |
5.1(r) |
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Additional Conditions Precedent |
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5.1(r) |
6.2 |
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Existing Debt |
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6.2 |
6.5 |
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Litigation and Judgments |
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6.5 |
6.13 |
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Subsidiaries, Ventures, Etc. |
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6.14 |
CREDIT AND SECURITY AGREEMENT
THIS CREDIT AND SECURITY AGREEMENT (the Agreement), dated as of August 26, 2016 (the Closing Date) is between AmeriHome Mortgage Company, LLC, a Delaware limited liability company (Borrower), and NEXBANK SSB (Lender).
RECITALS
WHEREAS, Borrower has requested that Lender extend a revolving line of credit to Borrower as described in this Agreement. Lender is willing to make such credit available to Borrower upon and subject to the provisions, terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
Section 1.1 Definitions. As used in this Agreement, all exhibits, appendices and schedules hereto and in any note, certificate, report or other Loan Documents made or delivered pursuant to this Agreement, the following terms will have the meanings given such terms in this Section 1 or in the provision, section or recital referred to below:
Acknowledgment Agreement means an acknowledgment agreement in the form prescribed by Fannie Mae to be executed by Borrower, the Lender and Fannie Mae as a condition to Borrowers pledging Fannie Maes Agency Servicing Rights to the Lender.
Advances means, collectively, the Taxes and Insurance Advances, Corporate Advances and P&I Advances.
Affiliate means, as to any Person, any other Person (a) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person; (b) that directly or indirectly beneficially owns or holds twenty-five percent (25%) or more of any class of voting stock of such Person; or (c) twenty-five percent (25%) or more of the voting stock of which is directly or indirectly beneficially owned or held by such Person. The term control means the possession, directly or indirectly, of the power to direct or cause direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise; provided, however, in no event shall Lender be deemed an Affiliate of Borrower or any Obligated Party, or any of their Subsidiaries or Affiliates.
Agency means Fannie Mae and any other government mortgage loan program acceptable to the Lender or any successors thereto.
Agency Contract has the meaning set forth in Section 4.2.
Agency Guidelines means, the Fannie Mae Guide.
Agency Servicing Rights means all of Borrowers rights and interests under any Servicing Agreement between Borrower and an Agency, including the rights to (a) service the Serviced Loans that are the subject matter of such Servicing Agreement and (b) be compensated, directly or indirectly, for doing so.
Agencys Interest means the interest of the related Agency in the Collateral pursuant to the terms of the related Agency Contract, Acknowledgment Agreement and Servicing Agreement.
Agreement has the meaning set forth in the introductory paragraph hereto, and includes all schedules, exhibits and appendices attached or otherwise identified therewith.
Appraisal means an appraisal of Mortgaged Premises by a licensed or otherwise qualified, disinterested and independent appraiser who (a) meets the standards of the Financial Institutions Reform, Recovery & Enforcement Act of 1989 and all requirements of the applicable Agency Guidelines, (b) if selected by Borrower, was selected reasonably and in good faith.
Appraisal Report means a written report of an Appraisal or a Brokers Price Opinion of the value of Mortgaged Premises, a signed copy of which is in the possession of Borrower or the Servicer of the related Mortgage Loan, setting forth the relevant appraisers or brokers opinion and method of determination of the fair market value of such Mortgaged Premises, including a statement of all material assumptions made, and dated and signed, by such appraiser or broker, who, and the form of which report, must not be unacceptable to the Lender in its reasonable discretion, it being understood that an appraisal on a form generally acceptable to an Agency will be acceptable to the Lender.
Approved Servicing Agreement means a Servicing Agreement between Borrower and an Agency that is not a Recourse Servicing Agreement.
Approved Servicing Appraiser means MountainView Servicing Group, LLC or any other servicing appraiser acceptable to the Lender.
Borrower means the Person identified as such in the introductory paragraph hereto, and its successors and assigns to the extent permitted by Section 11.8.
Borrowing means any advance by Lender to Borrower pursuant to Section 2.
Borrowing Base means, on any Determination Date, the sum of the Collateral Values of the following: (a) Eligible Agency Servicing Rights then Pledged to the Lender, (b) all Advances; provided that the Borrowing Base may be revised by the Lender in its commercially reasonable discretion. For the avoidance of doubt, the Eligible Agency Servicing Rights shall be Pledged to the Lender in order to be included in the Borrowing Base.
Borrowing Base Deficiency has the meaning for such term set forth in Section 3.2(b).
Borrowing Base Report means, as of any date of preparation, a certificate, substantially the form of Exhibit A, prepared by a Responsible Officer of Borrower.
Borrowing Request Form means a certificate, in a form reasonably approved by Lender, properly completed and signed by Borrower requesting a Borrowing, which certificate shall include a Pledged Agency Servicing Rights Schedule for the initial Borrowing and, if applicable, for any subsequent Borrowings to the extent the Pledged Agency Servicing Rights Schedule is being amended from the prior version provided to Lender, a calculation of the Borrowing Base and such other supporting documentation and information that the Lender may reasonably request, including an updated Exhibit F to the Acknowledgement Agreement Executed by Fannie Mae when applicable, and that, when appropriately completed and submitted with the required documentation set forth below and attached, may include requests for Borrowings to finance Eligible Agency Servicing Rights and Eligible Servicing Receivables.
Brokers Price Opinion means the written opinion of the value of Mortgaged Premises, issued by a real estate broker duly licensed as such by the jurisdiction in which such Mortgaged Premises are located, reasonably acceptable to the Lender and that is not an Affiliate of Borrower or of any of Borrowers or its Subsidiaries or Affiliates directors, members, managers or officers and is not an employee of any of them, selected reasonably and in good faith by Borrower.
Business Day has the meaning assigned to it in the Revolving Credit Note.
Capitalized Lease Obligation means, with respect to any Person, the amount of Debt under a lease of Property by such Person that would be shown as a liability on a balance sheet of such Person prepared for financial reporting purposes in accordance with GAAP.
Cash Flow is defined as (a) net income, after income tax, plus (b) less income or plus losses from discontinued operations and extraordinary items, plus (c) depreciation, depletion, amortization, and other non-cash charges, plus (d) interest expense on all obligations, minus (e) unrealized or realized gains or losses related to the hedging of mortgage servicing rights, minus (f) dividends, withdrawals, and other distributions, and minus (g) changes in the fair value of the Agency Servicing Rights.
Change of Control means if Aris Mortgage Holding Company, LLC ceases to own at least 51% of the equity interests in Borrower.
Closing Date has the meaning set forth in the introductory paragraph hereto.
Code means the Internal Revenue Code of 1986, as amended.
Collateral has the meaning for such term set forth in Section 4.1.
Collateral Exclusion Event has the meaning for such term set forth in Section 10.1(c).
Collateral Value means, as of any Determination Date, (a) [***] of the Market Value of all Eligible Agency Servicing Rights as updated for the most recent unpaid principal balance and as most recently determined by a Servicing Appraisal and (b) and [***] of the sum of all Advances. Each of such values shall be as determined by the Lender in its reasonable discretion, which may accept as correct any value proposed by Borrower that is not obviously and materially incorrect on its face, and each determination by the Lender of Collateral Value (and of each element of each such determination, including Market Value) may be computed using any
reasonable averaging, interpolation and attribution method and, absent manifest error, shall be conclusive and binding.
Commitment means the obligation of Lender to make Borrowings pursuant to Section 2 in an aggregate principal amount at any time outstanding up to but not exceeding [***], subject, however, to termination pursuant to Section 10.2.
Compliance Certificate means a certificate, substantially in the form of Exhibit B, prepared by and certified by a Responsible Officer.
Constituent Documents means (a) in the case of a corporation, its articles or certificate of incorporation and bylaws; (b) in the case of a general partnership, its partnership agreement; (c) in the case of a limited partnership, its certificate of limited partnership and partnership agreement; (d) in the case of a trust, its trust agreement; (e) in the case of a joint venture, its joint venture agreement; (f) in the case of a limited liability company, its articles of organization, operating agreement, regulations and/or other organizational and governance documents and agreements; and (g) in the case of any other entity, its organizational and governance documents and agreements.
Contingent Liability means a contingent liability that is required by FAS-5 either to be accrued as a charge to income or to be disclosed by a note to Borrowers financial statements.
Corporate Advance means a recoverable servicer advance made by Borrower pursuant to a Pledged Servicing Receivables Agreement to pay customary, reasonable and necessary out-of-pocket costs and expenses incurred by the Servicer in the performance of its servicing obligations, including, but not limited to, the cost of (a) the preservation, restoration and protection of any related Mortgaged Premises or REO Property, (b) any enforcement or judicial proceedings, including foreclosures, and (c) the management and liquidation of any related REO Property.
Customer means and includes each maker of a Mortgage Note and each cosigner, guarantor, endorser, surety and assumptor thereof, and each mortgagor or grantor under a Mortgage, whether or not such Person has personal liability for its payment of the Mortgage Loan evidenced or secured thereby, in whole or in part.
Debt means, of any Person as of any date of determination (without duplication): (a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, notes, debentures, or other similar instruments; (c) all obligations of such Person to pay the deferred purchase price of Property or services, except trade accounts payable of such Person arising in the Ordinary Course of Business that are not past due by more than ninety (90) days; (d) all Capitalized Lease Obligations of such Person; (e) all Debt or other obligations of others Guaranteed by such Person; (f) all obligations secured by a Lien existing on Property owned by such Person, whether or not the obligations secured thereby have been assumed by such Person or are non-recourse to the credit of such Person; (g) any other obligation for borrowed money or other financial accommodations which in accordance with GAAP would be shown as a liability on the balance sheet of such Person; (h) any repurchase obligation or liability of a Person with respect to accounts, chattel paper or notes receivable sold by such Person; (i) any liability under a sale and leaseback transaction that is not a Capitalized Lease Obligation; (j) any obligation under any
so-called synthetic leases; (k) any obligation arising with respect to any other transaction that is the functional equivalent of borrowing but which does not constitute a liability on the balance sheets of a Person; (1) all payment and reimbursement obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bankers acceptances, surety or other bonds and similar instruments; and (m) all liabilities of such Person in respect of unfunded vested benefits under any Plan.
Debt Service Coverage Ratio means the ratio of (A) Cash Flow to the sum of (B) (i) the current portion of long term debt, (ii) the current portion of Pro Forma Debt Service, (iii) the current portion of capitalized lease obligations, and (iv) interest expense on all Obligations and all other Debt.
Default means an Event of Default or the occurrence of an event or condition which with notice or lapse of time or both would become an Event of Default.
Default Interest Rate has the meaning assigned to it in the Revolving Credit Note.
Defaulted Mortgage Loan means, a Mortgage Loan with respect to which any Mortgage Note payment or escrow payment is unpaid for [***] or more after its due date (whether or not Borrower has allowed any grace period or extended the due date thereof by any means) or another material default has occurred and is continuing, including the commencement of foreclosure proceedings or the commencement of a case in bankruptcy for any Customer under such Mortgage Loan.
Determination Date means the date as of, or for, which a specified subject matter is being determined for purposes of a provision of this Agreement or another Loan Document.
Dollars and $ mean lawful money of the United States of America.
Eligible Agency Servicing Rights means, as of any Determination Date, the Pledged Agency Servicing Rights as to which each of the representations and warranties with respect to such Agency Servicing Rights set forth in this Agreement are true and correct on the date of each Borrowing and the date of each submission of a Borrowing Base Report, including, without limitation: (a) such Agency Servicing Rights are owned by Borrower giving Borrower the right to service (and be compensated as servicer for servicing) a portfolio of Single-family Mortgage Loans pursuant to an Approved Servicing Agreement, (b) such Agency Servicing Rights have been reviewed and approved by the Lender, (c) such Agency Servicing Rights are owned by Borrower free and clear of all Liens (other than the Lenders Lien), such Agency Servicing Rights are Pledged Agency Servicing Rights and the Lender has been granted and continues to hold a valid, first priority perfected Lien on such Agency Servicing Rights, (d) in the case of each Servicing Agreement between Borrower and any Agency, is subject to an Acknowledgment Agreement with such Agency, (e) the Mortgage Loan documents related to such Agency Servicing Rights are with a holder or custodian for a holder of such Mortgage Loans who is acceptable to the Lender, (f) the Servicing Agreement related to such Agency Servicing Rights is not a subservicing arrangement, (g) the Servicing Agreement related to such Agency Servicing Rights is in full force and effect and is legal, valid and enforceable in accordance with its terms, and no default or event that, with notice or lapse of time or both, would become a default, exists under such Servicing Agreement
(h) Borrowers rights to payment under the related Servicing Agreement are genuine and enforceable without defense, offset, bona fide counterclaim or bona fide defense, and (i) such Agency Servicing Rights are subject to an Acknowledgment Agreement; provided that with respect to any Agency Servicing Rights added as Mortgage Loans following the Closing Date pursuant to the terms and conditions of the Acknowledgment Agreement (including Section 15 and Exhibit F thereof), such Agency Servicing Rights shall not be deemed an Eligible Agency Servicing Right hereunder unless and until Lender receives evidence that Fannie Mae has executed a Request to Add Mortgage Loans with respect to the mortgage loans related to such Agency Servicing Rights.
Eligible Servicing Receivables means, as of any Determination Date, a Pledged Servicing Receivable as to which each of the representations and warranties with respect to such Servicing Receivable set forth in this Agreement are true and correct on the date of each Borrowing and the date of each submission of a Borrowing Base Report, including without limitation:
(a) such Servicing Receivable is a Taxes and Insurance Advance, a Corporate Advance or a P&I Advance made in connection with a Mortgage Loan in a Fannie Mae MBS program;
(b) such Servicing Receivable was produced by Borrower making a Taxes and Insurance Advance, a Corporate Advance or a P&I Advance in accordance with all applicable terms of the related Agency Guidelines;
(c) such Servicing Receivable has been reviewed and approved by the Lender;
(d) such Servicing Receivable relates to a Taxes and Insurance Advance, a Corporate Advance or a P&I Advance or if not fully recovered from any source or sources described in clauses (i) through (iv) and (vi) through (viii) of the definition of Servicing Receivable such Servicing Receivable is ultimately recoverable from any source or sources described in the clause (v) of the definition of Servicing Receivable;
(e) there is no bona fide pending claim against Borrower for any credit, allowance or adjustment with respect to such Servicing Receivable;
(f) such Servicing Receivable is genuine and enforceable without defense, offset, bona fide counterclaim or bona fide defense;
(g) there is no reasonable basis for doubt, as determined by the Lender in its sole and commercially reasonable discretion, as to Borrowers ability to fully collect such Servicing Receivable pursuant to the related Servicing Agreement;
(h) such Servicing Receivable is owned by Borrower free and clear of all Liens (other than the Lenders Lien), such Servicing Receivable is a Pledged Servicing Receivable and the Lender has been granted and continues to hold a valid, first priority perfected Lien on such Servicing Receivable;
(i) no Collateral Exclusion Event has occurred and is continuing with respect to such Servicing Receivable;
(j) if such Servicing Receivable was produced by a servicing advance made in respect of a Mortgage Loan which was a Defaulted Mortgage Loan at the time of such servicing advance, Borrower has obtained an Appraisal Report if required by the applicable Agency Guidelines;
(k) such Servicing Receivable is a receivable according to the applicable terms of the related Agency Guidelines;
(l) No Agency has terminated, modified or amended the Servicing Agreement related to such Servicing Receivable and no Agency has denied such Servicing Receivable as a receivable; and
(m) the Servicing Agreement related to such Servicing Receivable is in full force and effect and is legal, valid and enforceable in accordance with its terms, and no default or event that, with notice or lapse of time or both, would become a default, exists under such Servicing Agreement.
Environmental Laws means any and all federal, state, and local laws, regulations, judicial decisions, orders, decrees, plans, rules, permits, licenses, and other governmental restrictions and requirements pertaining to health, safety, or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601 et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901 et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. § 1251 et seq., and the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.
Environmental Liabilities means, as to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs, and expenses (including, without limitation, all reasonable fees, disbursements and expenses of counsel, expert and consulting fees and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand, by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, including any Environmental Law, permit, order or agreement with any Governmental Authority or other Person, arising from environmental, health or safety conditions or the Release or threatened Release of a Hazardous Material into the environment, resulting from the past, present, or future operations of such Person or its Affiliates.
ERISA means the Employee Retirement Income Security Act of 1974.
ERISA Affiliate means any corporation or trade or business which is a member of the same controlled group of corporations (within the meaning of Section 414(b) of the Code) as Borrower or any Obligated Party or is under common control (within the meaning of Section 414(c) of the Code and Sections 414(m) and (o) of the Code for purposes of the provisions relating to Section 412 of the Code) with Borrower or any Obligated Party.
ERISA Event means (a) a Reportable Event with respect to a Plan, (b) a withdrawal by Borrower or any Obligated Party or any ERISA Affiliate from a Plan subject to Section 4063 of ERISA during a plan year in which it was a substantial employer (as defined in Section 4001(a)(2) of ERISA) or a cessation of operations which is treated as such a withdrawal under Section 4062(e) of ERISA, (c) a complete or partial withdrawal by Borrower or any Obligated Party or any ERISA
Affiliate from a Multiemployer Plan or notification that a Multiemployer Plan is in reorganization, (d) the filing of a notice of intent to terminate, the treatment of a Plan amendment as a termination under Section 4041 or 4041A of ERISA, or the commencement of proceedings by the PBGC to terminate a Plan or Multiemployer Plan, (e) the occurrence of an event or condition which might reasonably be expected to constitute grounds under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan or Multiemployer Plan, (f) the imposition of any liability to the PBGC under Title IV of ERISA, other than for PBGC premiums due but not delinquent under Section 4007 of ERISA, upon Borrower or any Obligated Party or any ERISA Affiliate, (g) the failure of Borrower or any Obligated Party or ERISA Affiliate to meet any funding obligations with respect to any Plan or Multiemployer Plan, or (h) a Plan becomes subject to the at-risk requirements in Section 303 of ERISA and Section 430 of the Code.
Event of Default has the meaning set forth in Section 10.1.
Fannie Mae means the Federal National Mortgage Association and any successor.
Fannie Mae Guides means the Fannie Mae Selling Guide and the Fannie Mae Servicing Guide, as amended from time to time, and any related announcements, directives and correspondence issued by Fannie Mae.
Fitch means Fitch Ratings, Inc., or any successor thereto.
GAAP means generally accepted accounting principles, applied on a consistent basis, as set forth in opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board and/or their respective successors and which are applicable in the circumstances as of the date in question. Accounting principles are applied on a consistent basis when the accounting principles applied in a current period are comparable in all material respects to those accounting principles applied in a preceding period.
Governmental Authority means any nation or government, any state or political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory, or administrative functions of or pertaining to government.
Guarantee by any Person means any obligation or liability, contingent or otherwise, of such Person directly or indirectly guaranteeing any Debt or other obligation of any other Person as well as any obligation or liability, direct or indirect, contingent or otherwise, of such Person (a) to purchase or pay (or advance or supply funds for the purchase or payment of) such Debt or other obligation or liability (whether arising by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, to operate Property, to take-or-pay, or to maintain net worth or working capital or other financial statement conditions or otherwise) or (b) entered into for the purpose of indemnifying or assuring in any other manner the obligee of such Debt or other obligation or liability of the payment thereof or to protect the obligee against loss in respect thereof (in whole or in part), provided that the term Guarantee shall not include endorsements for collection or deposit in the Ordinary Course of Business. The term Guarantee used as a verb has a corresponding meaning.
Hazardous Material means any substance, product, waste, pollutant, material, chemical, contaminant, constituent, or other material which is or becomes listed, regulated, or addressed under any Environmental Law, including, without limitation, asbestos, petroleum, and polychlorinated biphenyls.
Hedge Agreement means (a) any and all interest rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (b) any and all transactions of any kind, and the related confirmations, which are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules and annexes, a Master Agreement).
HUD means the U.S. Department of Housing and Urban Development and any successor.
Intellectual Property means all copyrights, copyright licenses, patents, patent licenses, trademarks, trademark licenses and other types of intellectual property, in whatever form, now owned or hereafter acquired.
IRS means the Internal Revenue Service or any entity succeeding to all or any of its functions.
Laws means any law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, authorization or other determination, direction or requirement (including any of the foregoing which relate to environmental standards or controls, energy regulations and occupational safety and health standards or controls) of any (domestic or foreign) arbitrator, court or other Governmental Authority.
Lender means the Person identified as such in the introductory paragraph hereto, and includes its successors and assigns.
Lien means any lien, mortgage, security interest, tax lien, pledge, charge, hypothecation, assignment, preference, priority, or other encumbrance of any kind or nature whatsoever (including, without limitation, any conditional sale or title retention agreement), whether arising by contract, operation of law, or otherwise.
Liquidity means, for any period, the amount of unrestricted cash and cash equivalents of Borrower, which cash and cash equivalents cannot be subject to any Lien.
Loan means any Borrowing.
Loan Documents means this Agreement, the Security Documents, the Revolving Credit Note, and all other promissory notes, security agreements, deeds of trust, assignments, letters of credit, guaranties, and other instruments, documents, or agreements executed and delivered pursuant to or in connection with this Agreement or the Security Documents.
Mandatory Prepayment Event has the meaning set forth in Section 3.2(b).
Market Value means, with respect to any Agency Servicing Rights, as of any Determination Date, the value for such Agency Servicing Rights that is equal to the product of (a) the low end price of such Agency Servicing Rights (stated as a percentage of the unpaid principal balance of the subject Serviced Loans) as determined by the most recent (no less than quarterly) appraisal thereof by an Approved Servicing Appraiser and stated in a Servicing Appraisal times (b) the aggregate principal balances on the relevant Determination Date of the Pledged Agency Servicing Rights. The appraised value shall be determined by an Approved Servicing Appraiser selected by Borrower unless a Default has occurred that has not been cured by Borrower or an Event of Default has occurred that has not been declared in writing by the Lender to have been cured or waived, in which event the Lender, in its sole discretion, shall select and approve the Approved Servicing Appraiser; or if (x) a Default has occurred that has not been cured or an Event of Default has occurred that the Lender has not declared in writing to have been cured or waived or (y) the Lender, using its customary methods, systems and procedures, is unable to obtain a brokers opinion of the most likely market bid price, the Lenders reasonable determination of such market value, taking into account customary factors, including current market conditions and the fact that the Agency Servicing Rights may be sold or otherwise disposed of (including termination by settlement agreement with the counterparty to the relevant Servicing Agreement). The Lenders determination of Market Value hereunder shall be conclusive and binding upon the parties, absent manifest error.
Material Adverse Event means any act, event, condition, or circumstance which could reasonably be expected to materially and adversely affect: (a) the operations, business, properties, liabilities (actual or contingent), condition (financial or otherwise) or prospects of Borrower or Borrower and its Subsidiaries, taken as a whole; (b) the ability of Borrower or any Obligated Party to perform its obligations under any Loan Document to which it is a party; or (c) the legality, validity, binding effect or enforceability against Borrower or any Obligated Party of any Loan Document to which it is a party.
Maximum Rate means, at all times, the maximum rate of interest which may be charged, contracted for, taken, received or reserved by Lender in accordance with applicable Texas law (or applicable United States federal law to the extent that such law permits Lender to charge, contract for, receive or reserve a greater amount of interest than under Texas law). The Maximum Rate shall be calculated in a manner that takes into account any and all fees, payments, and other charges in respect of the Loan Documents that constitute interest under applicable law. Each change in any interest rate provided for herein based upon the Maximum Rate resulting from a change in the Maximum Rate shall take effect without notice to Borrower at the time of such change in the Maximum Rate.
MBS means a mortgage pass-through security, collateralized mortgage obligation, REMIC or other security that (a) is based on and backed by an underlying pool of Mortgage Loans
and (b) provides for payment by its issuer to its holder of specified principal installments and/or a fixed or floating rate of interest on the unpaid balance and for prepayments to be passed through to the holder, whether issued in certificated or book-entry form and whether or not issued, guaranteed, insured or bonded by an Agency, an insurance company, a private issuer or any other Person.
MERS means Mortgage Electronic Registration Systems, Inc., or any successor thereto.
Moodys means Moodys Investors Service, Inc. or any successors thereto.
Mortgage means a mortgage, deed of trust, deed to secure debt, security deed or other mortgage instrument or similar evidence of lien legally effective in the U.S. jurisdiction where the relevant real property is located to create and constitute a valid and enforceable Lien, subject only to Liens permitted under Section 8.2 hereunder, on the fee simple or long term ground leasehold estate in improved real property.
Mortgage Loan means any loan related to the Pledged Agency Servicing Rights and such loan is evidenced by a Mortgage Note and includes all right, title and interest of the lender or mortgagee of such loan as a holder of both the beneficial and legal title to such loan, including (a) all loan documents, files and records of the lender or mortgagee for such loan, (b) the monthly payments, any prepayments, insurance and other proceeds, (c) the unseparated rights to service such loan and (d) all other rights, interests, benefits, security, proceeds, remedies and claims in favor or for the benefit of the lender or mortgagee arising out of or in connection with such loan.
Mortgage Note means a promissory note secured by a Mortgage.
Mortgaged Premises means the Property securing a Mortgage Note.
Multiemployer Plan means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions are being made or have been made by, or for which there is an obligation to make by or there is any liability, contingent or otherwise, with respect to Borrower or any Obligated Party or any ERISA Affiliate and which is covered by Title IV of ERISA.
Net Income means, for any Person for any period, an amount equal to net income determined in accordance with GAAP.
Non-agency MBS means MBS that are neither issued nor guaranteed as by an Agency.
Obligated Party means Borrower, each Pledgor or any other Person who is or becomes party to any agreement that obligates such Person to pay or perform, or that Guarantees or secures payment or performance of, the Obligations or any part thereof.
Obligations means all obligations, indebtedness, and liabilities of Borrower and any other Obligated Party to Lender or any Affiliate of Lender, or both, now existing or hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, =liquidated, joint, several, or joint and several, including, without limitation, the obligations, indebtedness, and liabilities under this Agreement, the other Loan Documents, any and all guarantees executed by Borrower or any other Obligated Party in favor of Lender for third-party indebtedness, any cash
management or treasury services agreements and all interest accruing thereon (whether a claim for post-filing or post-petition interest is allowed in any bankruptcy, insolvency, reorganization or similar proceeding) and all attorneys fees and other expenses incurred in the enforcement or collection thereof.
OFAC means the Office of Foreign Assets Control.
Ordinary Course of Business means the ordinary course of the respective businesses of Borrower and any Obligated Party, consistent with past practice, but excluding any event, action, circumstance or omission that would constitute or give rise to (a) a violation of applicable law, (b) a breach, default or violation of any contract of Borrower or any Obligated Party or (c) a breach of any representation, warranty or covenant of Borrower or any Obligated Party set forth in the Loan Documents.
Organic Change means any of the following: (a) any sale, assignment, lease conveyance, exchange, transfer, sale-leaseback or other disposition of substantially all of the assets, business, equity securities or properties of Borrower, whether in one or a series of transactions, other than in the Ordinary Course of Business and whether or not directly or indirectly or through the sale or other disposition of equity securities of any of the other Subsidiaries of Borrower, and (b) any (i) merger, consolidation or other combination to which Borrower or any its Subsidiaries is a party or (ii) liquidation, winding up or dissolution of Borrower or any of its Subsidiaries, other than (1) those not prohibited elsewhere in this Agreement (2) the merger of Borrower with an Affiliate organized solely for the purpose of reorganizing Borrower in another jurisdiction to realize tax or other benefits and (3) those transactions expressly consented to in writing by the Lender.
Other Debt means (i) any Debt owed by Borrower or its Affiliates to Lender or its Affiliates, (ii) any Debt owed to Lender guaranteed by Borrower, and (iii) any other Debt of Borrower permitted by this Agreement.
P&I Advance means principal and net interest advances expended by Borrower in accordance with each applicable Pledged Servicing Receivables Agreement (net of prepaid principal and interest, as applicable).
Patriot Act means the Uniting and Strengthening America by Providing Appropriate Tools to Intercept and Obstruct Terrorism Act of 2001 (Title III of Pub. L. 107-56, signed into law October 26, 2001).
PBGC means the Pension Benefit Guaranty Corporation or any entity succeeding to all or any of its functions under ERISA.
Permitted Acquisition means an acquisition by Borrower, whether by purchase, merger or otherwise, of all or substantially all of the assets of, all of the capital stock of, or a business line or unit or a division of, any Person; provided that: (i) immediately prior to, and after giving effect thereto, no Default or Event of Default shall have occurred and be continuing or would result therefrom; (ii) all transactions in connection therewith shall be consummated, in all material respects, in accordance with all applicable laws and in conformity with all applicable governmental authorizations; (iii) in the case of the acquisition of equity, all of the equity acquired or otherwise
issued by such Person or any newly formed wholly-owned Subsidiary of Borrower in connection with such acquisition shall be owned 100% by Borrower; (iv) Borrower shall be in compliance with the financial covenants set forth in Section 9 on a pro forma basis after giving effect to such acquisition as of the last day of the fiscal quarter most recently ended and for which financial statements are required to have been delivered pursuant to Section 7.1(b) (as determined in accordance with Section 9); (v) Borrower shall have delivered to Lender at least ten (10) Business Days prior to the consummation of such proposed acquisition, a Compliance Certificate evidencing compliance with Section 9 as required under clause (iv) above, together with (A) the aggregate consideration for such acquisition and any other information required to demonstrate compliance with Section 9 and (B) the amount and terms of any Debt incurred or assumed in connection therewith; and (vi) the aggregate consideration paid (including all Debt, known liabilities and known contingent obligations incurred or assumed in connection therewith) for such acquisition shall not exceed $50,000,000.
Permitted Affiliate Transactions means the following transactions between Borrower or an Obligated Party and any Affiliate of Borrower or such Obligated Party; provided that, such transactions are in the Ordinary Course of Business and pursuant to the reasonable requirements of Borrowers or such Obligated Partys business, and upon fair and reasonable terms no less favorable to Borrower or such Obligated Party than would be obtained in a comparable arms-length transaction with a Person not an Affiliate of Borrower or such Obligated Party: (i) purchase and sale of mortgage loans (for which an Affiliate is not an obligor) and mortgage servicing rights, (ii) leasing arrangements for the lease of office space, and (iii) ancillary services agreements.
Person means any individual, corporation, limited liability company, business trust, association, company, partnership, joint venture, Governmental Authority, or other entity, and shall include such Persons heirs, administrators, personal representatives, executors, successors and assigns.
Plan means any employee benefit or other plan, other than a Multiemployer Plan, established or maintained by, or for which there is an obligation to make contributions by or there is any liability, contingent or otherwise with respect to Borrower or any ERISA Affiliate and which is covered by Title IV of ERISA or subject to Section 412 of the Code.
Pledge Agreements means any Pledge Agreement with respect to any or all of the Obligations delivered pursuant to Section 7.13.
Pledged Agency Servicing Rights means the Agency Servicing Rights pledged to Lender hereunder as identified on the Pledged Agency Servicing Rights Schedule.
Pledged Agency Servicing Rights Schedule means the schedule of servicing rights identified on Schedule 4.1(a) hereto (as the same maybe amended, modified or updated from time to time), signed by a Responsible Officer and submitted to the Lender at the time of the initial Borrowing and at the time any amendments are made to such Pledged Agency Servicing Rights Schedule, listing all Serviced Loans related to the Pledged Agency Servicing Rights (Serviced Loans in pools shall be listed by pool number although the Lender shall have the right to require lists of Serviced Loans in such pools) and stating the portion of the current Collateral Value
evidenced by such Pledged Agency Servicing Rights provided by the Approved Servicing Appraiser.
Pledged Servicing Agreement means a Servicing Agreement, the Agency Servicing Rights of which are Pledged Agency Servicing Rights.
Pledged Servicing Receivables has the meaning set forth in Section 4.1(b).
Pledged Servicing Receivables Agreement means a Servicing Agreement, the Servicing Receivables of which are Pledged Servicing Receivables.
Pledged to the Lender means:
(a) for Agency Servicing Rights, Agency Servicing Rights that satisfy the definition of Agency Servicing Rights set forth herein and have been duly pledged by Borrower to the Lender and the Lender has been granted and continues to hold a valid, first priority perfected Lien on such Agency Servicing Rights; and such Agency Servicing Rights have not been released from the Lien hereunder;
(b) for Servicing Receivables, Servicing Receivables that satisfy the definition of Servicing Receivables set forth herein and have been duly pledged by Borrower to the Lender and the Lender has been granted and continues to hold a valid, first priority perfected Lien on such Servicing Receivables; and such Servicing Receivables have not been released from the Lien hereunder;
(c) any investment securities or deposit account, that has been made subject to a control agreement executed by the relevant securities intermediary or depository and the Lender that gives control of such investment securities or deposit account to the Lender and the Lender has been granted and continues to hold a valid, first priority perfected Lien in such investment securities or deposit account; and
(d) for any other type of property, that Borrower has granted to the Lender a Lien therein and have taken all steps required under applicable Law to perfect such Lien as a first and prior Lien and security interest in all of Borrowers present and future right, title and interest therein.
Pledgor means any domestic Subsidiary that executes a Pledge Agreement.
Pro Forma Debt Service means debt service with respect to the Obligations, assuming a fully funded Revolving Credit Note with an outstanding principal balance at all times of [***] (regardless of the actual outstanding principal balance on the Revolving Credit Note at any time) and a pro forma 10-year amortization.
Prohibited Transaction means any transaction set forth in Section 406 of ERISA or Section 4975 of the Code.
Property of a Person means any and all property, whether real, personal, tangible, intangible or mixed, of such Person, or any other assets owned, operated or leased by such Person, including the Collateral.
Recourse Servicing Agreement means a Servicing Agreement with respect to which the servicer is obligated to repurchase or indemnify the holder of the related Mortgage Loans in respect of defaults on such Mortgage Loans at any time during the term of such Mortgage Loans.
Related Indebtedness has the meaning set forth in Section 11.20.
Release means, as to any Person, any release, spill, emission, leaking, pumping, injection, deposit, disposal, disbursement, leaching, or migration of Hazardous Materials into the indoor or outdoor environment or into or out of property owned by such Person, including, without limitation, the movement of Hazardous Materials through or in the air, soil, surface water, ground water, or Property.
Remedial Action means all actions required to (a) clean up, remove, treat, or otherwise address Hazardous Materials in the indoor or outdoor environment, (b) prevent the Release or threat of Release or minimize the further Release of Hazardous Materials so that they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, or (c) perform pre-remedial studies and investigations and post-remedial monitoring and care.
REO Property means a Mortgaged Premises acquired by Borrower on behalf of a MBS trust through foreclosure or deed-in-lieu of foreclosure.
Reportable Event means any of the events set forth in Section 4043 of ERISA.
Responsible Officer means the chief executive officer, president, chief financial officer, controller or treasurer of Borrower or any Person designated by a Responsible Officer to act on behalf of a Responsible Officer; provided that such designated Person may not designate any other Person to be a Responsible Officer. Any document delivered hereunder that is signed by a Responsible Officer of Borrower shall be conclusively presumed to have been authorized by all necessary corporate, partnership and/or other action on the part of Borrower and such Responsible Officer shall be conclusively presumed to have acted on behalf of Borrower.
Revolving Credit Note means the promissory note of Borrower payable to the order of Lender, in substantially the form of Exhibit C.
Secured Parties means the collective reference to Lender, each hedge bank, and any other Person the Obligations owing to which are, or are purported to be, secured by the Collateral under the terms of the Security Documents.
Security Documents means each and every security agreement, pledge agreement, mortgage, deed of trust or other collateral security agreement required by or delivered to Lender from time to time that purport to create a Lien in favor of any of the Secured Parties to secure payment or performance of the Obligations or any portion thereof.
Serviced Loans means all Mortgage Loans serviced or required to be serviced by Borrower under any Servicing Agreement, irrespective of whether the actual servicing is done by another Person (a subservicer) retained by Borrower for that purpose.
Servicer means a Person (which may, or shall, mean Borrower if the context permits, or requires, it) retained by the owner (or a trustee for the owner) of Mortgage Loans to service them under a Servicing Agreement. For the avoidance of doubt, Cenlar and LoanCare Servicing are Servicers approved by Lender as of the Closing Date.
Servicer Downgrade Event means any debt, deposit, financial strength or any other financial, operational or performance rating for Borrower, a Servicer or any sub-servicer is downgraded one or more levels below SQ3 by Moodys or RPS3 by Fitch.
Servicers Deposit Account means a deposit account maintained at Lender, provided that Lender has been approved and continues to be approved at all times while funds are held in such account by the related Agency or owner to maintain such deposit account, for deposits of principal and interest payments or taxes and insurance payments made by Customers of Serviced Loans, irrespective of how such account is styled or who is the designated owner of such account, in respect of which Borrower, as servicer, has the right (whether absolute or conditional) to make withdrawals to reimburse itself (or to be reimbursed by withdrawals from such account by an owner of the related Serviced Loans or a trustee for such owner which such owner or trustee is contractually obligated to make and pay over to Borrower upon Borrowers request therefor) for having made servicer advances to pay any or all of the following: scheduled principal and interest payments and property taxes and insurance payments; it being understood that a daily average (calculated over thirty (30) calendar days) of at least [***] must be kept on deposit in such Servicers Deposit Account.
Servicer Side Letter means a letter agreement, in form and substance acceptable to Lender in its sole discretion, executed by a Servicer or subservicer, as applicable, in favor of Lender, which letter agreement provides, at a minimum, that (i) upon notice of an Event of Default hereunder, Servicer and/or subservicer agrees to (A) segregate amounts collected on account of the applicable Mortgage Loans and hold them in trust for Lender and (B) deliver to Lender any information with respect to the Mortgage Loans as requested by Lender, and (ii) such other terms as requested by Lender.
Servicing Agreement means, with respect to any Person, the arrangement, whether or not evidenced in writing, pursuant to which that Person acts as servicer of Mortgage Loans, whether or not any of such Mortgage Loan is owned by such Person, in accordance with the Agency Guidelines.
Servicing Appraisal means a written appraisal or evaluation by an Approved Servicing Appraiser evaluating the fair market value of all of the Pledged Agency Servicing Rights as of a date stated in the written report of such evaluation, each such evaluation and report to be made at Borrowers expense, to be addressed to the Lender and to be in a form reasonably acceptable to the Lender, it being understood that, for purposes of this Agreement, (i) the opinion of value in any such independent appraisal or evaluation shall be expressed as a range of values, and for purposes of this Agreement, the Market Value shall be deemed the midpoint (the average of the
limits) of the range and (ii) each Servicing Appraisal shall take into account customary factors, including current market conditions and the fact that the Agency Servicing Rights may be terminated by the relevant Servicing Agreements counterparty, or sold or otherwise disposed of, under circumstances where Borrower is in default under the applicable Servicing Agreement. Borrower acknowledges that each Approved Servicing Appraisers determination of market value is for the limited purpose of determining an advance rate for purposes of the financing provided in this Agreement.
Servicing Payment Account means Borrowers non-interest bearing demand deposit account to be maintained with Lender and to be used for (a) the Lenders deposits of proceeds of Loans made by the Lender to Borrower, and payments constituting the sale proceeds of principal from any Collateral (other than regular principal and interest payments on the Collateral); (b) the Lenders deposits of principal and interest payments for the repayment of Loans received from Borrower or for Borrowers account and (c) only if and when (i) no Default has occurred unless it has been either cured by Borrower or waived in writing by the Lender and (ii) no Event of Default has occurred unless the Lender has declared in writing that it has been cured or waived, the Lenders transfer to Borrowers designated operating account (or to a controlled disbursement account maintained by Borrower with the Lender) of proceeds of sales or other dispositions of released Collateral permitted hereunder. The Servicing Payment Account shall be a blocked and controlled account from which Borrower shall have no right to directly withdraw funds, but instead such funds may be withdrawn or paid out only against the order of an authorized officer of the Lender.
Servicing Portfolio means Borrowers entire portfolio of Serviced Loans.
Servicing Receivables means all of Borrowers present and future rights to have, demand, receive, recover, obtain and retain payments and prepayments of principal, interest or both, and tax, assessment, maintenance fee and insurance escrow payments, owing, paid or due to be paid on, under or in respect of Serviced Loans that are the subject of the Pledged Servicing Receivables Agreements, to reimburse Borrower for making advances under such Pledged Servicing Receivables Agreements, including all of Borrowers present and future rights to have, demand, receive, recover, obtain and retain payment, reimbursement or indemnity for (or making) advances made by Borrower (or its predecessor servicer) under the Pledged Servicing Receivables Agreements, in each case from any other source or sources, including:
(i) sums paid or to be paid by or for the accounts of the Customers in respect of such Serviced Loans;
(ii) any other Mortgage Loan master servicer, servicer or subservicer, whether or not affiliated or bound by any contract with Borrower;
(iii) any owner or holder of any Serviced Loan or MBS backed by such Serviced Loans under the Pledged Servicing Receivables Agreements, or any trustee, master servicer, servicer, subservicer or asset manager for any such owner;
(iv) any investor (whether pursuant to an express or implied advances reimbursement covenant under a contract between such investor and Borrower, or any predecessor servicer,
contained in or executed pursuant to any asset management agreement or any mortgage or MBS selling or servicing guide, pursuant to any other agreement between Borrower, or any predecessor servicer, and such investor or by operation of any legal or equitable rule or principle, including subrogation);
(v) governmental, government-sponsored enterprise or private mortgage insurer or guarantor;
(vi) any proceeds of foreclosure or other realizations on any security for or guarantees or insurance of Serviced Loans under any Pledged Servicing Receivables Agreement in respect of which Serviced Loans an advance was made by Borrower (or its predecessor servicer);
(vii) any pool insurance, title insurance or any other insurance on property or property rights comprising or covered by any Serviced Loan which is the subject of any unrecovered advance; and
(viii) funds paid over by Borrower to the trustee for the holder of the related MBSs for such servicer advances as are subsequently determined to not be recoverable from such Customers.
Single-family is a preface that means that a Mortgage Loan is secured by a Mortgage covering real property improved by a one-, two-, three- or four-family residence.
Subsidiary means (a) any corporation of which at least a majority of the outstanding shares of stock having by the terms thereof ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether or not at the time stock of any other class or classes of such corporation shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by Borrower or one or more of other Subsidiaries or by Borrower and one or more of such Subsidiaries, and (b) any other entity (i) of which at least a majority of the ownership, equity or voting interest is at the time directly or indirectly owned or controlled by one or more of Borrower and other Subsidiaries and (ii) which is treated as a subsidiary in accordance with GAAP.
Tangible Net Worth means, for any Person as of any date, all amounts which, in conformity with GAAP, would be included as stockholders equity on a balance sheet of such Person; provided, however, there shall be excluded therefrom: (a) any amount at which the equity of such Person appears as an asset on such Persons balance sheet; (b) goodwill, including any amounts, however designated, that represent the excess of the purchase price paid for assets or stock over the value assigned thereto; (c) patents, trademarks, trade names, and copyrights; (d) deferred expenses; (e) loans and advances to any stockholder, director, officer, or employee of such Person; and (f) all other assets which are properly classified as intangible assets; provided that, for the purposes hereof, Agency Servicing Rights shall not be considered an intangible asset.
Taxes and Insurance Advance means a recoverable servicer advance made by Borrower pursuant to a Pledged Servicing Receivables Agreement to pay property taxes, assessments, casualty insurance premiums, ground rents and similar obligations due in respect of Serviced Loans that are the subject of such Pledged Servicing Receivables Agreement required by either the insufficiency of escrow or impound payments received by Borrower (as servicer) from such Serviced Loans Customers to fully fund payment of such obligations when due or the failure of
the Customers to make such payments if the related Mortgage Loans do not provide for escrow or impound payments.
Termination Date means 5:00 P.M. Dallas, Texas time on August 25, 2017, such later date as shall be established pursuant to Section 2.5 or such earlier date on which the Commitment terminates as provided in this Agreement.
Test Period means the previous four (4) fiscal quarters.
UCC means Chapters 1 through 11 of the Texas Business and Commerce Code.
Unfunded Pension Liability means the excess, if any, of (a) the funding target as defined under Section 430(d) of the Code without regard to the special at-risk rules of Section 430(i) of the Code, over (b) the value of plan assets as defined under Section 430(g)(3)(A) of the Code determined as of the last day of each calendar year, without regard to the averaging which may be allowed under Section 310(g)(3)(B) of the Code and reduced for any prefunding balance or funding standard carryover balance as defined and provided for in Section 430(f) of the Code.
Section 1.2 Accounting Matters. Any accounting term used in this Agreement or any other Loan Document shall have, unless otherwise specifically provided therein, the meaning customarily given such term in accordance with GAAP, and all financial computations thereunder shall be computed, unless otherwise specifically provided therein, with respect to Borrower and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied; provided, however, that all financial covenants and calculations in the Loan Documents shall be made in accordance with GAAP as in effect on the date of this Agreement unless Borrower and Lender shall otherwise specifically agree in writing. That certain items or computations are explicitly modified by the phrase in accordance with GAAP shall in no way be construed to limit the foregoing
Section 1.3 ERISA Matters. If, after the date hereof, there shall occur, with respect to ERISA, the adoption of any applicable law, rule, or regulation, or any change therein, or any change in the interpretation or administration thereof by the PBGC or any other Governmental Authority, then Borrower or Lender may request a modification to this Agreement solely to preserve the original intent of this Agreement with respect to the provisions hereof applicable to ERISA, and the parties to this Agreement shall negotiate in good faith to complete such modification.
Section 1.4 Other Definitional Provisions. All definitions contained in this Agreement are equally applicable to the singular and plural forms of the terms defined. The words hereof, herein, and hereunder and words of similar import referring to this Agreement refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified, all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear. Terms used herein that are defined in the UCC, unless otherwise defined herein, shall have the meanings specified in the UCC. Any definition of or reference to any agreement, instrument or other document shall be construed as referring to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or in any other Loan Document). Any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time.
SECTION 2
BORROWINGS
Section 2.1 Borrowings.
(a) Borrowings. Subject to the terms and conditions of this Agreement, Lender agrees to make one or more revolving credit loans to Borrower from time to time from the date hereof to and including the Termination Date in an aggregate principal amount at any time outstanding up to but not exceeding the amount of the Commitment, provided that the aggregate amount of all Borrowings at any time outstanding shall not exceed the lesser of (i) the amount of the Commitment and (ii) the Borrowing Base. Subject to the foregoing limitations, and the other terms and provisions of this Agreement, Borrower may borrow, repay, and reborrow hereunder.
(i) The Revolving Credit Note. The obligation of Borrower to repay the Borrowings and interest thereon shall be evidenced by the Revolving Credit Note executed by Borrower, and payable to the order of Lender, in the principal amount of the Commitment as originally in effect.
(ii) Repayment of Borrowings. Borrower shall repay the unpaid principal amount of all Borrowings on the Termination Date, unless sooner due by reason of acceleration by Lender as provided in this Agreement or by reason of voluntary prepayment as set forth in Section 3.2(a).
(iii) Interest. The unpaid principal amount of the Borrowings shall, subject to the following sentence, bear interest at the rate provided in the Revolving Credit Note or at the Maximum Rate, whichever is lower. Accrued and unpaid interest on the Borrowings shall be payable as provided in the Revolving Credit Note and on the Termination Date.
(iv) Borrowing Procedure. Borrower shall give Lender notice of each Borrowing by means of a Borrowing Request Form containing the information required therein and delivered (by hand or electronically by email) to Lender no later than 10:00 a.m. (Dallas, Texas time) on the Business Day on which the Borrowing is desired to be funded. Any notice of Borrowing received after 10:00 a.m. (Dallas, Texas time) shall be processed by Lender on a commercially reasonable efforts basis on the same Business Day but no later than on the following Business Day. Lender at its option may accept telephonic requests for such Borrowings, provided that such acceptance shall not constitute a waiver of Lenders right to require delivery of a Borrowing Request Form in connection with
subsequent Borrowings. Any telephonic request for a Borrowing by Borrower shall be promptly confirmed by submission of a properly completed Borrowing Request Form to Lender, but failure to deliver a Borrowing Request Form shall not be a defense to payment of the Borrowing. Lender shall have no liability to Borrower for any loss or damage suffered by Borrower as a result of Lenders honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically or electronically by email and purporting to have been sent to Lender by Borrower and Lender shall have no duty to verify the origin of any such communication or the identity or authority of the Person sending it. Subject to the terms and conditions of this Agreement, each Borrowing shall be made available to Borrower by depositing the same, in immediately available funds, in an account of Borrower designated by Borrower maintained with Lender. If, after giving effect to a requested Borrowing, the Lender determines (either then or on any later day in the course of reviewing the same) that (i) the Borrowing Request Form submitted to it is incomplete or incorrect in any material respect, then the Lender shall use commercially reasonable efforts to promptly inform Borrower of such incomplete or incorrect Borrowing Request Form and withhold the entire Borrowing until Borrower shall have demonstrated to the Lenders reasonable satisfaction that such Borrowing Request Form is in fact not (or is no longer) incomplete or incorrect in any material respect or (ii) the amount of the requested Borrowing exceeds the amount available to Borrower under the terms and conditions of this Agreement, then the Lender shall use commercially reasonable efforts to promptly inform Borrower thereof and shall withhold that portion of the Borrowing that exceeds the amount available to Borrower under the terms and conditions of this Agreement.
Section 2.2 General Provisions Regarding Interest; Etc.
(a) Default Interest Rate. Any outstanding principal of any Borrowing and (to the fullest extent permitted by law) any other amount payable by Borrower under this Agreement or any other Loan Document that is not paid in full when due (whether at stated maturity, by acceleration, or otherwise) shall bear interest at the Default Interest Rate for the period from and including the due date thereof to but excluding the date the same is paid in full. Additionally, at any time that an Event of Default exists, all outstanding and unpaid principal amounts of all of the Obligations shall, to the extent permitted by law, bear interest at the Default Interest Rate. Interest payable at the Default Interest Rate shall be payable from time to time on demand.
(b) Computation of Interest. Interest on the Borrowings and all other amounts payable by Borrower hereunder shall be computed on the basis of a year of 360 days and the actual number of days elapsed (including the first day but excluding the last day) unless such calculation would result in a usurious rate, in which case interest shall be calculated on the basis of a year of 365 or 366 days, as the case may be.
Section 2.3 Reserved.
Section 2.4 Use of Proceeds. The proceeds of the Borrowings shall be used by Borrower for expanding its mortgage servicing business and acquiring mortgage servicing rights and assets related thereto.
Section 2.5 Extension of Termination Date. So long as no Default or Event of Default shall have occurred and be continuing on the date on which notice is given in accordance with the following clause (a) or on the Termination Date, Borrower may extend the Termination Date to a date that is three hundred and sixty-four (364) days after the then-effective Termination Date, no more than two times, upon: (a) delivery of a written request therefor to Lender at least thirty (30) days, but no more than (60) days, prior to the Termination Date then in effect; (b) receipt by the Lender of a certificate of Borrower dated the date of such request stating that (i) no Default or Event of Default then exists and is continuing and (ii) Borrower is in compliance with the financial covenants set forth in Section 9. Any written requests from Borrower to extend the Termination Date that is received less than thirty (30) days prior to such Termination Date shall be reviewed by Lender on a best efforts basis. Such extension shall be evidenced by delivery of written confirmation of the same by Lender to Borrower.
SECTION 3
PAYMENTS
Section 3.1 Method of Payment. All payments of principal, interest, and other amounts to be made by Borrower under this Agreement and the other Loan Documents shall be made to Lender in Dollars and immediately available funds, without setoff, deduction, or counterclaim, and free and clear of all taxes at the time and in the manner provided in the Revolving Credit Note.
Section 3.2 Prepayments.
(a) Voluntary Prepayments. Borrower may prepay all or any portion of the Revolving Credit Note to the extent and in the manner provided for therein.
(b) Mandatory Prepayment.
(i) If at any time the unpaid principal balance of the Revolving Credit Note exceeds the Borrowing Base then in effect (a Borrowing Base Deficiency), then Borrower shall immediately either prepay the entire amount of such excess to Lender or pledge additional Agency Servicing Rights with a Market Value sufficient to eliminate such excess; provided, however, that if a Borrowing Base Deficiency directly results from the Borrowing Base being revised by the Lender in its commercially reasonable discretion, then Borrower shall, within five (5) days, either prepay the entire amount of such excess to Lender or pledge additional Agency Servicing Rights with a Market Value sufficient to eliminate such excess.
(ii) Without limiting the foregoing, if at any time (x) this Agreement or any other Loan Document shall cease to be in full force and effect or shall be declared null and void or (y) any Lien created by the Loan Documents shall for any reason
cease to be a valid, first priority perfected Lien upon any of the Collateral purported to be covered thereby, then, at the option of the Lender, Borrower shall make a mandatory prepayment of the Loan in whole (or, at the option of the Lender, in part) no more than thirty (30) days following the occurrence of (x) or (y) above.
(iii) Without limiting the foregoing, if at any time (x) the validity or enforceability of this Agreement or any other Loan Document shall be contested or challenged (in writing) by Borrower, any Obligated Party or any of their respective equity holders, or (y) Borrower or any Obligated Party shall deny (in writing) that it has any further liability or obligation under any of the Loan Documents, then, at the option of the Lender, Borrower shall make a mandatory prepayment of the Loan in whole (or, at the option of the Lender, in part) within one (1) Business Day following the occurrence of (x) or (y) above.
(iv) Without limiting the foregoing, if at any time any of the following events occurs (each such event, a Mandatory Prepayment Event), then, at the option of the Lender, Borrower shall make a mandatory prepayment of the Loan in whole (or, at the option of the Lender, in part) prior to or simultaneously with such Mandatory Prepayment Event: (i) the consummation of an Organic Change; or (ii) the occurrence of a Change of Control. Borrower shall give written notice to Lender of any Mandatory Prepayment Event not less than fifteen (15) nor more than sixty (60) days prior to the proposed closing date thereof, describing in reasonable detail such transaction and the proposed closing date. Upon receipt of such notice, Lender shall have a period of fifteen (15) days in which to notify Borrower of the principal amount of the Loan or portion thereof to be prepaid. Upon receipt of such notice from Lender, Borrower covenants and agrees that it shall prepay, on the closing date of such transaction, the Loan or a portion thereof subject to prepayment.
SECTION 4
SECURITY
Section 4.1 Grant of Security Interest. As security for the payment of the Borrowings and for the payment and performance of all of the Obligations, Borrower hereby grants to the Lender a first priority security interest in all of Borrowers present and future estate, right, title and interest in and to the following (collectively, the Collateral) (although Lender does not assume any of Borrowers or any other liability or obligation under or in respect of any Collateral):
(a) Agency Servicing Rights. All Pledged Agency Servicing Rights (whether classified as instruments, accounts, payment intangibles or general intangibles under the UCC) listed on any Pledged Agency Servicing Rights Schedule, together with:
(i) all of Borrowers rights to late charges, ancillary fees and other servicing compensation under, for or in respect of the Pledged Agency Servicing Rights, whether or not yet accrued, earned, due or payable;
(ii) all of Borrowers rights to proceeds of any sale or other disposition of Pledged Agency Servicing Rights and to any payment in respect of the transfer or termination of Pledged Agency Servicing Rights by the counterparty to the relevant Servicing Agreement;
(iii) all other present and future rights and interests of Borrower in, to, and under the Pledged Agency Servicing Rights;
(iv) all insurance and claims for insurance effected or held for the benefit of Borrower or the Lender in respect of the Pledged Agency Servicing Rights;
(v) all of Borrowers files, certificates, correspondence, appraisals, accounting entries, journals and reports, other information and data that describes, catalogs or lists such information or data, or that otherwise directly relates to the Pledged Agency Servicing Rights, and other information and data that is used or useful for managing and administering the Pledged Agency Servicing Rights;
(vi) all media (tapes, discs, cards, drives, flash memory or any other kind of physical or virtual data or information storage media or systems) on which is stored only information or data that relates to the Pledged Agency Servicing Rights, and on which no other material information and data that relates to property other than the Pledged Agency Servicing Rights is stored;
(vii) reserved;
(viii) all payments of principal, interest and other distributions thereon or products and proceeds of the Pledged Agency Servicing Rights, all accounts, payment intangibles and general intangibles arising from, under or in respect of the Pledged Agency Servicing Rights or relating thereto, and all accessions or additions to and all substitutions for any of the Pledged Agency Servicing Rights;
(ix) all instruments, documents, or writings evidencing any monetary obligation, account, payment intangible, general intangible or security interest in any of the Pledged Agency Servicing Rights, whether now existing or hereafter arising, accruing or acquired; and
(x) all security for or claims against others in respect of the Pledged Agency Servicing Rights;
(b) Servicing Receivables under the Pledged Servicing Receivables Agreements. All Servicing Receivables under the Servicing Agreements, including, to the extent constituting Eligible Servicing Receivables, those listed on Schedule 4.1(b) hereto or on any update to Schedule 4.1(b) from time to time submitted to the Lender by Borrower (the Pledged Servicing Receivables), together with;
(i) all rights to funds from any and all Servicers Deposit Accounts from which Borrower has the right to make withdrawals to reimburse Borrower for any Pledged Servicing Receivable under any Pledged Servicing Receivables Agreement;
(ii) all profits, income, surplus, moneys and revenues of any kind accruing, and all accounts arising, under or in respect of the Pledged Servicing Receivables;
(iii) all accounts, payment intangibles and general intangibles, whether now or hereafter existing (including all of Borrowers present and future rights to have and receive interest and other compensation, whether or not yet accrued, earned, due or payable), under or arising out of any or all of the Pledged Servicing Receivables;
(iv) all of Borrowers right, title and interest in and to any and all security for or claims against others in respect of the Pledged Servicing Receivables;
(v) all of Borrowers files, surveys, certificates, correspondence, appraisals, tapes, discs, cards, accounting records and other information and data directly relating to any of the Pledged Servicing Receivables; and
(vi) all of Borrowers proceeds and rights to proceeds of any sale or other disposition of any or all of the Pledged Servicing Receivables;
(c) Servicing Payment Account. The Servicing Payment Account and all sums from time to time on deposit in it;
(d) Hedge Agreements. The portion of all Hedge Agreements constituting or relating to the Pledged Agency Servicing Rights, including all rights to the portion of payments arising under such Hedge Agreements allocable to the Pledged Agency Servicing Rights;
(e) Other Property. Any other Property acceptable to the Lender and Pledged to the Lender; and
(f) Other Rights. All rights to have and receive any of the Collateral described above, all accessions or additions to and substitutions for any of such Collateral, together with all renewals and replacements of any of such Collateral, all other rights and interests now owned or hereafter acquired by Borrower in, under or relating to any of such Collateral or referred to above and all proceeds of any of such Collateral; all of Borrowers present and future accounts, payment intangibles and general intangibles arising from or relating to any of the Pledged Servicing Receivables under the Pledged Servicing Receivables Agreements and the Pledged Servicing, the Servicing Payment Account or any such other Property as may be specifically Pledged to the Lender in writing by Borrower and acceptable to the Lender; all other rights and interests of Borrower in, under or, in the case of Pledged Servicing only, relating to any of such property, all of Borrowers rights and interests (but none of its obligations) in, to and under all contracts and agreements, whether oral or written, relating thereto; any instruments, documents or writings evidencing any monetary obligation, contract right, account or security interest in any of such property or its proceeds accruing or accrued and all other rights and interests in and to any and all security for or claims against others in respect of any of the property described or referred to above in this Section 6.1; all books, records, contract rights, instruments, documents (including all documents of title), chattel paper and proceeds relating to, arising from or by virtue of or collections with respect to, or comprising part of, any of such property,
including all insurance and claims for insurance effected or held for the benefit of Borrower or the Lender respect of any of the foregoing, in each case whether now existing or hereafter arising, accruing or accrued; and all other rights and interests in and to any and all security for or claims against others in respect of any of the rights, interests and property described or referred to above.
Section 4.2 Limited Pledge of Servicing. Notwithstanding anything to the contrary in this Agreement or any of the other Loan Documents, the pledge of Borrowers right, title and interest in mortgage servicing rights under servicing agreements with an Agency shall only secure Borrowers debt to the Lender incurred under a facility used in whole or in part for the purposes of, or to refinance a facility used in whole or in part for the purposes of, purchasing Mortgage Loan servicing rights; provided, that the foregoing provisions of this paragraph shall be deemed automatically supplemented or amended if and to the extent such Agency supplements or amends the corresponding requirement, whether in its rules, regulations, guides, Servicing Agreements, Acknowledgment Agreements, or published announcements or otherwise waives or grants exceptions from such requirement, and in each instance, with the same substantive force and effect; and provided further that the security interest created hereby is subject to the following provision to be included in each financing statement filed in respect hereof:
The Security Interest described in this financing statement is subordinate to all rights of Fannie Mae under (0 the terms of an Acknowledgment Agreement, with respect to the Security Interest among Fannie Mae, AmeriHome Mortgage Company, LLC (the Debtor) and Nexbank SSB, and (ii) the Mortgage Selling and Servicing Contract, the Fannie Mae Selling Guide, the Fannie Mae Servicing Guide and all supplemental servicing instructions or directives provided by Fannie Mae, all applicable master agreements, recourse agreements, repurchase agreements, indemnification agreements, loss-sharing agreements, and any other agreements between Fannie Mae and the Debtor, and all as amended, restated or supplemented from time to time (collectively, the Fannie Mae Lender Contract), which rights include the right of Fannie Mae to terminate the Fannie Mae Lender Contract with or without cause and the right to sell, or have transferred, the Servicing Rights.
Section 4.3 Substitution or Removal of Collateral. From time to time, Borrower may provide the Lender with a written request for release or substitution of Collateral (a Collateral Request), which Collateral Request shall include, at a minimum: a list of all Collateral that Borrower seeks to be released or substituted (by pool number and/or loan number) and stating the portion of the current Collateral Value evidenced by such Collateral provided by the Approved Servicing Appraiser; provided that (a) Lender shall receive any mandatory prepayment or pledge of additional Collateral with a Market Value sufficient to replace such released Collateral as may be required pursuant to Section 3.2(b) and/or (b) Borrower has or is substantially concurrently providing substitute Collateral to replace such removed Collateral. Lender may grant or deny such request in its reasonable discretion. Lender may request, and Borrower shall provide, other appropriate documentation relating to such Collateral Request, as
requested by Lender. If Lender determines that it shall grant such request in its reasonable discretion, then Lender shall release such Collateral to Borrower within five (5) Business Days of the notification to Lender of such Collateral Request.
Section 4.4 Lender Requires Acknowledgment Agreements. Pledged Agency Servicing Rights under Servicing Agreements with any Agency will have a Market Value of zero for purposes of determining Collateral Value until the date on which an Acknowledgment Agreement covering such Pledged Agency Servicing Rights has been executed and delivered by the applicable Borrower, the Lender and such Agency.
Section 4.5 Further Assurances Concerning Collateral. In furtherance of the foregoing, Borrower hereby agrees to perform, or cause to be performed, such acts and duly to authorize, execute, acknowledge, deliver, file and record (or cause such actions to be taken with respect to) such financing statements, assignments, security agreements, deeds of trust, mortgages, bond powers and supplements, modifications or amendments to any of them, and such other papers as the Lender may reasonably request in order to establish and preserve the priority of, perfect and protect the Liens granted or intended to be granted to the Lender in and to any and all such Collateral and to preserve and protect the Lenders rights in respect of all present and future Collateral for the Obligations.
Section 4.6 Financing Statements Filing Authorization. Borrower hereby irrevocably authorizes the Lender, at any time and from time to time, to file at Borrowers cost and expense in any filing office in any jurisdiction any initial financing statements and continuations thereof and amendments thereto, including amendments to update the lists of Pledged Servicing Receivables Agreements and Pledged Servicing Agreements attached as exhibits to such financing statements whenever such lists are updated, and that (a) indicate the Collateral, regardless of whether any particular asset in the Collateral falls within the scope of Article 9 of the UCC, and (b) provide any other information required for the sufficiency or filing office acceptance of any financing statement or amendment. Borrower agrees to furnish any such information to the Lender promptly upon the Lenders request.
Section 4.7 Borrower Remains Liable. Notwithstanding anything contained in this Agreement to the contrary, Borrower expressly agrees that it shall (a) remain liable under each of the Pledged Servicing Receivables Agreements and Pledged Servicing Agreements and related agreements included in the Collateral to keep, observe and perform all of the conditions and obligations to be kept, observed and performed by Borrower (or any predecessor in interest) thereunder and (b) perform all of its duties and obligations thereunder, all in accordance with and pursuant to the terms and provisions of each such agreement. The Lender shall not have any obligation or liability under any such agreement by reason of, or arising out of, this Agreement or the granting to the Lender of a Lien therein or the receipt by the Lender of any payment relating to any such agreement.
Section 4.8 Rights after Occurrence of Default. After the occurrence of any Event of Default that the Lender has not declared in writing to have been cured or waived, the Lender shall have the following rights (but no obligations):
(a) in its discretion, to demand, sue for, collect or receive and receipt for (in its own name, in the name of Borrower or otherwise) any money or property at any time payable or receivable on account of any of the Collateral, in consideration of its transfer or in exchange for it;
(b) to direct, and to take any and all other steps necessary to cause, any Servicer of any of the Collateral to pay over directly to the Lender for the account of Borrower (instead of to Borrower or any other Person) all sums from time to time due to Borrower and to take any and all other actions that Borrower or the Lender has the right to take under Borrowers contract with such Servicer; and
(c) to request that Borrower forthwith pay to the Lender all amounts thereafter received by Borrower upon or in respect of any of the Collateral, advising the Lender as to the sources of such funds, and if the Lender does so request, then Borrower shall diligently and continuously thereafter comply with such request.
(d) All amounts so received and collected by the Lender shall be applied to pay (i) fees owing under the Loan Documents, (ii) the reasonable costs and expenses incurred by the Lender in collecting or enforcing the Revolving Credit Note and the other Loan Documents, defending against any claims made in respect of the Loan Documents or any related transactions, protecting or realizing on Collateral and (iii) accrued and unpaid interest on and principal of the Revolving Credit Note.
(e) Reserved.
Section 4.9 Attorney-In-Fact Appointment. Borrower hereby appoints the Lender as its attorney-in-fact upon the occurrence of an Event of Default to take all such steps in its name and behalf as are necessary or appropriate to (i) request that any Pledged Agency Servicing Right related to any Agency or any other investor be transferred to the Lender or to another approved servicer approved by such Agency or such other investor (as the case may be) and perform (without assuming or being deemed to have assumed any of the obligations of Borrower thereunder) all aspects of each servicing contract that is Collateral, (ii) request distribution to the Lender of sale proceeds or any applicable contract termination fees arising from the sale or termination of such servicing rights and remaining after satisfaction of Borrowers relevant obligations to such Agency or such other investor (as the case may be), including costs and expenses related to any such sale or transfer of such servicing rights and other amounts due for unmet obligations of Borrower to such Agency or such other investor (as the case may be) under applicable Agency Guideline or such other investors contract, (iii) deal with investors and any and all subservicers and master servicers in respect of any of the Collateral in the same manner and with the same effect as if done by Borrower and (iv) take any action and execute any instruments that the Lender deems necessary or advisable to accomplish any of such purposes, and such appointment shall be deemed a power coupled with an interest and shall be irrevocable for so long as any of the Obligations shall be unpaid or Lender shall have any outstanding commitment to lend or to extend any other financial accommodations to or for the account of Borrower.
Section 4.10 Periodic Valuations of Agency Servicing Rights. The value of all Pledged Agency Servicing Rights to the Lender shall be periodically determined as provided in
Section 7.14 by an Approved Servicing Appraiser and the Borrowing Base shall be adjusted to reflect each such determination and updating of the value of such Collateral; provided that, notwithstanding any other provision hereof to the contrary, the Lender shall have the right, exercisable from time to time (daily or less often) in its sole discretion on any day after the occurrence and during the continuance of any Event of Default to mark the Pledged Agency Servicing Rights to market, whereupon, for purposes of determining the Collateral Value for that day (and for each day thereafter until it shall thereafter be evaluated or re-evaluated by such an approved appraiser or broker or again marked to market by the Lender) such Pledged Agency Servicing Rights shall be equal to [***] of its Market Value on that day (which the parties acknowledge may be nominal). Borrower acknowledges that a determination by the Lender of Market Value pursuant to this Agreement is for the limited purpose of determining Collateral Value for lending purposes under this Agreement without the ability to perform customary purchasers due diligence and is not necessarily equivalent to a determination of the fair market value of Collateral achieved by obtaining competing bids in an orderly market in which the servicer is not in default, insolvent or the subject of a case in bankruptcy and the bidders have adequate opportunity to perform customary diligence.
Section 4.11 Collections in General. After the occurrence of any Event of Default that the Lender has not declared in writing to have been cured or waived, the Lender shall have the right (but no obligation) in its sole discretion to take any or all of the following actions with respect to the Collateral, which rights are in addition to, and not in derogation or in lieu of, any other rights available to a secured creditor under any applicable law, rule, or regulation or any order, writ, injunction, or decree of any Governmental Authority or arbitrator:
(a) Demand, sue for, collect or receive and receipt for (in its own name, in the name of Borrower or otherwise) any money or property at any time payable or receivable on account of any of the Collateral, in consideration of its transfer or in exchange for it;
(b) Request Borrower to pay over to the Lender all sums from time to time due Borrower under or in respect of the Pledged Servicing Agreements and any amounts paid to Borrower in respect of any Pledged Servicing Receivables, including any and all fees and other compensation under the Pledged Servicing Agreements for servicing the Serviced Loans and all amounts paid to or collectable by Borrower to pay Servicing Receivables, whether paid to Borrower or withheld or recovered by Borrower from collections and realizations on such Serviced Loans or any other source, and to take any and all other actions that, subject to any restrictions imposed by the relevant Pledged Servicing Agreement or Pledged Servicing Receivables Agreement for the benefit of the party to it on whose behalf the Serviced Loans are being serviced (to the extent that such restrictions are valid and enforceable under the applicable UCC and other Laws), Borrower or the Lender has the right to take under that Servicing Agreement, and if the Lender does so request, then Borrower shall diligently and continuously thereafter comply with such request; and
(c) Request that Borrower forthwith pay to the Lender all amounts thereafter received by Borrower upon or in respect of any of the Collateral, whether paid to Borrower or withheld or recovered by Borrower from collections and realizations on the Serviced Loans or any other source, advising the Lender as to the source of such funds, and if the Lender
does so request, then Borrower shall diligently and continuously thereafter comply with such request.
All amounts so received and collected by the Lender pursuant to this Section 4.11 shall be applied in the same order and manner as is specified in Section 10.3. Notwithstanding anything contained in this Section 4.11, Lender shall not take any action that is inconsistent with or prohibited by the Pledged Servicing Receivables Agreements.
Section 4.12 Setoff. If an Event of Default exists, Lender shall have the right to set off and apply against the Obligations in such manner as Lender may reasonably determine, at any time (with notice provided to Borrower or any Obligated Party), any and all deposits (general or special, time or demand, provisional or final) or other sums at any time credited by or owing from Lender to Borrower or any Obligated Party whether or not the Obligations are then due. For the avoidance of doubt, Lender shall not have the right to use the Servicers Deposit Accounts for any such set off. The rights and remedies of Lender hereunder are in addition to other rights and remedies (including, without limitation, other rights of setoff) which Lender may have.
SECTION 5
CONDITIONS PRECEDENT
Section 5.1 Initial Extension of Credit. The obligation of Lender to make the initial Borrowing under the Revolving Credit Note is subject to the condition precedent that Lender shall have received on or before the day of such Borrowing all of the following, each dated (unless otherwise indicated) the date hereof, in form and substance satisfactory to Lender:
(a) Resolutions. Resolutions of the managers or members (or other governing body) of Borrower and each other Obligated Party certified by the Secretary or an Assistant Secretary (or other custodian of records) of such Person which authorize the execution, delivery, and performance by such Person of this Agreement and the other Loan Documents to which such Person is or is to be a party;
(b) Incumbency Certificate. A certificate of incumbency certified by a Responsible Officer certifying the names of the individuals or other Persons authorized to sign this Agreement and each of the other Loan Documents to which Borrower and each other Obligated Party is or is to be a party (including the certificates contemplated herein) on behalf of such Person together with specimen signatures of such individual Persons;
(c) Constituent Documents. The Constituent Documents for Borrower and each other Obligated Party certified as of a date acceptable to Lender by the appropriate government officials of the state of formation of Borrower and each other Obligated Party;
(d) Governmental Certificates. Certificates of the appropriate government officials of the state of formation or organization of Borrower and each other Obligated Party as to the existence and good standing of Borrower and each other Obligated Party, each dated within ten (10) days prior to the date of the initial Borrowing;
(e) Revolving Credit Note. The Revolving Credit Note executed by Borrower;
(f) Security Documents. The Security Documents executed by Borrower and other Obligated Parties;
(g) Acknowledgment Agreement. An Acknowledgement Agreement executed by Borrower and each of Fannie Mae in a form satisfactory to Lender;
(h) Financing Statements. UCC financing statements reflecting Borrower and the other Obligated Parties, as debtors, and Lender, as secured party, which are required to grant a Lien which secures the Obligations and covering such Collateral as Lender may request;
(i) Agency Approval. Written approval from Fannie Mae approving the Pledge to the Lender of the Collateral hereunder, which approval shall be dated a date that is within thirty (30) days prior to the Closing Date;
(j) Insurance Matters. Copies of insurance certificates describing all insurance policies required by Section 7.5;
(k) Lien Searches. The results of UCC, tax lien and judgment lien searches showing all financing statements and other documents or instruments on file against Borrower and each other Obligated Party in the appropriate filing offices, such search to be as of a date no more than ten (10) days prior to the date of the initial Borrowing;
(l) Opinion of Counsel. A favorable opinion of Sutton, Pakfar & Courtney LLP, legal counsel to Borrower and each Obligated Party, as to such matters as Lender may reasonably request;
(m) Attorneys Fees and Expenses. Evidence that the costs and expenses (including reasonable third party attorneys fees) referred to in Section 11.1, to the extent incurred, shall have been paid in full by Borrower;
(n) Closing Fees. Evidence that the any fees due at closing have been paid;
(o) Compliance Certificate. A certificate of a Responsible Officer of Borrower (i) stating that to the best of such officers knowledge, no Default has occurred and is continuing, or if a Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto, and (ii) showing in reasonable detail the calculations demonstrating compliance with the covenants set forth in Section 9;
(p) Reserved.
(q) Borrowing Base Report. A Borrowing Base Report executed by Borrower;
(r) Reserved.
(s) Additional Items. The additional items set forth on Schedule 5.1(r).
Section 5.2 All Extensions of Credit. The obligation of Lender to make any Borrowing (including the initial Borrowing) is subject to the following additional conditions precedent:
(a) Request for Borrowing. Lender shall have received in accordance with this Agreement, as the case may be, a Borrowing Request Form pursuant to Lenders requirements and executed by a Responsible Officer of Borrower;
(b) No Default. No Default shall have occurred and be continuing, or would result from or after giving effect to such Borrowing;
(c) No Material Adverse Event. No Material Adverse Event has occurred and no circumstance exists that could be a Material Adverse Event;
(d) Representations and Warranties. All of the representations and warranties contained in Section 6 and in the other Loan Documents shall be true and correct on and as of the date of such Borrowing with the same force and effect as if such representations and warranties had been made on and as of such date; and
(e) Additional Documentation. Lender shall have received such additional approvals, opinions, or documents as Lender or its legal counsel may reasonably request.
Each Borrowing hereunder shall be deemed to be a representation and warranty by Borrower and each other Obligated Party that the conditions specified in this Section 5.2 have been satisfied on and as of the date of the applicable Borrowing.
SECTION 6
REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into this Agreement, and to make Borrowings hereunder, and except as set forth in this Agreement and on the Schedules hereto, Borrower represents and warrants to Lender that:
Section 6.1 Entity Existence. Borrower and each Obligated Party (a) is duly formation, validly existing, and in good standing under the laws of the jurisdiction of its formation or organization; (b) has all requisite power and authority to own its assets and carry on its business as now being or as proposed to be conducted; and (c) is qualified to do business in all jurisdictions in which the nature of its business makes such qualification necessary and where failure to so qualify could result in a Material Adverse Event. Borrower and each Obligated Party has the power and authority to execute, deliver, and perform its obligations under this Agreement and the other Loan Documents to which it is or may become a party.
Section 6.2 Financial Statements; Etc. Borrower and each Obligated Party has delivered to Lender audited financial statements of Borrower and each Obligated Party as at and for the fiscal year ended December 31, 2014 and unaudited financial statements of Borrower and each Obligated Party for the three (3)-month period ended September 30, 2015. Such financial statements are true and correct in all material respects, have been prepared in accordance with
GAAP, and fairly and accurately present, on a consolidated basis, the financial condition of Borrower and each Obligated Party as of the respective dates indicated therein and the results of operations for the respective periods indicated therein. Neither Borrower nor any other Obligated Party has any material contingent liabilities, liabilities for taxes, unusual forward or long-term commitments, or unrealized or anticipated losses from any unfavorable commitments except as referred to or reflected in such financial statements. No Material Adverse Event has occurred since the effective date of the financial statements referred to in this Section 6.2. All projections delivered by Borrower and each Obligated Party to Lender have been prepared in good faith, with care and diligence and use assumptions that are reasonable under the circumstances at the time such projections were prepared and delivered to Lender and all such assumptions are disclosed in the projections. Neither Borrower nor any Obligated Party has any material Guarantees, contingent liabilities, liabilities for taxes, or any long-term leases or unusual forward or longterm commitments, or any Hedge Agreement or other transaction or obligation in respect of derivatives, that are not reflected in the most-recent financial statements referred to in this Section 6.2. Other than the Debt listed on Schedule 6.2, Borrower and each Obligated Party have no Debt.
Section 6.3 Action; No Breach. The execution, delivery, and performance by Borrower and each other Obligated Party of this Agreement and the other Loan Documents to which such Person is or may become a party and compliance with the terms and provisions hereof and thereof have been duly authorized by all requisite action on the part of such Person and do not and will not (a) violate or conflict with, or result in a breach of, or require any consent under (i) the Constituent Documents of such Person, (ii) any applicable law, rule, or regulation or any order, writ, injunction, or decree of any Governmental Authority or arbitrator, or (iii) any agreement or instrument to which such Person is a party or by which it or any of its Properties is bound or subject, or (b) constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any of the revenues or assets of such Person.
Section 6.4 Operation of Business. Borrower and each Obligated Party possess all licenses, permits, franchises, patents, copyrights, trademarks, and trade names, or rights thereto, necessary to conduct its respective businesses substantially as now conducted and as presently proposed to be conducted, and neither Borrower nor any Obligated Party is in violation of any valid rights of others with respect to any of the foregoing. Borrower and the Servicers (if any) of its Mortgage Loans are duly registered as mortgage lenders and servicers in each state in which Mortgage Loans have been or are from time to time originated, to the extent such registration is required by any applicable law, rule, or regulation or any order, writ, injunction, or decree of any Governmental Authority or arbitrator, except where the failure to register could not reasonably be expected to result in a Material Adverse Event.
Section 6.5 Litigation and Judgments. Except as specifically disclosed in Schedule 6.5 as of the date hereof, there is no action, suit, investigation, or proceeding before or by any Governmental Authority or arbitrator pending, or to the knowledge of Borrower or any Obligated Party, threatened against or affecting Borrower or any Obligated Party that could, if adversely determined, result in a Material Adverse Event. There are no outstanding judgments against Borrower or any Obligated Party.
Section 6.6 Rights in Properties; Liens. Borrower and each Obligated Party has good and indefeasible title to or valid leasehold interests in its respective Collateral and
Properties, including the Collateral and Properties reflected in the financial statements described in Section 6.2, and none of the Collateral of Borrower or any Obligated Party is subject to any Lien, except as permitted by Section 8.2.
Section 6.7 Enforceability. This Agreement constitutes, and the other Loan Documents to which Borrower or any other Obligated Party is a party, when delivered (and assuming due execution and delivery by the other parties hereto), shall constitute legal, valid, and binding obligations of such Person, enforceable against such Person in accordance with their respective terms, except as limited by bankruptcy, insolvency, or other laws of general application relating to the enforcement of creditors rights.
Section 6.8 Approvals. No authorization, approval, or consent of, and no filing or registration with, any Governmental Authority or third party (other than from the applicable Agency) is or will be necessary for the execution, delivery, or performance by Borrower or any other Obligated Party of this Agreement and the other Loan Documents to which such Person is or may become a party or the validity or enforceability thereof.
Section 6.9 Taxes. Borrower and each Obligated Party has filed all material tax returns (federal, state, and local) required to be filed, including all income, franchise, employment, Property, and sales tax returns, and has paid all of their respective material liabilities for taxes, assessments, governmental charges, and other levies that are due and payable. Borrower and each Obligated Party knows of no pending investigation of Borrower or any Obligated Party by any taxing authority or of any pending but =assessed tax liability of Borrower or any Obligated Party.
Section 6.10 Use of Proceeds; Margin Securities. Neither Borrower nor any Obligated Party is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations T, U, or X of the Board of Governors of the Federal Reserve System). The proceeds of any Borrowing will be used by Borrower solely for the purposes specified in Section 2.4. None of such proceeds will be used to purchase or carry any margin stock, or to reduce or retire any indebtedness originally incurred to purchase or carry margin stock or for any other purpose that might constitute this transaction a purpose credit within the meaning of such Regulation U. Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stocks. Neither Borrower nor any Person acting on behalf of Borrower has taken or will take any action that might cause the Revolving Credit Note or any of the other Loan Documents, including this Agreement, to violate Regulation U or any other regulations of the Board of Governors of the Federal Reserve System or to violate Section 7 of the Securities Exchange Act of 1934 or any rule or regulation thereunder, in each case as now in effect or as the same may hereinafter be in effect. Borrower and its Affiliates own no margin stock except for that described in the financial statements referred to in Section 6.2 and, as of the date hereof, the aggregate value of all margin stock owned by Borrower and its Affiliates does not exceed twenty-five percent (25%) of all of the value of all of Borrowers and its Affiliates assets.
Section 6.11 ERISA. Each Plan that is intended to qualify under Section 401(a) of the Code has received a favorable determination letter from the IRS or an application for such a letter is currently being processed by the IRS with respect thereto and, to the knowledge of Borrower or any Obligated Party, nothing has occurred which would prevent, or cause the loss of,
such qualification. No application for a funding waiver or an extension of any amortization period pursuant to Section 412 of the Code has been made with respect to any Plan. There are no pending or, to the knowledge of Borrower or Obligated Party, threatened claims, actions or lawsuits, or action by any Governmental Authority, with respect to any Plan. There has been no Prohibited Transaction or violation of the fiduciary responsibility rules with respect to any Plan. No ERISA Event has occurred or is reasonably expected to occur. No Plan has any Unfunded Pension Liability. No Obligated Party or ERISA Affiliate has incurred, or reasonably expects to incur, any liability under Title IV of ERISA with respect to any Plan (other than premiums due and not delinquent under Section 4007 of ERISA). No Obligated Party or ERISA Affiliate has incurred, or reasonably expects to incur, any liability (and no event has occurred which, with the giving of notice under Section 4219 of ERISA, would result in such liability) under Section 4201 or 4243 of ERISA with respect to a Multiemployer Plan. No Obligated Party or ERISA Affiliate has engaged in a transaction that could be subject to Section 4069 or 4212(c) of ERISA.
Section 6.12 Disclosure. No statement, information, report, representation, or warranty made by Borrower or any other Obligated Party in this Agreement or in any other Loan Document or furnished to Lender in connection with this Agreement or any of the transactions contemplated hereby contains any untrue statement of a material fact or omits to state any material fact necessary to make the statements herein or therein not misleading. There is no fact known to Borrower or any Obligated Party which is a Material Adverse Event, or which might in the future be a Material Adverse Event that has not been disclosed in writing to Lender.
Section 6.13 Subsidiaries. Borrower has no Subsidiaries other than those listed on Schedule 6.13 and Schedule 6.13 sets forth the jurisdiction of formation or organization of each such Subsidiary and the percentage of Borrowers ownership interest in such Subsidiary. All of the outstanding capital stock or other equity interests of each Subsidiary described on Schedule 6.13 has been validly issued, is fully paid, and is nonassessable. There are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments of any nature relating to any equity interests of Borrower.
Section 6.14 Agreements. Neither Borrower nor any Obligated Party is a party to any indenture, loan, or credit agreement, or to any lease or other agreement or instrument, or subject to any charter or limited liability, corporate or other organizational restriction, in each case which could result in a Material Adverse Event. Neither Borrower nor any Obligated Party is in material default in any respect in the performance, observance, or fulfillment of any of the obligations, covenants, or conditions contained in any agreement or instrument material to its business to which it is a party. No holder of Borrowers or any Subsidiarys debt or other obligations has given notice of any asserted default that could reasonably be expected to constitute a Material Adverse Event. No liquidation or dissolution of Borrower is pending or, to Borrowers knowledge, threatened and no liquidation or dissolution of any Subsidiary is pending or threatened in writing that could reasonably be expected to constitute Material Adverse Event. No receivership, insolvency, bankruptcy, reorganization or other similar proceedings relative to Borrower or any of its properties is pending, or to Borrowers knowledge, threatened. No receivership, insolvency, bankruptcy, reorganization or other similar proceedings relative to any Subsidiary of Borrower or any of its properties is pending, or to Borrowers knowledge, threatened that could reasonably be expected to constitute Material Adverse Event.
Section 6.15 Compliance with Laws. Neither Borrower nor any Obligated Party is in violation in any material respect of any law, rule, regulation, order, or decree of any Governmental Authority or arbitrator.
Section 6.16 Regulated Entities. Neither Borrower nor any Obligated Party is (a) an investment company or a company controlled by an investment company within the meaning of the Investment Company Act of 1940 or (b) subject to regulation under the Federal Power Act, the Interstate Commerce Act, any state public utilities code, or any other federal or state statute, rule or regulation limiting its ability to incur Debt, pledge its assets or perform its obligations under the Loan Documents.
Section 6.17 Environmental Matters.
(a) Borrower and each Obligated Party, and all of its respective Properties, assets, and operations are in material compliance with all Environmental Laws. Neither Borrower nor the Obligated Parties are aware of, nor have Borrower or any Obligated Party, received notice of, any past, present, or future conditions, events, activities, practices, or incidents which may interfere with or prevent the compliance or continued compliance of Borrower and the Obligated Parties with all Environmental Laws;
(b) Each of Borrower and the Obligated Parties has obtained all permits, licenses, and authorizations that are required under applicable Environmental Laws, and all such permits are in good standing and Borrower and each Obligated Party is in compliance with all of the terms and conditions of such permits;
(c) No Hazardous Materials exist on, about, or within or have been used, generated, stored, transported, disposed of on, or Released from any of the Properties or assets of Borrower or any Obligated Party. The use which Borrower and any Obligated Party make and intend to make of their respective Properties and assets will not result in the use, generation, storage, transportation, accumulation, disposal, or Release of any Hazardous Material on, in, or from any of their Properties or assets;
(d) Neither Borrower nor any Obligated Party nor any of their respective currently or previously owned or leased Properties or operations is subject to any outstanding or threatened (in writing) order from or agreement with any Governmental Authority or other Person or subject to any judicial or docketed administrative proceeding with respect to (i) failure to comply with Environmental Laws, (ii) Remedial Action, or (iii) any Environmental Liabilities arising from a Release or threatened Release;
(e) There are no conditions or circumstances associated with the currently or previously owned or leased Properties or operations of Borrower or any Obligated Party that could reasonably be expected to give rise to any Environmental Liabilities;
(f) Neither Borrower nor any Obligated Party is a treatment, storage, or disposal facility requiring a permit under the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., regulations thereunder or any comparable provision of state law. Borrower and each Obligated Party is in compliance with all applicable financial responsibility requirements of all Environmental Laws;
(g) Neither Borrower nor any Obligated Party has filed or failed to file any notice required under applicable Environmental Law reporting a Release; and
(h) No Lien arising under any Environmental Law has attached to any property or revenues of Borrower or any Obligated Party.
Section 6.18 Membership and Standing. Borrower is an approved member in good standing of the MERS System. Borrower is (a) an approved servicer, seller/servicer or issuer, as applicable, of mortgage loans for Fannie Mae, (b) properly licensed and qualified to do business and in good standing in each jurisdiction in which such licensing and qualification is necessary to act as the servicer under any of the Servicing Agreement and applicable law, and (c) qualified to act as the servicer under the Servicing Agreement, and no event has occurred which would make Borrower unable to comply with all such eligibility requirements or which would require notification to Fannie Mae. Borrower has not received any written notice from any Governmental Authority that it intends to terminate or restrict Borrowers status as an approved servicer in its programs for which Borrower is registered, approved or authorized.
Section 6.19 Foreign Assets Control Regulations and Anti-Money Laundering. Each Obligated Party and each Subsidiary of each Obligated Party is and will remain in compliance in all material respects with all United States economic sanctions laws, Executive Orders and implementing regulations as promulgated by OFAC, and all applicable anti-money laundering and counter-terrorism financing provisions of the Bank Secrecy Act and all regulations issued pursuant to it. No Obligated Party and no Subsidiary or Affiliate of any Obligated Party (a) is a Person designated by the United States government on the list of the Specially Designated Nationals and Blocked Persons (the SDN List) with which a United States Person cannot deal with or otherwise engage in business transactions, (b) is a Person who is otherwise the target of United States economic sanction laws such that a United States Person cannot deal or otherwise engage in business transactions with such Person, or (c) is controlled by (including without limitation by virtue of such person being a director or owning voting shares or interests), or acts, directly or indirectly, for or on behalf of, any person or entity on the SDN List or a foreign government that is the target of United States economic sanctions prohibitions such that the entry into, or performance under, this Agreement or any other Loan Document would be prohibited under United States law.
Section 6.20 Patriot Act. The Obligated Parties, each of their Subsidiaries, and each of their Affiliates are in compliance with (a) the Trading with the Enemy Act, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B Chapter V, as amended), and all other enabling legislation or executive order relating thereto, (b) the Patriot Act, and (c) all other federal or state laws relating to know your customer and anti-money laundering rules and regulations. No part of the proceeds of any Loan will be used directly or indirectly for any payments to any government official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977.
Section 6.21 Nature of Business. As of the date hereof, Borrower and each Obligated Party is engaged directly or through Subsidiaries and Affiliates in the business of
originating, buying, selling and servicing mortgage loans secured by residential real estate and the selling of the servicing rights related to such mortgage loans.
Reserved.
Section 6.22 Special Representations Concerning Collateral.
(a) The Pledged Agency Servicing Rights Schedule and Pledged Servicing Receivables List most recently submitted to the Lender are true and complete.
(b) Borrower has not selected the Collateral in a manner that will adversely affect the Lenders interests.
(c) Borrower is the legal and equitable owner and holder of the Collateral, free and clear of all Liens (other than the Lenders Lien and any rights of the related Agency) and the Collateral is validly pledged or assigned to the Lender, subject to no other Liens. Borrower has the sole right to act as servicer with respect to the Mortgage Loans pursuant to and subject to the terms and conditions of the Servicing Agreement.
(d) No fraud and, in addition, no material error, omission, misrepresentation, negligence or similar occurrence with respect to the Collateral and the Mortgage Loans related thereto has taken place on the part of Borrower or any of its Affiliates.
(e) No consent of any obligor or any other Person is required for the grant of the security interest provided in this Agreement by Borrower in any of the Collateral, other than consents that have been obtained, nor will any consent need to be obtained upon the occurrence of an Event of Default for the Lender to exercise its rights with respect to any of the Collateral.
(f) Each Servicing Agreement is a valid and binding obligation of Borrower, is in full force and effect, and is enforceable by Borrower in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors rights generally, and subject, as to enforceability, to general principles of equity, whether applied in a court of law or a court of equity.
(g) Fannie Mae has not provided written notice to Borrower that it will terminate, modify or amend the Servicing Agreement or Borrowers benefits or the Agency Servicing Rights under any Servicing Agreement.
(h) Borrower has not engaged any subservicers, subcontractors or other agents to perform any of its duties under any of the Servicing Agreements, other than engagements that are permitted by, and are in compliance in all material respects with the requirements of, the applicable Servicing Agreement, and all fees and expenses due and payable to any such subservicer, subcontractor or agent as of the Closing Date in connection therewith have been paid, or will be paid before overdue, by Borrower.
(i) All Advances were made and are eligible for reimbursement or recoverable in accordance with applicable Laws and Agency Guidelines, are carried on the books of
Borrower at values determined in accordance with generally accepted accounting principles, are not subject to any set-off or claim that could be asserted against Borrower, and Borrower has not received any notice from any Agency or any other investor, or any mortgage insurer or other Person in which such investor, insurer or Person disputes or denies a claim by Borrower for reimbursement in connection with any Advances.
(j) No Advances have been sold, transferred, assigned or pledged by Borrower to any Person. Borrower has not taken any action that, or failed to take any action the omission of which would materially impair the rights of Borrower with respect to any such Advances.
All representations and warranties by Borrower shall survive delivery of the Loan Documents and the making of the Borrowings, and any investigation at any time made by or on behalf of the Lender shall not diminish the Lenders right to rely on them.
SECTION 7
AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, as long as the Obligations or any part thereof are outstanding or Lender has any Commitment hereunder:
Section 7.1 Reporting Requirements. Borrower shall, and shall cause each Obligated Party to furnish to Lender:
(a) Annual Financial Statements. For the fiscal year ending December 31, 2015, and each fiscal year thereafter, as soon as available, and in any event within one hundred twenty (120) days after the last day of each fiscal year of Borrower and each Obligated Party, a copy of the annual audit report of Borrower and each Obligated Party for such fiscal year containing, on a consolidated basis, balance sheets and statements of income, retained earnings, and cash flow as of the end of such fiscal year and for the twelve (12)-month period then ended, in each case setting forth in comparative form the figures for the preceding fiscal year, all in reasonable detail and audited and certified by independent certified public accountants of recognized standing acceptable to Lender, to the effect that such report has been prepared in accordance with GAAP and containing no material qualifications or limitations on scope;
(b) Quarterly Financial Statements. As soon as available, and in any event within forty-five (45) days after the last day of each fiscal quarter of each fiscal year of Borrower and each Obligated Party, a copy of an unaudited financial report of Borrower and each such Obligated Party as of the end of such fiscal quarter and for the portion of the fiscal year then ended, containing, on a consolidated and consolidating basis, balance sheets and statements of income, retained earnings, and cash flow, in each case setting forth in comparative form the figures for the corresponding period of the preceding fiscal year, all in reasonable detail certified by a Responsible Officer to have been prepared in accordance with GAAP and to fairly and accurately present (subject to year-end audit adjustments) the financial condition and results of operations of Borrower and each such Obligated Party,
on a consolidated and consolidating basis, as of the dates and for the periods indicated therein;
(c) Borrowing Base Report. As soon as available, and in any event within forty-five (45) days after the last day of each fiscal quarter of each fiscal year of Borrower, a Borrowing Base Report;
(d) Compliance Certificate. Concurrently with the delivery of each of the financial statements referred to in Sections 7.1. (a) and 7.1. (b), a certificate of a Responsible Officer of Borrower (i) stating that to the best of such officers knowledge, no Default has occurred and is continuing, or if a Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto, and (ii) showing in reasonable detail the calculations demonstrating compliance with the covenants set forth in Section 9;
(e) Management Letters. Promptly notify Lender of any adverse findings identified in any management letter or written report submitted to Borrower or any Obligated Party by independent certified public accountants with respect to the business, condition (financial or otherwise), operations, prospects, or Properties of Borrower or any Obligated Party;
(f) Notice of Litigation. Promptly after Borrower has received notice of the commencement thereof, notice of all actions, suits, and proceedings before any Governmental Authority or arbitrator affecting Borrower or any Obligated Party which, if determined adversely to Borrower or such Obligated Party, could be a Material Adverse Event;
(g) Notice of Default. As soon as possible and in any event within [***] Business Days after Borrower has become aware of the occurrence of any Default, a written notice setting forth the details of such Default and the action that Borrower has taken and proposes to take with respect thereto;
(h) ERISA Reports. Promptly after the filing or receipt thereof, copies of all reports, including annual reports, and notices which any Borrower or ERISA Affiliate files with or receives from the PBGC, the IRS, or the U.S. Department of Labor under ERISA; as soon as possible and in any event within five (5) Business Days after Borrower or any ERISA Affiliate knows or has reason to know that any ERISA Event or Prohibited Transaction has occurred with respect to any Plan, a certificate of a Responsible Officer of Borrower setting forth the details as to such ERISA Event or Prohibited Transaction and the action that Borrower proposes to take with respect thereto; annually, copies of the notice described in Section 101(f) of ERISA that Borrower or ERISA Affiliate receives with respect to a Plan or Multiemployer Plan; within thirty (30) days following the execution of this Agreement, Borrower and each ERISA Affiliate shall request in writing from each Multiemployer Plan the information described in Sections 101(k) and 101(1) of ERISA and shall provide a copy of such requests to Lender; promptly upon receiving such information from the Multiemployer Plans, provide such information to Lender, and thereafter, such requests
and such information shall only be required to be provided upon Lenders request, which shall be made no more frequently than annually;
(i) Reports to Other Creditors. Upon request by the Lender from time to time, promptly after the request therefor, copies of any statement or report furnished to any other party pursuant to the terms of any indenture, loan, or credit or similar agreement and not otherwise required to be furnished to Lender pursuant to any other clause of this Section 7.1 so long as such copies are not prohibited from being disclosed to Lender by the lender under such indenture, loan, or credit or similar agreement;
(j) Notice of Material Adverse Event. As soon as possible and in any event within [***] Business Days after Borrower becomes aware of the occurrence thereof, written notice of any event or circumstance that could result in a Material Adverse Event;
(k) Notice of Attachment. Promptly, and in any event within ten (10) Business Days after the commencement thereof, notice of any attachment, sequestration, or similar proceeding or proceedings against Borrower involving an aggregate amount in excess of [***] against any of its assets or properties;
(l) Pledgor Financial Statement. Each Pledgor shall provide an annual financial statement, in such form and detail as Lender shall reasonably require, within one hundred twenty (120) days after the end of each calendar year;
(m) Reserved.
(n) Other Reports. Borrower shall promptly furnish to the Lender from time to time information regarding the business and affairs of Borrower, including the following and such other information as the Lender may from time to time reasonably request (each report required must be signed by a duly authorized officer of Borrower and the Lender will have no responsibility to verify or track any of the items referenced or conclusions stated in such reports or to verify the authority of its signatory):
(i) Upon request by the Lender from time to time, expeditiously apply for and, if such counterparties are willing to make such agreements with Borrower (Borrower agrees in good faith to urge them to do so), to execute such acknowledgment agreements and related agreements with the counterparties to Servicing Agreements as are necessary or appropriate, in the Lenders reasonable opinion, to achieve, maintain or improve establishment and perfection of the Lenders security interest granted hereby in Collateral.
(ii) Borrower shall notify Lender in the event that Borrower incurs Debt (other than the Loan) which is secured by a pledge of Agency Servicing Rights to another Person (the Other Party) and shall furnish to Lender, within thirty (30) days of the last day of each calendar quarter, an electronic listing of all Mortgage Loans (each a Loan Listing) in respect of which Borrower has pledged to any Other Parties. Each Loan Listing shall (x) be in the form of a Microsoft Excel spreadsheet, (y) include, at a minimum, the loan number assigned to each Mortgage
Loan, the original principal amount of each Mortgage Loan, and the date on which Borrower pledged collateral to the applicable Other Party with respect to such Mortgage Loan, and (z) be delivered to Lender. Borrower shall, or shall cause Other Party to, deliver to Lender copies of any Uniform Commercial Code filings pertaining to the pledged Agency Servicing Rights pledged to any Other Party, together with an electronic listing (in Microsoft Excel format) of any such collateral described therein, contemporaneously with the recording of the same in any jurisdiction.
(iii) Monthly, a report, to deliver to the Lender in form and substance acceptable to the Lender in its reasonable discretion, detailing the most current unpaid principal balance of all Pledged Agency Servicing Rights, any request for, or resolution of a prior request for, repurchase or indemnity under the Pledged Servicing Agreements, updated information from the most recent servicing valuation report and delinquency and foreclosure information.
(iv) To deliver to the Lender such other reports by Borrower in respect of the Collateral, in such detail and at such times as the Lender or any Lender in its reasonable discretion or at the reasonable direction of a Lender may request at any time or from time to time.
(v) As soon as available and in any event within 10 days of the date publicly distributed, deliver to the Lender copies of all definitive prospectuses relating to (i) any security offerings by Borrower or any of its Subsidiaries (including Single-purpose Finance Subsidiaries) or (ii) any securities to be based on, backed by or created from any Collateral and to be offered by Borrower or any of its Subsidiaries.
(vi) As soon as available and in any event within 10 days after filing, deliver to the Lender copies of (i) all regular or periodic financial reports, and copies of all extraordinary or non-routine filings, if any, that shall be filed with the U.S. Securities and Exchange Commission or any successor agency by or on behalf of Borrower or any of its Subsidiaries (including Single-purpose Finance Subsidiaries) and (iii) all such filings relating to any securities that are or are to be based on, backed by or created from any Collateral and which filings are made by or in respect of Borrower or any of its Subsidiaries; and
(o) General Information. Promptly, such other information concerning Borrower, or any Obligated Party as Lender may from time to time reasonably request.
Section 7.2 Maintenance of Existence; Conduct of Business. Borrower shall, and shall cause each Obligated Party to, preserve and maintain its existence and all of its leases, privileges, licenses, permits, franchises, qualifications, and rights that are necessary or desirable in the ordinary conduct of its business. Borrower shall, and shall cause each Obligated Party to, conduct its business in an orderly and efficient manner in accordance with good business practices.
Section 7.3 Maintenance of Properties. Borrower shall, and shall cause each Obligated Party to, maintain, keep, and preserve all of its Properties (tangible and intangible) necessary or useful in the proper conduct of its business in good working order and condition.
Section 7.4 Taxes and Claims. Borrower shall, and shall cause each Obligated Party to, pay or discharge at or before maturity or before becoming delinquent (a) all taxes, levies, assessments, and governmental charges imposed on it or its income or profits or any of its Property, and (b) all lawful claims for labor, material, and supplies, which, if unpaid, might become a Lien upon any of its Property; provided, however, that neither Borrower nor any Obligated Party shall be required to pay or discharge any tax, levy, assessment, or governmental charge which is being contested in good faith by appropriate proceedings diligently pursued, and for which adequate reserves in accordance with GAAP have been established.
Section 7.5 Insurance. Borrower shall, and shall cause each Obligated Party to, maintain insurance with financially sound and reputable insurance companies in such amounts and covering such risks as is usually carried by limited liability companies engaged in similar businesses and owning similar Properties in the same general areas in which Borrower and each Obligated Party operate, provided that in any event Borrower will maintain and cause each Obligated Party to maintain workmens compensation insurance, property insurance and comprehensive general liability insurance reasonably satisfactory to Lender.
Section 7.6 Inspection Rights.
(a) Inspection. Upon the occurrence of an Event of Default, at any time upon reasonable notice and from time to time during Borrowers normal business hours, Borrower shall, and shall cause each Obligated Party to, (a) permit representatives of Lender to examine, inspect, review, evaluate and make physical verifications and appraisals of the inventory and other Collateral in any manner and through any medium that Lender considers advisable, (b) to examine, copy, and make extracts from its books and records, and (c) to visit and inspect its Properties, in each instance, at Borrowers expense.
(b) Discussions with Borrower. At any time upon reasonable notice and from time to time during Borrowers normal business hours, Borrower shall, and shall cause each Obligated Party to discuss its business, operations, and financial condition with its officers, employees, and independent certified public accountants, which shall not be at Borrowers expense, unless an Event of Default has occurred and is continuing.
Section 7.7 Keeping Books and Records. Borrower shall, and shall cause each Obligated Party to, maintain proper books of record and account in which full, true, and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities.
Section 7.8 Compliance with Laws. Borrower shall, and shall cause each Obligated Party to, comply in all material respects with all applicable laws, rules, regulations, orders, and decrees of any Governmental Authority or arbitrator.
Section 7.9 Compliance with Agreements. Borrower shall, and shall cause each Obligated Party to, comply in all material respects with all agreements, contracts, and instruments binding on it or affecting its Properties or business.
Section 7.10 Further Assurances. Borrower shall, and shall cause each Obligated Party to, execute and deliver such further agreements and instruments and take such further action as may be reasonably requested by Lender to carry out the provisions and purposes of this Agreement and the other Loan Documents and to create, preserve, and perfect the Liens of Lender in the Collateral.
Section 7.11 ERISA. Borrower shall, and shall cause each Obligated Party to, comply with all minimum funding requirements, and all other material requirements, of ERISA, if applicable, so as not to give rise to any liability thereunder.
Section 7.12 Servicer Side Letter. If, pursuant to a transaction which is expressly permitted under this Agreement, a Servicer or subservicer is replaced or a new Servicer or subservicer is added, then prior to any such replacement or addition, Borrower shall deliver, or cause to be delivered, a Servicer Side Letter from such replacement or new Servicer or subservicer, as applicable, in favor of Lender.
Section 7.13 Reserved.
Section 7.14 Provide Quarterly Servicing Appraisals. Borrower shall provide a new Servicing Appraisal to the Lender once each calendar quarter (with the first such period ending June 30, 2016); provided that the Servicing Appraisal for each calendar quarter must be provided to the Lender no later than thirty (30) days following the end of such quarter and; provided further that if a Default or Event of Default has occurred, Lender shall have the right in Lenders sole discretion to require independent appraisals or evaluations more frequently than every calendar quarter.
Section 7.15 Special Affirmative Covenants Concerning Collateral. Until all of the Obligations shall have been fully paid in cash and satisfied and the Lender has no obligation to lend or provide any other financial accommodations to Borrower under or otherwise in respect of this Agreement, Borrower agrees to:
(a) Warrant and defend the right, title and interest of the Lender, for the benefit of itself and the other Secured Parties, in and to the Pledged Agency Servicing Rights and Pledged Servicing Receivables against the claims and demands of all Persons whomsoever, subject to any restrictions imposed by the relevant Servicing Agreement for the benefit of the party to it on whose behalf the Mortgage Loans are being serviced to the extent (if any) that such restrictions are valid and enforceable under the applicable UCC and other Laws.
(b) Diligently fulfill its duties and obligations under each Pledged Servicing Agreement and Pledged Receivables Servicing Agreement, and not be declared by a counterparty to each such Servicing Agreement to be in default; provided that Borrower shall not be in breach of this covenant if a default declared by a counterparty to such Servicing Agreement arose from a failure of the portfolio of Serviced Loans to perform as required by the relevant Servicing Agreement and such counterparty has elected in writing
to continue to use Borrower as Servicer thereof and has not rescinded or revoked such election.
(c) Diligently and timely collect its Servicing Receivables under each Pledged Servicing Receivables Agreement and its servicing compensation under each Pledged Servicing Agreement and cause Borrowers rights to collect Servicing Receivables under each Pledged Receivables Agreement to remain in full force and effect.
(d) Cause Borrowers rights to the servicing compensation provided for in each Pledged Servicing Agreement to remain in full force and effect until the Borrowings to finance Borrowers retention of the Pledged Agency Servicing Rights related to such Pledged Servicing Agreement have been fully repaid, or until such Servicing Agreement expires in accordance with its terms and without renewal.
(e) Cause Borrowers rights to collect Servicing Receivables under each Pledged Servicing Receivables Agreement to remain in full force and effect.
(f) Reconfirm the filing authorization given in this Agreement to such UCC financing statements and continuation statements as the Lender may reasonably request from time to time (although no such reconfirmation shall be a condition to the filing of any financing statement, including any in lieu financing statement, or continuation statement) and execute and deliver to the Lender such further instruments of sale, pledge, assignment or transfer, and such powers of attorney, as shall be reasonably required by the Lender from time to time, and do and perform all matters and things necessary or desirable to be done or observed, for the purpose of effectively creating, maintaining and preserving the security and benefits intended to be afforded the Lender and the Lenders under this Agreement, the Revolving Credit Note and the other Loan Documents. The Lender shall have all the rights and remedies of a secured party under the UCC and any other applicable law, in addition to all rights provided for in this Agreement.
(g) Use its commercially reasonable efforts to cause each of its Servicers, if any, to keep in force throughout the term of this Agreement (i) a policy or policies of insurance covering errors and omissions for failure to maintain insurance as required by this Agreement and (ii) a fidelity bond. Each such policy and fidelity bond shall be in such form and amount as is generally customary among Persons who service a portfolio of Mortgage Loans having an aggregate principal amount comparable to that of the servicing portfolio of such Servicer or Borrower, respectively, and which are generally regarded as servicers acceptable to institutional investors and to the related Agency.
SECTION 8
NEGATIVE COVENANTS
Borrower covenants and agrees that, as long as the Obligations or any part thereof are outstanding or Lender has any Commitment hereunder:
Section 8.1 Reserved.
Section 8.2 Limitation on Liens. Other than the related Agencys Interest, Borrower shall not pledge, grant a security interest or assign any existing or future rights to service any of the Collateral or to be compensated for servicing any of the Collateral, or pledge or grant to any other Person any security interest in any Agency Servicing Rights at any time Pledged to the Lender, any Pledged Servicing Receivables Agreement, or any Servicing Receivables under any Pledged Servicing Receivables Agreement.
Section 8.3 Mergers. Borrower shall not, and shall not permit any Obligated Party to, directly or indirectly, (a) become a party to a merger or consolidation, (b) purchase or otherwise acquire all or any part of the assets of any Person or any shares or other evidence of beneficial ownership of any Person, except a Permitted Acquisition, or (c) wind-up, dissolve, or liquidate.
Section 8.4 Restricted Payments. If an Event of Default has occurred and is continuing or would result therefrom, Borrower shall not pay, make, declare or incur any liability to pay, make, declare or incur any dividends (excluding stock dividends) or other distribution, direct or indirect, on or on account of any shares of its stock (or equivalent equity interest) or any redemption or other acquisition, direct or indirect, of any shares of its stock (or equivalent equity interest) or of any warrants, rights or other options to purchase any shares of its stock (or equivalent equity interest), nor purchase, acquire, redeem or retire any stock (or equivalent equity interest) in itself whether now or hereafter outstanding.
Section 8.5 Reserved.
Section 8.6 Transactions With Affiliates. Borrower shall not, and shall not permit any Obligated Party to, directly or indirectly, enter into any transaction, including, without limitation, the purchase, sale, or exchange of property, the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate of Borrower or such Obligated Party, except (i) in the Ordinary Course of Business and pursuant to the reasonable requirements of Borrowers or such Obligated Partys business, pursuant to a transaction which is otherwise expressly permitted under this Agreement, and upon fair and reasonable terms no less favorable to Borrower or such Obligated Party than would be obtained in a comparable arms-length transaction with a Person not an Affiliate of Borrower or such Obligated Party or (ii) Permitted Affiliate Transactions.
Section 8.7 Disposition of Assets. Borrower shall not, and shall not permit any Obligated Party to, directly or indirectly, sell, lease, assign, transfer, or otherwise dispose of any of its assets, except (a) dispositions of assets in the Ordinary Course of Business or (b) dispositions, for fair value, of worn-out and obsolete equipment not necessary or useful to the conduct of business.
Section 8.8 Change in Location. Borrower shall use commercially reasonable efforts to notify Lender of any change to its chief executive office or place of business to a location other 21215 Burbank Blvd, 4th Floor, Woodland Hills, California 91367-7090.
Section 8.9 Reserved.
Section 8.10 Nature of Business. Without the prior written consent of Lender, Borrower shall not, and shall not permit any Obligated Party to, engage in any business other than the businesses in which they are engaged as of the date hereof and related business lines relating or incidental to the origination, buying, selling or servicing of residential mortgage loans or the buying and selling of the servicing rights related to such residential mortgage loans. Borrower shall not, and shall not permit any Obligated Party to, make any material change in its credit collection policies if such change would materially impair the collectability of any Account, nor will it rescind, cancel or modify any Account except in the Ordinary Course of Business.
Section 8.11 Environmental Protection. Borrower shall not, and shall not permit any Obligated Party to, directly or indirectly (a) use (or permit any tenant to use) any of their respective Properties or assets for the handling, processing, storage, transportation, or disposal of any Hazardous Material, (b) generate any Hazardous Material, (c) conduct any activity that is likely to cause a Release or threatened Release of any Hazardous Material, or (d) otherwise conduct any activity or use any of their respective Properties or assets in any manner that is likely to violate any Environmental Law or create any Environmental Liabilities for which Borrower or any Obligated Party would be responsible.
Section 8.12 Accounting. Borrower shall not, and shall not permit any Obligated Party to, change its fiscal year or make any material change (a) in accounting treatment or reporting practices, except as required by GAAP and disclosed to Lender within thirty (30) days of any such change, or (b) in tax reporting treatment, except as required by law and disclosed to Lender.
Section 8.13 No Negative Pledge. Borrower shall not, and shall not permit any Obligated Party to, enter into or permit to exist any arrangement or agreement, other than pursuant to this Agreement or any Loan Document, which directly or indirectly prohibits Borrower or any Obligated Party from creating or incurring a Lien on the Collateral.
Section 8.14 Reserved.
Section 8.15 Reserved.
Section 8.16 OFAC. Borrower shall not, and shall not permit any Obligated Party to, fail to comply with the laws, regulations and executive orders referred to in Section 6.19 and Section 6.20.
Section 8.17 Reserved.
Section 8.18 Conditional Repurchase, Indemnity or Other Recourse Obligations. Borrower shall not undertake or assume any conditional repurchase, indemnity or other recourse obligations in respect of Mortgage Loans sold which obligations and liabilities, when combined with Borrowers Contingent Liabilities, aggregate more than 5.0% of Borrowers Tangible Net Worth at the time of determination.
Section 8.19 Special Negative Covenants Concerning Collateral.
(a) Without the Lenders prior written consent, Borrower shall not execute any amendments to any Servicing Agreement that could reasonably be expected to materially
and adversely affect the value of any Collateral or to reduce or delay payment or collection of amounts due Borrower from or in respect of any Collateral and Borrower will provide a copy of every supplement, amendment, restatement or replacement of any of such Servicing Agreements to the Lender promptly (and in no event later than five (5) Business Days) after the same shall become effective.
(b) Borrower shall not create, incur, grant, assume or suffer to exist any Lien on any of the Collateral, except only for Liens in favor of the Lender pursuant to this Agreement.
(c) Borrower shall not offer as Collateral any property against which any Person other than the Lender (for the benefit of itself and the Secured Parties) has a Lien.
Section 8.20 Termination of Servicing Agreements or Agency Servicing Rights.
Borrower shall not, and shall not give any Agency advance written notice of any intention to, terminate its contractual rights to the servicing of any Mortgage Loans without prior approval from Lender.
Section 8.21 No Amendments.
Borrower will make, or permit to be made, any amendments or modifications to its Constituent Documents, which could reasonably be expected to have a material adverse effect on any Borrower or Lender.
SECTION 9
FINANCIAL COVENANTS
Borrower covenants and agrees that, as long as the Obligations or any part thereof are outstanding or Lender has any Commitment hereunder:
Section 9.1 Minimum Tangible Net Worth. Borrower shall maintain on a consolidated basis, as of the last day of the any fiscal quarter, Tangible Net Worth equal to at least [***].
Section 9.2 Minimum Liquidity. Borrower shall not permit, as of the last day of any fiscal quarter, Liquidity to be less than [***].
Section 9.3 Debt Service Coverage Ratio. Borrower shall maintain on a consolidated basis a Debt Service Coverage Ratio of at least [***] for any Test Period.
SECTION 10
DEFAULT
Section 10.1 Events of Default. Each of the following shall be deemed an Event of Default:
(a) Borrower shall fail to pay the Obligations or any part thereof shall not be paid when due or declared due;
(b) (i) Borrower shall breach Section 8.18 of this Agreement and such breach continues for more than [***] following the date such breach first began, or (ii) Borrower shall fail to provide to Lender timely any notice of Default as required by Section 7.1(g) of this Agreement or Borrower shall breach any provision of Section 8 (other than Section 8.18) or Section 9 of this Agreement;
(c) Any representation or warranty made or deemed made by Borrower or any other Obligated Party (or any of their respective officers) in any Loan Document or in any certificate, report, notice, or financial statement furnished at any time in connection with this Agreement shall be false, misleading, or erroneous in any material respect (without duplication of any materiality qualifier contained therein) when made or deemed to have been made; ]provided that if any of the Companys representations in Section 6.22 (titled Special Representations Concerning Collateral) for any reason shall be (or shall prove to have been) untrue or incorrect, then such untruth or incorrectness shall not constitute a Default or an Event of Default, although, as provided in the definition thereof, such untruth or incorrectness will be a Collateral Exclusion Event for all affected items of Collateral, which will each thereupon have zero Collateral Value, unless such untrue or incorrect representation relates to two or more Approved Servicing Agreements or five or more other items of Collateral;
(d) Borrower or any Obligated Party shall fail to perform, observe, or comply with any covenant, agreement, or term contained in this Agreement, any other Loan Document or any agreements or documents evidencing or related to Other Debt (other than as covered by Sections 10.1(a) and (b)), and such failure continues for more than [***] following Borrowers receipt of written notice of such failure;
(e) Borrower or any other Obligated Party shall commence a voluntary proceeding seeking liquidation, reorganization, or other relief with respect to itself or its debts under any bankruptcy, insolvency, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian, or other similar official of it or a substantial part of its Property or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against it or shall make a general assignment for the benefit of creditors or shall generally fail to pay its debts as they become due or shall take any limited liability company action to authorize any of the foregoing;
(f) An involuntary proceeding shall be commenced against Borrower or any Obligated Party seeking liquidation, reorganization, or other relief with respect to it or its debts under any bankruptcy, insolvency, or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian, or other similar official for it or a substantial part of its Property, and such involuntary proceeding shall remain undismissed and unstayed for a period of [***];
(g) Borrower or any other Obligated Party shall fail to pay when due any principal of or interest on any Debt (other than the Obligations) and such failure shall continue beyond any applicable grace or cure period, or the maturity of any such Debt shall have been accelerated, or any such Debt shall have been required to be prepaid prior to the stated maturity thereof, or any event shall have occurred that permits (or, with the giving of notice or lapse of time or both, would permit) any holder or holders of such Debt or any Person acting on behalf of such holder or holders to accelerate the maturity thereof or require any such prepayment, and such failure, acceleration or prepayment is related to a Debt in excess of [***];
(h) reserved;
(i) reserved;
(j) Any of the following events shall occur or exist with respect to Borrower or any ERISA Affiliate: (i) any ERISA Event occurs with respect to a Plan or Multiemployer Plan, or (ii) any Prohibited Transaction involving any Plan; and in each case above, such event or condition, together with all other events or conditions, if any, have subjected or could in the reasonable opinion of Lender subject Borrower or any ERISA Affiliate to any tax, penalty, or other liability to a Plan, a Multiemployer Plan, the PBGC, the IRS, the U.S. Department of Labor, or otherwise (or any combination thereof) which in the aggregate exceed or could reasonably be expected to result in a Material Adverse Event;
(k) A Change of Control or an Organic Change shall occur;
(l) Borrower, any of its Subsidiaries, or any Obligated Party, or any of their properties, revenues, or assets, shall become subject to an order of forfeiture, seizure, or divestiture (whether under the Racketeer Influenced and Corrupt Organization Act of 1970 or otherwise) and the same shall not have been discharged within [***] from the date of entry thereof;
(m) Borrower or any Obligated Party shall fail to discharge, stay or appeal within a period of [***] after the commencement thereof any attachment, sequestration, or similar proceeding or proceedings involving an aggregate amount in excess of [***] against any of its assets or Properties;
(n) A final judgment or judgments for the payment of money in excess of [***] in the aggregate shall be rendered by a court or courts against Borrower or any Obligated Party and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within [***] from the date of entry thereof and Borrower or such Obligated Party shall not, within such period of [***], or such longer period during which execution of the same shall have been satisfied, stayed, appeal therefrom or cause the execution thereof to be stayed during such appeal;
(o) Lender determines in its reasonable discretion that a Material Adverse Event has occurred or a circumstance exists that could result in a Material Adverse Event;
(p) Borrower shall take or omit to take any act (i) that would result in the suspension or loss of any of its statuses, once achieved or any of such statuses of its subservicer, if any, of any Agencys Mortgage Loans pools for which Borrower is Servicer, as an Agency-approved servicer, unless Borrower has replaced such subservicer as soon as practicable, but in no event later than [***] after such suspension or loss, with a subservicer (x) approved by an Agency and (y) that has executed a Servicer Side Letter in favor of Lender, or (ii) after which Borrower or any such relevant subservicer would no longer be in good standing as such, unless Borrower has replaced such subservicer as soon as practicable, but in no event later than [***] after such failure to be in good standing, with a subservicer (x) approved by an Agency and (y) that has executed a Servicer Side Letter in favor of Lender, or (iii) after which Borrower or any such relevant subservicer would no longer currently satisfy all applicable Agencys net worth requirements, if all of the material effects of such act or omission shall have not been cured by Borrower or waived by the relevant Person (Fannie Mae) before termination of such status; unless Borrower has replaced such subservicer as soon as practicable, but in no event later than [***] after such failure to satisfy such net worth requirements, with a subservicer (x) approved by an Agency and (y) that has executed a Servicer Side Letter in favor of Lender;
(q) Borrowers rights to service Mortgage Loans for any one or more investors under Servicing Agreements the value of which rights to Borrower (as reasonably estimated by the Lender) equals or exceeds [***] of the aggregate principal amount of Borrowers Servicing Portfolio shall be terminated for cause (i.e., on account of act(s) or omission(s) by Borrower for which the holder, or a trustee for the holder, of the relevant Serviced Loans has the right under such Servicing Agreement to terminate such servicing rights);
(r) Fannie Mae terminates any Pledged Agency Servicing Right or Pledged Servicing Agreement related to the Collateral that has been Pledged to Lender; or
(s) A Servicer Downgrade Event has occurred, unless Borrower has replaced such Servicer as soon as practicable, but in no event later than [***] after such failure to be in good standing, with a Servicer (x) approved by an Agency and (y) that has executed a Servicer Side Letter in favor of Lender.
Section 10.2 Remedies Upon Default. If any Event of Default shall occur and be continuing, then Lender may without notice terminate the Commitment or declare the Obligations or any part thereof to be immediately due and payable, or both, and the same shall thereupon become immediately due and payable, without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, protest, or other formalities of any kind, all of which are hereby expressly waived by Borrower; provided, however, that upon the occurrence of an Event of Default under Section 10.1(e) or (f), the Commitment shall automatically terminate, and the Obligations shall become immediately due and payable, in each case without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, protest, or other formalities of any kind, all of which are hereby expressly waived by Borrower. In addition to the foregoing, if any Event of Default shall occur and be continuing, Lender may exercise all rights and remedies available to it in law or in equity, under the Loan Documents, or otherwise. Lender shall use
commercially reasonable efforts to notify Borrower of an Event of Default hereunder; provided, however, that the failure to give such notice shall not affect any of Lenders rights and remedies hereunder, including, but not limited to, Lenders ability to terminate the Commitment, declare the Obligations due and payable or any of Lenders other rights and remedies hereunder.
Section 10.3 Application of Funds. After the exercise of remedies provided for in Section 10.2 (or after the Loans have automatically become immediately due and payable), any amounts received on account of the Obligations shall be applied by Lender in such order as it elects in its sole discretion.
Section 10.4 Performance by Lender. If Borrower shall fail to perform any covenant or agreement contained in any of the Loan Documents, then Lender may perform or attempt to perform such covenant or agreement on behalf of Borrower upon prior notice to Borrower. In such event, Borrower shall, at the request of Lender, promptly reimburse to Lender any third party costs reasonably expended by Lender in connection with such performance or attempted performance, together with interest thereon at the Default Interest Rate from and including the date of such expenditure to but excluding the date such expenditure is paid in full. Notwithstanding the foregoing, it is expressly agreed that Lender shall not have any liability or responsibility for the performance of any covenant, agreement, or other obligation of Borrower under this Agreement or any other Loan Document.
SECTION 11
MISCELLANEOUS
Section 11.1 Expenses. Borrower hereby agrees to pay on demand: (a) all reasonable out-of-pocket costs and expenses of Lender in connection with the preparation, negotiation, execution, and delivery of this Agreement and the other Loan Documents and any and all amendments, modifications, renewals, extensions, and supplements thereof and thereto, including, without limitation, the reasonable fees and expenses of outside legal counsel, advisors, consultants, and auditors for Lender; (b) all out-of-pocket costs and expenses of Lender in connection with any Default and the enforcement of this Agreement or any other Loan Document, including, without limitation, the fees and expenses of outside legal counsel, advisors, consultants, and auditors for Lender; (c) all transfer, stamp, documentary, or other similar taxes, assessments, or charges levied by any Governmental Authority in respect of this Agreement or any of the other Loan Documents; (d) all out-of-pocket costs, expenses, assessments, and other charges incurred in connection with any filing, registration, recording, or perfection of any Lien contemplated by this Agreement or any other Loan Document; and (e) all other costs and expenses incurred by Lender in connection with this Agreement or any other Loan Document, any litigation, dispute, suit, proceeding or action; the enforcement of its rights and remedies, and the protection of its interests in bankruptcy, insolvency or other legal proceedings, including, without limitation, all costs, expenses, and other charges (but excluding Lenders internal charges) incurred in connection with evaluating, observing, collecting, examining, auditing, appraising, selling, liquidating, or otherwise disposing of the Collateral or other assets of Borrower.
Section 11.2 INDEMNIFICATION. EACH PARTY HERETO SHALL INDEMNIFY THE OTHER PARTY, AND EACH AFFILIATE THEREOF AND THEIR
RESPECTIVE OWNERS, MEMBERS, PARTNERS, INVESTORS, DIRECTORS, OFFICERS, EMPLOYEES, FIDUCIARIES, INSURERS, SUCCESSORS, OR ASSIGNS FROM, AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING REASONABLE OUTSIDE ATTORNEYS FEES, COLLECTIVELY THE COSTS) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY BORROWER OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES OR ASSETS OF BORROWER OR ANY OF ITS SUBSIDIARIES OR ANY OTHER OBLIGATED PARTY, OR (E) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY OF THE FOREGOING. WITHOUT LIMITING ANY PROVISION OF THIS AGREEMENT OR OF ANY OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, OUT OF POCKET COSTS, AND EXPENSES (INCLUDING REASONABLE OUTSIDE ATTORNEYS FEES) ARISING OUT OF OR RESULTING FROM THE SOLE CONTRIBUTORY OR ORDINARY NEGLIGENCE OF SUCH PERSON; PROVIDED, HOWEVER, THAT NO PARTY HERETO SHALL BE INDEMNIFIED FOR ANY COSTS RESULTING FROM SUCH PARTYS OWN BAD FAITH, NEGLIGENCE, OR WILLFUL MISCONDUCT.
Section 11.3 Limitation of Liability. Neither Lender nor any Affiliate, officer, director, employee, attorney, or agent of Lender shall have any liability with respect to, and Borrower hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by Borrower or any other Obligated Party in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents. Borrower hereby waives, releases, and agrees not to sue Lender or any of Lenders Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents.
Section 11.4 No Duty. All attorneys, accountants, appraisers, and other professional Persons and consultants retained by Lender shall have the right to act exclusively in the interest of Lender and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to Borrower or any of Borrowers equity holders, Affiliates, officers, employees, attorneys, agents, or any other Person.
Section 11.5 Lender Not Fiduciary. The relationship between Borrower and Lender is solely that of debtor and creditor, and Lender has no fiduciary or other special relationship with Borrower, and no term or condition of any of the Loan Documents shall be construed so as to deem the relationship between Borrower and Lender to be other than that of debtor and creditor.
Section 11.6 Equitable Relief. Borrower recognizes that in the event Borrower fails to pay, perform, observe, or discharge any or all of the Obligations, any remedy at law may prove to be inadequate relief to Lender. Borrower therefore agrees that Lender, if Lender so requests and such request is granted by the court, shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.
Section 11.7 No Waiver; Cumulative Remedies. No failure on the part of Lender to exercise and no delay in exercising, and no course of dealing with respect to, any right, remedy, power, or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power, or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, remedy, power, or privilege. The rights and remedies provided for in this Agreement and the other Loan Documents are cumulative and not exclusive of any rights and remedies provided by law.
Section 11.8 Successors and Assigns. This Agreement is binding upon and shall inure to the benefit of Lender and Borrower and its successors and assigns, except that Borrower may assign or transfer any of its rights, duties, or obligations under this Agreement or the other Loan Documents without the prior written consent of Lender.
Section 11.9 Survival. All representations and warranties made in this Agreement or any other Loan Document or in any document, statement, or certificate furnished in connection with this Agreement shall survive the execution and delivery of this Agreement and the other Loan Documents, and no investigation by Lender or any closing shall affect the representations and warranties or the right of Lender to rely upon them. Without prejudice to the survival of any other obligation of Borrower hereunder, the obligations of Borrower under Sections 11.1, and 11.2 shall survive repayment of the Obligations and termination of the Commitment.
Section 11.10 Amendment. The provisions of this Agreement and the other Loan Documents to which Borrower is a party may be amended or waived only by an instrument in writing signed by the parties hereto.
Section 11.11 Notices. Unless otherwise expressly provided herein, all notices and other communications provided for hereunder shall be in writing and mailed, emailed or delivered, to the address, or subject to the last sentence hereof electronic mail address specified for notices below the signatures hereon or to such other address as shall be designated by such party in a notice to the other parties. All such other notices and other communications shall be deemed to have been given or made upon the earliest to occur of (a) actual receipt by the intended recipient or (b)(i) if delivered by hand or courier, when signed for by the designated recipient; (ii) if delivered by mail, four (4) business days after deposit in the mail, postage prepaid; and (iii) if delivered by electronic mail (which form of delivery is subject to the provisions of the last sentence
below), when delivered; provided, however, that notices and other communications pursuant to Section 2 shall not be effective until actually received by Lender. Electronic mail may be used to distribute routine communications, such as financial statements and other information, and to distribute Loan Documents for execution by the parties thereto.
Section 11.12 GOVERNING LAW; VENUE; SERVICE OF PROCESS. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS; PROVIDED THAT LENDER SHALL RETAIN ALL RIGHTS UNDER FEDERAL LAW. THIS AGREEMENT HAS BEEN ENTERED INTO IN DALLAS COUNTY, TEXAS, AND IS PERFORMABLE FOR ALL PURPOSES IN DALLAS COUNTY, TEXAS. THE PARTIES HEREBY AGREE THAT ANY LAWSUIT, ACTION, OR PROCEEDING THAT IS BROUGHT (WHETHER IN CONTRACT, TORT OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS, THE TRANSACTIONS CONTEMPLATED THEREBY, OR THE ACTIONS OF THE LENDER IN THE NEGOTIATION, ADMINISTRATION OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS SHALL BE BROUGHT IN A STATE OR FEDERAL COURT OF COMPETENT JURISDICTION LOCATED IN DALLAS COUNTY, TEXAS. BORROWER HEREBY IRREVOCABLY AND UNCONDITIONALLY (A) SUBMITS TO THE EXCLUSIVE JURISDICTION OF SUCH COURTS, (B) WAIVES ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH LAWSUIT, ACTION, OR PROCEEDING BROUGHT IN ANY SUCH COURT, AND (C) FURTHER WAIVES ANY CLAIM THAT IT MAY NOW OR HEREAFTER HAVE THAT ANY SUCH COURT IS AN INCONVENIENT FORUM. EACH OF THE PARTIES HERETO AGREE THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT REQUESTED AT THE ADDRESS FOR NOTICES REFERENCED IN SECTION 11.11 HEREOF.
Section 11.13 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Section 11.14 Severability. Any provision of this Agreement held by a court of competent jurisdiction to be invalid or unenforceable shall not impair or invalidate the remainder of this Agreement and the effect thereof shall be confined to the provision held to be invalid or illegal.
Section 11.15 Headings. The headings, captions, and arrangements used in this Agreement are for convenience only and shall not affect the interpretation of this Agreement.
Section 11.16 Participations; Etc. Lender shall have the right at any time and from time to time to grant participations in, and sell and transfer, the Obligations and any Loan Documents. Each actual or proposed participant or assignee, as the case may be, shall be entitled to receive all information received by Lender regarding Borrower and the Obligated Parties, including, without limitation, information required to be disclosed to a participant or assignee pursuant to Banking Circular 181 (Rev., August 2, 1984), issued by the Comptroller of the Currency (whether the actual or proposed participant or assignee is subject to the circular or not); provided, that any potential participant or assignee shall have entered into a confidentiality
agreement containing provisions relating to confidentiality at least as restrictive as the provisions contained in this Agreement prior to receipt of any confidential information of Borrower.
Section 11.17 Construction. Borrower and Lender acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement and the other Loan Documents with its legal counsel and that this Agreement and the other Loan Documents shall be construed as if jointly drafted by Borrower and Lender.
Section 11.18 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of a Default if such action is taken or such condition exists.
Section 11.19 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF LENDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF. EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PERSON HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PERSON WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 11.19.
Section 11.20 Additional Interest Provision. It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply strictly with the applicable law governing the maximum rate or amount of interest payable on the indebtedness evidenced by the Revolving Credit Note, any Loan Document, and the Related Indebtedness (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under applicable law). If the applicable law is ever judicially interpreted so as to render usurious any amount (a) contracted for, charged, taken, reserved or received pursuant to the Revolving Credit Note, any of the other Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of the Loan Documents, (b) contracted for, charged, taken, reserved or received by reason of Lenders exercise of the option to accelerate the maturity of the Revolving Credit Note and/or any and all indebtedness paid or payable by Borrower to Lender pursuant to any Loan Document other than the Revolving Credit Note (such other indebtedness being referred to in this Section as the Related Indebtedness), or (c) Borrower will have paid or Lender will have received by reason of any voluntary prepayment by Borrower of the Revolving Credit Note and/or the Related Indebtedness, then it is Borrowers and Lenders express intent that all amounts charged in excess of the Maximum Rate shall be automatically canceled, ab initio, and
all amounts in excess of the Maximum Rate theretofore collected by Lender shall be credited on the principal balance of the Revolving Credit Note and/or the Related Indebtedness (or, if the Revolving Credit Note and all Related Indebtedness have been or would thereby be paid in full, refunded to Borrower), and the provisions of the Revolving Credit Note and the other Loan Documents shall immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder; provided, however, if the Revolving Credit Note or Related Indebtedness has been paid in full before the end of the stated term thereof, then Borrower and Lender agree that Lender shall, with reasonable promptness after Lender discovers or is advised by Borrower that interest was received in an amount in excess of the Maximum Rate, either refund such excess interest to Borrower and/or credit such excess interest against the Revolving Credit Note and/or any Related Indebtedness then owing by Borrower to Lender. Borrower hereby agrees that as a condition precedent to any claim seeking usury penalties against Lender, Borrower will provide written notice to Lender, advising Lender in reasonable detail of the nature and amount of the violation, and Lender shall have sixty (60) days after receipt of such notice in which to correct such usury violation, if any, by either refunding such excess interest to Borrower or crediting such excess interest against the Revolving Credit Note to which the alleged violation relates and/or the Related Indebtedness then owing by Borrower to Lender. All sums contracted for, charged, taken, reserved or received by Lender for the use, forbearance or detention of any debt evidenced by the Revolving Credit Note and/or the Related Indebtedness shall, to the extent permitted by applicable law, be amortized or spread, using the actuarial method, throughout the stated term of the Revolving Credit Note and/or the Related Indebtedness (including any and all renewal and extension periods) until payment in full so that the rate or amount of interest on account of the Revolving Credit Note and/or the Related Indebtedness does not exceed the Maximum Rate from time to time in effect and applicable to the Revolving Credit Note and/or the Related Indebtedness for so long as debt is outstanding. In no event shall the provisions of Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts and revolving triparty accounts) apply to the Revolving Credit Note and/or any of the Related Indebtedness. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.
Section 11.21 Ceiling Election. To the extent that Lender is relying on Chapter 303 of the Texas Finance Code to determine the Maximum Rate payable on the Revolving Credit Note and/or any other portion of the Indebtedness, Lender will utilize the weekly ceiling from time to time in effect as provided in such Chapter 303. To the extent United States federal law permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law, Lender will rely on United States federal law instead of such Chapter 303 for the purpose of determining the Maximum Rate. Additionally, to the extent permitted by applicable law now or hereafter in effect, Lender may, at its option and from time to time, utilize any other method of establishing the Maximum Rate under such Chapter 303 or under other applicable law by giving notice, if required, to Borrower as provided by applicable law now or hereafter in effect.
Section 11.22 USA Patriot Act Notice. Lender hereby notifies Borrower that pursuant to the requirements of the Patriot Act, it is required to obtain, verify and record information that identifies Borrower and each other Obligated Party, which information includes the name and address of Borrower and each other Obligated Party and other information that will allow Lender to identify Borrower and each other Obligated Party in accordance with the Patriot Act. In addition, Borrower agrees to (a) ensure that no Person who owns a controlling interest in or otherwise controls Borrower or any Subsidiary of Borrower is or shall be listed on the Specially Designated Nationals and Blocked Person List or other similar lists maintained by the OFAC, the Department of the Treasury or included in any Executive Order, (b) not to use or permit the use of proceeds of the Obligations to violate any of the foreign asset control regulations of the OFAC or any enabling statute or Executive Order relating thereto, and (c) comply, or cause its Subsidiaries to comply, with the applicable laws.
Section 11.23 NOTICE OF FINAL AGREEMENT. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
Section 11.24 CONFIDENTIALITY.
(a) Confidential Terms. Lender and Borrower hereby acknowledge and agree that all information provided before or after the date hereof by one party to any other in connection with this Agreement or the transactions contemplated hereby, whether furnished by or on behalf of Lender or Borrower or any of their representatives including without limitation: (i) all knowledge or information concerning the business, operations and assets of the Lender or Borrower or their respective affiliates, which for the avoidance of doubt, shall include, without limitation, internal operating procedures; methodologies; investment strategies; hedging strategies; structuring strategies and concepts; trade secrets; sales data; vendor data and customer lists (existing and potential); financial plans, projections and reports; product strategies; and investment strategies; (ii) all property owned, licensed and/or developed by or for the Lender or Borrower or their respective affiliates, such as computer systems, programs, software and devices, plus information about the design, methodology and documentation therefor; (iii) information about or personal to the Lender or Borrower or their respective affiliates, insureds, employees, agents and applicants (for jobs or products) of any of the foregoing and (iv) information, materials, products or any other tangible or intangible assets in the possession or the control of the Lender or Borrower or their respective affiliates, which is proprietary to, or confidential to or about, any other person or entity (the Confidential Terms) shall be kept confidential and shall not be divulged to any party without the prior written consent of such other party except to the extent set forth in clause (b) below. Confidential Terms shall not include information that (A) is or becomes part of the public domain through no fault of the Lender or Borrower, as applicable, or its Permitted Recipients (as defined below) in violation of this Agreement; (B) is already known to the Lender or Borrower, as applicable, or any of its Permitted Recipients on a non-confidential basis prior to disclosure of such information by either party; (C) is subsequently received by the Lender or Borrower, as applicable, or its
Permitted Recipients from a third party who the Lender or Borrower, as applicable, or its Permitted Recipients believe is not prohibited from disclosing such information by a contractual, legal, fiduciary or other obligation owed to the Lender or Borrower, as applicable.
(b) Permitted Disclosures. Notwithstanding clause (a) above, Lender and Borrower, as applicable, shall be permitted to disclose Confidential Terms to the extent that (i) it is necessary in connection with this Agreement to do so in working with its affiliates, legal counsel, actuaries, auditors, directors, officers, employees (Permitted Recipients); (ii) taxing authorities or other governmental agencies or regulatory bodies or in order to comply with any applicable federal or state laws; or (iii) in the event of an Event of Default, Lender determines such information to be necessary or desirable to disclose in connection with the marketing and sales of the Collateral or otherwise to enforce or exercise Lenders rights hereunder.
(c) Involuntary Disclosures. If the Lender or Borrower shall at any time be involved in any litigation, arbitration, administrative, legal, regulatory or other proceeding or if Lender or Borrower and/or its respective Permitted Recipients is otherwise required by law, regulation or other legal process, in each case, in which such party and/or its Permitted Recipient, on the advice of its own legal counsel, may be or becomes required to disclose any Confidential Terms in violation of this Section of this Agreement (a Legal Proceeding), whether in discovery or otherwise, including by any oral question, subpoena, interrogatory, deposition, request for documents or information, order, writ, rule, regulatory, or other legal process, such party and/or its Permitted Recipients shall, if such party and/or its Permitted Recipients may lawfully do so, promptly notify the other party of the receipt of such Legal Proceeding whereupon such other party may seek an appropriate protective order or other relief at such other partys own expense. Lender or Borrower and its respective Permitted Recipients, as applicable, shall reasonably cooperate with the other party, at such other partys expense, to obtain a protective order or other remedy or reasonable assurance that confidential treatment will be afforded the Confidential Terms in the Legal Proceeding. Lender or Borrower and/or its respective Permitted Recipients may disclose any Confidential Terms in accordance with such Legal Proceeding in the event that the other party fails to obtain any protective order or other relief but shall use its reasonable efforts to disclose only that portion of the Confidential Terms which is necessary to comply with such Legal Proceeding after taking commercially reasonable steps to ensure that the portion of the Confidential Terms so disclosed will be treated confidentially by the party to which it has been so disclosed. Notwithstanding the foregoing, no notice or other action by Lender or Borrower, as applicable, or any of their respective Permitted Recipients shall be required where disclosure of Confidential Terms is made in connection with a routine request, audit or examination by a bank examiner, auditor, regulatory authority or supervisory authority not targeting or in regards to the transactions contemplated hereunder or the Lender or Borrower, as applicable.
(d) Treatment of Confidential Information. Lender acknowledges that the Confidential Terms may contain information that is subject to internal policies and processes that require Lender and its Permitted Recipients to receive, maintain, store and dispose of such Confidential Terms in compliance with, any and all applicable federal, state and local laws,
rules, regulations and ordinances governing or relating to privacy rights in connection with its performance under this Agreement including, without limitation, the Gramm-Leach-Bliley Act, as amended (the GLB Act).
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
EXECUTED to be effective as of the date first written above.
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AMERIHOME MORTGAGE COMPANY, LLC, | |
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/S/ Josh Adler |
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21215 Burbank Blvd, 4th Floor | |
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Woodland Hills, CA 91367-7090 | |
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e-mail: | |
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Attention: Legal Department | |
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Signature Page to Credit Agreement
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LENDER: | ||
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NEXBANK SSB | ||
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/S/ Rhett Miller | |
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Rhett Miller |
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SVP & Chief Credit Officer |
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2515 McKinney Ave, Suite 1100 | ||
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Dallas, Texas 75201 | ||
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Telephone No.: (972) 934 4717 | ||
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Attention: Kevin Olding | ||
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E-mail: kevin.olding@nexbank.com |
Signature Page to Credit Agreement
EXHIBIT A
BORROWING BASE REPORT
EXHIBIT B
COMPLIANCE CERTIFICATE
EXHIBIT C
REVOLVING CREDIT NOTE
See Attached.
Exhibit C to Credit Agreement
PROMISSORY NOTE
SCHEDULE 4.1(a)
PLEDGED AGENCY SERVICING RIGHTS SCHEDULE
[See Attached]
Schedule 4.1(a) to Credit Agreement
SCHEDULE 4.1(b)
PLEDGED SERVICING RECEIVABLES
None.
Schedule 4.1(b) to Credit Agreement
SCHEDULE 5.1(r)
ADDITIONAL CONDITIONS PRECEDENT
None.
Schedule 5.1(r) to Credit Agreement
SCHEDULE 6.2
EXISTING DEBT
Schedule 6.2 to Credit Agreement
SCHEDULE 6.5
LITIGATION AND JUDGMENTS
None.
Schedule 6.5 to Credit Agreement
SCHEDULE 6.14
SUBSIDIARIES, VENTURES, ETC.
None.
Schedule 6.14 to Credit Agreement
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this Amendment) is entered into as of June 8, 2017, between AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company (Borrower), and NEXBANK SSB (with its participants successors and assigns, Lender).
RECITALS
A. Borrower and Lender are parties to that certain Credit and Security Agreement dated as of August 26, 2016 (as amended, modified, supplemented, restated or amended and restated from time to time, the Loan Agreement). Unless otherwise indicated herein, all terms used with their initial letter capitalized are used herein with their meaning a defined in the Loan Agreement and all Section references are to Sections in the Loan Agreement.
B. On August 26, 2016, Borrower executed a Promissory Note in the principal amount of [***] in favor of Lender evidencing the Loan (the Original Note).
C. Borrower and Lender have agreed to increase the maximum amount of the Loan in an amount equal to [***], after which the maximum outstanding principal balance of the Loan as of the Effective Date (as hereinafter defined) shall be [***].
D. Borrower has requested that Lender amend the Loan Agreement as provided below.
E. Borrower has requested that Lender amend the Original Note as provided in the Amended and Restated Promissory Note being delivered in connection herewith (the Amended and Restated Note).
F. Borrower and Lender desire to amend the Loan Documents, subject to the terms, conditions, and representations set forth herein, as requested by Borrower.
G. Borrower and Lender agree to the other terms and provisions provided below, subject to the terms, conditions and representations set forth herein.
NOW, THEREFORE in consideration of these premises and other valuable consideration, the receipt and adequacy of which are, hereby acknowledged, the parties hereto agree, as follows:
1. Amendments to Loan Agreement. Subject to the satisfaction of the conditions set forth herein the Loan Agreement is amended as follows:
(a) The following definitions in Section 1.1 of the Loan Agreement are hereby amended and restated in their entirety to read as follows:
Commitment means the obligation of Lender to make Borrowings pursuant to Section 2 in an aggregate principal amount at any time outstanding up to but not exceeding [***], subject, however, to termination pursuant to Section 10.2.
Pro Forma Debt Service means debt service with respect to the Obligations, assuming a fully funded Revolving Credit ate with an outstanding principal balance at all times of [***] (regardless of the actual outstanding principal balance on the Revolving Credit Note at any time) and a pro forma l0-year amortization.
2. Conditions Precedent. Notwithstanding any contrary provision, this Amendment shall be effective on the first Business Day upon which all of the following conditions precedent have been satisfied (the Effective Date):
(a) Lender shall have received counterparts of this Amendment executed by Borrower, Lender, and each other party set forth on the signature pages hereto, and the original executed Amended and Restated Note:
(b) Lender shall have received satisfactory evidence that Borrower has paid the fees and expenses of counsel described in Section 5;
(c) No Default or Event of Default shall have occurred and be continuing or shall result after giving effect to this Amendment·
(d) Lender shall ha e received such other instruments and documents incidental and appropriate to the transaction provided for herein as Lender or its counsel may reasonably request, and all such documents shall be in form and substance satisfactory to Lender (it being agreed that execution of this Amendment by Lender shall evidence that the foregoing conditions have been fulfilled).
3. Reaffirmation of Loan Documents and Liens. Except as amended and modified hereby, an and all of the terms and provisions of the Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby in all respect ratified and confirmed by Borrower. Borrower hereby agrees that, except as expressly provided in this Amendment the amendments and modifications herein contained shall in no manner affect or impair the liabilities, duties and obligations of Borrower under the Loan Agreement and the other Loan Document or the Liens securing the payment and performance thereof. Borrower further confirms that the liens and security interests in the Collateral created under the Loan Documents secure among other indebtedness Borrowers obligations under the Loan Documents, and all modifications, amendment, renewal, extensions, and restatements thereof.
4. Representations and Warranties. As a material inducement for Lender to enter into this Amendment, Borrower hereby represents and warrants to Lender (with the knowledge and intent that Lender is relying upon the same in consenting to this Amendment) that as of the Effective Date and after giving effect to the transactions contemplated by this Amendment: (a) all representations and warranties in the Loan Agreement and in all other Loan Documents are true and correct in all material respects, as though made on the date hereof, except to the extent that (i) any of them speak to a different specific date; or (ii) the fact or circumstances on which an of them were based have been changed by transaction or events not prohibited by the Loan Documents; (b) no Default or Event of Default exists under the Loan Documents or will exist after giving effect to this Amendment; (c) this Amendment has been duly authorized and approved by all necessary organizational action and requires the consent of no other Person
and is binding and enforceable against Borrower in accordance with its terms; (d) the execution, delivery and performance of this Amendment in accordance with its terms, does not and will not, by the passage of time, the giving of notice, or otherwise: (i) require any governmental approval other than such a ha e been obtained and are in full force and effect, or violate any applicable law relating to Borrower; (ii) conflict with, result in a breach of or constitute a default under the Constituent Documents of Borrower thereof, or any indenture, agreement, or other instrument to which Borrower is a party or by which it or any of its properties may be bound; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by Borrower and (e) Borrowers Constituent Documents delivered to Lender on August 26, 2016 (i) have not been amended, modified, rescinded, revoked or otherwise modified, and no action has been taken by the officers managers or members of Borrower in contemplation of or to effect or authorize the foregoing, and (ii) remain in full force and effect as of the date hereof.
5. Fees, Costs and Expense. Borrower agrees to pay promptly the reasonable fees and expenses of counsel to Lender for services rendered in connection with the preparation negotiation reproduction, execution, and delivery of this Amendment and all related document and
6. Miscellaneous.
(a) This Amendment shall be deemed to constitute a Loan Document for all purposes and in all respects. Each reference in the Loan Agreement or Amended and Restated Promissory Note to this Agreement, hereunder hereof herein or words of like import, and each reference in the Loan Agreement or in any other Loan Document or other agreements documents or other instruments executed and delivered pursuant to the Loan Agreement to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended by this Amendment.
(b) The Loan Documents shall remain unchanged and in full force and effect, except as provided in this Amendment and the Amended and Restated Note and are hereby ratified and confirmed. The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any rights of Lender under any Loan Document, nor constitute a waiver under any of the Loan Documents.
(c) All of the terms and provisions of this Amendment hall bind and inure to the benefit of the parties hereto and their respective successors and assigns.
(d) This Amendment may be executed in one or more counterparts and by different parties hereto in separate counterparts each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument signature page may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of photocopies of the signature pages to this Amendment by facsimile or electronic mail shall be effective as delivery of manually executed counterparts of this Amendment.
(e) THIS AMENDMENT, THE LOAN AGREEMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(f) The headings, caption and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof.
(g) Any provision of this Amendment held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
(h) This Amendment shall be construed in accordance with and governed by the laws of the State of Texas without regard to its principle of conflicts of laws.
(i) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Lender under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
IN WITESS WHEREOF the parties hereto have executed this Amendment in multiple counterparts on the date stated on the signature page hereto but effective as of Effective Date.
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BORROWER: | |
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AMERIHOME MORTGAGE COMPANY, LLC, | |
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a Delaware limited liability company | |
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By: |
/S/ Jim Furash |
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Name: Jim Furash |
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Title: CEO |
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LENDER: | |
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NEXBANK SSB | |
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Signature Page to
First Amendment to Credit and Security Agreement
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LENDER: | |
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NEXBANK | |
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/S/ Rhett Miller |
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Name: Rhett Miller |
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Title: SVP & Chief Credit Officer |
Signature Page to
First Amendment to Credit and Security Agreement
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this Amendment) is entered into as of February 23, 2018, between AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company (Borrower), and NEXBANK SSB (with its participants, successors and assigns, Lender).
R E C I T A L S
A. Borrower and Lender are parties to that certain Credit and Security Agreement dated as of August 26, 2016 (as amended, modified, supplemented, restated or amended and restated from time to time, the Loan Agreement). Unless otherwise indicated herein, all terms used with their initial letter capitalized are used herein with their meaning as defined in the Loan Agreement and all Section references are to Sections in the Loan Agreement.
B. On June 8, 2017, Borrower executed an Amended and Restated Promissory Note in the principal amount of $45,000,000 in favor of Lender, evidencing the Loan (the Original Note).
C. Borrower and Lender have agreed to increase the maximum amount of the Loan by [***], after which the maximum outstanding principal balance of the Loan as of the Effective Date (as hereinafter defined) shall be [***].
D. Borrower has requested that Lender amend the Loan Agreement as provided below.
E. Borrower has requested that Lender amend the Original Note as provided in the Second Amended and Restated Promissory Note being delivered in connection herewith (the Amended and Restated Note).
F. Borrower and Lender desire to amend the Loan Documents, subject to the terms, conditions, and representations set forth herein, as requested by Borrower.
G. Borrower and Lender agree to the other terms and provisions provided below, subject to the terms, conditions, and representations set forth herein.
NOW, THEREFORE, in consideration of these premises and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree, as follows:
1. Amendments to Loan Agreement. Subject to the satisfaction of the conditions set forth herein, the Loan Agreement is amended as follows:
(a) The following definitions are hereby added to Section 1.1 of the Loan Agreement in appropriate alphabetical order:
Third Party Servicing Rights means all of Borrowers rights and interests under any Third Party Servicing Agreement (exclusive of Agency Servicing Rights), including the rights to (a) service the mortgage loans serviced or required to be serviced by Borrower
under any Third Party Servicing Agreement, irrespective of whether the actual servicing is done by another Person (a subservicer) retained by Borrower for that purpose, that are the subject matter of such Third Party Servicing Agreement and (b) be compensated, directly or indirectly, for doing so.
Third Party Servicing Agreement means, with respect to any Person, the arrangement, whether or not evidenced in writing, pursuant to which Borrower acts as servicer of mortgage loans, whether or not any such mortgage loan is owned by Borrower.
(b) The following definitions in Section 1.1 of the Loan Agreement are hereby amended and restated in their entirety to read as follows:
Commitment means the obligation of Lender to make Borrowings pursuant to Section 2 in an aggregate principal amount at any time outstanding up to but not exceeding [***], subject, however, to termination pursuant to Section 10.2.
Pro Forma Debt Service means debt service with respect to the Obligations, assuming a fully funded Revolving Credit Note with an outstanding principal balance at all times of [***] (regardless of the actual outstanding principal balance on the Revolving Credit Note at any time) and a pro forma 10-year amortization.
Servicing Appraisal means a written appraisal or evaluation by an Approved Servicing Appraiser evaluating the fair market value of (i) all of the Agency Servicing Rights (ii) all of the Pledged Agency Servicing Rights, in each case as of a date stated in the written report of such evaluation and identifying whether such Agency Servicing Rights are Pledged Agency Servicing Rights, each such evaluation and report to be made at Borrowers expense, to be addressed to the Lender and to be in a form reasonably acceptable to the Lender, it being understood that, for purposes of this Agreement, (i) the opinion of value in any such independent appraisal or evaluation shall be expressed as a range of values, and for purposes of this Agreement, the Market Value shall be deemed the midpoint (the average of the limits) of the range and (ii) each Servicing Appraisal shall take into account customary factors, including current market conditions and the fact that the Agency Servicing Rights may be terminated by the relevant Servicing Agreements counterparty, or sold or otherwise disposed of, under circumstances where Borrower is in default under the applicable Servicing Agreement. Borrower acknowledges that each Approved Servicing Appraisers determination of market value is for the limited purpose of determining an advance rate for purposes of the financing provided in this Agreement.
(c) Section 2.1(a)(iv) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
(iv) Borrowing Procedure. Borrower shall give Lender notice of each Borrowing by means of a Borrowing Request Form containing the information required therein and delivered (by hand or electronically by email) to Lender no later than 5:00 p.m. (Dallas, Texas time) on the Business Day prior to the Business Day on which the Borrowing is desired to be funded. Any notice of Borrowing received after 5:00 p.m. (Dallas, Texas time) shall be processed by Lender on a commercially reasonable efforts basis on the
immediately following Business Day but no later than the second Business Day following the Business Day on which it was received. Lender at its option may accept telephonic requests for such Borrowings, provided that such acceptance shall not constitute a waiver of Lenders right to require delivery of a Borrowing Request Form in connection with subsequent Borrowings. Any telephonic request for a Borrowing by Borrower shall be promptly confirmed by submission of a properly completed Borrowing Request Form to Lender, but failure to deliver a Borrowing Request Form shall not be a defense to payment of the Borrowing. Lender shall have no liability to Borrower for any loss or damage suffered by Borrower as a result of Lenders honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically or electronically by email and purporting to have been sent to Lender by Borrower and Lender shall have no duty to verify the origin of any such communication or the identity or authority of the Person sending it. Subject to the terms and conditions of this Agreement, each Borrowing shall be made available to Borrower by depositing the same, in immediately available funds, in an account of Borrower designated by Borrower maintained with Lender. If, after giving effect to a requested Borrowing, the Lender determines (either then or on any later day in the course of reviewing the same) that (i) the Borrowing Request Form submitted to it is incomplete or incorrect in any material respect, then the Lender shall use commercially reasonable efforts to promptly inform Borrower of such incomplete or incorrect Borrowing Request Form and withhold the entire Borrowing until Borrower shall have demonstrated to the Lenders reasonable satisfaction that such Borrowing Request Form is in fact not (or is no longer) incomplete or incorrect in any material respect or (ii) the amount of the requested Borrowing exceeds the amount available to Borrower under the terms and conditions of this Agreement, then the Lender shall use commercially reasonable efforts to promptly inform Borrower thereof and shall withhold that portion of the Borrowing that exceeds the amount available to Borrower under the terms and conditions of this Agreement.
(d) Section 7.1(b) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
(b) Monthly Financial Statements. As soon as available, and in any event within thirty (30) days after the last day of each calendar month of each fiscal year of Borrower and each Obligated Party, a copy of an unaudited financial report of Borrower and each such Obligated Party as of the end of such calendar month and for the portion of the fiscal year then ended, containing, on a consolidated and consolidating basis, balance sheets and statements of income, retained earnings, and cash flow, in each case setting forth in comparative form the figures for the corresponding period of the preceding fiscal year, all in reasonable detail certified by a Responsible Officer to have been prepared in accordance with GAAP and to fairly and accurately present (subject to year-end audit adjustments) the financial condition and results of operations of Borrower and each such Obligated Party, on a consolidated and consolidating basis, as of the dates and for the periods indicated therein;
(e) Section 7.1(d) of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
Compliance Certificate. Concurrently with the delivery of each of the financial statements referred to in Section 7.1.(a), and as soon as available, and in any event within forty-five (45) days, after the last day of each fiscal quarter of each fiscal year of Borrower and each Obligated Party, a certificate of a Responsible Officer of Borrower (i) stating that to the best of such officers knowledge, no Default has occurred and is continuing, or if a Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto, and (ii) showing in reasonable detail the calculations demonstrating compliance with the covenants set forth in Section 9;
(f) Section 7.14 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
Provide Quarterly Servicing Appraisals. Borrower shall provide (i) a new Servicing Appraisal and (ii) a new summary valuation of all Agency Servicing Rights and Third Party Servicing Rights, in form and substance satisfactory to Lender, in each case to the Lender once each calendar quarter (with the first such period ending March 31, 2018); provided that such Servicing Appraisal and summary valuation for each calendar quarter must be provided to the Lender no later than thirty (30) days following the end of such quarter and; provided further that if a Default or Event of Default has occurred, Lender shall have the right in Lenders sole discretion to require independent appraisals or evaluations more frequently than every calendar quarter.
(g) Exhibit B to the Credit Agreement is hereby amended and restated to read as set forth on Exhibit B attached hereto.
2. Conditions Precedent. Notwithstanding any contrary provision, this Amendment shall be effective on the first Business Day upon which all of the following conditions precedent have been satisfied (the Effective Date):
(a) Lender shall have received counterparts of this Amendment executed by Borrower, Lender, and each other party set forth on the signature pages hereto, and the original executed Amended and Restated Note;
(b) Lender shall have received satisfactory evidence that Borrower has paid the fees and expenses of counsel described in Section 5;
(c) No Default or Event of Default shall have occurred and be continuing or shall result after giving effect to this Amendment;
(d) Lender shall have received such other instruments and documents incidental and appropriate to the transactions provided for herein as Lender or its counsel may reasonably request, and all such documents shall be in form and substance satisfactory to Lender (it being agreed that execution of this Amendment by Lender shall evidence that the foregoing conditions have been fulfilled).
3. Reaffirmation of Loan Documents and Liens. Except as amended and modified hereby, any and all of the terms and provisions of the Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby in all respects ratified and confirmed by Borrower. Borrower hereby agrees that, except as expressly provided in this Amendment, the amendments and modifications herein contained shall in no manner affect or impair the liabilities, duties and obligations of Borrower under the Loan Agreement and the other Loan Documents or the Liens securing the payment and performance thereof. Borrower further confirms that the liens and security interests in the Collateral created under the Loan Documents secure, among other indebtedness, Borrowers obligations under the Loan Documents, and all modifications, amendments, renewals, extensions, and restatements thereof.
4. Representations and Warranties. As a material inducement for Lender to enter into this Amendment, Borrower hereby represents and warrants to Lender (with the knowledge and intent that Lender is relying upon the same in consenting to this Amendment) that as of the Effective Date, and after giving effect to the transactions contemplated by this Amendment: (a) all representations and warranties in the Loan Agreement and in all other Loan Documents are true and correct in all material respects, as though made on the date hereof, except to the extent that (i) any of them speak to a different specific date; or (ii) the facts or circumstances on which any of them were based have been changed by transactions or events not prohibited by the Loan Documents; (b) no Default or Event of Default exists under the Loan Documents or will exist after giving effect to this Amendment; (c) this Amendment has been duly authorized and approved by all necessary organizational action and requires the consent of no other Person, and is binding and enforceable against Borrower in accordance with its terms; (d) the execution, delivery and performance of this Amendment in accordance with its terms, does not and will not, by the passage of time, the giving of notice, or otherwise: (i) require any governmental approval, other than such as have been obtained and are in full force and effect, or violate any applicable law relating to Borrower; (ii) conflict with, result in a breach of, or constitute a default under the Constituent Documents of Borrower thereof, or any indenture, agreement, or other instrument to which Borrower is a party or by which it or any of its properties may be bound; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by Borrower and (e) [Borrowers Constituent Documents delivered to Lender on August 26, 2016 (i) have not been amended, modified, rescinded, revoked or otherwise modified, and no action has been taken by the officers, managers or members of Borrower in contemplation of, or to effect or authorize, the foregoing], and (ii) remain in full force and effect as of the date hereof.
5. Fees, Costs and Expenses. Borrower agrees to pay promptly the reasonable fees and expenses of counsel to Lender for services rendered in connection with the preparation, negotiation, reproduction, execution, and delivery of this Amendment and all related documents; and
6. Miscellaneous.
(a) This Amendment shall be deemed to constitute a Loan Document for all purposes and in all respects. Each reference in the Loan Agreement or Amended and Restated Promissory Note to this Agreement, hereunder, hereof, herein or words of like import, and each reference in the Loan Agreement or in any other Loan Document, or other agreements,
documents or other instruments executed and delivered pursuant to the Loan Agreement to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended by this Amendment.
(b) The Loan Documents shall remain unchanged and in full force and effect, except as provided in this Amendment and the Amended and Restated Note, and are hereby ratified and confirmed. The execution, delivery, and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any rights of Lender under any Loan Document, nor constitute a waiver under any of the Loan Documents.
(c) All of the terms and provisions of this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.
(d) This Amendment may be executed in one or more counterparts and by different parties hereto in separate counterparts each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of photocopies of the signature pages to this Amendment by facsimile or electronic mail shall be effective as delivery of manually executed counterparts of this Amendment.
(e) THIS AMENDMENT, THE LOAN AGREEMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(f) The headings, captions and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof.
(g) Any provision of this Amendment held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
(h) This Amendment shall be construed in accordance with and governed by the laws of the State of Texas without regard to its principles of conflicts of laws.
(i) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Lender under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment in multiple counterparts on the date stated on the signature pages hereto, but effective as of Effective Date.
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BORROWER | |
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AMERIHOME MORTGAGE COMPANY, LLC, | |
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a Delaware limited liability company | |
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By: |
/s/ Josh Adler |
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Name: Josh Adler |
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Title: Managing Director, Capital Markets |
Signature Page to
Second Amendment to Credit and Security Agreement
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LENDER: | |
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NEXBANK SSB | |
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By: |
/s/ Kevin Olding |
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Name: Kevin Olding |
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Title: Senior Vice President |
Signature Page to
Second Amendment to Credit and Security Agreement
EXHIBIT B
COMPLIANCE CERTIFICATE
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS THIRD AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this Amendment) is entered into as of September 7, 2018, between AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company (Borrower), and NEXBANK SSB (with its participants, successors and assigns, Lender).
R E C I T A L S
A. Borrower and Lender are parties to that certain Credit and Security Agreement dated as of August 26, 2016 (as amended, modified, supplemented, restated or amended and restated from time to time, the Loan Agreement). Unless otherwise indicated herein, all terms used with their initial letter capitalized are used herein with their meaning as defined in the Loan Agreement and all Section references are to Sections in the Loan Agreement.
B. On February 23, 2018, Borrower executed a Second Amended and Restated Promissory Note in the principal amount of [***] in favor of Lender, evidencing the Loan (the Original Note).
C. Borrower and Lender have agreed to increase the maximum amount of the Loan by [***], after which the maximum outstanding principal balance of the Loan as of the Effective Date (as hereinafter defined) shall be [***].
D. Borrower has requested that Lender amend the Loan Agreement as provided below.
E. Borrower has requested that Lender amend the Original Note as provided in the Third Amended and Restated Promissory Note being delivered in connection herewith (the Amended and Restated Note).
F. Borrower and Lender desire to amend the Loan Documents, subject to the terms, conditions, and representations set forth herein, as requested by Borrower.
G. Borrower and Lender agree to the other terms and provisions provided below, subject to the terms, conditions, and representations set forth herein.
NOW, THEREFORE, in consideration of these premises and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree, as follows:
1. Amendments to Loan Agreement. Subject to the satisfaction of the conditions set forth herein, the Loan Agreement is amended as follows:
(a) The following definitions in Section 1.1 of the Loan Agreement are hereby amended and restated in their entirety to read as follows:
Commitment means the obligation of Lender to make Borrowings pursuant to Section 2 in an aggregate principal amount at any time outstanding up to but not exceeding [***], subject, however, to termination pursuant to Section 10.2.
Pro Forma Debt Service means debt service with respect to the Obligations, assuming a fully funded Revolving Credit Note with an outstanding principal balance at all times of [***] (regardless of the actual outstanding principal balance on the Revolving Credit Note at any time) and a pro forma 10-year amortization.
Termination Date means 5:00 P.M. Dallas, Texas time on August 23, 2019, such later date as shall be established pursuant to Section 2.5 or such earlier date on which the Commitment terminates as provided in this Agreement. For the avoidance of doubt, as of the Third Amendment Effective Date, Borrower shall be entitled to two (2) extensions of the Termination Date pursuant to Section 2.5, notwithstanding any extensions of the Termination Date made pursuant to Section 2.5 prior to the Third Amendment Effective Date.
(b) The following definition is hereby added to Section 1.1 of the Loan Agreement in appropriate alphabetical order:
Third Amendment Effective Date means September 7, 2018.
2. Conditions Precedent. Notwithstanding any contrary provision, this Amendment shall be effective on the first Business Day upon which all of the following conditions precedent have been satisfied (the Effective Date):
(a) Lender shall have received counterparts of this Amendment executed by Borrower, Lender, and each other party set forth on the signature pages hereto, and the original executed Amended and Restated Note;
(b) Lender shall have received satisfactory evidence that Borrower has paid the fees and expenses of counsel described in Section 5;
(c) No Default or Event of Default shall have occurred and he continuing or shall result after giving effect to this Amendment:
(d) Lender shall have received such other instruments and documents incidental and appropriate to the transactions provided for herein as Lender or its counsel may reasonably request, and all such documents shall be in form and substance satisfactory to Lender (it being agreed that execution of this Amendment by Lender shall evidence that the foregoing conditions have been fulfilled).
3. Reaffirmation of Loan Documents and Liens. Except as wended and modified hereby, any and all of the terms and provisions of the Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby in all respects ratified and confirmed by Borrower. Borrower hereby agrees that, except as expressly provided in this Amendment, the amendments and modifications herein contained shall in no manner affect or impair the liabilities, duties and obligations of Borrower under the Loan Agreement and the other Loan Documents or the Liens securing the payment and performance thereof. Borrower further confirms that the liens and security interests in the Collateral created under the Loan Documents secure, among other indebtedness, Borrowers obligations under the Loan
Documents, and all modifications, amendments, renewals, extensions, and restatements thereof.
4. Representations and Warranties. As a material inducement for Lender to enter into this Amendment, Borrower hereby represents and warrants to Lender (with the knowledge and intent that Lender is relying upon the same in consenting to this Amendment) that as of the Effective Date, and after giving effect to the transactions contemplated by this Amendment: (a) all representations and warranties in the Loan Agreement and in all other Loan Documents are true and correct in all material respects, as though made on the date hereof, except to the extent that (i) any of them speak to a different specific date; or (ii) the facts or circumstances on which any of them were based have been changed by transactions or events not prohibited by the Loan Documents; (b) no Default or Event of Default exists under the Loan Documents or will exist after giving effect to this Amendment; (c) this Amendment has been duly authorized and approved by all necessary organizational action and requires the consent of no other Person, and is binding and enforceable against Borrower in accordance with its terms; (d) the execution, delivery and performance of this Amendment in accordance with its terms, does not and will not, by the passage of time, the giving of notice, or otherwise: (i) require any governmental approval, other than such as have been obtained and are in full force and effect, or violate any applicable law relating to Borrower; (ii) conflict with, result in a breach of, or constitute a default under the Constituent Documents of Borrower thereof, or any indenture, agreement, or other instrument to which Borrower is a party or by which it or any of its properties may be bound; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by Borrower and (e) Borrowers Constituent Documents delivered to Lender on August 26, 2016 (i) have not been amended, modified, rescinded, revoked or otherwise modified, and no action has been taken by the officers, managers or members of Borrower in contemplation of, or to effect or authorize, the foregoing, and (ii) remain in full force and effect as of the date hereof.
5. Fees, Costs and Expenses. Borrower agrees to pay promptly the reasonable fees and expenses of counsel to Lender for services rendered in connection with the preparation, negotiation, reproduction, execution, and delivery of this Amendment and all related documents; and
6. Miscellaneous.
(a) This Amendment shall be deemed to constitute a Loan Document for all purposes and in all respects. Each reference in the Loan Agreement or Amended and Restated Promissory Note to this Agreement, hereunder, hereof herein or words of like import, and each reference in the Loan Agreement or in any other Loan Document, or other agreements, documents or other instruments executed and delivered pursuant to the Loan Agreement to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended by this Amendment.
(b) The Loan Documents shall remain unchanged and in full force and effect, except as provided in this Amendment and the Amended and Restated Note, and are hereby ratified and confirmed. The execution, delivery, and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any rights of Lender under any Loan Document, nor constitute a waiver under any of the Loan Documents.
(c) All of the terms and provisions of this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.
(d) This Amendment may be executed in one or more counterparts and by different parties hereto in separate counterparts each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of photocopies of the signature pages to this Amendment by facsimile or electronic mail shall be effective as delivery of manually executed counterparts of this Amendment.
(e) THIS AMENDMENT, THE LOAN AGREEMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(f) The headings, captions and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof.
(g) Any provision of this Amendment held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
(h) This Amendment shall be construed in accordance with and governed by the laws of the State of Texas without regard to its principles of conflicts of laws.
(i) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Lender under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents
[Remainder of Page Intentionally Left Blank: Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment in multiple counterparts on the date stated on the signature pages hereto, but effective as of Effective Date.
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BORROWER: | |
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AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company | |
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By: |
/s/ Kathleen Conte |
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Name: Kathleen Conte |
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Title: SVP, Capital Markets |
Signature Page to Third Amendment to Credit and Security Agreement
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LENDER: | |
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NEXBANK SSB | |
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By: |
/s/ Kevin Olding |
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Name: Kevin Olding |
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Title: SVP |
Signature Page to Third Amendment to Credit and Security Agreement
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this Amendment) is entered into as of October 31, 2018, between AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company (Borrower), and NEXBANK SSB (with its participants, successors and assigns, Lender).
R E C I T A L S
A. Borrower and Lender are parties to that certain Credit and Security Agreement dated as of August 26, 2016 (as amended, modified, supplemented, restated or amended and restated from time to time, the Loan Agreement). Unless otherwise indicated herein, all terms used with their initial letter capitalized are used herein with their meaning as defined in the Loan Agreement and all Section references are to Sections in the Loan Agreement.
B. Borrower has requested that Lender amend the Loan Agreement as provided below in order to clarify a situation that had not been previously contemplated in the Loan Agreement.
C. Borrower and Lender desire to amend the Loan Documents, subject to the terms, conditions, and representations set forth herein, as requested by Borrower.
D. Borrower and Lender agree to the other terms and provisions provided below, subject to the terms, conditions, and representations set forth herein.
NOW, THEREFORE, in consideration of these premises and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree, as follows:
1. Amendment to Loan Agreement. Subject to the satisfaction of the conditions set forth herein, the Loan Agreement is amended as follows:
(a) The following definitions in Section 1.1 of the Loan Agreement are hereby amended and restated in their entirety to read as follows:
Cash Flow means (a) net income, after income tax, plus (b) less income or plus losses from discontinued operations and extraordinary items, plus (c) depreciation, depletion, amortization, and other non-cash charges, plus (d) interest expense on all obligations, minus (e) unrealized or realized gains or losses related to the hedging of mortgage servicing rights, minus (f) the amount by which dividends, withdrawals, and other distributions exceed Borrowers receipt of cash proceeds (net of underwriting discounts and commissions and other costs and expenses associated therewith) from debt offerings or asset sales made by Borrower for the applicable period; provided however, that for purposes of calculating Cash Flow, the amount of such cash proceeds shall not exceed [***] in the aggregate over the term of this Agreement, and minus (g) changes in the fair value of the Agency Servicing Rights.
2. Conditions Precedent. Notwithstanding any contrary provision, this Amendment shall be effective on the first Business Day upon which all of the following conditions precedent have been satisfied (the Effective Date):
(a) Lender shall have received counterparts of this Amendment executed by Borrower, Lender, and each other party set forth on the signature pages hereto;
(b) Lender shall have received satisfactory evidence that Borrower has paid the fees and expenses of counsel described in Section 5;
(c) No Default or Event of Default shall be continuing or shall result after giving effect to this Amendment;
(d) Lender shall have received such other instruments and documents incidental and appropriate to the transactions provided for herein as Lender or its counsel may reasonably request, and all such documents shall be in form and substance satisfactory to Lender (it being agreed that execution of this Amendment by Lender shall evidence that the foregoing conditions have been fulfilled).
3. Reaffirmation of Loan Documents and Liens. Except as amended and modified hereby, any and all of the terms and provisions of the Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby in all respects ratified and confirmed by Borrower. Borrower hereby agrees that, except as expressly provided in this Amendment, the amendments and modifications herein contained shall in no manner affect or impair the liabilities, duties and obligations of Borrower under the Loan Agreement and the other Loan Documents or the Liens securing the payment and performance thereof. Borrower further confirms that the liens and security interests in the Collateral created under the Loan Documents secure, among other indebtedness, Borrowers obligations under the Loan Documents, and all modifications, amendments, renewals, extensions, and restatements thereof.
4. Representations and Warranties. As a material inducement for Lender to enter into this Amendment, Borrower hereby represents and warrants to Lender (with the knowledge and intent that Lender is relying upon the same in consenting to this Amendment) that as of the Effective Date, and after giving effect to the transactions contemplated by this Amendment: (a) all representations and warranties in the Loan Agreement and in all other Loan Documents are true and correct in all material respects, as though made on the date hereof, except to the extent that (i) any of them speak to a different specific date; or (ii) the facts or circumstances on which any of them were based have been changed by transactions or events not prohibited by the Loan Documents; (b) no Default or Event of Default is continuing or will exist after giving effect to this Amendment; (c) this Amendment has been duly authorized and approved by all necessary organizational action and requires the consent of no other Person, and is binding and enforceable against Borrower in accordance with its terms; (d) the execution, delivery and performance of this Amendment in accordance with its terms, does not and will not, by the passage of time, the giving of notice, or otherwise: (i) require any governmental approval, other than such as have been obtained and are in full force and effect, or violate any applicable law relating to Borrower; (ii) conflict with, result in a breach of, or constitute a default under the Constituent Documents of Borrower thereof, or any indenture, agreement, or other instrument to which Borrower is a party or by which it or any of its properties may be bound; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by Borrower and (e) Borrowers Constituent
Documents delivered to Lender on August 26, 2016 (i) have not been amended, modified, rescinded, revoked or otherwise modified, and no action has been taken by the officers, managers or members of Borrower in contemplation of, or to effect or authorize, the foregoing, and (ii) remain in full force and effect as of the date hereof.
5. Fees, Costs and Expenses. Borrower agrees to pay promptly the reasonable fees and expenses of counsel to Lender for services rendered in connection with the preparation, negotiation, reproduction, execution, and delivery of this Amendment and all related documents; and
6. Miscellaneous.
(a) This Amendment shall be deemed to constitute a Loan Document for all purposes and in all respects. Each reference in the Loan Agreement to this Agreement, hereunder, hereof, herein or words of like import, and each reference in the Loan Agreement or in any other Loan Document, or other agreements, documents or other instruments executed and delivered pursuant to the Loan Agreement to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended by this Amendment.
(b) The Loan Documents shall remain unchanged and in full force and effect, except as provided in this Amendment, and are hereby ratified and confirmed. The execution, delivery, and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any rights of Lender under any Loan Document, nor constitute a waiver under any of the Loan Documents.
(c) All of the terms and provisions of this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.
(d) This Amendment may be executed in one or more counterparts and by different parties hereto in separate counterparts each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of photocopies of the signature pages to this Amendment by facsimile or electronic mail shall be effective as delivery of manually executed counterparts of this Amendment.
(e) THIS AMENDMENT, THE LOAN AGREEMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(f) The headings, captions and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof.
(g) Any provision of this Amendment held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity,
illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
(h) This Amendment shall be construed in accordance with and governed by the laws of the State of Texas without regard to its principles of conflicts of laws.
(i) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Lender under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.
[Remainder of Page Intentionally Left Blank: Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment in multiple counterparts on the date stated on the signature pages hereto, but effective as of Effective Date.
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BORROWER: | |
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AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company | |
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By: |
/s/ Kathleen Conte |
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Name: Kathleen Conte |
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Title: SVP, Capital Markets |
Signature Page to Fourth Amendment to Credit and Security Agreement
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LENDER: | |
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NEXBANK SSB | |
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By: |
/s/ Kevin Olding |
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Name: Kevin Olding |
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Title: SVP |
Signature Page to Fourth Amendment to Credit and Security Agreement
Annex A
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
FIFTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS FIFTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this Amendment) is entered into as of January 9, 2019, between AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company (Borrower), and NEXBANK SSB (with its participants, successors and assigns, Lender).
R E C I T A L S
A. Borrower and Lender are parties to that certain Credit and Security Agreement dated as of August 26, 2016 (as amended, modified, supplemented, restated or amended and restated from time to time, the Loan Agreement). Unless otherwise indicated herein, all terms used with their initial letter capitalized are used herein with their meaning as defined in the Loan Agreement and all Section references are to Sections in the Loan Agreement.
B. Borrower has requested that Lender amend the Loan Agreement as provided below.
C. Borrower and Lender desire to amend the Loan Documents, subject to the terms, conditions, and representations set forth herein, as requested by Borrower.
D. Borrower and Lender agree to the other terms and provisions provided below, subject to the terms, conditions, and representations set forth herein.
NOW, THEREFORE, in consideration of these premises and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree, as follows:
1. Amendment to Loan Agreement. Subject to the satisfaction of the conditions set forth herein, the Loan Agreement is amended as follows:
(a) The definition of Collateral Value in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
Collateral Value means, as of any Determination Date, (a) [***] of the Market Value of all Eligible Agency Servicing Rights as updated for the most recent unpaid principal balance and as most recently determined by a Servicing Appraisal and (b) and [***] of the sum of all Advances. Each of such values shall be as determined by the Lender in its reasonable discretion, which may accept as correct any value proposed by Borrower that is not obviously and materially incorrect on its face, and each determination by the Lender of Collateral Value (and of each element of each such determination, including Market Value) may be computed using any reasonable averaging, interpolation and attribution method and, absent manifest error, shall be conclusive and binding.
(b) Section 4.10 of the Loan Agreement is hereby amended to delete the phrase [***] and replace it with the phrase [***].
(c) Exhibit A to the Loan Agreement is hereby amended to each instance of the phrase [***] and replace each with the phrase [***].
2. Conditions Precedent. Notwithstanding any contrary provision, this Amendment shall be effective on the first Business Day upon which all of the following conditions precedent have been satisfied (the Effective Date):
(a) Lender shall have received counterparts of this Amendment executed by Borrower, Lender, and each other party set forth on the signature pages hereto;
(b) Lender shall have received satisfactory evidence that Borrower has paid the fees and expenses of counsel described in Section 5;
(c) No Default or Event of Default shall have occurred and be continuing or shall result after giving effect to this Amendment;
(d) Lender shall have received such other instruments and documents incidental and appropriate to the transactions provided for herein as Lender or its counsel may reasonably request, and all such documents shall be in form and substance satisfactory to Lender (it being agreed that execution of this Amendment by Lender shall evidence that the foregoing conditions have been fulfilled).
3. Reaffirmation of Loan Documents and Liens. Except as amended and modified hereby, any and all of the terms and provisions of the Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby in all respects ratified and confirmed by Borrower. Borrower hereby agrees that, except as expressly provided in this Amendment, the amendments and modifications herein contained shall in no manner affect or impair the liabilities, duties and obligations of Borrower under the Loan Agreement and the other Loan Documents or the Liens securing the payment and performance thereof. Borrower further confirms that the liens and security interests in the Collateral created under the Loan Documents secure, among other indebtedness, Borrowers obligations under the Loan Documents, and all modifications, amendments, renewals, extensions, and restatements thereof.
4. Representations and Warranties. As a material inducement for Lender to enter into this Amendment, Borrower hereby represents and warrants to Lender (with the knowledge and intent that Lender is relying upon the same in consenting to this Amendment) that as of the Effective Date, and after giving effect to the transactions contemplated by this Amendment: (a) all representations and warranties in the Loan Agreement and in all other Loan Documents are true and correct in all material respects, as though made on the date hereof, except to the extent that (i) any of them speak to a different specific date; or (ii) the facts or circumstances on which any of them were based have been changed by transactions or events not prohibited by the Loan Documents; (b) no Default or Event of Default exists under the Loan Documents or will exist after giving effect to this Amendment; (c) this Amendment has been duly authorized and approved by all necessary organizational action and requires the consent of no other Person, and is binding and enforceable against Borrower in accordance with its terms; (d) the execution, delivery and performance of this Amendment in accordance with its terms, does not and will not, by the passage of time, the giving of notice, or otherwise: (i) require any governmental approval, other than such as have been obtained and are in full force and effect, or violate any applicable law relating to Borrower; (ii) conflict with, result in a breach of, or
constitute a default under the Constituent Documents of Borrower thereof, or any indenture, agreement, or other instrument to which Borrower is a party or by which it or any of its properties may be bound; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by Borrower and (e) Borrowers Constituent Documents delivered to Lender on August 26, 2016 (i) have not been amended, modified, rescinded, revoked or otherwise modified, and no action has been taken by the officers, managers or members of Borrower in contemplation of, or to effect or authorize, the foregoing, and (ii) remain in full force and effect as of the date hereof.
5. Fees, Costs and Expenses. Borrower agrees to pay promptly the reasonable fees and expenses of counsel to Lender for services rendered in connection with the preparation, negotiation, reproduction, execution, and delivery of this Amendment and all related documents.
6. Miscellaneous.
(a) This Amendment shall be deemed to constitute a Loan Document for all purposes and in all respects. Each reference in the Loan Agreement to this Agreement, hereunder, hereof, herein or words of like import, and each reference in the Loan Agreement or in any other Loan Document, or other agreements, documents or other instruments executed and delivered pursuant to the Loan Agreement to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended by this Amendment
(b) The Loan Documents shall remain unchanged and in full force and effect, except as provided in this Amendment, and are hereby ratified and confirmed. The execution, delivery, and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any rights of Lender under any Loan Document, nor constitute a waiver under any of the Loan Documents.
(c) All of the terms and provisions of this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.
(d) This Amendment may be executed in one or more counterparts and by different parties hereto in separate counterparts each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of photocopies of the signature pages to this Amendment by facsimile or electronic mail shall be effective as delivery of manually executed counterparts of this Amendment.
(e) THIS AMENDMENT, THE LOAN AGREEMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(f) The headings, captions and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof.
(g) Any provision of this Amendment held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
(h) This Amendment shall be construed in accordance with and governed by the laws of the State of Texas without regard to its principles of conflicts of laws.
(i) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Lender under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents
[Remainder of Page Intentionally Left Blank: Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment in multiple counterparts on the date stated on the signature pages hereto, but effective as of Effective Date.
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BORROWER: | |
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AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company | |
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By: |
/s/ Kathleen Conte |
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Name: Kathleen Conte |
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Title: SVP, Capital Markets |
Signature Page to Fifth Amendment to Credit and Security Agreement
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LENDER: | |
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NEXBANK SSB | |
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By: |
/s/ Kevin Olding |
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Name: Kevin Olding |
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Title: SVP |
Signature Page to Fifth Amendment to Credit and Security Agreement
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
SIXTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT
THIS SIXTH AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this Amendment) is entered into as of December 6, 2019, between AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company (Borrower), and NEXBANK SSB (with its participants, successors and assigns, Lender).
R E C I T A L S
A. Borrower and Lender are parties to that certain Credit and Security Agreement dated as of August 26, 2016 (as amended, modified, supplemented, restated or amended and restated from time to time, the Loan Agreement). Unless otherwise indicated herein, all terms used with their initial letter capitalized are used herein with their meaning as defined in the Loan Agreement and all Section references are to Sections in the Loan Agreement.
B. Borrower has requested that Lender amend the Loan Agreement as provided below.
C. Borrower and Lender desire to amend the Loan Documents, subject to the terms, conditions, and representations set forth herein, as requested by Borrower.
D. Borrower and Lender agree to the other terms and provisions provided below, subject to the terms, conditions, and representations set forth herein.
NOW, THEREFORE, in consideration of these premises and other valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree, as follows:
1. Amendment to Loan Agreement. Subject to the satisfaction of the conditions set forth herein, the Loan Agreement is amended as follows:
(a) The definition of Collateral Value in Section 1.1 of the Loan Agreement is hereby amended to delete each instance of the phrase [***] and replace each with the phrase [***].
(b) The definition of Commitment in Section 1.1 of the Loan Agreement is hereby amended and restated in its entirety to read as follows:
Commitment means the obligation of Lender to make Borrowings pursuant to Section 2 in an aggregate principal amount at any time outstanding up to but not exceeding the Maximum Amount, subject, however, to termination pursuant to Section 10.2.
(c) The following defined terms are hereby added to Section 1.1 in the Credit Agreement in appropriate alphabetical order as follows:
Existing Commitment Amount means [***].
Incremental Amount Date has the meaning specified in Section 2.6(a)(i).
Increased Commitment Agreement has the meaning specified in Section 2.6(b)(v).
Incremental Revolving Loan has the meaning specified in Section 2.6(a)(ii).
Incremental Revolving Loan Commitments has the meaning specified in Section 2.6(a)(i).
Maximum Amount means as of any date of determination, the Existing Commitment Amount, as may have been increased by Incremental Revolving Loan Commitments as provided in Section 2.6.
(d) Section 2 of the Loan Agreement is hereby amended to add a new Section 2.6 thereto as follows:
Section 2.6 Incremental Revolving Loans.
(a) Incremental Revolving Loans.
(i) The Borrowers may, by written notice to Lender, elect to request the establishment of incremental revolving loan commitments (the Incremental Revolving Loan Commitments); provided that upon giving effect to such establishment, which shall be in the sole discretion of Lender pursuant to Section 2.6(c), the aggregate principal amount of the Incremental Revolving Loan Commitments shall not exceed [***]. Any request for an Incremental Revolving Loan Commitment shall be in a minimum amount of [***] and integral multiples of [***] in excess thereof. Each such notice shall specify the date (each, an Incremental Amount Date) on which the Borrowers propose that the Incremental Revolving Loan Commitments shall be effective, which shall be not less than thirty (30) days after the date on which such notice is delivered to Lender. Such Incremental Revolving Loan Commitments shall become effective as of such Incremental Amount Date upon the satisfaction in form and substance reasonably satisfactory to Lender of the conditions set forth in Section 2.6(b).
(ii) On any Incremental Amount Date on which any Incremental Revolving Loan Commitments are effective, subject to the satisfaction of the foregoing terms and conditions, Lender shall make a loan to the Borrower (an Incremental Revolving Loan) in an amount equal to its Incremental Revolving Loan Commitment.
(iii) Each Increased Commitment Agreement may effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of Lender, to effect the provisions of this Section 2.6(a).
(b) Conditions to Increase. The effectiveness of each Incremental Revolving Loan Commitment shall be in the sole discretion of Lender (pursuant to Section 2.6(c))
and shall be subject to the following conditions that on and as of such Incremental Amount Date:
(i) No Default would occur or be continuing before or after giving effect to such Incremental Revolving Loan Commitment.
(ii) Both before and after giving effect to the consummation of the Incremental Revolving Loans, and the transactions related thereto, each of the representations and warranties contained in this Agreement and the other Loan Documents shall be true and correct in all material respects to the same extent as though made on and as of that date, except to the extent such representations and warranties specifically relate to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date (provided that if a representation and warranty is qualified as to materiality, the materiality qualifier set forth above shall be disregarded with respect to such representation and warranty for purposes of this condition).
(iii) After giving effect to such Incremental Revolving Loan, the aggregate outstanding principal balance of all Loans hereunder would not exceed [***] of the Market Value of all Collateral, as determined by Lender in its sole discretion.
(iv) The Borrower shall deliver or cause to be delivered any legal opinions or other documents reasonably requested by Lender in connection with any such transaction.
(v) An amendment to each of the Credit Agreement and the then existing Revolving Credit Note, in each case in form and substance reasonably satisfactory to Lender, pursuant to which, effective as of such Incremental Amount Date, Lender shall provide its Incremental Revolving Loan Commitment, shall be duly executed by Lender and the Borrowers (each, an Increased Commitment Agreement).
(vi) A certificate of a Responsible Officer shall be delivered to Lender stating that the conditions with respect to such Incremental Revolving Loan Commitment under this Section 2.6(b) have been satisfied.
(c) No Obligation to Increase. Notwithstanding anything herein to the contrary, Lender shall not have any obligation to agree to extend any Incremental Revolving Loan and/or to increase any of its Commitments hereunder and any election to do so shall be in the sole discretion of Lender.
(e) Section 3.2(b)(i) of the Loan Agreement is hereby amended and restated in its entirety as follows:
(i) If at any time the unpaid principal balance of the Revolving Credit Note exceeds the Borrowing Base then in effect (a Borrowing Base Deficiency), then Borrower shall either prepay the entire amount of such excess to Lender or pledge
additional Agency Servicing Rights with a Market Value sufficient to eliminate such excess, in each case, within thirty (30) days of the most recent Determination Date of the Borrowing Base; provided, however, that if a Borrowing Base Deficiency directly results from the Borrowing Base being revised by the Lender in its commercially reasonable discretion, then Borrower shall, within thirty (30) days of such determination by Lender, either prepay the entire amount of such excess to Lender or pledge additional Agency Servicing Rights with a Market Value sufficient to eliminate such excess.
(f) Section 4.10 of the Loan Agreement is hereby amended to delete the phrase [***] and replace it with the phrase [***].
(g) Exhibit A to the Loan Agreement is hereby amended to delete each instance of the phrase [***] and replace each with the phrase [***].
2. Conditions Precedent. Notwithstanding any contrary provision, this Amendment shall be effective on the first Business Day upon which all of the following conditions precedent have been satisfied (the Effective Date):
(a) Lender shall have received counterparts of this Amendment executed by Borrower, Lender, and each other party set forth on the signature pages hereto;
(b) Lender shall have received satisfactory evidence that Borrower has paid the fees and expenses of counsel described in Section 5 that have been invoiced prior to the Effective Date;
(c) No Default or Event of Default shall have occurred and be continuing or shall result after giving effect to this Amendment;
(d) Lender shall have received such other instruments and documents incidental and appropriate to the transactions provided for herein as Lender or its counsel may reasonably request, and all such documents shall be in form and substance satisfactory to Lender (it being agreed that execution of this Amendment by Lender shall evidence that the foregoing conditions have been fulfilled).
3. Reaffirmation of Loan Documents and Liens. Except as amended and modified hereby, any and all of the terms and provisions of the Loan Agreement and the other Loan Documents shall remain in full force and effect and are hereby in all respects ratified and confirmed by Borrower. Borrower hereby agrees that, except as expressly provided in this Amendment, the amendments and modifications herein contained shall in no manner affect or impair the liabilities, duties and obligations of Borrower under the Loan Agreement and the other Loan Documents or the Liens securing the payment and performance thereof. Borrower further confirms that the liens and security interests in the Collateral created under the Loan Documents secure, among other indebtedness, Borrowers obligations under the Loan Documents, and all modifications, amendments, renewals, extensions, and restatements thereof.
4. Representations and Warranties. As a material inducement for Lender to enter into this Amendment, Borrower hereby represents and warrants to Lender (with the knowledge and intent that Lender is relying upon the same in consenting to this Amendment) that as of the Effective Date, and after giving effect to the transactions contemplated by this Amendment: (a) all representations and warranties in the Loan Agreement and in all other Loan Documents are true and correct in all material respects, as though made on the date hereof, except to the extent that (i) any of them speak to a different specific date; or (ii) the facts or circumstances on which any of them were based have been changed by transactions or events not prohibited by the Loan Documents; (b) no Default or Event of Default exists under the Loan Documents or will exist after giving effect to this Amendment; (c) this Amendment has been duly authorized and approved by all necessary organizational action and requires the consent of no other Person, and is binding and enforceable against Borrower in accordance with its terms; (d) the execution, delivery and performance of this Amendment in accordance with its terms, does not and will not, by the passage of time, the giving of notice, or otherwise: (i) require any governmental approval, other than such as have been obtained and are in full force and effect, or violate any applicable law relating to Borrower; (ii) conflict with, result in a breach of, or constitute a default under the Constituent Documents of Borrower thereof, or any indenture, agreement, or other instrument to which Borrower is a party or by which it or any of its properties may be bound; or (iii) result in or require the creation or imposition of any Lien upon or with respect to any property now owned or hereafter acquired by Borrower and (e) Borrowers Constituent Documents delivered to Lender on August 26, 2016 (i) have not been amended, modified, rescinded, revoked or otherwise modified, and no action has been taken by the officers, managers or members of Borrower in contemplation of, or to effect or authorize, the foregoing, and (ii) remain in full force and effect as of the date hereof.
5. Fees, Costs and Expenses. Borrower agrees to pay promptly the reasonable fees and expenses of counsel to Lender for services rendered in connection with the preparation, negotiation, reproduction, execution, and delivery of this Amendment and all related documents.
6. Miscellaneous.
(a) This Amendment shall be deemed to constitute a Loan Document for all purposes and in all respects. Each reference in the Loan Agreement to this Agreement, hereunder, hereof, herein or words of like import, and each reference in the Loan Agreement or in any other Loan Document, or other agreements, documents or other instruments executed and delivered pursuant to the Loan Agreement to the Loan Agreement, shall mean and be a reference to the Loan Agreement as amended by this Amendment.
(b) The Loan Documents shall remain unchanged and in full force and effect, except as provided in this Amendment, and are hereby ratified and confirmed. The execution, delivery, and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any rights of Lender under any Loan Document, nor constitute a waiver under any of the Loan Documents.
(c) All of the terms and provisions of this Amendment shall bind and inure to the benefit of the parties hereto and their respective successors and assigns.
(d) This Amendment may be executed in one or more counterparts and by different parties hereto in separate counterparts each of which when so executed and delivered shall be deemed an original, but all such counterparts together shall constitute but one and the same instrument; signature pages may be detached from multiple separate counterparts and attached to a single counterpart so that all signature pages are physically attached to the same document. Delivery of photocopies of the signature pages to this Amendment by facsimile or electronic mail shall be effective as delivery of manually executed counterparts of this Amendment.
(e) THIS AMENDMENT, THE LOAN AGREEMENT, AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
(f) The headings, captions and arrangements used in this Amendment are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify or modify the terms of this Amendment, nor affect the meaning thereof.
(g) Any provision of this Amendment held to be invalid, illegal or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such invalidity, illegality or unenforceability without affecting the validity, legality and enforceability of the remaining provisions hereof; and the invalidity of a particular provision in a particular jurisdiction shall not invalidate such provision in any other jurisdiction.
(h) This Amendment shall be construed in accordance with and governed by the laws of the State of Texas without regard to its principles of conflicts of laws.
(i) The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of Lender under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents
[Remainder of Page Intentionally Left Blank; Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have executed this Amendment in multiple counterparts on the date stated on the signature pages hereto, but effective as of Effective Date.
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BORROWER: | |
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AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company | |
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By: |
/s/ Kathleen Conte |
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Name: Kathleen Conte |
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Title: SVP, Capital Markets |
Signature Page to
Sixth Amendment to Credit and Security Agreement
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
WESTERN ALLIANCE BANK
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY AGREEMENT (Agreement) is made and entered into effective August 21, 2020 (the Effective Date), by and between WESTERN ALLIANCE BANK, an Arizona corporation (Bank), and AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company (Borrower).
RECITALS
A. Borrower has requested that Bank extend credit to Borrower as described in this Agreement.
B. Subject to and upon the provisions, terms and conditions of this Agreement, Bank is willing to make such credit available to Borrower and has agreed to lend to Borrower the amounts herein described for the purposes set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the covenants, representations, warranties and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto her by covenant and agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1. Definitions. As used in this Agreement, all addendums, exhibits and schedules hereto and in any note, certificate, report or other Loan Documents made or delivered pursuant to this Agreement, the following terms will have the meanings given such terms in this Article 1 unless otherwise provided in any such other document.
Acknowledgment Agreement means an acknowledgment agreement in the form prescribed by Freddie Mac to be executed by Borrower, Bank and Freddie Mac as a condition to Borrowers pledging Freddie Mac Servicing Rights to Bank.
Advance means any disbursement of an amount or amounts to be loaned by Bank to Borrower hereunder or the re-borrowing of amounts previously loaned hereunder.
Advance Request means, as of the date of preparation, a certificate requesting an Advance (in a form acceptable to Bank) prepared by an Authorized Officer.
Affiliate means, as to any Person, any other Person (a) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person, (b) that directly or indirectly beneficially owns or holds fifty percent (50%) or more of any class of voting stock of such Person, or (c) that controls fifty percent (50%) or more of the voting stock of which is directly or indirectly beneficially owned or held by the Person in question. As used herein, the term control means the possession, directly or indirectly, of the power to direct
or cause direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise; provided, however, in no event shall Bank be deemed an Affiliate of Borrower. For purposes of this Agreement, Aris Mortgage Holding Company, LLC shall be deemed to be the only Affiliate of Borrower.
Agreement means this Loan and Security Agreement, as the same may, from time to time, be amended, supplemented, or replaced.
Agency means Freddie Mac.
Agency Guidelines means, the Freddie Mac Guide and the Purchase Documents (as such term is defined in the Freddie Mac Guide).
Approved Purposes has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Approved Servicing Agreement means the Servicing Agreement between Borrower and the Agency.
Adjusted Tangible Net Worth has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Article and Articles have the meanings set forth in Section 1.6.
Authorized Officer means the President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Controller, Treasurer and any other officers legally authorized by Borrower and approved hereafter in writing by Bank.
Bank means Western Alliance Bank, an Arizona corporation and its participants, successors and assigns.
Borrower means the Person identified as such in the introductory paragraph hereof, and its successors and assigns.
Borrowing Base has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Borrowing Base Certificate means, as of any date of preparation, a certificate setting forth the Borrowing Base in substantially the form of Exhibit B attached hereto, prepared by and certified by an Authorized Officer of Borrower.
Borrowing Base Deficiency has the meaning set forth in Section 2.4.
Borrowing Limit means the lesser of (a) the Borrowing Base, minus the outstanding Principal Balance of the Loans, or (b) the Committed Sum.
Business Day means a day other than a Saturday, Sunday or a day on which commercial banks in Phoenix, Arizona or the State of California are authorized to be closed. Unless otherwise provided, the term days means calendar days.
Code means the Uniform Commercial Code of the State of Arizona; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any Collateral or the continuation, renewal or enforcement thereof is governed by the Uniform Commercial Code as in effect in a jurisdiction other than Arizona, Code shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or nonperfection.
Collateral means the following property which secures, either directly or indirectly, the payment and performance of the Indebtedness and the Obligations, wherever located, in which Borrower now has or at any time hereafter has or acquires any right, title or interest, and all Proceeds and products thereof, together with all books and records, customer lists, credit files, computer files, printouts and other computer materials and records related thereto:
(a) all Pledged Servicing Rights (whether classified as instruments, accounts, payment intangibles or general intangibles under the Code), together with all of Borrowers rights in and to:
(i) late charges, ancillary fees and other servicing compensation under, for or in respect of the Pledged Servicing Rights, whether or not yet accrued, earned, due or payable;
(ii) proceeds of any sale or other disposition of the Pledged Servicing Rights and to any payment in respect of the transfer or termination of the Pledged Servicing Rights by the Agency;
(iii) all other present and future rights and interests of Borrower in, to, and under the Pledged Servicing Rights;
(iv) all insurance and claims for insurance effected or held for the benefit of Borrower and Bank in respect of the Pledged Servicing Rights;
(v) all of Borrowers files, certificates, correspondence, appraisals, accounting entries, journals and reports, other information and data that describes, catalogs or lists such information or data, or that otherwise directly relates to the Pledged Servicing Rights, and other information and data that is used for managing and administering the Pledged Servicing Rights;
(vi) all media (tapes, discs, cards, drives, flash memory or any other kind of physical or virtual data or information storage media) on which is stored only information or data that relates to the Pledged Servicing Rights, and on which no other material information and data that relates to property other than the Pledged Servicing Rights is stored;
(vii) [Reserved];
(viii) all rights to collect payments of principal, interest, tax and insurance escrows, impound accounts, and other distributions thereon or products and proceeds of the Pledged Servicing Rights, all accounts, payment intangibles and general intangibles arising from, under or in respect of the Pledged Servicing Rights or relating thereto, and all accessions or additions to and all substitutions for any of the Pledged Servicing Rights;
(ix) all instruments, documents, or writings evidencing any monetary obligation, account, payment intangible, general intangible or security interest in any of the Pledged Servicing Rights, whether now existing or hereafter arising, accruing or acquired; and
(x) all security for or claims against others in respect of the Pledged Servicing Rights;
(b) All Pledged Servicing Receivables (whether classified as instruments, accounts, payment intangibles or general intangibles under the Code), together with all of Borrowers rights in and to:
(i) [Reserved];
(ii) all rights to funds from any and all Servicers Deposit Accounts from which Borrower has the right to make withdrawals to reimburse Borrower for monies advanced by Borrower as the servicer of Mortgage Loans relating to the Pledged Servicing Receivables;
(iii) all profits, income, surplus, moneys and revenues of any kind accruing, and all accounts arising, under or in respect of the Pledged Servicing Receivables;
(iv) all accounts, payment intangibles and general intangibles, whether now or hereafter existing (including all of Borrowers present and future rights to have and receive interest and other compensation, whether or not yet accrued, earned, due or payable), under or arising out of any or all of the Pledged Servicing Receivables;
(v) title and interest in and to any and all security for or claims against others in respect of the Pledged Servicing Receivables;
(vi) all of Borrowers files, surveys, certificates, correspondence, appraisals, tapes, discs, cards, accounting records and other information and data directly relating to any of the Pledged Servicing Receivables; and
(vii) all of Borrowers proceeds and rights to proceeds of any sale or other disposition of any or all of the Pledged Servicing Receivables;
(c) The Pledged Deposit Account; and
(d) All rights to have and receive any of the Collateral described above, all accessions or additions to and substitutions for any of such Collateral, together with all renewals and replacements of any of such Collateral, all other rights and interests now owned or hereafter acquired by Borrower in, under or relating to any of such Collateral or referred to above and all proceeds of any of such Collateral; all of Borrowers present and future accounts, payment intangibles and general intangibles arising from or relating to any of the Pledged Servicing Receivables or any such other property as may be specifically pledged in writing by Borrower to Bank; all other rights and interests of Borrower in, under or, in the case of Servicing only, relating to any of such property, all of Borrowers rights and interests (but none of its obligations) in, to and under all contracts and agreements, whether oral or written, relating thereto; any instruments, documents or writings evidencing any monetary obligation, contract right, account or security interest in any of such property or its proceeds accruing or accrued and all other rights and interests in and to any and all security for or claims against others in respect of any of the property described or referred to herein; all books, records, contract rights, instruments, documents (including all documents of title), chattel paper and proceeds relating to, arising from or by virtue of or collections with respect to, or comprising part of, any of such property, including all insurance and claims for insurance effected or held for the benefit of Borrower or Bank in respect of any of the foregoing, in each case whether now existing or hereafter arising, accruing or accrued; and all other rights and interests in and to any and all security for or claims against others in respect of any of the rights, interests and property described or referred to above.
Bank understands and agrees that the Collateral includes rights that may be transferred or acquired by the Agency under the Approved Servicing Agreement, are derivative of servicers rights under the Approved Servicing Agreement and, as such, are subject to the prior rights of, or revision by, the Agency or standby servicer, in an event of default or extinguishment.
Notwithstanding anything in the foregoing, after the Conversion Date and the indefeasible repayment of any outstanding principal balance of the Servicing Advances Note, the Pledged Servicing Receivables shall not longer constitute Collateral as used herein.
Commitment means the obligation of Bank to make the Loans in an aggregate principal amount at any time outstanding up to but not to exceed in the aggregate the Borrowing Limit in effect from time to time.
Committed Sum has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Compliance Certificate means a certificate, substantially in the form of Exhibit C attached hereto, prepared by and executed by an Authorized Officer of Borrower.
Consent Agreement means the Consent Agreement, dated as of the date hereof, by and among Freddie Mac, Borrower and Bank, which provides the terms and conditions under which Freddie Mac granted its consent to Borrowers pledge of Pledged Servicing Receivables to Bank.
Consumer Mortgage Loan means a Mortgage Loan made to a Person for personal, family or household purposes.
Conversion Date shall have the meaning set forth in Section 2.10 herein.
Corporate Advance means customary and necessary out of pocket costs and expenses (including attorneys fees and disbursements) incurred in the performance by Borrower under the Approved Servicing Agreement (other than P&I Advances and Escrow Advances) related to a Mortgage Loan for (1) the preservation, restoration and protection of any Mortgaged Property, including property inspection and valuation fees, (2) any enforcement or administrative, judicial or other legal proceedings, including foreclosures, (3) the management and liquidation of a Mortgaged Property if such Mortgaged Property is acquired in satisfaction of the related Serviced Loan, or (4) other default related fees.
Corporate Advances Sublimit has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Current Financial Statements means the financial statements of Borrower most recently submitted to Bank and dated within thirty (30) days of the Effective date.
Debt means with respect to any Person at any time (without duplication), (a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, notes, debentures, or other similar instruments; (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable of such Person arising in the ordinary course of business that are not past due by more than ninety (90) days; (d) all capital lease obligations of such Person; (e) all Debt or other obligations of others guaranteed by such Person; (f) all obligations secured by a Lien existing on property owned by such Person, whether or not the obligations secured thereby have been assumed by such Person or are non-recourse to the credit of such Person; (g) any other obligation for borrowed money or other financial accommodations which in accordance with GAAP, or other method of accounting acceptable to Bank, would be shown as a liability on the balance sheet of such Person; (h) any repurchase obligation or liability of a Person with respect to accounts, chattel paper or notes receivable sold by such Person; (i) any liability under a sale and leaseback transaction that is not a capital lease obligation; (j) any obligation arising with respect to any other transaction that is the functional equivalent of borrowing but which does not constitute a liability on the balance sheets of a Person; (k) all payment and reimbursement obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bankers acceptances, surety or other bonds and similar instruments; and (l) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any equity interests in such Person or any other Person, valued, in the case of redeemable preferred stock interests, at the greater of its voluntary or involuntary liquidation preference plus all accrued and unpaid dividends.
Debtor Relief Laws means Bankruptcy Code of the United States and all other applicable liquidation, receivership, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar debtor relief Laws affecting the rights of creditors generally from time to time in effect.
Effective Date has the meaning provided in the introductory paragraph hereof.
Eligible Pledged Servicing Receivable has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Eligible Pledged Servicing Right has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Environmental Laws means any and all federal, state, and local laws, regulations, judicial decisions, orders, decrees, plans, rules, permits, licenses, and other governmental restrictions and requirements pertaining to health, safety, or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901, et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651, et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. § 1251, et seq., and the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq., as the same may be amended or supplemented from time to time.
Environmental Liabilities means, as to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, costs, and expenses (including, without limitation, all reasonable fees, disbursements and expenses of counsel, expert and consulting fees and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand, by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, including any Environmental Law, permit, order or agreement with any Governmental Authority or other Person, arising from environmental, health or safety conditions or the Release or threatened Release of a Hazardous Material into the environment, resulting from the past, present, or future operations of such Person.
Escrow Advance means customary and necessary out of pocket costs and expenses (including attorneys fees and disbursements) incurred by Borrower under the Approved Servicing Agreement related to a Mortgage Loan for (1) the payment of taxes, assessments, water rates, sewer rents and other charges that are or may become a lien upon the related Mortgaged Property, or (2) the payment of premiums for fire, hazard and (to the extent required by law) flood insurance.
Event of Default has the meaning set forth in Article 9 of this Agreement.
Existing Litigation has the meaning set forth in Section 5.5.
Facility Fee has the meaning set forth in Section 6 of the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Fitch means Fitch Ratings, Inc., or any successor.
Freddie Mac means the Federal Home Loan Mortgage Corporation and any successor.
Freddie Mac Guide shall mean the Freddie Mac Single-Family Seller/Servicer Guide, as it may be amended from time to time.
GAAP means generally accepted accounting principles, applied on a consistent basis, set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board which are applicable under the circumstances and in effect as of the date in question.
Guarantor means any Person who from time to time guarantees all or any part of the Indebtedness. The parties agree there shall be no Guarantor under this Agreement.
Guaranty Agreement means a written guaranty of each Guarantor, if any, in favor of Bank, in form and substance satisfactory to Bank, as the same may be amended, modified, restated, renewed, replaced, extended, supplemented or otherwise changed from time to time. The parties agree there shall be no Guaranty Agreement.
Hazardous Material means any substance, product, waste, pollutant, material, chemical, contaminant, constituent, or other material which is or becomes listed, regulated, or addressed under any Environmental Law, including, without limitation, asbestos, petroleum, and polychlorinated biphenyls.
Inchoate Lien means any Tax Lien for Taxes not yet due and payable and any mechanics Lien and materialmans Lien for services or materials for which payment is not yet due.
Indebtedness means all present and future indebtedness, obligations, and liabilities of Borrower to Bank, including all direct and contingent obligations arising under letters of credit, bankers acceptances, bank guaranties and similar instruments, overdrafts, Automated Clearing House obligations, and all other financial accommodations which could be considered a liability under GAAP, or other method of accounting acceptable to Bank, and all renewals, extensions, and modifications thereof, or any part thereof, now or hereafter owed to Bank by Borrower, and all interest accruing thereon and costs, expenses, and reasonable attorneys fees incurred in the enforcement or collection thereof, regardless of whether such indebtedness, obligation, and liabilities are direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, including, but not limited to, the indebtedness, obligations, and liabilities evidenced, secured, or arising pursuant to (i) any of the Loan Documents and all renewals and extensions thereof, or any part thereof, and all present and future amendments thereto and (ii) any other documents or agreements between Borrower and Bank, together with all renewals and extensions thereof or any part thereof, and all present and future amendments thereto.
Laws means all applicable statutes, laws, ordinances, regulations, orders, writs, injunctions, or decrees of the United States, any city or municipality, state, commonwealth, nation, country, territory, possession, or any Tribunal.
Leases means those certain lease agreements between the owners of the real property on which any part of Borrowers business is operated, as landlord, and Borrower, as tenant, pertaining to the lease of such real property.
Leverage Ratio has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Lien means any mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance, lien (whether statutory or otherwise), or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction in respect of any of the foregoing).
Liquid Assets means, at any particular time, the sum of Borrowers cash, cash equivalents (certificates of deposit and other depository accounts established at FDIC-insured banks and all unrestricted cash on deposit with Borrowers warehouse lenders), United States government-issued securities and other registered, unrestricted equity or debt securities which are publicly traded on a recognized United States exchange and have been approved by Bank, in its sole and absolute discretion and which, in all events, are held in Borrowers name and are free and clear of all Liens (except Liens in favor of Bank).
Litigation means any proceeding, claim, lawsuit, and/or investigation conducted or threatened by or before any Tribunal, including, but not limited to, proceedings, claims, lawsuits, and/or investigations under or pursuant to any environmental, occupational safety and health, antitrust, unfair competition, securities, Tax, or other Law, or under or pursuant to any agreement, document, or instrument.
Loans means the Revolving Loans and the Term Loan, collectively.
Loan Documents mean this Agreement, the Promissory Note, any guaranty, the Security Documents, and any and all other agreements, documents, and instruments executed and delivered in connection with the Loans, and any future amendments thereto, or restatements thereof, together with any and all renewals, extensions, and restatements of, and amendments and modifications to, any such agreements, documents, and instruments.
Loan Period means the combined Revolving Loan Period and Term Loan Period.
Maker means and includes each maker of a Mortgage Note and each cosigner, guarantor, endorser, surety and assumptor thereof, and each mortgagor or grantor under a Mortgage Loan, whether or not such Person has personal liability for its payment of the Mortgage Loan evidenced or secured thereby, in whole or in part.
Margin Call has the meaning set forth in Section 2.4.
Material Adverse Effect means any set of circumstances or event which with respect to any Person (a) could reasonably be expected to have a material adverse effect upon the validity, performance, or enforceability of any Loan Document against such Person, (b) is or could reasonably be expected to have a material adverse effect upon the condition (financial or otherwise), properties, liabilities (actual or contingent), business operations or prospects of such Person, (c) could reasonably be expected to materially impair the ability of such Person to pay the Indebtedness or to fulfill its Obligations under the Loan Documents, or (d) could reasonably be expected to cause an Event of Default.
Maximum Rate means the maximum non-usurious rate of interest (or, if the context so requires, an amount calculated at such rate) which Bank is allowed to contract for, charge, take, reserve, or receive in this transaction under applicable federal or state Law from time to time in effect after taking into account, to the extent required by applicable federal or state Law from time to time in effect, any and all relevant payments or charges under the Loan Documents.
MBS means a mortgage pass-through security, collateralized mortgage obligation, REMIC interest or other security issued by Freddie Mac that (a) is based on and backed by an
underlying pool of Mortgage Loans and (b) provides for payment by its issuer to its holder of specified principal installments and/or a fixed or floating rate of interest on the unpaid balance and for prepayments to be passed through to the holder, whether issued in certificated or book-entry form.
Minimum Servicing Compensation means an amount equal to the greater of the actual cost to perform the servicing under the Approved Servicing Agreement or [***] per annum of the aggregate unpaid principal balance of all Mortgage Loans subject to this Agreement which is paid to Servicer in accordance with the Approved Servicing Agreement.
Moodys means Moodys Investors Service, Inc. or any successors thereto.
Mortgage Loan shall mean a loan, which may be a Consumer Mortgage Loan, evidenced by a Mortgage Note and secured by a Security Instrument.
Mortgage Note shall mean a full recourse promissory note secured by a Security Instrument and evidencing a Mortgage Loan.
Mortgaged Property shall mean the Residential Real Property subject to a Security Instrument securing a Mortgage Loan.
MSR Note has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
MSR Revolving Loan has the meaning set forth in Section 2.1.
Net Income shall mean, for any particular period, Borrowers net income (after provision for taxes), as determined in accordance with GAAP.
Obligated Party means Borrower, each Guarantor or any other Person who is or becomes party to any agreement that guarantees or secures payment and performance of the Indebtedness and/or the Obligations or any part thereof.
Obligations means any and all of the covenants, conditions, warranties, representations and other obligations (other than to repay the Indebtedness) made or undertaken by Borrower or any Obligated Party to Bank as set forth in the Loan Documents.
Organizational Documents means (a) in the case of a corporation, its articles or certificate of incorporation and bylaws, (b) in the case of a general partnership, its partnership agreement, (c) in the case of a limited partnership, its certificate of limited partnership and partnership agreement, (d) in the case of a limited liability company, its articles of organization and operating agreement or regulations, and (e) in the case of any other entity, its organizational and governance documents and agreements.
P&I Advance shall mean advances of principal and interest by Borrower to Freddie Mac relating to a Serviced Loan.
Permitted Businesses mean, those businesses in which Borrower was engaged as of the Effective Date, including but not limited to Mortgage Loans and Consumer Mortgage Loans (and Servicing Rights related thereto), and related business lines relating or incidental to the origination, buying, selling or servicing of residential mortgage loans.
Permitted Liens means all (a) Inchoate Liens, (b) Liens created by or pursuant to the Loan Documents in favor of Bank, and all renewals and extensions of the same; and (c) Liens in favor of the Agency required pursuant to the Approved Servicing Agreement.
Person means any individual, firm, corporation, limited liability company, association, partnership, joint venture, trust, other entity, or a Tribunal.
Pledged Deposit Account means that certain demand deposit account to be established as described in Section 3.5 and to be named AmeriHome Mortgage Company, LLC in trust for Western Alliance Bank - Freddie Mac Servicing Rights Account or any other name selected by Bank and Borrower, which account may be established by Bank for the purpose of holding cash proceeds of Freddie Mac Servicing Rights for the benefit of Bank upon the occurrence and during the continuance of an Event of Default hereunder.
Pledged Servicing Receivables means all of Borrowers present and future rights to have, demand, receive, recover, obtain and retain payments and prepayments of principal, interest or both, and tax, assessment, maintenance fee and insurance escrow payments, and service fees and compensation, owing, paid or due to be paid on, under or in respect of the Serviced Loans that are the subject of the Approved Servicing Agreement and for which Borrower has granted Bank a security interest in the Pledged Servicing Rights related thereto, to reimburse Borrower for making Servicing Advances under the Approved Servicing Agreement, including all of Borrowers present and future rights to have, demand, receive1 recover, obtain and retain payment, reimbursement or indemnity for (or for making) advances made by Borrower (or its predecessor servicer) under the Approved Servicing Agreement, in each case from any other source or sources, to the extent applicable and subject in all respects to the Agency Guidelines, including:
(i) sums paid or to be paid by or for the accounts of the Makers in respect of such Serviced Loans;
(ii) any owner or holder of any Serviced Loan or MBS backed by such Serviced Loans under the Approved Servicing Agreement, or any trustee, master servicer, servicer, sub-servicer or asset manager for any such owner;
(iii) any investor (whether pursuant to an express or implied advances reimbursement covenant under a contract between such investor and Borrower, or any predecessor servicer, contained in or executed pursuant to any asset management agreement or any mortgage or Agency Guidelines, pursuant to any other agreement between Borrower, or any predecessor servicer, and such investor or by operation of any legal or equitable rule or principle, including subrogation);
(iv) any other governmental, government-sponsored enterprise or private mortgage insurer or guarantor;
(v) [reserved];
(vi) any pool insurance, title insurance or any other insurance on property or property rights comprising or covered by any such Serviced Loan which is the subject of any unrecovered advance; and
(vii) funds paid over by Borrower to the trustee for the holder of the related MBS for such servicer advances as are subsequently determined to not be recoverable from such Makers.
Pledged Servicing Rights has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Principal Balance means the aggregate unpaid principal balance of the Promissory Note on any date of determination.
Proceeds means any proceeds, as such term is defined in Chapter 9 of the Code and, in any event, shall include, but not be limited to, (a) any and all proceeds of any insurance, indemnity, warranty, or guaranty payable to Borrower from time to time with respect to any of the Collateral, (b) any and all payments (in any form whatsoever) made or due and payable to Borrower from time to time in connection with any requisition, confiscation, condemnation, seizure, or forfeiture of all or any part of the Collateral by any Tribunal (or any person acting under color of Tribunal), and (c) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral.
Promissory Note has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Release means, as to any Person, any release, spill, emissions, leaking, pumping, injection, deposit, disposal, disbursement, leaching, or migration of Hazardous Materials into the indoor or outdoor environment or into or out of property owned by such Person, including, without limitation, the movement of Hazardous Materials through or in the air, soil, surface water, ground water, or property.
Remedial Action means all actions required to (a) clean up, remove, treat, or otherwise address Hazardous Materials in the indoor or outdoor environment, (b) prevent the Release or threat of Release or minimize the further Release of Hazardous Materials so that they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, or (c) perform pre-remedial studies and investigations and post-remedial monitoring and care.
Residential Real Property shall mean a single platted lot of land improved with a one-to-four family residence.
Revolving Loan and Revolving Loans shall mean, individually and collectively, the MSR Revolving Loan and the Servicing Advances Revolving Loan.
Revolving Loan Period means the period beginning on the Effective Date and ending on the two (2) calendar year anniversary of the Effective Date, unless extended pursuant to Section 2.11 herein.
Rights mean any remedies, powers, and privileges exercisable by Bank under the Loan Documents, at Law, equity, or otherwise.
Section and Sections have the meanings set forth in Section 1.6.
Security Documents means this Agreement, the Acknowledgment Agreement and each other pledge agreement, security agreement or similar agreement or document required by or delivered to Bank from time to time that purports to create a Lien in favor of Bank to secure payment or performance of Indebtedness or Obligations or any portion thereof.
Security Instrument shall mean a full recourse mortgage or deed of trust securing a Mortgage Loan and granting a perfected first priority lien on Residential Real Property.
Serviced Loans means all Mortgage Loans serviced or required to be serviced by Borrower under a Servicing Agreement, irrespective of whether the actual servicing is done by another Person (a sub-servicer) retained by Borrower for that purpose.
Servicer means a Person (which may, or shall, mean Borrower if the context permits, or requires, it) retained by the owner (or a trustee for the owner) of Mortgage Loans to service such Mortgage Loans under the related Servicing Agreement.
Servicer Downgrade Event means any debt, deposit, financial strength or any other financial, operational or performance rating for Borrower, a Servicer or any sub-servicer is downgraded one or more levels below SQ3 by Moodys or RPS3 by Fitch or Average by S&P.
Servicers Deposit Account means a deposit account maintained with a financial institution for deposits of principal and interest payments or taxes and insurance payments made by Makers of Serviced Loans relating to the Pledged Servicing Rights, irrespective of how such account is styled or who is the designated owner of such account, in respect of which Borrower, as servicer, has the right (whether absolute or conditional) to make withdrawals to reimburse itself (or to be reimbursed by withdrawals from such account by an owner of such Serviced Loans or a trustee for such owner which such owner or trustee is contractually obligated to make and pay over to Borrower upon Borrowers request therefor) for having made Servicing Advances to pay any or all of the following: scheduled principal and interest payments and property taxes and insurance payments.
Servicing Advances shall mean, collectively, (i) Escrow Advances, (ii) Corporate Advances, and (iii) P&I Advances.
Servicing Advances Note has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Servicing Advances Revolving Loan has the meaning set forth in Section 2.1.
Servicing Agreement means, with respect to any Person, the arrangement, whether or not evidenced in writing, pursuant to which that Person acts as servicer of Mortgage Loans, whether or not any of such Mortgage Loan is owned by such Person; with respect to Mortgage
Loans owned or guaranteed by Freddie Mac, the Freddie Mac Guide and the other Purchase Documents (as such term is defined in the Freddie Mac Guide).
Servicing Appraisal means a written appraisal or evaluation by a servicing appraiser, acceptable to Bank, in its reasonable discretion, evaluating the fair market value of all of the Pledged Servicing Rights as of a date stated in the written report of such evaluation, each such evaluation and report to be made at Borrowers expense, to be addressed to Bank and to be in a form reasonably acceptable to Bank, it being understood that, for purposes of this Agreement, (i) if the opinion of value in any such independent appraisal or evaluation is expressed as a range of values, then for purposes of this Agreement, the market value shall be deemed the midpoint (the average of the limits) of the range, and (ii) each Servicing Appraisal shall take into account customary factors, including current market conditions and the fact that the Pledged Servicing Rights may be terminated by the relevant Servicing Agreements counterparty, or sold or otherwise disposed of, under circumstances where Borrower is in default under this Agreement. Borrower acknowledges that each Servicing Appraisals determination of market value is for the limited purpose of determining an advance rate for purposes of the financing provided in this Agreement.
Servicing Portfolio means Borrowers entire portfolio of Serviced Loans.
Servicing Portfolio Seriously Delinquent Rate means the unpaid principal balance of Mortgage Loans in Borrowers Servicing Portfolio that are [***] or more delinquent (using the Mortgage Bankers Association method of calculating delinquency) divided by the unpaid principal balance of all Mortgage Loans in Borrowers Servicing Portfolio.
Servicing Rights means all of Borrowers rights and interests under any Servicing Agreement, including the rights to (a) service the Serviced Loans that are the subject matter of such Servicing Agreement, and (b) be compensated, directly or indirectly, for doing so; with respect to Mortgage Loans owned or guaranteed by Freddie Mac, Servicing Rights refers to the indivisible, conditional, non-delegable contract right and obligation to service loans for and on behalf of Freddie Mac.
Subordinated Debt means all Debt of Borrower whether now existing or hereafter incurred which is subordinate in right of payment to the Indebtedness, pursuant to a written agreement in form and content satisfactory to Bank.
Subsection and Subsections have the meanings set forth in Section 1.6.
Subsidiary(ies) means any entity more than fifty percent (50%) of whose ownership, equity or voting interest now or hereafter is owned directly or indirectly by Borrower or any Subsidiary or may be voted by Borrower or any Subsidiary.
Tangible Net Worth means, for any Person at any particular time, all amounts which, in conformity with GAAP, or other method of accounting acceptable to Bank, would be included as owners equity on a balance sheet of a Person.
Taxes means all taxes (including withholding), assessments, fees, levies, imposts, duties, deductions, withholdings, or other charges of any nature whatsoever from time to time or at any time imposed by any Laws or by any Tribunal, excluding state and local sales and use taxes.
Term Loan Period means the period beginning on the Conversion Date and ending on the three (3) year anniversary of such Conversion Date.
Term Loan has the meaning set forth in Section 2.1.
Tribunal means any state, commonwealth, federal, foreign, territorial, or other court or governmental department, commission, board, bureau, agency, or instrumentality.
Tribunal Proceedings has the meaning set forth in Section 5.4.
Unpaid Judgments has the meaning set forth in Section 5.5.
Unused Credit Limit means, for the applicable calendar month, the amount by which the average monthly outstanding principal amount of Advances was less the specified percentage of the Committed Sum as set forth in Section 2.9.
Unused Line Fee means [***] times the Unused Credit Limit. The Unused Line Fee shall be payable as provided in Section 2.9.
1.2. Terms Defined in the Code. Terms (whether or not capitalized) defined in the Code which are not otherwise defined in this Agreement are used herein as defined in the Code as in effect on the date hereof.
1.3. Accounting Matters. Any accounting term used in this Agreement or the other Loan Documents shall have, unless otherwise specifically provided therein, the meaning customarily given such term in accordance with GAAP, or other method of accounting acceptable to Bank, and all financial computations thereunder shall be computed, unless otherwise specifically provided therein, in accordance with GAAP, or other method of accounting acceptable to Bank, consistently applied. That certain items or computations are explicitly modified by the phrase in accordance with GAAP, or other method of accounting acceptable to Bank shall in no way be construed to limit the foregoing.
1.4. Headings. The headings, captions, and arrangements used in any of the Loan Documents are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify, or modify the terms of the Loan Documents nor to affect the meaning thereof.
1.5. Number and Gender of Words. Whenever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate. Reference herein to Borrower shall mean, jointly and severally, each Person comprising same.
1.6. Articles, Addendums, Sections and Exhibits. All references herein to Article, Articles, Section, Sections, Subsection, and Subsections contained herein are, unless specified indicated otherwise, references to articles, sections, and subsections of this Agreement. All references herein to an Addendum, Exhibit or Schedule are references to exhibits or schedules attached hereto, all of which are made a part hereof for all purposes, the same as if set forth herein verbatim, it being understood that if any addendum, exhibit or schedule attached hereto which is to be executed and delivered, contains blanks, the same shall be completed
correctly and in accordance with the terms and provisions contained and as contemplated herein prior to or at the time of the execution and delivery thereof. The words herein, hereof, hereunder and other similar compounds of the word here when used in this Agreement shall refer to the entire Agreement and not to any particular provision or section.
ARTICLE 2
COMMITMENT TO LEND, TERMS OF PAYMENT
2.1. Revolving Loans and Term Loans. Subject to and upon the terms and conditions of this Agreement, during the Revolving Loan Period Bank agrees to make one or more Advances to Borrower for Approved Purposes (i) supported by the Pledged Servicing Rights portion of the Borrowing Base (hereafter, a MSR Revolving Loan), and (ii) supported by the Pledged Servicing Receivables portion of the Borrowing Base (hereafter, a Servicing Advances Revolving Loan). The aggregate principal amount of the Servicing Advances Revolving Loan at any one time outstanding may not exceed the maximum principal amount of the Servicing Advances Note, and the aggregate principal amount of the Revolving Loans at any one time outstanding may not exceed the Borrowing Limit. Subject to Section 11 of the Promissory Note, within the limit of the Borrowing Limit in effect from time to time, during the Revolving Loan Period, Borrower may borrow, repay without penalty, and re-borrow at any time and from time to time from the Effective Date to the earlier of (a) the expiration of the Revolving Loan Period, or (b) the earlier termination of Banks Commitment hereunder in accordance with Section 10.1 (the Commitment Termination Date). If, by virtue of payments made on the Promissory Note during the Revolving Loan Period, the principal amount owed on the Promissory Note during its term reaches zero at any point, Borrower agrees that all of the Collateral and all of the Loan Documents shall remain in full force and effect to secure any Advances made thereafter, and Bank shall be fully entitled to rely on all of the Collateral and all of the Loan Documents unless an appropriate release of all or any part of the Collateral or all or any part of the Loan Documents has been executed by Bank. From time to time, and provided no Event of Default has occurred and is continuing, Borrower may provide Bank with a written request for release or substitution of Collateral (a Collateral Request), which Collateral Request shall include, at a minimum: a list of all Collateral that Borrower seeks to be released or substituted (by pool number and/or loan number) and stating the portion of the current market value of such Collateral evidenced by the Servicing Appraisal; provided that Bank shall receive any mandatory prepayment or pledge of additional Collateral with a market value sufficient to replace such released Collateral. The Principal Balance may not exceed the Borrowing Limit at any time. Upon the expiration of the Revolving Loan Period, and provided that no Event of Default and no event that, with the lapse of time or notice or both, could reasonably be expected to become an Event of Default, has occurred and is continuing, the MSR Revolving Loan shall, without any further action by Bank or Borrower, convert to a term loan (the Term Loan) in accordance with the terms of the Promissory Note. Borrower may, without cause and for any reason whatsoever, terminate this Agreement by providing thirty (30) days prior written notice to Bank; provided that Borrower has paid in full all amounts then owing hereunder on or prior to such date of termination, including the Indebtedness and all other Obligations.
2.2. Promissory Note. The MSR Revolving Loan shall be evidenced by, be repayable, and accrue interest in accordance with the MSR Note and the Servicing Advances Revolving Loan shall be evidenced by, be repayable, and accrue interest in accordance with the Servicing Advances Note. Subject to the terms and conditions in this Agreement, the Promissory Note, and the other
Loan Documents, Borrower may borrow, repay, and re-borrow under the Promissory Note during the Revolving Loan Period. The unpaid principal balance of the Promissory Note shall be repaid as provided therein.
2.3. Borrowing Procedure. Borrower shall give Bank notice of each Revolving Loan by means of a written request containing the information required by Bank and delivered (by hand or email) to Bank no later than noon (Pacific time) on the day on which Borrower desires that Bank fund the Revolving Loan. Bank, at its option, may accept telephonic requests for such Advances, provided, however, that such acceptance shall not constitute a waiver of Banks right to require delivery of a written request in connection with subsequent Revolving Loans. Any telephonic request for a Revolving Loan by Borrower shall be promptly confirmed by Borrowers submission of a properly completed written request to Bank, but failure to deliver a written request shall not be a defense to payment of a Revolving Loan. Bank shall have no liability to Borrower for any loss or damage suffered by Borrower as a result of Banks honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically or electronically, and purporting to have been sent to Bank by Borrower and Bank shall have no duty to verify the origin of any such communication or the identity or authority of the Person sending it. Subject to the terms and conditions of this Agreement, each Revolving Loan shall be made available to Borrower by depositing the same, in immediately available funds, in an account or accounts of Borrower designated by Borrower maintained with Bank.
2.4. Borrowing Base Deficiency. If at any time, (i) during the Revolving Loan Period, the aggregate outstanding amount of Loans exceeds, as of the date of determination, [***] of the fair market value of the Eligible Pledged Servicing Rights as reflected in the Servicing Appraisal deemed most accurate, as determined by Bank in its reasonable discretion, plus the sum of (x) [***] of the P&I Advances and Escrow Advances, and (y) the lesser of [***] of the Corporate Advances or [***], or (ii) after the Conversion Date, the aggregate outstanding amount of the Loans exceeds, as of the date of determination, [***] of the fair market value of the Eligible Pledged Servicing Rights as reflected in the Servicing Appraisal deemed most accurate, as determined by Bank in its reasonable discretion (each such excess, a Borrowing Base Deficiency), then Bank may by notice to Borrower require Borrower to transfer to Bank cash in an amount at least equal to the Borrowing Base Deficiency (such requirement, a Margin Call). Notice delivered pursuant to this Section 2.4 may be given by any written or electronic means. Any notice given before 9:00 a.m. (Pacific time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (Pacific time) on such Business Day; notice given after 9:00 a.m. (Pacific time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (Pacific time) on the following Business Day. The failure of Bank, on any one or more occasion, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject to limit the right of Bank to do so at a later date. Borrower and Bank each agree that a failure or delay by Bank to exercise its rights hereunder shall not limit or waive Banks rights under this Agreement or otherwise existing by law or in any way create additional rights for Borrower.
2.5. Payments. If a scheduled payment under the Promissory Note is not made in a timely manner, Bank is authorized by Borrower to debit the amount of any such payments from the general deposit account of Borrower with Bank.
2.6. Purpose of Loans. Borrower represents that the proceeds of the Loans will be used only for Approved Purposes.
2.7. Sale of Participations; Disclosure of Information. Subject to the terms and provisions of the Acknowledgment Agreement and Consent Agreement, Bank may, with Borrowers consent, not to be unreasonably withheld, from time to time sell or offer to sell the Indebtedness, or interests therein, to one or more assignees or participants. Borrowers consent shall not be required, however, with respect to any sale of Bank or any division of Bank. Borrower further agrees that Bank is hereby authorized to disseminate and disclose any information (whether or not confidential or proprietary in nature) Bank now has or may hereafter obtain pertaining to Borrower, the Pledged Servicing Rights, the Indebtedness or the Loan Documents (including, without limitation, any credit or other information regarding Borrower, any of its principals, or any other person or entity liable, directly or indirectly, for any part of the Loan), to Persons who need to know such information and a:re any of: (a) any assignee or pa1ticipant or any prospective assignee or prospective participant, (b) any regulatory body having jurisdiction over Bank or the Indebtedness, (c) any sub-servicer of the Serviced Loans relating to Pledged Servicing Rights, including without limitation, any other mortgage originator under an interservicer agreement wherein such originator will take over and service such Serviced Loans if the Agency terminates Borrowers right to service the Serviced Loans relating to the Pledged Servicing Rights or if Borrower otherwise defaults hereunder, and (d) any other persons or entities as may be necessary or appropriate in Banks reasonable judgment (Permitted Recipients); provided, that Bank shall require any such Person (other than regulators having jurisdiction over Bank) to agree to adhere to the provisions relating to confidentiality contained in this Agreement with respect to any such confidential or proprietary information of Borrower; provided further that neither Bank nor Borrower shall disseminate or disclose terms of the Acknowledgment Agreement or Consent Agreement nor the Acknowledgment Agreement or Consent Agreement themselves without the prior express written consent of Freddie Mac.
2.8. Order of Application. Except as otherwise provided in the Loan Documents or otherwise agreed by Bank, all payments and prepayments of the Indebtedness, including proceeds from the exercise of any Rights under the Loan Documents or proceeds of any of the Collateral, shall be applied to the Indebtedness in the following order, any instructions from Borrower to the contrary notwithstanding: (a) to the expenses for which Bank shall be entitled to reimbursement under the Loan Documents, and not previously reimbursed, and then to all indemnified amounts due under the Loan Documents; (b) to fees then owed to Bank hereunder; (c) to accrued interest on the portion of the Indebtedness being paid or prepaid; (d) to the portion of the principal being paid or prepaid; (e) to the remaining accrued interest on the Indebtedness; (f) to the remaining principal; and (g) to the remaining Indebtedness. All amounts remaining after the foregoing application of funds shall be paid to Borrower.
2.9. Unused Line Fee. Commencing with the first full month following the Effective Date through the sixth (6th) month thereafter, during which the aggregate average monthly unpaid principal amount of outstanding Advances is less than [***] of the Committed Sum, Borrower shall pay to Bank, from its own funds, the Unused Line Fee. Commencing with the seventh (7th) month through the twelfth (12th) month, during which the aggregate average monthly unpaid principal amount of outstanding Advances is less than [***] of the Committed Sum, Borrower shall pay to Bank, from its own funds, the Unused Line Fee.
Commencing with the thirteenth (13th) month and continuing for each month thereafter, during which the aggregate average monthly unpaid principal amount of outstanding Advances is less than [***] of the Committed Sum, Borrower shall pay to Bank, from its own funds, the Unused Line Fee. The Unused Line Fee shall be calculated on a monthly basis by Bank for the preceding month, and shall be due and payable by Borrower to Bank in arrears on the tenth (10th) Business Day following the last day of the preceding month during the Revolving Loan Period. The Unused Line Fee shall be non-refundable, and shall be deemed fully earned by Bank upon the expiration of each month during the Revolving Loan Period of the Loan.
2.10. Conversion to Term Loan. At the end of the Revolving Loan Period (the Conversion Date), the MSR Revolving Loan shall convert to a Term Loan pursuant to the terms of the MSR Note upon the occurrence of each and all of the following conditions, each of which must occur or be satisfied (or waived by Bank in writing), as applicable, by no later than the Conversion Date:
(a) As of the Conversion Date, no Event of Default shall exist under any of the Loan Documents, and Borrower shall be in full compliance with the terms, conditions and covenants contained in this Agreement and the other Loan Documents in all material respects;
(b) There shall have occurred no material adverse change in the financial condition of Borrower from that which existed as of the Effective Date;
(c) [Reserved];
(d) Borrower shall be in compliance with Section 2.4 herein and Borrower shall pay to Bank the Borrowing Base Deficiency if a Margin Call exists upon the Conversion Date;
(e) Bank shall have no further obligations to make Advances under this Agreement;
(f) Borrower shall provide Bank with such additional documents as Bank may reasonably request in order to effectuate the conversion to a Term Loan; and
(g) Borrower shall pay to Bank, from Borrowers own funds, all reasonable and documented out-of-pocket fees, costs and expenses of Bank arising from or relating to the conversion of the Loan to a Term Loan, including, without limitation, Banks reasonable and documented outside legal expenses.
For the avoidance of doubt, upon the Conversion Date, the Revolving Loan Period shall terminate as to the Servicing Advances Loan and the outstanding principal balance of the Servicing Advances Loan shall be due and payable to Bank pursuant to the terms of the Servicing Advances Note.
2.11. Extension of Revolving Loans. At the end of the Revolving Loan Period, Borrower may request an extension of the Revolving Loan Period by an additional one (1) year period. Bank may grant such request, in its sole and reasonable discretion, provided that:
(a) At the time of the request for an extension of the Revolving Loan Period, no Event of Default shall exist under any of the Loan Documents, and Borrower shall be in full compliance
with the terms, conditions and covenants contained in this Agreement and the other Loan Documents in all material respects;
(b) Borrower shall have provided Bank a written request for extension of the Conversion Date no later than thirty (30) days prior to the end of the Revolving Loan Period;
(c) Borrower shall provide Bank with such additional documents as Bank may reasonably request to effectuate extension of the Revolving Loan Period;
(d) Borrower shall pay to Bank, from Borrowers own funds, all reasonable and documented out-of-pocket fees, costs and expenses of Bank arising from or relating to the extension of the Revolving Loan Period, including, without limitation, Banks reasonable and documented outside legal expenses; and
(e) From Borrowers own funds, Borrower shall have paid to Bank an extension fee of [***] on the Committed Sum, which shall be deemed fully earned and non-refundable to Borrower upon receipt by Bank.
There shall be no limit in the number of times Borrower may request an extension of the Revolving Loan Period, provided, however, Bank may decline a request to extend the Revolving Loan Period for any reason in its sole and reasonable discretion.
ARTICLE 3
COLLATERAL
3.1. Security Interests. Subject to the prior rights in favor of the Agency pursuant to the Acknowledgment Agreement and the Consent Agreement, Borrower hereby pledges, assigns and grants to Bank a continuing first priority security interest in all of Borrowers right, title and interest in and to all of the Collateral to secure the prompt and complete payment and performance when due of all of the Indebtedness and all of the Obligations.
3.2. Borrower Remains Liable. Notwithstanding anything to the contrary contained herein, (a) Borrower and each other Obligated Party shall remain liable under the Approved Servicing Agreement, contracts and other agreements to which such Person is a party and which are included in the Collateral and shall perform all of its respective duties and obligations thereunder to the same extent as if this Agreement had not been executed, and (b) Bank shall not have any obligation or liability under any of the Approved Servicing Agreement, contracts and other agreements included in the Collateral by reason of this Agreement, nor shall Bank be obligated to perform any of the obligations or duties of Borrower or any other Obligated Party thereunder or to take any action to collect or enforce any claim for payment assigned hereunder.
3.3. Authorization to File Financing Statements. Subject to the terms of the Acknowledgment Agreement and the Consent Agreement, Borrower hereby irrevocably authorizes Bank at any time and from time to time to prepare and file one or more financing statements (and any continuation statements and amendments thereto) describing the Collateral whether or not Borrowers signature appears thereon. Bank shall promptly amend or terminate such financing statements, if necessary, to reflect the release or substitution of Collateral by
Borrower from time to time. Bank shall promptly forward copies of all filed financing statements and any amendments or terminations thereto to Borrower.
3.4. Acknowledgment Agreements. The Pledged Servicing Rights will have a market value of zero for purposes of determining the Borrowing Base until the date on which the Acknowledgment Agreement covering such Servicing Rights has been executed and delivered by Borrower, Bank and Freddie Mac.
3.5. Pledged Deposit Account. Borrower shall establish and maintain with Bank the Pledged Deposit Account in the form of a time deposit or demand account. Subject to the terms and provisions of the Acknowledgment Agreement, the Consent Agreement and Section 10.12 hereof, upon the occurrence and during the continuance of an Event of Default, Bank may direct Borrower or Borrowers sub-servicer to deposit in the Pledged Deposit Account, all Pledged Servicing Receivables and Pledged Servicing Rights funds Borrower is entitled to receive pursuant to the Approved Servicing Agreement, together with all proceeds from any sale or transfer of Pledged Servicing Rights permitted by Bank in its sole discretion, promptly, and in any event within two (2) Business Days after distributions relating the related MBS have been made to the related investors therein. Funds deposited in the Pledged Deposit Account (including any interest paid on such funds) may be distributed only with the consent of Bank. In furtherance of the foregoing, upon the occurrence and during the continuance of an Event of Default, Borrower shall not make any withdrawal from the custodial account or any other clearing account maintained under the Approved Servicing Agreement relating to the Pledged Servicing Rights or Pledged Servicing Receivables, but instead shall promptly, but in any event no later than two (2) Business Days following Banks written instruction, instruct or cause Borrowers sub-servicer to instruct, the related depository institution where such accounts are held to remit all collections, payments and proceeds in respect of any Pledged Servicing Receivables or Pledged Servicing Rights that would otherwise be due and owing to Borrower to be delivered into the Pledged Deposit Account.
3.6. Further Assurances Concerning Collateral. In furtherance of the foregoing, Borrower hereby agrees to perform, or cause to be performed, such acts and duly to authorize, execute, acknowledge, deliver, file and record (or cause such actions to be taken with respect to) such financing statements, assignments, security agreements, deeds of trust, mortgages, bond powers and supplements, modifications or amendments to any of them, and such other papers as Bank may reasonably request in order to establish and preserve the priority of, perfect and protect the Liens granted or intended to be granted to Bank in and to any and all such Collateral and to preserve and protect Banks rights in respect of all present and future Collateral for the Indebtedness and the Obligations.
3.7. [Reserved].
3.8. Limited Pledge of Freddie Mac Servicing. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, the pledge of Borrowers right, title and interest in the Servicing Rights under Approved Servicing Agreement with Freddie Mac shall only secure Borrowers indebtedness and obligations to Bank incurred (i) to fund Borrowers purchase of additional servicing portfolio; (ii) to effect Borrowers purchase of a mortgage banking company; (iii) to fund Borrowers working capital consistent with its residential mortgage business operations; or (iv) any other purpose which Freddie Mac, in its sole and absolute discretion,
considers to be consistent with the purposes of its Acknowledgment Agreement to be executed among Borrower, Bank and Freddie Mac; provided, that the foregoing provisions of this paragraph shall be deemed automatically supplemented or amended if and to the extent Freddie Mac supplements or amends the corresponding requirement, whether in the Freddie Mac Guide; its other rules, regulations and guides; the Approved Servicing Agreement; the Acknowledgment Agreement; or published announcements or otherwise waives or grants exceptions from such requirement, and in each instance, with the same substantive force and effect; provided that the security interest created hereby is subject to the following provision to be included in each financing statement filed in respect hereof (defined terms used below shall have the meanings set forth in the Acknowledgment Agreement and/or the Consent Agreement):
Notwithstanding anything to the contrary herein, the security interest publicized or perfected by this financing statement is subject and subordinate in each and every respect to all rights, powers and prerogatives of the Federal Home Loan Mortgage Corporation (Freddie Mac) under and in connection with (i) the terms and conditions of that certain Acknowledgment Agreement (the Acknowledgment Agreement) and Consent Agreement (the Consent Agreement), as such agreements may be amended from time to time in accordance with their terms, with respect to the Collateral (as defined in the Acknowledgment Agreement) and the Reimbursement Rights (as defined in the Consent Agreement), by and among Freddie Mac, AmeriHome Mortgage Company, LLC and Western Alliance Bank, (ii) the terms and conditions of the Purchase Documents, as that term is defined in the Freddie Mac Single-Family Seller/Servicer Guide, as it may be amended from time to time, other than as set forth pursuant to the express terms and provisions of the Acknowledgment Agreement or Consent Agreement, which rights include, without limitation, the right of Freddie Mac to disqualify (in whole or in part) the debtor named herein as an approved Freddie Mac Seller/Servicer, with or without cause, and the right to terminate (in whole or in part) the unitary, indivisible master servicing contract and to transfer and sell all or any portion of said servicing contract rights, as provided in the Purchase Documents; and (iii) to all claims of Freddie Mac arising out of or relating to any and all breaches, defaults and outstanding obligations of the debtor to Freddie Mac.
3.9. [Reserved].
3.10. Periodic Valuations of Servicing Rights. The value of all Servicing Rights and/or Pledged Servicing Rights, as applicable, to Bank shall be periodically determined as provided in Exhibit A attached hereto, and the Borrowing Base shall be adjusted to reflect each such determination and updating of the value of such Collateral; provided that, notwithstanding any other provision hereof to the contrary, Bank shall have the right, exercisable from time to time (daily or less often) in its sole discretion on any day after the occurrence and during the continuance of any Event of Default to mark the Servicing Rights to market, whereupon, for purposes of
determining the value of the Collateral for that day (and for each day thereafter until it shall thereafter be evaluated or re-evaluated by such an approved appraiser or broker or again marked to market by Bank) such Servicing Rights shall be equal to [***] of its market value on that day as determined by Bank in its sole and absolute discretion without regard to the then-current Servicing Appraisal (which market value Borrower acknowledges may be nominal). Borrower acknowledges that a determination by Bank of market value pursuant to this Agreement is for the limited purpose of determining value of the Collateral for lending or remargin purposes under this Agreement without the ability to perform customary purchasers due diligence and is not necessarily equivalent to a determination of the fair market value of Collateral achieved by obtaining competing bids in an orderly market in which the servicer is not in default, insolvent or the subject of a case in bankruptcy and the bidders have adequate opportunity to perform customary diligence.
ARTICLE 4
CONDITIONS PRECEDENT TO LENDING
4.1. Initial Extension of Credit. The obligation of Bank to make the initial Advance under the Promissory Note is subject to the condition precedent that Bank shall have received on or before the day of such Advance all of the following, each dated (as applicable and unless otherwise indicated) on or as of the Effective Date, in form and substance satisfactory to Bank:
(a) Resolutions. Certified resolutions of the directors or shareholders, as required, of Borrower and each other Obligated Party which authorize the execution, delivery, and performance by Borrower or any such Obligated Party of this Agreement and the other Loan Documents to which Borrower or any such Obligated Party is or is to be a party;
(b) Incumbency Certificate. A certificate of incumbency certified by an authorized officer or representative certifying the names of the individuals or other Persons authorized to sign this Agreement and the other Loan Documents to which Borrower or any other Obligated Party is or is to be a party on behalf of Borrower or any such Obligated Party together with specimen signatures of such Persons;
(c) Organizational Documents. Certified Organizational Documents for Borrower and each other Obligated Party as of a date acceptable to Bank;
(d) Governmental Certificates. Certificates of the appropriate government officials of the state of incorporation or organization of Borrower and each other Obligated Party as to the existence and good standing of Borrower or any such Obligated Party, each dated within thirty (30) days prior to the date of the initial Advance;
(e) Promissory Note. The Promissory Note, executed by Borrower;
(f) Loan and Security Agreement. This Agreement, executed by Borrower;
(g) Servicer Notice. With respect to each sub-servicer of Borrower, a fully-executed Servicer Notice in the form attached hereto as Exhibit D or such other form as approved by Bank.
(h) Insurance Matters. Copies of insurance certificates describing all insurance policies required by the Agreement and the other Loan Documents, together with loss payable and lender endorsements in favor of Bank with respect to all insurance policies covering Collateral;
(i) [Reserved].
(j) Security Documents. The Security Documents, executed by each party thereto;
(k) Borrowing Base Certificate; Other Loan Documents. The Borrowing Base Certificate computed as of the Effective Date duly executed by Borrower, together with each other Loan Document, duly executed by each Obligated Party which is a party thereto;
(l) Servicing Appraisal. A Servicing Appraisal of the Collateral;
(m) UCC Searches. (a) Results of UCC and other search reports from one or more commercial search firms acceptable to Bank, listing all of the effective financing statements and other Liens filed against Borrower in the jurisdiction in which Borrower is incorporated and any other jurisdiction Bank deems relevant, and (b) evidence reasonably satisfactory to Bank that any Liens relating to the Collateral indicated by the financing statements (or similar documents) disclosed by the reports described above have been released or will be released or amended on the Effective Date, including (x) copies of proper UCC termination and/or amendment statements, if any, necessary to release and/or amend such Liens and other rights of any Person in the Collateral, and (y) such other termination and/or amendment statements as Bank may reasonably request from Borrower relating to the Collateral;
(n) Facility Fee. Borrower shall have paid Bank that portion of the Facility Fee due on the Effective Date;
(o) Acknowledgment Agreement. A fully-executed Acknowledgment Agreement; and
(p) Additional Items. All other additional items as may be reasonably required by Bank.
4.2. Conditions for All Advances. In addition to the conditions precedent stated elsewhere herein, Bank shall not be obligated to make any Advance unless:
(a) Borrowing Base Certificate. An updated Borrowing Base Certificate computed as of a date not more than thirty (30) days prior to such Advance, duly executed by Borrower, together with each other Loan Document, duly executed by each Obligated Party which is a party thereto;
(b) Representations and Warranties. The representations and warranties made in Article 5 of this Agreement are true and correct in all material respects at and as of the time the Advance is to be made, and the request for an Advance shall constitute the representation and warranty by Borrower that such representations and warranties are true and correct in all material respects at such time;
(c) No Event of Default. On the date of, and upon receipt of, the Advance, no Event of Default, and no event which, with the lapse of time or notice or both, could reasonably be expected to become an Event of Default, shall have occurred and be continuing;
(d) Advance Request. Bank has received an Advance Request, as well as such other documents, opinions, certificates, agreements, instruments and evidences as Bank may reasonably request; and
(e) Additional Documentation. Bank shall have received such additional approvals, opinions, or documents as Bank may reasonably request.
Each Advance hereunder shall be deemed to be a representation and warranty by Borrower to Bank that the conditions specified in Section 4.1 and this Section 4.2 have been satisfied on and as of the date of the applicable Advance.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Bank as follows as of the date hereof and as of the date of each Loan:
5.1. Existence. Borrower is a duly organized, validly existing, and in good standing under the laws of the State of its formation, and is duly qualified to transact business and is in good standing in all jurisdictions where the nature and extent of its business and property requires the same and where the failure to so qualify would result in a Material Adverse Effect.
5.2. Authorization. Borrower possesses all requisite authority, power, licenses, permits, and franchises to conduct its business and execute, deliver, and comply with the terms of the Loan Documents. The execution and delivery of this Agreement, the consummation of the transactions herein contemplated and compliance with the terms and provisions hereof, the making of the Loans, and the execution, issuance, and delivery of the Loan Documents have been duly authorized and approved by all necessary entity action on the part of Borrower. No consent or approval of any Tribunal or any other Person is required in order for Borrower to legally execute, deliver, and comply with the terms of the Loan Documents.
5.3. Properties; Permitted Liens. Borrower has good and indefeasible title to, and is the legal and equitable owner and holder of, the Collateral, free and clear of all Liens except the Permitted Liens, has full power and authority to grant to Bank the security interest in the Collateral pursuant hereto, and the Collateral is validly pledged or assigned to Bank, subject to no other Liens except Permitted Liens. When financing statements have been filed in the appropriate offices against Borrower with respect to any Collateral, Bank will have a fully perfected first priority security interest in that portion of the Collateral in which a security interest may be perfected by filing, subject only to any Permitted Liens.
5.4. Compliance with Laws and Documents. Borrower is not, nor will the execution, delivery, and performance of and compliance with the terms of the Loan Documents cause Borrower to be, in violation of any Laws or in default (nor has any event occurred which, with the giving of notice or lapse of time or both, could constitute such a default) under any material
contract in any respect, which in either case could have a Material Adverse Effect. During the past two (2) years, there have been no proceedings, claims, or (to Borrowers knowledge) investigations against or involving Borrower by any Tribunal under or pursuant to any environmental, occupational safety and health, antitrust, unfair competition, securities, or other Laws which could have a Material Adverse Effect, except as previously disclosed to Bank in writing in connection with Borrowers application for the Loan (the Tribunal Proceedings).
5.5. Litigation. Except for Litigation in which Borrower is exclusively a plaintiff without a counterclaim, cross claim, or similar action asserted against Borrower and except as previously disclosed to Bank in writing in connection with Borrowers application for the Loan (the Existing Litigation), Borrower is not involved in, nor is Borrower aware of the threat of, any Litigation which could have a Material Adverse Effect, and there are no material outstanding or unpaid judgments against Borrower that could have a Material Adverse Effect, and which are not stayed or pending appeal, except as previously disclosed to Bank in writing in connection with Borrowers application for the Loan (the Unpaid Judgments).
5.6. Taxes. All material federal, state, foreign, and other Tax returns of Borrower required to be filed have been filed, all material federal, state, foreign, and other Taxes imposed upon Borrower which are due and payable have been paid, and to Borrowers knowledge, no material amounts of Taxes not reflected on such returns are payable by Borrower, other than Taxes being contested in good faith by appropriate legal proceedings and previously disclosed in writing by Borrower to Bank.
5.7. Enforceability of Loan Documents. All Loan Documents when duly executed and delivered by Borrower (and assuming due execution and delivery by the other parties thereto) will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their terms subject to Debtor Relief Laws and except that the availability of equitable remedies may be limited.
5.8. Financial Statements. All financial statements of Borrower heretofore and hereafter to be delivered to Bank have been and shall continue to be prepared in accordance with GAAP, and do and shall fairly represent the financial condition of Borrower as of the date of each such financial statement (subject to reasonable yearend adjustments for interim financial statements). There are and shall be no material liabilities, direct or indirect, fixed or contingent, as of the date of each such financial statement which are not reflected therein or in the notes thereto. Except for transactions directly related to, or specifically contemplated by, this Agreement and transactions heretofore disclosed in writing to Bank, there has been no material adverse change in the financial condition of Borrower as shown by the Current Financial Statements for Borrower between the date of such Current Financial Statements and the date hereof, nor has Borrower incurred any material liability, direct or indirect, fixed, or contingent, except as otherwise disclosed to and approved in writing by Bank. Neither Borrower nor any of its Subsidiaries has any material Debt, other contingent liabilities, liabilities for taxes, any long-term lease obligations or unusual forward or long-term commitments, or any Hedge Agreement or other transaction or obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph except as disclosed to Bank in writing.
5.9. Regulation U. The proceeds of the Advances are not and will not be used directly or indirectly for the purpose of purchasing or carrying, or for the purpose of extending credit to others for the purpose of purchasing or carrying, any margin stock as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System.
5.10. Subsidiaries. Borrower has no Subsidiaries as of the date of this Agreement except those disclosed to Bank in writing, in connection with Borrowers application for the Loan. There are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments of any nature relating to any equity interests of Borrower or any Obligated Party, except as created by the Loan Documents.
5.11. Other Debt. Except as previously disclosed to Bank in writing, Borrower is not directly, indirectly, or contingently obligated with respect to any Debt as of the Effective Date. Borrower is not in default in the payment of the principal of or interest on any Debt after consideration for applicable cure periods.
5.12. Regulatory Acts. Borrower is not an investment company or controlled by an investment company within the meaning of the Investment Company Act of 1940, as amended, nor is Borrower subject to regulation under the Federal Power Act, the Interstate Commerce Act, or any other Law (other than Regulation X of the Board of Governors of the Federal Reserve System) which regulates the incurring by Borrower or Guarantor of debt, including, without limitation, Laws regulating common or contract carriers or the sale of electricity, gas, steam, water, or other public utility serves.
5.13. [Reserved].
5.14. [Reserved].
5.15. General. There is no significant material fact or condition relating to the financial condition and business of Borrower, or the Collateral which has not been disclosed in writing to Bank, and all writings heretofore or hereafter exhibited, made, or delivered to Bank by or on behalf of Borrower are and will be genuine and in all material respects what they purport and appear to be.
5.16. Licensing. Borrower and any sub-servicers of Borrower are duly registered as mortgage lenders and/or servicers in each state in which Mortgage Loans have been or are from time to time originated or serviced, as applicable, to the extent such registration is required by any applicable Laws, except where the failure to register could not reasonably be expected to result in a Material Adverse Effect.
5.17. Solvency. Borrower and each Subsidiary are solvent and generally able to pay their debts as they come due.
5.18. Approved Servicing Agreement. Bank has received copies of any waivers granted to Borrower under the Approved Servicing Agreement, and Borrower hereby certifies that the copies delivered to Bank by Borrower are true, correct and complete in all material respects. None of such waivers has been amended, supplemented or otherwise modified since the respective dates thereof, except by amendments, copies of which have been delivered to Bank. No default or
material breach has occurred and is continuing by Borrower under the Approved Servicing Agreement.
5.19. Agency Approval: Servicing Facilities. Borrower or its sub-servicer has adequate financial standing, servicing facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same types as may from time to time constitute Mortgage Loans in accordance with the requirement of the Approved Servicing Agreement. Borrower is approved by Freddie Mac as an approved seller/servicer. Borrower is in good standing, with no event having occurred or Borrower having any reason whatsoever to believe or suspect will occur, including a change in insurance coverage that would either make Borrower unable to comply with the eligibility requirements for maintaining such approval or require notification to the Agency, except as disclosed to Bank in writing. Should Borrower for any reason cease to possess such approval, or should notification to the Agency be required, Borrower shall so notify Bank immediately in writing.
5.20. Eligible Pledged Servicing Rights. Each Pledged Servicing Right is an Eligible Pledged Servicing Right.
5.21. Eligible Pledged Servicing Receivables. Each Pledged Servicing Receivable included in the calculation of the Borrowing Base is an Eligible Pledged Servicing Receivable.
5.22. Financial Information. All representations and warranties set forth in the Loan Documents with respect to any financial information concerning Borrower or any Guarantor shall apply to all financial information delivered to Bank by Borrower, such Guarantor, or any Person purporting to be an Authorized Officer or other representative of Borrower or such Guarantor at the time of such transmission regardless of the method of transmission to Bank or whether or not signed by Borrower, such Guarantor or such Authorized Officer or other representative, as applicable.
ARTICLE 6
AFFIRMATIVE COVENANTS
So long as Bank is committed to make Advances hereunder, and thereafter until payment and performance in full of all of the Indebtedness and Obligations, Borrower covenants and agrees that:
6.1. Reporting Requirements. Borrower shall provide to Bank and/or cause the Guarantor to provide to Bank the financial statements and reports more particularly described in Exhibit A attached hereto.
6.2. Insurance. Borrower will maintain insurance with financially sound and reputable insurance companies in such amounts and covering such risks as is usually carried by corporations engaged in similar businesses and owning similar properties in the same general areas in which Borrower and the Subsidiaries operate, provided that in any event Borrower will maintain workmens compensation insurance, property insurance, and comprehensive general liability insurance reasonably satisfactory to Bank and any insurance required by the Agency. Each insurance policy covering Collateral shall name Bank as Joss payee and Borrower shall provide written notice to Bank within 30 days if such policy is canceled or reduced.
6.3. Payment of Debts. Borrower will pay or cause to be paid, prior to the date on which penalties attach thereto all of its Debt (except to the extent and so long as the payment thereof is being properly contested in good faith by appropriate proceedings and adequate reserves have been established therefor, or where such failure to so pay could not reasonably be expected to result in a Material Adverse Effect.
6.4. Taxes. Borrower will promptly pay or cause to be paid when due any and all material Taxes due by Borrower, including, without limitation, all material taxes, duties, fees, levies and other charges of whatsoever nature which have been or may be imposed by any government or by any department, agency, state, other political subdivision or taxing authority thereof or therein; provided that Borrower shall not be required to pay and discharge any such Taxes or charges so long as the validity thereof shall be contested in good faith by appropriate proceedings and Borrower shall set aside on its books adequate reserves with respect thereto and shall pay any such Taxes or charge before the property subject thereto shall be sold to satisfy any lien which has attached as security therefor.
6.5. Expenses of Bank. Borrower will reimburse Bank, for all reasonable and documented out-of-pocket costs, fees, and expenses incident to the Loan Documents or any transactions contemplated thereby through the Effective Date, including, without limitation, all recording fees, all recording taxes, and the reasonable and documented fees and disbursements of outside counsel for Bank for negotiation and preparation of the Loan Documents, preparation and review of other documents, and providing of other legal service. Borrower shall additionally reimburse Bank for all reasonable and documented out-of-pocket costs, fees and expenses arising after the Effective Date incident to the Loan Documents or the transactions contemplated thereby including without limitation for services (a) in connection with any subsequent Advance, (b) in connection with or in anticipation of an Event of Default or otherwise in the enforcement of the Loan Documents, (c) in connection with any amendment or waiver to any of the Loan Documents, (d) in connection with any request or action initiated by Borrower, or (e) in connection with the exercise of any of Banks rights and remedies under this Agreement, the Promissory Note, or any of the other Loan Documents, or at law, including, without limitation, all reasonable and documented consulting fees, filing fees, brokerage fees and commissions, fees incident to security interests, liens, and other title and other searches and reports, escrow fees, outside attorneys fees, legal expenses, court costs, auctioneer fees and expenses, and other fees and expenses incurred in connection with liquidation or sale of the Collateral, all of which shall be and become a part of the Indebtedness.
6.6. Maintenance of Entity Existence, Assets and Business; Continuance of Present Business. Borrower will preserve and maintain its existence and all of its leases, licenses, permits, franchises, qualifications, and rights that are necessary or desirable in the ordinary conduct of its business. Borrower will conduct its business in an orderly and efficient manner in accordance with good business practices. Borrower will keep or cause to be kept all of Borrowers assets which are useful and necessary in their respective businesses in good repair, working order and condition, and will make or cause to be made all necessary repairs, renewals and replacements as may be reasonably required.
6.7. Books and Records. Borrower will maintain proper books of record and account in which full, true, and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities.
6.8. Compliance with Applicable Laws and with Contracts. Borrower will comply with the requirements of all applicable material Laws, rules, regulations and orders of any governmental authority, except where contested in good faith and by proper proceedings. Borrower will not default or fail to comply with any agreement, contract or instrument binding on it or affecting its properties or business which default or failure to comply could result in a Material Adverse Effect.
6.9. [Reserved].
6.10. Notice of Termination of Approved Servicing Agreement, Event of Default, Suits, and Material Adverse Effect. Borrower will within five (5) Business Days notify Bank of (i) the transfer, expiration without renewal, termination or other loss of all or any part of the Approved Servicing Agreement or the right of Borrower to service Serviced Loans thereunder (or the termination or replacement of Borrower thereunder), the reason for such transfer, loss, termination or replacement, if known to Borrower, and the effects that such transfer, loss, termination or replacement will have (or will likely have) on the prospects for full and timely collection of all amounts owing to Borrower under or in respect of the Approved Servicing Agreement, (ii) any event, occurrence or circumstance that results in a Pledged Servicing Right not meeting any requirement to maintain its status as an Eligible Pledged Servicing Right, (iii) any event, occurrence or circumstance that results in a Pledged Servicing Receivable not meeting any requirement to maintain its status as an Eligible Pledged Servicing Receivable, and (iv) any breach of any of the covenants contained in Article 6 and Article 7 of this Agreement and of the occurrence of any Event of Default hereunder, or of the filing of any claim, action, suit or proceeding before any Tribunal agency against Borrower in which an adverse decision could reasonably be expected to have a Material Adverse Effect upon Borrower and advise Bank from time to time of the status thereof.
6.11. Information and Inspection. Borrower shall permit an authorized representative of Bank to visit with reasonable written advance notice to Borrower, which shall be at least five (5) Business Days notice provided no Event of Default then exists (and which notice shall specify what documents and information Bank would like to review, if any), and inspect at reasonable times any of the properties of Borrower and to discuss the affairs, finances, and accounts of Borrower with the officers and employees of Borrower.
6.12. Additional Information. Borrower will promptly furnish or cause to be furnished to Bank such other information not otherwise required herein respecting the business affairs, assets and liabilities of Borrower, Guarantor, the Subsidiaries and the Collateral as Bank shall from time to time reasonably request to the extent Borrower is not prohibited from sharing due to obligations of confidentiality relating to any such information.
6.13. [Reserved].
6.14. Covenants Relating to Collateral:
6.14.1 General:
(a) Records and Reports; Notification of Event of Default. Borrower will maintain complete and accurate books and records with respect to the Collateral, and furnish to Bank such reports relating to the Collateral as Bank shall from time to time reasonably request.
(b) Inspection. Borrower will permit representatives of Bank, during normal business hours with reasonable advance written notice to Borrower, which shall be at least five (5) Business Days notice provided no Event of Default then exists (and which notice shall specify what documents and information Bank would like to review, if any), (i) to inspect the Collateral, (ii) to examine and make copies of the records of Borrower relating to the Collateral, and (iii) to discuss the Collateral and the related records of Borrower with, and to be advised as to the same by, Borrowers officers and employees.
(c) Taxes. Borrower will pay when due all material taxes, assessments and governmental charges and levies upon the Collateral, except those which are being contested in good faith by appropriate proceedings and with respect to which Borrower has notified Bank in writing and no Lien exists.
(d) Defense of Title. Borrower will take any and all actions necessary to defend title to the Collateral against all persons and to defend the security interest of Bank in the Collateral and the priority thereof against any Lien not expressly permitted hereunder.
(e) [Reserved].
(f) Change in Location, Jurisdiction of Organization or Name. Borrower shall give Bank written notice prior to (i) changing its principal place of business to a location other than a location previously disclosed to Bank in writing, (ii) changing its name or taxpayer identification number, (iii) changing its mailing address, or (iv) changing its jurisdiction of organization.
(g) [Reserved].
(h) Further Assurances. At any time and from time to time, upon the request of Bank, and at the sole expense of Borrower, Borrower shall promptly execute and deliver all such further instruments and documents and take such further action as Bank may reasonably deem necessary or desirable to preserve and perfect its security interest in the Collateral and carry out the provisions and purposes of this Agreement, including, without limitation, the preparation (and execution, if necessary) and filing of such financing statements as Bank may require.
6.14.2 [Reserved].
6.14.3 Pledged Servicing Rights and Pledged Servicing Receivables.
(a) Claims and Demands. Borrower will warrant and forever defend the right, title and interest of Bank in and to the Pledged Servicing Rights and Pledged Servicing Receivables against the claims and demands of all Persons whomsoever.
(b) Duties and Obligations. Borrower will diligently fulfill its duties and obligations under the Approved Servicing Agreement, and not be declared by the Agency to be in default thereof; provided that Borrower shall not be in breach of this covenant if a default of the Approved Servicing Agreement declared by the Agency arose from a failure of the related Serviced Loans to perform as required by the Approved Servicing Agreement and the Agency has elected in writing to continue to use Borrower as Servicer thereof and has not rescinded or revoked such election.
(c) Collection. Diligently and timely collect its Pledged Servicing Receivables and its servicing compensation under the Approved Servicing Agreement and cause Borrowers rights to collect Pledged Servicing Receivables under the Approved Servicing Agreement to remain in full force and effect.
(d) [Reserved].
(e) Pledged Servicing Receivables. Borrower will cause the rights to collect Pledged Servicing Receivables under the Approved Servicing Agreement to remain in full force and effect. Borrower shall ensure that at all times each Pledged Servicing Receivable included in the calculation of the Borrowing Base is an Eligible Pledged Servicing Receivable.
(f) Filing Authorization. Borrower will reconfirm the filing authorization given in Section 3.3 as to such UCC financing statements and continuation statements as Bank may reasonably request from time to time (although no such reconfirmation shall be a condition to the filing of any financing statement, including any in lieu financing statement, or continuation statement) and execute and deliver to Bank such further instruments of sale, pledge, assignment or transfer, and such powers of attorney, as shall be reasonably required by Bank from time to time, and do and perform all matters and things necessary or desirable to be done or observed, for the purpose of effectively creating, maintaining and preserving the security and benefits intended to be afforded Bank under this Agreement, the Promissory Note and the other Loan Documents. Bank shall have all the rights and remedies of a secured party under the Code and any other applicable law, in addition to all rights provided for in this Agreement.
(g) Insurance and Reports. Borrower will cause each of its Servicers, if any, to keep in force throughout the term of this Agreement (i) a policy or policies of insurance covering errors and omissions for failure to maintain insurance as required by this Agreement and (ii) a fidelity bond. Each such policy and fidelity bond shall be in such form and amount as is generally customary among Persons who service a portfolio of Mortgage Loans having an aggregate principal amount comparable to that of the servicing portfolio
of such Servicer or Borrower, respectively, and which are generally regarded as servicers acceptable to the Agency.
(h) Acknowledgment Agreement. Borrower will deliver to Bank within six (6) months after the Effective Date the Acknowledgment Agreement with Freddie Mac.
(i) Coordination with Other Banks/Repo Purchasers and Their Custodians. Borrower will keep Bank informed of the current name, address and contact information concerning each of Borrowers other servicing rights, warehouse credit and repurchase facilities (if any), update such information provided to Bank as changes occur, and will cooperate and assist Bank in exchanging information with such others (and their document custodians or trustees) to prevent and promptly correct conflicting claims to and interests in Collateral between or among lenders or repurchase facilities counterparties. Solely upon the occurrence and during the continuance of an Event of Default hereunder, Borrower hereby irrevocably authorizes Bank to communicate and exchange information with such other lenders.
ARTICLE 7
NEGATIVE COVENANTS
So long as Bank is committed to make Advances hereunder, and thereafter until payment and performance in full of all of the Indebtedness and all of the Obligations, Borrower covenants and agrees that, without the prior written consent or notice as applicable, of Bank:
7.1. [Reserved].
7.2. [Reserved].
7.3. Pledging or Assignment of Servicing Rights. Except in the ordinary course of Borrowers business upon prompt notice to Bank, and subject to the prior written consent of the Agency, Borrower shall not pledge, grant a security interest or assign any existing or future rights to service any of the Collateral or to be compensated for servicing any of the Collateral, or pledge or grant to any other Person any security interest in any Pledged Servicing Rights or any Pledged Servicing Receivables.
7.4. Limitation on Liens and Financing Statements. Borrower will not, directly or indirectly, incur, create, assume, or permit to exist any Lien upon the Collateral, whether now owned or hereafter acquired, except Permitted Liens, and Borrower will not sign or authorize the preparation and filing of any financing statement naming it as debtor covering all or any portion of the Collateral, except as permitted by the Loan Documents.
7.5. Mergers, Etc. Borrower will not, directly or indirectly (a) become a party to a merger or consolidation, or (b) without notice to Bank, other than in the ordinary course of business, purchase or otherwise acquire all or substantially all of the assets or shares or other evidence of beneficial ownership of any Person, (c) form a new Subsidiary or transfer assets to any Subsidiary, unless prior to the formation of or any transfer of assets to a Subsidiary, such Subsidiary executes and delivers to Bank such guaranty, security agreements and/or pledge agreements as may be required by Bank, or (d) wind-up, dissolve, or liquidate without the prior
written consent of Bank; provided, however, that Borrower may, without the prior written consent of Bank, and provided that an Event of Default is not then existing and will not occur as a result thereof: (i) merge or consolidate with any Person if Borrower is the surviving and controlling entity, (ii) in the ordinary course of business, sell equipment that is uneconomic or obsolete in accordance with Section 7.9, and (iii) acquire mortgage loans and servicing rights for resale and sell mortgage loans and servicing rights.
7.6. [Reserved].
7.7. [Reserved].
7.8. Transactions with Affiliates. Borrower will not, directly or indirectly, enter into any transaction, including, without limitation, the purchase, sale, or exchange of property or the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate of Borrower, except in the ordinary course of and pursuant to the reasonable requirements of Borrowers business, and upon fair and reasonable terms no less favorable to Borrower than would be obtained in a comparable arms-length transaction with a Person not an Affiliate of Borrower.
7.9. Disposition of Assets. Other than in the ordinary course of business, including but not limited to (i) the disposition of Mortgage Loans and Servicing Rights, or with respect to Mortgage Loans owned or guaranteed by Freddie Mac, any voluntary partial cancellation of mortgage servicing rights with respect to Mortgage Loans that have Delinquencies (as such term is defined in the Freddie Mac Guide) or sixty (60) days or greater) and (ii) dispositions, for fair value, of worn-out and obsolete equipment not necessary or useful to the conduct of business, Borrower will not, directly or indirectly, sell, lease, assign, transfer, or otherwise dispose of all or any material portion of its assets.
7.10. Nature of Business. Borrower will not engage in any business other than the Permitted Businesses without providing Bank prior written notice.
7.11. Environmental Protection. Borrower will not, directly or indirectly, (a) use (or permit any tenant to use) any of its properties or assets for the handling, processing, storage, transportation, or disposal of any Hazardous Material, (b) generate any Hazardous Material, (c) conduct any activity that is likely to cause a Release or threatened Release of any Hazardous Material, or (d) otherwise conduct any activity or use any of its respective properties or assets in any manner that is likely to violate any Environmental Law or create any Environmental Liabilities for which Borrower would be responsible.
7.12. No Negative Pledge. Borrower will not enter into or permit to exist any arrangement or agreement, other than pursuant to this Agreement or any Loan Document, which directly or indirectly prohibits or limits the ability of Borrower to or from creating or incurring a Lien on any of the Collateral, whether now owned or hereafter acquired.
7.13. Judgments. Borrower will not allow any judgment rendered against it that could reasonably be determined to cause a Material Adverse Effect to Borrower to remain undischarged or unsuperseded for a period of thirty (30) days during which execution shall not be effectively stayed.
7.14. [Reserved].
7.15. Special Negative Covenants Concerning Collateral. Borrower will not, without providing Bank prior written notice, request additional waivers to the Approved Servicing Agreement that could reasonably be expected to materially and adversely affect the value of any Collateral or to reduce or delay payment or collection of amounts due Borrower from or in respect of any Collateral and Borrower will provide a copy of every requested waiver to the Approved Servicing Agreement to Bank promptly (and in no event later than five (5) Business Days) after the same shall become effective. Borrower will not engage any new sub-servicer or terminate any agreement with any sub-servicer that performs any services with respect to the Collateral without giving prior written notice to Bank. Borrower will also provide notice to Bank of any material amendments or modifications to any agreement with any sub-servicer. Any new sub-servicer shall execute and deliver a service notice in the form set forth as Exhibit D or such other form as Bank may approve.
ARTICLE 8
FINANCIAL COVENANTS
Borrower covenants and agrees that, as long as any Indebtedness or Obligations or any part thereof is outstanding or Bank is under any obligation to make additional Advances under this Agreement, Borrower will, at all times, observe and perform the financial covenants set forth on Exhibit A attached hereto.
ARTICLE 9
EVENTS OF DEFAULT
The term Event of Default as used herein shall mean the occurrence of any one or more of the following events:
9.1. Payment of Indebtedness. The failure of Borrower to punctually pay the Indebtedness, or any part thereof, as the same become due in accordance with the terms of the Loan Documents, including, without limitation, the failure or refusal of Borrower to punctually pay the principal of or the interest on any Loan or the failure of Borrower to meet a Margin Call in accordance with the terms of Section 2.4, and such failure continues for more than [***] following written notice of such default by Bank to Borrower.
9.2. Misrepresentation. Any statement, representation, or warranty heretofore or hereafter made or deemed made by Borrower or any Obligated Party in this Agreement or any other Loan Document or in any writing, or any statement or representation made in any certificate, report, or opinion delivered to Bank pursuant to the Loan Documents, is incorrect, false, calculated to mislead, misleading, or erroneous in any material respect at the time made, and such failure continues for more than [***] following written notice of such default by Bank to Borrower.
9.3. Covenants. The failure or refusal of Borrower or any Obligated Party to materially perform, observe, and comply with any covenant or agreement contained in any of the Loan Documents, and (i) with respect to any financial covenant, such failure to perform, observe or comply continues for a period of [***]; and (ii) with respect to any other term, covenant or
agreement, such failure to perform, observe or comply continues for a period of [***] following Borrowers receipt of written notice of such default.
9.4. Voluntary Debtor Relief. Borrower or any Obligated Party shall (a) execute an assignment for the benefit of creditors, (b) become or be adjudicated as bankrupt or insolvent, or (c) admit in writing its inability to, pay its debts generally as they become due, (d) apply for or consent to the appointment of a conservator, receiver, trustee, liquidator, custodian or other similar official of it or all or a substantial part of it assets, (e) file a voluntary petition, or commence any other proceeding, or other action, seeking liquidation, reorganization or dissolution, conservatorship, or seek any other arrangement with creditors or to take advantage or seek any other relief under any Debtor Relief Law now or hereafter existing, (f) file an answer admitting the material allegations of or consenting to, or default in, a petition filed against it in any liquidation, conservatorship, bankruptcy, reorganization, rearrangement, debtors relief, or other insolvency proceedings, or (g) institute or voluntarily be or become a party to any other judicial proceedings intended to effect a discharge of its debts, in whole or in part, or a postponement of the maturity or the collection thereof, or a suspension of any of the Rights or powers of Bank granted in any of the Loan Documents.
9.5. Involuntary Proceedings. Borrower or any Obligated Party shall involuntarily (a) have an order, judgment, or decree entered against it by any Tribunal pursuant to any Debtor Relief Law that could suspend or otherwise affect any of the Rights granted to Bank in any of the Loan Documents, and such order, judgment, or decree is not permanently stayed, vacated, or reversed within [***] after the entry thereof, or (b) have a petition filed against it or any of its property seeking the benefit or benefits provided for by any Debtor Relief Law that would suspend or otherwise affect any of the Rights granted to Bank in any of the Loan Documents, and such petition is not discharged within [***] after the filing thereof.
9.6. Attachment. The failure to have discharged within a period of [***] after the commencement thereof any attachment, sequestration, or similar proceedings against any of the material assets of Borrower which could reasonably be expected to result in a Material Adverse Effect.
9.7. Other Debt. Borrower or any other Obligated Party shall default in the due and punctual payment of the principal of or the interest, on any Debt (other than the Loans made hereunder) with Bank, secured or unsecured, or in the due performance or observance of any covenant or condition of any agreement executed in connection therewith, and such default shall have continued beyond any period of grace or cure provided with respect thereto.
9.8. Servicer Status. Borrower shall take or omit to take any act (i) that would result in the suspension or loss of its status, for Freddie Mac Mortgage Loans pools for which Borrower is Servicer, as a Freddie Mac approved servicer, (ii) after which Borrower would no longer be in good standing as such, or (iii) after which Borrower would no longer currently satisfy all applicable Freddie Mac net worth requirements, if both (x) all of the material effects of such act or omission shall have not been cured by Borrower or waived by Freddie Mac before termination of such status, and (y) it could reasonably be expected to result in a Material Adverse Effect; and Borrower does not (A) provide within [***] of termination of such status a plan (Plan) acceptable to Bank to engage another sub-servicer acceptable to lender in good status with Freddie Mac, and
(B) diligently and continuously pursues such Plan and engages and transfers all applicable assets to such replacement sub-servicer within [***] of the termination of such status.
9.9. Dissolution. The dissolution of Borrower for any reason whatsoever.
9.10. Termination of Servicing Rights. Borrowers rights to service Serviced Loans for any one or more investors under Servicing Agreements the value of which rights to Borrower (as reasonably estimated by Bank) equals or exceeds [***] of the aggregate principal amount of Borrowers Servicing Portfolio shall be terminated for cause (i.e., on account of act(s) or omission(s) by Borrower for which the holder, or a trustee for the holder, of the relevant Serviced Loans has the right under the related Servicing Agreement to terminate such servicing rights).
9.11. Servicer Downgrade Event. A Servicer Downgrade Event has occurred; and (A) such Servicer Downgrade Event is not reversed or Borrower has not provided within [***] of termination of such status a plan (Plan) acceptable to Bank to engage another sub-servicer acceptable to Bank in good status with Freddie Mac, and (B) if such a Plan is submitted, Borrower diligently and continuously pursues such Plan and engages and transfers all applicable assets to such replacement sub-servicer within [***] of the Servicer Downgrade Event.
9.12. Defaults on Other Debt or Agreements. Borrower or any other Obligated Party shall default in the due and punctual payment of the principal of or the interest on any Debt owing to any Person (other than Bank), or shall fail to materially perform, observe or comply with any covenant, agreement or other obligation to be performed, observed or complied with by Borrower or such Obligated Party in any agreement ancillary to such Debt, subject to any grace and/or cure periods provided therein, which default or failure could reasonably be expected to result in a Material Adverse Effect.
9.13. Liens. Borrower shall grant, or suffer to exist, any Lien on any Collateral (except any Lien in favor of Bank or any other Permitted Lien) or the Liens contemplated hereby are not first priority perfected Liens on the Collateral in favor of Bank.
9.14. Material Adverse Effect. A Material Adverse Effect has occurred.
9.15. [Reserved.]
ARTICLE 10
CERTAIN RIGHTS AND REMEDIES OF BANK
10.1. Rights upon Event of Default. Subject and subordinate in all respects to the rights, powers and prerogatives of the Agency under the Acknowledgment Agreement and Consent Agreement, if any Event of Default shall occur and be continuing, Bank may upon notice terminate the Commitment and declare the Indebtedness or any part thereof to be immediately due and payable, and the same shall thereupon become immediately due and payable without notice, demand, present, notice of dishonor notice of acceleration, notice of intent to accelerate, protest or other formalities of any kind, all of which are hereby expressly waived by Borrower; provided,
however, that upon the occurrence of an Event of Default under Section 9.4 or Section 9.5, the Commitment shall automatically terminate, and the Indebtedness shall become immediately due and payable without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, protest, or other formalities of any kind, all of which are hereby expressly waived by Borrower. Notwithstanding the foregoing, Borrower reserves the right to contest the existence of an Event of Default. If any Event of Default shall occur and be continuing, Bank may, subject to Section 10.12, exercise all rights and remedies available to it in law or in equity, under the Loan Documents, or otherwise, including without limitation:
(a) in its discretion, to demand, sue for, collect or receive and receipt for (in its own name, in the name of Borrower or otherwise) any money or property at any time payable or receivable on account of any of the Collateral, in consideration of its transfer or in exchange for it;
(b) direct, and to take any and all other steps necessary to cause, any Servicer of any of the Collateral to pay over directly to Bank for the account of Borrower (instead of to Borrower or any other Person) all sums from time to time due to Borrower and to take any and all other actions that Borrower or Bank has the right to take under Borrowers contract with such Servicer; and
(c) direct Borrower to pay over to Bank all sums from time to time due Borrower under or in respect of the Collateral, including any and all fees and other compensation under the Approved Servicing Agreement for servicing the Serviced Loans related to the Pledged Servicing Rights and all amounts paid to or collectable by Borrower to pay Pledged Servicing Receivables, whether paid to Borrower or withheld or recovered by Borrower from collections and realizations on the Mortgage Loans related to the Pledged Servicing Rights or any other source, and to take any and all other actions that, subject to any restrictions imposed by the Approved Servicing Agreement for the benefit of the Agency (to the extent that such restrictions are valid and enforceable under the applicable Code and other Laws), Borrower or Bank has the right to take under the Approved Servicing Agreement, and if Bank does so request, then Borrower shall diligently and continuously thereafter comply with such request. All amounts so received and collected by Bank pursuant to this Section 10.1 shall be applied in the same order and manner as is specified in Section 10.2.1.
(d) foreclose upon or otherwise enforce its security interest in and Lien on the Collateral, or on such portions or elements of the Collateral as Bank shall elect to proceed against from time to time.
(e) at Banks option and in its sole discretion, to notify any or all Makers obligated under any or all items of Collateral, that the Collateral has been assigned to Bank and that all payments thereon are to be made directly to Bank or such other Person as may be designated by Bank; settle, compromise, or release, in whole or in part, any amounts owing on the Collateral or any portion of the Collateral, on terms acceptable to Bank; enforce payment and performance and prosecute any action or proceeding with respect to any and all Collateral; and where any such Collateral is in default, foreclose on and enforce Liens or security interests in, such Collateral by any available judicial procedure or without judicial process and sell property acquired as a result of any such foreclosure.
(f) [Reserved].
(g) As a matter of right and without notice to Borrower or anyone claiming under Borrower, and without regard to the then value of the Collateral or the interest of Borrower therein, to apply to any court having jurisdiction to appoint a receiver or receivers of the Collateral, and Borrower hereby irrevocably consents to such appointment and waives notice of any application therefor. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of Bank in case of entry as provided herein and shall continue as such and exercise all such powers until the date of the sale of the Collateral unless such receivership is sooner terminated.
(h) exercise all rights and remedies of a secured creditor under the Code, including selling the interests of Borrower in the Collateral at public or private sale. Bank shall give Borrower not less than ten (10) days written notice of any such public sale or of the date after which private sale may be held. Borrower agrees that ten (10) days written notice shall be reasonable notice. At any such sale any or all of the Collateral may be sold as an entirety or in separate parts, as Bank may determine in its sole discretion. Bank may, without notice or publication, adjourn any public or private sale or cause the same to be adjourned from time to time by announcement at the time and place fixed for the sale, and such sale may be made at any time or place to which the same may be so adjourned. Bank is authorized at any such sale, if Bank deems it advisable so to do, to restrict the prospective bidders or purchasers to Persons who will represent and agree that they are purchasing the Collateral for their own account for investment and not with a view to the distribution or resale of any of the Collateral. Borrower specifically agrees that any such sale, whether public or private, of any Collateral pursuant to the commitment of any investor to purchase such Collateral that was obtained by (or with the approval of) Borrower will be commercially reasonable, and if such sale is for the price provided for in such commitment, then such sale shall be held to be for value reasonably equivalent to the value of the Collateral so sold. Upon any such sale, Bank shall have the right to deliver, assign and transfer to the purchaser thereof the Collateral so sold. Each purchaser at any such sale shall hold the property sold absolutely free from any claim or right of whatsoever kind, including any equity or right of redemption, stay or appraisal which Borrower has or may have under any rule of law or statute now existing or hereafter adopted. In case of any sale of all or any part of the Collateral on credit or for future delivery, the Collateral so sold may be retained by Bank until the selling price is paid by the purchaser, but Bank shall not incur any liability in case of such purchasers failure to take up and pay for the Collateral so sold and, in case of any such failure, such Collateral may again be sold upon like notice. Nothing in this Agreement shall be construed as Borrowers waiver of, or agreement to waive, any requirement imposed by applicable law that any sale of the Collateral be commercially reasonable.
10.2. Rights Relating to Collateral.
10.2.1 Application of Proceeds. Subject and subordinate in all respects to the rights, powers and prerogatives of the Agency under the Acknowledgment Agreement and Consent Agreement, if any Event of Default shall have occurred and be continuing, Bank may at its discretion, in accordance and as provided in the Code and other applicable law, apply or use any cash held by Bank as Collateral and any cash proceeds received by Bank in respect of any sale or
other disposition of, collection from, or other realization upon, all or any part of the Collateral as follows in such order and manner as Bank may elect:
(a) To the repayment or reimbursement of the reasonable out-of-pocket costs and expenses (including, without limitation, reasonable outside attorneys fees and expenses) incurred by Bank in connection with (i) the administration of the Loan Documents, (ii) the custody, preservation, use or operation of, or the sale of, collection from, or other realization upon, the Collateral, and (iii) the exercise or enforcement of any of the rights and remedies of Bank hereunder;
(b) To the payment or other satisfaction of any Liens upon the Collateral;
(c) To the satisfaction of the Indebtedness;
(d) To the payment of any other amounts required by applicable law; and
(e) By delivery to Borrower or any other party lawfully entitled to receive such cash or proceeds whether by direction of a court of competent jurisdiction or otherwise.
10.2.2 Other Recourse. Borrower waives any right to require Bank to proceed against any third party, exhaust any Collateral or other security for the Indebtedness, or to have any third party joined with Borrower in any suit arising out of the Indebtedness or any of the Loan Documents, or pursue any other remedy available to Bank. Borrower further waives any defense arising by reason of any disability or other defense of any third party or by reason of the cessation from any cause whatsoever of the liability of any third party.
10.2.3 Disclaimer of Warranties, Sales on Credit and Limitation of Liability. In connection with any foreclosure sale of the Collateral, Bank may specifically disclaim any warranties of title or the like. This procedure will not be considered to adversely affect the commercial reasonableness of any sale of the Collateral. If Bank sells any of the Collateral upon credit, Borrower will be credited only with payments actually made by the purchaser, received by Bank and applied to the indebtedness of the purchaser. In the event the purchaser fails to pay for the Collateral, Bank may resell the Collateral and Borrower shall be credited with the proceeds of the sale. Bank shall not incur any liability as a result of the sale of the Collateral, or any part of it, at any private sale. Borrower hereby waives any claims it may have against Bank arising by reason of the fact that the price at which the Collateral may have been sold at such private sale was less than the price that might have been obtained at a public sale, less than the price that might have been obtained had the Collateral been sold pursuant to a purchase agreement for it obtained by Borrower, or less than the aggregate amount of the outstanding Loans and the unpaid interest accrued on them; provided such sale is conducted in a commercially reasonable manner.
10.2.4 [Reserved].
10.3. Attorney-in-Fact. Subject and subordinate in all respects to the rights, powers and prerogatives of the Agency under the Acknowledgment Agreement and Consent Agreement, upon the occurrence and during the continuance of an Event of Default, Bank is hereby appointed the attorney-in-fact of Borrower, with full power of substitution, for the purpose of carrying out the provisions of this Agreement and taking any action and executing any agreements, documents or
instruments that Bank may deem necessary or advisable to accomplish this Agreements purposes, which appointment as attorney-in-fact is coupled with an interest and irrevocable for so long as any of the Indebtedness, the Obligations or the C01mnitments are outstanding. Bank agrees not to exercise its rights under this power of attorney unless, in its opinion or the opinion of its legal counsel, an Event of Default has occurred that Bank has not declared in writing to have been cured or waived. Without limiting the generality of the foregoing, Bank shall have the right and power, either in the name of Borrower or both, or in its own name, to (a) give notices of its security interest in the Collateral to any Person, (b) endorse in blank, to itself or to a nominee all items of Collateral that are transferable by endorsement and are payable to the order of Borrower, including canceling, completing or supplying any unneeded, incomplete or missing endorsement of Borrower and any related assignment, (c) receive, endorse, collect and receipt for all checks and other orders made payable to the order of Borrower representing any payment of account of the principal of or interest on any Collateral or their proceeds (including any securities), or the proceeds of sale of any of the Collateral, or any payment in respect of any hedging arrangement or device, and to give full discharge for them, (d) request that any Pledged Servicing Right related to Freddie Mac be transferred to Bank or to another approved servicer approved by Freddie Mac and perform (without assuming or being deemed to have assumed any of the obligations of Borrower thereunder) all aspects of each servicing contract that is Collateral, (e) request distribution to Bank of sale proceeds or any applicable contract termination fees arising from the sale or termination of such Pledged Servicing Rights and remaining after satisfaction of Borrowers relevant obligations to Freddie Mac, including costs and expenses related to any such sale or transfer of such Pledged Servicing Rights and other amounts due for unmet obligations of Borrower to the Agency under the Agency Guidelines, (f) deal with investors and any and all sub-servicers and master servicers in respect of any of the Collateral in the same manner and with the same effect as if done by Borrower and (g) take any action and execute any instruments that Bank deems necessary or advisable to accomplish any of such purposes.
10.4. Setoff. At any time during the continuance of an Event of Default, to the extent permitted by law, Bank shall be entitled to exercise rights of setoff or bankers lien against the interest of Borrower in and to each and every account and other property of Borrower which are in the possession of Bank (except trust or custodial accounts) to the extent of the full amount of the Indebtedness; provided that such Indebtedness is then due. The rights and remedies of Bank hereunder are in addition to other rights and remedies (including, without limitation, other rights of setoff) which Bank may have.
10.5. Performance by Bank. Upon the occurrence and during the continuance of an Event of Default hereunder, should any covenant, duty, or agreement of Borrower fail to be materially performed in accordance with the terms of the Loan Documents, Bank may, at its option and upon notice to Borrower, perform or attempt to perform such covenant, duty, or agreement on behalf of Borrower. In such event, or if Bank reasonably expends any sum pursuant to the exercise of any Right provided herein, Borrower shall, at the request of Bank, promptly pay to Bank any such amount reasonably expended by Bank in such performance or attempted performance, together with interest thereon at the Maximum Rate from the date of such expenditure by Bank until paid. Notwithstanding the foregoing, it is expressly understood that Bank does not assume any liability or responsibility for the performance of any duties of Borrower or Guarantor hereunder or in connection with all or any part of the Collateral.
10.6. Appointment of Receiver. At any time an Event of Default exists, Bank shall be entitled to exercise the right to appoint or seek appointment of a receiver, custodian, or trustee of Borrower or any of the Collateral pursuant to an order by any Tribunal, and Borrower consents to such appointment and will not oppose Banks efforts to obtain such receiver, custodian, or trustee.
10.7. Diminution in Collateral Value. Bank does not assume, and shall never have, any liability or responsibility for any loss or diminution in the value of all or any part of the Collateral.
10.8. Waivers. The acceptance of Bank at any time and from time to time of part payment on the Indebtedness shall not be deemed to be a waiver of any Event of Default then existing. No waiver by Bank of any Event of Default shall be deemed to be a waiver of any other then-existing or subsequent Event of Default. No waiver by Bank of any of its Rights hereunder, in the other Loan Documents, or otherwise shall be considered a waiver of any other or subsequent Right of Bank. No delay or omission by Bank in exercising any Right under the Loan Documents shall impair such Right or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such Right preclude other or further exercise thereof, or the exercise of any other Right under the Loan Documents or otherwise.
10.9. Cumulative Rights. All Rights available to Bank under the Loan Documents shall be cumulative of and in addition to all other Rights granted to Bank at Law or in equity, whether or not the Indebtedness or the Obligations be due and payable or performance required and whether or not Bank shall have instituted any suit for collection, foreclosure, or other action under or in connection with the Loan Documents.
10.10. INDEMNIFICATION OF BANK. BORROWER SHALL INDEMNIFY BANK, EACH AFFILIATE OF BANK AND EACH OF ITS AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FOR, FROM, AND AGAINST AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENAL TIES, JUDGMENTS, DISBURSEMENTS, AND OUT-OF-POCKET COSTS AND EXPENSES (INCLUDING REASONABLE OUTSIDE ATTORNEYS FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH ARISE FROM OR RELATE TO (A) THE NEGOTIATION, EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY BORROWER OR ANY OTHER OBLIGATED PARTY OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN OR AFFECTING ANY OF THE PROPERTIES OR ASSETS OF BORROWER OR ANY SUBSIDIARY, (E) THE USE OR PROPOSED USE OF ANY LETTER OF CREDIT, (F) ANY AND ALL TAXES, LEVIES, DEDUCTIONS, AND CHARGES IMPOSED ON BANK OR ANY OF BANKS CORRESPONDENTS IN RESPECT OF ANY LETTER OF CREDIT, (G) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY OF THE FOREGOING, OR (H) ANY HEDGE AGREEMENT. WITHOUT LIMITING ANY
PROVISION OF THIS AGREEMENT OR OF ANY OTHER LOAN DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FOR, FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, AND OUT-OF-POCKET COSTS AND EXPENSES (INCLUDING REASONABLE OUTSIDE ATTORNEYS FEES) ARISING OUT OF OR RESULTING FROM THE SOLE CONTRIBUTORY OR ORDINARY NEGLIGENCE OF SUCH PERSON; PROVIDED, HOWEVER, THE INDEMNITIES PROVIDED IN THIS SECTION 10.10 DO NOT EXTEND TO LOSSES, LIABILITIES, CLAIMS, OR DAMAGES CAUSED BY BANKS BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
10.11. Limitation of Liability. Neither party hereto nor any Affiliate, officer, director, employee, attorney, or agent of such party shall have any liability with respect to, and hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by such party in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents. Each party hereby waives, releases, and agrees not to sue the other party or any of such partys Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents.
10.12. Servicer. Servicer covenants that notwithstanding anything in the Loan Documents to the contrary, following the occurrence of an Event of Default which remains unwaived, Borrower will not deposit into the Pledged Deposit Accounts the Minimum Servicing Compensation with respect to Mortgage Loans owned or guaranteed by Freddie Mac, and Bank acknowledges that Borrowers failure to deposit the Minimum Servicing Compensation with respect to Mortgage Loans owned or guaranteed by Freddie Mac into the Pledged Deposit Accounts shall not give rise to a default or an Event of Default under the Loan Documents.
ARTICLE 11
MISCELLANEOUS
11.1. Headings. The headings, captions, and arrangements used in any of the Loan Documents are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify, or modify the terms of the Loan Documents, nor affect the meaning thereof.
11.2. Number and Gender of Words. Whenever herein the singular number is used, the same shall include the plural where appropriate, and vice versa; and words of any gender shall include each other gender where appropriate.
11.3. Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered personally or mailed by first-class registered or certified mail, postage prepaid, overnight delivery service, or email to any party at its address shown on the signature pages of this Agreement or at such other address as may be designated by it by notice to
the other party. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.
11.4. [Reserved].
11.5. Survival. All covenants, agreements, undertakings, representations, and warranties made in any of the Loan Documents shall survive all closings under the Loan Documents and shall continue in full force and effect so long as any part of the Indebtedness remains outstanding and, except as otherwise indicated, shall not be affected by any investigation made by any party. Notwithstanding anything contained herein to the contrary, the covenants, agreements, undertakings, representations, and warranties made in Section 6.5 and Section 10.10 shall survive the expiration or termination of this Agreement, regardless of the means of such expiration or termination.
11.6. GOVERNING LAW; PLACE OF PERFORMANCE. THE LOAN DOCUMENTS ARE BEING EXECUTED AND DELIVERED, AND ARE INTENDED TO BE PERFORMED, IN THE STATE OF ARIZONA, AND THE LAWS OF SUCH STATE (WITHOUT REGARD TO ITS PROVISIONS OF CHOICE OF LAWS) AND OF THE UNITED STATES SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES HERETO AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THE LOAN DOCUMENTS, EXCEPT TO THE EXTENT OTHERWISE SPECIFIED IN ANY OF THE LOAN DOCUMENTS. THIS AGREEMENT, ALL OF THE OTHER LOAN DOCUMENTS, AND ALL OF THE OBLIGATIONS OF BORROWER UNDER ANY OF THE LOAN DOCUMENTS ARE PERFORMABLE, AND THE INDEBTEDNESS IS PAYABLE, IN MARICOPA COUNTY, ARIZONA. VENUE OF ANY LITIGATION INVOLVING THIS AGREEMENT OR ANY LOAN DOCUMENT SHALL BE MAINTAINED, AN EACH PARTY CONSENTS TO JURISDICTION, IN AN APPROPRIATE STATE OR FEDERAL COURT LOCATED IN MARICOPA COUNTY, ARIZONA, TO THE EXCLUSION OF ALL OTHER VENUES.
11.7. Additional Sums. All fees, charges, goods, things in action or any other sums or things of value, other than the interest resulting from the Stated Interest Rate and the Default Interest Rate (as those terms are defined in the Promissory Note, as applicable, paid or payable by Borrower (collectively, the Additional Sums), whether pursuant to the Promissory Note, this Agreement, any of the other Loan Documents or otherwise with respect to this lending transaction, that, under the laws of the State of Arizona, may be deemed to be interest with respect to this lending transaction, for the purpose of any laws of the State of Arizona that may limit the maximum amount of interest to be charged with respect to this lending transaction, shall be payable by Borrower as, and shall be deemed to be, additional interest, and for such purposes only, the agreed upon and contracted for rate of interest of this lending transaction shall be deemed to be increased by the rate of interest resulting from the Additional Sums. Borrower understands and believes that this lending transaction complies with the usury laws of the State of Arizona; however, if any interest or other charges in connection with this lending transaction are ever determined to exceed the maximum amount permitted by law, then Borrower agrees that: (a) the amount of interest or charges payable pursuant to this lending transaction shall be reduced to the maximum amount permitted by law; and (b) any excess amount previously collected from Borrower in connection with this lending transaction that exceeded the maximum amount
permitted by law, will be credited against the principal balance then outstanding hereunder. If the outstanding principal balance hereunder has been paid in full, the excess amount paid will be refunded to Borrower.
11.8. Invalid Provisions. If any provision of any of the Loan Documents is held to be illegal, invalid, or unenforceable under present or future Laws effective during the term thereof, such provision shall be fully severable, the appropriate Loan Document shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part thereof, and the remaining provisions thereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance therefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provision, there shall be added automatically as a part of such Loan Document a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable.
11.9. Entirety and Amendments. This Agreement, together with the other Loan Documents, embodies the entire agreement between the parties relating to the subject matter hereof, supersedes all prior agreements and understandings, if any, relating to the subject matter hereof, and may be amended only by an instrument in writing executed jointly by Borrower and Bank and supplemented only by documents delivered or to be delivered in accordance with the express terms hereof.
11.10. Multiple Counterparts. This Agreement has been executed in a number of identical counterparts, each of which constitutes an original and all of which constitute, collectively, one agreement; but in making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. Facsimile or email copies of signatures may be accepted as originals.
11.11. Parties Bound. This Agreement shall be binding upon and inure to the benefit of Borrower, Bank and their respective successors and assigns; provided, however that Borrower may not, without the prior written consent of Bank, assign any of its Rights, duties, or obligations hereunder. No term or provision of this Agreement shall inure to the benefit of any Person other than Borrower and Bank and their respective successors and assigns.
11.12. Banks Consent or Approval. Except where otherwise expressly provided in the Loan Documents, in any instance where the approval, consent or the exercise of judgment of Bank is required, the granting or denial of such approval or consent and the exercise of such judgment shall be (a) within the sole discretion of Bank, and (b) deemed to have been given only by a specific writing intended for the purpose and executed by Bank. Each provision for consent, approval, inspection, review, or verification by Bank is for Banks own purposes and benefit only.
11.13. Conflicts. In the event of any conflict between the terms of the Acknowledgment Agreement and any other Loan Document, the provisions of the Acknowledgment Agreement shall govern. In the event of any conflict between the terms of this Agreement and any terms of any other Loan Documents (other than the Acknowledgment Agreement), the terms of this Agreement shall govern. All of the Loan Documents are by this reference incorporated into this Agreement.
11.14. WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF BANK IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
11.15. Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another covenant shall not avoid the occurrence of an Event of Default if such action is taken or such condition exists.
11.16. USA Patriot Act. Bank is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the Act) and hereby notifies Borrower that pursuant to the requirements of the Act, it is required to obtain, verify, and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow such Bank to identify Borrower in accordance with the Act.
11.17. [Reserved].
11.18. Confidentiality.
(a) Confidential Terms. Bank and Borrower hereby acknowledge and agree that certain non-public, confidential or proprietary information may be provided before or after the date hereof by one party to any other in connection with this Agreement or the transactions contemplated hereby, whether furnished by or on behalf of Bank or Borrower or any of their representatives including without limitation: (i) knowledge or information concerning the business, operations and assets of Bank or Borrower or their respective Affiliates, internal operating procedures; methodologies; investment strategies; hedging strategies; structuring strategies and concepts; trade secrets; sale data; vendor data and customer lists (existing and potential); financial plans, projections and report ; product strategies; and investment strategies; (ii) property owned, licensed and/or developed by or for Bank or Borrower or their respective Affiliates, such as computer systems, programs, software and devices, plus information about the design, methodology and documentation therefor; (iii) information about or personal to Bank or Borrower or their respective Affiliates, insureds, employees, agents and applicants (for jobs or products) of any of the foregoing, and (iv) information, materials, products or any other tangible or intangible assets in the possession or the control of Bank or Borrower or their respective Affiliates, which is proprietary to, or confidential to or about, any other person or entity (the Confidential Terms). Bank and Borrower agree that Confidential Terms shall be kept confidential and shall not be divulged to any party without the prior written consent of such other party except to the extent set forth in clause (b) below. Confidential Terms shall not include information that (A) is or becomes part of the public domain other than as a result of an unauthorized disclosure by Bank or Borrower, as applicable, or its Permitted Recipients (as defined below) in violation of this Agreement; (B) is already known to Bank or Borrower, as applicable,
or any of its Permitted Recipients on a non-confidential basis prior to disclosure of such information by either party; (C) is subsequently received by Bank or Borrower, as applicable, or its Permitted Recipients from a third party who is not known by Bank or Borrower, as applicable, or its Permitted Recipients to be under an obligation of confidentiality; or (D) is independently developed by Bank or Borrower, as applicable without use of Confidential Terms of the other.
(b) Permitted Disclosures. Notwithstanding clause (a) above, Bank and Borrower, as applicable, shall be permitted to disclose, on a confidential basis, Confidential Terms (i) in working with its Affiliates, legal counsel, actuaries, auditors, professional advisors, directors, officers, employees, rating agencies, participants, successors or assigns (Permitted Recipients); (ii) to any taxing authorities or other governmental agencies or regulatory bodies or in order to comply with any applicable federal or state laws; (iii) subject to an agreement containing provisions substantially the same as this section, to any actual or prospective successor (or its advisors); (iv) in the event of an Event of Default, Bank determines such information to be necessary or desirable to disclose in connection with the marketing and sales of the Purchased Assets or otherwise to enforce or exercise Banks rights hereunder; and (v) to Agency.
(c) Involuntary Disclosures. If Bank or Borrower shall at any time be involved in any litigation, arbitration, administrative, legal, regulatory or other proceeding or if Bank or Borrower and/or its respective Permitted Recipients is otherwise required by law, regulation or other legal process, in each case, in which such party and/or its Permitted Recipient, on the advice of its own legal counsel, may be or becomes required to disclose any Confidential Terms in violation of this Section of this Agreement (a Legal Proceeding), whether in discovery or otherwise, including by any oral question, subpoena, interrogatory, deposition, request for documents or information, order, writ, rule, regulatory, or other legal process, such party and/or it Permitted Recipients shall, if such party and/or its Permitted Recipients may lawfully do so, promptly notify the other party of the receipt of such Legal Proceeding whereupon such other party may seek an appropriate protective order or other relief at such other partys own expense. Bank or Borrower and its respective Permitted Recipients, as applicable, shall reasonably cooperate with the other party, at such other partys expense, if it seeks to obtain a protective order or other remedy or reasonable assurance that confidential treatment will be afforded the Confidential Terms in the Legal Proceeding. Notwithstanding the foregoing, no notice or other action by Bank or Borrower, as applicable, or any of their respective Permitted Recipients shall be required where disclosure of Confidential Terms is made in connection with a routine request, audit or examination by a bank examiner, auditor, regulatory authority or supervisory authority.
(d) Treatment of Confidential Terms. Bank understands that the Confidential Terms may contain information that is subject to, and accordingly Bank represents and warrants to Borrower that Bank and its Affiliates are subject to internal policies and processes that require Bank and its Permitted Recipients to receive, maintain, store and dispose of such Confidential Terms in compliance with, any and all applicable federal, state and local laws, rules, regulations and ordinances governing or relating to privacy rights in connection with its performance under this Agreement including, without limitation, the Gramm Leach Bliley Act, as amended (the GLB Act). Such policies and procedures include the implementation of such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of any nonpublic personal information that is disclosed to Bank in any manner or for any purpose and that pertains to any customers or consumers (as all such terms are defined in the GLB Act) of Borrower,
(b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Bank further understands that Borrower is relying on Banks representation and warranty in disclosing the Confidential Terms. Upon written request from Borrower, Bank will provide written confirmation of the continued accuracy of this representation and warranty, it being understood that disclosure of information pertaining to specific policies or processes may require a confidentiality undertaking from Borrower.
(e) Required Tax Disclosures. Notwithstanding the foregoing or anything to the contrary contained herein or in any other Loan Document, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the transactions, any fact relevant to understanding the federal, state and local tax treatment of the transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that Borrower may not disclose the name of or identifying information with respect to Bank, its Affiliates or any other indemnified party, or any pricing terms or other nonpublic business or financial information (including any sublimits and financial covenants) that is unrelated to the federal, state and local tax treatment of the transactions and is not relevant to understanding the federal, state and local tax treatment of the transactions, without the prior written consent of Bank. The provisions set forth in this Section shall survive the termination of this Agreement.
[Signature Page Follows]
EXECUTED to be effective as of the date first written above.
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Western Alliance Bank, an Arizona corporation | |
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Name: Joshua Ormiston | |
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Title: Vice President | |
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Western Alliance Bank | |
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2701 East Camelback Road, Suite 110 | |
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Phoenix, Arizona 85016 | |
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With a copy to: | |
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Western Alliance Bank | |
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2701 East Camelback Road, Suite 110 | |
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Phoenix, Arizona 85016 | |
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[Signature Page to Loan and Security Agreement]
EXECUTED to be effective as of the date first written above.
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BORROWER: | |
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AmeriHome Mortgage Company, LLC, a Delaware | |
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limited liability company | |
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/s/ Jim Furash |
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Name: Jim Furash | |
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Title: CEO | |
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AmeriHome Mortgage Company, LLC | |
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1 Baxter Way, Suite 300 | |
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Thousand Oaks, CA 91362-3888 | |
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AmeriHome Mortgage Company, LLC | |
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I Baxter Way, Suite 300 | |
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Thousand Oaks, CA 91362-3888 | |
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and to: | |
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AmeriHome Mortgage Company, LLC | |
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[Signature Page to Loan and Security Agreement]
EXHIBIT A
(TO LOAN AND SECURITY AGREEMENT)
ADDITIONAL LOAN TERMS AND COVENANTS ADDENDUM
This ADDITIONAL LOAN TERMS AND COVENANTS ADDENDUM (this Addendum) is effective August 21, 2020 (the Effective Date), and is entered into by AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company (Borrower) and Western Alliance Bank, an Arizona corporation (Bank) concurrently with, and as a condition to the effectiveness of, that certain Loan and Security Agreement (as amended and modified from time to time, the Loan Agreement) dated the Effective Date, executed by Bank and Borrower. Accordingly, Bank and Borrower agree as follows:
1. Additional Definitions. Capitalized terms used herein but not defined shall have the meanings ascribed to them in the Agreement. In addition, the following terms shall have the following definitions, and if a term is defined in the Agreement and in this Addendum, the definition set forth in this Addendum shall govern and control for purposes of this Addendum:
Adjusted Tangible Net Worth means the Tangible Net Worth of such Person plus (a) the MSR Value at such date; minus: (b) (i) the aggregate book value of all intangible assets of such Person (as determined in accordance with GAAP), including, without limitation: goodwill; trademarks, trade names, service marks, copyrights, patents, licenses and franchises; capitalized Servicing Rights; organizational expenses; deferred expenses; (ii) receivables from equity owners, Affiliates or employees; (iii) any other assets deemed intangible by Bank; in all cases, calculated on a consolidated basis and detern1ined in accordance with GAAP consistent with those applied in the preparation of the Financial Statements referred to herein.
Approved Purposes means (a) working capital in the ordinary course of Borrowers residential mortgage operations (including the funding of Servicing Advances), (b) the pay-off of that certain revolving line of credit in the maximum principal amount of [***] and that certain term loan in the unpaid principal amount of [***] extended by Bank to Borrower; (c) expanding Borrowers mortgage servicing business, including without limitation purchasing mortgage loans, mortgage loan servicing rights and assets related thereto, and (d) related business lines relating or incidental to the origination, buying, selling or servicing of residential mortgage loans. Notwithstanding the foregoing, in no event shall any use be an Approved Purpose if such use would violate the terms of the Acknowledgement Agreement and/or Consent Agreement or otherwise result in Freddie Mac having a right to challenge or limit Banks security interest in the Pledged Servicing Rights or Pledged Servicing Receivables.
Borrowing Base means, as of the date of determination, the lesser of (A) the Committed Sum, or (B) the sum of (x) [***] of the fair market value of the Eligible Pledged Servicing Rights as reflected in the Servicing Rights Appraisal deemed most accurate by Bank in its sole and reasonable discretion, which may not be the most recent Servicing Rights Appraisal, plus (y) [***] of the aggregate value of P&I Advances and Escrow Advances, plus (z) [***] of the value of Corporate Advances, not to exceed [***]. Servicing Advances shall not be included in the Borrowing
Base (i) if they are no longer an Eligible Pledged Servicing Receivable, (ii) in aggregate amounts greater than the maximum principal amount of the Servicing Advances Note, (iii) Corporate Advances exceed the Corporate Advances Sublimit, and (iv) after the Conversion Date.
Committed Sum means (a) during the Revolving Loan Period, [***] and (b) during the Term Loan Period, [***] or such lesser amount as may be outstanding on the Conversion Date, in each case reduced on the date of each scheduled payment under the Promissory Note by the principal amount of each such scheduled payment during the Term Loan Period.
Corporate Advances Sublimit means the maximum portion of the Servicing Advances Note that can be used to reimburse Borrower for making Corporate Advances under the Borrowing Base, which shall be equal to [***].
Debt Service Coverage Ratio means, [***].
Eligible Pledged Servicing Receivable means a Pledged Servicing Receivable:
(a) that complies with all applicable Laws and other legal requirements, whether federal, state or local;
(b) that constitutes an account or a general intangible as defined in the Code and is not evidenced by an instrument, as defined in the Code as so in effect;
(c) that arose pursuant to an Approved Servicing Agreement;
(d) that is genuine and constitutes a legal, valid, binding and irrevocable payment obligation, enforceable in accordance with the terms of the Approved Servicing Agreement under which it has arisen, subject to no offsets, counterclaims or defenses;
(e) [Reserved];
(f) that is owned solely by Borrower free and clear of all Liens other than Liens in favor of Bank (but subject to the applicable Agencys interest in such Pledged Servicing Receivable pursuant to the Consent Agreement or similar agreement) and has not been sold, conveyed, pledged or assigned to any other lender, purchaser or Person;
(g) for which there exists no dispute of which the Borrower is aware regarding the Pledged Servicing Receivable that results in the Pledged Servicing Receivable being invalid or otherwise not recoverable or payable and in respect of which Borrower has complied in all material respects with the Approved Servicing Agreement;
(h) in respect of which Borrower has no knowledge of any fact that has led it to expect that such Pledged Servicing Receivable will not be fully recoverable;
(i) that relates to either a Corporate Advance, an Escrow Advance, or a P&I Advance; and
(j) [Reserved].
Eligible Pledged Servicing Right means a Pledged Servicing Right:
(a) that complies with all applicable Laws and other legal requirements, whether federal, state or local;
(b) that constitutes an account or a general intangible as defined in the Code and is not evidenced by an instrument, as defined in the Code as so in effect;
(c) that arose pursuant to the Approved Servicing Agreement;
(d) that is genuine and constitutes a legal, valid, binding and irrevocable payment obligation, enforceable in accordance with the terms of the Approved Servicing Agreement, subject to no offsets, counterclaims or defenses;
(e) that was not originated in or subject to the Laws of a jurisdiction whose Laws would make such Pledged Servicing Right, the Approved Servicing Agreement or the financing thereof contemplated hereby unlawful, invalid or unenforceable and is not subject to any legal limitation on transfer;
(f) that is owned solely by Borrower free and clear of all Liens, other than Liens in favor of Bank and any other Permitted Liens, and has not been sold, conveyed, pledged or assigned to any other lender, purchaser or Person; and
(g) for which there exists no dispute regarding the Pledged Servicing Right that results in the Pledged Servicing Right being invalid or otherwise not recoverable or payable and in respect of which Borrower has complied in all material respects with the Approved Servicing Agreement.
MSR Note means the promissory note, dated as of the Effective Date, in the maximum principal amount of Three Hundred Million and No/100 Dollars ($300,000,000.00), executed by Borrower and payable to the order of Bank, in form and substance satisfactory to Bank, and all amendments, extensions, renewals, replacements, increases, and modifications thereof, which evidences the Revolving Loans outside of the Servicing Advances Revolving Loan.
MSR Value means, as of any date of determination, the lesser of (a) Borrowers capitalized Servicing Rights at such time, and (b) as applicable, and with respect to the same Servicing Rights (i) the value set forth in the Servicing Appraisal, at such time, with respect to those Mortgage Loans then included in Borrowers capitalized Servicing Rights, or (ii) if the applicable Servicing Appraisal has not been timely delivered to Bank, such amount as Bank shall determine in its reasonable discretion, using such means of valuation as it reasonably deems appropriate under the circumstances.
Pledged Servicing Rights means the Servicing Rights under the Approved Servicing Agreement that are pledged to Bank hereunder as identified on the Pledged Servicing Rights Schedule.
Pledged Servicing Rights Schedule means the schedule of servicing rights identified on Schedule A hereto (as the same may be amended, modified or updated from time to time by agreement of Borrower and Bank), signed by an Authorized Officer of Borrower, listing all Serviced Loans related to the Pledged Servicing Rights (Serviced Loans in pools shall be listed by pool number although Bank shall have the right to require lists of Serviced Loans in such pools) and stating the current fair market value of the Collateral evidenced by such Pledged Servicing Rights pursuant to the Servicing Appraisal.
Pre-Tax Profitability means Borrowers pre-tax Net Income.
Promissory Note means, individually and collectively, the MSR Note and Servicing Advances Note.
Restricted Cash means any amount of cash of such Person that is contractually required to be set aside, segregated or otherwise reserved.
Servicing Advances Note means the promissory note, dated as of the Effective Date, in the maximum principal amount of One Hundred Million and No/100 Dollars ($100,000,000.00), executed by Borrower and payable to the order of Bank, in form and substance satisfactory to Bank, and all amendments, extensions, renewals, replacements, increases, and modifications thereof, which evidences the Servicing Advances Revolving Loan.
2. [Reserved.]
3. Financial Covenants. Borrower covenants and agrees that, as long as the Agreement remains in effect, Borrower will, on a quarterly basis, observe, perform and comply with each of the following covenant(s):
(a) Maintenance of Adjusted Tangible Net Worth. Borrower shall maintain an Adjusted Tangible Net Worth of not less than [***].
(b) Maintenance of Ratio of Debt to Adjusted Tangible Net Worth. Borrower shall maintain the ratio of Debt minus Subordinated Debt to Adjusted Tangible Net Worth plus Subordinated Debt of no greater than [***].
(c) Maintenance of Liquidity. Borrower shall ensure that it has cash and Liquid Assets (excluding Restricted Cash or cash pledged to Persons other than Bank) in an amount not less than the minimum liquidity required by the Federal Housing Finance Agency, or as required by Freddie Mac in the event that Freddie Mac is no longer regulated by the Federal Housing Finance Agency.
(d) Minimum Pre-Tax Profitability. Borrower shall not permit Borrowers Pre-Tax Profitability to be less than $1.00 for any fiscal calendar quarter.
(e) Debt Service Coverage Ratio. Borrower shall maintain a Debt Service Coverage Ratio of at least [***].
(f) Maximum Servicing Portfolio Seriously Delinquent Rate. Borrower shall not allow its Servicing Portfolio Seriously Delinquent Rate for any calendar quarter to exceed [***].
(g) Maintenance of Custodial Accounts. Borrower shall maintain custodial accounts on deposit with Bank at a minimum of [***] in average account balance, as determined by Bank in its sole and reasonable discretion, or the interest rate applicable to the Promissory Note shall increase by [***]. for any applicable month during which such average custodial account deposits dip below [***]. For the avoidance of doubt, notwithstanding the application of an increase to the interest rates on the Promissory Note pursuant to this Section 3(g), for any subsequent month for which the average custodial account deposits are greater than or equal to [***], then no such [***] increase shall apply.
4. Non-Financial Covenants. Borrower covenants and agrees that, as long as the Agreement remains in effect, Borrower will, at all times, observe, perform and comply with each of the following covenant(s):
(a) Borrowing Base Certificate. Within forty five (45) days after the last day of each calendar quarter, and whenever otherwise requested by Bank, submit to Bank a Borrowing Base Certificate as of the end of such quarter and certified by an Authorized Officer of Borrower. Such Borrowing Base Certificate shall be in the form of Exhibit B to the Agreement or in such other form as Bank may reasonably require;
(b) Financial Statements and Compliance Certificate; Financial Reporting. Borrower shall maintain a system of accounting established and administered in accordance with GAAP, and furnish, or cause to be furnished, to Bank:
(i) Within one hundred twenty (120) days after the close of each fiscal year, audited financial statements, including a statement of income and changes in shareholders equity of Borrower for such year, and the related balance sheet as at the end of such year, all in reasonable detail and accompanied by an opinion of a certified public accountant acceptable to Bank as to said financial statements, and certified by such Borrower that said financial statement fairly presents the financial condition of such Borrower as of such date;
(ii) Within forty five (45) days after the end of each calendar quarter, including the last quarter of Borrowers fiscal year, the unaudited balance sheets of Borrower as at the end of such period and the related unaudited consolidated statements of income and retained earnings and of cash flows for Borrower for such period and the portion of the fiscal year through the end of such period, subject, however, to year-end adjustments. Such reports shall include, without limitation, in the form agreed by Borrower and Bank, the results of Borrowers hedging activities for the applicable period;
(iii) Concurrently with the delivery of the financial statements required above, submit to Bank: (1) a Compliance Certificate as of the end of such period; and (2) a certificate of an Authorized Officer of Borrower (i) stating that to the best of such Persons knowledge, no Event of Default has occurred and is continuing, or if an Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto, and (ii) showing in reasonable detail the calculations demonstrating compliance with Article 8 and this Addendum. Such Compliance Certificate shall be in the form of Exhibit C to the Agreement or in such other form as Bank may reasonably require; and
(iv) [Reserved];
(v) [Reserved];
(c) Servicing Appraisals. Within thirty (30) days after the last day of each calendar month a Servicing Appraisal as of the end of such month in form acceptable to Bank and by an appraiser acceptable to Bank in its reasonable discretion. Borrower agrees to pay the reasonable and documented out-of-pocket costs and expenses of such third party Servicing Appraisal and any third-party review fees.
(d) Agency Audit Reports. Promptly after Borrowers receipt, and anytime upon Banks request, all Agency audit reports provided that the release of any such audit report to Bank is approved by the Agency and Bank has agreed to any confidentiality requirements of the Agency.
(e) Restricted Payments. Provided no Event of Default has occurred and is continuing, and such payment or distribution will not result in an Event of Default, Borrower may , directly or indirectly, declare or pay any dividends or make any other payment or distribution (in cash, property, or obligations) on account of its equity interests, or redeem, purchase, retire, or otherwise acquire any of its equity interests, or set apart any money for a sinking or other analogous fund for any dividend or other distribution on its equity interests or for any redemption, purchase, retirement, or other acquisition of any of its equity interests, or undertake any new obligation (contingent or otherwise) to do any of the foregoing.
(f) Change in Management or Subservicer. Borrower shall not permit any change in the senior executive management of Borrower or subservicer of Borrower without promptly providing Bank notice of such a change.
(g) Change in Ownership or Control. Borrower shall not permit any change in the ownership or control of Borrower, or permit the sale, transfer or conveyance of more than fifty percent (50%) of the shares or other equity interests in Borrower without promptly providing Bank notice of such a change.
5. Breach. Any material breach by Borrower of any of the covenants set forth herein shall be an Event of Default and shall entitle Bank to exercise its rights and remedies under the Agreement or any other Loan Document.
6. Facility Fee. Borrower shall pay Bank a facility fee (the Facility Fee) in an amount equal to [***] of the Committed Sum, which Facility Fee is fully-earned and payable on the Effective Date.
7. Miscellaneous. This Addendum is made a part of and is incorporated into the Agreement. Except as hereby modified or supplemented, the Agreement shall remain in full force and effect. The liability of all Persons obligated in any manner under this Addendum shall be joint and several. If more than one Person shall execute this Addendum as Borrower, then the term Borrower as used herein shall refer both to each such Person individually and to all such Persons collectively.
[Signature Page Follows]
EXECUTED by Borrower to be effective as of the Effective Date.
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BANK: | |
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Western Alliance Bank, an Arizona corporation | |
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By: |
/s/ Joshua Ormiston |
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Name: Joshua Ormiston | |
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Title: Vice President | |
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BORROWER: | |
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AmeriHome Mortgage Company, LLC, a Delaware | |
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limited liability company | |
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By: |
/s/ Jim Furash |
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Name: Jim Furash | |
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Title: CEO |
[Signature Page to Exhibit A to Loan and Security Agreement]
EXECUTED by Borrower to be effective as of the Effective Date.
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BANK: | |
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Western Alliance Bank, an Arizona corporation | |
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By: |
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Name: | |
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Title: | |
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BORROWER: | |
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AmeriHome Mortgage Company, LLC, a Delaware | |
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limited liability company | |
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By: |
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Name: Jim Furash | |
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Title: CEO |
[Signature Page to Exhibit A to Loan and Security Agreement]
Schedule A
Pledged Servicing Rights Schedule
(See attached)
EXHIBIT B
BORROWING BASE CERTIFICATE
EXHIBIT C
COMPLIANCE CERTIFICATE
EXHIBIT D
SUBSERVICER NOTICE
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
Execution
MASTER REPURCHASE AGREEMENT
between
BANK OF AMERICA, N.A.
(Buyer)
and
AMERIHOME MORTGAGE COMPANY, LLC
(Seller)
dated as of
October 9, 2015
TABLE OF CONTENTS
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Page |
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ARTICLE 1 DEFINITIONS AND PRINCIPLES OF CONSTRUCTION |
1 | |
1.1 |
Defined Terms |
1 |
1.2 |
Interpretation; Principles of Construction |
1 |
ARTICLE 2 AMOUNT AND TERMS OF TRANSACTIONS |
2 | |
2.1 |
Agreement to Enter into Transactions |
2 |
2.2 |
Transaction Limits |
3 |
2.3 |
Description of Purchased Assets |
3 |
2.4 |
Maximum Transaction Amounts |
3 |
2.5 |
Use of Proceeds |
4 |
2.6 |
Price Differential |
4 |
2.7 |
All Transactions are Servicing Released |
4 |
2.8 |
Terms and Conditions of Transactions |
5 |
2.9 |
Reserved |
5 |
2.10 |
Temporary Increase of Aggregate Transaction Limit |
5 |
ARTICLE 3 PROCEDURES FOR REQUESTING AND ENTERING INTO TRANSACTIONS |
5 | |
3.1 |
Policies and Procedures |
5 |
3.2 |
Request for Transaction; Asset Data Record |
6 |
3.3 |
Delivery of Mortgage Loan Documents |
6 |
3.4 |
Haircut |
8 |
3.5 |
Over/Under Account |
8 |
3.6 |
Payment of Purchase Price |
11 |
3.7 |
Approved Payees |
12 |
3.8 |
Delivery of Mortgage-Backed Securities |
13 |
ARTICLE 4 REPURCHASE |
13 | |
4.1 |
Repurchase Price |
13 |
4.2 |
Repurchase Acceleration Events |
14 |
4.3 |
Reduction of Asset Value as Alternative Remedy |
15 |
4.4 |
Designation as Noncompliant Asset as Alternative Remedy |
15 |
4.5 |
Illegality or Impracticability |
16 |
4.6 |
Increased Costs |
16 |
4.7 |
Payments Pursuant to Sale to Approved Investors |
17 |
4.8 |
Application of Payments from Seller or Approved Investors |
17 |
4.9 |
Method of Payment |
18 |
4.10 |
Reserved |
18 |
4.11 |
Reserved |
18 |
4.12 |
Book Account |
18 |
4.13 |
Full Recourse |
19 |
ARTICLE 5 FEES |
19 | |
5.1 |
Payment of Fees |
19 |
ARTICLE 6 SECURITY; SERVICING; MARGIN ACCOUNT MAINTENANCE; CUSTODY OF MORTGAGE LOAN DOCUMENTS; REPURCHASE TRANSACTIONS; DUE DILIGENCE |
19 | |
6.1 |
Precautionary Grant of Security Interest in Purchased Assets and Purchased Items |
19 |
6.2 |
Servicing |
20 |
6.3 |
Margin Account Maintenance |
25 |
6.4 |
Custody of Mortgage Loan Documents |
26 |
6.5 |
Repurchase and Release of Purchased Assets |
28 |
6.6 |
Repurchase Transactions |
28 |
6.7 |
Periodic Due Diligence |
29 |
ARTICLE 7 CONDITIONS PRECEDENT |
29 | |
7.1 |
Initial Transaction |
29 |
7.2 |
All Transactions |
31 |
7.3 |
Reserved |
34 |
7.4 |
Satisfaction of Conditions |
34 |
ARTICLE 8 REPRESENTATIONS AND WARRANTIES |
34 | |
8.1 |
Representations and Warranties Concerning Seller |
34 |
8.2 |
Representations and Warranties Concerning Purchased Assets |
39 |
8.3 |
Continuing Representations and Warranties |
39 |
8.4 |
Amendment of Representations and Warranties |
39 |
ARTICLE 9 AFFIRMATIVE COVENANTS |
40 | |
9.1 |
Financial Statements and Other Reports |
40 |
9.2 |
Inspection of Properties and Books |
41 |
9.3 |
Notice |
42 |
9.4 |
Existence, Etc. |
44 |
9.5 |
Servicing of Mortgage Loans |
44 |
9.6 |
Evidence of Purchased Assets |
44 |
9.7 |
Defense of Title; Protection of Purchased Items |
44 |
9.8 |
Further Assurances |
45 |
9.9 |
Fidelity Bonds and Insurance |
45 |
9.10 |
Table-Funded Mortgage Loans |
45 |
9.11 |
Sharing of Information |
46 |
9.12 |
ERISA |
46 |
9.13 |
Additional Repurchase or Warehouse Facility |
47 |
9.14 |
MERS |
47 |
9.15 |
Agency Audit and Approval Maintenance |
47 |
9.16 |
Most Favored Status |
47 |
9.17 |
Financial Covenants and Ratios |
48 |
ARTICLE 10 NEGATIVE COVENANTS |
48 | |
10.1 |
Debt |
48 |
10.2 |
Lines of Business |
48 |
10.3 |
Subordinated Debt |
48 |
10.4 |
Loss of Eligibility |
48 |
10.5 |
Loans to Officers, Employees and Shareholders |
48 |
10.6 |
Liens on Purchased Assets and Purchased Items |
49 |
10.7 |
Transactions with Affiliates |
49 |
10.8 |
Consolidation, Merger, Sale of Assets and Change of Control |
49 |
10.9 |
Payment of Dividends and Retirement of Stock |
49 |
10.10 |
Purchased Items |
49 |
10.11 |
Secondary Marketing, Underwriting, Third Party Origination and Interest Rate Risk Management Practices |
50 |
10.12 |
Notice Additional Facilities |
50 |
ARTICLE 11 DEFAULTS AND REMEDIES |
50 | |
11.1 |
Events of Default |
50 |
11.2 |
Remedies |
53 |
11.3 |
Treatment of Custodial Account |
55 |
11.4 |
Sale of Purchased Assets |
55 |
11.5 |
No Obligation to Pursue Remedy |
55 |
11.6 |
No Judicial Process |
56 |
11.7 |
Reimbursement of Costs and Expenses |
56 |
11.8 |
Application of Proceeds |
56 |
11.9 |
Rights of Set-Off |
57 |
11.10 |
Reasonable Assurances |
58 |
ARTICLE 12 INDEMNIFICATION |
58 | |
12.1 |
Indemnification |
58 |
12.2 |
Reimbursement |
58 |
12.3 |
Payment of Taxes |
59 |
12.4 |
Buyer Payment |
60 |
12.5 |
Agreement not to Assert Claims |
62 |
12.6 |
Survival |
61 |
ARTICLE 13 TERM AND TERMINATION |
61 | |
13.1 |
Term |
61 |
13.2 |
Termination |
61 |
13.3 |
Extension of Term |
62 |
ARTICLE 14 GENERAL |
62 | |
14.1 |
Integration; Servicing Provisions Integral and Non-Severable |
62 |
14.2 |
Amendments |
63 |
14.3 |
No Waiver |
63 |
14.4 |
Remedies Cumulative |
63 |
14.5 |
Assignment |
63 |
14.6 |
Successors and Assigns |
63 |
14.7 |
Participations |
63 |
14.8 |
Invalidity |
63 |
14.9 |
Additional Instruments |
63 |
14.10 |
Survival |
64 |
14.11 |
Notices |
64 |
14.12 |
Governing Law |
65 |
14.13 |
Submission to Jurisdiction; Service of Process; Waivers |
65 |
14.14 |
Waiver of Jury Trial |
65 |
14.15 |
Counterparts |
66 |
14.16 |
Headings |
66 |
14.17 |
Reserved |
66 |
14.18 |
Confidential Information |
66 |
14.19 |
Intent |
68 |
14.20 |
Right to Liquidate |
68 |
14.21 |
Insured Depository Institution |
69 |
14.22 |
Netting Contract |
69 |
14.23 |
Tax Treatment |
69 |
14.24 |
Examination and Oversight by Regulators |
69 |
EXHIBITS
Exhibit A: |
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Glossary of Defined Terms |
Exhibit B: |
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Irrevocable Closing Instructions |
Exhibit C: |
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Reserved |
Exhibit D: |
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Form of Hedge Report |
Exhibit E: |
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Officers Certificate |
Exhibit F: |
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Assignment of Closing Protection Letter |
Exhibit G: |
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Reserved |
Exhibit H: |
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Form of Power of Attorney |
Exhibit I: |
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Acknowledgement of Password Confidentiality Agreement |
Exhibit J: |
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Wiring Instructions |
Exhibit K: |
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Form of Servicer Notice |
Exhibit L: |
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Representations and Warranties |
Exhibit M: |
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Required Agency Documents |
Exhibit N: |
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Form of Trade Assignment |
Exhibit O: |
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Form of Request for Temporary Increase |
Exhibit P: |
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Reserved |
Exhibit Q: |
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Reserved |
Exhibit R: |
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Auto Fund Authorization Request |
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SCHEDULES | ||
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Schedule 1: |
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Filing Jurisdictions and Offices |
Schedule 2: |
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States and Jurisdictions |
Schedule 3: |
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List of Sellers Existing Debt |
MASTER REPURCHASE AGREEMENT
This MASTER REPURCHASE AGREEMENT (the Agreement) is made and entered into as of October 9, 2015 by and between Bank of America, N.A., a national banking association (Buyer), and AmeriHome Mortgage Company, LLC, a Delaware limited liability company (Seller).
RECITALS
A. Seller has requested Buyer to enter into transactions with Seller whereby Seller may, from time to time, sell to Buyer certain residential mortgage loans (including the Servicing Rights related thereto) and/or other mortgage related assets and interests, against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to sell to Seller such purchased assets at a date certain or on demand after the Purchase Date, against the transfer of funds by Seller (each such transaction, a Transaction).
B. Buyer has agreed to enter into such Transactions, subject to the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual rights and obligations provided herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Seller and Buyer agree as follows:
ARTICLE 1
DEFINITIONS AND PRINCIPLES OF CONSTRUCTION
1.1 Defined Terms. As used in this Agreement, capitalized terms shall have the meanings set forth in Exhibit A hereto. All such defined terms shall, unless specifically provided to the contrary, have the defined meanings set forth herein when used in any other agreement, certificate or document made or delivered pursuant hereto.
1.2 Interpretation; Principles of Construction. The following rules of this Section 1.2 apply unless the context requires otherwise. A gender includes all genders. Where a word or phrase is defined, its other grammatical forms have a corresponding meaning. A reference to a subsection, Section, Schedule or Exhibit is, unless otherwise specified, a reference to a Section of, or schedule or exhibit to, this Agreement. A reference to a party to this Agreement or another agreement or document includes the partys successors and permitted substitutes or assigns. A reference to an agreement or document (including any Principal Agreement) is to the agreement or document as amended, modified, novated, supplemented or replaced, except to the extent prohibited thereby or by any Principal Agreement and in effect from time to time in accordance with the terms thereof. A reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it. A reference to writing includes a facsimile or electronic transmission and any means of reproducing words in a tangible and permanently visible form. The words hereof, herein, hereunder and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement. The term
including is not limiting and means including without limitation. In the computation of periods of time from a specified date to a later specified date, the word from means from and including, the words to and until each mean to but excluding, and the word through means to and including.
Except where otherwise provided in this Agreement, any determination, consent, approval, statement or certificate made or confirmed in writing with notice to Seller by Buyer or an authorized officer of Buyer provided for in this Agreement is conclusive and binds the parties in the absence of manifest error.
A reference to a document includes an agreement (as so defined) in writing or a certificate, notice, instrument or document, or any information recorded in electronic form. Where Seller is required to provide any document to Buyer under the terms of this Agreement, the relevant document shall be provided in writing or printed form unless Buyer requests otherwise. At the request of Buyer, the document shall be provided in electronic form or both printed and electronic form.
This Agreement is the result of negotiations among, and has been reviewed by counsel to, Buyer and Seller, and is the product of all parties. In the interpretation of this Agreement, no rule of construction shall apply to disadvantage one party on the ground that such party proposed or was involved in the preparation of any particular provision of this Agreement or this Agreement itself. Except where otherwise expressly stated, Buyer may give or withhold, or give conditionally, approvals and consents and may form opinions and make determinations at its sole and absolute discretion. Any requirement of good faith, discretion or judgment by Buyer shall not be construed to require Buyer to request or await receipt of information or documentation not immediately available from or with respect to Seller, a servicer of the Purchased Mortgage Loans, any other Person or the Purchased Assets themselves. All references herein or in any Principal Agreement to good faith means good faith as defined in Section 1-201(19) of the Uniform Commercial Code.
ARTICLE 2
AMOUNT AND TERMS OF TRANSACTIONS
2.1 Agreement to Enter into Transactions. Subject to the terms and conditions of this Agreement and provided that no Event of Default or Potential Default has occurred and is continuing, Buyer shall, from time to time during the term of this Agreement, enter into Transactions with Seller; provided, however, that (a) the Aggregate Outstanding Purchase Price as of any date shall not exceed the Aggregate Transaction Limit and (b) the Aggregate Outstanding Purchase Price for any Type of Transaction shall not exceed the applicable Type Sublimit. Buyer shall have the obligation to enter into Transactions with an Aggregate Outstanding Purchase Price equal to or less than the Committed Amount, and Buyer shall have no obligation to enter into Transactions with respect to the Uncommitted Amount. All purchases of Purchased Assets shall be first deemed committed up to the Committed Amount and then the remainder, if any, shall be deemed uncommitted up the Uncommitted Amount. Seller may request Transactions in excess of the Aggregate Transaction Limit and Buyer may, from time to time, in its sole and absolute discretion,
consent to a Temporary Increase of the Aggregate Transaction Limit in accordance with Section 2.10.
2.2 Transaction Limits. The Aggregate Transaction Limit and each Type Sublimit shall be as set forth in the Transactions Terms Letter. Upon five (5) Business Days prior written notice to Seller, Buyer shall have the right to terminate any Transactions with respect to the Uncommitted Amount and require the repurchase of any such Purchased Assets, or reduce, whether permanently or temporarily, and without refund of any fee or other amount previously paid by Seller, the Aggregate Transaction Limit and/or each Type Sublimit by an amount up to the Uncommitted Amount. In the event of any reduction pursuant to this Section 2.2, Buyer shall give Seller prior notice thereof, which notice shall designate (a) the effective date of any such reduction, (b) the amount of the reduction and (c) the Transaction and/or Type Sublimit limit(s) to which such reduction amount shall apply. Upon receipt of Buyers notice to terminate any Transactions or reduce the Aggregate Transaction Limit and/or each Type Sublimit as described above, Seller shall repurchase (i) at least twenty five percent (25%) of all such terminated Transactions or Transactions that exceed the reduced Aggregate Transaction Limit and/or each Type Sublimit, as applicable, within five (5) Business Days of receipt of such notice, (ii) at least fifty percent (50%) of all such terminated Transactions or Transactions that exceed the reduced Aggregate Transaction Limit and/or each Type Sublimit, as applicable, within ten (10) Business Days of receipt of such notice, (iii) at least seventy five percent (75%) of all such terminated Transactions or Transactions that exceed the reduced Aggregate Transaction Limit and/or each Type Sublimit, as applicable, within fifteen (15) Business Days of receipt of such notice, and (iv) all such terminated Transactions or Transactions that exceed the reduced Aggregate Transaction Limit and/or each Type Sublimit, as applicable, within twenty-five (25) calendar days of receipt of such notice. Buyer shall not be liable to Seller for any costs, losses or damages arising from or relating to a reduction by Buyer in the Aggregate Transaction Limit or any Type Sublimit. Notwithstanding the above, all Maximum Dwell Times shall continue to apply.
2.3 Description of Purchased Assets. With respect to each Transaction, Seller shall cause to be maintained with Buyer Purchased Assets with an Asset Value not less than, at any date, the related Purchase Price for such Transaction. With respect to each Transaction, the type of Purchased Asset shall be the type of Asset as specified in the Transactions Terms Letter as the Type, and in each case shall consist of the type of mortgage loans, mortgage related securities, or interests therein as described in Bankruptcy Code Section 101(47)(A). If there is uncertainty as to the Type of a Purchased Asset, Buyer shall determine the correct Type for such Purchased Asset.
2.4 Maximum Transaction Amounts. The Purchase Price for each proposed Transaction shall not exceed the lesser of:
(a) the Aggregate Outstanding Purchase Price for the applicable Type Sublimit (after giving effect to all Transactions then subject to the Agreement), as determined by the Type of Purchased Asset;
(b) the Aggregate Transaction Limit (as such amount may be increased from time to time in the sole discretion of Buyer as provided in Section 2.10), minus the Aggregate Outstanding Purchase Price of all other Transactions outstanding, if any; and
(c) the Asset Value of the related Purchased Asset(s).
2.5 Use of Proceeds. Seller shall use the Purchase Price of each Transaction solely for the purpose of originating and/or acquiring the related Purchased Asset(s).
2.6 Price Differential.
(a) Price Differential. Notwithstanding that Buyer and Seller intend that the Transactions hereunder be sales by Seller to Buyer of the Purchased Assets for all purposes except accounting and tax purposes, Seller shall pay Buyer interest on the Purchase Price for each Purchased Asset from the Purchase Date until, but not including, the date on which the Repurchase Price is paid, at an annual rate equal to the Price Differential; provided that if the Repurchase Price for a Transaction is not paid by Seller when due (whether at the Repurchase Date, upon acceleration or otherwise) and such default has not been cured within one (1) Business Day of the earlier of Sellers knowledge or receipt of notice of such default, the Repurchase Price shall bear a Price Differential from the date due until paid in full at an annual rate equal to the Default Rate. For the avoidance of doubt, from and after the date on which a Purchased Asset is deemed to be a Noncompliant Asset, the Purchase Price for such Purchased Asset shall bear a Price Differential at an annual rate equal to the sum of the Applicable Pricing Rate plus the Type Margin for a Noncompliant Asset.
(b) Time for Payment. Price Differential with respect to any Purchased Asset shall be due and payable on the Payment Date occurring in the second month following the related Purchase Date and thereafter on each subsequent Payment Date. On the date that the Repurchase Price for such Purchased Asset is paid, all accrued Price Differential not otherwise paid by the Seller with respect to such Purchased Asset shall be due and payable. Notwithstanding anything to the contrary in this Section 2.6(b), in the event the Asset Value of any Purchased Asset is marked to zero and Seller requests Buyer to release its security interest in such Purchased Asset or any Purchased Items related thereto, Buyer shall not release any such security interest therein unless and until Seller shall have paid to Buyer the Repurchase Price for such Purchased Asset.
(c) Computations. All computations of Price Differential and fees payable hereunder shall be based upon the actual number of days (including the first day but excluding the last day) occurring in the relevant period, and a three-hundred sixty (360) day year.
2.7 All Transactions are Servicing Released. The sale of Mortgage Loans by Seller to Buyer pursuant to Transactions under this Agreement includes the Servicing Rights related to the
Mortgage Loans and all Transactions under this Agreement are servicing released purchase and sale transactions for all intents and purposes, it being understood that the Purchase Price paid by Buyer to Seller for each such Mortgage Loan includes a premium that compensates Seller for the Servicing Rights related to the Mortgage Loan and upon payment of the Purchase Price by Buyer to Seller, Buyer becomes the owner of the Mortgage Loan and the Servicing Rights related thereto.
2.8 Terms and Conditions of Transactions. The terms and conditions of the Transactions as set forth in the Transactions Terms Letter, this Agreement or otherwise may be changed from time to time by Buyer by providing prior notice to Seller and upon mutual agreement of Buyer and Seller. The terms and conditions of the Transactions Terms Letter are hereby incorporated and form a part of this Agreement as if fully set forth herein; provided however, to the extent of any conflict between the terms of this Agreement and the terms of the Transactions Terms Letter, the Transactions Terms Letter shall control.
2.9 Reserved.
2.10 Temporary Increase of Aggregate Transaction Limit. Seller may request a temporary increase of the Aggregate Transaction Limit (a Temporary Increase) by submitting to Buyer an executed request for Temporary Increase in the form of Exhibit O hereto (a Request for Temporary Increase), setting forth the requested increased Aggregate Transaction Limit (such increased amount, the Temporary Aggregate Transaction Limit), the effective date and time of such Temporary Increase and the date and time on which such Temporary Increase shall terminate. Buyer may from time to time, in its sole and absolute discretion, consent to such Temporary Increase, which consent shall be in writing as evidenced by Buyers delivery to Seller of a countersigned Request for Temporary Increase. At any time that a Temporary Increase is in effect, the Aggregate Transaction Limit shall equal the Temporary Aggregate Transaction Limit for all purposes of this Agreement and all calculations and provisions relating to the Aggregate Transaction Limit shall refer to the Temporary Aggregate Transaction Limit, including without limitation, Type Sublimits and the Minimum Over/Under Account Balance. Upon the termination of a Temporary Increase, Seller shall repurchase Purchased Assets in order to reduce the Aggregate Outstanding Purchase Price to the Aggregate Transaction Limit (as reduced by the termination of such Temporary Increase) in accordance with Section 4.2(k).
ARTICLE 3
PROCEDURES FOR REQUESTING AND ENTERING INTO TRANSACTIONS
3.1 Policies and Procedures. In connection with the Transactions contemplated hereunder, Seller shall comply with all applicable operating guidelines and procedures of Buyer as may currently exist or as hereafter created. Such policies and procedures may be in writing, published on Buyers website(s) or otherwise contained in the Handbook. Buyer shall have the right to change, revise, amend or supplement its policies and procedures and the Handbook from time to time to conform to current legal requirements or Buyer practices by giving thirty (30) days prior written notice to Seller of such changes, revisions,
amendments or supplements. To the extent of any conflict between the terms of this Agreement and the terms of the Handbook, this Agreement shall control.
3.2 Request for Transaction; Asset Data Record.
(a) Request for Transaction. Seller shall request a Transaction by delivering to Buyer, electronically or in writing, an Asset Data Record for each Asset intended to be the subject of the Transaction no later than 4:30 p.m. (New York City time) and, if an Asset Data Record is submitted after such time, Buyer shall use best efforts to enter into such Transaction. Buyer shall be under no obligation to enter into any Transaction or Transactions requested by Seller if the Purchase Price relates to the Uncommitted Amount. Assuming the satisfaction of all conditions precedent set forth in Article 7 and as otherwise set forth in this Agreement, Buyer may, for any Transaction with respect to the Uncommitted Amount and shall, for any Transaction with respect to the Committed Amount, confirm to Seller the terms of Transactions electronically or in writing. Buyer reserves the right to reject any Transaction request that Buyer determines fails to comply with the terms and conditions of this Agreement or Buyers then current policies and procedures.
(b) Failure to Enter into Transaction; Cancellation of Transaction. If Seller fails five times or more to enter into a Transaction in each case, after Seller has requested such Transaction and submitted an Asset Data Record in connection with such request, for each Transaction requested by Seller thereafter for which Seller fails to enter into such Transaction after Seller has requested such Transaction and submitted an Asset Data Record in connection with such request, Seller shall pay Buyer any breakage fees and reimburse Buyer for any reasonable and documented out-of-pocket losses, costs and expenses incurred by Buyer in connection with such failure to enter into the Transaction, including, without limitation, costs relating to re-employment of funds obtained by Buyer and fees payable to terminate the arrangements through which such funds were obtained. In addition, with respect to any Transaction, including the initial Transaction, if following disbursement by Buyer of the Purchase Price relating to such Transaction, Seller cancels such Transaction, in each case, Seller shall pay Buyer a Price Differential on such Purchase Price from the Purchase Date until, but not including, the date the Purchase Price is returned to Buyer.
(c) Form of Asset Data Record. Buyer shall have the right to revise or supplement the form of the Asset Data Record from time to time by giving thirty (30) days prior written notice thereof to Seller.
3.3 Delivery of Mortgage Loan Documents.
(a) Dry Mortgage Loans. Prior to any Transaction related to a Dry Mortgage Loan, Seller shall deliver to Buyer or its Custodian, or authorize and direct the Closing Agent to deliver to Buyer or its Custodian, the related Mortgage Loan Documents in accordance with and pursuant to the terms of Section 7.2 hereof and the Custodial Agreement.
(b) Wet Mortgage Loans. With respect to a Transaction the subject of which is a Wet Mortgage Loan, (i) Seller shall deliver to Buyer or its Custodian any Mortgage Loan Documents in Sellers possession, and (ii) Seller shall authorize and direct the Closing Agent to deliver the related Mortgage Loan Documents to Seller, for delivery to Buyer or its Custodian, in each case, within the Maximum Dwell Time in accordance with the terms of Section 7.2 hereof, Exhibit B hereof and the Custodial Agreement.
(c) Pooled Mortgage Loans. With respect to a Transaction the subject of which is a Pooled Mortgage Loan, the provisions of the Joint Securities Agreement shall control or if mutually agreed to by Seller and Buyer, Seller shall deliver to Buyer or its Custodian, as applicable, the related Agency Documents in accordance with and pursuant to the terms of Section 7.2(e) hereof and the Custodial Agreement and Seller shall cause the Custodian to deliver a trust receipt to Buyer with respect to such Mortgage Loans in accordance with the terms of the Custodial Agreement. In addition, Seller shall deliver to Buyer or its designee a duly executed Trade Assignment together with a true and complete copy of the Purchase Commitment with respect to the related Mortgage-Backed Security in accordance with and pursuant to the terms of Section 7.2(b) and Section 7.2(e).
(d) Government Mortgage Loans. With respect to a Transaction the subject of which is a Government Mortgage Loan, Seller shall, (i) at the request of Buyer, deliver to Buyer or its Custodian, within seventy five (75) calendar days following the Purchase Date for such Mortgage Loan, the FHA Mortgage Insurance Contract, the VA Loan Guaranty Agreement or the RD Loan Guaranty Agreement, as applicable, or evidence of such insurance or guaranty, as applicable, including proof of payment of the premium and the case number so Buyer can access the information on the computer system maintained by FHA, the VA or the RD, and (ii) notify Buyer within forty-five (45) days following the Purchase Date if such documents are not accessible on the computer system maintained by the FHA, the VA or the RD pursuant to the officers certificate required to be delivered pursuant to Section 9.1(d).
(e) Mortgage Loan Documents in Sellers Possession. At all times during which the Mortgage Loan Documents related to any Purchased Mortgage Loan are in the possession of Seller, and until such Purchased Mortgage Loan is repurchased by Seller, Seller shall, or shall cause its custodian to hold such Mortgage Loan Documents in trust separate and apart from Sellers own documents and assets and for the exclusive benefit of Buyer and shall act only in accordance with Buyers written instructions thereto. Such Mortgage Loan Documents should be clearly marked as held for the benefit of Buyer. For the avoidance of doubt, with respect to Mortgage Loan Documents that are held only electronically, Sellers or Sellers custodians system shall have a field identifying such Mortgage Loan Documents as being held for the benefit of Buyer.
(f) Other Mortgage Loan Documents in Sellers Possession. With respect to each Purchased Mortgage Loan, until such Purchased Mortgage Loan is repurchased by
Seller, Seller shall, or shall cause its custodian to hold in trust separate and apart from Sellers own documents and assets and for the exclusive benefit of Buyer all mortgage loan documents related to such Purchased Mortgage Loan and not delivered to Buyer, including, without limitation, the Other Mortgage Loan Documents, as applicable. All such mortgage loan documents shall be clearly marked as held for the benefit of Buyer. For the avoidance of doubt, with respect to Mortgage Loan Documents that are held only electronically, Sellers or Sellers custodians system shall have a field identifying such Mortgage Loan Documents as being held for the benefit of Buyer.
3.4 Haircut. With respect to each Transaction for which the related Purchase Price is being remitted by Buyer to one or more Approved Payees, Seller shall ensure that there are sufficient funds on deposit in the Over/Under Account such that following the withdrawal of the related Haircut by Buyer, the balance of the Over/Under Account is equal to or greater than the Minimum Over/Under Account Balance, as set forth in the Transactions Terms Letter.
3.5 Over/Under Account.
(a) Minimum Balance. Seller shall at all times maintain a balance in the Over/Under Account of not less than the Minimum Over/Under Account Balance, as set forth in the Transactions Terms Letter. The Over/Under Account shall be used to assist in settling the Transactions and any other obligations under this Agreement. Buyer shall not be required to segregate and hold funds deposited by or on behalf of Seller in the Over/Under Account separate and apart from Buyers own funds or funds deposited by or held for others. Upon the occurrence of a Potential Default or an Event of Default, if Buyer has elected to continue to enter into Transactions pursuant to this Agreement, Buyer shall have the right to increase the Minimum Over/Under Account Balance Seller is required to maintain in the Over/Under Account by giving notice to Seller thereof. If Seller fails to deposit funds in the Over/Under Account to comply with any such required increase within the time frame required by Buyer, Buyer shall have the right to retain in the Over/Under Account any amounts received by Buyer on behalf of Seller or otherwise credited to the Over/Under Account to comply with any such required increases, including, without limitation, any purchase proceeds received by Buyer from any Approved Investor pursuant to Section 4.7. Buyer shall not be liable to Seller for any costs, losses or damages arising from or relating to the increase of the Minimum Over/Under Account Balance that Seller is required to maintain in the Over/Under Account or retention of excess funds by Buyer to comply with any such increase.
(b) Deposits.
(i) Seller. Seller shall deposit margin in the form of funds in the Over/Under Account in accordance with the terms of this Agreement, including, without limitation, Section 3.4 and Section 3.5(a).
(ii) Buyer. Buyer shall credit to the Over/Under Account all amounts in excess of those amounts due to Buyer in accordance with the Principal Agreements on the date Buyer receives or has received both (1) a payment by Seller or an Approved Investor pursuant to a Purchase Commitment and (2) a Purchase Advice relating to such payment without discrepancy; provided, however, that with respect to funds and Purchase Advices received by Buyer after 4:30 p.m. (New York City time), Buyer shall use best efforts to credit same day and if not possible, shall be deemed to have been received on the next Business Day. Buyer shall use reasonable efforts to notify Seller if there is a discrepancy between a wire transfer and the related Purchase Advice, and thereafter, Seller shall notify Buyer as to whether Buyer should accept such settlement payment despite the discrepancy between the amount received and the related Purchase Advice; provided, however, that if an Event of Default or Potential Default has occurred and is continuing, Buyer is not obligated to receive approval from Seller prior to accepting any amounts received and releasing the related Purchased Assets.
(iii) Settlement Statement. Buyer shall deliver to Seller via facsimile or make available to Seller via the internet by 4:30 p.m. (New York City time) on such Business Day a settlement statement, which includes an explanation of all amounts credited by Buyer to the Over/Under Account to settle the Transaction. Notwithstanding the foregoing, Buyer shall use best efforts to credit all amounts received in connection with the settlement of a Transaction on the same day received and if not possible, shall be deemed to have been received on the next Business Day following settlement of a Transaction, or as soon thereafter as is reasonably possible.
(c) Withdrawals.
(i) Seller. If the amount credited to the Over/Under Account creates a balance in excess of the Minimum Over/Under Account Balance required pursuant to Section 3.5(a) above, provided that no Potential Default or Event of Default has occurred and is continuing, Seller may submit a written request to Buyer for return or payment of such excess funds. If any such request is received by Buyer prior to 2:00 p.m. (New York City time) on a Business Day, Buyer shall use commercially reasonable efforts to wire such requested excess funds to Seller by the end of such Business Day and in no event no later than one (1) Business Day after Buyers receipt of such request. Notwithstanding anything contained in this Section 3.5(c)(i) to the contrary, Buyer reserves the right to reject any request for excess funds from the Over/Under Account if Buyer determines that such excess funds shall be used to satisfy Sellers outstanding obligations under this Agreement or are subject to other rights as provided in this Agreement.
(ii) Buyer. Buyer may, from time to time and without separate authorization by Seller or notice to Seller, withdraw funds from the Over/Under Account to settle amounts owed in accordance with the terms of this Agreement or to
otherwise satisfy Sellers obligations under this Agreement, including, without limitation:
(1) with respect to any Transaction with respect to which the Purchase Price is being paid to one or more Approved Payees on behalf of Seller, to deliver the Haircut to such Approved Payees;
(2) to reimburse itself for any reasonable costs and expenses incurred by Buyer in connection with this Agreement, as permitted herein;
(3) to pay itself any Price Differential on a Purchase Price that is due and owing;
(4) to Seller as provided in Section 3.5(c)(i);
(5) after the occurrence and during the continuance of a Potential Default or an Event of Default, as security for the performance of Sellers obligations hereunder;
(6) without limiting the generality of Section 3.5(c)(ii)(5), to satisfy any outstanding Margin Deficit as provided in Section 6.3(b); and
(7) in the exercise of Buyers or its Affiliates rights under Section 6.3(d) or Section 11.9.
(d) Failure to Maintain Balance. If, at any time, Seller fails to maintain in the Over/Under Account the Minimum Over/Under Account Balance as required hereunder, in addition to any other rights and remedies that Buyer may have against Seller, Buyer shall have the right to immediately stop entering into Transactions with Seller and/or to charge Seller accrued interest on that portion of the Minimum Over/Under Account Balance that Seller has failed to maintain, at the Default Rate, from the time that such balance failed to be maintained until the time that funds are deposited into or held in the Over/Under Account to comply with such Minimum Over/Under Account Balance requirements hereunder. Without limiting the generality of the foregoing, it is understood and agreed that should the balance in the Over/Under Account become negative, Seller will continue to owe Buyer accrued interest as provided herein.
(e) Security Interest. Any funds of Seller at any time deposited or held in the Over/Under Account, whether such funds are required to be deposited and held in the Over/Under Account pursuant to this Section 3.5, are hereby pledged by Seller as security for its obligations under this Agreement, and Seller hereby grants a security interest in such funds to Buyer, and such pledge and security interest shall be considered a security agreement or other arrangement or other credit enhancement that is related to the Agreement and Transactions hereunder within the meaning of Bankruptcy Code Sections 101(38A)(A), 101(47)(a)(v) and 741(7)(A)(x).
3.6 Payment of Purchase Price.
(a) Payment of Purchase Price. On the Purchase Date for each Transaction, ownership of the Purchased Assets, including the Servicing Rights related to Purchased Assets consisting of Purchased Mortgage Loans, shall be transferred to Buyer against the simultaneous transfer of the Purchase Price to Seller or on behalf of Seller to an Approved Payee, as applicable, and simultaneously with the delivery to Buyer of the Purchased Assets relating to each Transaction. With respect to the Purchased Assets being sold by Seller on the Purchase Date, Seller hereby sells, transfers, conveys and assigns to Buyer or its designee without recourse, but subject to the terms of this Agreement, all of Sellers right, title and interest in and to the Purchased Assets, including the Servicing Rights related to the Purchased Mortgage Loans, together with all right, title and interest of Seller in and to all amounts due and payable under the terms of such Purchased Assets.
(b) Methods of Payment. On the Purchase Date for each Transaction:
(i) Buyer shall pay the Purchase Price for all Transactions by wire transfer to the applicable Approved Payee or to Seller in accordance with Sellers wire instructions set forth on Exhibit J, in each case as directed by Seller. Notwithstanding the foregoing, Buyer shall not be obligated to pay the Purchase Price under any method of payment to any Closing Agent, third party institutional originator or warehouse lender that is not an Approved Payee. Further, the payment of the Purchase Price by Buyer to any Closing Agent, third party institutional originator or warehouse lender that is not an Approved Payee shall not make such Closing Agent, third party institutional originator or warehouse lender an Approved Payee. Any funds disbursed by Buyer to Seller or its Approved Payee shall be subject to all applicable federal, state and local laws, including, without limitation, regulations and policies of the Board of Governors of the Federal Reserve System on Reduction of Payments System Risk. Seller acknowledges that as a result of such applicable laws, regulations and policies, equipment malfunction, Buyers approval procedures or circumstances beyond the reasonable control of Buyer, the payment of a Purchase Price may be delayed. Buyer shall not be liable to Seller for any costs, losses or damages arising from or relating to any such delays, or
(ii) Notwithstanding the foregoing, where a Purchased Asset is the subject of third party financing, Buyer may pay all or any portion of the Purchase Price directly to the warehouse lender or other lender that has a security interest in such Purchased Asset to satisfy the related indebtedness and obtain a release of such security interest.
(c) Transaction Limitations and Other Restrictions Relating to Closing Agents. Notwithstanding that a particular Transaction request will not exceed the Aggregate Transaction Limit or applicable Type Sublimit, if the payment of the Purchase Price for such Transaction to the related Closing Agent will violate Buyers applicable
policies and procedures (as contained in the Handbook or otherwise) regarding payments to Closing Agents, Buyer may refuse to pay the Purchase Price to such Closing Agent.
(d) Return of Purchase Price. If a Wet Mortgage Loan subject to a Transaction is not closed on the same day on which the Purchase Price was funded, Seller shall immediately return, or cause to be immediately returned (but in any event within forty-eight (48) hours), the Purchase Price (or such greater amount that shall have been remitted by Buyer, if applicable) with respect to such Wet Mortgage Loan to Buyer by wire transfer in accordance with Buyers wire instructions set forth on Exhibit B. Further, Seller shall pay Buyer all fees and expenses incurred by Buyer in connection with the funding of the Purchase Price for such Wet Mortgage Loan and, from the date of such funding up to but excluding the date such Purchase Price is returned to Buyer, Seller shall also pay Buyer any Price Differential accrued on such Purchase Price immediately upon notification from Buyer; provided, however, that Price Differential shall continue to accrue until the Purchase Price is returned to Buyer.
3.7 Approved Payees.
(a) Closing Agents. In order for a Closing Agent to be designated an Approved Payee with respect to any Purchase Price for new origination Wet Mortgage Loans or Dry Mortgage Loans as to which the origination funds are being remitted to the closing table, Seller shall submit to Buyer the following documents:
(i) if the title company issuing the title policy that covers the applicable Mortgage Loan has not issued to Buyer a blanket Closing Protection Letter, which covers closings conducted by this Closing Agent in the jurisdiction where this closing will take place:
(1) a valid blanket Closing Protection Letter, in a form acceptable to Buyer, issued to Seller or Buyer by the title company, which is issuing the title insurance policy that covers the related Mortgage Loan and is an Acceptable Title Insurance Company, that covers closings conducted by the Closing Agent in the jurisdiction where this closing will take place and if applicable, an assignment to Buyer of such Closing Protection Letter, substantially in the form of Exhibit F hereto; or
(2) a valid Closing Protection Letter, in a form acceptable to Buyer, issued to Seller or Buyer by the title company, which is issuing the title insurance policy that covers the related Mortgage Loan and is an Acceptable Title Insurance Company, that covers the closing of this specific Mortgage Loan and if applicable, an assignment to Buyer of such Closing Protection Letter, substantially in the form of Exhibit F hereto; or
(3) with respect to those jurisdictions outlined in the Handbook for which Closing Protection Letters are not available or are limited in their applicability, any other documents Buyer may require; and
(ii) evidence that the Irrevocable Closing Instructions, in the applicable form and signed by Seller and Buyer, have been delivered to such Closing Agent.
(b) Warehouse Lenders. In order for a warehouse lender to be designated an Approved Payee with respect to any Purchase Price, Seller shall submit to Buyer a written request, including the name and address of the warehouse lender, demonstrating a need for such designation. Notwithstanding the foregoing, Buyer reserves the right to refuse to designate any warehouse lender as an Approved Payee, or, alternatively, to require additional terms and conditions in order for Buyer to pay a Purchase Price to a warehouse lender.
(c) Approval Process. Buyer shall review the applicable documents and notify Seller within two (2) Business Days as to whether such Closing Agent or warehouse lender has been designated by Buyer to be an Approved Payee with respect to such Purchase Price. Buyer may withdraw its approval of any Closing Agent or warehouse lender as an Approved Payee if Buyer becomes aware of any facts or circumstances at any time related to such Closing Agent or warehouse lender which Buyer determines materially and adversely affects the Closing Agent or warehouse lender or otherwise makes the Closing Agent or warehouse lender unacceptable as an Approved Payee.
3.8 Delivery of Mortgage-Backed Securities. With respect to Purchased Mortgage Loans that are Pooled Mortgage Loans, Buyer shall release its interests in such Purchased Mortgage Loans simultaneously with the Book-Entry Date of a Mortgage-Backed Security backed by a Pool containing such Purchased Mortgage Loans. Provided that such Mortgage-Backed Security has been issued to the Depository as described in the Joint Securities Agreement, from and after such Book-Entry Date, the Mortgage-Backed Security shall replace the related Purchased Mortgage Loans as the Asset that is subject to the related Transaction.
ARTICLE 4
REPURCHASE
4.1 Repurchase Price.
(a) Payment of Repurchase Price. The Repurchase Price for each Purchased Asset shall be payable in full and by wire transfer in accordance with Buyers wire instructions set forth on Exhibit B or Exhibit J, as applicable, upon the earliest to occur of (i) the Repurchase Date of the related Transaction, (ii) the occurrence of any Repurchase Acceleration Event with respect to such Purchased Asset, (iii) at Buyers sole option, upon the occurrence or during the continuance of an Event of Default, or (iv) the Expiration Date. Such obligation to repurchase exists without regard to any prior or intervening liquidation or foreclosure with respect to any
Purchased Asset. While it is anticipated that Seller will repurchase each Purchased Asset on its related Repurchase Date, Seller may repurchase any Purchased Asset hereunder on demand without any prepayment penalty or premium.
(b) Effect of Payment of Repurchase Price. On the Repurchase Date (or such other date on which the Repurchase Price is received in full by Buyer), termination of the related Transaction will be effected by the repurchase by Seller or its designee of the Purchased Assets and the simultaneous transfer of the Repurchase Price to an account of Buyer, or transfer of additional Asset(s) (in each case subject to the provisions of Section 6.5), and all of Buyers rights, title and interests therein shall then be conveyed to Seller or its designee; provided that, Buyer shall not be deemed to have terminated or conveyed its interests in such Purchased Assets if an Event of Default shall be caused by such repurchase or if such repurchase gives rise to or perpetuates a Margin Deficit that is not satisfied in accordance with Section 6.3(b). With respect to Purchased Assets that are Purchased Mortgage Loans, Seller is obligated to obtain the related Mortgage Loan Documents from the Custodian at Sellers expense on the Repurchase Date.
4.2 Repurchase Acceleration Events. The occurrence of any of the following events shall be a Repurchase Acceleration Event with respect to one or more Purchased Assets, as the case may be:
(a) The Purchased Asset is a Defective Asset;
(b) [***] calendar days elapse from the date the related Mortgage Loan Documents were delivered to an Approved Investor and such Approved Investor has not returned such Mortgage Loan Documents or purchased such Purchased Asset, unless an extension is granted by Buyer;
(c) unless any such longer time period is agreed to in writing by Buyer, [***] Business Days elapse from the date a related Mortgage Loan Document was delivered to Seller for correction or completion or for servicing purposes, without being returned to Buyer or its designee;
(d) with respect to a Wet Mortgage Loan, Seller fails to deliver to Buyer the related Mortgage Loan Documents within the Maximum Dwell Time or any Mortgage Loan Document delivered to Buyer, upon examination by Buyer, is found not to be in compliance with the requirements of this Agreement is not corrected within the Maximum Dwell Time;
(e) regardless of whether a Purchased Mortgage Loan is a Defective Asset, a foreclosure or similar type of proceeding is initiated with respect to such Mortgage Loan;
(f) the further sale of a Purchased Asset by Seller to any party other than an Approved Investor;
(g) (1) with respect to any Pooled Mortgage Loan that has been pooled to support a Mortgage-Backed Security issued by Seller and fully guaranteed by Ginnie Mae, Fannie Mae or Freddie Mac, as applicable, for which Buyer has executed a Form HUD 11711A, Form FHLMC 996E, Form GNMA 11711A or Form FNMA 2004A, as applicable, the Custodian ceases to hold the Mortgage Loan File and the related Mortgage Loan Documents in respect thereof for the sole and exclusive benefit of Buyer at any time prior to the issuance of the related Mortgage-Backed Security, or (2) with respect to all other Purchased Mortgage Loans, the Custodian ceases to hold the related Mortgage Loan File and all Mortgage Loan Documents in respect thereof for the sole and exclusive benefit of Buyer at any time other than as released pursuant to the terms of the Custodial Agreement;
(h) with respect to any Pooled Mortgage Loan or Mortgage-Backed Security and other than as set forth in the Joint Securities Agreement, if the Seller has failed to deliver the related Trade Assignment to Buyer or its designee in accordance with the requirements set forth in Section 7.2(b);
(i) with respect to any Pooled Mortgage Loan, if the Applicable Agency has not issued the related Mortgage-Backed Security to the Depository in the name of Buyer or Buyers nominee on the related Settlement Date or in the name of Seller or its nominee if delivered to the Securities Intermediary under the Joint Securities Agreement;
(j) with respect to any Mortgage-Backed Security that is subject to a Transaction pursuant to Section 3.8, if Buyer or its designee has not received the related Takeout Price from the Approved Investor on the related Settlement Date; or
(k) following the termination of a Temporary Increase, the Aggregate Outstanding Purchase Price exceeds the Aggregate Transaction Limit (as reduced by the termination of such Temporary Increase).
4.3 Reduction of Asset Value as Alternative Remedy. In Buyers good faith discretion, in lieu of requiring full repayment of the Repurchase Price upon the occurrence of a Repurchase Acceleration Event, Buyer may elect to reduce the Asset Value of the related Purchased Asset (to as low as zero) and accordingly require a full or partial repayment of such Repurchase Price or the delivery of other funds or collateral, which additional assets shall be margin payments or settlement payments as such terms are defined in Bankruptcy Code Sections 741(5) and (8), respectively.
4.4 Designation as Noncompliant Asset as Alternative Remedy. In Buyers good faith discretion, in lieu of requiring full repayment of the Repurchase Price upon the occurrence of a Repurchase Acceleration Event, Buyer may elect to deem the related Purchased Asset a Noncompliant Asset, provided that (a) after such Purchased Asset is deemed to be a Noncompliant Asset, the aggregate original Asset Value of all Noncompliant Assets does not exceed the Type Sublimit for Noncompliant Assets; (b) the Asset Value of the Noncompliant Asset is greater than the Repurchase Price or Seller provides Additional Purchased Assets or repays part of the Repurchase Price as provided in Section 6.3 in each
case as a margin payment as such term is defined in Bankruptcy Code Section 741(5); and (c) Seller delivers to Buyer all documentation relating to the Purchased Asset reasonably requested by Buyer.
4.5 Illegality or Impracticability. Notwithstanding anything to the contrary in this Agreement, if Buyer determines in good faith that any law, regulation, treaty or directive or any change therein or in the interpretation or application thereof, or any circumstance materially and adversely affecting the London interbank market, the repurchase market for mortgage loans or mortgage-backed securities or the source or cost of Buyers funds, shall make it unlawful, impractical or commercially unreasonable for Buyer to enter into or maintain Transactions as contemplated by this Agreement, (a) the commitment of Buyer hereunder to enter into or to continue to maintain Transactions shall be cancelled and (b) the Repurchase Price for each Transaction then outstanding shall be due and payable upon the earlier to occur of (i) the date required by any financial institution providing funds to Buyer, (ii) sale of the Purchased Assets in accordance with the terms of this Agreement, and (iii) the date as of which Buyer determines that such Transactions are unlawful or impractical or commercially unreasonable to maintain; provided, that Buyer shall not be liable to Seller for any costs, losses or damages arising from or relating from any actions taken by Buyer pursuant to this Section 4.5; provided that Buyer shall provide Seller with thirty (30) days prior written notice in advance of taking any actions set forth in this Section 4.5 due to a determination that Transactions are impracticable or commercially unreasonable. No notice shall be required if such Transactions are unlawful.
4.6 Increased Costs.
(a) Notwithstanding anything to the contrary in this Agreement, if Buyer determines that if any change in any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority or any change in the interpretation or application thereof or compliance by Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof (i) subjects Buyer to any tax of any kind whatsoever with respect to this Agreement or any Purchased Assets (excluding Excluded Taxes) or changes the basis of taxation of payments to Buyer in respect thereof, (ii) imposes, modifies or holds applicable any reserve, special deposit, compulsory advance or similar requirement against assets held by deposits or other liabilities in or for the account of Transactions or extensions of credit by, or any other acquisition of funds by any office of Buyer which is not otherwise included in the determination of the Applicable Pricing Rate hereunder, or (iii) imposes on Buyer any other condition, the result of which is to increase the cost to Buyer, by an amount which Buyer deems to be material, of effecting or maintaining purchases hereunder, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, Seller shall either, (A) terminate this Agreement and immediately remit the Repurchase Price to Buyer, or (B) promptly pay Buyer such additional amount or amounts as will compensate Buyer for such increased cost or reduced amount receivable thereafter incurred.
(b) If Buyer has determined that the adoption of or any change in any law, treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any corporation controlling Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof has the effect of reducing the rate of return on Buyers or such corporations capital as a consequence of its obligations hereunder to a level below that which Buyer or such corporation but for such adoption, change or compliance (taking into consideration Buyers or such corporations policies with respect to capital adequacy) by an amount deemed by Buyer to be material, then from time to time, Seller shall either, (A) terminate this Agreement and immediately remit the Repurchase Price to Buyer, or (B) promptly pay to Buyer such additional amount or amounts as will thereafter compensate Buyer for such reduction.
If Buyer becomes entitled to claim any additional amounts pursuant to this Section 4.6, it shall promptly notify Seller of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this subsection submitted by Buyer to Seller shall be conclusive in the absence of manifest error.
4.7 Payments Pursuant to Sale to Approved Investors. Seller shall direct each Approved Investor purchasing a Purchased Asset to pay directly to Buyer or its designee in accordance with Joint Securities Agreement, by wire transfer of immediately available funds, the applicable Takeout Price in full and without set-off on the date set forth in the applicable Purchase Commitment. In addition, Seller shall provide Buyer with a Purchase Advice relating to such payment. Seller shall not direct the Approved Investor to pay to Buyer an amount less than the full Takeout Price or modify or otherwise change the wire instructions for payment of the Takeout Price provided to Approved Investor by Buyer. Buyer shall apply all amounts received from an Approved Investor for the account of Seller in accordance with Section 4.8 below and credit all amounts due Seller to the Over/Under Account in accordance with Section 3.5(b)(ii) above. Buyer may reject, after notice to Seller, any amount received from an Approved Investor and not release the related Purchased Asset if (a) Buyer does not receive a Purchase Advice in respect of any wire transfer, (b) Buyer does not receive the full Takeout Price, without set-off or (c) the amount received is not sufficient to pay the related Repurchase Price in full. Alternatively, in lieu of rejecting an amount received by Buyer from an Approved Investor, at Buyers option, if the amount received from the Approved Investor does not equal or exceed the related Repurchase Price, Buyer may accept the amount received from the Approved Investor and deduct the remaining amounts owed by Seller from the Over/Under Account or demand payment of such remaining amount from Seller. If Seller receives any funds intended for Buyer, Seller shall segregate and hold such funds in trust for Buyer and immediately pay to Buyer all such amounts by wire transfer of immediately available funds together with providing Buyer with a settlement statement for the transaction.
4.8 Application of Payments from Seller or Approved Investors. Unless Buyer determines otherwise in its good faith discretion, payments made directly by Seller or an Approved Investor to Buyer shall be applied in the following order of priority:
(a) first, to any amounts due and owing to Buyer pursuant to Section 6.3;
(b) second, to all costs, expenses and fees incurred or charged by Buyer under this Agreement that are due and owing and related to the Transaction in connection with which the payment is made;
(c) third, to all costs, expenses and fees incurred or charged by Buyer under this Agreement that are due and owing and not related to a specific Transaction, and Buyer shall provide Seller with an accounting of such amounts as soon as practicable after application of such amounts;
(d) fourth, to the Price Differential then due and owing and the outstanding Purchase Price, in each case, on the Purchased Asset in connection with which the payment is made; and
(e) fifth, to the amount of all other obligations then due and owing by Seller to Buyer under this Agreement and the other Principal Agreements, and Buyer shall provide Seller with an accounting of such amounts as soon as practicable after application of such amounts.
Buyer and Seller intend and agree that all such payments shall be settlement payments as such term is defined in Bankruptcy Code Section 741(8). After the settlement payments have been applied as set forth above, Buyer shall deposit in the Over/Under Account any amounts that remain.
4.9 Method of Payment. Except as otherwise specifically provided herein, all payments hereunder must be received by Buyer on the date when due and shall be made in United States dollars by wire transfer of immediately available funds in accordance with Buyers wire instructions set forth on Exhibit B or Exhibit J, as applicable. Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day, and with respect to payments of the Purchase Price, the Price Differential thereon shall be payable at the Applicable Pricing Rate during such extension. All payments made by or on behalf of Seller with respect to any Transaction shall be applied to Sellers account in accordance with Section 3.5(b)(ii) and Section 4.8 above and shall be made in such amounts as may be necessary in order that all such payments after withholding for or on account of any present or future Taxes imposed by any Governmental Authority, other than any Excluded Taxes, compensate Buyer for any additional cost or reduced amount receivable of making or maintaining Transactions as a result of such Taxes. All payments to be made by or on behalf of Seller with respect to any Transaction shall be made without set-off, counterclaim or other defense.
4.10 Reserved.
4.11 Reserved.
4.12 Book Account. Buyer and Seller shall maintain an account on their respective books of all Transactions entered into between Buyer and Seller and for which the Repurchase Price
has not yet been paid. As a courtesy to Seller, Buyer shall provide such information to Seller via the Internet, electronic mail, telephone or facsimile, if Seller is unable to access the information via the Internet. Notwithstanding the foregoing, Seller shall be responsible for maintaining its own book account and records of Transactions entered into with Buyer, amounts due to Buyer in connection with such Transactions and for paying such amounts when due. Failure of Buyer to provide Seller with information regarding any Transaction shall not excuse Sellers timely performance of all obligations under this Agreement, including, without limitation, payment obligations under this Agreement.
4.13 Full Recourse. The obligations of Seller from time to time to pay the Repurchase Price, Margin Deficit payments, settlement payments and all other amounts due under this Agreement shall be full recourse obligations of Seller.
ARTICLE 5
FEES
5.1 Payment of Fees. Seller shall pay to Buyer those fees set forth in this Agreement and the Transactions Terms Letter when they become due and owing. Without limiting the generality of the foregoing, the Facility Fee shall be paid on or before the Effective Date and if this Agreement is renewed, thereafter on or before the anniversary of the Effective Date. Buyer shall be entitled to withdraw from the Over/Under Account or retain from payments made by Seller or an Approved Investor, subject to Section 4.6, or set off against any Purchase Prices to be paid by Buyer any fees permitted under this Agreement that are due and owing, with notice of such set off to Seller as soon as practicable after application of such amounts; provided, that failure to provide such notice shall not affect Buyers rights to set off hereunder. If such amounts on deposit in the Over/Under Account or payments received in connection with a Transaction or Purchase Prices to be paid by Buyer are not sufficient to pay Buyer all fees owed, Buyer shall notify Seller and Seller shall pay to Buyer, within one (1) Business Day, all unpaid fees.
ARTICLE 6
SECURITY; SERVICING; MARGIN ACCOUNT MAINTENANCE; CUSTODY OF MORTGAGE LOAN DOCUMENTS; REPURCHASE TRANSACTIONS; DUE DILIGENCE
6.1 Precautionary Grant of Security Interest in Purchased Assets and Purchased Items. With respect to the Purchased Assets, although the parties intend that all Transactions hereunder be sales and purchases (other than for accounting and tax purposes) and not loans, and without prejudice to the provisions of Section 6.6 and the expressed intent of the parties, if any Transactions are deemed to be loans, as security for the performance of all of Sellers obligations hereunder, Seller hereby pledges, assigns and grants to Buyer a continuing first priority security interest in and lien upon the Purchased Assets and other Purchased Items and Buyer shall have all the rights and remedies of a secured party under the Uniform Commercial Code with respect to the Purchased Assets and other Purchased Items. Possession of any promissory notes, instruments or documents by the Custodian shall constitute possession on behalf of Buyer.
Seller acknowledges that it has no rights to the Servicing Rights related to any Purchased Mortgage Loan. Without limiting the generality of the foregoing and for the avoidance of doubt, if any determination is made that the Servicing Rights related to any Purchased Mortgage Loan were not sold by Seller to Buyer or that the Servicing Rights are not an interest in such Purchased Mortgage Loan and are severable from such Purchased Mortgage Loan despite Buyers and Sellers express intent herein to treat them as included in the purchase and sale transaction, Seller hereby pledges, assigns and grants to Buyer a continuing first priority security interest in and lien upon the Servicing Rights related to such Purchased Mortgage Loans, and Buyer shall have all the rights and remedies of a secured party under the Uniform Commercial Code with respect thereto. In addition, Seller further grants, assigns and pledges to Buyer a first priority security interest in and lien upon (i) all documentation and rights to receive documentation related to such Servicing Rights and the servicing of each of the Purchased Mortgage Loans, (ii) all Income related to the Purchased Assets received by Seller, (iii) all rights to receive such Income, (iv) all other Purchased Items, and (v) all products, proceeds and distributions relating to or constituting any or all of the foregoing (collectively, and together with the pledge of Servicing Rights in the immediately preceding sentence, the Related Credit Enhancement). The Related Credit Enhancement is hereby pledged as further security for Sellers obligations to Buyer hereunder.
At any time and from time to time, upon the written request of Buyer, and at the sole expense of Seller, Seller will promptly and duly execute and deliver, or will promptly cause to be executed and delivered, such further instruments and documents and take such further action as Buyer may request in good faith for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including, without limitation, the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any jurisdiction with respect to the Purchased Assets and related Purchased Items and the liens created hereby. Seller also hereby authorizes Buyer to file any such financing or continuation statement in a manner consistent with this Agreement to the extent permitted by applicable law. For purposes of the Uniform Commercial Code and all other relevant purposes, this Agreement shall constitute a security agreement.
6.2 Servicing.
(a) Servicing Rights Owned by Buyer; Buyers Right to Appoint Servicer. In recognition that each Purchased Mortgage Loan is sold by Seller to Buyer on a servicing released basis and Buyer is the owner of the Servicing Rights related to such Purchased Mortgage Loan, subject to paragraphs (b) and (c) below, Buyer shall have the sole right to appoint the Servicer for each Purchased Mortgage Loan.
(b) Appointment of Servicer. Subject to Buyers right to appoint a successor Servicer at its discretion upon the occurrence of an Event of Default or Servicer Termination Event, Buyer hereby appoints Seller or the Servicer, as applicable, to subservice the Purchased Mortgage Loans on behalf of Buyer as agent for Buyer for the period between the Purchase Date and the Repurchase Date of the Purchased Mortgage Loans. The right of Seller or the Servicer, as applicable, to service the Purchased
Mortgage Loans is on an interim basis only and does not provide or confer a contractual, ownership or other right for Seller or the Servicer, as applicable, to service the Purchased Mortgage Loans, it being understood that upon payment of the Purchase Price, Buyer owns the Servicing Rights and may assume servicing or appoint a Successor Servicer at any time. Further, the fact that Seller or the Servicer may be entitled to a servicing fee for interim servicing of the Purchased Mortgage Loans or that Buyer may provide a separate notice of default to Seller or the Servicer regarding the servicing of the Purchased Mortgage Loans shall not affect or otherwise change Buyers ownership of the Servicing Rights related to the Purchased Mortgage Loans.
(c) Interim Servicing Period; Servicing Fees or Income. For each Transaction, Sellers or the Servicers, as applicable, right to interim service a Purchased Mortgage Loan shall commence on the related Purchase Date and shall automatically terminate without notice on the earlier to occur of (i) the Repurchase Date or (ii) the occurrence of an Event of Default or Servicer Termination Event. Buyer shall have no right to terminate Seller or Servicer, as applicable, as the interim servicer other than in connection with an Event of Default or Servicer Termination Event. Seller or the Servicer, as applicable, shall transfer servicing of the Purchased Mortgage Loan (which shall include the delivery of all Servicing Records related to such Purchased Mortgage Loan) to Buyer or its designee in accordance with the instructions of Buyer and any other applicable requirements of this Agreement. For the avoidance of doubt, upon expiration of the interim servicing period with respect to any Purchased Mortgage Loan, Seller shall have no right to service the related Purchased Mortgage Loan nor shall Buyer have any obligation to extend the interim servicing period (or continue to extend the interim servicing period), it being understood that upon such expiration, Seller shall promptly transfer the servicing of the related Purchased Mortgage Loan to Buyer or its designee in accordance with the instructions of Buyer and any other applicable requirements of this Agreement. Buyer shall have no obligation to pay Seller or the Servicer, as applicable, however, Seller or the Servicer, as applicable, shall have the right to deduct or retain, any servicing fee or similar compensation in connection with the interim servicing of a Purchased Mortgage Loan.
(d) Servicing Agreement. The Servicing Agreement and/or Servicer Notice and Acknowledgement shall be on terms acceptable to Buyer in its good faith discretion, and which shall include, at a minimum, (i) a recognition by the Servicer of Buyers interests and rights to the Purchased Mortgage Loans as provided under this Agreement, including, without limitation, Buyers ownership of the Servicing Rights related to the Purchased Mortgage Loans; (ii) an obligation for the Servicer to subservice the Purchased Mortgage Loans consistent with the degree of skill and care that the Servicer customarily requires with respect to similar Mortgage Loans owned or managed by it but in no event no less than in accordance with Accepted Servicing Practices; (iii) an obligation to comply with all applicable federal, state and local laws and regulations; (iv) an obligation to maintain all state and federal licenses necessary for it to perform its subservicing responsibilities; (v) an obligation not to impair the rights of Buyer in any Purchased Mortgage Loans or
any payment thereto, and (vi) an obligation to collect all Income in respect of the Purchased Mortgage Loans on behalf of Buyer, in trust, in segregated custodial accounts for the benefit of Seller and remit such Income to the custodial account within two (2) Business Days of receipt. Buyer may terminate the subservicing of any Purchased Mortgage Loan with the then existing Servicer in accordance with either Section 6.2(f) or Section 6.2(n).
(e) Servicing Obligations of Seller. To the extent Seller shall subservice any Purchased Mortgage Loan on behalf of Buyer, Seller shall:
(i) Subservice and administer the Purchased Mortgage Loans on behalf of Buyer in accordance with prudent mortgage loan servicing standards and procedures generally accepted in the mortgage banking industry and in accordance with the degree of care and servicing standards generally prevailing in the industry, including all applicable requirements of the Agency Guides, applicable law, FHA Regulations, VA Regulations and RD Regulations, the requirements of any Insurer, as applicable, and the requirements of any applicable Purchase Commitment and the related Approved Investor, so that neither the eligibility of the Purchased Mortgage Loan and any related Mortgage-Backed Security for purchase under such Purchase Commitment nor the FHA Mortgage Insurance, VA Loan Guaranty Agreement, RD Loan Guaranty Agreement or any other applicable insurance or guarantee in respect of any such Purchased Mortgage Loan, if any, is voided or reduced by such servicing and administration;
(ii) Subject to Section 6.2(f), and to the extent not otherwise held by the Custodian, Seller shall at all times maintain and safeguard the Mortgage Loan File for the Purchased Mortgage Loan in accordance with applicable law and lending industry custom and practice and shall hold such Mortgage Loan File in trust for Buyer, and in any event shall maintain and safeguard photocopies of the documents delivered to Buyer pursuant to Section 3.3, and accurate and complete records of its servicing of the Purchased Mortgage Loan; Sellers possession of such Mortgage Loan File is for the sole purpose of subservicing such Purchased Mortgage Loan and such retention and possession by Seller is in a custodial capacity only;
(iii) Buyer may, at any time during Sellers business hours on reasonable notice, examine and make copies of such documents and records, or require delivery of the originals of such documents and records to Buyer or its designee;
(iv) Seller shall deliver to Buyer all such reports with respect to the Purchased Mortgage Loans required in the Transactions Terms Letter and herein at the times and on the dates set forth therein and herein. In addition, at Buyers request, Seller shall promptly deliver to Buyer reports regarding the status of any Purchased Mortgage Loan being subserviced by it, which reports
shall include, but shall not be limited to, a description of any default thereunder for more than thirty (30) days or such other circumstances that could reasonably be expected to cause a material adverse effect with respect to such Purchased Mortgage Loan, Buyers title to such Purchased Mortgage Loan or the collateral securing such Purchased Mortgage Loan; Seller is required to deliver such reports until the repurchase of the Purchased Mortgage Loan by Seller; and
(v) Seller shall immediately notify Buyer if Seller becomes aware of any payment default that occurs under a Purchased Asset.
(f) Sale or Transfer of Servicing Rights by Buyer. Upon the occurrence of an Event of Default, Buyer may sell or transfer any Servicing Rights with respect to a Purchased Mortgage Loan without the prior written consent of Seller or any Servicer.
(g) Release of Mortgage Loan Files. Seller shall release its custody of the contents of any Mortgage Loan File only in accordance with the written instructions of Buyer, except when such release is required (1) as incidental to Sellers subservicing of the related Purchased Mortgage Loan, (2) to complete the Purchase Commitment, or (3) by law.
(h) Right to Appoint Successor Servicer. Upon the occurrence of an Event of Default or Servicer Termination Event, or if no Event of Default or Servicer Termination Event has occurred and is continuing with Sellers consent, Buyer may appoint a successor servicer to subservice any Purchased Mortgage Loan (each a Successor Servicer). In the event of such an appointment, Seller or the Servicer, as applicable, shall perform all acts and take all action so that any part of the Mortgage Loan File and related Servicing Records held by Seller or the Servicer, together with all funds in the applicable custodial account and other receipts relating to such Purchased Mortgage Loan, are promptly delivered to the Successor Servicer. Upon the occurrence of an Event of Default or Servicer Termination Event (but specifically excluding the case where Buyer and Seller have mutually agreed to replace the Servicer), Seller shall have no claim for servicing fees, lost profits or other damages if Buyer appoints a Successor Servicer hereunder.
(i) Income.
(i) Any Income received with respect to a Purchased Asset purchased hereunder (but not any interest accrued on such Purchased Asset up to but not including the Purchase Date for such Purchased Asset), shall be segregated and held in trust for the exclusive benefit of Buyer as the owner of such Purchased Asset and shall be released only as follows:
(1) if a Successor Servicer is appointed by Buyer, all amounts shall be transferred into an account established by the Successor Servicer
pursuant to its agreement with Buyer (and then released pursuant to either clause (2) or (3) below;
(2) after the Repurchase Price for such Purchased Asset has been paid in full to Buyer, all amounts shall be released by Buyer to Seller or transferred to the Approved Investor or its designee as directed by Seller; or
(3) after the occurrence and during the continuance of an Event of Default, upon instruction by Buyer.
(j) Reserved.
(k) Reserved.
(l) Servicer Notice. As a condition precedent to Buyer funding the Purchase Price for any Purchased Mortgage Loan subserviced by a Servicer other than Seller, Buyer, or an Affiliate of Buyer, Seller shall provide to Buyer a Servicer Notice addressed to and agreed to by the Servicer, advising the Servicer of such matters as Buyer may reasonably request, including, without limitation, recognition by the Servicer of Buyers interest in such Purchased Mortgage Loans and ownership of the Servicing Rights related thereto and the Servicers agreement that upon receipt of notice of an Event of Default from Buyer, it will follow the instructions of Buyer with respect to the subservicing of the related Purchased Mortgage Loans.
(m) Notification of Servicer Defaults. If Seller should discover that, for any reason whatsoever, any entity responsible to Seller by contract for managing or servicing any such Purchased Asset has failed to perform fully Sellers obligations with respect to the management or servicing of such Purchased Mortgage Loan as required under this Agreement or any of the obligations of such entities with respect to the Purchased Asset as delegated by such Seller pursuant to any Servicing Agreement, Seller shall promptly notify Buyer.
(n) Termination. Buyer shall have the right at any time to immediately terminate Sellers or any Servicers (as applicable) right to service the Purchased Mortgage Loans due to an Event of Default or a Servicer Termination Event, in either case if Seller has not cured such default within [***] in accordance with the Servicing Agreement, and Seller has not (A) appointed a successor servicer acceptable to Buyer and (B) delivered a fully executed Servicer Notice with such successor servicer, in each case within [***] following the occurrence of such Servicer Termination Event; without payment of any penalty or termination fee. Seller shall cooperate, or cause the Servicer to cooperate, in transferring the servicing of the Purchased Mortgage Loans to a successor servicer appointed by Buyer in its good faith discretion. For the avoidance of doubt, any termination of the Servicers rights to service by Buyer as a result of a Servicer Termination Event or an Event of Default shall be deemed part of an exercise of Buyers rights to cause the liquidation, termination or acceleration of this Agreement.
(o) Buyers Right to Service. Buyer or its designee, upon the occurrence of an Event of Default or a Servicer Termination Event, shall be entitled to service some or all of the Purchased Assets that are Purchased Mortgage Loans, including, without limitation, receiving and collecting all sums payable in respect of same. Upon Buyers determination and written notice to Seller or the Servicer, as applicable, that Buyer desires to service some or all of the Purchased Mortgage Loans following the occurrence of an Event of Default or a Servicer Termination Event, Seller shall promptly cooperate, or shall cause the Servicer to promptly cooperate, with all instructions of Buyer and do or accomplish all acts or things necessary to effect the transfer of the servicing to Buyer or its designee, at Sellers sole expense. Upon Buyers or its designees servicing of the Purchased Mortgage Loans, (i) Buyer may, in its own name or otherwise in accordance with permissible law, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for the Purchased Mortgage Loan(s), but shall be under no obligation to do so; (ii) Seller shall, if Buyer so requests, pay to Buyer all amounts received by Seller upon or in respect of the Purchased Mortgage Loan(s) or other Purchased Assets, advising Buyer as to the source of such funds; and (iii) all amounts so received and collected by Buyer shall be held by it as part of the Purchased Assets or applied against any outstanding Repurchase Price owed Buyer.
6.3 Margin Account Maintenance.
(a) Asset Value. Buyer shall have the right to determine the Asset Value of each Purchased Asset at any time.
(b) Margin Deficit and Margin Call. If Buyer shall determine at any time that (x) the Asset Value of a Purchased Asset subject to a Transaction is less than the related Purchase Price for such Purchased Asset, (y) the aggregate Asset Value of all Purchased Assets subject to each Transaction is less than the Aggregate Outstanding Purchase Price for such Transactions, or (z) the aggregate Asset Value of all Purchased Assets subject to all Transactions is less than the Aggregate Outstanding Purchase Price for such Transactions (in any such case, a Margin Deficit), then Buyer may, at its sole option and by notice to Seller (as such notice is more particularly set forth below, a Margin Call), require Seller to either:
(i) transfer to Buyer or its designee cash or, at Buyers sole option, Eligible Assets approved by Buyer (Additional Purchased Assets) so that (x) the individual Asset Value of the Purchased Asset, (y) the aggregate Asset Value of all Purchased Assets subject to each Transaction, or (z) the aggregate Asset Value of all Purchased Assets subject to Transactions, as the case may be, including any such cash or Additional Purchased Assets tendered by the Seller, will thereupon equal or exceed the individual or Aggregate Outstanding Purchase Price(s) as applicable; or
(ii) pay one or more Repurchase Prices, as applicable, in an amount sufficient to reduce the related Purchase Price so that the related Purchase Price (or
the related aggregate Purchase Price) is less than or equal to the Asset Value of the Purchased Asset (or the aggregate Asset Value of the Purchased Assets, as applicable).
If Buyer delivers a Margin Call to Seller on or prior to 12:00 p.m. (New York City time) on any Business Day, then Seller shall transfer cash or Additional Purchased Assets, as applicable, to Buyer no later than 5:00 p.m. (New York City time) that same day or such other later time in Buyers sole discretion. If Buyer delivers a Margin Call to Seller after 12:00 p.m. (New York City time) on any Business Day, Seller shall be required to transfer cash or Additional Purchased Assets no later than 5:00 p.m. (New York City time) on the next subsequent Business Day. Notice of a Margin Call may be provided by Buyer to Seller electronically or in writing, such as via electronic mail.
(c) Buyers Discretion. Buyers election not to make a Margin Call at any time there is a Margin Deficit shall not in any way limit or impair its right to make a Margin Call at any time a Margin Deficit exists.
(d) Over/Under Account. Buyer may withdraw from the Over/Under Account amounts equal to any Margin Deficit which is not otherwise satisfied by Seller within the time frames provided in this Section 6.3.
(e) Credit to Repurchase Price. Any cash transferred to Buyer pursuant to this Section 6.3 shall be credited to the Repurchase Price of the related Transaction(s).
6.4 Custody of Mortgage Loan Documents.
(a) Custodial Arrangements. With respect to Purchased Mortgage Loans, Buyer may appoint any Person to act as the Custodian, with Sellers consent (provided no consent shall be required if an Event of Default has occurred), to hold possession of the Mortgage Loan Documents and the Agency Documents (or a portion thereof) and to take actions at the direction of Buyer. If any Person other than Buyer is appointed as Custodian, it shall be a condition precedent to Buyer entering into any Transactions hereunder that Seller, Buyer and Custodian enter into a Custodial Agreement acceptable to Buyer. Seller agrees to deliver the Mortgage Loan Documents and certain of the Agency Documents to the Custodian upon the direction of Buyer. Seller further agrees that (i) the Custodian shall be exclusively the agent, bailee and/or custodian of Buyer; (ii) receipt of the Mortgage Loan Documents or the Agency Documents by the Custodian shall be constructive receipt by Buyer of such documents; (iii) Seller shall not have and shall not attempt to exercise any degree of control over the Custodian or any Mortgage Loan Document or Agency Document held by the Custodian; and (iv) Buyer shall not be liable for any act or omission by the Custodian selected by Buyer with reasonable care.
(b) Temporary Withdrawal of Mortgage Loan Documents for Correction. Buyer may permit Seller to withdraw, for a period not to exceed ten (10) Business Days (unless otherwise agreed to by Buyer), specified Mortgage Loan Documents for the
purpose of correcting or completing such documents or servicing the related Purchased Mortgage Loan; provided, however, that unless otherwise agreed to by Buyer in writing, in no event shall more than fifteen (15) Mortgage Loan Files (or Mortgage Loan Documents from more than fifteen (15) Mortgage Loan Files) shall be released from Custodians possession at any one time; provided further, that any Mortgage Loan Documents that are withdrawn by or at the request of Seller and delivered to a Person other than Seller shall at all times be covered by one or more Bailee Agreements, true and complete and fully executed copies of which shall be delivered to Buyer. Notwithstanding the foregoing, Buyer shall be deemed to be in possession of any Mortgage Loan Documents released pursuant to this Section 6.4(b), and the interest of Buyer in the related Purchased Mortgage Loan shall continue unimpaired until the Mortgage Loan Documents are returned to, or the Repurchase Prices with respect thereto are received by, Buyer.
(c) Delivery of Mortgage Loan Documents to Approved Investors. Provided that no Potential Default or Event of Default has occurred and is continuing, upon the written request of Seller, Buyer will, or shall cause the Custodian to, deliver to an Approved Investor, or its custodian, the Mortgage Loan Documents relating to a specified Purchased Mortgage Loan. All such Purchased Mortgage Loans and the related Mortgage Loan Documents shall at all times be covered by one or more Bailee Agreements. Notwithstanding the foregoing, Buyer shall be deemed to be in possession of any Mortgage Loan Documents released pursuant to this Section 6.4(c), and the interest of Buyer in the related Purchased Mortgage Loan shall continue unimpaired until the Mortgage Loan Documents are returned to, or the Repurchase Prices with respect thereto are received by, Buyer. If the Approved Investor does not purchase a Purchased Mortgage Loan as contemplated by the related Purchase Commitment, Seller shall, upon the request of Buyer, assist Buyer in the recovery of any Mortgage Loan Documents not returned by the Approved Investor to Buyer.
(d) Delivery of Mortgage Loan Documents Relating to Mortgage-Backed Securities. Upon the written request of Seller, Buyer shall deliver to the certifying custodian or permit the delivery to the certifying custodian of the Mortgage Loan Documents relating to those Purchased Mortgage Loans that are or will be Pooled Mortgage Loans. All such Purchased Mortgage Loans and the related Mortgage Loan Documents shall at all times be covered by a Bailee Agreement, and Buyer or its designee will not release Mortgage Loan Documents to a certifying custodian unless Buyer or its designee has received a signed tri-party custodial agreement from such custodian, in a form acceptable to Buyer. Buyer shall have no obligation to release or permit the release of any Mortgage Loan Documents to any certifying custodian that will not sign a custodial agreement. Notwithstanding the foregoing, Buyer shall be deemed to be in possession of any Mortgage Loan Documents released pursuant to this Section 6.4(d), and the interest of Buyer in the related Purchased Mortgage Loans shall continue unimpaired until the Mortgage Loan Documents are returned to, or proceeds thereof are received by, Buyer. Seller shall pay for all costs of the certifying custodian and use its best efforts to ensure that the
issuer delivers the Mortgage-Backed Securities to the Depository on the related Book-Entry Date as described in the Joint Securities Agreement.
6.5 Repurchase and Release of Purchased Assets. Provided that no Event of Default or Potential Default has occurred and is continuing, Seller may repurchase a Purchased Asset by either:
(a) paying, or causing an Approved Investor to pay, to Buyer, subject to Sections 4.7 and 4.8 above, the Repurchase Price; or
(b) transferring to Buyer additional Assets satisfactory to Buyer and/or cash, in aggregate amounts sufficient to cover the amount by which the aggregate amount of Transactions then outstanding hereunder (plus accrued interest and accrued fees with respect thereto) exceeds the Asset Value of the existing Purchased Assets, excluding the Purchased Assets to be released; provided that (i) such additional Assets shall be deemed part of a new Transaction, (ii) the conditions precedent in Section 7.2 shall be satisfied prior to any such transfer, and (iii) any such transfer shall only relate to repurchases of Purchased Assets with respect to the Committed Amount.
Upon receipt of the applicable amount, as set forth above, Buyer shall (i) with respect to Purchased Mortgage Loans, deliver or shall cause the Custodian to deliver the related Mortgage Loan Documents to Seller or Sellers designee, if such documents have not already been delivered pursuant to a Bailee Agreement and (ii) with respect to related Mortgage-Backed Securities, deliver the Mortgage-Backed Security to Seller or Approved Investor, as applicable, on a delivery versus payment basis. If any such release gives rise to or perpetuates a Margin Deficit, Buyer shall notify Seller of the amount thereof and Seller shall thereupon satisfy the Margin Call in the manner specified in Section 6.3(b). Buyer shall have no obligation to release a repurchased Purchased Asset or terminate its security interest in such Purchased Asset until such Margin Call is satisfied.
6.6 Repurchase Transactions. Beginning on the related Purchase Date and prior to the related Repurchase Date for a Transaction, Buyer shall have free and unrestricted use of all related Purchased Assets and may in its discretion and without notice to Seller engage in repurchase transactions with respect to any or all of such Purchased Assets or otherwise pledge, hypothecate, assign, transfer or convey any or all of such Purchased Assets (such transactions, Repurchase Transactions); provided, however, that to the extent Buyer engages in Repurchase Transactions, it shall have reacquired title to the Purchased Assets prior to the related Repurchase Date. Nothing contained in this Agreement shall obligate Buyer to segregate any Purchased Asset or Purchased Item delivered to Buyer by Seller; provided further that Buyer shall give Seller prompt written notice of such Repurchase Transactions. Seller shall not be responsible for any additional obligations, costs or fees in connection with such Repurchase Transactions. Seller shall not take any action inconsistent with Buyers ownership of a Purchased Asset and shall not claim any legal, beneficial or other interest in such a Purchased Asset other than the limited right and obligations to provide servicing of such Purchased Mortgage Loans where Buyer designates Seller as servicer as provided in Section 6.2.
6.7 Periodic Due Diligence. Seller acknowledges that Buyer has the right at any time during the term of this Agreement to perform continuing due diligence reviews with respect to the Purchased Assets, for purposes of verifying compliance with the representations, warranties, covenants and specifications made hereunder or under any other Principal Agreement, or otherwise, and Seller agrees that upon reasonable (but no less than five (5) Business Days) prior notice to Seller (provided that upon the occurrence of a Potential Default or an Event of Default, no such prior notice shall be required), Buyer or its authorized representatives will be permitted during Sellers normal business hours to examine, inspect, make copies of, and make extracts of, the Mortgage Loan Files, the Servicing Records and any and all documents, records, agreements, instruments or information relating to such Purchased Assets in the possession, or under the control, of Seller, Custodian or Servicer. Further, Seller will make available to Buyer a knowledgeable financial or accounting officer and will instruct such officer to answer candidly and fully, at no cost to Buyer, any and all questions that any authorized representative of Buyer may address to them in reference to the Mortgage Loan Files and Purchased Assets. Without limiting the generality of the foregoing, Seller acknowledges that Buyer shall purchase Assets from Seller based solely upon the information provided by Seller to Buyer in the Asset Data Records and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right, at any time to re-underwrite any of the Purchased Assets itself or engage a third party underwriter to perform such re-underwriting. Seller agrees to cooperate with Buyer and any third party underwriter in connection with such re-underwriting, including, but not limited to, providing Buyer and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased Assets in the possession, or under the control, of Seller. Seller and Buyer further agree that all reasonable out-of-pocket costs and expenses incurred by Buyer in connection with Buyers activities pursuant to this Section 6.7 shall be paid by Seller, provided that no Potential Default or Event of Default has occurred or is continuing Sellers obligation to pay such costs and expenses shall be capped at $20,000.
ARTICLE 7
CONDITIONS PRECEDENT
7.1 Initial Transaction. As conditions precedent to Buyer considering whether to enter into the initial Transaction hereunder:
(a) Seller shall have delivered to Buyer, in form and substance satisfactory to Buyer:
(i) each of the Principal Agreements duly executed by each party thereto and in full force and effect, free of any modification, breach or waiver;
(ii) an opinion of Sellers counsel as to such matters as Buyer may reasonably request, including, without limitation, with respect to Buyers first priority lien on and perfected security interest in the Purchased Assets and Purchased Items; a non-contravention, enforceability and corporate opinion with respect to Seller; an opinion with respect to the inapplicability of the Investment Company Act of 1940 to Seller; and a Bankruptcy Code opinion
with respect to the matters outlined in Section 14.19, each in form and substance acceptable to Buyer;
(iii) a Power of Attorney duly executed by Seller and notarized (it being understood that Buyer shall not exercise such Power of Attorney prior to the occurrence and continuance of an Event of Default);
(iv) a certified copy of Sellers articles or certificate of incorporation and bylaws (or corresponding organizational documents if Seller is not a corporation) and, if required by Buyer, a certificate of good standing issued by the appropriate official in Sellers jurisdiction of organization, in each case, dated no less recently than one (1) month prior to the Effective Date;
(v) a certificate of Seller, dated as of the Effective Date, in form and substance acceptable to Buyer as to the incumbency and authenticity of the signatures of the officers of Seller executing the Principal Agreements and the resolutions of the board of directors of Seller (or its equivalent governing body or Person) in form and substance acceptable to Buyer;
(vi) independently audited financial statements of Seller (and its Subsidiaries, on a consolidated basis) for each of the two (2) fiscal years most recently ended (if available), containing a balance sheet and related statements of income, stockholders equity and cash flows, all prepared in accordance with GAAP, applied on a basis consistent with prior periods, and otherwise acceptable to Buyer, together with an auditors opinion that is unqualified or otherwise is consented to in writing by Buyer;
(vii) if more than six (6) months has passed since the close of the most recently ended fiscal year, interim financial statements of Seller covering the period from the first day of the current fiscal year to the last day of the most recently ended month;
(viii) the Servicing Agreement duly executed by each Servicer and Seller and a Servicer Notice duly executed by each Servicer shall have been delivered to Buyer;
(ix) copies of Sellers errors and omissions insurance policy or mortgage impairment insurance policy and blanket bond coverage policy or certificates of insurance for such policies, all in form and content satisfactory to Buyer, showing compliance by Seller with Section 9.9 below;
(x) if required by Buyer, a subordination agreement, in form and substance satisfactory to Buyer, executed by any Person which is, as of the Effective Date, a creditor of Seller, including each Affiliate of Seller that is a creditor of Seller;
(xi) an Acknowledgement of Confidentiality of Password Agreement in the form of Exhibit I hereto;
(xii) the Facility Fee and any other fees then due and owing under the Transactions Terms Letter;
(xiii) [reserved];
(xiv) a copy of Sellers underwriting guidelines for Mortgage Loans in form and substance acceptable to Buyer in its sole discretion, as amended from time to time; and
(xv) such other documents as Buyer or its counsel may reasonably request.
(b) Buyer shall have determined that it has received satisfactory evidence that the appropriate Uniform Commercial Code Financial Statements (UCC-1) and/or such other instruments as may be necessary in order to create in favor of Buyer, a perfected first- priority security interest in the Purchased Assets and related Purchased Items should any of the Transactions be deemed to be loans, and same shall have been duly executed and appropriately filed or recorded in each office of each jurisdiction in which such filings and recordations are required to perfect such first-priority security interest.
(c) Buyer shall have determined that it has satisfactorily completed its due diligence review of Sellers operations, business, financial condition and underwriting and origination of Mortgage Loans.
(d) Seller shall have provided evidence, satisfactory to Buyer, that Seller has all Approvals, as applicable, and such Approvals are in good standing; and
(e) Seller shall deliver to Buyer an Intercreditor Agreement signed by each creditor that provides warehouse lines of credit, repurchase facilities or similar mortgage finance arrangements to Seller.
7.2 All Transactions. As conditions precedent to Buyer (or the Custodian if set forth below) considering whether to enter into any Transaction hereunder (including the initial Transaction), or whether to continue a Transaction, in the case of a Transaction in respect of Mortgage Loans which convert to Pooled Mortgage Loans on the related Pooling Date or a Transaction in respect of Pooled Mortgage Loans which convert to a Mortgage-Backed Security on the related Book-Entry Date, as applicable:
(a) Seller shall have delivered to Buyer, in form and substance satisfactory to Buyer and not later than 4:00 p.m. (New York City time) and best efforts thereafter:
(i) an Asset Data Record for the Assets subject to the proposed Transaction, which Asset Data Record may be an individual record or part of a group report and shall be authenticated by Seller with the PIN or the handwritten signature of an authorized officer of Seller;
(ii) to the Custodian, a complete Mortgage Loan File for each Mortgage Loan subject to the proposed Transaction, unless such Mortgage Loan is a Wet Mortgage Loan;
(iii) [reserved];
(iv) for each Mortgage Loan that is subject to the proposed Transaction that is also subject to a security interest (including any precautionary security interest) immediately prior to the Purchase Date, a Warehouse Lenders Release, or bailee letter or Sellers Release, as applicable, for such Mortgage Loan;
(v) a schedule identifying each Asset subject to the proposed Transaction as either a Safe Harbor Qualified Mortgage, a Rebuttable Presumption Qualified Mortgage, a Permitted Non-Qualified Mortgage Loan or a Bond Loan 1st Lien, as applicable; and
(vi) such other documents pertaining to the Transaction as Buyer may reasonably request, from time to time;
(b) with respect to any Trade Assignment, Seller hereby acknowledges that, in order for Buyer to satisfy the good delivery standards of the Securities Industry and Financial Markets Association (SIFMA) as set forth in the SIFMA Uniform Practices Manual and SIFMAs Uniform Practices for the Clearance and Settlement of Mortgage Backed Securities and other Related Securities, in each case, as amended from time to time, Buyer must deliver each Trade Assignment in respect of Pooled Mortgage Loans or Mortgage-Backed Securities to the related Approved Investor no later than seventy-two (72) hours prior to settlement of the related Mortgage-Backed Security. Seller hereby acknowledges and agrees to deliver to Buyer, in form and substance satisfactory to Buyer and not later than 1:00 p.m. (New York City time) on the date on which such seventy-two (72) hour period commences, each related Trade Assignment (solely to the extent such Pooled Mortgage Loan is not pooled with Mortgage Loans financed by a third party pursuant to a joint pooling arrangement) executed by Seller, together with a true and complete copy of the related Purchase Commitment for any Assets subject to the proposed Transaction that are subject to a Purchase Commitment;
(c) for Mortgage Loans proposed to be sold to Buyer under such Transaction with respect to which the related Purchase Price is to be paid to one or more Approved Payees on behalf of Seller, an amount equal to the related Haircut (if any) plus the Minimum Over/Under Account Balance, as set forth in Section 3.5(a), shall be on deposit in the Over/Under Account;
(d) for all new origination Wet Mortgage Loans or Dry Mortgage Loans as to which the origination funds are being remitted to the closing table that are proposed to be sold under such Transaction, Seller shall have delivered to (i) the applicable Closing Agent (with a copy to Buyer) the Irrevocable Closing Instructions and final
closing instructions and, if applicable, (ii) to Buyer a copy of the blanket or individual Closing Protection Letter and the related Assignment of Closing Protection Letter duly executed and naming Buyer as the assignee, each in accordance with Section 9.10;
(e) on or prior to the Pooling Date for any Pooled Mortgage Loan, Seller shall deliver or cause to be delivered (A) to Buyer, an executed trust receipt from the Custodian relating to such Mortgage Loan in form and substance satisfactory to Buyer, (B) to the Custodian (or otherwise made available to the Custodian), all documents, schedules and forms required by and in accordance with the Custodial Agreement, (C) to Buyer or its designee, a copy of each of the applicable Agency Documents, and (D) to Buyer or its designee, a Trade Assignment executed by such Seller that satisfies the requirements set forth in Section 7.2(b);
(f) on or prior to the related Settlement Date for any Mortgage-Backed Security relating to a Purchased Mortgage Loan, Seller shall have provided Buyer or its designee with the CUSIP number for such Mortgage-Backed Security;
(g) Seller shall have paid all fees (including Facility Fees and Unused Facility Fees), expenses, indemnity payments and other amounts that are then due and owing under the Principal Agreements;
(h) [reserved];
(i) Seller shall have designated one or more Approved Payees, if applicable, to whom the related Haircut (if any) and Purchase Price shall be delivered;
(j) the representations and warranties of Seller set forth in Article 8 hereof shall be true and correct in all material respects as if made on and as of the date of each Transaction;
(k) [reserved];
(l) no Potential Default, Event of Default or a Material Adverse Effect shall have occurred and be continuing or will occur as a result of entering into such Transaction;
(m) if applicable, a Servicing Agreement duly executed by the Servicer and Seller and a Servicer Notice duly executed by the Servicer shall have been delivered to Buyer;
(n) Buyer shall have received a copy of any amendments or updates to Sellers underwriting guidelines certified by Seller to be a true and complete copy (to the extent not already delivered to Buyer) that clearly identifies the changes to the underwriting guidelines, and Buyer shall have approved such amendments to the extent such amendments or updates relate to the Mortgage Loans proposed to be subject to such Transaction;
(o) Buyer shall have received for each Purchased Asset subject to a Purchase Commitment or other hedging arrangement, an assignment of such Purchase Commitment or hedging arrangement duly executed by Seller and the related Approved Investor or hedging party, as applicable, and in favor of Buyer if such Purchased Asset is being assigned directly to Buyer; and
(p) To the extent the Mortgage Loan was subject to another warehouse facility of Sellers, Buyer shall have received a warehouse lender release for each Purchased Mortgage Loan that is subject to a security interest (including any precautionary security interest) immediately prior to the Purchase Date that is duly executed by the related secured party and Seller and in form and substance satisfactory to Buyer.
For the avoidance of doubt, notwithstanding that foregoing conditions may be satisfied with respect to any Transaction request, Buyer shall be under no obligation to enter into any Transaction with respect to the Uncommitted Amount and whether the Buyer enters into any Transaction with respect to the Uncommitted Amount shall be at the discretion of Buyer.
7.3 Reserved.
7.4 Satisfaction of Conditions. The entering into of any Transaction prior to or without the fulfillment by Seller of all the conditions precedent thereto, whether or not known to Buyer, shall not constitute a waiver by Buyer of the requirements that all conditions, including the non-performed conditions, shall be required to be satisfied with respect to all Transactions. All conditions precedent hereunder are imposed solely and exclusively for the benefit of Buyer and may be freely waived or modified in whole or in part by Buyer. Any waiver or modification asserted by Seller to have been agreed by Buyer must be in writing. Buyer shall not be liable to Seller for any costs, losses or damages arising from Buyers determination that Seller has not satisfactorily complied with any applicable condition precedent.
ARTICLE 8
REPRESENTATIONS AND WARRANTIES
8.1 Representations and Warranties Concerning Seller. Seller represents and warrants to and covenants with Buyer that the following representations and warranties are true and correct as of the Effective Date through and until the date on which all obligations of Seller under this Agreement are fully satisfied.
(a) Due Formation and Good Standing. Seller is (i) duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, (ii) has the full legal power and authority and has all governmental licenses, authorizations, consents and approvals, necessary to own its property and to carry on its business as currently conducted, and (iii) is duly qualified to do business and is in good standing in each jurisdiction in which the transaction of its business makes such qualification necessary.
(b) Authorization. The execution, delivery and performance by Seller of the Principal Agreements and all other documents and transactions contemplated thereby, are within Sellers corporate powers, have been duly authorized by all necessary corporate action and do not constitute or will not result in (i) a breach of any of the terms, conditions or provisions of Sellers articles or certificate of incorporation or bylaws (or corresponding organizational documents if Seller is not a corporation); (ii) a material breach of any legal restriction or any agreement or instrument to which Seller is now a party or by which it is bound; (iii) a material default or an acceleration under any of the foregoing; or (iv) the violation of any law, rule, regulation, order, judgment or decree to which Seller or its property is subject.
(c) Enforceable Obligation. The Principal Agreements and all other documents contemplated thereby constitute legal, binding and valid obligations of Seller, enforceable against Seller in accordance with their respective terms, except as limited by bankruptcy, insolvency or other similar laws affecting the enforcement of creditors rights.
(d) Approvals. The execution and delivery of the Principal Agreements and all other documents contemplated thereby and the performance of Sellers obligations thereunder do not require any license, consent, approval, authorization or other action of any Governmental Authority or any other Person, or if required, such license, consent, approval, authorization or other action has been obtained prior to the Effective Date.
(e) Compliance with Laws. Seller is not in violation of any of its articles or certificate of incorporation or bylaws (or corresponding organizational documents if Seller is not a corporation), of any provision of any applicable law, or of any judgment, award, rule, regulation, order, decree, writ or injunction of any court or public regulatory body or authority that might have a Material Adverse Effect with respect to Seller.
(f) Financial Condition. All financial statements of Seller delivered to Buyer fairly and accurately present the financial condition of the parties for whom such statements are submitted. The financial statements of Seller have been prepared in accordance with GAAP consistently applied throughout the periods involved, and there are no contingent liabilities not disclosed thereby that would adversely affect the financial condition of Seller. Since the close of the period covered by the latest financial statement delivered to Buyer with respect to Seller, there has been no material adverse change in the assets, liabilities or financial condition of Seller nor is Seller aware of any facts that, with or without notice or lapse of time or both, would or could result in any such material adverse change. No event has occurred, including, without limitation, any litigation or administrative proceedings, and no condition exists or, to the knowledge of Seller, is threatened, that (i) might render Seller unable to perform its obligations under the Principal Agreements; (ii) would constitute a Potential Default or Event of Default; or (iii) might have a Material Adverse Effect with respect to Seller.
(g) Credit Facilities. The only credit facilities, including repurchase agreements for mortgage loans and mortgage-backed securities, of Seller that are presently in effect and are secured by mortgage loans or provide for the purchase, repurchase or early funding of mortgage loan sales, are either (i) with Persons disclosed to Buyer at the time of application, or thereafter disclosed to and approved by Buyer, and, such Persons have executed and delivered an Intercreditor Agreement or (ii) warehouse lenders that are Approved Payees.
(h) Title to Assets. Seller has good, valid, insurable (in the case of real property) and marketable title to all of its properties and other assets, whether real or personal, tangible or intangible, reflected on the financial statements delivered to Buyer with respect to Seller, except for such properties and other assets that have been disposed of in the ordinary course of business of Sellers mortgage banking business, and all such properties and other assets are free and clear of all liens except as disclosed in such financial statements.
(i) Litigation. There are no actions, claims, suits, investigations or proceedings pending, or to the knowledge of Seller, threatened or reasonably anticipated against or affecting Seller or any of its Subsidiaries or Affiliates or any of the property thereof in any court or before or by any arbitrator, government commission, board, bureau or other administrative agency that, if adversely determined, may reasonably be expected to result in a Material Adverse Effect.
(j) Payment of Taxes. Seller has timely filed all Tax returns and reports required to be filed and has paid all taxes, assessments, fees and other governmental charges levied upon it or its property or income (whether or not shown on such Tax returns) that are due and payable, including interest and penalties, or has provided adequate reserves for the payment thereof in accordance with GAAP. Any Taxes, fees and other governmental charges payable by Seller in connection with a Transaction and the execution and delivery of the Principal Agreements have been paid.
(k) No Defaults. Seller is not in default under any indenture, mortgage, deed of trust, agreement or other instrument or contractual or legal obligation to which it is a party or by which it is bound in any respect that may reasonably be expected to result in a Material Adverse Effect.
(l) ERISA. Seller and each Plan is in compliance in all material respects with the requirements of ERISA and the Code, and no Reportable Event has occurred with respect to any Plan maintained by Seller or any of its ERISA Affiliates. The present value of all accumulated benefit obligations under each Plan subject to Title IV of ERISA or Section 412 of the Code (based on the assumptions used for purposes of Accounting Standards Codification (ASC) 715) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of such Plan, and the present value of all accumulated benefit obligations of all Plans (based on the assumptions used for purposes of ASC 715) did not, as of the date of the most recent financial statements reflecting such amounts, exceed the fair market value of the assets of all such Plans. Seller and its Subsidiaries and
their ERISA Affiliates do not provide any material medical or health benefits to former employees other than as required by the Consolidated Omnibus Budget Reconciliation Act, as amended, or similar state or local law (collectively, COBRA) at no cost to the employer. The assets of Seller are not plan assets within the meaning of 29 CFR 2510.3-101 as modified by section 3(42) of ERISA.
(m) Approved Mortgagee. Seller is an approved FHA, VA, RD, Ginnie Mae, Fannie Mae and/or Freddie Mac seller, issuer, mortgagee and/or servicer and is in good standing with these agencies, as applicable.
(n) True and Complete Disclosure. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of Seller or any of its Subsidiaries to Buyer in connection with the negotiation, preparation or delivery of this Agreement and the other Principal Agreements or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by or on behalf of Seller or any of its Subsidiaries to Buyer in connection with this Agreement and the other Principal Agreements and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no fact known to Seller that, after due inquiry, could reasonably be expected to have a Material Adverse Effect that has not been disclosed herein, in the other Principal Agreements or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to Buyer for use in connection with the transactions contemplated hereby or thereby.
(o) Ownership; Priority of Liens. Seller owns all Assets identified in the Transactions Terms Letter that are to become Purchased Assets, and any Transaction shall convey all of Sellers right, title and interest in and to the related Purchased Assets and other Purchased Items to Buyer, including with respect to each Purchased Mortgage Loan, the Servicing Rights related thereto. This Agreement creates in favor of Buyer, a valid, enforceable first priority lien and security interest in the Purchased Assets and other Purchased Items, prior to the rights of all third Persons and subject to no other liens.
(p) Investment Company Act. Neither Seller nor any of its Subsidiaries is an investment company or a company controlled by an investment company within the meaning of the Investment Company Act of 1940, as amended.
(q) Filing Jurisdictions; Relevant States. Schedule 1 hereto sets forth all of the jurisdictions and filing offices in which a financing statement should be filed in order for Buyer to perfect its security interest in the Purchased Assets and other Purchased Items. Schedule 2 hereto sets forth all of the states or other jurisdictions in which Seller originates or has originated Mortgage Loans in its own name or through brokers on or prior to the date of this Agreement.
(r) Seller Solvent; Fraudulent Conveyance. As of the date hereof and immediately after giving effect to each Transaction, the fair value of the assets of Seller is greater than the fair value of the liabilities (including, without limitation, contingent liabilities if and to the extent required to be recorded as a liability on the financial statements of Seller in accordance with GAAP) of Seller and Seller is and will be solvent, is and will be able to pay its debts as they mature and does not and will not have an unreasonably small capital to engage in the business in which it is engaged and proposes to engage. Seller does not intend to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Seller is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of Seller or any of its assets. Seller is not transferring any Assets with any intent to hinder, delay or defraud any of its creditors.
(s) Custodial Account. All funds required to be segregated and deposited into the applicable custodial account have been so segregated and deposited.
(t) Chief Executive Office. Sellers chief executive office is located at 21300 Victory Boulevard, Suite 900, Woodland Hills, California 91367.
(u) True Sales. For each Purchased Asset with respect to which the originator, issuer or prior owner is an Affiliate of Seller, any and all interest of such originator, issuer or prior owner has been sold, transferred, conveyed and assigned to Seller pursuant to a legal and true sale and such originator, issuer or prior owner retains no interest in such Purchased Asset, and if so requested by Buyer, such sale is covered by an opinion of counsel or such other documentation to that effect in form and substance acceptable to Buyer.
(v) No Adverse Selection. Seller used no selection procedures that identified Assets offered for sale to Buyer hereunder as being less desirable or valuable than other comparable Assets owned by Seller.
(w) No Broker. Seller has not dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Assets pursuant to this Agreement; provided, that if Seller has dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Assets pursuant to this Agreement, such commission or compensation shall have been paid in full by Seller.
(x) MERS. Seller is a member of MERS in good standing.
(y) Agency Approvals. Seller has all requisite Approvals and is in good standing with each Agency with which it is Approved, with no event having occurred or Seller having any reason whatsoever to believe or suspect will occur, including, without limitation, a change in insurance coverage which would either make Seller unable
to comply with the eligibility requirements for maintaining such Approvals or require notification to the relevant Agency or to HUD, FHA, VA or RD, as applicable.
(z) Custodian. If the Custodian is a Person other than Buyer, such Custodian is an eligible custodian under each applicable Agency Guide and Agency Program, and is not an Affiliate of Seller.
(aa) No Adverse Actions. Seller has not received from any Agency, HUD, the FHA, the VA or the RD a notice of extinguishment or a notice indicating material breach, default or material non-compliance which may entitle such Agency or HUD, the FHA, the VA or the RD to terminate, suspend, sanction or levy penalties against Seller, or a notice from any Agency, HUD, the FHA, the VA or the RD indicating any adverse fact or circumstance in respect of Seller which may entitle such Agency or HUD, the FHA, the VA or the RD, as the case may be, to revoke any Approval or otherwise terminate, suspend Seller as an approved issuer, seller or servicer, as applicable, or with respect to which such adverse fact or circumstance has caused any Agency, HUD, the FHA, the VA or the RD to terminate Seller.
(bb) Accuracy of Wire Instructions. With respect to each Purchased Mortgage Loan subject to a Purchase Commitment by an Agency, as applicable, (1) either the wire transfer instructions as set forth on the applicable Agency Documents are identical to Buyers (or the Securities Intermediary under the Joint Securities Agreement) designated wire instructions or the Buyer has approved such wire transfer instructions in writing in its sole discretion, or (2) either the payee number set forth on the applicable Agency Documents is identical to the payee number that has been identified by Buyer in writing as Buyers (or the Securities Intermediary under the Joint Securities Agreement) payee number or the Buyer has approved the related payee number in writing in its sole discretion. With respect each Pooled Mortgage Loan, the applicable Agency Documents are duly executed by Seller and designate Buyer or its designee as the party authorized to receive the related Mortgage-Backed Securities.
8.2 Representations and Warranties Concerning Purchased Assets. Seller represents and warrants to and covenants with Buyer that the representations and warranties contained on Exhibit L hereto are true and correct with respect to each Purchased Asset as of the related Purchase Date through and until the related Repurchase Date.
8.3 Continuing Representations and Warranties. By submitting an Asset Data Record hereunder, Seller shall be deemed to have represented and warranted the truthfulness and completeness of the representations and warranties set forth in Exhibit L hereto.
8.4 Amendment of Representations and Warranties. From time to time as determined necessary by Buyer with Sellers consent, provided that such consent shall not be unreasonably withheld, Buyer may amend the representations and warranties set forth in Exhibit L hereto. Any such amendment shall not apply to Transactions entered into prior
to the effective date of the amendment and in no event shall the amendment apply to any Transaction on a retroactive basis.
ARTICLE 9
AFFIRMATIVE COVENANTS
Seller hereby covenants and agrees with Buyer that during the term of this Agreement and for so long as there remain any obligations of Seller to be paid or performed under the Principal Agreements:
9.1 Financial Statements and Other Reports.
(a) Interim Statements. Within thirty (30) days after the end of each calendar month that is not a calendar quarter, Seller shall deliver to Buyer financial statements of Seller, including statements of income and changes in shareholders equity (or its equivalent) for the period from the beginning of such fiscal year to the end of such month, and the related balance sheet as of the end of such month, all in reasonable detail and certified by the chief financial officer, treasurer or controller of Seller, subject, however, to year-end audit adjustments.
(b) Quarterly Statements. Within forty-five (45) days after the end of each calendar quarter, Seller shall deliver to Buyer financial statements of Seller, including statements of income and changes in shareholders equity (or its equivalent) for such quarter and the related balance sheet as at the end of such period, all in reasonable detail and certified by the chief financial officer, treasurer or controller of Seller, subject, however, to year-end audit adjustments.
(c) Annual Statements. Within ninety (90) days following the end of Sellers fiscal year, Seller shall deliver to Buyer audited financial statements of Seller, including statements of income and changes in shareholders equity (or its equivalent) for such fiscal year and the related balance sheet as at the end of such fiscal year, all in reasonable detail and accompanied by an unqualified opinion of a certified public accounting firm reasonably satisfactory to Buyer including a management representation letter signed by the chief financial officer, treasurer or controller of Seller stating that the financial statements fairly present the financial condition and results of operations of Seller as of the end of, and for, such year.
(d) Officers Certificate. Together with the financial statements required to be delivered pursuant to Sections 9.1(a), (b) and (c), Seller shall deliver to Buyer an officers certificate substantially in a form to be provided by Buyer which shall include funding and production volume reports for the previous month and evidence of compliance with all financial covenants.
(e) Reserved.
(f) Investor Report Cards. If requested by Buyer and available to Seller, Seller shall promptly deliver to Buyer the most recent report cards from all investors who purchase 10% or more of Sellers production; provided that such report cards are
not subject to confidentiality agreements or Seller otherwise does not have permission from the related investor to share such report cards.
(g) Reserved.
(h) Hedging Reports. Seller shall deliver to Buyer, or cause to be delivered to Buyer, by not later than 4:00 p.m. (New York City time) on each Monday, or Tuesday if Monday is not a Business Day, or as reasonably requested by Buyer, (i) a summary, substantially in the form of Exhibit D hereto. To the extent Seller retains any Person(s) to perform hedging services on behalf of Seller, Seller hereby grants Buyer authority to contact, request and receive hedging reports directly from such Person(s) at no cost to Buyer. Further, Seller shall instruct such Person(s), upon reasonable notice from Buyer and during normal business hours, to answer candidly and fully, at no cost to Buyer, any and all questions that Buyer may address to them in reference to the hedging reports of Seller. Seller may have its representatives in attendance at any meetings between Buyer and such Person(s) held in accordance with this authorization.
(i) Reports and Information Regarding Purchased Assets. Seller shall deliver to Buyer, with reasonable promptness upon Buyers request: (i) copies of any reports related to the Purchased Assets, (ii) copies of all documentation in connection with the underwriting and origination of any Purchased Asset that evidences compliance with, (x) with respect to all Purchased Assets other than a Bond Loan 1st Lien, the Ability to Repay Rule and, (y) with respect to all Purchased Assets other than a Bond Loan 1st Lien and a Permitted Non-Qualified Mortgage Loan, the QM Rule, as applicable, and (iii) any other information in Sellers possession related to the Purchased Assets.
(j) Reserved.
(k) Other Reports. As may be reasonably requested by Buyer from time to time, Seller shall deliver to Buyer, within thirty (30) days of such request (i) copies of all regular or periodic financial or other reports, if any, that Seller files with any governmental, regulatory or other agency and (ii) copies of all audits, examinations and reports concerning the operations of Seller from any Approved Investor, Insurer or licensing authority; provided that sharing such information does not violate any confidentiality provisions of the related investor agreements or applicable law. Seller shall also deliver to Buyer, with reasonable promptness, such further information reasonably related to the business, operations, properties or financial condition of Seller, in such detail and at such times as Buyer may request. Seller understands and agrees that all reports and information provided to Buyer by or relating to Seller may be disclosed to Buyers Affiliates, provided that Buyers Affiliates have agreed to be bound by the confidentiality provisions of this Agreement.
9.2 Inspection of Properties and Books. At no cost to Buyer and subject to the confidentiality provisions of this Agreement, Seller shall permit authorized representatives of Buyer to
discuss the business, operations, assets and financial condition of Seller and its Affiliates and Subsidiaries with its officers and employees and to examine its books of account and make copies and/or extracts thereof, upon reasonable notice to Seller at Sellers place of business during Sellers normal business hours. Further, Seller will provide its accountants with a copy of this Agreement promptly after the execution hereof and will instruct its accountants to answer candidly and fully, at no cost to Buyer, any and all questions that any authorized representative of Buyer may address to them in reference to the financial condition or affairs of Seller and its Affiliates and Subsidiaries. Seller may have its representatives in attendance at any meetings between the officers or other representatives of Buyer and Sellers accountants held in accordance with this authorization.
9.3 Notice. Seller shall give Buyer prompt (but in no event later than three (3) Business Days after becoming aware, except for clause (r), with respect to which notice shall be provided immediately upon becoming aware) written notice, in reasonable detail, of:
(a) any and all material changes to the information set forth in the Application;
(b) any action, suit or proceeding instituted by or against Seller in any federal or state court or before any commission or other regulatory body (federal, state or local, foreign or domestic), or any such action, suit or proceeding threatened against Seller, in any case, if such action, suit or proceeding, or any such action, suit or proceeding threatened against Seller, (i) involves a potential liability, on an individual or aggregate basis, equal to or greater than [***] of Sellers Tangible Net Worth, (ii) is reasonably likely to result in a Material Adverse Effect if determined adversely, (iii) questions or challenges the validity or enforceability of any of the Principal Agreements or (iv) questions or challenges compliance of any Purchased Asset with, (x) with respect to any Purchased Asset other than a Bond Loan 1st Lien, the Ability to Repay Rule or, (y) with respect to any Purchased Asset other than a Bond Loan 1st Lien and a Permitted Non-Qualified Mortgage Loan, the QM Rule;
(c) the filing, recording or assessment of any federal, state or local tax lien against it, or any of its assets in an amount greater than $1,000,000 taken as a whole;
(d) the occurrence of any Potential Default or Event of Default;
(e) the actual or threatened (in writing) suspension, revocation or termination of Sellers licensing or eligibility, in any respect, as an approved, licensed lender, seller, mortgagee or servicer;
(f) the suspension, revocation or termination of any existing credit or investor relationship to facilitate the sale and/or origination of residential mortgage loans or residential mortgage-backed securities;
(g) any demand(s), after any applicable cure period and a final determination that such demand(s) are valid, whether on an individual or in the aggregate, on a rolling six-month basis, by an Approved Investor or Insurer for (i) the repurchase of a mortgage loan(s) if the unpaid principal balance of the mortgage loan(s) subject to
such demand(s) is equal to or greater than $5,000,000 or (ii) indemnification if the demanded indemnification amount(s) is equal to or greater than $5,000,000;
(h) any potential or existing Purchased Mortgage Loan where a director, officer, shareholder, member, partner or owner of Seller is the Mortgagor or guarantor;
(i) any Purchased Asset ceases to be an Eligible Asset;
(j) any Approved Investor that threatens to set-off amounts owed by Seller to such Approved Investor against the purchase proceeds owed by the Approved Investor to Seller for the Purchased Assets (excluding amounts owed by Seller to the Approved Investor which are directly related to Purchased Assets and which are expressly allowed to be set-off by the Approved Investor pursuant to the Bailee Agreement or otherwise by mutual agreement);
(k) any change in the Executive Management or Key Personnel of Seller;
(l) any other action, event or condition of any nature that may reasonably be expected to lead to or result in a Material Adverse Effect with respect to Seller or that, without notice or lapse of time or both, would constitute a default under any material agreement, instrument or indenture to which Seller is a party or to which Seller, its properties or assets may be subject;
(m) any (i) change to the location of its chief executive office/chief place of business from that specified in Section 8.1(t), (ii) change in the name, identity or corporate structure (or the equivalent) or change in the location where Seller maintains its records with respect to the Purchased Assets or any Purchased Items, or (iii) reincorporation or reorganization of Seller under the laws of another jurisdiction;
(n) upon Seller becoming aware of any penalties, sanctions or charges levied, or threatened to be levied (in writing), against Seller or any change or threatened change in Approval status, or the negative findings resulting from any Agency Audit, investigation, or the institution of any action or the threat of institution of any action against Seller by any Agency, HUD, the FHA, the VA or the RD or any other agency, or any supervisory or regulatory Governmental Authority supervising or regulating the origination or servicing of mortgage loans by, or the issuer or seller status of, Seller;
(o) with respect to a Purchased Mortgage Loan that is a Government Mortgage Loan, upon Seller becoming aware of any fact or circumstance which is not resolved pursuant to the timeframes set forth in Section 3.3(d) and would cause (a) such Mortgage Loan to be ineligible for FHA Mortgage Insurance, a VA loan guaranty or a RD loan guaranty, as applicable, (b) the FHA, the VA or the RD to deny or reject a Mortgagors application for FHA Mortgage Insurance, a VA loan guaranty or a RD loan guaranty, respectively, or (c) the FHA, the VA or the RD to deny or reject any claim under any FHA Mortgage Insurance Contract, a VA Loan Guaranty Agreement or a RD Loan Guaranty Agreement, respectively;
(p) upon Seller becoming aware of any termination or threatened termination (in writing) by any Agency of the Custodian as an eligible custodian;
(q) any change to the date on which Sellers fiscal year begins from Sellers current fiscal year beginning date; and
(r) for Transactions other than those subject to the Joint Securities Agreement, upon the earlier of (i) the certification of any Purchased Mortgage Loan by a certifying custodian to an Agency that such Purchased Mortgage Loan meets all of the criteria specified in the related Agency Guide for the securitization thereof, or (ii) the pooling of any Purchased Mortgage Loan for the purpose of backing a Mortgage-Backed Security.
9.4 Existence, Etc. Seller shall (i) preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises necessary for Seller to conduct its business and to perform its obligations under the Principal Agreements, (ii) comply with the requirements of all applicable laws, rules, regulations and orders of Governmental Authorities (including, without limitation, truth in lending, real estate settlement procedures and all environmental laws) if the failure to comply with such requirements would be reasonably likely (either individually or in the aggregate) to have a Material Adverse Effect, (iii) maintain adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied, and (iv) pay and discharge all Taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its properties prior to the date on which any related lien(s) attach thereto, except for any such Tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained in accordance with GAAP.
9.5 Servicing of Mortgage Loans. Subject to Section 6.2 above, Seller shall subservice all Purchased Mortgage Loans at Sellers expense and without charge of any kind to Buyer. Seller may delegate its obligations hereunder to subservice the Purchased Mortgage Loans (subject to Section 6.2) to an independent subservicer provided that such independent subservicer and the related Servicing Agreement has been approved by Buyer and such independent subservicer has executed a Servicer Notice with Buyer. The failure of Seller to obtain the prior approval of Buyer regarding the delegation of its subservicing obligations to an independent subservicer and/or the failure of the independent subservicer to execute and return to Buyer a Servicer Notice shall be considered an Event of Default hereunder. In any event, Seller or its delegate shall subservice such Purchased Mortgage Loans with the degree of care and in accordance with the subservicing standards generally prevailing in the industry, including those required by Fannie Mae, Freddie Mac and Ginnie Mae.
9.6 Evidence of Purchased Assets. Seller shall indicate on its books and records (including its computer records) that each Purchased Asset has been included in the Purchased Items.
9.7 Defense of Title; Protection of Purchased Items. Seller warrants and will defend the right, title and interest of Buyer in and to all Purchased Items against all adverse claims and
demands of all Persons whomsoever. Seller will comply with all applicable laws, rules and regulations of any Governmental Authority applicable to Seller or relating to the Purchased Items and cause the Purchased Items to comply with all applicable laws, rules and regulations of any such Governmental Authority. Seller shall allow Buyer, following prior notice to Seller, (a) to inspect any Mortgaged Property relating to a Purchased Mortgage Loan; (b) to appear in or intervene in any proceeding or matter affecting any Purchased Asset or other Purchased Item or the value thereof; (c) to initiate, commence, appear in and defend any foreclosure, action, bankruptcy or proceeding which could affect Buyers ownership or security of the Purchased Items or the value thereof, or the rights and powers of Buyer; (d) to contest by litigation or otherwise any lien asserted against any Purchased Mortgage Loan (or against the related Mortgaged Property) or against any other Purchased Item, the improvements, or the personal property identified therein; and/or (e) to make payments on account of such encumbrances, charges, or liens and to service any Purchased Mortgage Loans and take any action it may deem appropriate to collect all amounts due and owing with respect to any Purchased Items or any part thereof or to enforce any rights with respect thereto. All reasonable costs and expenses, including reasonable attorneys fees (including, but not limited to, those incurred on appeal), that Buyer may incur with respect to any of the foregoing and any expenditures it may make to protect or preserve the Purchased Items or the rights of Buyer, shall be payable by Seller. Seller shall repay the same to Buyer upon demand with interest, at the Default Rate, from the date any such expenditure shall have been made until the day it is repaid.
9.8 Further Assurances. Seller shall, at its expense, promptly procure, execute and deliver to Buyer, upon request, all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements of Seller in this Agreement.
9.9 Fidelity Bonds and Insurance. Seller shall maintain an insurance policy, in a form and substance satisfactory to Buyer, covering against loss or damage relating to or resulting from any breach of fidelity by Seller, or any officer, director, employee or agent of Seller, any loss or destruction of documents (whether written or electronic), fraud, theft, misappropriation and errors and omissions, such that Buyer shall have the right to pursue any claim for coverage available to any named insured to the full extent allowed by law. This policy shall name Buyer as a loss payee and shall provide coverage in an amount as required by the Fannie Mae Guide. Following approval by Buyer of a specific insurance policy, Seller shall not amend, cancel, suspend or otherwise change such policy to a lower amount of coverage without the prior written consent of Buyer.
9.10 Table-Funded Mortgage Loans. In connection with the funding of each new origination Wet Mortgage Loan or Dry Mortgage Loan as to which the origination funds are being remitted to the closing table, Seller shall provide to the applicable Closing Agent (with a copy to Buyer), (i) the Irrevocable Closing Instructions and (ii) final closing instructions which shall, without limitation, make reference to the Irrevocable Closing Instructions and stipulate the title insurance company that will be issuing the applicable title insurance policy and Closing Protection Letter, which title insurance company shall be an Acceptable Title Insurance Company. In no event shall Seller use such final closing instructions to modify or attempt to modify the terms of the Irrevocable Closing Instructions unless such
modifications are agreed to in advance and in writing by Buyer. Seller shall not otherwise modify or attempt to modify the terms of the Irrevocable Closing Instructions without Buyers prior written approval. If the Closing Agent is not an Acceptable Title Insurance Company, except as otherwise permitted pursuant to Section 3.7(a)(i), Seller shall also (a) confirm that the closing is covered by a blanket Closing Protection Letter issued to Seller, and assignable to Buyer, by the title insurance company stipulated in the final closing instructions, and shall provide a copy of such Closing Protection Letter to Buyer; or (b) provide to Buyer (1) a Closing Protection Letter covering the closing issued to Seller by the title insurance company stipulated in the final closing instructions and (2) a duly executed Assignment of Closing Protection Letter relating to the above referenced Closing Protection Letter naming Seller and assignable to Buyer.
9.11 Sharing of Information. Notwithstanding anything herein or in any other Principal Agreement to the contrary, upon the occurrence and during the continuance of a Potential Default or Event of Default, Buyer may exchange information related to Seller, the Transactions hereunder and the terms and conditions of the Principal Agreements with Persons who are providing or are contemplating providing credit of any kind to Seller; provided that such Persons have agreed to the confidentiality provisions as set forth in this Agreement.
9.12 ERISA. As soon as reasonably possible, and in any event within fifteen (15) days after Seller knows or has reason to believe that any of the events or conditions specified below with respect to any Plan has occurred or exists, a statement signed by a senior financial officer of Seller setting forth details respecting such event or condition and the action, if any, that Seller or its ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by Seller or an ERISA Affiliate with respect to such event or condition):
(a) any Reportable Event or failure to meet minimum funding standards, provided that a failure to meet the minimum funding standard of Section 412 of the Code or Sections 302 or 303 of ERISA, including, without limitation, the failure to make on or before its due date a required installment under Section 430(j) of the Code or Section 303(j) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code or any request for a waiver under Section 412(c) of the Code for any Plan;
(b) the distribution under Section 4041(c) of ERISA of a notice of intent to terminate any Plan or any action taken by Seller or an ERISA Affiliate to terminate any Plan;
(c) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by Seller, any Subsidiary or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan;
(d) the complete or partial withdrawal from a Multiemployer Plan by Seller, any Subsidiary or any ERISA Affiliate that results in liability under Section 4201 or
4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt by Seller, any Subsidiary or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA;
(e) the institution of a proceeding by a fiduciary of any Multiemployer Plan against Seller, any Subsidiary or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; and
(f) the adoption of an amendment to any Plan that, pursuant to Section 401(a)(29) of the Code, would result in the loss of tax-exempt status of the trust of which such Plan is a part if Seller, any Subsidiary or an ERISA Affiliate fails to timely provide security to such Plan in accordance with the provisions of said Sections.
9.13 Additional Repurchase or Warehouse Facility. Subject to Section 10.12, Seller shall maintain throughout the term of this Agreement, with nationally recognized and established counterparties (other than Buyer) mortgage loan repurchase or warehouse facilities that, in the aggregate: (i) provide funding in an amount equal to at least the Aggregate Transaction Limit and (ii) accommodate wet mortgage loans in an amount not less than the amount provided hereunder.
9.14 MERS. Seller will comply in all material respects with the rules and procedures of MERS in connection with the servicing of all Purchased Mortgage Loans that are registered with MERS for as long as such Purchased Mortgage Loans are so registered.
9.15 Agency Audit and Approval Maintenance. Seller shall (i) at all times maintain copies of relevant portions of all Agency Audits in which there are material adverse findings, including without limitation notices of defaults, notices of termination of approved status, notices of imposition of supervisory agreements or interim servicing agreements, and notices of probation, suspension, or non-renewal, (ii) provide Buyer with copies of such Agency Audits promptly upon Buyers request, and (iii) take all actions necessary to maintain its respective Approvals.
9.16 Most Favored Status. Seller and Buyer each agree that should Seller or any Affiliate thereof enter into a repurchase agreement, warehouse facility, guaranty or similar credit facility with any Person (including, without limitation, Buyer or any of its Affiliates) which by its terms provides any of the following (each, a More Favorable Agreement):
(a) more favorable terms with respect to any guaranties or financial or other material covenants;
(b) a security interest to any Person other than Buyer or an Affiliate of Buyer in substantially all assets of Seller or any Affiliate thereof; or
(c) a requirement that Seller has added or will add any Person other than Buyer or an Affiliate of Buyer as a loss payee under Sellers insurance policy maintained pursuant to Section 9.9 hereof;
then the Seller shall provide the Buyer with prompt notice of such more favorable terms contained in such More Favorable Agreement and the terms of this Agreement or the Transactions Terms Letter, as applicable, shall be deemed automatically amended to include such more favorable terms contained in such More Favorable Agreement, such that such terms operate in favor of Buyer or an Affiliate of Buyer; provided, that in the event that such More Favorable Agreement is terminated, upon notice by Seller to Buyer of such termination, the original terms of this Agreement shall be deemed to be automatically reinstated. Promptly, upon Seller or any Affiliate thereof entering into a repurchase agreement or other credit facility with any Person other than Buyer, Seller shall deliver to Buyer a true, correct and complete summary of the more favorable terms in such More Favorable Agreement.
9.17 Financial Covenants and Ratios. Seller shall at all times comply with any financial covenants and/or financial ratios set forth in the Transactions Terms Letter.
ARTICLE 10
NEGATIVE COVENANTS
Seller hereby covenants and agrees with Buyer that during the term of this Agreement and for so long as there remain any obligations of Seller to pay or perform under this Agreement, Seller shall comply with the following:
10.1 Debt. Seller shall not incur any additional material Debt without the prior written consent of Buyer, which consent shall not be unreasonably withheld, other than (i) the Existing Debt, (ii) Debt incurred with Buyer or its Affiliates, and (iii) usual and customary accounts payable for a mortgage company.
10.2 Lines of Business. Seller shall not engage to any substantial extent in any line or lines of business activity other than the businesses of mortgage banking and financial services related to mortgage banking or mortgage products.
10.3 Subordinated Debt. Upon the occurrence of a Potential Default or an Event of Default, Seller shall not incur additional Subordinated Debt or make payments on Subordinated Debt without the prior written consent of Buyer.
10.4 Loss of Eligibility. Seller shall not, either directly or indirectly, without the prior written consent of Buyer, take, or fail to take, any action that would cause Seller to lose all or any part of its status as an eligible lender, seller, mortgagee or servicer or willfully terminate its status as an eligible lender, seller, mortgagee or servicer without [***] prior written notice to Buyer.
10.5 Loans to Officers, Employees and Shareholders. Seller shall not, either directly or indirectly, without the prior written consent of Buyer, make any personal loans or advances to any officers, employees, shareholders, members, partners or owners of Seller in an aggregate amount exceeding [***] of Sellers Tangible Net Worth; provided, however, that Seller shall be entitled to make a personal loan or advance to a majority shareholder, member, partner or owner of Seller without the prior written consent of Buyer provided that (i) a Potential Default or an Event of Default is not existing and will not occur
as a result thereof and (ii) such loan or advance is clearly reflected on Sellers financial reports provided to Buyer.
10.6 Liens on Purchased Assets and Purchased Items. Seller acknowledges that with respect to each Transaction it shall have sold the Purchased Assets and related Purchased Items and shall have granted to Buyer a first priority security interest in such assets in the event such Transaction is deemed a loan. Accordingly, Seller shall not create, incur, assume or suffer to exist any lien upon the Purchased Assets or the Purchased Items, other than as granted to Buyer herein.
10.7 Transactions with Affiliates. Seller shall not, directly or indirectly, enter into any transaction with its Affiliates, if any, without the prior written consent of Buyer, including, without limitation, (a) making any loan, advance, extension of credit or capital contribution to an Affiliate, (b) transferring, selling, pledging, assigning or otherwise disposing of any of its assets to or on behalf of an Affiliate, (c) purchasing or acquiring assets from an Affiliate, or (d) paying management fees to or on behalf of an Affiliate; provided, however, that Seller may, without the prior written consent of Buyer, and provided that a Potential Default or an Event of Default is not existing and will not occur as a result thereof, engage in a transaction(s) with any or all of its Affiliates if (i) such transaction is in the ordinary course of Sellers mortgage banking business, and (ii) such transaction is upon fair and reasonable terms no less favorable to Seller had Seller entered into a comparable arm lengths transaction with a Person which is not an Affiliate.
10.8 Consolidation, Merger, Sale of Assets and Change of Control. Seller shall not, directly or indirectly, (a) wind up, liquidate or dissolve its affairs; (b) enter into any transaction of merger or consolidation with any Person; (c) convey, sell, lease or otherwise dispose of, or agree to do any of the foregoing at any future time, all or substantially all of its property or assets; (d) form or enter into any partnership, joint venture, syndicate or other combination which could have a Material Adverse Effect; or (e) allow a Change of Control to occur with respect to Seller, without prior written consent of Buyer; provided, however, that Seller may, without the prior written consent of Buyer, and provided that a Potential Default or an Event of Default is not existing and will not occur as a result thereof: (i) merge or consolidate with any Person if Seller is the surviving and controlling entity and (ii) in the ordinary course of Sellers mortgage banking business, sell equipment that is uneconomic or obsolete and acquire Mortgage Loans for resale and sell Mortgage Loans.
10.9 Payment of Dividends and Retirement of Stock. If a Potential Default or an Event of Default has occurred and is continuing or will occur as a result of such payments, Seller shall not pay any dividends or distributions with respect to any capital stock or other equity interests in Seller, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Seller.
10.10 Purchased Items. Seller shall not attempt to resell, reassign, retransfer or otherwise dispose of, or grant any option with respect to, or pledge or otherwise encumber (except pursuant to this Agreement or the Joint Securities Agreement) any of the Purchased Assets or other Purchased Items or any interest therein. Seller shall not, without prior written consent of
Buyer, amend or modify, or waive any of the terms and conditions of, or settle or compromise any legal claim in respect of, any Purchased Asset other than with respect to minor monetary claims related to ancillary servicing fees paid in the ordinary course of business.
10.11 Secondary Marketing, Underwriting, Third Party Origination and Interest Rate Risk Management Practices. Seller shall give prior written notice to Buyer of any material change in any secondary marketing, underwriting, third party origination and interest rate risk management practices of Seller that exist as of the Effective Date.
10.12 Notice Additional Facilities. Seller shall not, without prior written notification to Buyer, enter into any mortgage financing facility (including, without limitation, any warehouse, repurchase, purchase or off-balance sheet facility).
ARTICLE 11
DEFAULTS AND REMEDIES
11.1 Events of Default. The occurrence of any of the following conditions or events shall be an Event of Default:
(a) failure of Seller to transfer the Purchased Assets to Buyer on the applicable Purchase Date (provided Buyer has tendered the related Purchase Price);
(b) failure of Seller to (i) repurchase the Purchased Assets on the applicable Repurchase Date, (ii) repurchase Purchased Assets pursuant to Section 2.10, or (iii) perform its obligations under Section 6.3(b);
(c) failure of Seller to pay any other amount due under the Principal Agreements within [***] Business Days following the applicable due date;
(d) (i) Seller or any of its Affiliates or Subsidiaries shall default under, or fail to perform as required under, or shall otherwise breach the terms of any instrument, agreement or contract between Seller or any of its Affiliates or Subsidiaries, on the one hand, and Buyer or any of Buyers Affiliates on the other (in any case beyond the expiration of any applicable grace or cure period); or (ii) Seller or any of its Affiliates or Subsidiaries shall default under, or fail to perform as required under (in any case beyond the expiration of any applicable grace or cure period), the terms of any repurchase agreement, loan and security agreement or similar credit facility or agreement for borrowed funds or any other material agreement entered into by Seller or any of its Affiliates or Subsidiaries, on the one hand, and any third party on the other, which default or failure entitles any party to require acceleration or prepayment of any indebtedness thereunder or shall otherwise fail to pay a matured Debt obligation in excess of [***];
(e) [reserved];
(f) [reserved];
(g) any representation, warranty or certification made or deemed made herein or in any other Principal Agreement by Seller or any certificate furnished to Buyer pursuant to the provisions thereof, shall prove to have been false or misleading in any material respect as of the time made or furnished and such occurrence shall not have been remedied within [***] Business Days of the earlier of Sellers knowledge or receipt of notice of such breach (other than the representations and warranties set forth in Section 8.2 which shall be considered solely for the purpose of determining the Asset Value of the Purchased Assets; unless (i) Seller shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made or (ii) any such representations and warranties have been determined by Buyer to be materially false or misleading on a regular basis, in which case there shall be no such cure period);
(h) (i) the failure of Seller to perform, comply with or observe any term, covenant or agreement applicable to Seller as contained in Sections 9.4, 9.12, 9.13, 9.17, 10.1, 10.3, 10.6, 10.7, 10.8, 10.9 or 10.10 of this Agreement, irrespective of any cure period, (ii) the failure of Seller to perform, comply with or observe any term, covenant or agreement applicable to Seller as contained in Articles 9 and 10 of this Agreement (not listed in clause (i) hereof), and such occurrence shall not have been remedied within [***] Business Days of the earlier of Sellers knowledge or receipt of notice of such breach, or (iii) the failure of Seller to perform, comply with or observe any other term, covenant or agreement applicable to Seller as contained in this Agreement (not listed in clause (i) or (ii) hereof) and such occurrence shall not have been remedied within [***] Business Days of the earlier of Sellers knowledge or receipt of notice of such breach;
(i) an Insolvency Event shall have occurred with respect to Seller or any of its Affiliates or Subsidiaries; or Seller shall admit in writing its inability to, or intention not to, perform any of its obligations under this Agreement or any of the other Principal Agreements; or Buyer shall have determined in good faith that Seller is unable to meet its financial commitments as they come due;
(j) one or more judgments or decrees shall be entered against Seller or any of its Affiliates or Subsidiaries involving a liability of [***] or more (to the extent that it is, in the reasonable determination of Buyer, uninsured and provided that any insurance or other credit posted in connection with an appeal shall not be deemed insurance for these purposes), and all such judgments or decrees shall not have been vacated, discharged, stayed or bonded pending appeal within [***] days after entry thereof;
(k) any Plan maintained by Seller, any Subsidiary of Seller or any ERISA Affiliate shall be terminated within the meaning of Title IV of ERISA or a trustee shall be appointed by an appropriate United States District Court to administer any Plan, or the Pension Benefit Guaranty Corporation (or any successor thereto) shall institute proceedings to terminate any Plan or to appoint a trustee to administer any Plan if as of the date thereof Sellers liability, any such Subsidiarys liability or any ERISA Affiliates liability to the PBGC, the Plan or any other entity on termination under
the Plan exceeds the then current value of assets accumulated in such Plan by more than fifty thousand ($50,000) dollars (or in the case of a termination involving Seller as a substantial employer (as defined in Section 4001 (a)(2) of ERISA) the withdrawing employers proportionate share of such excess shall exceed such amount);
(l) Seller or any Subsidiary of Seller or any ERISA Affiliate, in each case, as employer under a Multiemployer Plan shall have made a complete or partial withdrawal from such Multiemployer Plan and the plan sponsor of such Multiemployer Plan shall have notified such withdrawing employer that such employer has incurred a withdrawal liability in (i) an annual amount exceeding fifty thousand ($50,000) dollars, or (ii) an aggregate amount exceeding five hundred thousand ($500,000) dollars;
(m) (i) any Person shall engage in any prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) a determination that a Plan is at risk (within the meaning of Section 303 of ERISA) or any Lien in favor of the PBGC or a Plan shall arise on the assets of Buyer or any ERISA Affiliate, (iii) a Reportable Event shall occur with respect to, or proceedings shall commence to have a trustee appointed, or a trustee shall be appointed, to administer or to terminate, any Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is, in the reasonable opinion of Buyer, likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) Seller or any ERISA Affiliate shall file an application for a minimum funding waiver under section 302 of ERISA or section 412 of the Code with respect to any Plan, (v) any obligation for post-retirement medical costs (other than as required by COBRA) exists, or (vi) any other event or condition shall occur or exist with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, could reasonably be expected to have a Material Adverse Effect or (vii) the assets of Seller, any Subsidiary of Seller, or any ERISA Affiliate become plan assets within the meaning of 29 CFR 2510.3101 as modified by section 3(42) of ERISA;
(n) any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to (i) condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property or assets of Seller or any of its Affiliates or Subsidiaries; (ii) displace the management of Seller or any of its Affiliates or Subsidiaries or to curtail its authority in the conduct of their respective business; or (iii) to remove, limit or restrict the approval of Seller or any of its Affiliates or Subsidiaries as an issuer, buyer or a seller/servicer of Mortgage Loans or securities backed thereby, and any such action provided for in this subsection (n) shall not have been discontinued or stayed within [***] days;
(o) Seller shall disavow its obligations hereunder or shall contest the validity or enforceability of the Principal Agreements or Buyers interest in any Purchased Asset or other Purchased Item;
(p) [reserved];
(q) [reserved];
(r) a Material Adverse Effect shall occur with respect to Seller;
(s) [reserved];
(t) this Agreement shall for any reason cease to create a valid, first priority security interest or ownership interest upon transfer in any of the Purchased Items;
(u) (i) a breach of any of Sellers or Servicers subservicing obligations, including, but not limited to, its failure to deposit any funds required to be deposited under Section 6.2(i), or (ii) a Servicer Termination Event shall occur and Seller has not (A) appointed a successor servicer acceptable to Buyer and (B) delivered a fully executed Servicer Notice with such successor servicer, in each case within [***] following the occurrence of such Servicer Termination Event;
(v) Sellers audited financial statements or notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of Seller as a going concern or reference of similar import;
(w) Seller shall fail to maintain all requisite Approvals;
(x) a Change of Control shall occur with respect to Seller without the prior written consent of Buyer.
With respect to any Event of Default which requires a determination to be made as to whether such Event of Default has occurred, such determination shall be made in Buyers sole good faith discretion and Seller hereby agrees to be bound by and comply with any such determination by Buyer absent manifest error. An Event of Default shall be deemed to be continuing unless expressly waived by Buyer in writing.
11.2 Remedies. Upon the occurrence of an Event of Default, Buyer may, by notice to Seller, declare all or any portion of the Repurchase Prices related to the outstanding Transactions to be immediately due and payable whereupon the same shall become immediately due and payable, and the obligation of Buyer to enter into Transactions shall thereupon terminate; provided that the acceleration of all Repurchase Prices and termination of Buyers obligation to enter into Transactions shall immediately occur upon the occurrence of an Event of Default under Section 11.1(i), (n) or (o), notwithstanding that Buyer may not have provided any such notice to Seller. Further, it is understood and agreed that upon the occurrence of an Event of Default, Seller shall strictly comply with the negative covenants contained in Article 10 hereunder and in no event shall Seller declare and pay any dividends, incur additional Debt or Subordinated Debt, make payments on Subordinated Debt or otherwise distribute or transfer any of Sellers property and assets to any Person without the prior written consent of Buyer. Upon the occurrence of any Event of Default, Buyer may also, at its option, exercise any or all of the following rights and remedies:
(a) enter the office(s) of Seller and take possession of any of the Purchased Items including any records that pertain to the Purchased Items;
(b) communicate with and notify Mortgagors of the Purchased Mortgage Loans and obligors under other Purchased Assets or on any portion thereof, whether such communications and notifications are in verbal, written or electronic form, including, without limitation, communications and notifications that the Purchased Assets have been assigned to Buyer and that all payments thereon are to be made directly to Buyer or its designee to the extent the Servicer Notice and related Servicing Agreement are in effect with respect to Buyer; settle compromise, or release, in whole or in part, any amounts owing on the Purchased Assets or other Purchased Items or any portion of the Purchased Items, on terms acceptable to Buyer; enforce payment and prosecute any action or proceeding with respect to any and all Purchased Assets or other Purchased Items; and where any Purchased Asset or other Purchased Item is in default, foreclose upon and enforce security interests in, such Purchased Asset or other Item by any available judicial procedure or without judicial process and sell property acquired as a result of any such foreclosure;
(c) collect payments from Mortgagors to the extent the Servicer Notice and related Servicing Agreement are in effect with respect to Buyer and/or assume servicing of, or contract with a third party to subservice, any or all Purchased Mortgage Loans requiring servicing and/or perform any obligations required in connection with Purchase Commitments, with all of any such third partys fees to be paid by Seller. In connection with collecting payments from Mortgagors and/or assuming servicing of any or all Purchased Mortgage Loans, Buyer may take possession of and open any mail addressed to Seller, remove, collect and apply all payments for Seller, sign Sellers name to any receipts, checks, notes, agreements or other instruments or letters or appoint an agent to exercise and perform any of these rights. To the extent the Servicer Notice and related Servicing Agreement are in effect with respect to Buyer, if Buyer so requests, Seller shall promptly forward to Buyer or its designee, all further mail and all trailing documents, such as title insurance policies, deeds of trust, and other documents, and all loan payment histories, both in paper and electronic format, in each case, as same relate to the Purchased Assets;
(d) proceed against Seller under this Agreement;
(e) either (x) sell, without notice or demand of any kind, at a public or private sale and at such price or prices as Buyer may deem to be commercially reasonable for cash or for future delivery without assumption of any credit risk, any or all or portions of the Purchased Assets on a servicing-retained or servicing-released basis; provided that Buyer may purchase any or all of the Purchased Assets at any public or private sale; provided further that Seller shall remain liable to Buyer for any amounts that remain owing to Buyer following any such sale and/or credit; or (y) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Assets, to give Seller credit for such Purchased Assets (including credit for the Servicing
Rights in respect of sales on a servicing-retained basis) in an amount equal to the Market Value of the Purchased Assets against the aggregate unpaid Repurchase Price and any other amounts owing by Seller hereunder. Seller shall remain liable to Buyer for any amounts that remain owing to Buyer following a sale and/or credit under the preceding sentence;
(f) enter into one or more hedging arrangements covering all or a portion of the Purchased Assets; and/or
(g) pursue any rights and/or remedies available at law or in equity against Seller.
11.3 Treatment of Custodial Account. During the existence of a Potential Default or an Event of Default, notwithstanding any other provision of this Agreement, Seller shall have no right to withdraw or release any funds in any custodial account relating to the Purchased Assets to itself or for its benefit, nor shall it have any right to set-off any amount owed to it by Buyer against funds held by it for Buyer in any custodial account relating to the Purchased Assets. During the existence of an Event of Default, Seller shall, or Servicer shall pursuant to the Servicer Notice, promptly remit to or at the direction of Buyer all funds related to the Purchased Assets in the applicable custodial account relating to the Purchased Assets.
11.4 Sale of Purchased Assets. With respect to any sale of Purchased Assets pursuant to Section 11.2(e), Seller acknowledges and agrees that it may not be possible to purchase or sell all of the Purchased Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Assets may not be liquid. Seller further agrees that in view of the nature of the Purchased Assets, liquidation of a Transaction or the underlying Purchased Assets does not require a public purchase or sale. Accordingly, Buyer may elect the time and manner of liquidating any Purchased Asset and nothing contained herein shall obligate Buyer to liquidate any Purchased Asset on the occurrence of an Event of Default, to liquidate all Purchased Assets in the same manner or on the same Business Day, or constitute a waiver of any right or remedy of Buyer. Seller hereby waives any claims it may have against Buyer arising by reason of the fact that the price at which the Purchased Assets may have been sold at such private sale was less than the price which might have been obtained at a public sale or was less than the aggregate Repurchase Price amount of the outstanding Transactions, even if Buyer accepts the first offer received and does not offer the Purchased Assets, or any part thereof, to more than one offeree. Seller hereby agrees that the procedures outlined in Section 11.2(e) and this Section 11.4 for disposition and liquidation of the Purchased Assets are commercially reasonable. Seller further agrees that it would not be commercially unreasonable for Buyer to dispose of the Purchased Assets or any portion thereof by using internet sites that provide for the auction of assets similar to the Purchased Assets, or that have the reasonable capability of doing so, or that match buyers and sellers of assets.
11.5 No Obligation to Pursue Remedy. Buyer shall have the right to exercise any of its rights and/or remedies without presentment, demand, protest or further notice of any kind other than as expressly set forth herein, all of which are hereby expressly waived by Seller. Seller
further waives any right to require Buyer to (a) proceed against any Person, (b) proceed against or exhaust all or any of the Purchased Assets or pursue its rights and remedies as against the Purchased Assets in any particular order, or (c) pursue any other remedy in its power. Buyer shall not be required to take any steps necessary to preserve any rights of Seller against holders of mortgages prior in lien to the lien of any Purchased Asset or to preserve rights against prior parties. No failure on the part of Buyer to exercise, and no delay in exercising, any right, power or remedy provided hereunder, at law or in equity shall operate as a waiver thereof; nor shall any single or partial exercise by Buyer of any right, power or remedy provided hereunder, at law or in equity preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein provided are cumulative and are not exclusive of any remedies provided at law or in equity.
11.6 No Judicial Process. Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives, to the extent permitted by law, any right Seller might otherwise have to require Buyer to enforce its rights by judicial process. Seller also waives, to the extent permitted by law, any defense Seller might otherwise have to its obligations under this Agreement arising from use of nonjudicial process, enforcement and sale of all or any portion of the Purchased Assets or from any other election of remedies. Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arms length.
11.7 Reimbursement of Costs and Expenses. Buyer may, but shall not be obligated to, advance any sums or do any act or thing necessary to uphold and enforce the lien and priority of, or the security intended to be afforded by, any Purchased Asset, including, without limitation, payment of delinquent Taxes or assessments and insurance premiums. All advances, charges, reasonable third party costs and expenses, including reasonable attorneys fees and disbursements and losses resulting from any hedging arrangements entered into by Buyer pursuant to Section 11.2(f), incurred or paid by Buyer in exercising any right, power or remedy conferred by this Agreement, or in the enforcement hereof, together with interest thereon, at the Default Rate, from the time of payment until repaid, shall become a part of the Repurchase Price.
11.8 Application of Proceeds. The proceeds of any sale or other enforcement of Buyers interest in all or any part of the Purchased Assets shall be applied by Buyer:
(a) first, to the payment of the costs and expenses of such sale or enforcement, including reasonable compensation to Buyers third party agents and counsel, and all expenses, liabilities and advances made or incurred by or on behalf of Buyer in connection therewith;
(b) second, to the costs of cover and/or related hedging transactions;
(c) third, to the payment of any other amounts due under this Agreement other than the aggregate Repurchase Price;
(d) fourth, to the payment of the aggregate Repurchase Price;
(e) fifth, to all other obligations owed by Seller under the other Principal Agreements; and
(f) sixth, in accordance with Buyers exercise of its rights under Section 11.9 hereof.
11.9 Rights of Set-Off. Buyer shall have the following rights of set-off:
(a) If Seller shall default in the payment or performance of any of its obligations under this Agreement, Buyer shall have the right, at any time, and from time to time, without notice, to set-off claims and to appropriate or apply any and all deposits of money or property or any other indebtedness at any time held or owing by Buyer to or for the credit of the account of Seller against and on account of the obligations and liabilities of Seller under this Agreement, irrespective of whether or not Buyer shall have made any demand hereunder; provided, however, that the aforesaid right to set-off shall not apply to any deposits of escrow monies being held on behalf of the Mortgagors related to the Purchased Mortgage Loans or other third parties. Without limiting the generality of the foregoing, Buyer shall be entitled to set-off claims and apply property held by Buyer with respect to any Transaction against obligations and liabilities owed by Seller to Buyer with respect to any other Transaction. Buyer may set off cash, the proceeds of any liquidation of the Purchased Assets and all other sums or obligations owed by Buyer to Seller against all of Sellers obligations to Buyer, whether under this Agreement, under a Transaction, or under any other agreement between the parties, or otherwise, without prejudice to Buyers right to recover any deficiency. Buyer agrees promptly to notify Seller after any such set-off and application made by Buyer; provided that the failure to give such notice shall not affect the validity of such set-off and application.
(b) In addition to the rights in subsection (a), Buyer and its Affiliates (collectively, the Bank of America Related Entities), shall have the right to set-off and to appropriate or apply any and all deposits of money or property or any other indebtedness at any time held or owing by the Bank of America Related Entities to or for the credit of the account of Seller and its Affiliates against and on account of the obligations of Seller under any agreement(s) between Seller and/or its Affiliates, on the one hand, and the Bank of America Related Entities, on the other hand, irrespective of whether or not the Bank of America Related Entity shall have made any demand hereunder. In exercising the foregoing right to set-off, any Bank of America Related Entity shall be entitled to withdraw funds in the Over/Under Account which are being held for or owing to Seller to set-off against any amounts due and owing by Seller to the Bank of America Related Entity. If a Bank of America Related Entity other than Buyer intends to exercise its right to set-off in this subsection (b), such Bank of America Related Entity shall provide Seller prior notice thereof, and upon Sellers receipt of such notice, if the basis for such right to set-off is Sellers breach or default of its obligations to the Bank of America Related Entity, Seller shall have three (3) Business Days to cure any such breach or default in order to avoid such set-off.
(c) Buyer shall provide Seller an accounting of any set off in form an substance satisfactory to Buyer pursuant to this Section 11.9 as soon as practicable following application of such amounts; provided, that failure to provide such accounting shall not affect Buyers rights to set off hereunder.
11.10 Reasonable Assurances. If, at any time during the term of the Agreement, Buyer has reason to believe that Seller is not conducting its business in accordance with, or otherwise is not satisfying: (i) all applicable statutes, regulations, rules, and notices of federal, state, or local governmental agencies or instrumentalities, all applicable requirements of Approved Investors and Insurers and prudent industry standards or (ii) all applicable requirements of Buyer, as set forth in this Agreement, then, Buyer shall have the right to demand, pursuant to notice from Buyer to Seller specifying with particularity the alleged act, error or omission in question, reasonable assurances from Seller that such a belief is in fact unfounded, and any failure of Seller to provide to Buyer such reasonable assurances in form and substance reasonably satisfactory to Buyer, within the time hereunder, without a further cure period. Seller hereby authorizes Buyer to take such actions as may be necessary or appropriate to confirm the continued eligibility of Seller for Transactions hereunder, including without limitation (i) ordering credit reports and/or appraisals with respect to any Purchased Mortgage Loan, (ii) contacting Mortgagors, licensing authorities and Approved Investors or Insurers, and (iii) performing due diligence reviews on the Purchased Mortgage Loans and related Mortgage Loan Files pursuant to Section 6.7 and other Purchased Assets.
ARTICLE 12
INDEMNIFICATION
12.1 Indemnification. Seller shall indemnify and hold harmless each of the Bank of America Related Entities and any of their respective officers, directors, employees, agents and advisors (each, an Indemnified Party) from and against any and all liabilities, obligations, losses, damages, penalties, judgments, suits, costs, expenses and disbursements of any kind whatsoever (including reasonable fees and disbursements of its external legal counsel) that may be imposed upon, incurred by or asserted against such Indemnified Party in any way relating to or arising out of the Principal Agreements, any other document referred to therein or any of the transactions contemplated thereby, or any Purchased Assets or Sellers obligations thereunder. Seller also agrees to reimburse an Indemnified Party as and when billed by such Indemnified Party for all such Indemnified Partys reasonable third party costs and expenses incurred in connection with the enforcement or the preservation of such Indemnified Partys rights under this Agreement, any other Principal Agreement (provided that if the terms of any Principal Agreement conflict with the foregoing, the terms of the Principal Agreement shall control) or any transaction contemplated hereby or thereby, including without limitation the reasonable fees and disbursements of its external legal counsel.
12.2 Reimbursement. Seller shall reimburse the Bank of America Related Entities for all expenses required in the Transactions Terms Letter to be reimbursed when they become due and owing. In addition, Seller agrees to pay as and when billed by Buyer all of the reasonable out-of pocket costs and expenses incurred by Buyer in connection with (i) the
consummation and administration of the transactions contemplated hereby including, without limitation, all the due diligence, inspection, testing and review costs and expenses incurred by Buyer with respect to Purchased Assets prior to the Effective Date or pursuant to Section 6.7, or otherwise, (ii) the development, preparation and execution of, and any amendment, supplement or modification to, any Principal Agreement or any other documents prepared in connection therewith, and (iii) all the reasonable fees, disbursements and expenses of external legal counsel to Buyer incurred in connection with any of the foregoing.
12.3 Payment of Taxes.
(a) All payments made by Seller under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future taxes, levies, imposts, duties, deductions, charges, assessments, fees or withholdings (including backup withholdings), and all liabilities (including penalties, interest and additions to tax) with respect thereto imposed by any Governmental Authority (collectively, Taxes), but excluding income taxes (however denominated), branch profits taxes and franchise taxes imposed by the United States, a state or a foreign jurisdiction under the laws of which Buyer is organized or any applicable lending office, or any political subdivision thereof (such exclusions from Taxes, Excluded Taxes), all of which shall be paid by Seller for its own account not later than the date when due. If Seller is required by law or regulation to deduct or withhold any Taxes from or in respect of any amount payable hereunder, it shall: (i) make such deduction or withholding; (ii) pay the amount so deducted or withheld to the appropriate Governmental Authority not later than the date when due; (iii) deliver to Buyer, promptly, original tax receipts and other evidence satisfactory to Buyer of the payment when due of the full amount of such Taxes; and (iv) pay to Buyer such additional amounts as may be necessary so that Buyer receives, free and clear of all Indemnified Taxes (as defined below), a net amount equal to the amount it would have received under this Agreement, as if no such deduction or withholding had been made. In addition, Seller agrees to timely pay to the relevant Governmental Authority in accordance with applicable law any current or future stamp, court or documentary taxes, intangible, filing, excise, property or similar Taxes (including, without limitation, mortgage recording taxes, transfer taxes and similar fees) imposed by any Governmental Authority that arise from any payment made hereunder or from the execution, delivery, performance or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, this Agreement (Other Taxes). Taxes other than Excluded Taxes shall be referred to in this Agreement as Indemnified Taxes.
(b) Seller shall, within ten (10) Business Days after demand therefor, indemnify and hold Buyer harmless from and against the full amount of any and all Indemnified Taxes (including any Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section) and Other Taxes arising with respect to the Purchased Assets, the Principal Agreements and other documents related thereto and fully indemnify and hold Buyer harmless from and against any and all liabilities
or expenses with respect to or resulting from any delay or omission to pay such Taxes, whether or not such Indemnified Taxes or Other Taxes were correctly or legally imposed or assessed by the relevant Governmental Authority. A certificate as to the amount of any payment or liability of Buyer with respect to such Indemnified Taxes or Other Taxes delivered to Seller by Buyer shall be conclusive absent manifest error.
(c) Any Buyer that is not incorporated under the laws of the United States, any State thereof, or the District of Columbia (a Foreign Buyer) and that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under this Agreement shall provide Seller with properly completed United States Internal Revenue Service (IRS) Form W-8BEN, W-8BEN-E, W-8IMY or W-8ECI or any successor form prescribed by the IRS, certifying that such Foreign Buyer is entitled to benefits under an income tax treaty to which the United States is a party which reduces or eliminates the rate of withholding Tax on payments of interest or certifying that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States on or prior to the date upon which each such Foreign Buyer becomes a Buyer. If an IRS form previously delivered expires or becomes obsolete or inaccurate in any respect, each Foreign Buyer will update such form or promptly notify Seller of its legal inability to do so. For any period with respect to which a Foreign Buyer has failed to provide Seller with the appropriate IRS forms prescribed by this Section 12.3(c) (unless such failure is due to a change in treaty, law, or regulation occurring subsequent to the date on which such form originally was required to be provided), such Foreign Buyer shall not be entitled to any gross-up of Indemnified Taxes or indemnification under Section 12.3(b) with respect to Taxes imposed by the United States; provided, however, that should a Foreign Buyer, which is otherwise exempt from a withholding tax, become subject to Taxes because of its failure to deliver an IRS form required hereunder, Seller shall take such steps as such Foreign Buyer shall reasonably request to assist such Foreign Buyer to recover such Taxes.
(d) Nothing contained in this Section 12.3 shall require Buyer to make available any of its tax returns or other information that it deems to be confidential or proprietary or otherwise subject Buyer to any material unreimbursed third party cost or expense or materially prejudice the legal or commercial position of Buyer.
12.4 Buyer Payment. If Seller fails to pay when due any costs, expenses or other amounts payable by it under this Article 12, such amount may be paid on behalf of Seller by Buyer, in its good faith discretion, upon five (5) Business Days notice to Seller, and Seller shall remain liable for any such payments by Buyer. No such payment by Buyer shall be deemed a waiver of any of Buyers rights under any of the Principal Agreements.
12.5 Agreement not to Assert Claims. Seller agrees not to assert any claim against any Indemnified Party, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the Principal Agreements, the actual or proposed use of the proceeds of the Transactions, this Agreement or any of the transactions
contemplated hereby or thereby. THE FOREGOING INDEMNITY AND AGREEMENT NOT TO ASSERT CLAIMS EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.
12.6 Survival. Without prejudice to the survival of any other agreement of Seller hereunder, the covenants and obligations of Seller contained in this Article 12 shall survive the payment in full of the Repurchase Prices and all other amounts payable hereunder and delivery of the Purchased Assets by Buyer against full payment therefor.
ARTICLE 13
TERM AND TERMINATION
13.1 Term. Provided that no Event of Default or Potential Default has occurred and is continuing, and except as otherwise provided for herein, this Agreement shall commence on the Effective Date and continue until the Expiration Date. Following expiration or termination of this Agreement, all amounts due Buyer under the Principal Agreements shall be immediately due and payable without notice to Seller and without presentment, demand, protest, notice of protest or dishonor, or other notice of default, and without formally placing Seller in default, all of which are hereby expressly waived by Seller.
13.2 Termination.
(a) Buyer may terminate this Agreement for Cause (as defined below) at any time by providing notice to Seller. Cause shall be deemed to exist if (i) this Agreement or any Transaction is deemed by a court or by statute to not constitute a repurchase agreement, a securities contract, or a master netting agreement, as each such term is defined in the Bankruptcy Code, (ii) payments or security offered hereunder are deemed by a court or by statute not to constitute settlement payments or margin payments as each such term is defined in the Bankruptcy Code, (iii) this Agreement or any Transaction is deemed by a court or by statute not to constitute an agreement to provide financial accommodations as described in Bankruptcy Code Section 365(c)(1) or (iv) Buyer determines, in good faith, that there has been fraud, misrepresentation or any similar intentional conduct on behalf of Seller, its officers, directors, employees, agents and/or its representatives with respect to any of Sellers obligations, responsibilities or actions undertaken in connection with this Agreement. Seller may, without cause and for any reason whatsoever, terminate this Agreement by providing five (5) Business Days prior notice to Buyer and Seller shall remit the Repurchase Price to Buyer and pay all amounts then owing on the Termination Date.
(b) Subject to Section 2.2, upon termination of this Agreement for any reason, all outstanding amounts due to Buyer under the Principal Agreements shall be immediately due and payable without notice to Seller and without presentment, demand, protest, notice of protest or dishonor, or other notice of default, and without formally placing Seller in default, all of which are hereby expressly waived by Seller. Further, any termination of this Agreement shall not affect the
outstanding obligations of Seller under this Agreement or any other Principal Agreement and all such outstanding obligations and the rights and remedies afforded Buyer in connection therewith, including, without limitation, those rights and remedies afforded Buyer under this Agreement, shall survive any termination of this Agreement. Buyer shall not be liable to Seller for any costs, loss or damages arising from or relating to a termination by Buyer in accordance with any subsection of this Section 13.2.
13.3 Extension of Term. Upon mutual agreement of Seller and Buyer, the term of this Agreement may be extended. Such extension may be made subject to the terms and conditions hereunder and to any other terms and conditions as Buyer and Seller mutually agree upon. Under no circumstances shall such an extension by Buyer be interpreted or construed as a forfeiture by Buyer of any of its rights, entitlements or interest created hereunder. Seller acknowledges and understands that Buyer is under no obligation whatsoever to extend the term of this Agreement beyond the initial term.
ARTICLE 14
GENERAL
14.1 Integration; Servicing Provisions Integral and Non-Severable. This Agreement, together with the other Principal Agreements, and all other documents executed pursuant to the terms hereof and thereof, constitute the entire agreement between the parties with respect to the subject matter hereof and supersedes any and all prior or contemporaneous oral or written communications with respect to the subject matter hereof, all of which such communications are merged herein. All Transactions hereunder constitute a single business and contractual relationship and each Transaction has been entered into in consideration of the other Transactions. Accordingly, each of Buyer and Seller agrees that payments, deliveries, and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries, and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries, and other transfers may be applied against each other and netted. Without limiting the generality of the foregoing, the provisions of this Agreement related to the servicing and Servicing Rights of the Purchased Mortgage Loans are integral, interrelated, and are non-severable from the purchase and sale provisions of the Agreement. Buyer has relied upon such provisions as being integral and non-severable in determining whether to enter into this Agreement and in determining the Purchase Price methodology for such Mortgage Loans. The integration of these servicing provisions is necessary to enable Buyer to obtain the maximum value from the sale of the Purchased Mortgage Loans by having the ability to sell the Servicing Rights related to such Purchased Mortgage Loans free from any claims or encumbrances. Further, the fact that Seller or the Servicer may be entitled to a servicing fee for interim servicing of the Purchased Mortgage Loans or that Buyer may provide a separate notice of default to Seller or the Servicer regarding the servicing of the Purchased Mortgage Loans shall not affect or otherwise change the intent of Seller and Buyer regarding the integral and non- severable nature of the provisions in the Agreement related to servicing and Servicing Rights nor will such facts affect or otherwise change Buyers ownership of the Servicing Rights related to the Purchased Mortgage Loans.
14.2 Amendments. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the party against whom the enforcement of such modification, waiver, amendment, discharge or change is sought.
14.3 No Waiver. No failure or delay on the part of Seller or Buyer in exercising any right, power or privilege hereunder and no course of dealing between Seller and Buyer shall operate as a waiver thereof nor shall any single or partial exercise of any right, power or privilege hereunder preclude any other or further exercise thereof or the exercise of any other right, power or privilege hereunder.
14.4 Remedies Cumulative. The rights and remedies herein expressly provided are cumulative and not exclusive of any rights or remedies that Seller or Buyer would otherwise have. No notice or demand on Seller in any case shall entitle Seller to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of Buyer to any other or further action in any circumstances without notice or demand.
14.5 Assignment. The Principal Agreements may not be assigned by Seller. The Principal Agreements, along with Buyers right, title and interest, including its security interest, in any or all of the Purchased Assets and other Purchased Items, may, at any time, be transferred or assigned, in whole or in part, by Buyer, and upon providing at least two (2) Business Days prior notice to Seller of such transfer or assignment, any transferee or assignee thereof may enforce the Principal Agreements and such security interest directly against Seller.
14.6 Successors and Assigns. The terms and provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
14.7 Participations. Buyer may from time to time sell or otherwise grant participations in this Agreement, and the holder of any such participation, if the participation agreement so provides, (i) shall, with respect to its participation, be entitled to all of the rights of Buyer and (ii) may exercise any and all rights of set-off or bankers lien with respect thereto, in each case as fully as though Seller were directly obligated to the holder of such participation in the amount of such participation; provided, however, that Seller shall not be required to send or deliver to any of the participants other than Buyer any of the materials or notices required to be sent or delivered by it under the terms of this Agreement, nor shall it have to act except in compliance with the instructions of Buyer.
14.8 Invalidity. In case any one or more of the provisions contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had not been included.
14.9 Additional Instruments. Seller shall execute and deliver such further instruments and shall do and perform all matters and things necessary or expedient to be done or observed for
the purpose of effectively creating, maintaining and preserving the security and benefits intended to be afforded by this Agreement.
14.10 Survival. All representations, warranties, covenants and agreements herein contained on the part of Seller shall survive any Transaction and shall be effective so long as this Agreement is in effect or there remains any obligation of Seller hereunder to be performed.
14.11 Notices.
(a) All notices, demands, consents, requests and other communications required or permitted to be given or made hereunder in writing shall be mailed (first class, return receipt requested and postage prepaid) or delivered in person or by overnight delivery service or by electronic delivery, addressed to the respective parties hereto at their respective addresses set forth below or, as to any such party, at such other address as may be designated by it in a notice to the other:
If to Seller: The address set forth in the Transactions Terms Letter
If to Buyer: Bank of America, N.A.
31303 Agoura Road
Mail Code: CA7-910-02-63
Westlake Village, California 91361
Attention: Adam Gadsby, Managing Director
Telephone: (818) 225-6541
Facsimile: (213) 457-8707
Email: Adam.Gadsby@baml.com
With copies to:
Bank of America, N.A.
One Bryant Park, 11th Floor
Mail Code: NY1-100-11-01
New York, New York 10036
Attention: Eileen Albus, Director, Mortgage Finance
Telephone: (646) 855-0946
Facsimile: (646) 855-5050
Email: Eileen.Albus@baml.com
Bank of America, N.A.
One Bryant Park
Mail Code: NY1-100-17-01
New York, New York 10036
Attention: Amie Davis, Assistant General Counsel
Telephone: (646) 855-0183
Facsimile: (704) 409-0337
Email: Amie.Davis@bankofamerica.com
All written notices shall be conclusively deemed to have been properly given or made when duly delivered, if delivered in person or by overnight delivery service, or on the third (3rd) Business Day after being deposited in the mail, if mailed in accordance herewith, or upon transmission by the receiving party of electronic delivery confirming receipt.
(b) All notices, demands, consents, requests and other communications required or permitted to be given or made hereunder which are not required to be in writing may also be provided electronically either (i) as an electronic mail sent and addressed to the respective parties hereto at their respective electronic mail addresses set forth below, or as to any such party, at such other electronic mail address as may be designated by it in a notice to the other or (ii) with respect to Buyer, via a posting of such notice on Buyers customer website(s).
If to Seller: The email address(es) specified in the Transactions Terms Letter, if any.
If to Buyer: Adam.Gadsby@baml.com, Adam.Robitshek@baml.com, Eileen.Albus@baml.com and Amie.Davis@bankofamerica.com.
14.12 Governing Law. This Agreement and the rights and obligations of the parties hereunder shall be construed in accordance with and governed by the laws of the State of New York, without regard to principles of conflicts of laws (other than Section 5-1401 of the New York General Obligations Law).
14.13 Submission to Jurisdiction; Service of Process; Waivers. All legal actions between or among the parties regarding this Agreement, including, without limitation, legal actions to enforce this Agreement or because of a dispute, breach or default of this Agreement, shall be brought in the federal or state courts located in New York County, New York, which courts shall have sole and exclusive in personam, subject matter and other jurisdiction in connection with such legal actions. The parties hereto irrevocably consent and agree that venue in such courts shall be convenient and appropriate for all purposes and, to the extent permitted by law, waives any objection that it may now or hereafter have to the venue of any such action or proceeding in any such court or that such action or proceeding was brought in an inconvenient court and agrees not to plead or claim the same. The parties hereto further irrevocably consent and agree that service of process in any such action or proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially similar form of mail), postage prepaid, to its address set forth in Section 14.11(a), and that nothing herein shall affect the right to effect service of process in any other manner permitted by law or shall limit the right to sue in any other jurisdiction.
14.14 Waiver of Jury Trial. Each of Seller and Buyer hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement, any other Principal Agreement or the transactions contemplated hereby or thereby.
14.15 Counterparts. This Agreement may be executed in any number of counterparts by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same Agreement.
14.16 Headings. The headings in this Agreement are for purposes of reference only and shall not limit or otherwise affect the meaning or interpretation of any provisions hereof.
14.17 Reserved.
14.18 Confidential Information. To effectuate this Agreement, Buyer and Seller may disclose to each other certain confidential information relating to the parties operations, computer systems, technical data, business methods, and other information designated by the disclosing party or its agent to be confidential, or that should be considered confidential in nature by a reasonable person given the nature of the information and the circumstances of its disclosure (collectively the Confidential Information). Confidential Information can consist of information that is either oral or written or both, and may include, without limitation, any of the following: (i) any reports, information or material concerning or pertaining to businesses, methods, plans, finances, accounting statements, and/or projects of either party or their affiliated or related entities; (ii) any of the foregoing related to the parties or their related or affiliated entities and/or their present or future activities and/or (iii) any term or condition of any agreement (including this Agreement) between either party and any individual or entity relating to any of their business operations. With respect to Confidential Information, the parties hereby agree, except as otherwise expressly permitted in this Agreement:
(a) not to use the Confidential Information except in furtherance of this Agreement;
(b) to use reasonable efforts to safeguard the Confidential Information against disclosure to any unauthorized third party with the same degree of care as they exercise with their own information of similar nature; and
(c) not to disclose Confidential Information to anyone other than employees, agents or contractors with a need to have access to the Confidential Information and who are bound to the parties by like obligations of confidentiality, except that the parties shall not be prevented from using or disclosing any of the Confidential Information which: (i) is already known to the receiving party at the time it is obtained from the disclosing party; (ii) is now, or becomes in the future, public knowledge other than through wrongful acts or omissions of the party receiving the Confidential Information; (iii) is lawfully obtained by the party from sources independent of the party disclosing the Confidential Information and without confidentiality and/or non-use restrictions; or (iv) is independently developed by the receiving party without any use of the Confidential Information of the disclosing party. Notwithstanding anything contained herein to the contrary, Buyer may share any Confidential Information of Seller with an Affiliate of Buyer for any valid business purpose, such as, but not limited to, to assist an Affiliate in evaluating a current or potential business relationship with Seller.
In addition, the Principal Agreements and their respective terms, provisions, supplements and amendments, and transactions and notices thereunder (other than the tax treatment and tax structure of the transactions), are proprietary to Buyer and shall be held by Seller in strict confidence and shall not be disclosed to any third party without the consent of Buyer except for (i) disclosure to Sellers direct and indirect parent companies, directors, attorneys, agents or accountants, provided that such attorneys or accountants likewise agree to be bound by this covenant of confidentiality, or are otherwise subject to confidentiality restrictions; (ii) upon prior written notice to Buyer, if Seller may lawfully do so, disclosure required by law, rule, regulation or order of a court or other regulatory body; (iii) upon prior written notice to Buyer, disclosure to any approved hedge counterparty to the extent necessary to obtain any hedging hereunder; (iv) any disclosures or filing required under Securities and Exchange Commission (SEC) or state securities laws; or (v) the tax treatment and tax structure of the transactions, which shall not be deemed confidential; provided that in the case of (ii), (iii) and (iv), Seller shall take reasonable actions to provide Buyer with prior written notice; provided further that in the case of (iv), Seller shall not file any of the Principal Agreements other than the Agreement with the SEC or state securities office unless Seller has (x) provided at least thirty (30) days (or such lesser time as may be demanded by the SEC or state securities office) prior written notice of such filing to Buyer, and (y) redacted all pricing information and other commercial terms. Notwithstanding the foregoing, Seller may provide confidential information, for the purposes of fulfilling its ordinary course regulatory obligations whether or not specifically directed towards this transaction, including to any banking or insurance regulatory agency, without providing prior notice to or obtaining the consent of Buyer.
Notwithstanding anything in this Agreement to the contrary, Seller and Buyer shall comply with all applicable local, state and federal laws, including, without limitation, all privacy and data protection law, rules and regulations that are applicable to the Confidential Information. Seller and Buyer each understands that the Confidential Information may contain nonpublic personal information, as that term is defined in Section 509(4) of the Gramm-Leach-Bliley Act (the Act), and each agrees to maintain such nonpublic personal information that it receives hereunder in accordance with the Act and other applicable federal and state privacy laws. Seller and Buyer shall implement such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of the nonpublic personal information of the customers and consumers (as those terms are defined in the Act) that the other party and their Affiliates hold, (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Seller represents and warrants that it has implemented appropriate measures to meet the objectives of Section 501(b) of the Act and of the applicable standards adopted pursuant thereto, as now or hereafter in effect. Upon request, Seller will provide evidence reasonably satisfactory to allow Buyer to confirm that the providing party has satisfied its obligations as required under this Section. Without limitation, this may include Buyers review of audits, summaries of test results, and other equivalent evaluations of Seller. Seller and Buyer shall notify the other party immediately following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the customers and consumers of the other party or their Affiliates provided directly to the other party or their Affiliates. Such party shall provide such notice to the
other by personal delivery, by facsimile with confirmation of receipt, or by overnight courier with confirmation of receipt to the applicable requesting individual.
If any party or any of its successors, Subsidiaries, officers, directors, employees, agents and/or representatives, including, without limitation, its insurers, sureties and/or attorneys, breaches its respective duty of confidentiality under this Agreement, the nonbreaching party(ies) shall be entitled to all remedies available at law and/or in equity, including, without limitation, injunctive relief
14.19 Intent. Seller and Buyer recognize and intend that:
(a) this Agreement and each Transaction hereunder constitutes a repurchase agreement as that term is defined in Section 101(47)(A)(i) of the Bankruptcy Code, a securities contract as that term is defined in Section 741(7)(A)(i) of the Bankruptcy Code and a master netting agreement as that term is defined in Section 101(38A)(A) of the Bankruptcy Code and that the pledge of the Related Credit Enhancement in Section 6.1 hereof constitutes a security agreement or other arrangement or other credit enhancement that is related to the Agreement and Transactions hereunder within the meaning of Sections 101(38A)(A), 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code. Seller and Buyer further recognize and intend that this Agreement is an agreement to provide financial accommodations and is not subject to assumption pursuant to Bankruptcy Code Section 365(a);
(b) Buyers right to liquidate the Purchased Mortgage Loans delivered to it in connection with the Transactions hereunder or to accelerate or terminate this Agreement or otherwise exercise any other remedies herein is a contractual right to liquidate, accelerate or terminate such Transaction as described in Bankruptcy Code Sections 555, 559 and 561;
(c) any payments or transfers of property made with respect to this Agreement or any Transaction to: (i) satisfy a Margin Deficit, (ii) comply with a Margin Call, or (iii) satisfy the provision of additional security agreements to provide enhancements to satisfy a deficiency in the Over/Under Account, shall in each case be considered a margin payment as such term is defined in Bankruptcy Code Section 741(5); and
(d) any payments or transfers of property by Seller (i) on account of a Haircut, (ii) in partial or full satisfaction of a repurchase obligation, or (iii) fees and costs under this Agreement or under any Transaction shall in each case constitute settlement payments as such term is defined in Bankruptcy Code Section 741(8).
14.20 Right to Liquidate. It is understood that either partys right to liquidate Purchased Assets delivered to it in connection with Transactions hereunder or to terminate or accelerate obligations under this Agreement or any individual Transaction, are contractual rights for same as described in Sections 555 and 559 of the Bankruptcy Code.
14.21 Insured Depository Institution. If a party hereto is an insured depository institution as such term is defined in the Federal Deposit Insurance Act (as amended, the FDIA), then each Transaction hereunder is a qualified financial contract as that term is defined in the FDIA and any rules, orders or policy statements thereunder except insofar as the type of assets subject to such Transaction would render such definition inapplicable.
14.22 Netting Contract. This Agreement constitutes a netting contract as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a covered contractual payment entitlement or covered contractual payment obligation, respectively, as defined in and subject to the FDICIA except insofar as one or more of the parties hereto is not a financial institution as that term is defined in the FDICIA.
14.23 Tax Treatment. Each party to this Agreement acknowledges that it is its intent, solely for purposes of United States federal income tax purposes and any corresponding provisions of state, local and foreign law, but not for bankruptcy or any other non-tax purpose, to treat each Transaction as indebtedness of Seller that is secured by the Purchased Assets and to treat the Purchased Assets as beneficially owned by Seller in the absence of an Event of Default by Seller. All parties to this Agreement agree to such tax treatment and agree to take no action inconsistent with this treatment, unless required by law.
14.24 Examination and Oversight by Regulators. Seller agrees that the transactions with Buyer under this Agreement may be subject to regulatory examination and oversight by one or more Governmental Authorities. Seller shall comply with all requests made by Buyer to assist Buyer in complying with regulatory requirements imposed on Buyer.
(Signature page to follow)
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.
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Signature Page to the Master Repurchase Agreement
EXHIBIT A
GLOSSARY OF DEFINED TERMS
Ability to Repay Rule: 12 CFR 1026.43(c), including all applicable official staff commentary.
Acceptable Title Insurance Company: A nationally recognized title insurance company that has not been disapproved by Buyer in a writing provided to Seller.
Accepted Servicing Practices: With respect to any Purchased Mortgage Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans of the same type as such Purchased Mortgage Loan in the jurisdiction where the related Mortgaged Property is located.
Acknowledgement of Confidentiality of Password Agreement: That certain Acknowledgement of Confidentiality of Password Agreement attached hereto as Exhibit I.
Additional Purchased Assets: Those additional Eligible Assets or cash provided by Seller to Buyer pursuant to Section 6.3 of this Agreement.
Affiliate: With respect to any specified entity, any other entity controlling or controlled by or under common control with such specified entity; provided, however, for purposes of the Principal Agreements, Aris Mortgage Holding Company, LLC shall be considered the sole Affiliate of Seller. For the purposes of this definition, control when used with respect to a specified entity means the power to direct the management and policies of such entity, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms controlling and controlled having meanings correlative to the foregoing.
Agency: Fannie Mae, Freddie Mac or Ginnie Mae, as applicable.
Agency Audit: Any Agency, HUD, FHA, VA and RD audits, examinations, evaluations, monitoring reviews and reports of its origination and servicing operations (including those prepared on a contract basis for any such Agency, HUD, FHA, VA or RD).
Agency Documents: The documents set forth on Exhibit M.
Agency Eligible Mortgage Loan: Unless defined otherwise in the Transactions Terms Letter, a first lien mortgage loan or a Cooperative Loan that is originated in Strict Compliance with the Agency Guides and the eligibility requirements specified for the applicable Agency Program, and is eligible for sale to or securitization by such Agency.
Agency Guides: The Ginnie Mae Guide, the Fannie Mae Guide, the Freddie Mac Guide, the FHA Regulations, the VA Regulations or the RD Regulations, as the context may require, in each case as such guidelines have been or may be amended, supplemented or otherwise modified from time to time (i) by Ginnie Mae, Fannie Mae, Freddie Mac, the FHA, the VA or the RD, as applicable, in the ordinary course of business and, with respect to material amendments, supplements or other modifications, as to which Buyer shall not have reasonably objected within ten (10) days of receiving notice of such or (ii) by Ginnie Mae, Fannie Mae, Freddie Mac, the FHA, the VA or the
RD, as applicable, at the request of Seller and as to which (x) Seller has given notice to Buyer of any such material amendment, supplement or other modification and (y) Buyer shall not have reasonably objected.
Agency Program: The Ginnie Mae Program, the Fannie Mae Program and/or the Freddie Mac Program, as the context may require.
Aggregate Outstanding Purchase Price: The aggregate outstanding Purchase Price of all Transactions or specified Purchased Assets, as the case may be, as of any date of determination.
Aggregate Transaction Limit: The maximum aggregate principal amount of Transactions (measured by the related outstanding Purchase Price) that may be outstanding at any one time, as set forth in the Transactions Terms Letter.
Applicable Pricing Rate: With respect to any date of determination, the greater of (i) One-Month LIBOR, and (ii) the LIBOR Floor. It is understood that the Applicable Pricing Rate shall be adjusted on a daily basis.
Application: The application or Buyer Application Profile, including all supporting documentation, submitted by Seller to Buyer with respect to this Agreement.
Approvals: With respect to Seller or Servicer, the approvals obtained by the applicable Agency, HUD, the VA or the RD in designation of Seller as a Ginnie Mae-approved issuer, a Ginnie Mae-approved servicer, a FHA-approved mortgagee, a VA-approved lender, a RD-approved lender, a Fannie Mae-approved lender or a Freddie Mac-approved Seller/Servicer, as applicable, in good standing.
Approved Investor: Any Agency, any private institution or Governmental Authority as approved by Buyer in its sole discretion, purchasing such Purchased Mortgage Loans or Mortgage-Backed Securities on a forward basis from Seller pursuant to a Purchase Commitment.
Approved Payee: As defined in the Transactions Terms Letter and as described in Section 3.7 of this Agreement.
Asset: A Mortgage Loan, or in the case of a Pooled Mortgage Loan, the resulting Mortgage-Backed Security pursuant to Section 3.8, as the context may require.
Asset Data Record: A document containing the information set forth on Buyers website(s), which may be amended, supplemented and modified from time to time as further set forth in the Handbook or such other information as Buyer may reasonably request from time to time, completed by Seller and submitted to Buyer with respect to each Purchased Asset.
Asset Value: With respect to each Purchased Asset and any date of determination, an amount equal to the following, as applicable, as the same may be reduced in accordance with Section 4.3, and, in the case of each Purchased Mortgage Loan, as shall include the related Servicing Rights:
(a) if the Purchased Asset (other than a Pooled Mortgage Loan) has Standard Status, the product of the related Type Purchase Price Percentage and the least of: (i) the Market Value
of such Purchased Asset; (ii) the unpaid principal balance of such Purchased Asset; (iii) the purchase price paid by Seller for such Purchased Asset if it is a Mortgage Loan; and (iv) the Takeout Price committed by the related Approved Investor, as evidenced by the related Purchase Commitment, if applicable;
(b) if the Purchased Asset is a Noncompliant Asset (other than a Pooled Mortgage Loan), the product of the related Type Purchase Price Percentage for a Noncompliant Asset and the least of: (i) the Market Value of such Purchased Asset; (ii) the unpaid principal balance of such Purchased Asset; (iii) the purchase price paid by Seller for such Purchased Asset if it is a Mortgage Loan; and (iv) the Takeout Price committed by the related Approved Investor, as evidenced by the related Purchase Commitment, if applicable;
(c) if the Purchased Asset is a Pooled Mortgage Loan, the product of the related Type Purchase Price Percentage and the Takeout Price committed by the related Approved Investor, as evidenced by the related Purchase Commitment; or
(d) if the Purchased Asset is a Defective Asset, zero.
Assignment: A duly executed assignment to Buyer in recordable form of a Purchased Mortgage Loan, of the indebtedness secured thereby and of all documents and rights related to such Purchased Mortgage Loan.
Assignment of Closing Protection Letter: An assignment assigning and subrogating Buyer to all of Sellers rights in a Closing Protection Letter, substantially in the form of Exhibit F hereto.
Assignment of Proprietary Lease: The specific agreement creating a first lien on and pledge of the Cooperative Shares and the appurtenant Proprietary Lease securing a Cooperative Loan.
Bailee Agreement: A bailee agreement or bailee letter that is in a form acceptable to Buyer.
Bankruptcy Code: Title 11 of the United States Code, now or hereafter in effect, as amended, or any successor thereto.
Bond Loan 1st Lien: Unless defined otherwise in the Transactions Terms Letter, a first lien mortgage loan (i) that was originated and underwritten in accordance with a qualifying local or state governmental homeownership program administered by a Housing Finance Agency (as defined under 24 CFR 266.5) and (ii) with respect to which Seller has obtained a Purchase Commitment on or prior to the related Purchase Date.
Bond Loan 2nd Lien: Unless defined otherwise in the Transactions Terms Letter, a second lien mortgage loan (i) that was originated and underwritten in accordance with a qualifying local or state governmental homeownership program administered by a Housing Finance Agency (as defined under 24 CFR 266.5) and (ii) with respect to which Seller has obtained a Purchase Commitment on or prior to the related Purchase Date.
Book-Entry Date: With respect to a Mortgage-Backed Security, the date on which the applicable Agency delivers such Mortgage-Backed Security to the Depository and it is registered as a book-entry security in the name of the Depository.
Business Day: Any day, excluding Saturday, Sunday and any day that is a legal holiday under the laws of the State of New York and the State of California or as may otherwise be published on Buyers website(s).
Cash Equivalents: Any (a) securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and Eurodollar time deposits with maturities of ninety (90) days or less from the date of acquisition and overnight bank deposits of any commercial bank having capital, surplus and retained earnings in excess of [***], (c) repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than seven days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by S&P or p-1 or the equivalent thereof by Moodys and in either case maturing within ninety (90) days after the day of acquisition, (e) securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moodys, (f) securities with maturities of ninety (90) days or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (b) of this definition, or (g) shares of money market, mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition.
Change of Control: Change of Control shall mean:
(a) any transaction or event as a result of which Aris Mortgage Holding Company, LLC ceases to own, directly or indirectly at least 100% of the membership interests of Seller;
(b) the sale, transfer or other disposition of all or substantially all of Sellers assets (excluding any such action taken in connection with any securitization transaction);
(c) the consummation of a merger or consolidation of Seller with or into another entity or any other corporate reorganization (in one transaction or in a series of transactions), if the combined voting power of the continuing or surviving entitys stock or other equity interests outstanding immediately after such merger or consolidation is more than 50% of such entitys stock or other equity interests;
(d) the sale or disposition of all or substantially all of such Persons assets (or consummation of any transaction, or series of related transactions, having similar effect);
(e) there occurs a change in the composition of the Board of Directors or governing body of such Person within a six (6) month period, as a result of which fewer than a majority of the directors or governing body members are incumbent; provided, however, that this provision (e) shall not apply in the event that the composition of the Board of Directors or governing body changes as a result of such Person availing itself of the public or private debt or equity markets;
(f) the dissolution or liquidation of such Person; or
(g) any transaction or series of related transactions that has the substantial effect of any one or more of the foregoing.
Closing Agent: The Person designated by Seller and approved by Buyer in accordance with Section 3.7, to receive Purchase Prices from Buyer, for the account of Seller, for the purpose of (i) funding a Purchased Mortgage Loan or (ii) in the case of a new origination Wet Mortgage Loan or Dry Mortgage Loan as to which the origination funds are being remitted to the closing table, originating such Mortgage Loan in accordance with local law and practice in the jurisdiction where such Mortgage Loan is being originated.
Closing Protection Letter: A document issued by a title insurance company to Seller and/or Buyer and relied upon by Buyer to provide closing protection for one or more mortgage loan closings and to insure Seller and/or Buyer, without limitation, against embezzlement by the Closing Agent and loss or damage resulting from the failure of the Closing Agent to comply with all applicable closing instructions.
COBRA: As defined in Section 8.1(l) of this Agreement.
Code: The Internal Revenue Code of 1986, as amended.
Committed Amount: The portion of the Aggregate Transaction Limit that is committed, as set forth in the Transactions Terms Letter.
Contingent Obligations: Any obligation of Seller arising from an existing condition or situation that involves uncertainty as to outcome and that will be resolved by the occurrence or nonoccurrence of some future event, including, without limitation, any obligation guaranteeing or intended to guarantee any Debt, leases, dividends or other obligations of any other Person in any manner, whether directly or indirectly; provided; however, that endorsements of instruments for deposit or collection in the ordinary course of business shall not be included. With respect to guarantees, the amount of the Contingent Obligation shall be equal to the stated or determinable amount of the primary obligation in respect of the guarantee or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof, as determined by Buyer.
Conventional Conforming Mortgage Loan: Unless defined otherwise in the Transactions Terms Letter, a first lien mortgage loan that fully conforms to all underwriting standards, loan amount limitations and other requirements of that standard Agency mortgage loan purchase program accepting mortgage loans underwritten without dependence on expanded criteria provisions, or that is approved by Desktop Underwriter or Loan Prospector.
Cooperative Agency Mortgage Loan: An Agency Eligible Mortgage Loan that is a Cooperative Loan.
Cooperative Jumbo Mortgage Loan: A Jumbo Mortgage Loan that is a Cooperative Loan.
Cooperative Corporation: With respect to any Cooperative Loan, the cooperative apartment corporation that holds legal title to the related Cooperative Project and grants occupancy rights to units therein to stockholders through Proprietary Leases or similar arrangements.
Cooperative Loan: A mortgage loan that is secured by a first lien on and perfected security interest in Cooperative Shares and the related Proprietary Lease granting exclusive rights to occupy the related Cooperative Unit in the building owned by the related Cooperative Corporation.
Cooperative Project: With respect to any Cooperative Loan, all real property and improvements thereto and rights therein and thereto owned by a Cooperative Corporation including without limitation the land, separate dwelling units and all common elements.
Cooperative Shares: With respect to any Cooperative Loan, the shares of stock issued by a Cooperative Corporation and allocated to a Cooperative Unit and represented by a Stock Certificate.
Cooperative Unit: With respect to a Cooperative Loan, a specific unit in a Cooperative Project.
Correspondent Mortgage Loan: A Mortgage Loan originated by a third party originator and acquired by Seller in accordance with Sellers correspondent Mortgage Loan program.
Current Assets: Those assets set forth in the consolidated balance sheet of Seller, prepared in accordance with GAAP, as current assets, defined as those assets that are now cash or will by their terms or disposition be converted to cash within one (1) year of the date of the determination.
Current Liabilities: Those liabilities set forth in the consolidated balance sheet of Seller, prepared in accordance with GAAP, as current liabilities, defined as those liabilities due upon demand or within one (1) year of the date of determination.
Custodial Agreement: The Custodial Agreement executed among Buyer, Seller and Custodian with respect to this Agreement, as the same shall be modified and supplemented and in effect from time to time.
Custodian: Deutsche Bank National Trust Company or such other custodian selected by Buyer and acceptable to Seller, provided that no such consent of Seller shall be required upon the occurrence and during the continuance of an Event of Default.
Debt: The debt of Seller consisting of, without duplication: (a) indebtedness for borrowed money, including principal, interest, fees and other charges; (b) obligations evidenced by bonds, debentures, notes or other similar instruments; (c) obligations to pay the deferred purchase price of property or services; (d) obligations as lessee under leases that shall have been or should be in accordance with GAAP, recorded as capital leases; (e) obligations secured by any lien upon property or assets owned by Seller, even though Seller has not assumed or become liable for payment of such obligations; (f) obligations in connection with any letter of credit issued for the account of Seller; (g) obligations under direct or indirect guarantees in respect of and obligations, contingent or otherwise, to purchase or otherwise acquire, or otherwise assure a creditor against loss in respect of, indebtedness or obligations of others of the kinds referred to above; and (h) all Contingent Obligations.
Default Rate: The lesser of (i) the Applicable Pricing Rate plus [***], or (ii) the maximum non-usurious interest rate, if any, that at any time, or from time to time, may be
contracted for, taken, reserved, charged or received under the laws of the United States and the State of New York, per annum.
Defective Asset: A Purchased Asset:
(a) that is not or at any time ceases to be an Eligible Asset;
(b) that has not been repurchased within the Maximum Dwell Time for a Noncompliant Asset or is ineligible to be a Noncompliant Asset because the Aggregate Outstanding Purchase Price of other Purchased Assets that are deemed to be Noncompliant Assets is equal to or exceeds the permitted Type Sublimit for Noncompliant Assets (to the extent any such Type Sublimit is set forth in the Transactions Terms Letter);
(c) that is a Mortgage Loan and is the subject of fraud by any Person involved in the origination of such Mortgage Loan;
(d) that is a Mortgage Loan and the related Mortgaged Property is the subject of material damage or waste and such damage or waste shall not have been remedied within five (5) Business Days after receipt of notice from Buyer to do so;
(e) for which any material breach of a warranty or representation set forth in Section 8.2 occurs;
(f) that is a Mortgage Loan where the related Mortgagor fails to make the first payment due under the Mortgage Note on or before the applicable due date, including any applicable grace period;
(g) that was rejected by the Approved Investor set forth in the related Purchase Commitment unless otherwise approved by Buyer; or
(h) that is a Purchased Mortgage Loan and it is determined to be ineligible for sale as a Purchased Mortgage Loan of any Type.
Depository: The Federal Reserve Bank of New York, or as otherwise defined in the glossary of the Ginnie Mae Guide, the Fannie Mae Guide or the Freddie Mac Guide, as applicable.
Dry Mortgage Loan: A Mortgage Loan for which Buyer or its Custodian has possession of the related Mortgage Loan Documents, in a form and condition acceptable to Buyer, prior to the payment of the Purchase Price.
Effective Date: That effective date set forth in the Transactions Terms Letter.
Electronic Tracking Agreement: An Electronic Tracking Agreement in a form acceptable to Buyer.
Eligible Asset: With respect to any Transaction (i) from and after the related Purchase Date, an Eligible Mortgage Loan, and (ii) from and after the related Pooling Date, an Eligible Mortgage Loan that is a Pooled Mortgage Loan, as the context may require.
Eligible Bank: Either (i) Buyer, or (ii) a bank selected by Seller and approved by Buyer in writing and authorized to conduct trust and other banking business in any state in which Seller conducts operations.
Eligible Mortgage Loan: A Mortgage Loan that meets the eligibility criteria set forth in the Transactions Terms Letter.
ERISA: The Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute.
ERISA Affiliate: Any person (as defined in section 3(9) of ERISA) that together with Seller or any of its Subsidiaries would be a member of the same controlled group or treated as a single employer within the meaning of Section 414 of the Code or ERISA Section 4001.
Event of Default: Any of the conditions or events set forth in Section 11.1.
Excluded Taxes: As defined in Section 12.3(a).
Executive Management: Sellers (i) chairman of the board of directors, (ii) chief executive officer, (iii) president, (iv) chief financial officer, treasurer or controller, (v) chief operations officer, and (vi) chief legal officer.
Existing Debt: Debt of Seller existing on the date of this Agreement, as set forth on Schedule 3 hereto.
Expiration Date: The earliest of (i) the Expiration Date set forth in the Transactions Terms Letter, (ii) at Buyers option, upon the occurrence of an Event of Default and (iii) the date on which this Agreement shall terminate in accordance with the provisions hereof or by operation of law.
Facility Fee: The non-refundable, annual commitment fee set forth in the Transactions Terms Letter.
Fannie Mae: The Federal National Mortgage Association and any successor thereto.
Fannie Mae Guide: The Fannie Mae MBS Selling and Servicing Guide, as such guide may hereafter from time to time be amended.
Fannie Mae Program: The Fannie Mae Guaranteed Mortgage-Backed Securities Programs, as described in the Fannie Mae Guide.
FHA: The Federal Housing Administration of the United States Department of Housing and Urban Development and any successor thereto.
FHA Mortgage Insurance: Mortgage insurance authorized under Sections 203(b), 213, 221(d)(2), 222, and 235 of the Federal Housing Administration Act and provided by the FHA.
FHA Mortgage Insurance Contract: A contractual obligation of the FHA respecting the insurance of a Mortgage Loan.
FHA Regulations: The regulations promulgated by HUD under the FHA Act, codified in 24 Code of Federal Regulations, and other HUD issuances relating to Government Mortgage Loans, including the related handbooks, circulars, notices and mortgagee letters.
FHA Streamline Refinance Mortgage Loan: A Government Mortgage Loan originated and underwritten in accordance with the FHA streamline refinance program and FHA Regulations.
FICO Score: The credit score of the Mortgagor provided by Fair, Isaac & Company, Inc. or such other organization providing credit scores on the origination date of a Mortgage Loan; provided, that if (a) two separate credit scores are obtained on such origination date, the FICO Score shall be the lower credit score; and (b) three separate credit scores are obtained on such origination date, the FICO Score shall be the middle credit score.
Foreign Buyer: As defined in Section 12.3(c) of this Agreement.
Freddie Mac: The Federal Home Loan Mortgage Corporation and any successor thereto.
Freddie Mac Guide: The Freddie Mac Sellers and Servicers Guide, as such guide may hereafter from time to time be amended.
Freddie Mac Program: The Freddie Mac Home Mortgage Guarantor Program or the Freddie Mac FHA/VA Home Mortgage Guarantor Program, as described in the Freddie Mac Guide.
GAAP: Generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession and that are applicable to the circumstances as of the date of determination.
Ginnie Mae: Government National Mortgage Association or any successor thereto.
Ginnie Mae Guide: The Ginnie Mae Mortgage-Backed Securities Guide I or II, as such guide may hereafter from time to time be amended.
Ginnie Mae Program: The Ginnie Mae Mortgage-Backed Securities Programs, as described in the Ginnie Mae Guide.
Government Mortgage Loan: Unless defined otherwise in the Transactions Terms Letter, a first lien mortgage loan that is (i) (a) eligible for FHA Mortgage Insurance and is so insured or is subject to a current binding and enforceable commitment for such insurance pursuant to the provisions of the National Housing Act, as amended, and is originated in Strict Compliance with the Ginnie Mae Guide; (b) eligible to be guaranteed by the VA and is so guaranteed or is subject to a current binding and enforceable commitment for such guarantee pursuant to the provisions of the Servicemens Readjustment Act, as amended; or (c) eligible to be guaranteed by the RD and is so guaranteed pursuant to the provisions of the RD Regulations; and (ii) is otherwise eligible for inclusion in a Ginnie Mae mortgage-backed security pool.
Governmental Authority: With respect to any Person, any nation or government, any state or other political subdivision, agency or instrumentality thereof, any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any court or arbitrator having jurisdiction over such Person, any of its Subsidiaries or any of its properties.
Haircut: With respect to any Transaction with respect to which the Purchase Price is being paid to one or more Approved Payees on behalf of Seller, if the Purchase Price is less than the amount that such Approved Payees are entitled to receive in respect of the related Mortgage Loans, the positive result (if any) equal to such amount minus such Purchase Price, which shall be considered a settlement payment as defined in Bankruptcy Code Section 741(8).
Handbook: The guide prepared by Buyer containing additional policies and procedures, as same may be amended from time to time.
HARP Mortgage Loan: Unless otherwise defined in the Transactions Terms Letter, a Mortgage Loan that fully conforms to the Home Affordable Refinance Program (as such program is amended, supplemented or otherwise modified, from time to time), and is referred to by Fannie Mae as a Refi Plus mortgage loan or DU Refi Plus mortgage loan, and by Freddie Mac as a Relief Refinance Mortgage.
HUD: The United States Department of Housing and Urban Development or any successor thereto.
Income: With respect to any Purchased Asset at any time, any principal and/or interest thereon and all dividends, Proceeds and other collections and distributions thereon.
Indemnified Party or Indemnified Parties: As defined in Section 12.1 of this Agreement.
Insolvency Event: The occurrence of any of the following events:
(a) such Person shall become insolvent or generally fail to pay, or admit in writing its inability to pay, its debts as they become due, or shall voluntarily commence any proceeding or file any petition under any bankruptcy, insolvency or similar law or seeking dissolution, liquidation or reorganization or the appointment of a receiver, trustee, custodian, conservator or liquidator for itself or a substantial portion of its property, assets or business or to effect a plan or other arrangement with its creditors, or shall file any answer admitting the jurisdiction of the court and the material allegations of an involuntary petition filed against it in any bankruptcy, insolvency or similar proceeding, or shall be adjudicated bankrupt, or shall make a general assignment for the benefit of creditors, or such Person, or a substantial part of its property, assets or business, shall be subject to, consent to or acquiesce in the appointment of a receiver, trustee, custodian, conservator or liquidator for itself or a substantial property, assets or business;
(b) corporate action shall be taken by such Person for the purpose of effectuating any of the foregoing;
(c) an order for relief shall be entered in a case under the Bankruptcy Code in which such Person is a debtor; or
(d) involuntary proceedings or an involuntary petition shall be commenced or filed against such Person under any bankruptcy, insolvency or similar law or seeking the dissolution, liquidation or reorganization of such Person or the appointment of a receiver, trustee, custodian, conservator or liquidator for such Person or of a substantial part of the property, assets or business of such Person, or any writ, order, judgment, warrant of attachment, execution or similar process shall be issued or levied against a substantial part of the property, assets or business of such Person, and such proceeding or petition shall not be dismissed, or such execution or similar process shall not be released, vacated or fully bonded, within sixty (60) days after commencement, filing or levy, as the case may be.
Insurer: A private mortgage insurer, which is acceptable to Buyer.
Intercreditor Agreement: An agreement substantially in the form acceptable to Buyer.
Interest Only Mortgage Loan: A Mortgage Loan which, by its terms, requires the related Mortgagor to make monthly payments of only accrued interest for a certain period of time following origination. After such interest-only period, the loan terms provide that the Mortgagors monthly payment will be recalculated to cover both interest and principal so that such Mortgage Loan will amortize fully on or prior to its final payment date.
Irrevocable Closing Instructions: Closing instructions, including wire instructions, in the form of Exhibit B issued in connection with funds disbursed for the funding of new origination Wet Mortgage Loans or Dry Mortgage Loans as to which the origination funds are being remitted to the closing table.
Joint Securities Agreement: That certain Joint Securities Account Control Agreement, dated as of June 19, 2014, among Buyer, Seller, the Securities Intermediary and the other parties thereto, as the same may be amended from time to time.
Jumbo High LTV Mortgage Loan: A Jumbo Mortgage Loan which meets the criteria set forth in the Transactions Terms Letter.
Jumbo Mortgage Loan: Unless defined otherwise in the Transactions Terms Letter, a first lien mortgage loan or Cooperative Loan (i) with respect to which Seller has obtained a Purchase Commitment on or prior to the related Purchase Date or (ii) meets the transaction requirements set forth on Schedule 1 to the Transactions Terms Letter.
Key Personnel: Any employee, officer, director, agent or representative of Seller identified in the Transactions Terms Letter as a Key Person.
LIBOR Floor: As defined in the Transactions Terms Letter.
Lien: Any mortgage, lien, pledge, charge, security interest or similar encumbrance.
Liquidity: As of any date of determination, the sum of (a) Sellers unrestricted and unencumbered cash and Cash Equivalents and (b) the balance in the Over/Under Account exclusive of funds held due to a Margin Deficit or Margin Call. By way of example but not limitation, cash in escrow and/or impound accounts shall not be included in this calculation.
Manufactured Home: A prefabricated or manufactured home on which a lien secures a Mortgage Loan and which is considered and treated as real estate under applicable law.
Manufactured Home Loan: A Conventional Conforming Mortgage Loan or Government Mortgage Loan secured by a manufactured home (as defined by HUD) provided that (a) such manufactured home is attached to a permanent foundation, is no longer transportable (mobile homes) and is considered and treated as real estate under applicable law, (b) such manufactured home is originated in compliance with Title II under FHA 203(b) and (c) such Conventional Conforming Mortgage Loan or Government Mortgage Loan is eligible for securitization by an Agency pursuant to the terms of the applicable Agency Guides.
Margin Call: A margin call, as defined and described in Section 6.3 of this Agreement.
Margin Deficit: A margin deficit, as defined and described in Section 6.3 of this Agreement.
Market Value: With respect to an Asset, the fair market value of the Asset as determined by Buyer in its sole discretion without regard to any market value assigned to such Asset by Seller. Buyers determination of Market Value shall be conclusive upon the parties, absent manifest error on the part of Buyer. At no time and in no event will the Market Value of a Purchased Asset (other than a Pooled Mortgage Loan) be greater than the Market Value of such Purchased Asset on the Purchase Date. Any Mortgage Loan that is not an Eligible Asset shall have a Market Value of zero.
Master Netting Agreement: A master netting agreement among Buyer, Seller and certain Affiliates and Subsidiaries of Buyer and/or Seller, in form and substance acceptable to Buyer, as the same shall be modified and supplemented and in effect from time to time.
Material Adverse Effect: Any of the following: (i) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of Seller or any Affiliate, taken as a whole; (ii) a material impairment of the ability of Seller or any Affiliate to perform under any Principal Agreement and to avoid any Event of Default or (iii) a material adverse effect upon the legality, validity, binding effect or enforceability of any Principal Agreement against Seller or any Affiliate; in each case which change would materially and adversely affect the ability of Seller, or any Affiliate, to perform its obligations to Buyer under the Principal Agreements and in each case as determined by Buyer in its sole good faith discretion.
Maximum Dwell Time: (i) For any Purchased Asset with Standard Status, the maximum number of days such Purchased Asset can be not repurchased by Seller before such Purchased Asset may be deemed to be a Noncompliant Asset; and (ii) with respect to a Noncompliant Asset, the maximum number of days that such Noncompliant Asset can be deemed to be a Noncompliant Asset before it may be deemed to be a Defective Asset, all as set forth in the Transactions Terms Letter.
MERS: Mortgage Electronic Registration Systems, Inc., a Delaware corporation, or any successor in interest thereto.
Minimum Over/Under Account Balance: The balance required to be maintained by Seller in the Over/Under Account as provided in Section 3.5(a) of this Agreement, which balance is specified in the Transactions Terms Letter.
Moodys: Moodys Investors Service, Inc. or any successor thereto.
Mortgage: A first-lien or second-lien mortgage, deed of trust, security deed or similar instrument on either (i) with respect to a Mortgage Loan other than a Cooperative Loan, improved real property or (ii) with respect to a Cooperative Loan, the Proprietary Lease and related Cooperative Shares.
Mortgage-Backed Security: Any fully-modified pass-through mortgage-backed security that is (i) either issued by Seller and fully guaranteed by Ginnie Mae or issued and fully guaranteed with respect to timely payment of interest and ultimate payment of principal by Fannie Mae or Freddie Mac; (ii) evidenced by a book-entry account in a depository institution having book-entry accounts at the applicable Depository; and (iii) backed by a Pool, in substantially the principal amount and with substantially the other terms as specified with respect to such Mortgage-Backed Security in the related Purchase Commitment.
Mortgage Loan: An Agency Eligible Mortgage Loan, Bond Loan 1st Lien, Conventional Conforming Mortgage Loan, Cooperative Agency Mortgage Loan, Cooperative Jumbo Mortgage Loan, FHA Streamline Refinance Mortgage Loan, Government Mortgage Loan, HARP Mortgage Loan, Interest Only Mortgage Loan, Jumbo Mortgage Loan (including a Jumbo High LTV Mortgage Loan), Manufactured Home Loan, Texas Cash-Out Refinance Mortgage Loan and VA Streamline Refinance Mortgage Loan, as further specified in the Transactions Terms Letter, which Mortgage Loan may be either a Dry Mortgage Loan or a Wet Mortgage Loan.
Mortgage Loan Documents: With respect to each Purchased Mortgage Loan:
(a) the original Mortgage Note evidencing the Mortgage Loan, bearing all intervening endorsements from the originator to the last endorsee endorsed, Pay to the order of , without recourse and signed in the name of the last endorsee by an officer of the last endorsee;
(b) if Seller did not originate the Mortgage Loan, a copy of all original intervening assignments duly executed and acknowledged and in recordable form, evidencing the chain of mortgage assignments from the originator of the Mortgage Loan to Seller, or to MERS, in the case of a Mortgage Loan registered with MERS, together with a certificate from Seller, the applicable title insurance company, the applicable Closing Agent or the applicable recorders office, certifying that such copy represents a true and correct reproduction of the original and that such original has been duly recorded or delivered for recordation in the appropriate records of the jurisdiction in which the related Mortgaged Property is located;
(c) except with respect to a Mortgage Loan that is registered with MERS, an original Assignment in blank, executed by Seller, for the Mortgage securing the Mortgage Note, in recordable form but unrecorded, with a complete chain of intervening assignments from the originator to Seller;
(d) a copy of the Mortgage securing the Mortgage Note bearing evidence of the recordation of such Mortgage with the appropriate Governmental Authority, together with a certificate from Seller, the applicable title insurance company, the applicable Closing Agent or the applicable recorders office, certifying that such copy represents a true and correct reproduction of the original and that such original has been duly recorded or delivered for recordation in the appropriate records of the jurisdiction in which the related Mortgaged Property is located, or if such recording information is unavailable because the document has not yet come back from the applicable recording office, then a copy of evidence that such original Mortgage was sent out for recording by a Closing Agent; and
(e) an original or copy of the title insurance policy insuring the first lien or second lien position of the Mortgage, as applicable, in at least the original principal amount of the related Mortgage Note and containing only those exceptions permitted by the Purchase Commitment, an unconditional commitment to issue such a title insurance policy, or a copy of the preliminary title commitment showing the policy number or preliminary attorneys opinion of title and the original policy of mortgagees title insurance or unexpired commitment for a policy of mortgagees title insurance.
Mortgage Loan File: With respect to each Mortgage Loan, that file that contains the Mortgage Loan Documents and is delivered to Buyer or its Custodian.
Mortgage Note: A promissory note secured by a Mortgage and evidencing a Mortgage Loan.
Mortgaged Property: The real property or other Cooperative Loan collateral securing repayment of the debt evidenced by a Mortgage Note.
Mortgagor: The obligor of a Mortgage Loan.
Multiemployer Plan: A multiemployer plan within the meaning of Sections 3(37) or 4001(a)(3) of ERISA.
Net Income: For any period, the net income of any Person for such period as determined in accordance with GAAP.
Net Worth: With respect to any Person, the excess of total assets of such Person, over total liabilities of such Person, determined in accordance with GAAP.
Noncompliant Asset: If applicable per the Transactions Terms Letter, as of any date of determination, a Purchased Asset that is an Eligible Asset and was not repurchased prior to the expiration of the Maximum Dwell Time permitted for a Purchased Asset with Standard Status but was repurchased prior to the expiration of the Maximum Dwell Time for Noncompliant Assets.
One-Month LIBOR: The daily rate per annum (rounded to three (3) decimal places) for one-month U.S. dollar denominated deposits as offered to prime banks in the London interbank market, as published on the Official ICE LIBOR Fixings page by Bloomberg or in the Wall Street Journal as of the date of determination; provided, that if Buyer determines that any law, regulation, treaty or directive or any change therein or in the interpretation or application thereof, or any circumstance materially and adversely affecting the London interbank market, shall make it
unlawful, impractical or commercially unreasonable for Buyer to enter into or maintain Transactions as contemplated by this Agreement using One-Month LIBOR, then Buyer may, in addition to its rights under Section 4.5 herein, select an alternative rate of interest or index in its discretion.
Other Mortgage Loan Documents: In addition to the Mortgage Loan Documents, with respect to any Mortgage Loan, the following: (i) the original recorded Mortgage, if not included in the Mortgage Loan Documents; (ii) a copy of the preliminary title commitment showing the policy number or preliminary attorneys opinion of title and the original policy of mortgagees title insurance or unexpired commitment for a policy of mortgagees title insurance, if not included in the Mortgage Loan Documents; (iii) the original Closing Protection Letter and a copy of the Irrevocable Closing Instructions; (iv) the original Purchase Commitment, if any; (v) the original FHA certificate of insurance or commitment to insure, the VA certificate of guaranty or commitment to guaranty the RD Loan Guaranty Agreement or the Insurers certificate or commitment to insure, as applicable; (vi) the survey, flood certificate, hazard insurance policy and flood insurance policy, as applicable; (vii) the original of any assumption, modification, consolidation or extension agreements, with evidence of recording thereon or copies stamp certified by an authorized officer of Seller to have been sent for recording, if any; (viii) copies of each instrument necessary to complete identification of any exception set forth in the exception schedule in the title policy; (ix) the loan application; (x) verification of the Mortgagors employment and income, if applicable; (xi) verification of the source and amount of the downpayment; (xii) credit report on Mortgagor; (xiii) appraisal of the Mortgaged Property (or in the case of any HARP Mortgage Loan, an appraisal or a waiver thereof, and/or a point value estimate, as permitted by the applicable Agency Guides); (xiv) the original executed disclosure statement; (xv) Tax receipts, insurance premium receipts, ledger sheets, payment records, insurance claim files and correspondence, current and historical computerized data files, underwriting standards used for origination and all other related papers and records; (xvi) the original of any guarantee executed in connection with the Mortgage Note (if any); (xvii) the original of any security agreement, chattel mortgage or equivalent document executed in connection with the Mortgage; (xviii) all copies of powers of attorney or similar instruments, if applicable; (xix) copies of all documentation in connection with the underwriting and origination of any Purchased Mortgage Loan that evidences compliance with, (1) with respect to all Purchased Mortgage Loans other than a Bond Loan 1st Lien, the Ability to Repay Rule and, (2) with respect to all Purchased Mortgage Loans other than a Bond Loan 1st Lien and a Permitted Non-Qualified Mortgage Loan, the QM Rule; and (xx) all other documents relating to the Purchased Mortgage Loan.
Other Taxes: As defined in Section 12.3(a).
Over/Under Account: That account maintained by Buyer, as described in Section 3.5.
Payment Date: The fifth (5th) day of each month, or if such date is not a Business Day, the Business Day immediately following the fifth (5th) day of the month; provided, however, Buyer may change the Payment Date from time to time upon thirty (30) days prior notice to Seller.
PBGC: The Pension Benefit Guaranty Corporation and any successor thereto.
Permitted Non-Qualified Mortgage Loan: An Interest Only Mortgage Loan.
Person: Includes natural persons, corporations, limited partnerships, general partnerships, limited liability companies, joint stock companies, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts or other organizations, whether or not legal entities, and governments and agencies and political subdivisions thereof.
Plan: Any Multiemployer Plan or single-employer plan as defined in section 4001 of ERISA, that is maintained and contributed to by (or to which there is an obligation to contribute of), or at any time during the five (5) calendar years preceding the date of this Agreement was maintained or contributed to by (or to which there is an obligation to contribute of), Seller or by a Subsidiary of Seller or an ERISA Affiliate.
Pool: A pool of fully amortizing first lien residential Mortgage Loans eligible in the aggregate to back a Mortgage-Backed Security.
Pooled Mortgage Loan: Any Mortgage Loan that is part of a Pool of Mortgage Loans certified by the Custodian to an Agency that will be exchanged on the related Book-Entry Date for a Mortgage-Backed Security backed by such Pool in accordance with the terms of the applicable Agency Guide.
Pooling Date: With respect to Pooled Mortgage Loans, the date on which an Agency pool number is assigned to the related Pool.
Potential Default: The occurrence of any event or existence of any condition that, but for the giving of notice, the lapse of time, or both, would constitute an Event of Default.
Power of Attorney: A power of attorney, substantially in the form attached hereto as Exhibit H.
Price Differential: For each Purchased Asset or Transaction as of any date of determination, an amount equal to the product of (a) (i) prior to the occurrence of an Event of Default, the sum of the Applicable Pricing Rate plus the applicable Type Margin, or (ii) following the occurrence and during the continuance of an Event of Default, the Default Rate, and (b) the Purchase Price for such Purchased Asset or Transaction. Price Differential will be calculated in accordance with Section 2.6.
Principal Agreements: This Agreement, the Transactions Terms Letter, the Electronic Tracking Agreement, the Custodial Agreement, the Master Netting Agreement, the Joint Securities Agreement, any Servicing Agreement together with the related Servicer Notice, the Intercreditor Agreement (if any), all Trade Assignments and related Purchase Commitments, and all other documents and instruments evidencing the Transactions, as same may from time to time be supplemented, modified or amended, and any other agreement entered into between Buyer and Seller in connection herewith or therewith.
Proceeds: The total amount receivable or received when a Purchased Asset or other Purchased Item is sold, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, including, without limitation, all rights to payment, including return premiums,
with respect to any insurance relating thereto and all escrow withholds and escrow payments for Property Charges, as applicable.
Property Charges: All taxes, fees, assessments, water, sewer and municipal charges (general or special) and all insurance premiums, leasehold payments or ground rents.
Proprietary Lease: The lease on a Cooperative Unit evidencing the possessory interest of the owner of the Cooperative Shares in such Cooperative Unit.
Purchase Advice: In connection with each wire transfer to be made to Buyer by Seller or an Approved Investor, a written or electronic notification setting forth (a)(i) the loan number assigned by Seller or last name of the Mortgagor for each Mortgage Loan that is related to the Transaction in connection with which a payment is being made, or (ii) pool number or Agency commitment number; (b) the amount of the wire transfer to be applied in the Transaction; and (c) the total amount of the wire.
Purchase Commitment: A trade ticket or other written commitment issued in favor of Seller by an Approved Investor pursuant to which that Approved Investor commits to purchase one or more Purchased Assets, and as to which the Takeout Price for such Purchased Assets (unless Seller has agreed to pay any shortfall between the Takeout Price and the related Repurchase Price), is for an amount that is not less than the outstanding Repurchase Price for such Purchased Assets, together with the related correspondent, whole loan or forward purchase agreement by and between Seller and the Approved Investor governing the terms and conditions of any such purchases, all in form and substance satisfactory to Buyer.
Purchase Date: The date on which Buyer purchases a Purchased Asset from Seller. If the Purchase Price is paid by wire transfer, the Purchase Date shall be the date such funds are wired. If the Purchase Price is paid by a cashiers check, the Purchase Date shall be the date such check is issued by the bank. If the Purchase Price is paid by a funding draft, the Purchase Date shall be the date that the draft is posted by the bank on which the draft is drawn.
Purchase Price: The price at which each Asset is transferred by Seller to Buyer which, except as otherwise may be set forth in the Transactions Terms Letter, shall be equal to the product of the applicable Type Purchase Price Percentage and the least of (i) the unpaid principal balance of such Asset, (ii) the Market Value of such Asset, (iii) the purchase price committed by the related Approved Investor, if applicable, as evidenced by the related Purchase Commitment, or (iv) the purchase price paid by Seller for such Asset. For the sake of clarity, the Purchase Price for each Mortgage-Backed Security subject to a Transaction pursuant to Section 3.8 shall be the same Purchase Price that was paid for the Purchased Mortgage Loans backing such Mortgage-Backed Security. For Pooled Mortgage Loans, the Purchase Price shall be the Type Purchase Price Percentage multiplied by the Takeout Price.
Purchased Assets: Purchased Mortgage Loans. The term Purchased Assets with respect to any Transaction at any time shall also include Mortgage-Backed Securities that replace the related Purchased Mortgage Loans pursuant to Section 3.8 and Additional Purchased Assets delivered pursuant to Section 6.3 of this Agreement.
Purchased Items: All now existing and hereafter arising right, title and interest of Seller in, under and to the following:
(a) all Purchased Mortgage Loans, now owned or hereafter acquired, including all Mortgage Notes and Mortgages evidencing such Mortgage Loans and the related Mortgage Loan Documents, for which a Transaction has been entered into between Buyer and Seller hereunder and for which the Repurchase Price has not been paid in full and all Mortgage Loans, including all Mortgage Notes and Mortgages evidencing such Mortgage Loans and the related Mortgage Loan Documents, which, from time to time, are delivered, or caused to be delivered, to Buyer (including delivery to a custodian or other third party on behalf of Buyer) as additional security for the performance of Sellers obligations hereunder;
(b) all Mortgage-Backed Securities issued in exchange for Purchased Mortgage Loans for which the Repurchase Price has not been received by Buyer;
(c) all Income related to the Purchased Assets and all rights to receive such Income;
(d) any custodial account relating to the Purchased Assets and all amounts on deposit therein;
(e) all rights of Seller under all related Purchase Commitments (including the right to receive the related Takeout Price), purchase agreements or other hedging arrangements, agreements, contracts or take-out commitments relating to or constituting any or all of the foregoing, now existing and hereafter arising, covering any part of the Purchased Assets, and all rights to receive documentation relating thereto, and all rights to deliver Purchased Mortgage Loans and related Mortgage-Backed Securities to permanent investors and other purchasers pursuant thereto and all Proceeds resulting from the disposition of such Purchased Assets;
(f) all now existing and hereafter established accounts maintained with broker-dealers by Seller for the purpose of carrying out transactions under Purchase Commitments relating to any part of the Purchased Assets;
(g) all now existing and hereafter arising rights of Seller to service, administer and/or collect on the Purchased Assets hereunder and any and all rights to the payment of monies on account thereof;
(h) all Servicing Rights related to the Purchased Mortgage Loans, all related Servicing Records, and all rights of Seller to receive from any third party or to take delivery of any Servicing Records or other documents which constitute a part of the Mortgage Loan Files, all rights of Seller to receive from any third party or to take delivery of any records or other documents which constitute a part of the Mortgage Loan Files, including, without limitation, the Other Mortgage Loan Documents;
(i) all now existing and hereafter arising accounts, contract rights and general intangibles constituting or relating to any of the Purchased Assets;
(j) all mortgage and other insurance and all commitments issued by Insurers, the FHA, the VA or the RD, as applicable, to insure or guaranty any Purchased Asset, including, without
limitation, all FHA Mortgage Insurance Contracts, VA Loan Guaranty Agreements and RD Loan Guaranty Agreements relating to such Purchased Assets and the right to receive all insurance proceeds and condemnation awards that may be payable in respect of the premises encumbered by any Mortgage; and all other documents or instruments delivered to Buyer in respect of the Purchased Assets;
(k) all documents, files, surveys, certificates, correspondence, appraisals, computer programs, tapes, discs, cards, accounting records and other information and data of Seller relating to Purchased Assets;
(l) all rights, but not any obligations or liabilities, of Seller with respect to the Approved Investors relating to the Purchased Assets;
(m) all property of Seller, in any form or capacity now or at any time hereafter in the possession or control of Buyer, including, without limitation, all deposit accounts and any funds at any time held therein, into which Proceeds of the Purchased Assets are at any time deposited;
(n) all products and Proceeds of the Purchased Assets; and
(o) any funds of Seller at any time deposited or held in the Over/Under Account.
Purchased Mortgage Loan: A Mortgage Loan that has been purchased by Buyer from Seller in connection with a Transaction and which has not been repurchased by Seller hereunder.
QM Rule: 12 CFR 1026.43(e), including all applicable official staff commentary.
Qualified Mortgage: A Mortgage Loan that satisfies the criteria for a qualified mortgage as set forth in the QM Rule.
RD: The United States Department of Agriculture Rural Development and any successor thereto.
RD Loan Guaranty Agreement: The obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the Mortgagor.
RD Regulations: The regulations promulgated by the RD under the Consolidated Farm and Rural Development Act of 1977; and other RD issuances relating to rural housing loans codified in the Code of Federal Regulations.
Rebuttable Presumption Qualified Mortgage: A Qualified Mortgage with an annual percentage rate that exceeds the average prime offer rate for a comparable mortgage loan as of the date the interest rate is set by 1.5 or more percentage points for a first-lien Mortgage Loan or by 3.5 or more percentage points for a subordinate-lien Mortgage Loan.
Recognition Agreement: An agreement among a Cooperative Corporation, a lender and a Mortgagor with respect to a Cooperative Loan whereby such parties (i) acknowledge that such lender may make, or intends to make, such Cooperative Loan, and (ii) make certain agreements with respect to such Cooperative Loan.
Reportable Event: An event described in Section 4043(b) of ERISA with respect to a Plan as to which the thirty (30) days notice requirement has not been waived by the PBGC.
Repurchase Acceleration Event: Any of the conditions or events set forth in Section 4.2 of this Agreement.
Repurchase Date: The date on which Seller is to repurchase a Purchased Asset subject to a Transaction from Buyer, which is either (i) the date specified in the related Transactions Terms Letter and/or Asset Data Record, or (ii) the date identified to Buyer by Seller as the date that the related Purchased Asset is to be sold pursuant to a Purchase Commitment; provided, however, that if the Repurchase Date is not a date within the Maximum Dwell Time for a Purchased Asset with Standard Status, Buyer may, at its discretion, deem such Purchased Asset a Noncompliant Asset and Buyer may pursue any rights and remedies accorded Buyer hereunder as a result thereof, including, without limitation, charging Seller any applicable fees as a result thereof. The Repurchase Date for each Purchased Asset shall in no event occur later than one (1) year after the Purchase Date of such Purchased Asset.
Repurchase Price: The price at which a Purchased Asset is to be transferred from Buyer or its designee to Seller upon termination of a Transaction, which shall equal the sum of (i) the Purchase Price, (ii) any applicable unpaid fees and indemnities owed by Seller in connection with the Purchased Asset and (iii) the Price Differential due on such Purchase Price pursuant to Section 2.6 as of the date of such determination.
Repurchase Transaction: A repurchase transaction, as defined and described in Section 6.6 of this Agreement.
Request for Temporary Increase: As defined in Section 2.10 of this Agreement.
S&P: Standard and Poors Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor thereto.
Safe Harbor Qualified Mortgage: A Qualified Mortgage with an annual percentage rate that does not exceed the average prime offer rate for a comparable mortgage loan as of the date the interest rate is set by 1.5 or more percentage points for a first-lien Mortgage Loan or by 3.5 or more percentage points for a subordinate-lien Mortgage Loan.
Securities Intermediary: Deutsche Bank National Trust Company, or any successor thereto under the Joint Securities Agreement.
Sellers Release: A Sellers release in substantially the form set forth in the Custodial Agreement.
Selling System: The Freddie Mac automated system by which sellers and servicers of mortgage loans to Freddie Mac transfer mortgage summary and record data or mortgage accounting and servicing information from their computer system or service bureau to Freddie Mac, as more fully described in the Freddie Mac Guide.
Servicer: Seller, LoanCare, LLC, Cenlar FSB, or such other entity responsible for servicing or subservicing, as the case may be, the Purchased Mortgage Loans and that has been approved by Buyer in writing, or, in each case, any successor or permitted assigns thereof.
Servicer Notice: The notice acknowledged by the Servicer which is substantially in the form of Exhibit K hereto.
Servicer Termination Event: The occurrence of any of the following conditions or events shall be a Servicer Termination Event:
(a) Servicer ceases to meet the qualifications for maintaining all Approvals, such Approvals are revoked or such Approvals are materially modified;
(b) Servicer becomes subject to any material penalties and/or sanctions by any Agency, HUD, FHA, VA or RD;
(c) Servicer fails to service the Eligible Assets subject to Transactions materially in accordance with applicable Agency Guides resulting in a diminution in value of any such Eligible Asset; or
(d) Servicer fails to service the Eligible Assets subject to Transactions materially in accordance with the related Servicing Agreement or otherwise default under the related Servicing Agreement, after giving effect to any applicable notice or grace periods.
Servicing Agreement: If the Purchased Mortgage Loans are serviced by any third party servicer, the agreement with that third party in form and substance acceptable to Buyer.
Servicing Records: All servicing agreements, files, documents, records, data bases, computer tapes, and copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records, and any other records relating to or evidencing the servicing of a Mortgage Loan.
Servicing Rights: The contractual, possessory or other rights of Seller, Servicer or any other Person, whether arising under a Servicing Agreement, the Custodial Agreement or otherwise, to administer or service a Mortgage Loan or to possess related Servicing Records.
Settlement Date: With respect to a Mortgage-Backed Security, the date on which the applicable third party investor purchases such Mortgage-Backed Security.
Standard Status: As of any date of determination, a Purchased Asset that has been subject to a Transaction for less than the applicable Maximum Dwell Time and that is not a Noncompliant Asset or a Defective Asset.
Stock Certificate: With respect to a Cooperative Loan, the certificates evidencing ownership of the Cooperative Shares issued by the Cooperative Corporation.
Stock Power: With respect to a Cooperative Loan, an assignment of the Stock Certificate or an assignment of the Cooperative Shares issued by the Cooperative Corporation.
Strict Compliance: The compliance of Seller and Mortgage Loans that are intended to be Agency Eligible Mortgage Loans with the requirements of the applicable Agency Guide, as applicable and as amended by any agreements between Seller and the applicable Agency, sufficient to enable Seller to issue and Ginnie Mae to guarantee or Fannie Mae or Freddie Mac to issue and guarantee a Mortgage-Backed Security; provided, that until copies of any such agreements between Seller and Fannie Mae, Freddie Mac or Ginnie Mae, as applicable, have been provided to Buyer by Seller (if such agreements do not prevent Seller from doing so) and agreed to by Buyer, such agreements shall be deemed, as between Seller and Buyer, not to amend the requirements of the applicable Agency Guide.
Subordinated Debt: Debt of Seller that either (i) has been subordinated to Buyer as provided in this Agreement or (ii) that has been otherwise approved by Buyer.
Subsidiary: With respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person.
Successor Servicer: Any successor subservicer of the Purchased Mortgage Loans appointed by Buyer and approved by Seller (provided such approval shall not be required if an Event of Default has occurred) as described in Section 6.2(h) of this Agreement.
Takeout Price: The purchase price to be paid for a Purchased Asset or related Mortgage-Backed Security by the related Approved Investor pursuant to the related Purchase Commitment.
Tangible Net Worth: As of any date of determination, (i) the Net Worth of Seller and its consolidated Subsidiaries, on a combined basis, determined in accordance with GAAP, minus (ii) all intangibles determined in accordance with GAAP (including, without limitation, goodwill, capitalized financing costs and capitalized administration costs but excluding originated and purchased mortgage servicing rights) and any and all advances to, investments in and receivables held from Affiliates, and minus (iii) loans held for investment and real estate owned net of acceptable financing (financing must be deemed acceptable by Buyer in its sole discretion).
Taxes: As defined in Section 12.3(a) of this Agreement.
Temporary Aggregate Transaction Limit: As defined in Section 2.10 of this Agreement.
Temporary Increase: As defined in Section 2.10 of this Agreement.
Texas Cash-Out Refinance Mortgage Loan: A Mortgage Loan originated in the state of Texas pursuant to Article XVI, Section 50(a)(6) of the Texas Constitution.
TILA-RESPA Integrated Disclosure Rule: The Truth-in-Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure Rule, adopted by the Consumer Financial
Protection Bureau, which is effective for residential mortgage loan applications received on or after October 3, 2015.
Total Liabilities: As of any date of determination, the sum of (i) the total liabilities of Seller on any given date of determination, to be determined in accordance with GAAP consistent with those applied in the preparation of Sellers financial statements, plus (ii) to the extent not already included under GAAP, the total aggregate outstanding amount owed by Seller under any purchase, repurchase, refinance or other similar credit arrangements, plus (iii) to the extent not already included under GAAP, any off balance sheet purchase, repurchase, refinance or other similar credit arrangements, minus (iv) non-recourse debt.
Total Marginable Assets: As of any date of determination, in accordance with GAAP, the sum of the following assets of Seller subject to margin (i) mortgage loans held for sale, (ii) derivative assets less derivative liabilities (only to the extent that it is greater than or equal to 0) and (iii) mortgage servicing rights.
Trade Assignment: An assignment to Buyer of a forward trade between an Approved Investor and Seller with respect to one or more Purchased Assets or related Mortgage-Backed Security, in each case in substantially the form of Exhibit N hereto, together with the related Purchase Commitment that has been fully executed, is enforceable and is in full force and effect and confirms the details of such forward trade.
Transaction: As set forth in the Recitals of this Agreement.
Transactions Terms Letter: The document executed by Buyer and Seller, referencing this Agreement and setting forth certain specific terms, and any additional terms, with respect to this Agreement.
Type: A specific type of Purchased Asset, as set forth in the Transactions Terms Letter.
Type Margin: With respect to each Type of Purchased Asset, the corresponding annual rate of interest for such Type as set forth in the Transactions Terms Letter that shall be added to the Applicable Pricing Rate to determine the annual rate of interest for the related Purchase Price.
Type Purchase Price Percentage: With respect to each Type of Purchased Asset, the corresponding purchase price percentage for such Type, as set forth in the Transactions Terms Letter.
Type Sublimit: Any of the applicable Type Sublimits, as set forth in the Transactions Terms Letter.
Uncommitted Amount: The amount of the Aggregate Transaction Limit that is uncommitted, as set forth in the Transactions Terms Letter, or such other amount as may be determined by the Buyer in its sole discretion.
Underwriter Approval: Written evidence, in form and substance acceptable to Buyer, that a Purchased Mortgage Loan has been underwritten to the satisfaction of the Approved Investor issuing the applicable Purchase Commitment.
Uniform Commercial Code: The Uniform Commercial Code as in effect on the date hereof in the State of New York or the Uniform Commercial Code as in effect in the applicable jurisdiction.
Unused Facility Fee: The fee set forth in the Transactions Terms Letter.
VA: The Department of Veterans Affairs and any successor thereto.
VA Loan Guaranty Agreement: The obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the Mortgagor pursuant to the Servicemens Readjustment Act, together with all amendments, modifications, supplements and restatements thereto.
VA Regulations: Regulations promulgated by the U.S. Department of Veterans Affairs pursuant to the Servicemens Readjustment Act, as amended, codified in 38 Code of Federal Regulations, and other VA issuances relating to Government Mortgage Loans, including related handbooks, circulars and notices.
VA Streamline Refinance Mortgage Loan: A Government Mortgage Loan originated and underwritten in accordance with the VA Streamline Refinance program and VA Regulations.
Warehouse Lenders Release: A warehouse lenders release in substantially the form set forth in the Custodial Agreement.
Wet Mortgage Loan: A Mortgage Loan for which the complete Mortgage Loan File has not been delivered to Custodian, subject to Sellers obligation to deliver all of the related Mortgage Loan Documents to Buyer or its Custodian in a form and condition acceptable to Buyer within the applicable Maximum Dwell Time.
Wet Mortgage Loans Sublimit: The maximum aggregate principal amount of Purchased Mortgage Loans that may be Wet Mortgage Loans at any time, as set forth in the Transactions Terms Letter.
EXHIBIT J
WIRING INSTRUCTIONS
Sellers Wire Instructions:
Account #: *******
Account Holders name:
ABA #: *********
Bank name:
Buyers Wire Instructions:
Bank:
ABA No.: *********
Account No.: ********
Reference:
These wiring instructions may not be changed except by an authorized representative of Buyer or Seller, as applicable. Buyer shall be entitled to rely on these wiring instructions without further inquiry or verification.
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
EXECUTION
AMENDMENT NO. 1
TO MASTER REPURCHASE AGREEMENT
Amendment No. 1 to Master Repurchase Agreement, dated as of November 10, 2016 (this Amendment), by and between Bank of America, N.A. (Buyer) and AmeriHome Mortgage Company, LLC (Seller).
RECITALS
Buyer and Seller are parties to that certain Master Repurchase Agreement, dated as of October 9, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Existing Master Repurchase Agreement; and as further amended by this Amendment, the Master Repurchase Agreement).
Buyer and Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Master Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Master Repurchase Agreement.
Accordingly, Buyer and Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Master Repurchase Agreement is hereby amended as follows:
SECTION 1. Agreement to Enter into Transactions. Section 2.1 of the Existing Master Repurchase Agreement is hereby amended by deleting it in its entirety and replacing it with the following:
2.1 Agreement to Enter into Transactions. Subject to the terms and conditions of this Agreement and provided that no Event of Default, Potential Default or Event of Early Termination has occurred and is continuing, Buyer shall, from time to time during the term of this Agreement, enter into Transactions with Seller; provided, however, that (a) the Aggregate Outstanding Purchase Price as of any date shall not exceed the Aggregate Transaction Limit and (b) the Aggregate Outstanding Purchase Price for any Type of Transaction shall not exceed the applicable Type Sublimit. Buyer shall have the obligation to enter into Transactions with an Aggregate Outstanding Purchase Price equal to or less than the Committed Amount, and Buyer shall have no obligation to enter into Transactions with respect to the Uncommitted Amount. All purchases of Purchased Assets shall be first deemed committed up to the Committed Amount and then the remainder, if any, shall be deemed uncommitted up the Uncommitted Amount. Seller may request Transactions in excess of the Aggregate Transaction Limit and Buyer may, from time to time, in its sole and absolute discretion, consent to a Temporary Increase of the Aggregate Transaction Limit in accordance with Section 2.10.
SECTION 2. Over/Under Account. Section 3.5 of the Existing Master Repurchase Agreement is hereby amended by:
2.1 deleting section 3.5(a) in its entirety and replacing it with the following:
(a) Minimum Balance. Seller shall at all times maintain a balance in the Over/Under Account of not less than the Minimum Over/Under Account Balance, as set forth in the Transactions Terms Letter. The Over/Under Account shall be used to assist in settling the Transactions and any other obligations under this Agreement. Buyer shall not be required to segregate and hold funds deposited by or on behalf of Seller in the Over/Under Account separate and apart from Buyers own funds or funds deposited by or held for others. Upon the occurrence of a Potential Default, an Event of Default or an Event of Early Termination, if Buyer has elected to continue to enter into Transactions pursuant to this Agreement, Buyer shall have the right to increase the Minimum Over/Under Account Balance Seller is required to maintain in the Over/Under Account by giving notice to Seller thereof. If Seller fails to deposit funds in the Over/Under Account to comply with any such required increase within the time frame required by Buyer, Buyer shall have the right to retain in the Over/Under Account any amounts received by Buyer on behalf of Seller or otherwise credited to the Over/Under Account to comply with any such required increases, including, without limitation, any purchase proceeds received by Buyer from any Approved Investor pursuant to Section 4.7. Buyer shall not be liable to Seller for any costs, losses or damages arising from or relating to the increase of the Minimum Over/Under Account Balance that Seller is required to maintain in the Over/Under Account or retention of excess funds by Buyer to comply with any such increase.
2.2 deleting section 3.5(b)(ii) in its entirety and replacing it with the following:
(ii) Buyer. Buyer shall credit to the Over/Under Account all amounts in excess of those amounts due to Buyer in accordance with the Principal Agreements on the date Buyer receives or has received both (1) a payment by Seller or an Approved Investor pursuant to a Purchase Commitment and (2) a Purchase Advice relating to such payment without discrepancy; provided, however, that with respect to funds and Purchase Advices received by Buyer after 4:30 p.m. (New York City time), Buyer shall use best efforts to credit same day and if not possible, shall be deemed to have been received on the next Business Day. Buyer shall use reasonable efforts to notify Seller if there is a discrepancy between a wire transfer and the related Purchase Advice, and thereafter, Seller shall notify Buyer as to whether Buyer should accept such settlement payment despite the discrepancy between the amount received and the related Purchase Advice; provided, however, that if an Event of Default, Potential Default or Event of Early Termination has occurred and is continuing, Buyer is not obligated to receive approval from Seller prior to accepting any amounts received and releasing the related Purchased Assets.
2.3 deleting section 3.5(c)(ii)(5) in its entirety and replacing it with the following:
(ii)(5) after the occurrence and during the continuance of a Potential Default, an Event of Default or an Event of Early Termination, as security for the performance of Sellers obligations hereunder;
SECTION 3. Servicing Obligations of Seller. Section 6.2(e)(ii) of the Existing Master Repurchase Agreement is hereby amended by deleting the reference to Section 6.2(f) and replacing it with Section 6.2(g).
SECTION 4. Repurchase and Release of Purchased Assets. Section 6.5 of the Existing Master Repurchase Agreement is hereby amended by deleting the introductory sentence in its entirety and replacing it with the following:
6.5 Repurchase and Release of Purchased Assets. Provided that no Event of Default, Event of Early Termination or Potential Default has occurred and is continuing, Seller may repurchase a Purchased Asset by either:
SECTION 5. Periodic Due Diligence. Section 6.7 of the Existing Master Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
6.7 Periodic Due Diligence. Seller acknowledges that Buyer has the right at any time during the term of this Agreement to perform continuing due diligence reviews with respect to the Purchased Assets, for purposes of verifying compliance with the representations, warranties, covenants and specifications made hereunder or under any other Principal Agreement, or otherwise, and Seller agrees that upon reasonable (but no less than five (5) Business Days) prior notice to Seller (provided that upon the occurrence of a Potential Default, an Event of Default or an Event of Early Termination, no such prior notice shall be required), Buyer or its authorized representatives will be permitted during Sellers normal business hours to examine, inspect, make copies of, and make extracts of, the Mortgage Loan Files, the Servicing Records and any and all documents, records, agreements, instruments or information relating to such Purchased Assets in the possession, or under the control, of Seller, Custodian or Servicer. Further, Seller will make available to Buyer a knowledgeable financial or accounting officer and will instruct such officer to answer candidly and fully, at no cost to Buyer, any and all questions that any authorized representative of Buyer may address to them in reference to the Mortgage Loan Files and Purchased Assets. Without limiting the generality of the foregoing, Seller acknowledges that Buyer shall purchase Assets from Seller based solely upon the information provided by Seller to Buyer in the Asset Data Records and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right, at any time to re-underwrite any of the Purchased Assets itself or engage a third party underwriter to perform such re-underwriting. Seller agrees to cooperate with Buyer and any third party underwriter in connection with such re-underwriting, including, but not limited to, providing Buyer and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased Assets in the possession, or under the control, of Seller. Seller and Buyer further agree that all reasonable out-
of-pocket costs and expenses incurred by Buyer in connection with Buyers activities pursuant to this Section 6.7 shall be paid by Seller, provided that no Potential Default, Event of Default or Event of Early Termination has occurred or is continuing Sellers obligation to pay such costs and expenses shall be capped at $20,000.
SECTION 6. All Transactions. Section 7.2 of the Existing Master Repurchase Agreement is hereby amended by deleting clause (l) in its entirety and replacing it with the following:
(l) no Potential Default, Event of Early Termination, Event of Default or a Material Adverse Effect shall have occurred and be continuing or will occur as a result of entering into such Transaction;
SECTION 7. Notice. Section 9.3 of the Existing Master Repurchase Agreement is hereby amended by (i) deleting the and at the end of clause (q); (ii) deleting the . at the end of clause (r) and replacing it with ; and; and (iii) adding the following:
(s) any settlement with, or issuance of a consent order by, any Governmental Authority, in which the fines, penalties, settlement amounts or any other amounts owed by Seller thereunder exceeds $5,000,000 in the aggregate.
SECTION 8. Subordinated Debt. Section 10.3 of the Existing Master Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
10.3 Subordinated Debt. (i) Upon the occurrence of a Potential Default or an Event of Default, Seller shall not incur additional Subordinated Debt and shall not make payments on Subordinated Debt without the prior written consent of Buyer.
(ii) Upon the occurrence of an Event of Early Termination, Seller shall not make any payments on Subordinated debt without the prior written consent of Buyer which consent shall not be unreasonably withheld.
SECTION 9. Loans to Officers, Employees and Shareholders. Section 10.5 of the Existing Master Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
10.5 Loans to Officers, Employees and Shareholders. Seller shall not, either directly or indirectly, without the prior written consent of Buyer, make any personal loans or advances to any officers, employees, shareholders, members, partners or owners of Seller in an aggregate amount exceeding [***] of Sellers Tangible Net Worth; provided, however, that Seller shall be entitled to make a personal loan or advance to a majority shareholder, member, partner or owner of Seller without the prior written consent of Buyer provided that (i) a Potential Default, an Event of Default or an Event of Early Termination is not existing and will not occur as a result thereof and (ii) such loan or advance is clearly reflected on Sellers financial reports provided to Buyer.
SECTION 10. Transactions with Affiliates. Section 10.7 of the Existing Master Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
10.7 Transactions with Affiliates. Seller shall not, directly or indirectly, enter into any transaction with its Affiliates, if any, without the prior written consent of Buyer, including, without limitation, (a) making any loan, advance, extension of credit or capital contribution to an Affiliate, (b) transferring, selling, pledging, assigning or otherwise disposing of any of its assets to or on behalf of an Affiliate, (c) purchasing or acquiring assets from an Affiliate, or (d) paying management fees to or on behalf of an Affiliate; provided, however, that Seller may, without the prior written consent of Buyer, and provided that a Potential Default, an Event of Default or an Event of Early Termination is not existing and will not occur as a result thereof, engage in a transaction(s) with any or all of its Affiliates if (i) such transaction is in the ordinary course of Sellers mortgage banking business, and (ii) such transaction is upon fair and reasonable terms no less favorable to Seller had Seller entered into a comparable arm lengths transaction with a Person which is not an Affiliate.
SECTION 11. Consolidation, Merger, Sale of Assets and Change of Control. Section 10.8 of the Existing Master Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
10.8 Consolidation, Merger, Sale of Assets and Change of Control. Seller shall not, directly or indirectly, (a) wind up, liquidate or dissolve its affairs; (b) enter into any transaction of merger or consolidation with any Person; (c) convey, sell, lease or otherwise dispose of, or agree to do any of the foregoing at any future time, all or substantially all of its property or assets; (d) form or enter into any partnership, joint venture, syndicate or other combination which could have a Material Adverse Effect; or (e) allow a Change of Control to occur with respect to Seller, without prior written consent of Buyer; provided, however, that Seller may, without the prior written consent of Buyer, and provided that a Potential Default, an Event of Default or an Event of Early Termination is not existing and will not occur as a result thereof: (i) merge or consolidate with any Person if Seller is the surviving and controlling entity and (ii) in the ordinary course of Sellers mortgage banking business, sell equipment that is uneconomic or obsolete, sell mortgage servicing rights and acquire Mortgage Loans for resale and sell Mortgage Loans.
SECTION 12. Payment of Dividends and Retirement of Stock. Section 10.9 of the Existing Master Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
10.9 Payment of Dividends and Retirement of Stock. If a Potential Default, an Event of Default or an Event of Early Termination has occurred and is continuing or will occur as a result of such payments, Seller shall not pay any dividends or distributions with respect to any capital stock or other equity interests in Seller, whether now or hereafter outstanding, or make any other distribution in respect
thereof, either directly or indirectly, whether in cash or property or in obligations of Seller.
SECTION 13. Events of Default. Section 11.1(m) of the Existing Master Repurchase Agreement is hereby amended by replacing the word Buyer in subclause (ii) with the word Seller.
SECTION 14. Treatment of Custodial Account. Section 11.3 of the Existing Master Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
11.3 Treatment of Custodial Account. During the existence of a Potential Default, an Event of Default or an Event of Early Termination, notwithstanding any other provision of this Agreement, Seller shall have no right to withdraw or release any funds in any custodial account relating to the Purchased Assets to itself or for its benefit, nor shall it have any right to set-off any amount owed to it by Buyer against funds held by it for Buyer in any custodial account relating to the Purchased Assets. During the existence of an Event of Default, Seller shall, or Servicer shall pursuant to the Servicer Notice, promptly remit to or at the direction of Buyer all funds related to the Purchased Assets in the applicable custodial account relating to the Purchased Assets.
SECTION 15. Event of Early Termination. Article 11 of the Existing Master Repurchase Agreement is hereby amended by adding the following new section at the end thereof:
11.11 Event of Early Termination. (a) An Event of Early Termination shall have occurred if Seller has entered into any settlement with, or consented to the issuance of a consent order by, any Governmental Authority in which the fines, penalties, settlement amounts or any other amounts owed by Seller thereunder exceeds $5,000,000 in the aggregate; provided, that an Event of Early Termination shall be deemed not to occur if Buyer, in its sole discretion, within seven (7) Business Days following receipt of notice from Seller pursuant to Section 9.3(s), of Sellers entry into any such settlement or consent order, provides written approval to Seller (which may be via electronic mail), that such settlement or consent order by Seller is acceptable to Buyer.
(b) Upon the occurrence of an Event of Early Termination, the obligation of Buyer to enter into Transactions shall thereupon terminate. The outstanding Repurchase Price shall continue to be paid in accordance with the terms hereof, including, without limitation, Section 4.1 hereof. Any excess proceeds in the Over/Under Account may not be withdrawn until full repayment by Seller of the outstanding Repurchase Price. In no event shall this Section 11.11(b) limit Buyers rights under Section 2.2 hereof.
SECTION 16. Term. Section 13.1 of the Existing Master Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
13.1 Term. Provided that no Event of Default, Potential Default or Event of Early Termination has occurred and is continuing, and except as otherwise provided for herein, this Agreement shall commence on the Effective Date and continue until the Expiration Date. Following expiration or termination of this Agreement, all amounts due Buyer under the Principal Agreements shall be immediately due and payable without notice to Seller and without presentment, demand, protest, notice of protest or dishonor, or other notice of default, and without formally placing Seller in default, all of which are hereby expressly waived by Seller.
SECTION 17. Defined Terms. Exhibit A of the Existing Master Repurchase Agreement is hereby amended by:
18.1 deleting the definitions of Agency Documents, Applicable Pricing Rate, Government Mortgage Loan and Jumbo Mortgage Loan in their entirety and replacing them with the following:
Agency Documents: The documents set forth on Exhibit M as may be required, supplemented or modified from time to time by the applicable Agency.
Applicable Pricing Rate: With respect to any date of determination, the greater of (i) One-Month LIBOR, and (ii) the LIBOR Floor. It is understood that the Applicable Pricing Rate shall be adjusted on a daily basis. Notwithstanding the foregoing, under no circumstances shall the Applicable Pricing Rate be less than zero.
Government Mortgage Loan: Unless defined otherwise in the Transactions Terms Letter, a first lien mortgage loan that is:
(a) subject to FHA Mortgage Insurance under a FHA Mortgage Insurance Contract and is so insured, or is subject to a current binding and enforceable commitment for such insurance pursuant to the provisions of the National Housing Act, as amended, was originated in Strict Compliance with the Ginnie Mae Guide, is eligible for inclusion in the Ginnie Mae Program, and unless otherwise agreed to by Buyer in its sole discretion, does not exceed the applicable maximum mortgage limits as set forth in the FHA Regulations, including the general loan limits and the high-cost area loan limits;
(b) subject to a guarantee by the VA under a VA Loan Guaranty Agreement, or is subject to a current binding and enforceable commitment for such guarantee pursuant to the provisions of the Servicemens Readjustment Act, as amended, was originated in Strict Compliance with VA Regulations and the Ginnie Mae Guide, is eligible for inclusion in the Ginnie Mae Program, and unless otherwise agreed to by Buyer in its sole discretion, does not exceed the applicable maximum mortgage limits as set forth in the VA Regulations, including the general loan limits and the high-cost area loan limits;
(c) eligible to be guaranteed by the RD under a RD Loan Guaranty Agreement, and is so guaranteed pursuant to the provisions of the RD Regulations, and was originated in Strict
Compliance with RD Regulations and the Ginnie Mae Guide, is eligible for inclusion in the Ginnie Mae Program, and unless otherwise agreed to by Buyer in its sole discretion, does not exceed the applicable maximum mortgage limits as set forth in the RD Regulations, including the general loan limits and the high-cost area loan limits.
Jumbo Mortgage Loan: Unless defined otherwise in the Transactions Terms Letter, a first lien mortgage loan or Cooperative Loan (i) for which the original loan amount is greater than the conforming limit in the jurisdiction where the related Mortgaged Property is located or (ii) meets the transaction requirements set forth on Schedule 1 to the Transactions Terms Letter.
18.2 adding the following definition in its proper alphabetical order:
Event of Early Termination: Any of the conditions or events set forth in Section 11.11 of the Agreement.
SECTION 18. Representations and Warranties. Exhibit L of the Existing Master Repurchase Agreement is hereby amended by deleting paragraph (q) in its entirety and replacing it with the following:
(q) Occupancy and Use of the Mortgaged Property. As of the date of origination, the Mortgaged Property was lawfully occupied under applicable law, and to Sellers Knowledge, the Mortgaged Property is lawfully occupied under applicable law as of the Purchase Date. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities. Seller has not received notification from any Governmental Authority that the Mortgaged Property is in material non-compliance with such laws or regulations, is being used, operated or occupied unlawfully or has failed to have or obtain such inspection, licenses or certificates, as the case may be. Seller has not received notice of any violation or failure to comply with any such law, ordinance, regulation, standard, license or certificate. Solely with respect to Jumbo Mortgage Loans and to the best of Sellers knowledge, the Mortgaged Property is not being used for business purposes, as defined in the Federal Truth-in-Lending Act of 1968, as amended, and Regulation Z thereunder.
SECTION 19. Fees and Expenses. Seller hereby agrees to pay to Buyer, on demand, any and all reasonable fees, costs and expenses (including reasonable fees and expenses of counsel) incurred by Buyer in connection with the development, preparation and execution of this Amendment, irrespective of whether any transactions hereunder are executed.
SECTION 20. Conditions Precedent. This Amendment shall become effective as of the date hereof upon Buyers receipt of this Amendment, executed and delivered by a duly authorized officer of Buyer and Seller.
SECTION 21. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Master Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 22. Counterparts. This Amendment may be executed in any number of counterparts each of which shall constitute one and the same instrument, and each party hereto may execute this Amendment by signing any such counterpart. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment.
SECTION 23. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 24. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
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IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.
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Signature Page to Amendment No. 1 to Master Repurchase Agreement
EXECUTION
AMENDMENT NO. 2
TO MASTER REPURCHASE AGREEMENT
Amendment No. 2 to Master Repurchase Agreement, dated as of November 21, 2017 (this Amendment), by and between Bank of America, N.A. (Buyer) and AmeriHome Mortgage Company, LLC (Seller).
RECITALS
Buyer and Seller are parties to that certain Master Repurchase Agreement, dated as of October 9, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Existing Master Repurchase Agreement; and as further amended by this Amendment, the Master Repurchase Agreement).
Buyer and Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Master Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Master Repurchase Agreement.
Accordingly, Buyer and Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Master Repurchase Agreement is hereby amended as follows:
SECTION 1. Representations and Warranties Concerning Seller. Section 8.1 of the Existing Master Repurchase Agreement is hereby amended by adding the following new subclauses at the end thereof, respectively:
(cc) No Sanctions. Neither Seller nor any of its Affiliates, officers, directors, partners or members, (i) is an entity or person (or to the Sellers knowledge, owned or controlled by an entity or person) that (A) is currently the subject of any economic sanctions administered or imposed by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majestys Treasury or any other relevant authority (collectively, Sanctions) or (B) resides, is organized or chartered, or has a place of business in a country or territory that is currently the subject of Sanctions or (ii) is engaging or will engage in any dealings or transactions prohibited by Sanctions or will directly or indirectly use the proceeds of any Transactions contemplated hereunder, or lend, contribute or otherwise make available such proceeds to or for the benefit of any person or entity, for the purpose of financing or supporting, directly or indirectly, the activities of any person or entity that is currently the subject of Sanctions.
(dd) Anti-Money Laundering Laws. Seller has complied with all applicable anti-money laundering laws and regulations, including, without limitation, the USA Patriot Act of 2001, as amended, and the Bank Secrecy Act of 1970, as amended (collectively, the Anti Money Laundering Laws); Seller has established an anti-money laundering compliance program as required by the Anti-Money Laundering
Laws, has conducted the requisite due diligence in connection with the origination of each Purchased Mortgage Loan for purposes of the Anti-Money Laundering Laws, including with respect to the bona fide identity of the applicable Mortgagor and the origin of the assets used by said Mortgagor to purchase the property in question, and maintains, and will maintain, sufficient information to identify the applicable Mortgagor for purposes of the Anti-Money Laundering Laws.
SECTION 2. Notices. Section 14.11 of the Existing Master Repurchase Agreement is hereby amended by deleting the notice information for Buyer and replacing it with the following:
If to Buyer: Bank of America, N.A.
31303 Agoura Road
Mail Code: CA6-917-02-63
Westlake Village, California 91361
Attention: Adam Gadsby, Managing Director
Telephone: (818) 225-6541
Facsimile: (213) 457-8707
Email: Adam.Gadsby@baml.com
With copies to:
Bank of America, N.A.
One Bryant Park, 11th Floor
Mail Code: NY1-100-11-01
New York, New York 10036
Attention: Eileen Albus, Director, Mortgage Finance
Telephone: (646) 855-0946
Facsimile: (646) 855-5050
Email: Eileen.Albus@baml.com
Bank of America, N.A.
One Bryant Park
Mail Code: NY1-100-17-01
New York, New York 10036
Attention: Amie Davis, Assistant General Counsel
Telephone: (646) 855-0183
Facsimile: (704) 409-0337
Email: Amie.Davis@bankofamerica.com
SECTION 3. Definitions. Exhibit A to the Existing Master Repurchase Agreement is hereby amended by:
3.1 deleting the definitions of Liquidity and Type in their entirety and replacing them with the following:
Liquidity: As of any date of determination, the sum of (a) Sellers unrestricted and unencumbered cash and Cash Equivalents, (b) the balance in the Over/Under
Account exclusive of funds held due to a Margin Deficit or Margin Call, (c) the excess balances in the over/under accounts, if any, of Sellers third party warehouse lenders (other than Buyer), but exclusive of restricted funds held therein as provided for under the related documentation, including such restricted funds held due to a minimum threshold amount, a margin deficit, a margin call, any default or on account of the payment of any fees or expenses due and payable to such third party warehouse lender thereunder, and (d) that portion of Sellers undrawn, available and committed mortgage servicing rights facilities as permitted under the Transaction Terms Letter. By way of example but not limitation, cash in escrow and/or impound accounts shall not be included in this calculation.
Type: A specific type of mortgage loan, as set forth in the Transactions Terms Letter.
3.2 adding the following definitions in their proper alphabetical order:
Anti-Money Laundering Laws: As defined in Section 8.1(dd) of this Agreement.
CRA Aggregation Mortgage Loan: An Agency Eligible Mortgage Loan or Government Mortgage Loan that is intended to be sold to an Approved Investor, other than an Agency, for purposes of such Approved Investor, at its sole discretion, seeking credits for the Community Reinvestment Act (CRA) (1977) (12 U.S.C. 2901-Regulations 12 CFR parts 25, 228, 345, and 195).
Sanctions: As defined in Section 8.1(cc) of this Agreement.
USDA: The United States Department of Agriculture and any successor thereto.
SECTION 4. Fees and Expenses. Seller hereby agrees to pay to Buyer, on demand, any and all reasonable fees, costs and expenses (including reasonable fees and expenses of counsel) incurred by Buyer in connection with the development, preparation and execution of this Amendment, irrespective of whether any transactions hereunder are executed.
SECTION 5. Conditions Precedent. This Amendment shall become effective as of the date hereof upon Buyers receipt of this Amendment, executed and delivered by a duly authorized officer of Buyer and Seller.
SECTION 6. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Master Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 7. Counterparts. This Amendment may be executed in any number of counterparts each of which shall constitute one and the same instrument, and each party hereto may execute this Amendment by signing any such counterpart. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment.
SECTION 8. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 9. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
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IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.
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EXECUTION
AMENDMENT NO. 3
TO MASTER REPURCHASE AGREEMENT
Amendment No. 3 to Master Repurchase Agreement, dated as of April 9, 2018 (this Amendment), by and between Bank of America, N.A. (Buyer) and AmeriHome Mortgage Company, LLC (Seller).
RECITALS
Buyer and Seller are parties to that certain Master Repurchase Agreement, dated as of October 9, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Existing Master Repurchase Agreement; and as further amended by this Amendment, the Master Repurchase Agreement).
Buyer and Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Master Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Master Repurchase Agreement.
Accordingly, Buyer and Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Master Repurchase Agreement is hereby amended as follows:
SECTION 1. Financial Statements and Other Reports. Section 9.1 of the Existing Master Repurchase Agreement is hereby amended by adding the following new clause at the end thereof:
(l) Monthly Collateral Tape. Solely with respect to Purchased Mortgage Loans that are Jumbo Mortgage Loans and High-Balance Mortgage Loans, Seller shall, or shall cause Servicer to, deliver to Buyer within five (5) Business Days of the end of each calendar month a servicer tape containing data fields mutually agreeable to the parties (including, without limitation, the current outstanding principal balance thereof).
SECTION 2. Notice. Section 9.3 of the Existing Master Repurchase Agreement is hereby amended by (i) deleting the and at the end of clause (r); (ii) deleting the . at the end of clause (s) and replacing it with ; and; and (iii) adding the following new clause at the end thereof:
(t) the occurrence of a Purchase Price Percentage Trigger for each Mortgage Loan that is a High-Balance Mortgage Loan.
SECTION 3. Definitions. Exhibit A to the Existing Master Repurchase Agreement is hereby amended by:
3.1 deleting the definition of Permitted Non-Qualified Mortgage Loan in its entirety and replacing it with the following:
Permitted Non-Qualified Mortgage Loan: An Interest Only Mortgage Loan and a Jumbo Investment Mortgage Loan.
3.2 adding the following definitions in their proper alphabetical order:
High-Balance Mortgage Loan: An Agency Eligible Mortgage Loan for which the original loan amount exceeds the conforming loan limits published yearly by the Federal Housing Finance Agency (FHFA), but does not exceed the loan limit for the high-cost area in which the related Mortgaged Property is located, as specified by the FHFA.
Jumbo Investment Mortgage Loan: A Jumbo Mortgage Loan (i) for which the Mortgaged Property securing the related Mortgage is a non-owner occupied, single family residence, and (ii) that has been made solely for business purposes as defined in the Federal Truth-in-Lending Act of 1968, as amended, and Regulation Z thereunder.
Purchase Price Percentage Trigger: As defined in the Transactions Terms Letter.
SECTION 4. Form of Officers Certificate. Exhibit E to the Existing Master Repurchase Agreement is hereby amended by deleting such exhibit in its entirety and replacing it with Annex A hereto.
SECTION 5. Representations and Warranties Concerning Purchased Assets. Exhibit L to the Existing Master Repurchase Agreement is hereby amended by:
5.1 deleting paragraph (q) in its entirety and replacing it with the following:
(q) Occupancy of the Mortgaged Property. As of the date of origination, the Mortgaged Property was lawfully occupied under applicable law, and to Sellers Knowledge, the Mortgaged Property is lawfully occupied under applicable law as of the Purchase Date. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities. Seller has not received notification from any Governmental Authority that the Mortgaged Property is in material non-compliance with such laws or regulations, is being used, operated or occupied unlawfully or has failed to have or obtain such inspection, licenses or certificates, as the case may be. Seller has not received notice of any violation or failure to comply with any such law, ordinance, regulation, standard, license or certificate. Solely with respect to Jumbo Mortgage Loans (other than Jumbo Investment Mortgage Loans) and to the best of Sellers knowledge, the Mortgaged Property is not being used for business purposes, as defined in the Federal Truth-in-Lending Act of 1968, as amended, and Regulation Z thereunder. With respect to a Jumbo
Investment Mortgage Loan, the related Mortgagor has not occupied the related Mortgaged Property as a residence at any time since the date of origination.
5.2 adding the following new paragraphs (nnn) and (ooo) at the end thereof:
(nnn) Investment Mortgage Loans. Each Jumbo Investment Mortgage Loan is used for business purposes, as defined in the Federal Truth-in-Lending Act of 1968, as amended, and Regulation Z thereunder.
(ooo) High-Balance Mortgage Loans. With respect to any High-Balance Mortgage Loan with a note date of 120 days or more from any date of determination, the appraised value of the related Mortgaged Property as set forth in the appraisal delivered in connection with the origination thereof has not materially changed and such High-Balance Mortgage Loan continues to be eligible for delivery to the related Agency under the Agency Guides; provided that the failure to make such affirmative representation and warranty shall only result in a Purchase Price Percentage Trigger; provided, further, that nothing contained in this paragraph (ooo) shall limit or conflict with Buyers rights and remedies in the event of Sellers failure to make any other representation and warranty contained in this Exhibit L.
SECTION 6. Fees and Expenses. Seller hereby agrees to pay to Buyer, on demand, any and all reasonable fees, costs and expenses (including reasonable fees and expenses of counsel) incurred by Buyer in connection with the development, preparation and execution of this Amendment, irrespective of whether any transactions hereunder are executed.
SECTION 7. Conditions Precedent. This Amendment shall become effective as of the date hereof upon Buyers receipt of this Amendment, executed and delivered by a duly authorized officer of Buyer and Seller.
SECTION 8. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Master Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 9. Counterparts. This Amendment may be executed in any number of counterparts each of which shall constitute one and the same instrument, and each party hereto may execute this Amendment by signing any such counterpart. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment.
SECTION 10. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 11. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE
STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
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IN WITNESS WHEREOF, the parties have caused their names to he signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.
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ANNEX A
EXHIBIT E
FORM OF OFFICERS CERTIFICATE
EXECUTION
AMENDMENT NO. 4
TO MASTER REPURCHASE AGREEMENT
Amendment No. 4 to Master Repurchase Agreement, dated as of March 5, 2019 (this Amendment), by and between Bank of America, N.A. (Buyer) and AmeriHome Mortgage Company, LLC (Seller).
RECITALS
Buyer and Seller are parties to that certain Master Repurchase Agreement, dated as of October 9, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Existing Master Repurchase Agreement; and as further amended by this Amendment, the Master Repurchase Agreement).
Buyer and Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Master Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Master Repurchase Agreement.
Accordingly, Buyer and Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Master Repurchase Agreement is hereby amended as follows:
SECTION 1. Alternative Rate. Article 4 of the Existing Master Repurchase Agreement is hereby amended by adding the following new Section 4.14 at the end thereof:
4.14 Alternative Rate. If prior to any Payment Date, Buyer determines in its sole discretion that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining One-Month LIBOR, One-Month LIBOR is no longer in existence, or the administrator of One-Month LIBOR or a Governmental Authority having jurisdiction over Buyer has made a public statement identifying a specific date after which One-Month LIBOR shall no longer be made available or used for determining the interest rate of loans (such specific date, the Scheduled Unavailability Date), Buyer shall give prompt notice thereof to Seller. In addition, upon such time as Buyer chooses in good faith an alternative benchmark rate (including any mathematical or other adjustments to the benchmark rate (if any) incorporated therein and any proposed Successor Rate Conforming Changes, as determined by Buyer and consistent with the benchmark rate of similarly situated counterparties with similar assets in similar facilities) (such rate, a Successor Rate) to succeed One-Month LIBOR, Buyer shall give prior written notice thereof to Seller in the amount of the lesser of (i) forty-five (45) days, and (ii) the number of days remaining until the Scheduled Unavailability Date, and the Applicable Pricing Rate shall be such Successor Rate from the date specified in such notice until such notice has been withdrawn by Buyer. Upon receipt of such notice, if Seller determines that the Successor Rate chosen by Buyer is unacceptable for any reason, the parties hereto may mutually agree to terminate this Agreement pursuant to the terms hereof.
SECTION 2. Representations and Warranties Concerning Seller. Section 8.1 of the Existing Master Repurchase Agreement is hereby amended by adding the following new clause (ee) at the end thereof:
(ee) Beneficial Ownership Certification. The information included in the Beneficial Ownership Certification, if applicable, is true and correct in all respects or is otherwise being updated pursuant to Section 9.18(ii).
SECTION 3. Affirmative Covenants. Article 9 of the Existing Master Repurchase Agreement is hereby amended by adding the following new Section 9.18 at the end thereof:
9.18 Beneficial Ownership Certification. Seller shall at all times either (i) ensure that the Seller has delivered to Buyer a Beneficial Ownership Certification, if applicable, and that the information contained therein is true and correct in all respects, or (ii) deliver to Buyer an updated Beneficial Ownership Certification within ten (10) Business Days following the date on which Seller becomes aware the information contained in any previously delivered Beneficial Ownership Certification ceases to be true and correct in all respects.
SECTION 4. Recognition of the U.S. Special Resolution Regimes. Article 14 of the Existing Master Repurchase Agreement is hereby amended by adding the following new Section 14.25 at the end thereof:
14.25 Recognition of the U.S. Special Resolution Regimes.
(a) In the event that (i) Buyer or a BHC Act Affiliate of Buyer becomes subject to a proceeding under a U.S. Special Resolution Regime and (ii) notwithstanding Section 14.12 of this Agreement, this Agreement is determined, in whole or in part, not to be governed by the laws of the State of New York or otherwise governed by the laws of the United States or a state of the United States, the transfer from Buyer of this Agreement, and any interest and obligation in or under this Agreement, will be effective to the same extent as the transfer would be effective under the U.S. Special Resolution Regime if this Agreement, and any such interest and obligation, were governed by the laws of the United States or a state of the United States.
(b) In the event that (i) Buyer or a BHC Act Affiliate of Buyer becomes subject to a proceeding under a U.S. Special Resolution Regime and (ii) notwithstanding Section 14.12 of this Agreement, this Agreement is determined, in whole or in part, not to be governed by the laws of the State of New York or otherwise governed by the laws of the United States or a state of the United States, Default Rights under this Agreement that may be exercised against Buyer are permitted to be exercised to no greater extent than such Default Rights could be exercised under the U.S. Special Resolution Regime if this Agreement were governed by the laws of the United States or a state of the United States.
SECTION 5. Definitions. Exhibit A to the Existing Master Repurchase Agreement is hereby amended by:
5.1 deleting the definitions of Applicable Pricing Rate, Change of Control and One-Month LIBOR in their respective entireties and replacing them with the following:
Applicable Pricing Rate: With respect to any date of determination, the greater of (i) One-Month LIBOR or a Successor Rate, and (ii) 0%. It is understood that the Applicable Pricing Rate shall be adjusted on a daily basis.
Change of Control: Change of Control shall mean:
(a) any transaction or event as a result of which Aris Mortgage Holding Company, LLC ceases to own, directly or indirectly at least 100% of the membership interests of Seller;
(b) the sale, transfer or other disposition of all or substantially all of Sellers assets (excluding any such action taken in connection with any securitization transaction);
(c) the consummation of a merger or consolidation of Seller with or into another entity or any other corporate reorganization (in one transaction or in a series of transactions), if the combined voting power of the continuing or surviving entitys stock or other equity interests outstanding immediately after such merger or consolidation is more than 50% of such entitys stock or other equity interests;
(d) the sale or disposition of all or substantially all of such Persons assets (or consummation of any transaction, or series of related transactions, having similar effect);
(e) there occurs a change in the composition of the Board of Directors or governing body of such Person within a six (6) month period, as a result of which fewer than a majority of the directors or governing body members are incumbent; provided, however, that this provision (e) shall not apply in the event that the composition of the Board of Directors or governing body changes as a result of such Person availing itself of the public or private debt or equity markets;
(f) if such Person is a Delaware limited liability company, such Person enters into any transaction or series of transactions to adopt, file, effect or consummate a Division, or otherwise permits any such Division to be adopted, filed, effected or consummated;
(g) the dissolution or liquidation of such Person; or
(h) any transaction or series of related transactions that has the substantial effect of any one or more of the foregoing.
One-Month LIBOR: The daily rate per annum (rounded to three (3) decimal places) for one-month U.S. dollar denominated deposits as offered to prime banks in the London interbank market, as published on the Official ICE LIBOR Fixings page by Bloomberg or in the Wall Street Journal as of the date of determination.
5.2 adding the following definitions in their proper alphabetical order:
Beneficial Ownership Certification: A certification regarding beneficial ownership required by the Beneficial Ownership Regulation.
Beneficial Ownership Regulation: 31 C.F.R. § 1010.230.
BHC Act Affiliate: Has the meaning assigned to the term affiliate in, and shall be interpreted in accordance with, 12 U.S.C. § 1841(k).
Default Right: As defined in 12 C.F.R. §§ 252.81, 47.2 or 382.1, as applicable.
Delaware LLC Act: Chapter 18 of the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq., as amended.
Dividing LLC: A Delaware limited liability company that is effecting a Division pursuant to and in accordance with Section 18-217 of the Delaware LLC Act.
Division: The division of a Dividing LLC into two or more domestic limited liability companies pursuant to and in accordance with Section 18-217 of the Delaware LLC Act.
Scheduled Unavailability Date: As defined in Section 4.14 of this Agreement.
Successor Rate: A rate determined by Buyer in accordance with Section 4.14 hereof, which shall not be less than 0%.
Successor Rate Conforming Changes: With respect to any proposed Successor Rate, any spread adjustments or other conforming changes to the timing and frequency of determining rates and making payments of interest and other administrative matters as may be appropriate, in the discretion of Buyer, and determined in good faith, to reflect the adoption of such Successor Rate and to permit the administration thereof by Buyer in a manner substantially consistent with market practice.
U.S. Special Resolution Regime: Each of (i) the Federal Deposit Insurance Act and the regulations promulgated thereunder and (ii) Title II of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the regulations promulgated thereunder.
5.3 deleting the definition of LIBOR Floor in its entirety.
SECTION 6. Fees and Expenses. Seller hereby agrees to pay to Buyer, on demand, any and all reasonable fees, costs and expenses (including reasonable fees and expenses of counsel) incurred by Buyer in connection with the development, preparation and execution of this Amendment, irrespective of whether any transactions hereunder are executed.
SECTION 7. Conditions Precedent. This Amendment shall become effective as of the date hereof upon Buyers receipt of this Amendment, executed and delivered by a duly authorized officer of Buyer and Seller.
SECTION 8. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Master Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 9. Counterparts. This Amendment may be executed in any number of counterparts each of which shall constitute one and the same instrument, and each party hereto may execute this Amendment by signing any such counterpart. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment.
SECTION 10. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 11. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |
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Page to Amendment No. 4 to Master Repurchase Agreement
EXECUTION
AMENDMENT NO. 5
TO MASTER REPURCHASE AGREEMENT
Amendment No. 5 to Master Repurchase Agreement, dated as of March 4, 2020 (this Amendment), by and between Bank of America, N.A. (Buyer) and AmeriHome Mortgage Company, LLC (Seller).
RECITALS
Buyer and Seller are parties to that certain Master Repurchase Agreement, dated as of October 9, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Existing Master Repurchase Agreement; and as further amended by this Amendment, the Master Repurchase Agreement).
Buyer and Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Master Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Master Repurchase Agreement.
Accordingly, Buyer and Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Master Repurchase Agreement is hereby amended as follows:
SECTION 1. Alternative Rate. Section 4.14 of the Existing Master Repurchase Agreement is hereby amended by deleting such section and adding the following:
4.14 Alternative Rate. If prior to any Payment Date, Buyer determines in its sole good faith discretion that, by reason of circumstances affecting the relevant market, (i) adequate and reasonable means do not exist for ascertaining One-Month LIBOR, (ii) One-Month LIBOR is no longer in existence, (iii) the administrator of One-Month LIBOR or a Governmental Authority having jurisdiction over Buyer has made a public statement identifying a specific date after which One-Month LIBOR shall no longer be made available or used for determining the interest rate of loans, provided, that, at the time of such statement, there is no successor administrator that is satisfactory to Buyer, that will continue to provide One-Month LIBOR after such specific date (such specific date, the Scheduled Unavailability Date), or (iv) mortgage loan financing facilities similar to this facility, currently being executed, or that include language similar to that contained in this Section 4.14, are being executed or amended (as applicable) to incorporate or adopt a new benchmark interest rate to replace One-Month LIBOR, Buyer shall give prior written notice thereof to Seller in the amount of the lesser of (i) forty-five (45) days and (ii) the number of days remaining until the Scheduled Unavailability Date; provided, that, Buyer shall use good faith efforts to promptly deliver such notice. The Applicable Pricing Rate from the date specified in such notice, which may be the Scheduled Unavailability Date, for such period, and for all subsequent periods until such notice has been withdrawn by Buyer, shall be an alternative benchmark rate (including any mathematical or other adjustments to the benchmark rate (if any), giving due consideration to any evolving or then existing convention for similar U.S. dollar
denominated mortgage loan financing facilities for such benchmark rates, which adjustment or method for calculating such adjustment shall be published on an information service as selected by Buyer from time to time in its sole good faith discretion and may be periodically updated) (any such rate, a Successor Rate). Such Successor Rate shall be applied in a manner consistent with market practice; provided that to the extent such market practice is not administratively feasible for Buyer, such Successor Rate shall be applied in a manner as otherwise determined by Buyer in its sole good faith discretion. In connection with the implementation of a Successor Rate, Buyer shall have the right to make Successor Rate Conforming Changes, as determined by Buyer in its sole good faith discretion from time to time and, notwithstanding anything to the contrary herein or in any other Principal Agreement, any amendments implementing such Successor Rate Conforming Changes shall become effective without any further action or consent of any other party to this Agreement; provided that if, upon receipt of Buyers notice, Seller determines that the Successor Rate chosen by Buyer is unacceptable for any reason, the parties hereto may mutually agree to terminate this Agreement pursuant to the terms hereof.
SECTION 2. Monthly Collateral Tape. Section 9.1(l) of the Existing Master Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
9.1(l) Monthly Collateral Tape. Solely with respect to Purchased Mortgage Loans that are (i) Jumbo Mortgage Loans and (ii) High-Balance Mortgage Loans and Agency Investor Mortgage Loans for which the related Maximum Dwell Time is in excess of ninety (90) days as set forth on Schedule 1 to the Transactions Terms Letter, Seller shall, or shall cause Servicer to, deliver to Buyer within five (5) Business Days of the end of each calendar month a servicer tape containing data fields mutually agreeable to the parties (including, without limitation, the current outstanding principal balance thereof).
SECTION 3. Notice. Section 9.3(t) of the Existing Master Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
9.3(t) the occurrence of a Purchase Price Percentage Trigger for each Mortgage Loan that is a High-Balance Mortgage Loan or Agency Investor Mortgage Loan.
SECTION 4. Regulation W. Article 10 of the Existing Master Repurchase Agreement is hereby amended by adding the following new section at the end thereof:
10.13 Regulation W. To the best of Sellers knowledge, Seller has not used the proceeds from Transactions contemplated under this Agreement received by Seller from Buyer to effect transactions with any affiliate (as defined in 12 CFR §223.2 or 12 USC §371c) of Buyer.
SECTION 5. Notices. Section 14.11 of the Existing Master Repurchase Agreement is hereby amended by:
5.1 deleting the notice information for Buyer in clause (a) in its entirety and replacing it with the following:
If to Buyer: Bank of America, N.A.
31303 Agoura Road
Mail Code: CA6-917-02-63
Westlake Village, California 91361
Attention: Adam Gadsby, Managing Director
Telephone: (818) 225-6541
Facsimile: (213) 457-8707
Email: Adam.Gadsby@bofa.com
With copies to:
Bank of America, N.A.
One Bryant Park, 11th Floor
Mail Code: NY1-100-11-01
New York, New York 10036
Attention: Eileen Albus, Director, Mortgage Finance
Telephone: (646) 855-0946
Facsimile: (646) 855-5050
Email: Eileen.Albus@bofa.com
and
Bank of America, N.A.
214 N. Tryon Street
Mail Code: NC1-027-20-05
Charlotte, North Carolina 28255
Attention: Greg Lumelsky, Assistant General Counsel
Telephone: (980) 388-6357
Facsimile: (704) 409-0810
Email: Greg.Lumelsky@bofa.com
5.2 deleting the notice information for Buyer in clause (b) in its entirety and replacing it with the following:
If to Buyer: Adam.Gadsby@bofa.com, Adam.Robitshek@bofa.com, Eileen.Albus@bofa.com and Greg.Lumelsky@bofa.com.
SECTION 6. Definitions. Exhibit A to the Existing Master Repurchase Agreement is hereby amended by:
6.1 deleting the definitions of Successor Rate and Successor Rate Conforming Changes in their entirety and replacing them with the following:
Successor Rate: A rate determined by Buyer in accordance with Section 4.14 hereof.
Successor Rate Conforming Changes: With respect to any proposed Successor Rate, any spread adjustments or other conforming changes to the timing and frequency of determining rates and making payments of interest and other technical, administrative or
operational matters as may be appropriate, in the discretion of Buyer, determined in good faith, to reflect the adoption and implementation of such Successor Rate and to permit the administration thereof by Buyer in a manner substantially consistent with market practice (or, if Buyer determines that adoption of any portion of such market practice is not administratively feasible or that no market practice for the administration of such Successor Rate exists, in such other manner of administration as Buyer determines to be necessary in its sole good faith discretion).
6.2 adding the following new definition in its proper alphabetical order:
Agency Investor Mortgage Loan: An Agency Eligible Mortgage Loan for which the related Mortgaged Property is not occupied by the Mortgagor and is used for investment purposes.
SECTION 7. Officers Compliance Certificate. Exhibit E to the Existing Master Repurchase Agreement is hereby amended by deleting such exhibit in its entirety and replacing it with Annex A attached hereto.
SECTION 8. Representations and Warranties Concerning Purchased Assets. Exhibit L to the Existing Master Repurchase Agreement is hereby amended by deleting paragraphs (q), (jjj), (nnn) and (ooo) in their entirety and replacing them with the following:
(q) Occupancy and Use of the Mortgaged Property. As of the date of origination, the Mortgaged Property was lawfully occupied under applicable law, and to Sellers Knowledge, the Mortgaged Property is lawfully occupied under applicable law as of the Purchase Date. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities. Seller has not received notification from any Governmental Authority that the Mortgaged Property is in material non-compliance with such laws or regulations, is being used, operated or occupied unlawfully or has failed to have or obtain such inspection, licenses or certificates, as the case may be. Seller has not received notice of any violation or failure to comply with any such law, ordinance, regulation, standard, license or certificate. Solely with respect to Jumbo Mortgage Loans (other than Jumbo Investment Mortgage Loans) and to the best of Sellers knowledge, the Mortgaged Property is not being used for business purposes, as defined in the Federal Truth-in-Lending Act of 1968, as amended, and Regulation Z thereunder. With respect to a Jumbo Investment Mortgage Loan and an Agency Investor Mortgage Loan, the related Mortgagor has not occupied the related Mortgaged Property as a residence at any time since the date of origination.
(jjj) Qualified Mortgage. Each Mortgage Loan (other than a Bond Loan 1st Lien and a Permitted Non-Qualified Mortgage Loan) satisfies the following criteria:
(i) Other than with respect to (x) Jumbo Investment Mortgage Loans and (y) Agency Investor Mortgage Loans, such Mortgage Loan is a Qualified Mortgage and is supported by documentation that evidences compliance with the QM Rule;
(ii) Other than with respect to (x) Jumbo Investment Mortgage Loans and (y) Agency Investor Mortgage Loans, upon Buyers request, such Mortgage Loan is accurately identified in writing to Buyer as either a Safe Harbor Qualified Mortgage or a Rebuttable Presumption Qualified Mortgage; and
(iii) Other than with respect to (x) Jumbo Investment Mortgage Loans and (y) Agency Investor Mortgage Loans, prior to the origination of such Mortgage Loan, to the best of Sellers knowledge, the related originator made a reasonable and good faith determination that the related Mortgagor would have a reasonable ability to repay such Mortgage Loan according to its terms, in accordance with, at a minimum, the eight underwriting factors set forth in 12 CFR 1026.43(c)(2) and is supported by documentation that evidences compliance with the Ability to Repay Rule.
(nnn) Investment Mortgage Loans. Each Jumbo Investment Mortgage Loan and Agency Investor Mortgage Loan is used for a business purpose as such term is defined in the Federal Truth-in-Lending Act of 1968, as amended, and Regulation Z thereunder.
(ooo) High-Balance Mortgage Loans and Agency Investor Mortgage Loans. With respect to any High-Balance Mortgage Loan or Agency Investor Mortgage Loan with a note date of 120 days or more from any date of determination, the appraised value of the related Mortgaged Property as set forth in the appraisal delivered in connection with the origination thereof has not materially changed and such High-Balance Mortgage Loan or Agency Investor Mortgage Loan continues to be eligible for delivery to the related Agency under the Agency Guides; provided that the failure to make such affirmative representation and warranty shall only result in a Purchase Price Percentage Trigger; provided, further, that nothing contained in this paragraph (ooo) shall limit or conflict with Buyers rights and remedies in the event of Sellers failure to make any other representation and warranty contained in this Exhibit L.
SECTION 9. Fees and Expenses. Seller hereby agrees to pay to Buyer, on demand, any and all reasonable fees, costs and expenses (including reasonable fees and expenses of counsel) incurred by Buyer in connection with the development, preparation and execution of this Amendment, irrespective of whether any transactions hereunder are executed.
SECTION 10. Conditions Precedent. This Amendment shall become effective as of March 5, 2020 upon Buyers receipt of this Amendment, executed and delivered by a duly authorized officer of Buyer and Seller.
SECTION 11. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Master Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 12. Counterparts. This Amendment may be executed in any number of counterparts each of which shall constitute one and the same instrument, and each party hereto may execute this Amendment by signing any such counterpart. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by
facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment.
SECTION 13. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 14. GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the day and year first above written.
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |
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Signature Page to Amendment No. 5 to Master Repurchase Agreement
ANNEX A TO AMENDMENT
EXHIBIT E
FORM OF OFFICERS CERTIFICATE
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
EXECUTION
SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as administrative agent (Administrative Agent),
CREDIT SUISSE AG, a company incorporated in Switzerland, acting through its CAYMAN ISLANDS BRANCH, as a buyer (CS Cayman and a Buyer), ALPINE SECURITIZATION LTD, as a buyer (Alpine and a Buyer) and other Buyers from time to time (Buyers),
AMERIHOME MORTGAGE COMPANY, LLC, as seller (Seller), and
AHMC HOLDING I LLC, as REO subsidiary (REO Subsidiary)
Dated May 9, 2018
TABLE OF CONTENTS
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Page |
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1. |
Applicability |
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1 |
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2. |
Definitions |
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2 |
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3. |
Program; Initiation of Transactions |
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20 |
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4. |
Repurchase; Conversion to REO Property |
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22 |
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5. |
Price Differential |
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23 |
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6. |
Margin Maintenance |
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23 |
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7. |
Income Payments |
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24 |
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8. |
Security Interest |
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25 |
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9. |
Payment and Transfer |
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29 |
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10. |
Conditions Precedent |
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29 |
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11. |
Program; Costs |
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33 |
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12. |
Servicing |
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36 |
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13. |
Representations and Warranties |
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38 |
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14. |
Covenants |
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43 |
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15. |
Events of Default |
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50 |
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16. |
Remedies Upon Default |
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52 |
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17. |
Reports |
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56 |
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18. |
Repurchase Transactions |
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59 |
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19. |
Single Agreement |
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60 |
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20. |
Notices and Other Communications |
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60 |
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21. |
Entire Agreement; Severability |
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62 |
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22. |
Non assignability |
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62 |
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23. |
Set-off |
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63 |
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24. |
Binding Effect; Governing Law; Jurisdiction |
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63 |
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25. |
No Waivers, Etc. |
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64 |
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26. |
Intent |
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64 |
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27. |
Disclosure Relating to Certain Federal Protections |
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65 |
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28. |
Power of Attorney |
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66 |
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29. |
Buyers May Act Through Administrative Agent |
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66 |
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30. |
Indemnification; Obligations |
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31. |
Counterparts |
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67 |
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32. |
Confidentiality |
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67 |
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33. |
Recording of Communications |
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68 |
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34. |
Periodic Due Diligence Review |
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68 |
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35. |
Authorizations |
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69 |
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36. |
Acknowledgement of Assignment and Administration of Repurchase Agreement |
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69 |
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37. |
Acknowledgement Of Anti-Predatory Lending Policies |
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70 |
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38. |
Documents Mutually Drafted |
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70 |
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39. |
General Interpretive Principles |
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70 |
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40. |
Conflicts |
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71 |
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41. |
Bankruptcy Non-Petition |
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71 |
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42. |
Limited Recourse |
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71 |
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43. |
Amendment and Restatement |
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71 |
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44. |
Back-up Administrative Agent; Successor Administrative Agent |
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72 |
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45. |
Nominee |
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SCHEDULES | |
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Schedule 1-A |
Representations and Warranties with Respect to Purchased Mortgage Loans |
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Schedule 1-B |
Representations and Warranties with Respect to REO Subsidiary Interests |
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Schedule 1-C |
Representations and Warranties with Respect to REO Property |
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Schedule 2 |
Authorized Representatives |
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Schedule 3 |
Administrative Agents Wiring Instructions |
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EXHIBITS | |
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Exhibit A |
Form of Power of Attorney |
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Exhibit B |
Seller Parties Tax Identification Numbers |
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Exhibit C |
Existing Indebtedness |
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Exhibit D |
Escrow Instruction Letter |
Exhibit E |
Form of Servicer Notice |
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Exhibit F |
Form of Notice of Additional Buyer |
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Exhibit G |
Form of Appointment of Back-Up Administrative Agent Notice |
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Exhibit H |
Form of Successor Administrative Agent Notice |
This is a SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT, dated as of May 9, 2018, by and among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, (Administrative Agent) on behalf of Buyers, including but not limited to Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Islands Branch (CS Cayman a Buyer) and Alpine Securitization LTD (Alpine and a Buyer), AMERIHOME MORTGAGE COMPANY, LLC (Seller) and AHMC HOLDING I LLC (REO Subsidiary),
Administrative Agent, Buyers, and Seller previously entered into an Amended and Restated Master Repurchase Agreement, dated as of February 3, 2017 (the Existing Master Repurchase Agreement);
The parties hereto have requested that the Existing Master Repurchase Agreement be amended and restated in its entirety on the terms and subject to the conditions set forth herein;
Any Buyer may, from time to time, assign its rights and obligations under this Agreement as permitted hereunder; provided that Administrative Agent shall continue to administer this Agreement as contemplated hereunder;
NOW, THEREFORE, in consideration of the mutual agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Applicability
From time to time the parties hereto may enter into transactions in which Seller agrees to transfer to Administrative Agent (on behalf of Buyers) certain Purchased Assets (as hereinafter defined) on a servicing released basis against the transfer of funds by Administrative Agent, with a simultaneous agreement by Administrative Agent (on behalf of Buyers) to transfer to Seller such Purchased Assets on a servicing released basis at a date certain or on demand, against the transfer of funds by Seller. After the initial Purchase Date, as part of separate Transactions, Seller may request and Administrative Agent on behalf of Buyers may fund, subject to the terms and conditions of this Agreement, an increase in the Purchase Price for Purchased Assets based upon the transfer of REO Properties to the REO Subsidiary. Each such transaction shall be referred to herein as a Transaction and, unless otherwise agreed in writing, shall be governed by this Agreement, including any supplemental terms or conditions contained in any annexes identified herein, as applicable hereunder. For the avoidance of doubt, and for administrative and tracking purposes, the purchase and sale of each Purchased Mortgage Loan shall be deemed a separate Transaction.
Seller owns 100% of the Capital Stock in the REO Subsidiary on the initial Purchase Date. On the initial Purchase Date, Administrative Agent on behalf of Buyers will purchase the REO Subsidiary Interests from the Seller in connection with the Transaction on such date.
As additional consideration, the REO Subsidiary will pledge its interests in the Contributed REO Properties.
2. Definitions
Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:
1934 Act means the Securities Exchange Act of 1934, as amended from time to time.
Acceptable State means any state acceptable pursuant to Sellers Underwriting Guidelines.
Accepted Servicing Practices means, with respect to any Mortgage Loan or REO Property, those mortgage servicing practices or property management practices, as applicable, of prudent mortgage lending institutions which service mortgage loans and manage real estate properties, as applicable, of the same type as such Mortgage Loan or REO Property in the jurisdiction where the related Mortgaged Property is located in accordance with applicable law.
Act of Insolvency means, with respect to any Person or its Affiliates, (a) the filing of a petition, commencing, or authorizing the commencement of any case or proceeding, or the voluntary joining of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law relating to the protection of creditors, or suffering any such petition or proceeding to be commenced by another which is consented to, not timely contested or results in entry of an order for relief; (b) the seeking of the appointment of a receiver, trustee, custodian or similar official for such party or an Affiliate or any substantial part of the property of either; (c) the appointment of a receiver, conservator, or manager for such party or an Affiliate by any governmental agency or authority having the jurisdiction to do so; (d) the making or offering by such party or an Affiliate of a composition with its creditors or a general assignment for the benefit of creditors; (e) the admission by such party or an Affiliate of such party of its inability to pay its debts or discharge its obligations as they become due or mature; or (f) that any governmental authority or agency or any Person acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of such party or of any of its Affiliates, or shall have taken any action to displace the management of such party or of any of its Affiliates or to curtail its authority in the conduct of the business of such party or of any of its Affiliates.
Additional Buyer has the meaning set forth in Section 36 hereof.
Additional Repurchase Assets has the meaning assigned thereto in Section 8.a(2) hereof.
Administrative Agent means CSFBMC or any successor thereto.
Administrative Agents Wiring Instructions means the wiring instructions of Administrative Agent set forth on Schedule 3 hereof or such other instructions provided by Administrative Agent to Seller in writing, which may be by electronic means.
Affiliate means, with respect to any Person, any affiliate of such Person, as such term is defined in the Bankruptcy Code, which shall also include, for the avoidance of doubt, with
respect to Administrative Agent only, any CP Conduit; provided, however, that for purposes of this Agreement, Aris Mortgage Holding Company, LLC shall be deemed to be the only Affiliate of Seller.
Agency means Freddie Mac, Fannie Mae or GNMA, as applicable.
Agency Approvals has the meaning set forth in Section 14.w hereof.
Agency Mortgage Loan means any of a Conforming Mortgage Loan, FHA Loan, USDA Loan or VA Loan, but not a GNMA EBO.
Agency Security means a mortgage-backed security issued by an Agency.
Aging Limit has the meaning assigned to such term in the Pricing Side Letter.
Agreement means this Amended and Restated Master Repurchase Agreement, as it may be amended, supplemented or otherwise modified from time to time.
Appraised Value means the value set forth in an appraisal made in connection with the origination of the related Mortgage Loan as the value of the Mortgaged Property.
Asset Documents means the documents in the related Asset File to be delivered to the related Custodian.
Asset File means, collectively, the Mortgage File and the REO Property File.
Asset Schedule means, with respect to any Transaction as of any date, an Asset Schedule in the form prescribed by the Custodial Agreement.
Asset Value has the meaning assigned to such term in the Pricing Side Letter.
Assignment of Mortgage means an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the sale of the Mortgage.
Assignment of Proprietary Lease means the specific agreement creating a first lien on and pledge of the Co-op Shares and the appurtenant Proprietary Lease securing a Co-op Loan.
Bailee Letter has the meaning assigned to such term in the Custodial Agreement.
Bankruptcy Code means the United States Bankruptcy Code of 1978, as amended from time to time.
Business Day means any day other than (i) a Saturday or Sunday; (ii) a day on which the Federal Reserve Bank of New York or the Custodian is authorized or obligated by law or executive order to be closed or (iii) a public or bank holiday in the States of New York or California.
Buyer means each Buyer identified by Administrative Agent from time to time and their successors in interest and assigns pursuant to Section 22 and, with respect to Section 11, its participants.
Capital Stock means, as to any Person, any and all shares, interests, participations or other equivalents (however designated) of capital stock of a corporation, any and all equivalent equity ownership interests in a Person which is not a corporation, including, without limitation, any and all member or other equivalent interests in any limited liability company, limited partnership, trust, and any and all warrants or options to purchase any of the foregoing, in each case, designated as securities (as defined in Section 8-102 of the Uniform Commercial Code) in such Person, including, without limitation, all rights to participate in the operation or management of such Person and all rights to such Persons properties, assets, interests and distributions under the related organizational documents in respect of such Person.
Cenlar Servicer Notice means the Amended and Restated Servicer Notice, dated as of May 9, 2018, among Administrative Agent, as buyer, Seller and Cenlar FSB, as it may be amended, supplemented or otherwise modified from time to time.
Cenlar Servicing Agreement means the Subservicing Agreement, dated as of October 7, 2014, between Cenlar FSB and Seller, as it may be amended, supplemented or otherwise modified from time to time.
Certificate means any certificate evidencing a beneficial ownership interest of the REO Subsidiary.
Change in Control means:
(A) any transaction or event as a result of which Aris Mortgage Holding Company, LLC ceases to own, beneficially or of record, 100% of the membership interests of Seller;
(B) the sale, transfer, or other disposition of all or substantially all of Sellers assets (excluding any such action taken in connection with any securitization transaction);
(C) the consummation of a merger or consolidation of Seller with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entitys stock or other equity interests outstanding immediately after such merger, consolidation or such other reorganization is owned by Persons who were not stockholders or other equityholders of Seller immediately prior to such merger, consolidation or other reorganization or
(D) other than in connection with the Transactions under this Agreement, Seller shall fail to own 100% of the REO Subsidiary Interests of the REO Subsidiary.
Clearing Account has the meaning specified in Section (c) hereof.
Code means the Internal Revenue Code of 1986, as amended.
Collection Period means a monthly period as mutually agreed to by Seller and Administrative Agent.
Committed Mortgage Loan means a Mortgage Loan which is the subject of a Take-out Commitment with a Take-out Investor.
Confidential Information has the meaning set forth in Section 32.b hereof.
Conforming Mortgage Loan means a first lien Mortgage Loan originated in accordance with the criteria of an Agency for securitization or cash purchase of Mortgage Loans, including, without limitation, conventional Mortgage Loans.
Contributed REO Properties means the REO Properties converted from GNMA EBOs (together with the Repurchase Assets related to such REO Properties) transferred by Seller to REO Subsidiary or acquired by REO Subsidiary directly in connection with such conversion and subject to a Transaction under this Agreement, listed on the related Asset Schedule attached to the related Transaction Request, until the Administrative Agent on behalf of Buyers releases its interest in such Contributed REO Properties in accordance with the terms of this Agreement.
Conversion Date means the date an REO Property is contributed to the REO Subsidiary and becomes a Contributed REO Property.
Co-op Corporation means, with respect to any Co-op Loan, the cooperative apartment corporation that holds legal title to the related Co-op Project and grants occupancy rights to units therein to stockholders through Proprietary Leases or similar arrangements.
Co-op Loan means a Mortgage Loan secured by the pledge of stock allocated to a Co-op Unit in a Co-op Corporation and collateral assignment of the related Proprietary Lease.
Co-op Project means, with respect to any Co-op Loan, all real property and improvements thereto and rights therein and thereto owned by a Co-op Corporation including without limitation the land, separate dwelling units and all common elements.
Co-op Shares means, with respect to any Co-op Loan, the shares of stock issued by a Co-op Corporation and allocated to a Co-op Unit and represented by a Stock Certificates.
Co-op Unit means, with respect to any Co-op Loan, a specific unit in a Co-op Project.
CP Conduit means a commercial paper conduit, including but not limited to Alpine Securitization LTD, administered, managed or supported by CSFBMC or an Affiliate of CSFBMC.
CSFBMC means Credit Suisse First Boston Mortgage Capital LLC, or any successors or assigns.
Custodial Account means the account described in the Custodial Account Control Agreement, into which all collections and proceeds on or in respect of the Purchased Mortgage Loans shall be deposited by Seller or Servicer.
Custodial Account Control Agreement means that certain Deposit Account Control Agreement, dated as of January 31, 2018, among Administrative Agent, Seller and Western Alliance Bank, as the same may be amended, restated, supplemented or otherwise modified from time to time.
Custodial Agreement means that certain Second Amended and Restated Custodial Agreement, dated as of the date hereof, among Seller, Administrative Agent, Buyers and Custodian, as it may be amended, restated, supplemented or otherwise modified from time to time.
Custodial Asset Schedule has the meaning assigned to such term in the Custodial Agreement.
Custodian means Deutsche Bank National Trust Company or any successor thereto under the Custodial Agreement.
DE Compare Ratio means the Two Year FHA Direct Endorsement Lender Compare Ratio, excluding streamline FHA refinancings, as made publicly available by HUD.
Deed means the deed issued in connection with receiving a deed in lieu of foreclosure evidencing title to the related REO Property.
Default means an Event of Default or an event that with notice or lapse of time or both would become an Event of Default.
Dollars and $ means dollars in lawful currency of the United States of America.
Due Date means the day of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.
Early Buyout means the purchase of a modified or defaulted Mortgage Loan by Seller from a GNMA Security.
Effective Date means the date upon which the conditions precedent set forth in Section 10 shall have been satisfied.
Electronic Tracking Agreement means an Amended and Restated Electronic Tracking Agreement among Administrative Agent, Seller, MERS and MERSCORP Holdings, Inc., to the extent applicable as the same may be amended from time to time.
Environmental Issue means any material environmental issue with respect to any Mortgaged Property or Contributed REO Property, as determined by the Administrative Agent in its good faith discretion, including without limitation, the violation of any federal, state, foreign or
local statute, law, rule, regulation, ordinance, code, guideline, written policy and rule of common law now or hereafter in effect and in each case as amended, and any judicial or administrative interpretation thereof, including any judicial or administrative order, consent decree or judgment, relating to the environment, employee health and safety or hazardous substances, materials or other pollutants, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), 42 U.S.C. § 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C. § 1251 et seq.; the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. § 3803 et seq.; the Oil Pollution Act of 1990, 33 U.S.C. § 2701 et seq.; the Emergency Planning and the Community Right-to-Know Act of 1986, 42 U.S.C. § 11001 et seq.; the Hazardous Material Transportation Act, 49 U.S.C. § 1801 et seq. and the Occupational Safety and Health Act, 29 U.S.C. § 651 et seq.; and any state and local or foreign analogues, counterparts or equivalents, in each case as amended from time to time.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor thereto, and the regulations promulgated and administrative rulings issued thereunder.
ERISA Affiliate means any corporation or trade or business that, together with Seller is treated as a single employer under Section 414(b) or (c) of the Code or solely for purposes of Section 302 of ERISA and Section 412 of the Code is treated as single employer described in Section 414 of the Code.
Escrow Instruction Letter means the Escrow Instruction Letter from Seller to the Settlement Agent, in the form of Exhibit D hereto, as the same may be modified, supplemented and in effect from time to time.
Escrow Payments means, with respect to any Mortgage Loan, the amounts constituting ground rents, taxes, assessments, water rates, sewer rents, municipal charges, mortgage insurance premiums, fire and hazard insurance premiums, condominium charges, and any other payments required to be escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
Event of Default has the meaning specified in Section 15 hereof.
Event of Termination means with respect to any Seller Party (a) with respect to any Plan, a reportable event, as defined in Section 4043 of ERISA, as to which the PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within thirty (30) days of the occurrence of such event, or (b) the withdrawal of such Seller Party or any ERISA Affiliate thereof from a Plan during a plan year in which it is a substantial employer, as defined in Section 4001(a)(2) of ERISA, or (c) the failure by such Seller Party or any ERISA Affiliate thereof to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA with respect to any Plan, including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code (or Section 430(j) of the Code as amended
by the Pension Protection Act) or Section 302(e) of ERISA (or Section 303(j) of ERISA, as amended by the Pension Protection Act), or (d) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by such Seller Party or any ERISA Affiliate thereof to terminate any Plan, or (e) the failure to meet requirements of Section 436 of the Code resulting in the loss of qualified status under Section 401(a)(29) of the Code, or (f) the institution by the PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (g) the receipt by such Seller Party or any ERISA Affiliate thereof of a notice from a Multiemployer Plan that action of the type described in the previous clause (f) has been taken by the PBGC with respect to such Multiemployer Plan, or (h) any event or circumstance exists which may reasonably be expected to constitute grounds for such Seller Party or any ERISA Affiliate thereof to incur liability under Title IV of ERISA or under Sections 412(b) or 430(k) of the Code with respect to any Plan.
Excluded Taxes means any of the following Taxes imposed on or with respect to a Buyer or other recipient of any payment hereunder or required to be withheld or deducted from a payment to such Buyer or such other recipient: (a) Taxes based on (or measured by) net income or net profits, franchise Taxes and branch profits Taxes that are imposed on a Buyer or other recipient of any payment hereunder as a result of (i) being organized under the laws of, or having its principal office or its applicable lending office located in the jurisdiction imposing such Tax (or any political subdivision thereof), or (ii) a present or former connection between such Buyer or other recipient and the jurisdiction of the Governmental Authority imposing such Tax or any political subdivision or Taxing authority thereof (other than connections arising from such Buyer or other recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced under this Agreement or any Program Agreement, or sold or assigned an interest in any Purchased Mortgage Loan); (b) any Tax imposed on a Buyer or other recipient of a payment hereunder that is attributable to such Buyers or other recipients failure to comply with relevant requirements set forth in Section 11.e; (c) any withholding Tax that is imposed on amounts payable to or for the account of such Buyer or other recipient of a payment hereunder pursuant to a law in effect on the date such Person becomes a party to or under this Agreement, or such Person changes its lending office, except in each case to the extent that amounts with respect to Taxes were payable either to such Persons assignor immediately before such Person became a party hereto or to such Person immediately before it changed its lending office; and (d) any U.S. federal withholding Taxes imposed under FATCA.
Existing Indebtedness has the meaning specified in Section 13.a.23 hereof.
Fannie Mae means the Federal National Mortgage Association or any successor thereto.
FATCA means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code.
FHA means the Federal Housing Administration, an agency within the United States Department of Housing and Urban Development, or any successor thereto, and including the Federal Housing Commissioner and the Secretary of Housing and Urban Development where appropriate under the FHA Regulations.
FHA Approved Mortgagee means a corporation or institution approved as a mortgagee by the FHA under the National Housing Act, as amended from time to time, and applicable FHA Regulations, and eligible to own and service mortgage loans such as the FHA Loans.
FHA Connection System means the FHA Connection system, together with any successor FHA electronic access portal.
FHA Loan means a Mortgage Loan which is the subject of an FHA Mortgage Insurance Contract.
FHA Mortgage Insurance means, mortgage insurance authorized under the National Housing Act, as amended from time to time, and provided by the FHA.
FHA Mortgage Insurance Contract means the contractual obligation of the FHA respecting the insurance of a Mortgage Loan.
FHA Regulations means the regulations promulgated by the Department of Housing and Urban Development under the National Housing Act, as amended from time to time and codified in 24 Code of Federal Regulations, and other Department of Housing and Urban Development issuances relating to FHA Loans, including the related handbooks, circulars, notices and mortgagee letters.
Fidelity Insurance means insurance coverage with respect to employee errors, omissions, dishonesty, forgery, theft, disappearance and destruction, robbery and safe burglary, property (other than money and securities) and computer fraud in an aggregate amount acceptable to Sellers regulators.
Freddie Mac means the Federal Home Loan Mortgage Corporation or any successor thereto.
GAAP means generally accepted accounting principles in effect from time to time in the United States of America and applied on a consistent basis.
GNMA means the Government National Mortgage Association and any successor thereto.
GNMA EBO means a FHA Loan, USDA Loan or VA Loan which is subject to an Early Buyout and is a Purchased Mortgage Loan.
GNMA Guide means the GNMA Mortgage-Backed Securities Guide, Handbook 5500.3, Rev. 1, as amended from time to time, and any related announcements, directives and correspondence issued by GNMA.
GNMA Haircut Amount means, with respect to a Simultaneously Funded GNMA EBO, an amount equal to (i) the amount due to GNMA to repurchase such Mortgage Loan from GNMA less (ii) the Purchase Price for such Mortgage Loan.
GNMA Security means a mortgage-backed security guaranteed by GNMA pursuant to the GNMA Guide.
Governmental Authority means any nation or government, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions over Seller or Administrative Agent or any Buyer, as applicable.
Gross Margin means, with respect to each adjustable rate Mortgage Loan, the fixed percentage amount set forth in the related Mortgage Note.
Guarantee means, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term Guarantee shall not include (a) endorsements for collection or deposit in the ordinary course of business, or (b) obligations to make servicing advances for delinquent taxes and insurance or other obligations in respect of a Mortgage Loan or Mortgaged Property. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. The terms Guarantee and Guaranteed used as verbs shall have correlative meanings.
High Cost Mortgage Loan means a Mortgage Loan that is classified as (a) high cost, threshold, covered, abusive or predatory loan under HOEPA, Regulation Z, Regulation X or any other applicable state, federal or local law (or a similarly classified loan using different terminology under a law, regulation or ordinance imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees), or (b) a High Cost Mortgage Loan or Covered Mortgage Loan, as applicable (as such terms are defined in the then current S&P LEVELS® Glossary).
HUD means the United States Department of Housing and Urban Development or any successor thereto.
Income means, with respect to any Purchased Mortgage Loan or Contributed REO Property at any time until repurchased by Seller, any principal received thereon or in respect thereof and all interest, dividends or other distributions thereon.
Indebtedness has the meaning assigned to such term in the Pricing Side Letter.
Indemnified Taxes means Taxes other than Excluded Taxes and Other Taxes, imposed on or with respect to any payment made by or on account of any obligation of Seller hereunder or under any Program Agreement.
Index means, with respect to any adjustable rate Mortgage Loan, the index identified on the Asset Schedule and set forth in the related Mortgage Note for the purpose of calculating the applicable Mortgage Interest Rate.
Interest Rate Adjustment Date means the date on which an adjustment to the Mortgage Interest Rate with respect to each Mortgage Loan becomes effective.
Interest Rate Protection Agreement means, with respect to any or all of the Purchased Mortgage Loans, any short sale of a US Treasury Security, or futures contract, or mortgage related security, or Eurodollar futures contract, or options related contract, or interest rate swap, cap or collar agreement or Take-out Commitment, or similar arrangement providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by Seller and (i) any registered broker-dealer, (ii) any Affiliate of Administrative Agent, or (iii) such other party acceptable to Administrative Agent in its good faith discretion.
Joint Securities Agreement means that certain Joint Securities Account Control Agreement, dated as of June 2, 2014, among Buyer, Seller, the Securities Intermediary and the other parties thereto, as the same may be amended from time to time.
LIBOR has the meaning assigned to such term in the Pricing Side Letter.
Lien means any mortgage, lien, pledge, charge, security interest or similar encumbrance.
Loan to Value Ratio or LTV means, with respect to any Mortgage Loan, the ratio of the original outstanding principal amount of the Mortgage Loan to the Appraised Value or purchase price of the Mortgaged Property at origination as determined pursuant to the Underwriting Guidelines.
LoanCare Servicer Notice means the Servicer Notice, dated as of December 24, 2014, among Administrative Agent, Seller and LoanCare, LLC, as it may be amended, supplemented or otherwise modified from time to time.
LoanCare Servicing Agreement means the Subservicing Agreement, dated as of December 1, 2013, between LoanCare, LLC and Seller, as it may be amended, supplemented or otherwise modified from time to time.
Margin Call has the meaning specified in Section 6.a hereof.
Margin Deadline has the meaning specified in Section 6.b hereof.
Margin Deficit has the meaning specified in Section 6.a hereof.
Market Value has the meaning assigned to such term in the Pricing Side Letter.
Material Adverse Effect means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of Seller taken as a whole or REO Subsidiary; (b) a material impairment of the ability of any Seller Party to perform under any Program Agreement and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Program Agreement against any Seller Party, in each case which change would materially and adversely affect the ability of such Seller Party to perform its obligations to Administrative Agent (on behalf of Buyers) under any Program Agreement, as determined by Administrative Agent in its good faith discretion.
Maximum Aggregate Purchase Price has the meaning assigned to such term in the Pricing Side Letter.
MERS means Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.
MERS® System means the system of recording transfers of mortgages electronically maintained by MERS.
Monthly Payment means the scheduled monthly payment of principal and interest on a Mortgage Loan.
Moodys means Moodys Investors Service, Inc. or any successors thereto.
Mortgage means each mortgage, deed of trust, or deed to secure debt and in each case the related assignment of rents, security agreement and fixture filing, or similar instrument creating and evidencing a first lien on real property and other property and rights incidental thereto, unless such Mortgage is granted in connection with a Co-op Loan, in which case the first lien position is in the Co-op Shares and in the Proprietary Lease relating to such Co-op Shares.
Mortgage File means, with respect to a Mortgage Loan, the documents and instruments relating to such Mortgage Loan and set forth in an exhibit to the Custodial Agreement.
Mortgage Interest Rate means the rate of interest borne on a Mortgage Loan from time to time in accordance with the terms of the related Mortgage Note.
Mortgage Interest Rate Cap means, with respect to an adjustable rate Mortgage Loan, the limit on each Mortgage Interest Rate adjustment as set forth in the related Mortgage Note.
Mortgage Loan means any first lien closed Agency Mortgage Loan, Non-Agency Non-QM Mortgage Loan, Non-Agency QM Mortgage Loan or a GNMA EBO which is a fixed or floating-rate, one-to-four-family residential mortgage or home equity loan evidenced by a promissory note and secured by a first lien mortgage, which satisfies the requirements set forth in the Underwriting Guidelines and Section 13.b hereof; provided that, Mortgage Loans shall not include any High Cost Mortgage Loans.
Mortgage Note means the promissory note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage.
Mortgaged Property means the real property or other Co-op Loan collateral securing repayment of the debt evidenced by a Mortgage Note.
Mortgagor means the obligor or obligors on a Mortgage Note, including any Person who has assumed or guaranteed the obligations of the obligor thereunder.
Multiemployer Plan means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been or are required to be made by Seller or any ERISA Affiliate and that is covered by Title IV of ERISA.
Net Income means, for any period and any Person, the net income of such Person for such period as determined in accordance with GAAP.
Net Worth means, with respect to any Person, an amount equal to, on a consolidated basis, such Persons stockholder equity (determined in accordance with GAAP).
Nominee means AmeriHome Mortgage Company, LLC, or any successor Nominee appointed by Administrative Agent following an Event of Default.
Non-Agency QM Mortgage Loan means a Mortgage Loan that (a) does not meet the criteria for an Agency Mortgage Loan and (b) meets all applicable criteria as set forth in the Underwriting Guidelines and is otherwise acceptable to Administrative Agent in its sole discretion.
Non-Agency Non-QM Mortgage Loan means a Non-Agency QM Mortgage Loan that (a) does not meet the criteria for a Qualified Mortgage Loan and (b) meets all applicable criteria as set forth in the Underwriting Guidelines and is otherwise acceptable to Administrative Agent in its sole discretion.
Obligations means (a) all of Sellers indebtedness, obligations to pay the Repurchase Price on the Repurchase Date, the Price Differential on each Price Differential Payment Date, and other obligations and liabilities, to Administrative Agent or Buyers arising under, or in connection with, the Program Agreements, whether now existing or hereafter arising; (b) any and all sums paid by Administrative Agent, Buyers or Administrative Agent (on behalf of Buyers) in order to preserve any Purchased Asset or Contributed REO Property or its interest therein; (c) in the event of any proceeding for the collection or enforcement of any of Sellers indebtedness, obligations or liabilities referred to in clause (a), the reasonable third party expenses of retaking, holding,
collecting, preparing for sale, selling or otherwise disposing of or realizing on any Purchased Asset or Contributed REO Property, or of any exercise by Administrative Agent or Buyers of their rights under the Program Agreements, including, without limitation, reasonable outside attorneys fees and disbursements and court costs; and (d) all of Sellers indemnity obligations to Administrative Agent or Buyers pursuant to the Program Agreements.
OFAC has the meaning set forth in Section 13.a.27 hereof.
Officers Compliance Certificate has the meaning assigned to such term in the Pricing Side Letter.
Other Taxes means any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes or any excise, sales, goods and services or transfer taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Program Agreement.
PBGC means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
Pension Protection Act means the Pension Protection Act of 2006.
Person means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.
Plan means an employee benefit or other plan established or maintained by any Seller Party or any ERISA Affiliate and covered by Title IV of ERISA, other than a Multiemployer Plan.
Post Default Rate has the meaning assigned to such term in the Pricing Side Letter.
Power of Attorney means a Power of Attorney substantially in the form of Exhibit A delivered by a Seller Party.
Price Differential means with respect to any Transaction as of any date of determination, an amount equal to the product of (a) the Pricing Rate for such Transaction and (b) the Purchase Price for such Transaction, calculated daily on the basis of a 360-day year for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the Repurchase Date.
Price Differential Payment Date means the date that is two (2) Business Days following the date Seller receives the Price Differential Report from Administrative Agent, and in no event earlier than the fifth (5th) Business Day of each month.
Price Differential Report means the written or electronic report delivered by Administrative Agent to Seller which indicates the Price Differential due on such Price Differential Payment Date.
Pricing Rate has the meaning assigned to such term in the Pricing Side Letter.
Pricing Side Letter means, the amended and restated letter agreement dated as of the date hereof, among Administrative Agent, Buyers and Seller Parties, as the same may be amended from time to time.
Primary Repurchase Assets has the meaning assigned thereto in Section 8.a(1) hereof.
Program Agreements means, collectively, this Agreement, the Custodial Agreement, the Pricing Side Letter, the Electronic Tracking Agreement, the Joint Securities Agreement, the Custodial Account Control Agreement, the Powers of Attorney, the Servicing Agreement, if any, the REO Subsidiary Agreement and each Servicer Notice, if entered into.
Prohibited Person has the meaning set forth in Section 13.a.27 hereof.
Property means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.
Proprietary Lease means the lease on a Co-op Unit evidencing the possessory interest of the owner in the Co-op Shares in such Co-op Unit.
Purchase Date means the date on which Purchased Assets are to be transferred by Seller to Administrative Agent (on behalf of Buyers).
Purchase Price has the meaning assigned to such term in the Pricing Side Letter.
Purchase Price Percentage has the meaning assigned to such term in the Pricing Side Letter.
Purchased Assets means the collective reference to Purchased Mortgage Loans and the REO Subsidiary Interests, together with the beneficial interest in the Contributed REO Properties represented by the REO Subsidiary Interests, together with the other Repurchase Assets related to such Purchased Mortgage Loans, Contributed REO Properties and REO Subsidiary Interests transferred or pledged by Seller to Administrative Agent for the benefit of Buyers in a Transaction hereunder.
Purchased Mortgage Loans means the collective reference to Mortgage Loans together with the Repurchase Assets related to such Mortgage Loans transferred by Seller to Administrative Agent (on behalf of Buyers) in a Transaction hereunder, listed on the related Asset Schedule attached to the related Transaction Request, which such Mortgage Loans the Custodian has been instructed to hold for the benefit of Administrative Agent pursuant to the Custodial Agreement.
Qualified Mortgage Loan means a Mortgage Loan which is a Qualified Mortgage as defined in 12 CFR 1026.43(e).
Qualified Originator means an originator of Mortgage Loans which is acceptable under the Underwriting Guidelines.
Recognition Agreement means, an agreement among a Co-op Corporation, a lender and a Mortgagor with respect to a Co-op Loan whereby such parties (i) acknowledge that such lender may make, or intends to make, such Co-op Loan, and (ii) make certain agreements with respect to such Co-op Loan.
Records means all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by Seller, Servicer or any other Person with respect to a Purchased Asset. Records shall include the Mortgage Notes, any Mortgages, the Asset Files, the Deeds, the credit files related to the Purchased Asset or REO Property and any other instruments necessary to document or service a Mortgage Loan or REO Property.
Register has the meaning assigned to such term in Section 22 hereof.
Remittance Date means such date as mutually agreed to by Seller and Administrative Agent.
Remittance Report Date means the tenth (10th) Business Day following the end of each calendar month.
REO Property means real estate acquired by REO Subsidiary through foreclosure of a GNMA EBO or by deed in lieu of foreclosure with respect to such GNMA EBO.
REO Property File means, with respect to an REO Property, the documents and instruments relating to such REO Property and set forth in an exhibit to the Custodial Agreement.
REO Subsidiary means AHMC HOLDING I LLC, a Delaware limited liability company.
REO Subsidiary Agreement means the limited liability company agreement of the REO Subsidiary, dated as of May 9, 2018, as may be amended, supplemented or otherwise modified from time to time.
REO Subsidiary Interests means any and all of the Capital Stock of the REO Subsidiary.
Repledge Transaction has the meaning set forth in Section 18 hereof.
Repledgee means each Repledgee identified by Administrative Agent from time to time.
Reporting Date means, with respect to Section 17.d hereof, the 7th Business Day of each month.
Repurchase Assets has the meaning assigned thereto in Section 8.a hereof.
Repurchase Date means the earlier of (a) the Termination Date, (b) the date requested pursuant to Section 4.a, or (c) the date determined by application of Section 16 hereof.
Repurchase Price means the price at which Purchased Assets are to be transferred from Administrative Agent (on behalf of Buyers) to Seller upon termination of a Transaction, or at which the REO Subsidiary Interests are to be reduced in price with respect to Contributed REO Properties released therefrom, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price and the accrued but unpaid Price Differential as of the date of such determination.
Request for Certification means a notice sent to the Custodian reflecting the sale of one or more Purchased Mortgage Loans or REO Properties becoming subject to a Transaction to Administrative Agent (on behalf of Buyers) hereunder.
Requirement of Law means, with respect to any Person, any law, treaty, rule or regulation or determination of an arbitrator, a court or other governmental authority, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
Responsible Officer means as to any Person, the chief executive officer, the chief financial officer, treasurer or controller of such Person.
S&P means Standard & Poors Ratings Services, or any successor thereto.
SEC means the Securities and Exchange Commission, or any successor thereto.
Securities Intermediary means Deutsche Bank National Trust Company, or any successor thereto under the Joint Securities Agreement.
Seller means AmeriHome Mortgage Company, LLC or its permitted successors and assigns.
Seller Parties means, collectively, Seller and/or REO Subsidiary, as applicable.
Servicer means LoanCare, LLC, Cenlar FSB or any other servicer appointed by Seller and approved by Administrative Agent in its good faith discretion, which may be Seller.
Servicer Notice means (i) the Cenlar Servicer Notice, (ii) the LoanCare Servicer Notice or (iii) such other form as agreed by Administrative Agent and the applicable Servicer in their sole good faith discretion, in each case, as the same may be amended, restated or otherwise supplemented from time to time.
Servicing Agreement means (i) the Cenlar Servicing Agreement, (ii) the LoanCare Servicing Agreement or (iii) any other servicing agreement entered into between Seller and a third party Servicer, in each case, as the same may be amended from time to time.
Servicing Rights means rights of any Person to administer, service or subservice, the Purchased Mortgage Loans, REO Properties or to possess related Records.
Settlement Agent means, with respect to any Transaction the subject of which is a Wet-Ink Mortgage Loan, the entity approved by Administrative Agent, in its sole good-faith discretion, which may be a title company, escrow company or attorney in accordance with local law and practice in the jurisdiction where the related Wet-Ink Mortgage Loan is being originated. A Settlement Agent is deemed approved unless Administrative Agent notifies Seller otherwise at any time electronically or in writing.
Simultaneously Funded GNMA EBO means a GNMA EBO which Seller intends to be repurchased from GNMA substantially concurrently with the funding of the related Transaction hereunder.
SIPA means the Securities Investor Protection Act of 1970, as amended from time to time.
Stock Certificate means, with respect to a Co-op Loan, the certificates evidencing ownership of the Co-op Shares issued by the Co-op Corporation.
Stock Power means, with respect to a Co-op Loan, an assignment of the Stock Certificate or an assignment of the Co-op Shares issued by the Co-op Corporation.
Subsidiary means, with respect to any Person, any corporation, limited liability company, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.
Take-out Commitment means a commitment of Seller to either (a) sell one or more identified Purchased Mortgage Loans to a Take-out Investor or (b) (i) swap one or more identified Purchased Mortgage Loans with a Take-out Investor that is an Agency for an Agency Security, and (ii) sell the related Agency Security to a Take-out Investor, and in each case, the corresponding Take-out Investors commitment back to Seller to effectuate any of the foregoing, which commitment may be in the form of a to be allocated (TBA) commitment for which the related Purchased Mortgage Loans are allocated. With respect to any Take-out Commitment with an Agency, the applicable agency documents list Administrative Agent as sole subscriber.
Take-out Investor means (a) an Agency or (b)(i) with respect to Mortgage Loans, an institution which has made a Take-out Commitment and has been approved by Administrative Agent (on behalf of Buyers), or (ii) with respect to Agency Securities, a member of the Securities Industry and Financial Markets Association.
Taxes means any and all present or future taxes (including social security contributions and value added taxes), levies, imposts, duties (including stamp duties), deductions, charges (including ad valorem charges), withholdings (including backup withholding), assessments, fees or other charges of any nature whatsoever imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
Termination Date has the meaning assigned to such term in the Pricing Side Letter.
TILA RESPA Integrated Disclosure Rule means the Truth in Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure Rule, adopted by the Consumer Finance Protection Bureau, which is effective for residential mortgage loan applications received on or after October 3, 2015.
Transaction has the meaning set forth in Section 1 hereof.
Transaction Request means a request via email or other electronic medium from Seller to Administrative Agent notifying Administrative Agent that Seller wishes to enter into a Transaction hereunder that indicates that it is a Transaction Request under this Agreement. For the avoidance of doubt, a Transaction Request may refer to multiple Mortgage Loans or REO Properties; provided that each Mortgage Loan shall be deemed to be subject to its own Transaction.
Trust Receipt means, with respect to any Transaction as of any date, a receipt in the form attached as an exhibit to the Custodial Agreement.
Underwriting Guidelines means the guidelines of Seller for underwriting and acquiring Mortgage Loans which have been approved by Administrative Agent.
Uniform Commercial Code means the Uniform Commercial Code as in effect on the date hereof in the State of New York or the Uniform Commercial Code as in effect in the applicable jurisdiction.
USDA means the U.S. Department of Agriculture, an agency of the United States of America, or any successor thereto.
USDA LINC means the USDA Lender Interactive Network Connection, together with any successor USDA electronic access portal.
USDA Loan means a Mortgage Loan which is subject of a USDA Loan Guaranty Agreement.
USDA Loan Guaranty Agreement means the obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the Mortgagor pursuant under the USDA Rural Development Guaranteed Housing Loan Program.
USDA Regulations means the regulations promulgated by the Department of Agriculture under the Helping Families Save Their Homes Act of 2009, as amended from time to time and codified in 7 Code of Federal Regulations, and other Department of Agriculture issuances relating to USDA Loans, including the related handbooks, circulars, notices and mortgagee letters.
U.S. Tax Compliance Certificate has the meaning set forth in Section 11.e(ii)(B) hereof.
VA means the U.S. Department of Veterans Affairs, an agency of the United States of America, or any successor thereto including the Secretary of Veterans Affairs.
VA Approved Lender means a lender which is approved by the VA to act as a lender in connection with the origination of VA Loans.
VA Loan means a Mortgage Loan which is subject of a VA Loan Guaranty Agreement as evidenced by a loan guaranty certificate, or a Mortgage Loan which is a vendor loan sold by the VA.
VA Loan Guaranty Agreement means the obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the Mortgagor pursuant to the Servicemens Readjustment Act, as amended.
VA Regulations means the regulations promulgated by the U.S. Department of Veterans Affairs and codified in 38 Code of Federal Regulations, and other U.S. Department of Veterans Affairs issuances relating to VA Loans, including the related handbooks, circulars, notices and mortgagee letters.
Wet-Ink Delivery Date has the meaning assigned to such term in the Pricing Side Letter.
Wet-Ink Documents means, with respect to any Wet-Ink Mortgage Loan, the (a) Transaction Request and (b) the Asset Schedule.
Wet-Ink Mortgage Loan means a Mortgage Loan (other than a GNMA EBO) for which Seller is selling to Administrative Agent (on behalf of Buyers) and the Asset File is not in the possession of the Custodian.
3. Program; Initiation of Transactions
a. On the initial Purchase Date following the date of this Agreement, Administrative Agent for the benefit of Buyers will purchase the REO Subsidiary Interests. From time to time, in the sole discretion of Administrative Agent, Administrative Agent (on behalf of Buyers) may purchase from Seller certain Mortgage Loans that have been originated by Seller. This Agreement is not a commitment by Administrative Agent
(on behalf of Buyers) to enter into Transactions with Seller but rather sets forth the procedures to be used in connection with periodic requests for Administrative Agent (on behalf of Buyers) to enter into Transactions with Seller. Seller hereby acknowledges that Administrative Agent (on behalf of Buyers) is under no obligation to agree to enter into, or to enter into, any Transaction pursuant to this Agreement. All Purchased Mortgage Loans shall comply with the Underwriting Guidelines, and shall be serviced by Seller or Servicer, as applicable. The aggregate Purchase Price of Purchased Assets subject to outstanding Transactions shall not exceed the Maximum Aggregate Purchase Price.
b. Seller shall request that Administrative Agent (on behalf of Buyers) enter into a Transaction by delivering (i) to Administrative Agent, a Transaction Request by 4:30 p.m. (New York City time) on the proposed Purchase Date and (ii) to Administrative Agent and Custodian an Asset Schedule, in accordance with the Custodial Agreement. In the event the Asset Schedule provided by Seller contains erroneous computer data, is not formatted properly or the computer fields are otherwise improperly aligned, Administrative Agent shall provide written or electronic notice to Seller describing such error and Seller shall correct the computer data, reformat or properly align the computer fields itself and resubmit the Asset Schedule as required herein.
c. Upon the satisfaction of the applicable conditions precedent set forth in Section 10 hereof, all of Sellers interest in the Repurchase Assets shall pass to Administrative Agent (on behalf of Buyers) on the Purchase Date, against the transfer of the Purchase Price to Seller. Upon transfer of the Purchased Assets to Administrative Agent (on behalf of Buyers) as set forth in this Section and until termination of any related Transactions as set forth in Sections 4 or 16 of this Agreement, ownership of each Purchased Asset, including each document in the related Asset File and Records, is vested in Buyers, and record title in the name of Seller to each Mortgage shall be retained by Seller in trust, on behalf of Buyers, for the sole purpose of facilitating the servicing and the supervision of the servicing of the Mortgage Loans. For the avoidance of doubt, the parties acknowledge and agree that the Purchased Assets shall be held by Administrative Agent for the benefit of Buyers.
d. With respect to each Wet-Ink Mortgage Loan, by no later than the Wet-Ink Delivery Date, Seller shall cause the related Settlement Agent to deliver to the Custodian the documents in the Asset File, as more particularly set forth in the Custodial Agreement.
e. With respect to a Simultaneously Funded GNMA EBO for which Seller has submitted a Transaction Request, provided that the GNMA Haircut Amount has been remitted to the Administrative Agent, Administrative Agent shall remit the purchase price due to GNMA for such Simultaneously Funded GNMA EBO to Servicer. Seller shall cause Servicer to repurchase such Simultaneously Funded GNMA EBO from GNMA no later than the Business Day following the date of remittance of proceeds by Buyer to Servicer. In the event that Servicer fails to repurchase such Simultaneously Funded GNMA EBO, Seller shall cause Servicer to remit the Purchase Price for such Simultaneously Funded
GNMA EBO to the account designated in the Administrative Agents Wiring Instructions within three (3) Business Days following the related Purchase Date. Notwithstanding the foregoing, when a Simultaneously Funded GNMA EBO is repurchased, the Purchase Date hereunder shall be deemed the date of remittance of proceeds by Administrative Agent to Servicer.
4. Repurchase; Conversion to REO Property
a. Seller shall repurchase the related Purchased Assets and pay for the release of Contributed REO Properties from the REO Subsidiary, as applicable, from Administrative Agent for the benefit of Buyers on each related Repurchase Date. In addition, Seller may repurchase Purchased Mortgage Loans or pay for the release of Contributed REO Property without penalty or premium on any date. If Seller intends to make such a repurchase or payment on a Repurchase Date, Seller shall notify Administrative Agent, designating the Purchased Mortgage Loans or Contributed REO Property to be repurchased or released, as applicable. Such obligation to repurchase exists without regard to any prior or intervening liquidation or foreclosure with respect to any Purchased Mortgage Loan. Seller is obligated to repurchase and take physical possession of the Purchased Mortgage Loans and Contributed REO Property and related Asset Files from Administrative Agent or its designee (including the Custodian) at Sellers expense on the related Repurchase Date.
b. Provided that no Default shall have occurred and is continuing, and Administrative Agent has received the related Repurchase Price (excluding accrued and unpaid Price Differential, which, for the avoidance of doubt, shall be paid on the next succeeding Price Differential Payment Date) upon repurchase of the Purchased Assets or release of Contributed REO Property from the REO Subsidiary, as applicable, Administrative Agent (on behalf of Buyers) shall release the related Buyers ownership interest hereunder in such Purchased Assets or Contributed REO Property, as applicable (including, the Repurchase Assets related thereto) at the request of Seller. The Purchased Assets or Contributed REO Properties, as applicable (including the Repurchase Assets related thereto) shall be delivered to Seller free and clear of any lien, encumbrance or claim. With respect to payments in full by the related Mortgagor of a Purchased Mortgage Loan, Seller agrees to immediately remit (or cause to be remitted) to Administrative Agent (on behalf of Buyers) the Repurchase Price with respect to such Purchased Mortgage Loan. Administrative Agent (on behalf of Buyers) shall release the related Buyers ownership interest in any Purchased Mortgage Loan which has been prepaid in full after receipt of evidence of compliance with the immediately preceding sentence.
c. Promptly upon a GNMA EBO becoming an REO Property as contemplated by Section 8.b., Seller shall (i) be deemed to make the representations and warranties listed on Schedule 1-C hereto with respect to such REO Property, and (ii) the Purchase Price on account of the Purchased Mortgage Loan shall be decreased and the Purchase Price on account of the REO Subsidiary Interests shall be increased by the Purchase Price allocable to the Purchased Mortgage Loan. Such REO Property (x) shall be deemed a Contributed
REO Property owned by the REO Subsidiary hereunder and its Asset Value as determined by Administrative Agent shall be included in the Asset Value of the REO Subsidiary Interests and (y) to the extent that such conversion results in a Margin Deficit, Seller shall pay such amount in accordance with Section 6.b.
5. Price Differential
a. On each Business Day that a Transaction is outstanding, the Pricing Rate shall be reset and, unless otherwise agreed, the accrued and unpaid Price Differential shall be settled in cash on each related Price Differential Payment Date. Administrative Agent shall deliver to Seller the Price Differential Report on or about the fifth (5th) day of each calendar month. On the Price Differential Payment Date, Seller shall pay to Administrative Agent (on behalf of Buyers) the Price Differential for such Price Differential Payment Date (along with any other amounts to be paid pursuant to Sections 7 hereof), by wire transfer in immediately available funds.
b. If Seller fails to pay all or part of the Price Differential by 5:45 p.m. (New York City time) within two (2) Business Days after receipt of notice that such Price Differential has not been received, with respect to any Purchased Asset, Seller shall be obligated to pay to Administrative Agent (on behalf of Buyers) (in addition to, and together with, the amount of such Price Differential) interest on the unpaid Repurchase Price at a rate per annum equal to the Post Default Rate until the Price Differential is received in full by Administrative Agent (on behalf of Buyers).
6. Margin Maintenance
a. If at any time the outstanding Purchase Price allocated to any Purchased Asset or Contributed REO Property subject to a Transaction is greater than the Asset Value of such Purchased Asset or Contributed REO Property subject to a Transaction (a Margin Deficit), then Administrative Agent may by notice to Seller require Seller to transfer to Administrative Agent (on behalf of Buyers) cash in an amount at least equal to the Margin Deficit (such requirement, a Margin Call).
b. Notice delivered pursuant to Section 6.a above may be given by any written or electronic means. Any notice given before 1:00 p.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:45 p.m. (New York City time) on such Business Day; notice given after 1:00 p.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:45 p.m. (New York City time) on the following Business Day (the foregoing time requirements for satisfaction of a Margin Call are referred to as the Margin Deadlines), The failure of Administrative Agent (on behalf of Buyers), on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Administrative Agent (on behalf of Buyers)to do so at a later date. Seller and Administrative Agent each agree that a failure or delay by Administrative Agent (on behalf of Buyers) to exercise its rights hereunder shall not limit or waive
Administrative Agents (on behalf of Buyers) rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller.
c. In the event that a Margin Deficit exists with respect to any Purchased Asset or Contributed REO Property, Administrative Agent (on behalf of Buyers) may retain any funds received by it to which Seller would otherwise be entitled hereunder, which funds (i) shall be held by Administrative Agent (on behalf of Buyers) against the related Margin Deficit, and (ii) may be applied by Administrative Agent (on behalf of Buyers) against the Repurchase Price of any Purchased Asset or Contributed REO Property for which the related Margin Deficit remains otherwise unsatisfied. Notwithstanding the foregoing, Administrative Agent (on behalf of Buyers) retains the right, in its sole discretion, to make a Margin Call in accordance with the provisions of this Section 6.
7. Income Payments
a. If Income (including claims addressed pursuant to Section 7(c) with respect to a GNMA EBO) is paid in respect of any Purchased Assets or Contributed REO Property during the term of a Transaction, such Income shall be the property of Administrative Agent (on behalf of Buyers). Upon an Event of Default, Seller shall and shall cause Servicer to deposit all Income related to all Purchased Assets and Contributed REO Property to the Custodial Account within [***] of receipt thereof. All Income shall be remitted to the Custodial Account as set forth in this Section 7(b) below and the Custodial Account shall be subject to the terms of Custodial Account Control Agreement. Notwithstanding anything herein or in the Custodial Account Control Agreement to the contrary, unless an Event of Default has occurred and is continuing, Administrative Agent shall not exercise its rights under the Custodial Account Control Agreement with respect to disposition of amounts on deposit in the Custodial Account.
b. Prior to an Event of Default, Seller shall, and shall cause Servicer to remit all Income related to each GNMA EBO or Contributed REO Properties (other than claims proceeds addressed pursuant to Section 7(c) with respect to a GNMA EBO or Contributed REO Property) to the Custodial Account within [***] of receipt thereof.
c. With respect to each GNMA EBO, Seller shall be listed as the mortgagee of record. Seller shall remit or shall cause the Servicer to deposit, as applicable, all principal and interest claims proceeds received from HUD, VA or USDA on account of each GNMA EBO and Contributed REO Property to the Servicer for deposit into the Servicers clearing account (the Clearing Account) within [***] of receipt thereof. Seller shall cause Servicer to remit all such funds to the Custodial Account within [***] following receipt thereof. To the extent HUD, VA or USDA deducts any amounts owing to it by (x) Seller or (y) Servicer which are not attributable to such GNMA EBO or Contributed REO Property, in each case, Seller shall (A) give prompt written notice thereof to Administrative Agent and (B) within [***] following settlement date of the GNMA EBO or Contributed REO Property claim, deposit such deducted amounts into the Custodial Account.
d. With respect to each GNMA EBO and Contributed REO Property, no later than [***] prior to the Remittance Report Date, Seller shall cause the Servicer to remit an amount equal to all funds on deposit in the Custodial Account as of the end of the related Collection Period to Seller. On the Remittance Report Date, Seller shall provide to Administrative Agent a written report detailing the application of funds in the Custodial Account during the calendar month immediately preceding the Remittance Report Date. On the Remittance Date, Seller shall remit to Administrative Agent an amount sufficient to pay Administrative Agent amounts due pursuant to clauses (i) and (ii) below at the account set forth in Section 9 or as otherwise instructed by Administrative Agent in writing. Provided no Event of Default has occurred and is continuing, funds remitted to the Administrative Agent during any Collection Period shall be applied by Administrative Agent on each Remittance Report Date prior to the occurrence of an Event of Default as follows:
(i) first, to Administrative Agent for the benefit of Buyers on account of due but unpaid fees, expenses, indemnity amounts and any other amounts then due and owing to Administrative Agent or Buyers from Seller under this Agreement;
(ii) second, to Administrative Agent for the benefit of Buyers an amount sufficient to eliminate any outstanding Margin Deficit; and
(iii) third, all remaining amounts (if any), to Seller.
e. Upon termination of any Transaction, and to the extent (i) an Event of Default has occurred and is continuing, and (ii) there is any excess Income after repayment of all amounts to be transferred to Administrative Agent (on behalf of Buyers) by Seller, Administrative Agent, in its sole option, may apply the excess income to reduce the Repurchase Price due upon termination of any other outstanding Transactions.
f. Notwithstanding any provision to the contrary in this Section 7, immediately upon (i) receipt by Seller of any prepayment of principal in full, with respect to a Purchased Mortgage Loan, Seller shall remit such amount to Administrative Agent to the account in Section 9 hereof and Administrative Agent shall immediately apply any such amount received by Administrative Agent to reduce the amount of the Repurchase Price due upon termination of the related Transaction and (ii) the occurrence and continuance of an Event of Default, Administrative Agent shall apply all Income in the Custodial Account to reduce the Obligations hereunder to zero.
8. Security Interest
a. Conveyance; Security Interest; REO Property
1. On each Purchase Date, Seller hereby sells, assigns and conveys all rights and interests in the Purchased Assets identified on the related Asset Schedule,
including related Servicing Rights and Asset Documents, the REO Subsidiary Interests, and the Repurchase Assets to Administrative Agent (on behalf of Buyers). Although the parties intend that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, and in any event, Seller hereby pledges to Administrative Agent (on behalf of Buyers) as security for the performance by Seller of its Obligations and hereby grants, assigns and pledges to Administrative Agent (on behalf of Buyers) a fully perfected first priority security interest in the Purchased Assets, including the related Servicing Rights and Asset Documents, any Agency Security or right to receive such Agency Security when issued to the extent backed by any of the Purchased Assets, the Records, and all related Servicing Rights, the Program Agreements (to the extent such Program Agreements and Sellers right thereunder relate to the Purchased Assets), any related Take-out Commitments, any Property relating to the Purchased Assets, all insurance policies and insurance proceeds relating to any Purchased Asset or the related Mortgaged Property or Contributed REO Property, including, but not limited to, any payments or proceeds under any related primary insurance, hazard insurance and FHA Mortgage Insurance Contracts and VA Loan Guaranty Agreements (if any, including for the avoidance of doubt all debenture interest payable by HUD on account of any GNMA EBO and Contributed REO Property), Income, Interest Rate Protection Agreements, the Custodial Account and all amounts deposited therein, accounts (including any interest of Seller in escrow accounts) and any other contract rights, instruments, accounts, payments, rights to payment (including payments of interest or finance charges), general intangibles and other assets relating to the Purchased Assets (including, without limitation, any other accounts) or any interest in the Purchased Assets, and any proceeds (including the related securitization proceeds) and distributions with respect to any of the foregoing and any other property, rights, title or interests as are specified on a Transaction Request and/or Trust Receipt, in all instances, whether now owned or hereafter acquired, now existing or hereafter created (collectively, the Primary Repurchase Assets).
2. In order to further secure the Obligations hereunder, REO Subsidiary hereby grants, assigns and pledges to Administrative Agent for the benefit of Buyers a fully perfected first priority security interest in the Contributed REO Properties, including related Servicing Rights and Asset Documents, all debenture interest payable by HUD on account of any GNMA EBO, the Records related to the Contributed REO Properties, the Program Agreements (to the extent such Program Agreements and REO Subsidiarys rights thereunder relate to the Contributed REO Properties), any Property relating to the Contributed REO Properties, all insurance policies and insurance proceeds relating to any Contributed REO Properties, including, but not limited to, any payments or proceeds under any related primary insurance, hazard insurance and FHA Mortgage Insurance Contracts and VA Loan Guaranty Agreements (if any) to the extent of the Contributed REO Properties protected thereby, Income, Interest Rate Protection Agreements, deposit accounts or securities accounts related to the Contributed REO Properties (including any interest of REO Subsidiary in escrow accounts) and any other contract rights, instruments, deposit accounts or securities accounts, payments, rights to payment (including payments of interest or finance charges), general intangibles and other
assets to the extent relating to the Contributed REO Properties (including, without limitation, any other deposit accounts or securities accounts) or any interest in the Contributed REO Properties, and any proceeds (including the related securitization proceeds) and distributions with respect to any of the foregoing and any other property, rights, title or interests as are specified on a Transaction Request and/or Trust Receipt, in all instances, whether now owned or hereafter acquired, now existing or hereafter created (collectively, the Additional Repurchase Assets and together with the Primary Repurchase Assets, collectively, the Repurchase Assets).
b. Acquisition of REO Property, If the REO Subsidiary acquires any Contributed REO Property by extinguishing any Mortgage Note in connection with the foreclosure of the related Purchased Mortgage Loan, transferring the real property underlying the Mortgage Note in lieu of foreclosure or otherwise transferring of such real property, the REO Subsidiary shall cause such real property to be taken by Deed, or by means of such instruments as is provided by the Governmental Authority governing the transfer, or right to request transfer and issuance of the Deed, or such instrument as is provided by the related Governmental Authority, or to be acquired through foreclosure sale in the jurisdiction in which the REO Property is located, in the name of the Nominee for the benefit of REO Subsidiary and in accordance with the terms of the REO Subsidiary Agreement.
c. REO Subsidiary Interests as Securities, The parties acknowledge and agree that the REO Subsidiary Interests shall constitute and remain securities as defined in Section 8-102 of the Uniform Commercial Code; Seller Parties covenant and agree that (i) the REO Subsidiary Interests are not and will not be dealt in or traded on securities exchanges or securities markets, and (ii) the REO Subsidiary Interests are not and will not be investment company securities within the meaning of Section 8-103 of the Uniform Commercial Code. Seller shall, at its sole cost and expense, take all steps as may be necessary in connection with the re-registration, indorsement, transfer, delivery and pledge of all REO Subsidiary Interests to Administrative Agent.
d. Additional Interests. If Seller shall, as a result of ownership of the REO Subsidiary Interests, become entitled to receive or shall receive any certificate evidencing any REO Subsidiary Interests or other equity interest, any option rights, or any equity interest in the REO Subsidiary Interests, whether in addition to, in substitution for, as a conversion of, or in exchange for the REO Subsidiary Interests, or otherwise in respect thereof, Seller shall accept the same as the Administrative Agents agent, hold the same in trust for the Administrative Agent and deliver the same forthwith to the Administrative Agent in the exact form received, duly indorsed by the Seller to the Administrative Agent, if required, together with an undated transfer power, if required, covering such certificate duly executed in blank, or if requested, deliver the Certificate re-registered in the name of Administrative Agent, to be held by the Administrative Agent subject to the terms hereof as additional security for the Obligations. Any sums paid upon or in respect of the REO Subsidiary Interests upon the liquidation or dissolution of the REO Subsidiary, or otherwise shall be paid over to the Administrative Agent as additional security for the Obligations. If
following the occurrence and during the continuation of an Event of Default, any sums of money or property so paid or distributed in respect of the REO Subsidiary Interests shall be received by Seller, Seller shall, until such money or property is paid or delivered to the Administrative Agent, hold such money or property in trust for the Administrative Agent segregated from other funds of Seller as additional security for the Obligations.
e. Voting Rights. Subject to this Section, Administrative Agent as the holder, may exercise all voting and member rights with respect to the REO Subsidiary Interests. Notwithstanding the foregoing, so long as no Event of Default has occurred and is continuing, (a) Administrative Agent shall notify and consult with Seller prior to the exercise of any rights under this Section, and (b) Seller will have the right to direct Administrative Agent, with respect to any action or inaction related to the REO Subsidiary Interests (in the event any action is requested or required to be taken), and the Administrative Agent shall comply with such direction unless the Administrative Agent determines in its good faith discretion that such compliance with such direction will result in a Material Adverse Effect or conflict with any Program Agreement; provided, however, Administrative Agent may, or, in its sole discretion, may direct REO Subsidiary to transfer the servicing of Contributed REO Properties or terminate a Servicing Agreement in connection with an Event of Default that is continuing. In no event shall Administrative Agent be required to vote or exercise any equityholder right or take any other action which would impair the REO Subsidiary Interests or which would be inconsistent with or result in a violation of any provision of this Agreement. Without limiting the generality of the foregoing, Administrative Agent shall have no obligation (other than as expressly set forth in this Agreement) to (i) vote to enable, or take any other action to permit, the REO Subsidiary to issue any interests of any nature or to issue any other interests convertible into or granting the right to purchase or exchange for any interests of such entity, (ii) sell, assign, transfer, exchange or otherwise dispose of, or grant any option with respect to, the REO Subsidiary Interests, (iii) create, incur or permit to exist any Lien or option in favor of, or any claim of any Person with respect to, the Sellers interest in the REO Subsidiary Interests except for the Lien provided for by this Agreement, or (iv) enter into any agreement or undertaking restricting the right or ability of Seller to sell, assign or transfer the REO Subsidiary Interests.
f. Servicing Rights. Seller acknowledges that it has no rights to service the Purchased Mortgage Loans and Contributed REO Properties but only has rights as a party to the current Servicing Agreement. Without limiting the generality of the foregoing and in the event that Seller is deemed to retain any residual Servicing Rights, and for the avoidance of doubt, Seller grants, assigns and pledges to Administrative Agent (on behalf of Buyers) a security interest in the Servicing Rights and proceeds related thereto and in all instances, whether now owned or hereafter acquired, now existing or hereafter created. The foregoing provision is intended to constitute a security agreement or other arrangement or other credit enhancement related to this Agreement and Transactions hereunder as defined under Sections 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.
g. Financing Statements. Seller Parties agree to execute, deliver and/or file such documents and perform such acts as may be reasonably necessary to fully perfect Administrative Agents (on behalf of Buyers) security interest created hereby. Furthermore, the Seller Parties hereby authorize Administrative Agent (on behalf of Buyers) to file financing statements relating to the Repurchase Assets, as Administrative Agent, at its option, may deem appropriate. Seller shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 8.
h. Powers of Attorney. In addition to the foregoing, each Seller Party agrees to execute a Power of Attorney, in the form of Exhibit A hereto, to be delivered on the date hereof which may be used only in accordance with Section 28 hereof.
i. Intent. The foregoing provisions in Section 8(a) and (f) are each intended to constitute a security agreement or other arrangement or other credit enhancement related to this Agreement and Transactions hereunder as defined under Sections 1001(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code and are further intended to be a guaranty of the Obligations to the Administrative Agent and Buyers by REO Subsidiary to the extent of its Repurchase Assets.
9. Payment and Transfer
Unless otherwise mutually agreed in writing, all transfers of funds to be made by Seller hereunder shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to Administrative Agent (on behalf of Buyers) pursuant to Administrative Agents Wiring Instructions or such other account as Administrative Agent shall specify to Seller in writing. Seller acknowledges that it has no rights of withdrawal from the foregoing account. All Purchased Assets transferred by one party hereto to the other party shall be in the case of a purchase by Administrative Agent (on behalf of Buyers) in suitable form for transfer or shall be accompanied by duly executed instruments of transfer or assignment in blank and such other documentation as Administrative Agent may reasonably request. All Purchased Assets shall be evidenced by a Trust Receipt or Certificate. Any Repurchase Price received by Administrative Agent after 5:00 p.m. (New York City time) shall be deemed received on the next succeeding Business Day.
10. Conditions Precedent
a. Continuing Transaction. As conditions precedent to the continuing Transactions, Administrative Agent shall have received on or before the date hereof the following, in form and substance satisfactory to Administrative Agent and duly executed by Seller and each other party thereto:
1. Program Agreements. The Program Agreements duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver.
2. Security Interest. Evidence that all other actions necessary or, in the opinion of Administrative Agent, desirable to perfect and protect Administrative Agents and Buyers interest in the Purchased Assets and other Repurchase Assets have been taken, including, without limitation, duly authorized and filed Uniform Commercial Code financing statements on Form UCC-1 and Form UCC-3, as applicable.
3. Organizational Documents. A certificate of the secretary of each Seller Party in form and substance acceptable to Administrative Agent in its sole good faith discretion, attaching certified copies of each Seller Partys organizational documents and resolutions approving the Program Agreements and transactions thereunder (either specifically or by general resolution) and all documents evidencing other necessary corporate action or governmental approvals as may be required in connection with the Program Agreements.
4. Good Standing Certificate. A certified copy of a good standing certificate from the jurisdiction of organization of each Seller Party, dated as of no earlier than the date ten (10) Business Days prior to the Purchase Date with respect to the initial Transaction hereunder.
5. Incumbency Certificate. An incumbency certificate of the company secretary of each Seller Party, certifying the names, true signatures and titles of the representatives duly authorized to request transactions hereunder and to execute the Program Agreements.
6. Opinions of Counsel. An opinion of Seller Parties counsel, in form and substance acceptable to Administrative Agent in its sole good faith discretion, including an opinion that it is not necessary to register REO Subsidiary under the Investment Company Act, for specified reasons other than the exemption provided by Section 3(c)(1) or Section 3(c)(7) thereof.
7. Underwriting Guidelines. A true and correct copy of the Underwriting Guidelines.
8. Insurance. Evidence that Seller has added Administrative Agent as an additional loss payee under Sellers Fidelity Insurance.
9. Delivery of Certificate. Seller shall have delivered to Administrative Agent for the benefit of Buyers the original Certificate re-registered in Administrative Agents name.
b. All Transactions. The obligation of Administrative Agent (on behalf of Buyers) to enter into each Transaction pursuant to this Agreement is subject to the following conditions precedent:
1. Due Diligence Review. Without limiting the generality of Section 34 hereof, Administrative Agent and Buyers shall have completed, to their satisfaction,
their due diligence review of the related Purchased Assets, Contributed REO Properties, Seller, REO Subsidiary and the Servicer.
2. Required Documents.
(a) With respect to each Purchased Mortgage Loan which is not a Wet-Ink Mortgage Loan, the Asset File has been delivered to the Custodian in accordance with the Custodial Agreement.
(b) With respect to each Wet-Ink Mortgage Loan, the Wet-Ink Documents have been delivered to Administrative Agent or Custodian, as the case may be, in accordance with the Custodial Agreement.
3. Transaction Documents. Administrative Agent or its designee shall have received on or before the day of such Transaction (unless otherwise specified in this Agreement) the following, in form and substance satisfactory to Administrative Agent and (if applicable) duly executed:
(a) A Transaction Request and Asset Schedule delivered by Seller pursuant to Section 3.b or 3.c hereof.
(b) The Request for Certification and the related Asset Schedule delivered by Seller, and (i) with respect to Mortgage Loans other than Simultaneously Funded GNMA EBOs, the Trust Receipt and Custodial Asset Schedule or (ii) with respect each Mortgage Loans that are Simultaneously Funded GNMA EBO, a preliminary Custodial Asset Schedule, in each case, delivered by Custodian.
(c) Such certificates, opinions of counsel or other documents as Administrative Agent may reasonably request.
4. No Default. No Default or Event of Default shall have occurred and be continuing.
5. Requirements of Law. Neither Administrative Agent nor Buyers shall have determined that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to Administrative Agent or any Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Administrative Agent or any Buyer to enter into Transactions with a Pricing Rate based on LIBOR.
6. Representations and Warranties. Both immediately prior to the related Transaction and also after giving effect thereto and to the intended use thereof, the representations and warranties made by Seller in each Program Agreement shall be true, correct and complete on and as of such Purchase Date in all material respects with the same
force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
7. Electronic Tracking Agreement. To the extent Seller is selling Mortgage Loans which are registered on the MERS® System, an Electronic Tracking Agreement entered into, duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver.
8. Underwriting Guidelines. Administrative Agent shall have consented to any amendment or modifications to the Underwriting Guidelines prior to any Mortgage Loan originated under such revised Underwriting Guidelines becoming a Purchased Mortgage Loan.
9. Material Adverse Change. None of the following shall have occurred and/or be continuing:
(a) Credit Suisse AG, New York Branchs corporate bond rating as calculated by S&P or Moodys has been lowered or downgraded to a rating below investment grade by S&P or Moodys;
(b) an event or events shall have occurred in the good faith determination of Buyer resulting in the effective absence of a repo market or comparable lending market for financing debt obligations secured by mortgage loans or securities or an event or events shall have occurred resulting in Buyer not being able to finance Purchased Mortgage Loans or REO Properties through the repo market or lending market with traditional counterparties at rates which would have been reasonable prior to the occurrence of such event or events; or
(c) an event or events shall have occurred resulting in the effective absence of a securities market for securities backed by mortgage loans or an event or events shall have occurred resulting in Buyer not being able to sell securities backed by mortgage loans at prices which would have been reasonable prior to such event or events; or
(d) there shall have occurred (i) a material change in financial markets, an outbreak or escalation of hostilities or a material change in national or international political, financial or economic conditions; (ii) a general suspension of trading on major stock exchanges; or (iii) a disruption in or moratorium on commercial banking activities or securities settlement services; or
(e) there shall have occurred a material adverse change in the financial condition of a Buyer which affects (or can reasonably be expected to affect) materially and adversely the ability of such Buyer to fund its obligations under this Agreement; provided that such Buyer shall not invoke this subclause (e) with respect to Seller unless the New York-based residential mortgage loan
warehouse finance group of such Buyer shall invoke any similar clause contained in other substantially similar agreements between such Buyer and other Persons that are substantially similar to Seller and with respect to substantially the same types of assets as the Mortgage Loans that would be the subject of Transactions hereunder.
10. DE Compare Ratio. Sellers DE Compare Ratio is [***].
11. No HUD Suspension. HUD has not suspended Sellers ability to originate FHA Loans in any jurisdiction.
11. Program; Costs
a. Seller shall reimburse Administrative Agent and Buyers for any of Administrative Agents and Buyers reasonable out-of-pocket costs, including due diligence review costs and reasonable attorneys fees, incurred by Administrative Agent and Buyers in determining the acceptability to Administrative Agent and Buyers of any Mortgage Loans. During the occurrence and continuance of an Event of Default, Seller shall also pay, or reimburse Administrative Agent and Buyers if Administrative Agent or Buyers shall pay, any termination fee, which may be due any Servicer. Seller shall pay the reasonable fees and expenses of Administrative Agents and Buyers outside counsel in connection with the Program Agreements and any subsequent amendments thereto. Seller shall pay ongoing custodial fees and expenses as set forth in the Custodial Agreement or such other fee agreement as shall be entered into by and between Seller and Custodian from time to time, and any other reasonable ongoing third party fees and expenses under any other Program Agreement. Without limiting the foregoing, Seller shall pay all fees as and when required under the Pricing Side Letter. Notwithstanding anything herein to the contrary, Seller shall (i) not be a party to any Repledge Transaction, (ii) have no liability with respect to any Repledge Transaction, and (iii) not be responsible for any fees, costs and expenses of Administrative Agent, any Buyer, any Repledgee, Custodian or any Person relating to any Repledge Transaction.
b. If any Buyer determines in good faith that, due to the introduction of, any change in, or the compliance by such Buyer with (i) any Eurocurrency reserve requirement or (ii) the interpretation of any law, regulation or any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be a material increase in the cost to such Buyer in engaging in the present or any future Transactions, then Seller agrees to pay to such Buyer, from time to time, upon demand by such Buyer (with a copy to Custodian) the actual cost of additional amounts as specified by such Buyer to compensate such Buyer for such increased costs. If such Buyer becomes entitled to claim any additional amounts pursuant to this Section 11.b, Seller shall pay such additional amounts to such Buyer and such Buyer and Seller shall negotiate in good faith to mutually agree upon modified terms to this Agreement to account for such future additional amounts. If Seller and such Buyer cannot agree upon such modified terms within thirty (30) days of such Buyers notice to Seller of such changed circumstances, then Seller
(i) may terminate this Agreement; and (ii) shall immediately remit the Repurchase Price and any other amounts due hereunder.
c. With respect to any Transaction, Administrative Agent and Buyers may conclusively rely upon, and shall incur no liability to any Seller Party in acting upon, any request or other communication made by one of a Seller Partys Authorized Representatives. In each such case, such Seller Party hereby waives the right to dispute Administrative Agents and Buyers record of the terms of the request or other communication.
d. Notwithstanding the assignment of the Asset Documents with respect to each Purchased Asset to Administrative Agent (on behalf of Buyers), Seller agrees and covenants with Administrative Agent and Buyers to enforce diligently Sellers rights and remedies set forth in the Asset Documents.
e. (i) Any payments made by Seller to Administrative Agent (on behalf of Buyers) hereunder or any Program Agreement shall be made free and clear of and without deduction or withholding for any Taxes, except as required by applicable law. If Seller shall be required by applicable law (as determined in the good faith discretion of the applicable withholding agent) to deduct or withhold any Tax from any sums payable to Administrative Agent (on behalf of Buyers), then (i) Seller shall make such deductions or withholdings and pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law; (ii) to the extent the withheld or deducted Tax is an Indemnified Tax or Other Tax, the sum payable shall be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 11.e) Administrative Agent (on behalf of Buyers) receives an amount equal to the sum it would have received had no such deductions or withholdings been made; and (iii) Seller shall notify Administrative Agent of the amount paid and shall provide the original or a certified copy of a receipt issued by the relevant Governmental Authority evidencing such payment within ten (10) days thereafter. Seller shall otherwise indemnify Administrative Agent (on behalf of Buyers), within ten (10) days after demand therefor, for any Indemnified Taxes or Other Taxes imposed on any Buyer or Administrative Agent (on behalf of Buyers) (including Indemnified Taxes and Other Taxes imposed or asserted on or attributable to amounts payable under this Section 11.e) and any reasonable third-party expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority.
(ii) Administrative Agent shall cause each Buyer and Buyer assignee and participant to deliver to Seller, at the time or times reasonably requested by Seller, such properly completed and executed documentation reasonably requested by Seller as will permit payments made hereunder to be made without withholding or at a reduced rate of withholding. In addition, Administrative Agent shall cause each Buyer and Buyer assignee and participant, if reasonably requested by Seller, shall deliver such other documentation prescribed by applicable law or reasonably requested by Seller as will enable Seller to
determine whether or not such Buyer or any Buyer assignee or participant is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in this Section 11, the completion, execution and submission of such documentation (other than such documentation in Section 11.e((ii)(A), (B) and (C) below) shall not be required if in a Buyers or any Buyers assignees or participants judgment such completion, execution or submission would subject such Buyer or Buyer assignee or participant to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Buyer or Buyer assignee or participant. Without limiting the generality of the foregoing, Administrative Agent shall cause a Buyer or Buyer assignee or participant to deliver to Seller, to the extent legally entitled to do so:
(A) in the case of a Buyer or Buyer assignee or participant which is a U.S. Person as defined in section 7701(a)(30) of the Code, a properly completed and executed Internal Revenue Service (IRS) Form W-9 certifying that it is not subject to U.S. federal backup withholding tax;
(B) in the case of a Buyer or Buyer assignee or participant which is not a U.S. Person as defined in Code section 7701(a)(30): (I) a properly completed and executed IRS Form W-8BEN, W-8BENE-E or W-8ECI, as appropriate, evidencing entitlement to a zero percent or reduced rate of U.S. federal income tax withholding on any payments made hereunder, (II) in the case of such non-U.S. Person claiming exemption from the withholding of U.S. federal income tax under Code sections 871(h) or 881(c) with respect to payments of portfolio interest, a duly executed certificate (a U.S. Tax Compliance Certificate) to the effect that such non-U.S. Person is not (x) a bank within the meaning of Code section 881(c)(3)(A), (y) a 10 percent shareholder of Seller or affiliate thereof, within the meaning of Code section 881(c)(3)(B), or (z) a controlled foreign corporation described in Code section 881(c)(3)(C), (III) to the extent such non-U.S. Person is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8BENE-E, a U.S. Tax Compliance Certificate, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if such non-U.S. Person is a partnership and one or more direct or indirect partners of such non-U.S. Person are claiming the portfolio interest exemption, such non-U.S. Person may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner, and (IV) executed originals of any other form or supplementary documentation prescribed by law as a basis for claiming exemption from or a reduction in United States federal withholding tax together with such supplementary documentation as may be prescribed by law to permit Seller to determine the withholding or deduction required to be made.
(C) if a payment made to Administrative Agent (on behalf of Buyers) under this Agreement would be subject to U.S. federal withholding tax imposed by FATCA if such Buyer or assignee or participant were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or
1472(b) of the Code, as applicable), Administrative Agent (on behalf of Buyers) shall deliver to Seller at the time or times prescribed by law and at such time or times reasonably requested by Seller such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Seller as may be necessary for Seller to comply with their obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 11.e, FATCA shall include any amendments made to FATCA after the date of this Agreement.
The applicable IRS forms referred to above shall be delivered by Administrative Agent on behalf of each applicable Buyer or Buyer assignee or participant on or prior to the date on which such Person becomes a Buyer or Buyer assignee or participant under this Agreement, as the case may be, and upon the obsolescence or invalidity of any IRS form previously delivered by it hereunder.
f. Any indemnification payable by Seller to a Buyer or Administrative Agent (on behalf of Buyers) for Indemnified Taxes or Other Taxes that are imposed on such Buyer or Administrative Agent (on behalf of Buyers), as described in Section 11.e(i) hereof, shall be paid by Seller within ten (10) days after demand therefor from Administrative Agent (on behalf of Buyers). A certificate as to the amount of such payment or liability delivered to Seller by Administrative Agent (on behalf of Buyers) shall be conclusive absent manifest error.
g. Each partys obligations under this Section 11 shall survive any assignment of rights by, or the replacement of, a Buyer, and the repayment, satisfaction or discharge of all obligations under any Program Agreement.
h. Each party to this Agreement acknowledges that it is its intent for purposes of U.S. federal, state and local income and franchise taxes to treat each Transaction as indebtedness of Seller that is secured by the Purchased Assets, and the Purchased Assets as owned by Seller in the absence of an Event of Default by Seller. Administrative Agent (on behalf of Buyers) and Seller agree that they will treat and report for all tax purposes the Transactions entered into hereunder as one or more loans from a Buyer to Seller secured by the Purchased Mortgage Loans, unless otherwise prohibited by law or upon a final determination by any taxing authority that the Transactions are not loans for tax purposes.
12. Servicing
a. Seller Parties, on Administrative Agents and Buyers behalf, shall contract with Servicer to, or if Seller is the Servicer, Seller shall, service the Purchased Mortgage Loans and Contributed REO Properties consistent with the degree of skill and care that Seller customarily requires with respect to similar mortgage loans and real estate owned properties owned or managed by it and in accordance with Accepted Servicing Practices. The Seller Parties and Servicer shall (i) comply with all applicable Federal, State and local laws and regulations, (ii) maintain all state and federal licenses necessary for it to perform
its servicing responsibilities hereunder and (iii) not impair the rights of Administrative Agent or Buyers in any Purchased Mortgage Loans or Contributed REO Properties or any payment thereunder. Administrative Agent may terminate the servicing of any Purchased Mortgage Loans or Contributed REO Property with the then existing Servicer in accordance with Section 12.e hereof.
b. Seller Parties shall and shall cause the Servicer to hold or cause to be held all escrow funds collected by Seller Parties and Servicer with respect to any Purchased Mortgage Loans and Contributed REO Properties in trust accounts and shall apply the same for the purposes for which such funds were collected.
c. During the occurrence and continuance of an Event of Default, Seller shall, and shall cause Servicer to, deposit all Income received by Servicer on the Purchased Mortgage Loans and Contributed REO Properties in the Custodial Account.
d. In the event there is a third party Servicer and upon Administrative Agents request, Seller Parties shall provide promptly to Administrative Agent a Servicer Notice addressed to and agreed to by the Servicer of the related Purchased Mortgage Loans and Contributed REO Properties, advising such Servicer of such matters as Administrative Agent may reasonably request, including, without limitation, recognition by the Servicer of Administrative Agents and Buyers interest in such Purchased Mortgage Loans and Contributed REO Properties and the Servicers agreement that upon receipt of notice of an Event of Default from Administrative Agent, it will follow the instructions of Administrative Agent with respect to the Purchased Mortgage Loans and Contributed REO Properties and any related Income with respect thereto.
e. During the occurrence and continuance of an Event of Default hereunder or a material default under the Servicing Agreement, Administrative Agent shall have the right to immediately terminate the Servicers right to service the Purchased Mortgage Loans and REO Properties under the Servicing Agreement without payment of any penalty or termination fee. Seller Parties and the Servicer shall cooperate in transferring the servicing of the Purchased Mortgage Loans and Contributed REO Properties to a successor servicer appointed by Administrative Agent in its sole discretion. For the avoidance of doubt any termination of the Servicers rights to service by Administrative Agent as a result of an Event of Default shall be deemed part of an exercise of Administrative Agents rights to cause the liquidation, termination or acceleration of this Agreement.
f. If any Seller Party should discover that, for any reason whatsoever, a Seller Party or any entity responsible to such Seller Party for managing or servicing any such Purchased Mortgage Loan or Contributed REO Property has failed to perform fully such Seller Partys obligations under the Program Agreements or any of the obligations of such entities with respect to the Purchased Mortgage Loans or Contributed REO Properties, such Seller Party shall promptly notify Administrative Agent.
g. Reserved.
h. For the avoidance of doubt, until such time as Seller has repurchased any Purchased Mortgage Loan and Contributed REO Properties pursuant to this Agreement, Seller and REO Subsidiary each retains no economic rights to the servicing of the Purchased Mortgage Loans and Contributed REO Properties other than Sellers rights under the Servicing Agreement. As such, Seller Parties expressly acknowledge that the Purchased Mortgage Loans and Contributed REO Properties are sold to Administrative Agent (on behalf of Buyers) or contributed to the REO Subsidiary on a servicing released basis with such servicing retained by the Servicer.
13. Representations and Warranties
a. Each Seller Party represents and warrants to Administrative Agent (on behalf of Buyers) as of the date hereof and as of each Purchase Date for any Transaction that:
1. Seller Party Existence. Seller has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware. REO Subsidiary has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware.
2. Licenses. Each Seller Party is duly licensed or is otherwise qualified in each jurisdiction in which it transacts business for the business which it conducts and is not in material default of any applicable federal, state or local laws, rules and regulations unless, in either instance, the failure to take such action is not reasonably likely (either individually or in the aggregate) to cause a Material Adverse Effect and is not in material default of such states applicable laws, rules and regulations. Each Seller Party has the requisite power and authority and legal right to originate and purchase Mortgage Loans (as applicable) and to own, sell and grant a lien on all of its right, title and interest in and to the Mortgage Loans, and to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, each Program Agreement and any Transaction Request. Seller is an FHA Approved Mortgagee and VA Approved Lender.
3. Power. Each Seller Party has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect.
4. Due Authorization. Each Seller Party has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Program Agreements, as applicable. Each Program Agreement has been (or, in the case of Program Agreements not yet executed, will be) duly authorized, executed and delivered by such Seller Party, all requisite or other corporate action having been taken, and each is valid, binding and enforceable against such Seller Party in accordance with its
terms except as such enforcement may be affected by bankruptcy, by other insolvency laws, or by general principles of equity.
5. Financial Statements. Seller has heretofore furnished to Administrative Agent a copy of its consolidated balance sheet and the consolidated balance sheets of its consolidated Subsidiaries for the quarterly fiscal periods of Seller ended March 31, 2017, June 30, 2017 and September 30, 2017 and the related consolidated statements of income and retained earnings and of cash flows for Seller and its consolidated Subsidiaries for such quarterly fiscal periods. All such financial statements are complete and correct and fairly present, in all material respects, the consolidated financial condition of Seller and its consolidated Subsidiaries and the consolidated results of their operations as at such dates and for such fiscal periods, all in accordance with GAAP (other than monthly financial statements solely with respect to footnotes, year-end adjustments and cash flow statements) applied on a consistent basis. Since September 30, 2017, there has been no material adverse change in the consolidated business, operations or financial condition of Seller and its consolidated Subsidiaries taken as a whole from that set forth in said financial statements nor is Seller aware of any state of facts which (with notice or the lapse of time) would or could result in any such material adverse change. Seller has, on the date of the statements delivered pursuant to this Section (the Statement Date) no liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of Seller except as heretofore disclosed to Administrative Agent in writing.
6. Event of Default. There exists no Event of Default hereunder.
7. Solvency. Each Seller Party is solvent and will not be rendered insolvent by any Transaction and, after giving effect to such Transaction, will not be left with an unreasonably small amount of capital with which to engage in its business. No Seller Party intends to incur, nor believes that it has incurred, debts beyond its ability to pay such debts as they mature and is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such entity or any of its assets. The amount of consideration being received by Seller upon the sale of the Purchased Assets to Administrative Agent (on behalf of Buyers) constitutes reasonably equivalent value and fair consideration for such Purchased Assets under this Agreement. The amount of consideration being received by Seller upon the transfer of the Contributed REO Properties to REO Subsidiary constitutes reasonably equivalent value and fair consideration for such Contributed REO Properties. Seller is not transferring any Purchased Assets to Administrative Agent or any Contributed REO Property to REO Subsidiary with any intent to hinder, delay or defraud any of its creditors.
8. No Conflicts. The execution, delivery and performance by each Seller Party of each Program Agreement do not conflict with any term or provision of the formation documents or by-laws of such Seller Party or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to such Seller Party of any court, regulatory body, administrative agency or governmental body having jurisdiction over such Seller Party, which conflict would have a Material Adverse Effect and will not result in any violation of any such mortgage, instrument, agreement or obligation to which such Seller Party is a party.
9. True and Complete Disclosure. All information, reports, exhibits, schedules, financial statements or certificates of Seller Parties or any of their officers furnished or to be furnished to Administrative Agent or Buyers in connection with the initial or any ongoing due diligence of Seller Parties or officer thereof, and the negotiation, preparation, or delivery of the Program Agreements are true and complete and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading. All financial statements have been prepared in accordance with GAAP (other than monthly financial statements solely with respect to footnotes, year-end adjustments and cash flow statements).
10. Approvals. No consent, approval, authorization or order of, registration or filing with, or notice to any Governmental Authority or court is required under applicable law in connection with the execution, delivery and performance by any Seller Party of each Program Agreement.
11. Litigation. There is no action, proceeding or investigation pending with respect to which any Seller Party has received service of process or, to the best of Sellers knowledge threatened against it before any court, administrative agency or other tribunal (A) asserting the invalidity of any Program Agreement, (B) seeking to prevent the consummation of any of the transactions contemplated any Program Agreement, (C) making a claim (or reasonably could make a claim) individually in an amount greater than [***] or in an aggregate amount greater than [***], (D) making a claim for an unspecified amount of damages, (E) which requires filing with the Securities and Exchange Commission in accordance with the 1934 Act or any rules thereunder or (F) which might materially and adversely affect the validity of the Purchased Assets or Contributed REO Properties or the performance by it of its obligations under, or the validity or enforceability of any Program Agreement.
12. Reserved.
13. Ownership. Upon (a) payment of the Purchase Price, Administrative Agent (on behalf of Buyers) shall become the sole owner of the Purchased Assets and related Repurchase Assets, free and clear of all liens and encumbrances and (b) transfer of each Contributed REO Property to the REO Subsidiary, the REO Subsidiary shall become the sole owner of the Contributed REO Properties transferred thereto, subject to the Lien of the Administrative Agent.
14. Underwriting Guidelines. The Underwriting Guidelines provided to Administrative Agent from time to time are the true and correct Underwriting Guidelines of Seller.
15. Taxes. Each Seller Party and each Seller Partys Subsidiaries have timely filed all tax returns that are required to be filed by them and have paid all taxes due and payable, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided. The charges, accruals and reserves on the books of such Seller Party and such Seller Partys Subsidiaries in respect of taxes and other governmental charges are, in the opinion of Seller, adequate.
16. Investment Company. (i) Neither Seller nor any of its Subsidiaries is an investment company, or a company controlled by an investment company, within the meaning of the Investment Company Act of 1940, as amended, and (ii) it is not necessary to register the REO Subsidiary under the Investment Company Act, for specified reasons other than the exemption provided by Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act of 1940, as amended.
17. Chief Executive Office; Jurisdiction of Organization. On the Effective Date, Sellers chief executive office, is, and has been, located at 21215 Burbank Boulevard, 4th Floor, Woodland Hills, California 91367-7090. On the Effective Date, Sellers jurisdiction of organization is Delaware. On the Effective Date, REO Subsidiarys chief executive office is, and has been located at 21215 Burbank Boulevard, 4th Floor, Woodland Hills, California 91367-7090. On the Effective Date, REO Subsidiarys jurisdiction of organization is Delaware. Each Seller Party shall provide Administrative Agent with thirty (30) days advance notice of any change in such Seller Partys principal office or place of business, legal name or jurisdiction. The only trade names used by the Seller Parties are AmeriHome Funding, LLC, AmeriHome Mortgage and AMC, LLC. Since March 6, 2014, no Seller Party has been known by or done business under any other name (other than as set forth in the prior sentence), corporate or fictitious, and has not filed or had filed against it any bankruptcy receivership or similar petitions nor has it made any assignments for the benefit of creditors.
18. Location of Books and Records. The locations where Seller Parties keep their books and records, including all computer tapes and records relating to the Purchased Assets and Contributed REO Properties and the related Repurchase Assets is its chief executive office.
19. Reserved.
20. ERISA. Neither Seller Party nor their ERISA Affiliates (i) have Plans in effect, or (ii) each Plan to which a Seller Party or their ERISA Affiliates makes direct contributions, and, to the knowledge of such Seller Party, each other Plan and each Multiemployer Plan, is in compliance in all material respects with, and has been
administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or State law.
21. Adverse Selection. No Seller Party has selected the Purchased Assets or Contributed REO Properties in a manner so as to adversely affect Buyers interests.
22. Reserved.
23. Other Indebtedness. All Indebtedness (other than Indebtedness evidenced by this Agreement) of the Seller existing on the date hereof is listed on Exhibit C hereto (the Existing Indebtedness),
24. Agency Approvals. With respect to each Agency Security and to the extent necessary, Seller is (i) an FHA Approved Mortgagee and in good standing with FHA, (ii) a VA Approved Lender and in good standing with VA, (iii) approved by GNMA as an approved lender and in good standing with GNMA, (iv) approved by Fannie Mae as an approved lender and in good standing with Fannie Mae, (v) approved by Freddie Mac as an approved seller/servicer and in good standing with Freddie Mac, and, (vi) approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act and in good standing with the Secretary of Housing and Urban Development.
25. No Reliance. Each Seller Party has made its own independent decisions to enter into the Program Agreements and each Transaction and as to whether such Transaction is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including without limitation, legal counsel and accountants) as it has deemed necessary. No Seller Party is relying upon any advice from Administrative Agent or Buyers as to any aspect of the Transactions, including without limitation, the legal, accounting or tax treatment of such Transactions.
26. Plan Assets. No Seller Party is an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code, and the Purchased Assets and Contributed REO Properties are not plan assets within the meaning of 29 CFR §2510.3 101 as amended by Section 3(42) of ERISA, in such Seller Partys hands, and transactions by or with such Seller Party are not subject to any foreign, state or local statute regulating investments or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA or church plans within the meaning of Section 3(33) of ERISA.
27. No Prohibited Persons. No Seller Party nor any of their officers, directors, partners or members, is a Person (or to such Seller Partys knowledge, fifty (50) percent or greater owned by a Person): (i) whose name appears on the United States Treasury Departments Office of Foreign Assets Control (OFAC) most current list of Specifically Designated National and Blocked Persons (which list may be published
from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); or (ii) is otherwise the target of sanctions administered by OFAC (any and all parties or Persons described in clauses (i) and (ii) above are herein referred to as a Prohibited Person).
28. Servicing. Seller has, or has engaged qualified subcontractors that have, adequate financial standing, servicing facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans and REO Properties of the same types as may from time to time constitute Mortgage Loans or REO Properties and in accordance with Accepted Servicing Practices.
b. With respect to every Purchased Asset and Contributed REO Property, Seller represents and warrants to Administrative Agent and Buyers as of the applicable Purchase Date for any Transaction and each date that a Transaction is outstanding that each representation and warranty set forth on Schedule 1-A, Schedule 1-B and Schedule 1-C, as applicable, is true and correct.
c. The representations and warranties set forth in this Agreement shall survive transfer of the Purchased Assets to Administrative Agent (on behalf of Buyers) and shall continue for so long as the Purchased Assets and Contributed REO Properties are subject to this Agreement. Upon discovery by Seller Parties, Servicer or Administrative Agent of any breach of any of the representations or warranties set forth in this Agreement, the party discovering such breach shall promptly give notice of such discovery to the others. Without limiting the requirements of Section 6 hereof, Administrative Agent (on behalf of Buyers) has the right to require, in its good faith discretion, Seller to repurchase within [***] after receipt of notice from Administrative Agent any Purchased Asset and Contributed REO Property for which a material breach of one or more of the representations and warranties referenced in Section 13.b exists and which breach has a material adverse effect on the value of such Purchased Asset or Contributed REO Property or the interests of Administrative Agent (on behalf of Buyers).
14. Covenants
Each Seller Party covenants with Administrative Agent (on behalf of Buyers), during the term of this facility:
a. Litigation. Seller Parties will promptly, and in any event within ten (10) days after service of process on any of the following, give to Administrative Agent notice of all material litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are, to such Seller Partys knowledge, threatened or pending) or other legal or arbitrable proceedings affecting any Seller Party or affecting any of the Property of any of them before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Program Agreements or any action to be taken in connection with the transactions contemplated hereby, (ii) makes a claim individually in an amount greater than $[***] against Seller or $[***] against the
REO Subsidiary or in an aggregate amount greater than $[***] against Seller or $[***] against REO Subsidiary, (iii) makes a claim for an unspecified amount of damages, or (iv) which, individually or in the aggregate, if adversely determined, could be reasonably likely to have a Material Adverse Effect. Seller will promptly provide notice of any judgment, which with the passage of time, could cause an Event of Default hereunder.
b. Prohibition of Fundamental Changes. No Seller Party shall enter into any transaction of merger or consolidation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution), or sell all or substantially all of its assets; provided, that Seller may merge or consolidate with (a) any Person so long as no Change of Control has occurred, or (b) any other Person if Seller is the surviving entity; and provided further, that if after giving effect thereto, no Default would exist hereunder.
c. Servicing. No Seller Party shall cause the Purchased Mortgage Loans and Contributed REO Properties to be serviced by any servicer other than a servicer expressly approved in writing by Administrative Agent, which approval shall not be unreasonably withheld and is hereby granted by Administrative Agent (on behalf of Buyers) with respect to LoanCare, LLC and Cenlar FSB upon the execution of this Agreement.
d. Insurance. Seller shall continue to maintain Fidelity Insurance in such amounts acceptable to the Agencies. Seller shall maintain Fidelity Insurance in respect of its officers, employees and agents, with respect to any claims made in connection with all or any portion of the Repurchase Assets. Seller shall notify Administrative Agent of any material change in the terms of any such Fidelity Insurance.
e. No Adverse Claims. Each Seller Party warrants and will defend, and shall cause any Servicer to defend, the right, title and interest of (i) Administrative Agent (on behalf of Buyers) in and to all Purchased Assets and Contributed REO Properties and the related Repurchase Assets against all adverse claims and demands and (ii) REO Subsidiary in and to all Contributed REO Properties held by it.
f. Assignment. Except as permitted herein, no Seller Party nor any Servicer shall sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to the Program Agreements), any of the Purchased Assets, Contributed REO Properties or any interest therein, provided that this Section shall not prevent any transfer of Purchased Assets or Contributed REO Properties in accordance with the Program Agreements.
g. Security Interest. Seller Parties shall do all things necessary to preserve the Purchased Assets and Contributed REO Properties and the related Repurchase Assets so that they remain subject to a first priority perfected security interest hereunder. Without limiting the foregoing, each Seller Party will comply with all rules, regulations and other laws of any Governmental Authority and cause the Purchased Assets and Contributed REO Properties or the related Repurchase Assets to comply with all applicable rules, regulations
and other laws. No Seller Party will allow any default for which a Seller Party is responsible to occur under any Purchased Assets, Contributed REO Properties or the related Repurchase Assets or any Program Agreement and each Seller Party shall fully perform or cause to be performed when due all of its obligations under any Purchased Assets, Contributed REO Properties or the related Repurchase Assets and any Program Agreement.
h. Records.
1. Seller shall collect and maintain or cause to be collected and maintained all Records relating to the Purchased Assets and Contributed REO Properties in accordance with industry custom and practice for assets similar to the Purchased Assets and Contributed REO Properties and all such Records shall be in Sellers or Custodians possession unless Administrative Agent otherwise approves. Except in accordance with the Custodial Agreement, Seller will not allow any such papers, records or files that are an original or an only copy to leave Custodians possession, except for individual items removed in connection with servicing a specific Purchased Mortgage Loan or Contributed REO Property, in which event Seller will obtain or cause to be obtained a receipt from a financially responsible Person for any such paper, record or file. Seller or the Servicer of the Purchased Assets and Contributed REO Properties will maintain all such Records not in the possession of Custodian in good and complete condition in accordance with industry practices for assets similar to the Purchased Assets and Contributed REO Properties and preserve them against loss.
2. For so long as Administrative Agent (on behalf of Buyers) has an interest in or lien on any Purchased Assets or Contributed REO Properties, Seller will hold or cause to be held all related Records in trust for Administrative Agent (on behalf of Buyers). Seller shall notify, or cause to be notified, every other party holding any such Records of the interests and liens in favor of Administrative Agent (on behalf of Buyers) granted hereby.
3. Upon reasonable advance notice from Custodian or Administrative Agent, Seller shall (x) make any and all such Records available to Custodian, Administrative Agent and a Buyer to examine any such Records, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof, and (y) permit Administrative Agent or a Buyer or its authorized agents to discuss the affairs, finances and accounts of Seller with Responsible Officer of Seller and to discuss the affairs, finances and accounts of Seller with its independent certified public accountants.
i. Books. Each Seller Party shall keep or cause to be kept in reasonable detail books and records of account of its assets and business and shall clearly reflect therein the transfer of Purchased Assets to Administrative Agent (on behalf of Buyers) and the transfer of Contributed REO Properties to the REO Subsidiary.
j. Approvals. Each Seller Party shall maintain all licenses, permits or other approvals necessary for such Seller Party to conduct its business and to perform its obligations under the Program Agreements, and each Seller Party shall conduct its business materially in accordance with applicable law.
k. Material Change in Business. No Seller Party shall engage in any business other than mortgage-related or REO Property-related activities, as applicable, unless such Seller Party provides written notice to Administrative Agent and Administrative Agent approves such business in its sole good faith discretion.
l. Underwriting Guidelines. Subject to Section 10.b(8) hereof, Seller may amend or otherwise modify the Underwriting Guidelines. In the event that Seller makes any amendment or modification to the Underwriting Guidelines, Seller shall promptly deliver to Administrative Agent a complete copy of the amended or modified Underwriting Guidelines prior to any Mortgage Loan originated under such revised Underwriting Guidelines becoming a Purchased Mortgage Loan.
m. Distributions. If a Default or an Event of Default has occurred and is continuing, Seller shall not pay any dividends with respect to any capital stock or other equity interests in such entity, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Seller.
n. Applicable Law. Each Seller Party shall comply with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority.
o. Existence. Each Seller Party shall preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises.
p. Chief Executive Office; Jurisdiction of Organization. No Seller Party shall move its chief executive office from the address referred to in Section 13.a.17 or change its jurisdiction of organization from the jurisdiction referred to in Section 13.a.17 unless it shall have provided Administrative Agent thirty (30) days prior written notice of such change.
q. Taxes. Each Seller Party shall timely file all tax returns that are required to be filed by them and shall timely pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained.
r. Transactions with Affiliates. No Seller Party will enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) not otherwise
prohibited under the Program Agreements, and (b) upon fair and reasonable terms no less favorable to Seller than it would obtain in a comparable arms length transaction with a Person which is not an Affiliate, or make a payment that is not otherwise permitted by this Section to any Affiliate.
s. Reserved.
t. Indebtedness. Without the prior written consent of Administrative Agent, which consent may be granted or withheld in Administrative Agents good faith discretion, no Seller Party shall incur any additional material Indebtedness, including without limitation, any Indebtedness relating to any mortgage servicing rights or corporate or servicing advances, (other than (i) the Existing Indebtedness in amounts not to exceed the amounts specified on Exhibit C hereto and (ii) usual and customary accounts payable for a mortgage company).
u. Hedging. Seller shall hedge all Purchased Mortgage Loans in accordance with Sellers hedging policies in effect from time to time.
v. True and Correct Information. All information, reports, exhibits, schedules, financial statements or certificates of Seller or any of its officers furnished to Administrative Agent and/or Buyers hereunder and during Administrative Agents and/or Buyers diligence of Seller are and will be true and complete in all material respects and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading. All required financial statements, information and reports delivered by Seller to Administrative Agent and/or Buyers pursuant to this Agreement shall be prepared in accordance with U.S. GAAP, or, if applicable, to SEC filings, the appropriate SEC accounting regulations.
w. Agency Approvals. Seller shall maintain its status with Fannie Mae as an approved lender or Freddie Mac as an approved seller/servicer, in each case in good standing (Agency Approvals), Seller shall service all Purchased Mortgage Loans which are Committed Mortgage Loans in accordance with the applicable Agency guide. Should Seller, for any reason, cease to possess all such applicable Agency Approvals, or should notification to the relevant Agency or to the Department of Housing and Urban Development, FHA, USDA or VA be required, Seller shall notify Administrative Agent immediately in writing. Notwithstanding the preceding sentence, Seller shall take all necessary action to maintain all of their applicable Agency Approvals at all times during the term of this Agreement and each outstanding Transaction.
x. Take-out Payments. With respect to each Committed Mortgage Loan, Seller shall arrange that all payments under the related Take-out Commitment shall be paid to Administrative Agent pursuant (i) to the terms of the Joint Securities Agreement or (ii) to Administrative Agents Wiring Instructions, as applicable.
y. HUD and FHA Matters Regarding Income and Accounts with Respect to GNMA EBOs. With respect to each GNMA EBO (including a Contributed REO Property) that is (or was) an FHA Loan, Seller Parties shall list Servicer as the servicer on FHA Connection System and Seller to be identified as the mortgagee of record on such system under mortgagee number [***]. With respect to each GNMA EBO (including a Contributed REO Property) that is (or was) a VA Loan, Seller shall list Servicer as the servicer on the VALERI system. With respect to each GNMA EBO (including a Contributed REO Property) that is (or was) a USDA Loan, Seller shall list Servicer as the servicer and Seller as the holding lender on the USDA LINC system. Seller shall cause Servicer to submit all claims to HUD, VA and USDA under such applicable numbers for remittance of amounts to the Clearing Account.
z. Plan Assets. No Seller Party shall be an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code and no Seller Party shall use plan assets within the meaning of 29 CFR §2510.3 101, as amended by Section 3(42) of ERISA to engage in this Agreement or any Transaction hereunder. Transactions by or with such Seller Party shall not be subject to any foreign, state or local statute regulating investments of or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA or church plans within the meaning of Section 3(33) of ERISA.
aa. Reserved.
bb. No Pledge. Except pursuant to this Agreement, Seller shall not, and shall not cause Servicer to, pledge, transfer or convey any security interest in (i) the Clearing Account to any Person or (ii) Custodial Account to any Person (other than Administrative Agent), in each case, without the express written consent of Administrative Agent.
cc. No Prohibited Persons. Neither Seller Party nor any of their officers, directors, partners or members, shall be an entity or person (or to Sellers knowledge, 50 percent or greater owned by an entity or person): (i) whose name appears on the United States Treasury Departments Office of Foreign Assets Control (OFAC) most current list of Specifically Designated National and Blocked Persons (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); or (ii) shall otherwise be the target of sanctions administered by OFAC (any and all parties or persons described in clauses (i) and (ii) above are herein referred to as a Prohibited Person).
dd. Quality Control. Seller shall maintain an internal quality control program that verifies, on a regular basis, the existence and accuracy of all legal documents, credit documents, property appraisals, and underwriting decisions related to Mortgage Loans and shall provide a report on the results of such quality control program in the Officers Compliance Certificate provided pursuant to Section 17.b(3).
ee. Financial Covenants. Seller shall at all times comply with all financial covenants and/or financial ratios set forth in Section 2 of the Pricing Side Letter.
ff. Most Favored Status. Seller and Administrative Agent each agree that should Seller or any Affiliate thereof enter into a repurchase agreement or credit facility with any Person other than Administrative Agent or an Affiliate of Administrative Agent which by its terms provides more favorable terms to Administrative Agent with respect to any guaranties or financial covenants, including without limitation covenants covering the same or similar subject matter set forth in Sections 14.m and 14.ee hereof (a More Favorable Agreement), the terms of this Agreement shall be deemed automatically amended to include such more favorable terms contained in such More Favorable Agreement; provided, that in the event that such More Favorable Agreement is terminated, upon notice by Seller to Administrative Agent of such termination, the original terms of this Agreement shall be deemed to be automatically reinstated. Promptly upon Seller or any Affiliate thereof entering into a repurchase agreement or other credit facility with any Person other than Administrative Agent, Seller shall deliver to Administrative Agent a summary of the terms of the financial covenants thereof.
gg. SPE Covenant; Separateness. Seller shall ensure that REO Subsidiary, and REO Subsidiary shall (a) own no assets, and will not engage in any business, other than the assets and transactions specifically contemplated by this Agreement; (b) not incur any Indebtedness or obligation, secured or unsecured, direct or indirect, absolute or contingent (including guaranteeing any obligation), other than pursuant hereto; (c) not make any loans or advances to any third party, and shall not acquire obligations or securities of its Affiliates; (d) pay its debts and liabilities (including, as applicable, shared personnel and overhead expenses) only from its own assets; (e) comply with the provisions of its organizational documents; (f) do all things necessary to observe organizational formalities and to preserve its existence, and will not amend, modify or otherwise change its organizational documents, or suffer same to be amended, modified or otherwise changed, without the prior written consent of Administrative Agent on behalf of Buyers; (g) maintain all of its books, records, financial statements and bank accounts separate from those of its Affiliates (except that such financial statements may be consolidated to the extent consolidation is required under GAAP or as a matter of applicable law; provided, that (A) appropriate notation shall be made on such financial statements if prepared to indicate the separateness of the REO Subsidiary from such Affiliate and to indicate that the REO Subsidiarys assets and credit are not available to satisfy the debts and other obligations of such Affiliate or any other Person and (B) such assets shall also be listed on the REO Subsidiarys own separate balance sheet if prepared and (C) the REO Subsidiary shall file its own tax returns if filed, except to the extent consolidation is required or permitted under applicable law); (h) be, and at all times will hold itself out to the public as, a legal entity separate and distinct from any other entity (including any Affiliate), shall correct any known misunderstanding regarding its status as a separate entity, shall conduct business in its own name, shall not identify itself or any of its Affiliates as a division or part of the other and shall maintain and utilize a separate telephone number and separate stationery, invoices and checks; (i) maintain adequate capital for the normal obligations reasonably
foreseeable in a business of its size and character and in light of its contemplated business operations (provided, that no member of the REO Subsidiary shall have any obligation to make any contribution of capital to the REO Subsidiary); (j) not engage in or suffer any change of ownership, dissolution, winding up, liquidation, consolidation or merger in whole or in part; (k) other than deposits (including FHA Mortgage Insurance claim proceeds) into the Custodial Account as contemplated herein, not commingle its funds or other assets with those of any Affiliate or any other Person; (l) maintain its assets in such a manner that it will not be costly or difficult to segregate, ascertain or identify its individual assets from those of any Affiliate or any other person; (m) not and will not hold itself out to be responsible for the debts or obligations of any other Person; (n) cause each of its direct owners to agree (and Seller hereby agrees) not to (i) file or consent to the filing of any bankruptcy, insolvency or reorganization case or proceeding with respect to REO Subsidiary; institute any proceedings under any applicable insolvency law or otherwise seek any relief under any laws relating to the relief from debts or the protection of debtors generally with respect to REO Subsidiary; (ii) seek or consent to the appointment of a receiver, liquidator, assignee, trustee, sequestrator, custodian or any similar official for REO Subsidiary or a substantial portion of its properties; or (iii) make any assignment for the benefit of REO Subsidiarys creditors.
15. Events of Default
Each of the following shall constitute an Event of Default hereunder:
a. Payment Failure. Failure of Seller to (i) make any payment of (A) Price Differential, provided that if such failure is caused by operational mistake, Seller shall have [***] to cure such failure, or (B) Repurchase Price or any other sum which has become due, in each case, on a Price Differential Payment Date or a Repurchase Date or otherwise, whether by acceleration or otherwise, under the terms of this Agreement, any other warehouse and security agreement or any other document evidencing or securing Indebtedness of Seller to Administrative Agent (on behalf of Buyers), or (ii) cure any Margin Deficit when due pursuant to Section 6 hereof.
b. Cross Default. Any Seller Party or any of a Seller Partys Affiliates shall be in default under (i) any Indebtedness, in the aggregate, in excess of (x) $[***] with respect to Seller or of such Affiliate or (y) $[***] with respect to REO Subsidiary which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary with respect to such Indebtedness, or (ii) any other contract in excess of (x) $[***] to which Seller or such Affiliate is a party or (y) $[***] to which REO Subsidiary is a party which default (1) involves the failure to pay a matured obligation, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary of such contract, or (iii) any Indebtedness of Seller owed under a to be allocated (TBA) commitment or a master securities contract which default has resulted in the acceleration of the maturity of obligations by any other party to or beneficiary with respect to such Indebtedness.
c. Reserved.
d. Insolvency. An Act of Insolvency shall have occurred with respect to any Seller Party or Aris Mortgage Holding Company, LLC.
e. Material Adverse Change. The occurrence of a Material Adverse Effect.
f. Breach of Financial Representation or Covenant or Obligation. A breach by Seller of any of the representations, warranties or covenants or obligations set forth in Sections 13.a.1 (Seller Party Existence (solely as to existence)), 13.a.7 (Solvency), 13.a.23 (Other Indebtedness), 14.b (Prohibition of Fundamental Changes), 14.m (Distributions), 14.o (Existence (solely as to existence)), 14.t (Indebtedness), 14.z (Plan Assets), 14.bb (No Pledge), 14.ee (Financial Covenants) or 14.gg (SPE Covenant; Separateness) of this Agreement.
g. Breach of Non-Financial Representation or Covenant. A breach by any Seller Party of any other material representation, warranty or covenant set forth in this Agreement (and not otherwise specified in Section 15.f above), or any other Program Agreement, if such breach is not cured within [***] Business Days of such Seller Partys knowledge thereof (other than the representations and warranties set forth in Schedule 1-A, Schedule 1-B and Schedule 1-C, which shall be considered solely for the purpose of determining the Asset Value, the existence of a Margin Deficit and the obligation to repurchase such Purchased Mortgage Loan or REO Property unless (i) such party shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made, (ii) any such representations and warranties have been determined by Administrative Agent in its good faith discretion to be materially false or misleading on a regular basis, or (iii) Administrative Agent, in its good faith discretion, determines that such breach of a material representation, warranty or covenant materially and adversely affects (A) the condition (financial or otherwise) of such party or its Affiliates; or (B) Administrative Agents determination to enter into this Agreement or Transactions with such party, then such breach shall constitute an immediate Event of Default and Seller shall have no cure right hereunder).
h. Change of Control. The occurrence of a Change in Control.
i. Failure to Transfer. Seller fails to transfer the Purchased Assets to Administrative Agent for the benefit of the applicable Buyer on the applicable Purchase Date (provided Administrative Agent, on behalf of the applicable Buyer, has tendered the related Purchase Price).
j. Judgment. A final judgment or judgments for the payment of money in excess of (x) $[***] in the aggregate shall be rendered against Seller or any of its Affiliates or (y) $[***] against REO Subsidiary by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged
(or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within [***] from the date of entry thereof.
k. Government Action. Any Governmental Authority or any Person acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of any Seller Party, or shall have taken any action to displace the management of such Seller Party or to curtail its authority in the conduct of the business of such Seller Party, or takes any action in the nature of enforcement to remove, limit or restrict the approval of Seller as an issuer, buyer or a seller/servicer of Purchased Assets, Contributed REO Properties or securities backed thereby, and such action provided for in this Section 15.k shall not have been discontinued or stayed within [***] Business Days.
l. Inability to Perform. An officer of a Seller Party shall admit in writing its inability to, or its intention not to, perform any of such Seller Partys Obligations hereunder.
m. Security Interest. This Agreement shall for any reason cease to create a valid, first priority security interest in any material portion of the Purchased Assets or other Repurchase Assets purported to be covered hereby.
n. Financial Statements. Sellers audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of Seller as a going concern or a reference of similar import.
o. Reserved.
p. Servicer Default. There is a breach by Servicer of the Servicing Agreement and Seller has not appointed a successor servicer acceptable to Administrative Agent within [***] days.
An Event of Default shall be deemed to be continuing unless expressly waived by Administrative Agent in writing.
16. Remedies Upon Default
In the event that an Event of Default shall have occurred and be continuing:
a. Administrative Agent (on behalf of Buyers) may, at its option (which option shall be deemed to have been exercised immediately upon the occurrence of an Act of Insolvency of Seller), declare an Event of Default to have occurred hereunder and, upon the exercise or deemed exercise of such option, the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (except that, in the event that the Purchase Date for any Transaction has not yet occurred as of the date of such exercise or deemed exercise, such Transaction shall be deemed immediately
canceled). Administrative Agent shall (except upon the occurrence of an Act of Insolvency of Seller) give notice to Seller of the exercise of such option as promptly as practicable.
b. If Administrative Agent (on behalf of Buyers) exercises or is deemed to have exercised the option referred to in subparagraph (a) of this Section, (i) Sellers obligations in such Transactions to repurchase all Purchased Assets and Contributed REO Properties, at the Repurchase Price therefor on the Repurchase Date determined in accordance with subparagraph (a) of this Section, shall thereupon become immediately due and payable, (ii) all Income paid after such exercise or deemed exercise shall be retained by Administrative Agent (on behalf of Buyers) and applied, in Administrative Agents good faith discretion, to the aggregate unpaid Repurchase Prices for all outstanding Transactions and any other amounts owing by Seller hereunder, and (iii) Seller shall immediately deliver to Administrative Agent (on behalf of Buyers) the Asset Files relating to any Purchased Assets and Contributed REO Properties subject to such Transactions then in Sellers possession or control.
c. Administrative Agent (on behalf of Buyers) shall have the right to obtain physical possession, and to commence an action to obtain physical possession, of all Records and files of Seller relating to the Purchased Assets, Contributed REO Properties and Repurchase Assets and all documents relating to the Purchased Assets or Contributed REO Properties (including, without limitation, any legal, credit or servicing files with respect to the Purchased Assets, Contributed REO Properties and Repurchase Assets) which are then or may thereafter come in to the possession of Seller or any third party acting for Seller. To obtain physical possession of any Purchased Assets and Contributed REO Properties held by Custodian, Administrative Agent shall present to Custodian the applicable form pursuant to the Custodial Agreement. Without limiting the rights of Administrative Agent hereto to pursue all other legal and equitable rights available to Administrative Agent (on behalf of Buyers) for Sellers failure to perform its obligations under this Agreement, Seller acknowledges and agrees that the remedy at law for any failure to perform obligations hereunder would be inadequate and Administrative Agent (on behalf of Buyers) shall be entitled to specific performance, injunctive relief, or other equitable remedies in the event of any such failure. The availability of these remedies shall not prohibit Administrative Agent (on behalf of Buyers) from pursuing any other remedies for such breach, including the recovery of monetary damages.
d. Administrative Agent (on behalf of Buyers) shall have the right to direct all servicers then servicing any Purchased Assets and Contributed REO Properties to remit all collections thereon to Administrative Agent (on behalf of Buyers), and if any such payments are received by Seller, Seller shall not commingle the amounts received with other funds of Seller and shall promptly pay them over to Administrative Agent (on behalf of Buyers). Administrative Agent (on behalf of Buyers) shall also have the right to terminate any one or all of the servicers then servicing any Purchased Assets and Contributed REO Properties with or without cause. In addition, Administrative Agent (on behalf of Buyers) shall have the right to immediately sell the Purchased Assets and Contributed REO Properties and liquidate all Repurchase Assets. Such disposition of
Purchased Assets and Contributed REO Properties may be, at Administrative Agents option, on either a servicing-released or a servicing-retained basis. Administrative Agent (on behalf of Buyers) shall not be required to give any warranties as to the Purchased Assets and Contributed REO Properties with respect to any such disposition thereof. Administrative Agent (on behalf of Buyers) may specifically disclaim or modify any warranties of title or the like relating to the Purchased Assets and Contributed REO Properties. The foregoing procedure for disposition of the Purchased Assets and Contributed REO Properties and liquidation of the Repurchase Assets shall not be considered to adversely affect the commercial reasonableness of any sale thereof. Seller agrees that it would not be commercially unreasonable for Administrative Agent (on behalf of Buyers) to dispose of the Purchased Assets, Contributed REO Properties or the Repurchase Assets or any portion thereof by using Internet sites that provide for the auction of assets similar to the Purchased Assets, Contributed REO Properties or the Repurchase Assets, or that have the reasonable capability of doing so, or that match buyers and sellers of assets. Administrative Agent (on behalf of Buyers) shall be entitled to place the Purchased Assets and Contributed REO Properties in a pool for issuance of mortgage-backed securities at the then-prevailing price for such securities and to sell such securities for such prevailing price in the open market. Administrative Agent (on behalf of Buyers) shall also be entitled to sell any or all of such Purchased Assets and Contributed REO Properties individually for the prevailing price. Administrative Agent (on behalf of Buyers) shall also be entitled, in its good faith discretion to elect, in lieu of selling all or a portion of such Purchased Assets and Contributed REO Properties, to give Seller credit for such Purchased Assets, Contributed REO Properties and the Repurchase Assets in an amount equal to the Market Value of the Purchased Assets and Contributed REO Properties against the aggregate unpaid Repurchase Price and any other amounts owing by Seller hereunder.
e. Administrative Agent (on behalf of Buyers) may apply any proceeds from the liquidation of the Purchased Assets and Contributed REO Properties and Repurchase Assets to the Repurchase Prices hereunder and all other Obligations in the manner Administrative Agent deems appropriate in its sole discretion.
f. Seller recognizes that the market for the Contributed REO Properties may not be liquid and as a result it may not be possible for Administrative Agent to sell all of the REO Subsidiary Interests and Contributed REO Properties on a particular Business Day, or in a transaction with the same purchaser, or in the same manner. In view of the nature of the Contributed REO Properties, Seller agrees that liquidation of any Contributed REO Property may be conducted in a private sale and at such price as Administrative Agent may deem commercially reasonable. Seller further recognizes that Administrative Agent may be unable to effect a public sale of any or all of the Contributed REO Properties that are evidenced by REO Subsidiary Interests, by reason of certain prohibitions contained in the 1934 Act and applicable state securities laws or otherwise, and may be compelled to resort to one or more private sales thereof to a restricted group of purchasers which will be obliged to agree, among other things, to acquire such securities for their own account for investment and not a view to the distribution or resale thereof. In view of the nature of the Contributed REO Properties, Seller agrees that liquidation of any Contributed REO
Property may be conducted in a private sale and at such price as Administrative Agent may deem commercially reasonable. Administrative Agent shall be under no obligation to delay a sale of any of the REO Subsidiary Interests for the period of time necessary to permit the Seller to register the REO Subsidiary Interests for public sale under the 1934 Act, or under applicable state securities laws, even if Seller would agree to do so.
g. Seller shall be liable to Administrative Agent and each Buyer for (i) the amount of all reasonable outside legal and other expenses (including, without limitation, all reasonable third party costs and expenses of Administrative Agent and each Buyer in connection with the enforcement of this Agreement or any other agreement evidencing a Transaction, whether in action, suit or litigation or bankruptcy, insolvency or other similar proceeding affecting creditors rights generally, further including, without limitation, the reasonable fees and expenses of outside counsel incurred in connection with or as a result of an Event of Default, (ii) damages in an amount equal to the cost (including all reasonable third party fees, expenses and commissions) of entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default, and (iii) any other loss, damage, cost or reasonable expense directly arising or resulting from the occurrence of an Event of Default in respect of a Transaction.
h. To the extent permitted by applicable law, Seller shall be liable to Administrative Agent and each Buyer for interest on any amounts owing by Seller hereunder, from the date Seller becomes liable for such amounts hereunder until such amounts are (i) paid in full by Seller or (ii) satisfied in full by the exercise of Administrative Agents and Buyers rights hereunder. Interest on any sum payable by Seller under this Section 16.h shall accrue at a rate equal to the Post-Default Rate.
i. Administrative Agent (on behalf of Buyers) shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement or applicable law.
j. Administrative Agent (on behalf of Buyers) may exercise one or more of the remedies available to Administrative Agent immediately upon the occurrence of an Event of Default and, except to the extent provided in subsections (a) and (d) of this Section, at any time thereafter without notice to Seller. All rights and remedies arising under this Agreement as amended from time to time hereunder are cumulative and not exclusive of any other rights or remedies which Administrative Agent (on behalf of Buyers) may have.
k. Administrative Agent (on behalf of Buyers) may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require Administrative Agent (on behalf of Buyers) to enforce its rights by judicial process. Seller also waives any defense (other than a defense of payment or performance) Seller might otherwise have arising from the use of nonjudicial process, enforcement and sale of all or any portion of the Repurchase Assets, or from any other election of remedies. Seller recognizes that nonjudicial remedies
are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arms length.
l. Following the exercise of remedies pursuant to this Section 16, if Purchased Assets and Contributed REO Properties and the related Repurchase Assets are sold, Administrative Agent shall give written notice to Seller of the amount at which such Purchased Assets and Contributed REO Properties and the related Repurchase Assets were disposed and how such proceeds were applied.
17. Reports
a. Default Notices. Seller shall furnish to Administrative Agent (i) promptly, copies of any material and adverse notices (including, without limitation, notices of defaults, termination events, or breaches) and any material financial information that is not otherwise required to be provided by Seller hereunder which is given to Sellers lenders and (ii) immediately, notice of the occurrence of any (A) Event of Default hereunder, (B) default or material breach by Seller or Servicer of any obligation under any Program Agreement, or (C) event or circumstance that such party reasonably expects has resulted in, or will, with the passage of time, result in, a Material Adverse Effect or an Event of Default or such a default or breach by such party.
b. Financial Notices. Seller shall furnish to Administrative Agent:
1. as soon as available and in any event within thirty (30) calendar days after the end of each calendar month, the unaudited consolidated balance sheets of Seller and its consolidated Subsidiaries as of the end of such period and the related unaudited consolidated statements of income and retained earnings and of cash flows for Seller and its consolidated Subsidiaries for such period and the portion of the fiscal year through the end of such period, accompanied by a certificate of a Responsible Officer of Seller, which certificate shall state that said consolidated financial statements fairly present in all material respects the consolidated financial condition and results of operations of Seller and its consolidated Subsidiaries in accordance with GAAP (other than solely with respect to footnotes, year-end adjustments and cash flow statements) consistently applied, as at the end of, and for, such period;
2. as soon as available and in any event within ninety (90) days after the end of each fiscal year of Seller, the consolidated balance sheets of Seller and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and retained earnings and of cash flows for Seller and its consolidated Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall have no going concern qualification and shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of Seller and its respective consolidated Subsidiaries as at the end of, and for, such fiscal year in accordance with GAAP;
3. at the time Seller furnishes each set of financial statements pursuant to Section 17.b.1 or (2) above, an Officers Compliance Certificate of a Responsible Officer of Seller in the form attached as Exhibit A to the Pricing Side Letter;
4. Reserved;
5. as soon as available and in any event within thirty (30) days of receipt thereof:
(a) Reserved;
(b) written summaries of all final written Agency, FHA, VA, and material Governmental Authority audits, examinations, evaluations, monitoring reviews and reports of its operations (including those prepared on a contract basis) which provide for or relate to (i) material corrective action required, (ii) material sanctions proposed, imposed or required, including without limitation notices of defaults, notices of termination of approved status, notices of imposition of supervisory agreements or interim servicing agreements, and notices of probation, suspension, or non-renewal, or (iii) material adverse findings by such Agency or Governmental Authority;
(c) such other information regarding the financial condition, operations, or business of Seller as Administrative Agent may reasonably request; and
(d) the particulars of any Event of Termination in reasonable detail.
6. Seller shall provide the market value analysis for the valuation of its mortgage servicing rights as determined (i) internally for each monthly fiscal period and (ii) by a Third Party Evaluator for each quarterly fiscal period, in all instances as set forth in the Officers Compliance Certificate delivered pursuant to Section 17.b.3;
7. Seller shall provide Administrative Agent, as part of the Officers Certificate delivered pursuant to Section 17.b(3) above, a list of all (i) material actions, disputes, litigation, notices, proceedings, investigations or suspensions pending with respect to which Seller has received service of process or other form of notice or, to the best of Sellers knowledge, threatened against it, before any court, administrative, Governmental Authority or other regulatory body or tribunal which is reasonably expected, in Sellers good faith discretion, if adversely decided, to have a Material Adverse Effect on Seller, as of such date with such information provided, and (ii) material issues raised upon examination of Seller or Sellers facilities, operations, servicing, origination or correspondent activities by any Governmental Authority; each as noted in the applicable Schedule to Exhibit A of the Pricing Side Letter.
c. Notices of Certain Events. As soon as possible and in any event within [***] of knowledge thereof, Seller shall furnish to Administrative Agent notice of the following events:
1. Reserved;
2. Reserved;
3. Reserved;
4. with respect to any Purchased Mortgage Loan, that, to Sellers knowledge, the underlying Mortgaged Property has been damaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty, or otherwise damaged so as to affect adversely the value of such Mortgage Loan;
5. Reserved;
6. any material change in the Indebtedness of Seller, including, without limitation, any default, renewal, non-renewal, termination, increase in available amount or decrease in available amount related thereto; and
7. any other event, circumstance or condition that has resulted, or has a possibility of resulting, in a Material Adverse Effect with respect to Seller or Servicer.
d. Portfolio Performance Data. On the Reporting Date of each calendar month, Seller will furnish to Administrative Agent (i) in the event the Purchased Mortgage Loans and Contributed REO Properties are serviced on a retained basis, an electronic Purchased Mortgage Loan and Contributed REO Property performance data, and (ii) electronically, in a format mutually acceptable to Administrative Agent and Seller, servicing information, including the outstanding principal balance and the last payment date with respect to such Purchased Mortgage Loans and Contributed REO Properties and any other fields mutually agreed between Administrative Agent and Seller, on a loan-by-loan or REO-by-REO basis and in the aggregate, with respect to the Purchased Mortgage Loans and Contributed REO Properties serviced by Seller or any Servicer as of month end (or any portion thereof) prior to the Reporting Date.
e. Other Reports. Seller shall deliver to Administrative Agent any other reports or information reasonably requested by Administrative Agent and mutually agreed to by Administrative Agent and Seller, or as otherwise required pursuant to this Agreement or as set forth in the Officers Compliance Certificate delivered pursuant to Section 17.b.3 above.
f. DE Compare Ratio and HUD Reports. Seller shall furnish to Administrative Agent the following notices:
1. In the event Sellers DE Compare Ratio equals or exceeds [***], Seller shall provide Administrative Agent with written notice of such occurrence within five (5) Business Days, which notice shall include a written summary of actions Seller is taking to correct its DE Compare Ratio.
2. In the event Seller receives any inquiry or notice from HUD regarding its DE Compare Ratio, Seller shall provide Administrative Agent with written notice of such inquiry or notice within five (5) Business Days, regardless of Sellers current DE Compare Ratio.
3. In the event of any action plan with respect to Sellers DE Compare Ratio is agreed to between Seller and HUD or imposed upon Seller by HUD, Seller shall provide Administrative Agent with a written summary of such agreement or imposition, as applicable, within five (5) Business Days.
g. Recorded Deeds. With respect to each REO Property owned or deemed owned by REO Subsidiary, Seller shall, or shall cause the Servicer to, furnish to Administrative Agent promptly following a request therefor, evidence in form and substance acceptable to Administrative Agent that each Deed has been properly recorded.
18. Repurchase Transactions
Subject to Section 4.a, Section 4.b, Section 6 and Section 18, a Buyer may, in its sole election, engage in repurchase transactions (as seller thereunder) with any or all of the Purchased Assets and/or Repurchase Assets or pledge, hypothecate, assign, transfer or otherwise convey any or all of the Purchased Assets and/or Repurchase Assets with a counterparty of Buyers choice (such transaction, a Repledge Transaction), Any Repledge Transaction shall be effected by notice to Administrative Agent, and shall be reflected on the books and records of Administrative Agent. No such Repledge Transaction shall relieve such Buyer of its obligations to transfer Purchased Assets and Repurchase Assets to Seller (and not substitutions thereof) pursuant to the terms hereof. Seller shall not be responsible for any additional obligations, costs, fees or expenses in connection with any Repledge Transaction. In furtherance, and not by limitation of, the foregoing, it is acknowledged that each counterparty under a Repledge Transaction (a Repledgee), is a repledgee as contemplated by Sections 9-207 and 9-623 of the UCC (and the relevant Official Comments thereunder). Administrative Agent and Buyers are each hereby authorized to share any information delivered hereunder with the Repledgee. To the extent that Administrative Agent or any Buyer shall deliver any Seller Confidential Information to a prospective Repledgee, Administrative Agent shall cause such prospective Repledgee to agree to hold such information subject to and in accordance with confidentiality provisions substantively similar to the confidentiality provisions of this Agreement.
19. Single Agreement
Administrative Agent, Buyers and Seller Parties acknowledge they have and will enter into each Transaction hereunder, in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, each of Administrative Agent, Buyers and each Seller Party agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set-off claims and apply property held by them in respect of any Transactions between Seller and a particular Buyer against the obligations owing to them in respect of any other Transactions hereunder between Seller and such Buyer, and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted.
20. Notices and Other Communications
Any and all notices (with the exception of Transaction Requests, which shall be delivered via electronic mail or other electronic medium agreed to by Administrative Agent and Seller), statements, demands or other communications hereunder may be given by a party to the other by mail, email, messenger or otherwise to the address specified below, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other. All notices, demands and requests hereunder may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence. In all cases, to the extent that the related individual set forth in the respective Attention line is no longer employed by the respective Person, such notice may be given to the attention of a Responsible Officer of the respective Person or to the attention of such individual or individuals as subsequently notified in writing by a Responsible Officer of the respective Person.
If to a Seller Party:
AmeriHome Mortgage Company, LLC
21215 Burbank Blvd, 4th Floor
Woodland Hills, California 91367-7090
With copies to:
AmeriHome Mortgage Company, LLC
21215 Burbank Blvd, 4th Floor
Woodland Hills, California 91367-7090
and:
AmeriHome Mortgage Company, LLC
21215 Burbank Blvd, 4th Floor
Woodland Hills, California 91367-7090
If to Administrative Agent:
For Transaction Requests:
Credit Suisse First Boston Mortgage Capital LLC
c/o Credit Suisse Securities (USA) LLC
One Madison Avenue, 2nd floor
New York, New York 10010
With a copy to:
Credit Suisse First Boston Mortgage Capital LLC
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue, 4th Floor
New York, NY 10010
For all other Notices:
Credit Suisse First Boston Mortgage Capital LLC
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue, 4th Floor
Attention: Margaret Dellafera
New York, New York 10010
Phone Number: 212-325-6471
Fax Number: 212-743-4810
E-mail: margaret,dellafera@credit-suisse,com
With a copy to:
Credit Suisse First Boston Mortgage Capital LLC
c/o Credit Suisse Securities (USA) LLC
One Madison Avenue, 9th Floor
New York, NY 10010
Attention: Legal DepartmentRMBS Warehouse Lending
Fax Number: (212) 322-2376
21. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
22. Non assignability
(a) Assignments. The Program Agreements are not assignable by any Seller Party without the prior written consent of Administrative Agent. Subject to Section 37 (Acknowledgement of Assignment and Administration of Repurchase Agreement) hereof, Administrative Agent and Buyers may from time to time assign all or a portion of their rights and obligations under this Agreement and the Program Agreements with Sellers prior written consent (such approval not to be unreasonably withheld); provided, however, that such consent shall not be required if Administrative Agent or Buyers assigns their rights and obligations (i) to an Affiliate of Administrative Agent or a Buyer, or (ii) after the occurrence and during the continuance of an Event of Default; provided, further, that Administrative Agent shall maintain, solely for this purpose as a non-fiduciary agent of Seller Parties, for review by Seller Parties upon written request, a register of assignees and participants (the Register), a copy of an executed assignment and acceptance by Administrative Agent and assignee (Assignment and Acceptance), specifying the percentage or portion of such rights and obligations assigned and Seller Parties shall only be required to deal directly with Administrative Agent. The entries in the Register shall be conclusive absent manifest error, and Seller, REO Subsidiary, Administrative Agent and Buyers shall treat each Person whose name is recorded in the Register pursuant to the preceding sentence as a Buyer hereunder. Upon such assignment and recordation in the Register, (a) such assignee shall be a party hereto and to each Program Agreement to the extent of the percentage or portion set forth in the Assignment and Acceptance, and shall succeed to the applicable rights and obligations of Administrative Agent and Buyers hereunder, as applicable, and (b) Administrative Agent and Buyers shall, to the extent that such rights and obligations have been so assigned by them to either (i) an Affiliate of Administrative Agent or Buyers which assumes the obligations of Administrative Agent and Buyers, as applicable or (ii) another Person approved by Seller Parties (such approval not to be unreasonably withheld) which assumes the obligations of Administrative Agent and Buyers, as applicable, be released from its obligations hereunder and under the Program Agreements. Any assignment hereunder shall be deemed a joinder of such assignee as a Buyer hereto. Unless otherwise stated in the Assignment and Acceptance, Seller Parties shall continue to take directions solely from Administrative Agent unless otherwise notified by Administrative
Agent in writing. Administrative Agent and Buyers may distribute to any prospective assignee any document or other information delivered to Administrative Agent and/or Buyers by Seller Parties, provided that such prospective assignee has agreed to hold such information subject to and in accordance with confidentiality provisions substantively similar to the confidentiality provisions of this Agreement. Any assignment in violation of this Section 22 shall be considered void.
(b) Participations. Any Buyer may sell participations to one or more Persons in or to all or a portion of its rights and obligations under this Agreement and under the Program Agreements; provided, however, that (i) such Buyers obligations under this Agreement and the other Program Agreements shall remain unchanged, (ii) such Buyer shall remain solely responsible to the other parties hereto for the performance of such obligations; and (iii) Seller shall continue to deal solely and directly with Administrative Agent and/or Buyers in connection with such Buyers rights and obligations under this Agreement and the other Program Agreements except as provided in Section 7. Administrative Agent and Buyers may distribute to any prospective or actual participant this Agreement, the other Program Agreements any document or other information delivered to Administrative Agent and/or Buyers by Seller. To the extent that Administrative Agent or any Buyer shall deliver any Seller Confidential Information to a prospective participant, Administrative Agent or such Buyer shall cause such prospective participant to agree to hold such information subject to and in accordance with confidentiality provisions substantively similar to the confidentiality provisions of this Agreement.
23. Set-off
In addition to any rights and remedies of Administrative Agent and Buyers hereunder and by law, Administrative Agent (on behalf of Buyers) and Buyers shall have the right, without prior notice to Seller Parties, any such notice being expressly waived by Seller Parties to the extent permitted by applicable law to set-off and appropriate and apply against any Obligation from a Seller Party to a Buyer or any of its Affiliates any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other obligation (including to return excess margin), credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by or due from a Buyer or any Affiliate thereof to or for the credit or the account of Seller. Administrative Agent agrees promptly to notify Seller after any such set off and application made by Administrative Agent (on behalf of Buyers); provided, that the failure to give such notice shall not affect the validity of such set off and application.
24. Binding Effect; Governing Law; Jurisdiction
a. This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Each Seller Party acknowledges that the obligations of Administrative Agent and Buyers hereunder or otherwise are not the subject of any guaranty by, or recourse to, any direct or indirect parent or other Affiliate of Administrative Agent and Buyers. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH, AND GOVERNED BY, THE LAW OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF.
b. EACH OF SELLER PARTIES, ADMINISTRATIVE AGENT AND BUYERS HEREBY WAIVE TRIAL BY JURY. EACH SELLER PARTY HEREBY IRREVOCABLY CONSENTS TO THE EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS IN ANY ACTION OR PROCEEDING. EACH SELLER PARTY HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION IT MAY HAVE TO, EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS.
25. No Waivers, Etc.
No express or implied waiver of any Event of Default or other default of this Agreement by either party shall constitute a waiver of any other Event of Default or other default of this Agreement and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation on any of the foregoing, the failure to give a notice pursuant to Section 6.a, 16.a or otherwise, will not constitute a waiver of any right to do so at a later date.
26. Intent
a. The parties recognize that each Transaction is a repurchase agreement as that term is defined in Section 101 of Title 11 of the United States Code, as amended, a securities contract as that term is defined in Section 741 of Title 11 of the United States Code, as amended, and a master netting agreement as that term is defined in Section 101(38A)(A) of the Bankruptcy Code, that all payments hereunder are deemed margin payments or settlement payments as defined in Title 11 of the United States Code, and that the pledge of the Repurchase Assets constitutes a security agreement or other arrangement or other credit enhancement that is related to the Agreement and Transactions hereunder within the meaning of Sections 101(38A)(A), 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code. Each Seller Party, Administrative Agent and Buyers further recognize and intend that this Agreement is an agreement to provide financial accommodations and is not subject to assumption pursuant to Bankruptcy Code Section 365(a).
b. Administrative Agents or a Buyers right to liquidate the Purchased Assets or Contributed REO Properties delivered to it in connection with the Transactions
hereunder or to accelerate or terminate this Agreement or otherwise exercise any other remedies pursuant to Section 16 hereof is a contractual right to liquidate, accelerate or terminate such Transaction as described in Bankruptcy Code Sections 555, 559 and 561; any payments or transfers of property made with respect to this Agreement or any Transaction to satisfy a Margin Deficit shall be considered a margin payment as such term is defined in Bankruptcy Code Section 741(5).
c. The parties agree and acknowledge that if a party hereto is an insured depository institution, as such term is defined in the Federal Deposit Insurance Act, as amended (FDIA), then each Transaction hereunder is a qualified financial contract, as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).
d. It is understood that this Agreement constitutes a netting contract as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a covered contractual payment entitlement or covered contractual payment obligation, respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a financial institution as that term is defined in FDICIA).
e. This Agreement is intended to be a repurchase agreement and a securities contract, within the meaning of Section 101(47), Section 555, Section 559 and Section 741 under the Bankruptcy Code.
f. Each party agrees that this Agreement is intended to create mutuality of obligations among the parties, and as such, the Agreement constitutes a contract which (i) is between all of the parties and (ii) places each party in the same right and capacity.
27. Disclosure Relating to Certain Federal Protections
The parties acknowledge that they have been advised that:
a. in the case of Transactions in which one of the parties is a broker or dealer registered with the SEC under Section 15 of the 1934 Act, the Securities Investor Protection Corporation has taken the position that the provisions of the SIPA do not protect the other party with respect to any Transaction hereunder;
b. in the case of Transactions in which one of the parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other party with respect to any Transaction hereunder; and
c. in the case of Transactions in which one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are
not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable.
28. Power of Attorney
Each Seller Party hereby authorizes Administrative Agent to file such financing statement or statements relating to the Repurchase Assets without such Seller Partys signature thereon as Administrative Agent, at its option, may deem appropriate. Each Seller Party hereby appoints Administrative Agent as such Seller Partys agent and attorney-in-fact to execute any such financing statement or statements in such Seller Partys name and to perform all other acts which Administrative Agent deems appropriate to perfect and continue its ownership interest in and/or the security interest granted hereby, if applicable, and to protect, preserve and realize upon the Repurchase Assets, including, but not limited to, the right to endorse notes, complete blanks in documents, transfer servicing, and sign assignments on behalf of such Seller Party as its agent and attorney-in-fact. This agency and power of attorney is coupled with an interest and is irrevocable without Administrative Agents consent. Notwithstanding the foregoing, the power of attorney hereby granted under this Section 28 may be exercised only during the occurrence and continuance of any Event of Default hereunder. Each Seller Party shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 28. In addition the foregoing, each Seller Party agrees to execute a Power of Attorney, in the form of Exhibit A hereto, to be delivered on the date hereof.
29. Buyers May Act Through Administrative Agent
Each Buyer has designated Administrative Agent for the purpose of performing any action hereunder, provided that such designation shall not relieve any Buyer from any of its duties or obligations hereunder.
30. Indemnification; Obligations
Seller agrees to hold Administrative Agent, Buyers and each of their respective Affiliates and their officers, directors, employees, agents and advisors (each, an Indemnified Party) harmless from and indemnify each Indemnified Party (and will reimburse each Indemnified Party as the same is incurred) against all liabilities, losses, damages, judgments, costs and expenses (including, without limitation, reasonable fees and expenses of outside counsel) of any kind which may be imposed on, incurred by, or asserted against any Indemnified Party relating to or arising out of this Agreement, any Transaction Request, any Program Agreement or any transaction contemplated hereby or thereby resulting from anything other than the Indemnified Partys gross negligence or willful misconduct. Seller also agrees to reimburse each Indemnified Party for all reasonable third-party expenses in connection with the enforcement of this Agreement and the exercise of any right or remedy provided for herein, any Transaction Request and any Program Agreement, including, without limitation, the reasonable fees and disbursements of outside counsel. Sellers agreements in this Section 30 shall survive the payment in full of the Repurchase Price and the expiration or termination of this Agreement. Seller hereby acknowledges that its obligations hereunder are recourse obligations of Seller and are not limited to recoveries
each Indemnified Party may have with respect to the Purchased Assets and Contributed REO Properties. Seller also agrees not to assert any claim against Administrative Agent or Buyers or any of their Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the facility established hereunder, the actual or proposed use of the proceeds of the Transactions, this Agreement or any of the transactions contemplated thereby.
31. Counterparts
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all such counterparts shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement in a Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Agreement.
32. Confidentiality
a. This Agreement and its terms, provisions, supplements and amendments, and notices hereunder, are proprietary to Administrative Agent and Buyers and shall be held by Seller Parties in strict confidence and shall not be disclosed to any third party without the written consent of Administrative Agent except for (i) disclosure to a Seller Partys direct and indirect Affiliates and Subsidiaries, attorneys or accountants, but only to the extent such disclosure is necessary and such parties agree to hold all information in strict confidence, or (ii) disclosure required by law, rule, regulation or order of a court or other regulatory body. Notwithstanding the foregoing or anything to the contrary contained herein or in any other Program Agreement, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the Transactions, any fact relevant to understanding the federal, state and local tax treatment of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that no Seller Party may disclose the name of or identifying information with respect to Administrative Agent and Buyers or any pricing terms (including, without limitation, the Pricing Rate, Purchase Price Percentage, Purchase Price and any other fees specified in the Pricing Side Letter) or other nonpublic business or financial information (including any sublimits and financial covenants) that is unrelated to the federal, state and local tax treatment of the Transactions and is not relevant to understanding the federal, state and local tax treatment of the Transactions, without the prior written consent of Administrative Agent.
b. Notwithstanding anything in this Agreement to the contrary, each of Administrative Agent, each Buyer and the Seller Parties shall comply with all applicable local, state and federal laws, including, without limitation, all privacy and data protection law, rules and regulations that are applicable to the Purchased Mortgage Loans and/or any applicable terms of this Agreement (the Confidential Information), Each of Administrative Agent, each Buyer and each Seller Party understands that the Confidential
Information may contain nonpublic personal information, as that term is defined in Section 509(4) of the Gramm-Leach-Bliley Act (the Act), and each of Administrative Agent, each Buyer and each Seller Party agrees to maintain such nonpublic personal information that it receives hereunder in accordance with the Act and other applicable federal and state privacy laws. To the extent required by any Requirement of Law, each of Administrative Agent, each Buyer and each Seller Party shall notify all other parties hereto immediately following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the customers and consumers of any party hereto provided directly to any other party hereto.
33. Recording of Communications
Administrative Agent, Buyers and Seller Parties shall have the right (but not the obligation) from time to time to make or cause to be made tape recordings of communications between its employees and those of the other party with respect to Transactions. Administrative Agent, Buyers and Seller Parties consent to the admissibility of such tape recordings in any court, arbitration, or other proceedings. The parties agree that a duly authenticated transcript of such a tape recording shall be deemed to be a writing conclusively evidencing the parties agreement.
34. Periodic Due Diligence Review
Each Seller Party acknowledges that Administrative Agent and Buyers have the right to perform continuing due diligence reviews with respect to each Seller Party and the Purchased Assets and Contributed REO Properties, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, for the purpose of performing quality control review of the Purchased Assets and Contributed REO Properties or otherwise, and each Seller Party agrees that upon reasonable (but no less than ten (10) Business Days) prior notice unless an Event of Default shall have occurred, in which case no notice is required, to such Seller Party, Administrative Agent, Buyers or their authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Asset Files and any and all documents, data, records, agreements, instruments or information relating to such Purchased Assets and Contributed REO Properties (including, without limitation, quality control review) in the possession or under the control of such Seller Party and/or the Custodian. Each Seller Party also shall make available to Administrative Agent and Buyers a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Asset Files and the Purchased Assets and Contributed REO Properties. Without limiting the generality of the foregoing, each Seller Party acknowledges that Administrative Agent (on behalf of Buyers) may purchase Purchased Assets and Contributed REO Properties from Seller Parties based solely upon the information provided by Seller Parties to Administrative Agent (on behalf of Buyers) in the Asset Schedule and the representations, warranties and covenants contained herein, and that Administrative Agent or Buyers, at their option, have the right at any time to conduct a partial or complete due diligence review on some or all of the Purchased Assets and Contributed REO Properties purchased in a Transaction, including, without limitation, ordering Brokers price opinions, new credit reports and new appraisals on the related Mortgaged Properties and otherwise re-generating the information used to originate such Mortgage Loans. Administrative Agent or
Buyers may underwrite and/or review such Purchased Assets and Contributed REO Properties itself or engage a mutually agreed upon third party underwriter to perform such underwriting. Seller agrees to reasonably cooperate with Administrative Agent, Buyers and any third party underwriter in connection with such underwriting, including, but not limited to, providing Administrative Agent, Buyers and any third party underwriter with reasonable access to any and all documents, records, agreements, instruments or information relating to such Purchased Assets and Contributed REO Properties in the possession, or under the control, of Seller. Seller further agrees that Seller shall pay all reasonable out-of-pocket costs and expenses incurred by Administrative Agent or Buyers in connection with Administrative Agents or Buyers activities pursuant to this Section 34.
35. Authorizations
Any of the persons whose signatures and titles appear on Schedule 2 are authorized, acting singly, to act for Seller Parties or Administrative Agent to the extent set forth therein, as the case may be, under this Agreement. The Seller Parties may amend Schedule 2 from time to time by delivering a revised Schedule 2 to Administrative Agent and expressly stating that such revised Schedule 2 shall replace the existing Schedule 2.
36. Acknowledgement of Assignment and Administration of Repurchase Agreement
Pursuant to Section 22 (Non assignability) of this Agreement, Administrative Agent may sell, transfer and convey or allocate certain Purchased Mortgage Loans and the related Repurchase Assets and related Transactions to certain affiliates of Administrative Agent (which may be one or more CP Conduits) (the Additional Buyers). Administrative Agent shall deliver a notice to Seller Parties of the addition of any such Additional Buyer as set forth on Exhibit F hereto, and shall update the Register as provided in Section 22 with respect to such Additional Buyer, and such Additional Buyer shall be joined as an Additional Buyer under this Agreement; provided that so long as no Event of Default shall have occurred under this Agreement, with respect to any such Additional Buyer that is a CP Conduit and is not supported by CSFMBC or is not an Affiliate of CSFBMC, Administrative Agent shall obtain Seller Parties consent (which shall not be unreasonably withheld) prior to joining such Additional Buyer under this Agreement. Administrative Agent shall administer the provisions of this Agreement for the benefit of Buyers and Additional Buyers, as applicable. For the avoidance of doubt, all payments, notices, communications and agreements pursuant to this Agreement shall be delivered to, and entered into by, Administrative Agent for the benefit of Buyers and Additional Buyers, as applicable. Furthermore, to the extent that Administrative Agent exercises remedies pursuant to this Agreement, solely Administrative Agent will have the right to bid on and/or purchase any of the Repurchase Assets pursuant to Section 16 (Remedies Upon Default), The benefit of all representations, rights, remedies and covenants set forth in the Agreement shall inure to the benefit of Administrative Agent (on behalf of Buyers). All provisions of the Agreement shall survive the transfers contemplated herein (including any Repledge Transactions). Notwithstanding that multiple Buyers may purchase individual Mortgage Loans subject to Transactions entered into
under this Agreement, all Transactions shall continue to be deemed a single Transaction and all of the Repurchase Assets shall be security for all of the Obligations hereunder.
37. Acknowledgement Of Anti-Predatory Lending Policies
Administrative Agent has in place internal policies and procedures that expressly prohibit its purchase of any High Cost Mortgage Loan on behalf of Buyers.
38. Documents Mutually Drafted
The Seller Parties, Administrative Agent and Buyers agree that this Agreement and each other Program Agreement prepared in connection with the Transactions set forth herein have been mutually drafted and negotiated by each party, and consequently such documents shall not be construed against either party as the drafter thereof.
39. General Interpretive Principles
For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires:
a. the terms defined in this Agreement have the meanings assigned to them in this Agreement and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other gender;
b. accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP;
c. references herein to Articles, Sections, Subsections, Paragraphs, and other subdivisions without reference to a document are to designated Articles, Sections, Subsections, Paragraphs and other subdivisions of this Agreement;
d. a reference to a Subsection without further reference to a Section is a reference to such Subsection as contained in the same Section in which the reference appears, and this rule shall also apply to Paragraphs and other subdivisions;
e. the words herein, hereof, hereunder and other words of similar import refer to this Agreement as a whole and not to any particular provision;
f. the term include or including shall mean without limitation by reason of enumeration;
g. all times specified herein or in any other Program Agreement (unless expressly specified otherwise) are local times in New York, New York unless otherwise stated; and
h. all references herein or in any Program Agreement to good faith means good faith as defined in Section 5-102(7) of the UCC as in effect in the State of New York; and
i. an Event of Default that has been waived in writing shall be deemed not to be continuing.
40. Conflicts
In the event of any conflict between the terms of this Agreement and any other Program Agreement, the documents shall control in the following order of priority: first, the terms of the Pricing Side Letter shall prevail, then the terms of this Agreement shall prevail, and then the terms of the other Program Agreements shall prevail.
41. Bankruptcy Non-Petition
The parties hereby agree that they shall not institute against, or join any other person in instituting against, any Buyer that is a CP Conduit any bankruptcy, reorganization, arrangement, insolvency or liquidation proceeding, or other proceeding under any federal or state bankruptcy or similar law, for one year and one day after the latest maturing commercial paper note issued by the applicable CP Conduit is paid in full.
42. Limited Recourse
The obligations of each Buyer under this Agreement or any other Program Agreement are solely the corporate obligations of such Buyer. No recourse shall be had for the payment of any amount owing by any Buyer under this Agreement, or for the payment by any Buyer of any fee in respect hereof or any other obligation or claim of or against such Buyer arising out of or based on this Agreement, against any stockholder, partner, member, employee, officer, director or incorporator or other authorized person of such Buyer. In addition, notwithstanding any other provision of this Agreement, the Parties agree that all payment obligations of any Buyer that is a CP Conduit under this Agreement shall be limited recourse obligations of such Buyer, payable solely from the funds of such Buyer available for such purpose in accordance with its commercial paper program documents. Each party waives payment of any amount which such Buyer does not pay pursuant to the operation of the preceding sentence until the day which is at least one year and one day after the payment in full of the latest maturing commercial paper note (and waives any claim against such Buyer within the meaning of Section 101(5) of the Bankruptcy Code or any other Debtor Relief Law for any such insufficiency until such date).
43. Amendment and Restatement
Administrative Agent, Buyers, and Seller previously entered into the Existing Master Repurchase Agreement. Administrative Agent, Buyers and Seller Parties desire to enter into this Agreement in order to amend and restate the Existing Master Repurchase Agreement in its entirety. The amendment and restatement of the Existing Master Repurchase Agreement shall become effective on the Effective Date, and each of Administrative Agent, Buyers and Seller
Parties shall hereafter be bound by the terms and conditions of this Agreement and the other Program Agreements. This Agreement amends and restates the terms and conditions of the Existing Master Repurchase Agreement, and is not a novation of any of the agreements or obligations incurred pursuant to the terms of the Existing Master Repurchase Agreement. Accordingly, all of the agreements and obligations incurred pursuant to the terms of the Existing Master Repurchase Agreement are hereby ratified and affirmed by the parties hereto and remain in full force and effect. For the avoidance of doubt, it is the intent of Administrative Agent, Buyers and Seller Parties that the security interests and liens granted in the Purchased Assets pursuant to Section 8 of the Existing Master Repurchase Agreement shall continue in full force and effect. All references to the Existing Master Repurchase Agreement in any Program Agreement or other document or instrument delivered in connection therewith shall be deemed to refer to this Agreement and the provisions hereof.
44. Back-up Administrative Agent; Successor Administrative Agent
In the event that Administrative Agent gives Seller written notice that a back-up administrative agent (Back-up Administrative Agent) has been appointed hereunder (by provided the notice set forth as Exhibit G hereto). To the extent that Custodian and Seller subsequently receive written notice from Back-up Administrative Agent that it has assumed the role of administrative agent hereunder (in such case, Successor Administrative Agent), then upon delivery to Seller of the notice as set forth on Exhibit H hereto, Successor Administrative Agent shall assume all rights and obligations of Administrative Agent hereunder, with no other action required by the parties, and Seller shall be entitled to rely on the directions of Successor Administrative Agent hereunder for all directions to be given by Administrative Agent hereunder.
45. Nominee
a. Seller Parties and Administrative Agent hereby acknowledge and agree, and Seller Parties hereby appoint, the Nominee as (i) their nominee as mortgagee of record and payee on the FHA Connection System, USDA LINC and the VALERI system and requested holder of the Deed and the Nominee hereby accepts such appointment, and (ii) as nominee and agent of Seller Parties and Administrative Agent as set forth herein, to the extent applicable.
b. Following receipt by Nominee of written notice of the occurrence of an Event of Default, the Nominee agrees to take direction from the Administrative Agent with respect to the Mortgage Loans that are GNMA EBOs and Contributed REO Properties. Prior to such time, Nominee shall take direction from Seller Parties with respect to such Mortgage Loans that are GNMA EBOs and Contributed REO Properties.
c. It is the intent of the Seller Parties, Servicer and the Administrative Agent that the Nominee retain bare legal title to the Mortgage Loans and Contributed REO Properties for all purposes including, without limitation, for purposes of Section 541(d) of the Bankruptcy Code and accordingly, Nominee, in its capacity as nominee, shall have no property right to the Purchased Mortgage Loans or Contributed REO Properties.
d. Administrative Agent may, upon notice to the Seller Parties, terminate the Seller as Nominee and appoint itself or another person as the successor nominee following an Event of Default that is continuing.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly executed as of the date first above written.
Credit Suisse First Boston Mortgage Capital LLC, as Administrative Agent |
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Margaret Dellafera |
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Vice President |
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Credit Suisse AG, Cayman Islands Branch, as a Buyer |
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Margaret Dellafera |
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Authorized Signatory |
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Elie Chau |
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Authorized Signatory |
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Alpine Securization LTD, as a buyer |
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By: Credit Suisse AG, New York Branch, as its Attorney-in-fact |
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Elie Chau |
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Patrick J. Hart |
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Vice President |
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AmeriHome Mortgage Company, LLC, as Seller |
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Jim Furash |
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CEO |
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Signature Page to the Second Amended and Restated Master Repurchase Agreement
AHMC HOLDING, LLC, as REO Subsidiary |
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Jim Furash |
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Signature Page to the Second Amended and Restated Master Repurchase Agreement
SCHEDULE 1-A
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO PURCHASED
MORTGAGE LOANS
Seller makes the following representations and warranties to Administrative Agent (on behalf of Buyers) with respect to each Purchased Mortgage Loan as of the date on which Seller sells such Purchased Mortgage Loan to Administrative Agent (on behalf of Buyers) and at all times while the Purchased Mortgage Loan is subject to a Transaction hereunder. With respect to those representations and warranties which are made to the best of Sellers knowledge, if it is discovered by Seller or Administrative Agent that the substance of such representation and warranty is inaccurate, notwithstanding Sellers lack of knowledge with respect to the substance of such representation and warranty, such inaccuracy shall be deemed a breach of the applicable representation and warranty.
(a) Payments Current. Except with respect to a Mortgage Loan that is a GNMA EBO, all payments required to be made up to the Purchase Date for the Mortgage Loan under the terms of the Mortgage Note have been made and credited, it being understood that a payment is not required to be made until the last day of the month in which the related Due Date for such payment occurs. Except with respect to a Mortgage Loan that is a GNMA EBO, no payment required under the Mortgage Loan is [***] or more delinquent nor has any payment under the Mortgage Loan been [***] or more delinquent at any time since the origination of the Mortgage Loan (in each case it being understood that payment is delinquent after the expiration of any applicable grace period) and, if the Mortgage Loan is a Co-op Loan, no foreclosure action or private or public sale under the Uniform Commercial Code has ever, to the knowledge of Seller, been threatened or commenced with respect to the Co-op Loan. The first Monthly Payment with respect to the Mortgage Loan shall be made, or shall have been made, all in accordance with the terms of the related Mortgage Note, it being understood that a payment is not required to be made until the last day of the month in which the related Due Date for such payment occurs.
(b) No Outstanding Charges. All taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable. Neither Seller nor to the Sellers knowledge the Qualified Originator from which Seller acquired the Mortgage Loan has advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any principal and/or interest amount required under the Mortgage Loan, except for (i) interest accruing from the date of the Mortgage Note or date of disbursement of the proceeds of the Mortgage Loan, whichever is earlier, to the day which precedes by one month the Due Date of the first installment of principal and interest thereunder and (ii) principal and interest advances by Seller for remittance to GNMA.
(c) Original Terms Unmodified. Except with respect to a Mortgage Loan that is a GNMA EBO, the terms of the Mortgage Note (and the Proprietary Lease, the Assignment of Proprietary Lease and Stock Power with respect to each Co-op Loan) and Mortgage have not been impaired, waived, altered or modified in any respect, from the date of origination; except by a
written instrument which has been recorded, if necessary to protect the interests of Administrative Agent, and which has been delivered to the Custodian (or a copy thereof if the original has not yet been returned from the recording office) and the terms of which are reflected in the Custodial Asset Schedule. The substance of any such waiver, alteration or modification has been approved by the title insurer, to the extent required, and its terms are reflected on the Custodial Asset Schedule. No Mortgagor in respect of the Mortgage Loan has been released, in whole or in part, except in connection with an assumption agreement approved by the title insurer, to the extent required by such policy, and which assumption agreement is part of the Asset File delivered to the Custodian and the terms of which are reflected in the Custodial Asset Schedule.
(d) No Defenses. To Sellers knowledge, the Mortgage Loan (and the Assignment of Proprietary Lease related to each Co-op Loan) is not subject to any right of rescission, set-off, counterclaim or defense, including, without limitation, the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto, and no Mortgagor in respect of the Mortgage Loan was a debtor in any state or Federal bankruptcy or insolvency proceeding at the time the Mortgage Loan was originated. Except with respect to a Mortgage Loan that is a GNMA EBO, Seller has no knowledge nor has it received any notice that any Mortgagor in respect of the Mortgage Loan is a debtor in any state or federal bankruptcy or insolvency proceeding. Except with respect to a Mortgage Loan that is a GNMA EBO, Seller has no knowledge of any circumstances or condition with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagors credit standing that could reasonably be expected to cause investors to regard the Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to become delinquent or materially adversely affect the value or marketability of the Mortgage Loan.
(e) Hazard Insurance. Pursuant to the terms of the Mortgage, the Fannie Mae guide, if applicable, the Freddie Mac guide, if applicable, and any additional requirements set forth in the Underwriting Guidelines, all buildings or other improvements upon the Mortgaged Property are insured by a generally acceptable insurer against loss by fire, hazards of extended coverage and such other hazards. If required by the National Flood Insurance Act of 1968, as amended, each Mortgage Loan is covered by a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration as in effect which policy conforms to Fannie Mae or Freddie Mac, as well as all additional requirements set forth in the Servicing Agreement. All individual insurance policies contain a standard mortgagee clause naming Seller and its successors and assigns as mortgagee, and all premiums due and payable thereon have been paid. The Mortgage obligates the Mortgagor thereunder to maintain the hazard insurance policy at the Mortgagors cost and expense, and on the Mortgagors failure to do so, authorizes the holder of the Mortgage to obtain and maintain such insurance at such Mortgagors cost and expense, and to seek reimbursement therefor from the Mortgagor. Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance, provided the policy is not a master or blanket hazard insurance policy covering a condominium, or any hazard insurance policy covering the common facilities of a planned unit development. The hazard insurance policy is the valid and binding obligation of the insurer, is in full force and effect, and will be in full force and effect and inure to the benefit of Administrative Agent upon the consummation of the transactions contemplated by this Agreement. Seller has not
engaged in, and has no knowledge of the Mortgagors or any servicers having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of such policy, including, without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other person or entity, and no such unlawful items have been received, retained or realized by Seller.
(f) Environmental Compliance. To Sellers knowledge, there does not exist on the Mortgaged Property any hazardous substances, hazardous materials, hazardous wastes, solid wastes or other pollutants, as such terms are defined in the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. 9601 et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., or other applicable federal, state or local environmental laws including, without limitation, asbestos, in each case in excess of the permitted limits and allowances set forth in such environmental laws to the extent such laws are applicable to the Mortgaged Property. To Sellers knowledge, there is no pending action or proceeding directly involving the Mortgaged Property in which compliance with any environmental law, rule or regulation is an issue; there is no violation of any applicable environmental law (including, without limitation, asbestos), rule or regulation with respect to the Mortgaged Property.
(g) Compliance with Applicable Laws. Any and all requirements of any federal, state or local law including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity or disclosure laws applicable to the Mortgage Loan have been complied with, the consummation of the transactions contemplated hereby will not involve the violation of any such laws or regulations, and if required by such laws or regulations Seller shall maintain or shall cause its agent to maintain in its possession, available for the inspection of Administrative Agent, and shall deliver to Administrative Agent, upon demand, evidence of compliance with all such requirements.
(h) No Satisfaction of Mortgage. Except with respect to a Mortgage Loan that is a GNMA EBO where the related Mortgaged Property has been sold to a third party and the FHA Mortgage Insurance claim proceeds have not yet been received, the Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part, nor has any instrument been executed that would affect any such release, cancellation, subordination or rescission. Except with respect to a Mortgage Loan that is a GNMA EBO, Seller has not waived the performance by the Mortgagor of any action, if the Mortgagors failure to perform such action would cause the Mortgage Loan to be in default, nor has Seller waived any default resulting from any action or inaction by the Mortgagor.
(i) Location and Type of Mortgaged Property. The Mortgaged Property is located in an Acceptable State as identified in the Custodial Asset Schedule and consists of a single parcel of real property with a detached single family residence erected thereon, or a two- to four-family dwelling, or an individual condominium unit or a unit in a Co-op Project, or an individual unit in a planned unit development or a de minimis planned unit development; provided, however, that any condominium unit, Co-op Unit or planned unit development shall conform with the applicable Fannie Mae and Freddie Mac requirements regarding such dwellings or shall conform
to the Underwriting Guidelines and that no residence or dwelling is a mobile home. No portion of the Mortgaged Property is used for commercial purposes; provided, that, the Mortgaged Property may be a mixed use property if such Mortgaged Property conforms to the Underwriting Guidelines.
(j) Valid First Lien. Except with respect to a Mortgage Loan that is a GNMA EBO where the related Mortgaged Property has been sold to a third party and the FHA Mortgage Insurance claim proceeds have not yet been received, the Mortgage is a valid, subsisting, enforceable and perfected with respect to each first lien Mortgage Loan, first priority lien and first priority security interest on the real property included in the Mortgaged Property, including all buildings on the Mortgaged Property and all installations and mechanical, electrical, plumbing, heating and air conditioning systems located in or annexed to such buildings, and all additions, alterations and replacements made at any time with respect to the foregoing. The lien of the Mortgage is subject only to (collectively, Permitted Encumbrances):
a. the lien of current real property taxes and assessments not yet due and payable;
b. covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to prudent mortgage lending institutions generally and specifically referred to in lenders title insurance policy delivered to the originator of the Mortgage Loan and (a) referred to or otherwise considered in the appraisal made for the originator of the Mortgage Loan or (b) which do not adversely affect the Appraised Value of the Mortgaged Property set forth in such appraisal;
c. other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, subsisting and enforceable first lien and first priority security interest on the property described therein and Seller has full right to pledge and assign the same to Administrative Agent.
(k) Validity of Mortgage Documents. The Mortgage Note and the Mortgage and any other agreement executed and delivered by a Mortgagor or guarantor, if applicable, in connection with a Mortgage Loan are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, receivership or other similar laws affecting creditors rights generally from time to time in effect and general principles of equity. All parties to the Mortgage Note, the Mortgage and any other such related agreement had legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note, the Mortgage and any such agreement, and the Mortgage Note, the Mortgage and any other such related agreement have been duly and properly executed by such related parties. No fraud, error, omission, misrepresentation, negligence or similar occurrence with respect to a Mortgage Loan has taken place on the part of Seller, or to Sellers knowledge, any other Person, including, without limitation, the Mortgagor, any appraiser, any builder or developer, or any other party involved in the origination of the Mortgage Loan. Seller has reviewed all of the documents constituting the
Asset File and has made such inquiries as it deems necessary to make and confirm the accuracy of the representations set forth herein.
(l) Full Disbursement of Proceeds. Except as set forth on the Asset Schedule (and which shall be in conformity with the Underwriting Guidelines), there is no further requirement for future advances under the Mortgage Loan, except in connection with any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor not to exceed [***]. All costs, fees and expenses incurred in making or closing the Mortgage Loan and the recording of the Mortgage were paid, and the Mortgagor is not entitled to any refund of any amounts paid or due under the Mortgage Note or Mortgage. All broker fees have been properly assessed to the Mortgagor and no claims will arise as to broker fees that are double charged and for which the Mortgagor would be entitled to reimbursement.
(m) Ownership. Seller has full right to sell the Mortgage Loan to Administrative Agent free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest, and has full right and authority subject to no interest or participation of, or agreement with, any other party, to sell each Mortgage Loan pursuant to this Agreement and following the sale of each Mortgage Loan, Administrative Agent will own such Mortgage Loan (and with respect to any Co-op Loan, the sole owner of the related Assignment of Proprietary Lease) free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest except any such security interest created pursuant to the terms of this Agreement.
(n) Doing Business. All parties which have had any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (i) in compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and (ii) either (A) organized under the laws of such state, (B) qualified to do business in such state, (C) a federal savings and loan association, a savings bank or a national bank having a principal office in such state, or (D) not doing business in such state.
(o) Title Insurance. Except with respect to a Mortgage Loan that is a GNMA EBO where the related Mortgaged Property has been sold to a third party and the FHA Mortgage Insurance claim proceeds have not yet been received, the Mortgage Loan is covered by either (i) an attorneys opinion of title and abstract of title, the form and substance of which is acceptable to Fannie Mae, Freddie Mac or prudent mortgage lending institutions making mortgage loans in the area wherein the Mortgaged Property is located, or (ii) an ALTA lenders title insurance policy or other generally acceptable form of policy or insurance acceptable to prudent mortgage lending institutions making mortgage loans in the area wherein the Mortgaged Property is located with respect to Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans and Fannie Mae or Freddie Mac with respect to Mortgage Loans other than Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans and each such title insurance policy is issued by a title insurer acceptable prudent mortgage lending institutions making mortgage loans in the area wherein the Mortgaged Property is located with respect to Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans and Fannie Mae or Freddie Mac with respect to Mortgage Loans other than Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans and qualified to do business in the jurisdiction where the Mortgaged Property is
located, insuring Seller, its successors and assigns, as to the first priority lien of the Mortgage, as applicable, in the original principal amount of the Mortgage Loan, with respect to a Mortgage Loan (or to the extent a Mortgage Note provides for negative amortization, the maximum amount of negative amortization in accordance with the Mortgage), subject only to Permitted Encumbrances, and in the case of adjustable rate Mortgage Loans, against any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of the Mortgage providing for adjustment to the Mortgage Interest Rate and Monthly Payment. Where required by state law or regulation, the Mortgagor has been given the opportunity to choose the carrier of the required mortgage title insurance. Additionally, such lenders title insurance policy affirmatively insures ingress and egress and against encroachments by or upon the Mortgaged Property or any interest therein. The title policy does not contain any special exceptions (other than the standard exclusions) for zoning and uses. Seller, its successors and assigns, are the sole insureds of such lenders title insurance policy, and such lenders title insurance policy is valid and remains in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement. No claims have been made under such lenders title insurance policy, and to Sellers knowledge, no prior holder or servicer of the related Mortgage, including Seller, has done, by act or omission, anything which would impair the coverage of such lenders title insurance policy, including without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been received, retained or realized by any attorney, firm or other Person, and no such unlawful items have been received, retained or realized by Seller.
(p) No Defaults. Other than Mortgage Loans that are GNMA EBOs, there is no default, breach, violation or event of acceleration existing under the Mortgage or the Mortgage Note and no event has occurred which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration, and neither Seller nor its predecessors have waived any default, breach, violation or event of acceleration; and neither Seller nor any of its predecessors, have waived any default, breach, violation or event which would permit acceleration; and with respect to each Co-op Loan, there is no default in complying with the terms of the Mortgage Note, the Assignment of Proprietary Lease and the Proprietary Lease and all maintenance charges and assessments (including assessments payable in the future installments, which previously became due and owing) have been paid, and Seller has the right under the terms of the Mortgage Note, Assignment of Proprietary Lease and Recognition Agreement to pay any maintenance charges or assessments owed by the Mortgagor.
(q) No Mechanics Liens. There are no mechanics or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the Mortgaged Property which are or may be liens prior to, or equal or coordinate with, the lien of the Mortgage.
(r) Location of Improvements; No Encroachments. At origination of the Mortgage Loan, all improvements which were considered in determining the Appraised Value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property, and no improvements on adjoining properties encroach upon the Mortgaged Property. To Sellers knowledge, no improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning and building law, ordinance or regulation. All seller and/or builder concessions have been subtracted from the Appraised Value of the Mortgaged Property for purposes of determining the LTV.
(s) Origination; Payment Terms. The Mortgage Loan was originated by or in conjunction with a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or similar banking institution which is supervised and examined by a federal or state authority. Principal and interest payments on the Mortgage Loan commenced no more than 60 days after funds were disbursed in connection with the Mortgage Loan. No Mortgage Loan has a balloon payment feature. Interest on the Mortgage Loan is calculated on the basis of a 360-day year consisting of twelve 30-day months. With respect to adjustable rate Mortgage Loans, the Mortgage Interest Rate is adjusted on each Interest Rate Adjustment Date to equal the Index plus the Gross Margin (rounded up or down to the nearest .125%), subject to the Mortgage Interest Rate Cap. The Mortgage Note is payable on the first day of each month in equal monthly installments of principal and interest, which installments of interest with respect to adjustable rate Mortgage Loans, are subject to change on the Interest Rate Adjustment Date due to adjustments to the Mortgage Interest Rate on each Interest Rate Adjustment Date with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than 30 years from commencement of amortization.
(t) Customary Provisions. The Mortgage Note has a stated maturity. The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (i) in the case of a Mortgage designated as a deed of trust, by trustees sale, and (ii) otherwise by judicial foreclosure. Upon default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustees sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage Loan will be able to deliver good and merchantable title to the Mortgaged Property. There is no homestead or other exemption or other right available to the Mortgagor or any other person, or restriction on Seller or any other person, including without limitation, any federal, state or local, law, ordinance, decree, regulation, guidance, attorney general action, or other pronouncement, whether temporary or permanent in nature, that would interfere with, restrict or delay, either (y) the ability of Seller, Administrative Agent or any servicer or any successor servicer to sell the related Mortgaged Property at a trustees sale or otherwise, or (z) the ability of Seller, Administrative Agent or any servicer or any successor servicer to foreclose on the related Mortgage. The Mortgage Note and Mortgage are on forms acceptable to Administrative Agent with respect to Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans and Fannie Mae or Freddie Mac with respect to Mortgage Loans other than Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans.
(u) Occupancy of the Mortgaged Property. As of the date of origination of the Mortgage Loan, the Mortgaged Property was lawfully occupied under applicable law. As of the date of origination, all inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities and, to Sellers knowledge, the Mortgaged Property is not in material non-compliance with such laws or regulations, is not being used, operated or occupied unlawfully and has not failed to have or obtain such inspection, licenses or certificates, as the case may be. With respect to any Mortgage Loan originated with an owner-occupied Mortgaged Property, the Mortgagor represented at the time
of origination of the Mortgage Loan that the Mortgagor would occupy the Mortgaged Property as the Mortgagors primary residence.
(v) No Additional Collateral. The Mortgage Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage and the security interest of any applicable security agreement or chattel mortgage referred to in clause (j) above.
(w) Deeds of Trust. In the event the Mortgage constitutes a deed of trust, a trustee, authorized and duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by Administrative Agent to the trustee under the deed of trust, except in connection with a trustees sale after default by the Mortgagor or reconveyance of the deed of trust.
(x) Transfer of Mortgage Loans. Except with respect to Mortgage Loans intended for purchase by GNMA and for Mortgage Loans registered with MERS, the Assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located.
(y) Due-On-Sale. Except with respect to Mortgage Loans intended for purchase by GNMA, the Mortgage contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the mortgagee thereunder.
(z) No Buydown Provisions; No Graduated Payments or Contingent Interests. Except with respect to Agency Mortgage Loans and Non-Agency Non-QM Mortgage Loans, the Mortgage Loan does not contain provisions pursuant to which Monthly Payments are paid or partially paid with funds deposited in any separate account established by Seller, the Mortgagor, or anyone on behalf of the Mortgagor, or paid by any source other than the Mortgagor nor does it contain any other similar provisions which may constitute a buydown provision. The Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan does not have a shared appreciation or other contingent interest feature.
(aa) Consolidation of Future Advances. Any future advances made to the Mortgagor prior to the Purchase Date have been consolidated with the outstanding principal amount secured by the Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term. The lien of the Mortgage securing the consolidated principal amount is expressly insured as having first lien priority by a title insurance policy, an endorsement to the policy insuring the mortgagees consolidated interest or by other title evidence acceptable to prudent mortgage lending institutions making mortgage loans in the area wherein the Mortgaged Property is located with respect to Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans and acceptable to Fannie Mae or Freddie Mac with respect to Mortgage Loans other than Non-Agency QM Mortgage Loans and Non-Agency Non-QM Mortgage Loans. The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan.
(bb) Mortgaged Property Undamaged; No Condemnation Proceeding. There have not been any condemnation proceedings with respect to the Mortgaged Property and Seller
has no knowledge of any such proceedings. There is no proceeding pending or threatened for the total or partial condemnation of the Mortgaged Property. The Mortgaged Property is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty so as to affect adversely the value of the Mortgaged Property as security for the Purchased Mortgage Loan or the use for which the premises were intended and each Mortgaged Property is in good repair.
(cc) Collection Practices; Escrow Deposits; Interest Rate Adjustments. The origination and collection practices used by Seller, and to Sellers knowledge, the originator and each servicer of the Mortgage Loan, have been in all respects in compliance with Accepted Servicing Practices, applicable laws and regulations, and have been in all respects legal and proper. With respect to escrow deposits and Escrow Payments, all such payments are in the possession of, or under the control of, Seller or Servicer, and other than GNMA EBOs, there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. All Escrow Payments have been collected in full compliance with state and federal law. An escrow of funds is not prohibited by applicable law and, other than with respect to each GNMA EBO, has been established in an amount sufficient to pay for every item that remains unpaid and has been assessed but is not yet due and payable. No escrow deposits or Escrow Payments or other charges or payments due Seller have been capitalized under the Mortgage or the Mortgage Note. All Mortgage Interest Rate adjustments have been made in strict compliance with state and federal law and the terms of the related Mortgage Note. Any interest with respect to escrow deposits required to be paid pursuant to state, federal and local law has been properly paid and credited.
(dd) Conversion to Fixed Interest Rate. Except as allowed by the applicable Agency or otherwise as expressly approved in writing by Administrative Agent, with respect to adjustable rate Mortgage Loans, the Mortgage Loan is not convertible to a fixed interest rate Mortgage Loan.
(ee) Reserved.
(ff) Servicemembers Civil Relief Act. The Mortgagor has not notified Seller, and Seller has no knowledge, of any relief requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act of 2003.
(gg) Appraisal. Except with respect to an Agency Mortgage Loan and as permitted by the applicable Agency guide, the Asset File contains an appraisal of the related Mortgaged Property signed prior to the funding of the Mortgage Loan by a qualified appraiser, duly appointed by Seller, who had no interest, direct or indirect in the Mortgaged Property or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan, and the appraisal and appraiser both satisfy the requirements of Fannie Mae or Freddie Mac and Title XI of the Federal Institutions Reform, Recovery, and Enforcement Act of 1989 as amended and the regulations promulgated thereunder, all as in effect on the date the Mortgage Loan was originated. As of the origination date, no appraisal is more than one hundred and twenty (120) days old.
(hh) Disclosure Materials. The Mortgagor has received all disclosure materials required by applicable law with respect to the making of adjustable rate mortgage loans, and Seller maintains such materials in the Asset File as required by applicable law.
(ii) Construction or Rehabilitation of Mortgaged Property. No Mortgage Loan was made in connection with the construction or rehabilitation of a Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged Property.
(jj) Reserved.
(kk) Capitalization of Interest. The Mortgage Note does not by its terms provide for the capitalization or forbearance of interest.
(ll) Reserved.
(mm) Proceeds of Mortgage Loan. The proceeds of the Mortgage Loan have not been and shall not be used to satisfy, in whole or in part, any debt owed or owing by the Mortgagor to Seller or, to Sellers knowledge, any correspondent of Seller, except in connection with a refinanced Mortgage Loan.
(nn) Origination Date. (i) With respect to Mortgage Loans other than GNMA EBOs and correspondent loans, the Purchase Date is no more than [***] days following the origination date and (ii) with respect to correspondent loans (other than GNMA EBOs), the Purchase Date is no more than [***] days following the origination date.
(oo) No Exception. The Custodian has not noted any material exceptions on a Custodial Asset Schedule with respect to the Mortgage Loan which would materially adversely affect the Mortgage Loan or the related Buyers interest in the Mortgage Loan.
(pp) Mortgage Submitted for Recordation. The Mortgage either has been or will promptly be submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.
(qq) Documents Genuine. Such Purchased Mortgage Loan and all accompanying collateral documents are complete and authentic and all signatures thereon are genuine. Such Purchased Mortgage Loan is a closed loan fully funded by Seller and held in Sellers name.
(rr) Reserved.
(ss) Other Encumbrances. To the best of Sellers knowledge, any property subject to any security interest given in connection with such Purchased Mortgage Loan is not subject to any other encumbrances other than a stated first mortgage, if applicable, and encumbrances which may be allowed under the Underwriting Guidelines.
(tt) Reserved.
(uu) Located in U.S. No collateral (including, without limitation, the related real property and the dwellings thereon and otherwise) relating to a Purchased Mortgage Loan is located in any jurisdiction other than in one of the fifty (50) states of the United States of America or the District of Columbia.
(vv) Underwriting Guidelines. Except with respect to Mortgage Loans that are GNMA EBOs, each Purchased Mortgage Loan has been originated generally in accordance with the Underwriting Guidelines (including all supplements or amendments thereto) previously provided to Administrative Agent.
(ww) Reserved.
(xx) Reserved.
(yy) Primary Mortgage Guaranty Insurance. Each Mortgage Loan is insured as to payment defaults by a policy of primary mortgage guaranty insurance in the amount required where applicable, and by an acceptable insurer, as required by the Underwriting Guidelines, if applicable, and all provisions of such primary mortgage guaranty insurance have been and are being complied with, such policy is in full force and effect, and all premiums due thereunder have been paid. Each Mortgage Loan which is represented to Administrative Agent to have, or to be eligible for, FHA insurance is insured, or eligible to be insured, pursuant to the National Housing Act. Each Mortgage Loan which is represented by Seller to be guaranteed, or to be eligible for guaranty, by the VA is guaranteed, or eligible to be guaranteed, under the provisions of Chapter 37 of Title 38 of the United States Code. Each Mortgage Loan which is represented by Seller to be guaranteed, or to be eligible for guaranty, by the USDA is guaranteed, or eligible to be guaranteed, under the provisions of Chapter 37 of Title 38 of the United States Code. As to each FHA insurance certificate, USDA guaranty certificate or each VA guaranty certificate, Seller has complied with applicable provisions of the insurance for guaranty contract and federal statutes and regulations, all premiums or other charges due in connection with such insurance or guarantee have been paid, there has been no material act or omission which would or may invalidate any such insurance or guaranty, and the insurance or guaranty is, or when issued, will be, in full force and effect with respect to each Mortgage Loan. There are no defenses, counterclaims, or rights of setoff affecting the Mortgage Loans or affecting the validity or enforceability of any private mortgage insurance or FHA insurance applicable to the Mortgage Loans or any VA guaranty or USDA guaranty with respect to the Mortgage Loans.
(zz) Tax Service. The Mortgage Loan is covered by a life of loan, transferrable real estate tax service contract that may be assigned to Administrative Agent.
(aaa) High Cost Loans. No Mortgage Loan is classified as High Cost Mortgage Loan.
(bbb) Credit Score and Reporting. As of the origination date, the Mortgagors credit score as listed on the Asset Schedule is no more than one hundred and twenty (120) days old. Full, complete and accurate information with respect to the Mortgagors credit file was furnished to Equifax, Experian and Trans Union Credit Information in accordance with the Fair Credit Reporting Act and its implementing regulations.
(ccc) Wet-Ink Mortgage Loans. With respect to each Mortgage Loan that is a Wet-Ink Mortgage Loan, the Settlement Agent has been instructed in writing by Seller to hold the related Asset Documents as agent and bailee for Administrative Agent and to promptly forward
such Asset Documents in accordance with the provisions of the Custodial Agreement and the Escrow Instruction Letter.
(ddd) FHA Mortgage Insurance; VA Loan Guaranty. With respect to the FHA Loans, the FHA Mortgage Insurance Contract is or eligible to be in full force and effect and there exists no impairment to full recovery without indemnity to the Department of Housing and Urban Development or the FHA under FHA Mortgage Insurance. With respect to the VA Loans, the VA Loan Guaranty Agreement is or eligible to be in full force and effect to the maximum extent stated therein. With respect to USDA Loans, such USDA Loan is guaranteed, or eligible to be guaranteed by an USDA Guaranty, under the USDA Regulations and there exists no impairment to full recovery without indemnity to the USDA under the USDA Guaranty.
(eee) Asset Schedule. The information set forth in the related Asset Schedule and all other information or data furnished by, or on behalf of, Seller to Administrative Agent is complete, true and correct in all material respects.
(fff) Qualified Mortgage. Notwithstanding anything to the contrary set forth in this Agreement, on and after January 10, 2014 (or such later date as set forth in the relevant regulations), (i) prior to the origination of each Mortgage Loan, the originator made a reasonable and good faith determination that the Mortgagor had a reasonable ability to repay the loan according to its terms, in accordance with 12 CFR 1026.43(c) and (ii) except with respect to Non-Agency Non-QM Mortgage Loans or unless otherwise approved in writing by Administrative Agent in its sole discretion, each Mortgage Loan is a Qualified Mortgage Loan.
(ggg) Co-op Loan: Valid First Lien. Except with respect to a Co-op Loan that is a GNMA EBO where the related Mortgaged Property has been sold to a third party and the FHA Mortgage Insurance claim proceeds have not yet been received, the Mortgage related to such Co-op Loan is a valid, enforceable and subsisting first security interest on the related Co-op Shares securing the related Proprietary Lease, subject only to (a) liens of the Co-op Corporation for unpaid assessments representing the Mortgagors pro rata share of the Co-op Corporations payments for its blanket mortgage, current and future real property taxes, insurance premiums, maintenance fees and other assessments to which like collateral is commonly subject and (b) other matters to which like collateral is commonly subject which do not materially interfere with the benefits of the security intended to be provided by the security interest. There are no liens against or security interests in the Co-op Shares relating to each Co-op Loan (except for unpaid maintenance, assessments and other amounts owed to the related cooperative which individually or in the aggregate will not have a material adverse effect on such Co-op Loan), which have priority equal to or over Sellers security interest in such Co-op Shares.
(hhh) Co-op Loan: Compliance with Law. With respect to each Co-op Loan, the related Co-op Corporation that owns title to the related Co-op Project is a cooperative housing corporation within the meaning of Section 216 of the Internal Revenue Code, and is in material compliance with applicable federal, state and local laws which, if not complied with, could have a material adverse effect on the Mortgaged Property.
(iii) Co-op Loan: No Pledge. With respect to each Co-op Loan, there is no prohibition against pledging the Co-op Shares or assigning the Proprietary Lease. With respect to
each Co-op Loan, (i) the term of the related Proprietary Lease is longer than the term of the Co-op Loan, (ii) there is no provision in any Proprietary Lease which requires the Mortgagor to offer for sale the Co-op Shares owned by such Mortgagor first to the Co-op Corporation, (iii) there is no prohibition in any Proprietary Lease against pledging the Co-op Shares or assigning the Proprietary Lease and (iv) the Recognition Agreement is in a form acceptable to the Agencies.
(jjj) Co-op Loan: Acceleration of Payment. With respect to each Co-op Loan, each Assignment of Proprietary Lease contains enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization of the material benefits of the security provided thereby. The Assignment of Proprietary Lease contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Note in the event the Co-op Unit is transferred or sold without the consent of the holder thereof.
(kkk) TRID Compliance. With respect to each Mortgage Loan where the Mortgagors loan application for the Mortgage Loan was taken on or after October 3, 2015, such Mortgage Loan was originated materially in compliance with the TILA-RESPA Integrated Disclosure Rule.
SCHEDULE 1-B
REPRESENTATIONS AND WARRANTIES APPLICABLE TO REO
SUBSIDIARY INTERESTS
Seller makes the following representations and warranties to Administrative Agent with respect to each REO Subsidiary Interest as of the related Purchase Date for the purchase of any REO Subsidiary Interest by Administrative Agent from Seller and as of the date of this Agreement and any Transaction hereunder and at all times while the Program Agreements and any Transaction hereunder is in full force and effect. With respect to those representations and warranties which are made to the best of Sellers knowledge, if it is discovered by Seller or Administrative Agent that the substance of such representation and warranty is inaccurate, notwithstanding Sellers lack of knowledge with respect to the substance of such representation and warranty, such inaccuracy shall be deemed a breach of the applicable representation and warranty.
(a) Ownership. The REO Subsidiary Interests constitute all the issued and outstanding beneficial interests of all classes of the Capital Stock of such REO Subsidiary and are certificated.
(b) Compliance with Law. Each REO Subsidiary Interest complies in all respects with, or is exempt from, all applicable requirements of federal, state or local law relating to such REO Subsidiary Interest.
(c) Good and Marketable Title. Immediately prior to the sale, transfer and assignment to Administrative Agent thereof, Seller has good and marketable title to, and is the sole owner and holder of, the REO Subsidiary Interests, and Seller is transferring such REO Subsidiary Interests free and clear of any and all liens, pledges, encumbrances, charges, security interests or any other ownership interests of any nature encumbering such REO Subsidiary Interests. Upon consummation of the purchase contemplated to occur in respect of such REO Subsidiary Interests, Seller will have validly and effectively conveyed to Administrative Agent all legal and beneficial interest in and to such REO Subsidiary Interests free and clear of any pledge, lien, encumbrance or security interest and upon the filing of a financing statement covering the REO Subsidiary Interests in the appropriate jurisdiction and naming Seller as debtor and Administrative Agent as secured party, the Lien granted pursuant to this Agreement will constitute a valid, perfected first priority Lien on the REO Subsidiary Interests in favor of Administrative Agent enforceable as such against all creditors of Seller and any Persons purporting to purchase the REO Subsidiary Interests from Seller.
(d) No Fraud. No fraudulent acts were committed by Seller or any of its respective Affiliates in connection with the issuance of such REO Subsidiary Interests.
(e) No Defaults. No (i) monetary default, breach or violation exists with respect to any agreement or other document governing or pertaining to such REO Subsidiary Interests, or (ii) event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach or violation of such REO Subsidiary Interests.
(f) No Modifications. Seller is not a party to any document, instrument or agreement, and there is no document, that by its terms modifies or affects the rights and obligations
of any holder of such REO Subsidiary Interests and Seller has not consented to any material change or waiver to any term or provision of any such document, instrument or agreement and no such change or waiver exists.
(g) Power and Authority. Seller has full right, power and authority to sell and assign such REO Subsidiary Interests and such REO Subsidiary Interests have not been cancelled, satisfied or rescinded in whole or part nor has any instrument been executed that would effect a cancellation, satisfaction or rescission thereof.
(h) Consents and Approvals. Other than consents and approvals obtained as of the related Purchase Date or those already granted in the documents governing such REO Subsidiary Interests, no consent or approval by any Person is required in connection with Sellers sale and/or Administrative Agents acquisition of such REO Subsidiary Interests, for Administrative Agents exercise of any rights or remedies in respect of such REO Subsidiary Interests or for Administrative Agents sale, pledge or other disposition of such REO Subsidiary Interests. No third party holds any right of first refusal, right of first negotiation, right of first offer, purchase option, or other similar rights of any kind, and no other impediment exists to any such transfer or exercise of rights or remedies with respect to such REO Subsidiary Interests.
(i) No Governmental Approvals. No consent, approval, authorization or order of, or registration or filing with, or notice to, any court or governmental agency or body having jurisdiction or regulatory authority over Seller is required for any transfer or assignment by the holder of such REO Subsidiary Interests to the Administrative Agent.
(j) Original Certificates. Seller has delivered to Administrative Agent the original Certificates or other similar indicia of ownership of such REO Subsidiary Interests, however denominated, re-registered in Administrative Agents name.
(k) No Litigation. Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such REO Subsidiary Interests is or may become obligated.
(l) Duly and Validly Issued. Each of the Certificates has been duly and validly issued.
(m) No Notices. Seller has not received written notice of any outstanding liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind for which the holder of such REO Subsidiary Interests is or may become obligated.
(n) REO Subsidiary Interests as Securities. The REO Subsidiary Interests (a) constitute securities as defined in Section 8-102 of the Uniform Commercial Code, (b) are not dealt in or traded on securities exchanges or in securities markets, (c) do not constitute investment company securities (within the meaning of Section 8-103(c) of the Uniform Commercial Code) and (d) are not held in a securities account (within the meaning of Section 8-103(c) of the Uniform Commercial Code).
(o) No Distributions. There are (x) no outstanding rights, options, warrants or agreements for a purchase, sale or issuance, in connection with such REO Subsidiary Interests, (y) no agreements on the part of Seller to issue, sell or distribute such REO Subsidiary Interests (except as contemplated or permitted by this Agreement), and (z) no obligations on the part of Seller (contingent or otherwise) to purchase, repurchase, redeem or otherwise acquire any securities or any interest therein (other than from Administrative Agent or as contemplated by this Agreement) or to pay any dividend or make any distribution in respect of the REO Subsidiary Interests (other than to Administrative Agent or as contemplated by this Agreement until the repurchase of such REO Subsidiary Interests).
(p) Conveyance; First Priority Lien. Upon delivery to the Administrative Agent of the Certificate (and assuming the continuing possession by the Administrative Agent of such Certificate in accordance with the requirements of applicable law) and the filing of a financing statement covering the REO Subsidiary Interests in the appropriate jurisdictions and naming Seller as debtor and the Administrative Agent as secured party, Seller has conveyed and transferred to Administrative Agent all of its right, title and interest to the REO Subsidiary Interests, including taking all steps as may be necessary in connection with the endorsement, transfer of power, delivery and pledge of all REO Subsidiary Interests as securities (as defined in Section 8-102 of the Uniform Commercial Code) to Administrative Agent. The Lien granted hereunder is a first priority Lien on the REO Subsidiary Interests.
(q) No Waiver. Seller has not waived or agreed to any waiver under, or agreed to any amendment or other modification of the REO Subsidiary Agreement except as agreed to by Administrative Agent in writing.
(r) Status of REO Subsidiary. Since the date of its formation until the date of this Agreement, REO Subsidiary has not been engaged in any business or activity and has owned assets other than the assets made subject to Transactions hereunder and related Repurchase Assets.
SCHEDULE 1-C
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO REO PROPERTY
The Seller makes the following representations and warranties to the Administrative Agent, with respect to the REO Property owned or deemed owned by the REO Subsidiary, that as of the Conversion Date for the contribution of REO Property by REO Subsidiary and as of the date of this Agreement and any Transaction hereunder relating to the REO Subsidiary Interests is outstanding and on each day while the Program Agreements and any Transaction hereunder is in full force and effect.
(a) Asset File. (i) The related Deed in the name of the Nominee for the benefit of REO Subsidiary shall have been submitted for recording within [***] Business Days of the related Mortgage Loan having been converted to REO Property, and (ii) a copy of such Deed shall have been delivered as part of the Asset File to the applicable Custodian within fifteen (15) Business Days of such REO Property being acquired by the REO Subsidiary.
(b) Ownership. The REO Subsidiary is the sole owner and holder of the REO Property and the Servicing Rights related thereto. The REO Subsidiary has not assigned or pledged the REO Property and the related Servicing Rights except as contemplated in the Agreement, and, except as otherwise disclosed to Administrative Agent in writing, the REO Property is free and clear of any lien or encumbrance other than (A) liens for real estate taxes not yet due and payable, (B) covenants, conditions and restrictions, rights of way, easements and other matters of public record as of the date of recording of the related security instrument, such exceptions appearing of record being acceptable to mortgage lending institutions generally, and (C) other matters to which like properties are commonly subject which do not, individually or in the aggregate, materially interfere with the use, enjoyment or marketability of the REO Property.
(c) Title. Each Deed is genuine, constitutes the legal, valid and binding conveyance of the REO Property in fee simple to the Nominee for the benefit of REO Subsidiary or its designee.
(d) REO Property as Described. The information set forth in the related Asset Schedule and all other information or data furnished by, or on behalf of, Seller to Administrative Agent is true and correct in all material respects as of the date or dates on which such information is furnished.
(e) Taxes and Assessments. Except as otherwise disclosed to Administrative Agent in writing, there are no property taxes, governmental charges, levies or governmental assessments with respect to any REO Property that are delinquent by more than ninety (90) days; provided, however, that a disclosure of outstanding charges provided to Administrative Agent may include the total amount without specifying the related categories of outstanding charges.
(f) No Litigation. Other than any customary claim or counterclaim arising out of any eviction, foreclosure or collection proceeding relating to any REO Property or as otherwise disclosed in writing to Administrative Agent, there is no litigation, proceeding or governmental investigation pending, or any order, injunction or decree outstanding, existing or relating to Seller,
REO Subsidiary or any of their Subsidiaries with respect to the REO Property that would materially and adversely affect the value of the REO Property.
(g) Existing Insurance. All improvements upon each REO Property are insured by a borrower or blanket hazard insurance policy in an amount at least equal to the lesser of (1) 100% of the maximum insurable value of such improvements; (2) the replacement value of such improvements; and (3) the amount of the BPO valuation. Each such insurance policy contains a standard mortgagee clause naming Nominee for the benefit of REO Subsidiary or Servicer, its successors and assigns as loss payee or named insured, as applicable. If such REO Property at the time of origination of the related mortgage loan was in an area identified in the Federal Register by the Federal Emergency Management Agency as having special flood hazards (and such flood insurance has been made available) a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration is in effect with respect to such REO Property unless such REO Property is no longer so identified.
(h) No Mechanics Liens. Except as otherwise disclosed to Administrative Agent in writing, there are no mechanics or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the REO Property which are or may be liens prior to, or equal or coordinate with, the lien of the Mortgage.
(i) No Damage. Except as otherwise disclosed to Administrative Agent in writing, the REO Property is undamaged by water, fire, earthquake, earth movement other than earthquake, windstorm, flood, tornado, defective construction materials or work, or similar casualty which would cause such REO Property to become uninhabitable.
(j) No Condemnation. Except as otherwise disclosed to Administrative Agent in writing, there is no proceeding pending, or to Sellers knowledge, threatened, for the total or partial condemnation of the REO Property.
(k) No Hazardous Materials. To Sellers knowledge, there is no condition affecting any REO Property (x) relating to lead paint, radon, asbestos or other hazardous materials, (y) requiring remediation of any condition or (z) relating to a claim which could impose liability upon, diminish rights of or otherwise adversely affect Administrative Agent.
(l) Location and Type of REO Property. Unless otherwise agreed in writing by Administrative Agent, each REO Property is located in the U.S. or a territory of the U.S. and consists of a one- to four-unit residential property, which may include, but is not limited to, a single-family dwelling, townhouse, condominium unit, or unit in a planned unit development.
(m) No Fraudulent Acts. No fraudulent acts were committed by Seller or REO Subsidiary in connection with the acquisition of such REO Property.
(n) Acquisition of REO Property. With respect to each such REO Property, (i) such REO Property is a Mortgaged Property acquired by REO Subsidiary through foreclosure or by deed in lieu of foreclosure or otherwise, which was, prior to such foreclosure or deed in lieu of foreclosure, subject to the lien of a Mortgage Loan, and (ii) with respect to each such REO Property, upon the consummation of the related Transaction, the applicable Custodian shall have
received the related Asset File and such Asset File shall not have been released from the possession of the applicable Custodian for longer than the time periods permitted under the related Custodial Agreement.
(o) No Occupants. Except as otherwise disclosed in writing to Administrative Agent, no tenant or other party (other than a holdover Mortgagor) has any right to occupy or is currently occupying any REO Property.
(p) Title Policy. By no later than the deadline required by the applicable Agency, the REO Property is insured by either an American Land Title Association (ALTA) title insurance policy or other generally acceptable form of policy of title insurance acceptable to prudent mortgage lending institutions in the area where the related REO Property is located, issued by a title insurer acceptable to prudent mortgage lenders. With respect to each REO Property, REO Subsidiary is the sole insured of such policy, and such policy is in full force and effect and will be in full force and effect and inure to the benefit of Seller and its successors. To the Sellers knowledge, no claims have been made under such policy and no prior holder of the REO Property, including REO Subsidiary, has done by act or omission, anything that would impair the coverage of such policy.
(q) FHA/VA Insurance. Each REO Property (i) is covered by FHA Mortgage Insurance and there exists no impairment to full recovery without indemnity to the Department of Housing and Urban Development or the FHA under the FHA Mortgage Insurance, (ii) is guaranteed, or eligible to be guaranteed by a VA Loan Guaranty Agreement, under the VA Regulations and there exists no impairment to full recovery without indemnity to the VA under the VA Loan Guaranty Agreement or (iii) is guaranteed, or eligible to be guaranteed by a USDA Loan Guaranty Agreement, under the USDA Regulations and there exists no impairment to full recovery without indemnity to the USDA under the USDA Loan Guaranty Agreement.
(r) No Environmental Issue. All uses and operations on or of the REO Properties are free of Environmental Issues and in compliance with permits issued pursuant thereto and the REO Properties are free and clear of all Liens and other encumbrances that may be imposed as a result of any Environmental Issue, whether due to any act or omission of REO Subsidiary or any other person or entity.
SCHEDULE 2
AUTHORIZED REPRESENTATIVES
SELLER PARTY AUTHORIZATIONS
Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for Seller Parties under this Agreement:
Authorized Representatives for execution of Program Agreements and amendments
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ADMINISTRATIVE AGENT AND BUYER AUTHORIZATIONS
Any of the persons whose signatures and titles appear below, including any other authorized officers, are authorized, acting singly, to act for Administrative Agent and/or Buyers under this Agreement:
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SCHEDULE 3
ADMINISTRATIVE AGENTS WIRING INSTRUCTIONS
EXHIBIT A
FORM OF POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that [AMERIHOME MORTGAGE COMPANY, LLC][AHMC HOLDING I LLC] (Seller Party) hereby irrevocably constitutes and appoints Credit Suisse First Boston Mortgage Capital LLC (Administrative Agent) and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Seller Party and in the name of Seller Party or in its own name, from time to time in Administrative Agents discretion:
(a) in the name of Seller Party, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any assets purchased by Administrative Agent on behalf of certain Buyers under the Second Amended and Restated Master Repurchase Agreement (as amended, restated, supplemented or otherwise modified from time to time, the Repurchase Agreement) dated May 9, 2018 (the Assets) and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Administrative Agent for the purpose of collecting any and all such moneys due with respect to any other assets whenever payable;
(b) to pay or discharge taxes and liens levied or placed on or threatened against the Assets;
(c) (i) to direct any party liable for any payment under any Assets to make payment of any and all moneys due or to become due thereunder directly to Administrative Agent or as Administrative Agent shall direct; (ii) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Assets; (iii) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Assets; (iv) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Assets or any proceeds thereof and to enforce any other right in respect of any Assets; (v) to defend any suit, action or proceeding brought against Seller Party with respect to any Assets; (vi) to settle, compromise or adjust any suit, action or proceeding described in clause (v) above and, in connection therewith, to give such discharges or releases as Administrative Agent may deem appropriate; (vii) to cause the mortgagee of record to be changed to Administrative agent on the FHA, USDA or VA system, as applicable; and (viii) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Assets as fully and completely as though Administrative Agent (on behalf of the applicable Buyer) was the absolute owner thereof for all purposes, and to do, at Administrative Agents option and Seller Partys expense, at any time, and from time to time, all acts and things which Administrative Agent deems necessary to protect, preserve or realize upon the Assets and Administrative Agents (on behalf of the applicable Buyer) Liens thereon and to effect the intent of this Agreement, all as fully and effectively as Seller Party might do;
(d) for the purpose of carrying out the transfer of servicing with respect to the Assets from Seller Party to a successor servicer appointed by Administrative Agent in its sole discretion and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such transfer of servicing, and,
Signature Page to the Second Amended and Restated Master Repurchase Agreement
without limiting the generality of the foregoing, Seller Party hereby gives Administrative Agent the power and right, on behalf of Seller Party, without assent by Seller Party, to, in the name of Seller Party or its own name, or otherwise, prepare and send or cause to be sent good-bye letters to all mortgagors under the Assets, transferring the servicing of the Assets to a successor servicer appointed by Administrative Agent in its sole discretion;
(e) for the purpose of delivering any notices of sale to mortgagors or other third parties, including without limitation, those required by law.
Seller Party hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.
Seller Party also authorizes Administrative Agent, from time to time, to execute, in connection with any sale, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Assets.
The powers conferred on Administrative Agent hereunder are solely to protect Administrative Agents (on behalf of Buyers) interests in the Assets and shall not impose any duty upon it to exercise any such powers. Administrative Agent shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to Seller Party for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER PARTY HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND ADMINISTRATIVE AGENT ON ITS OWN BEHALF AND ON BEHALF OF ADMINISTRATIVE AGENTS ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
[REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURES FOLLOW.]
IN WITNESS WHEREOF Seller Party has caused this Power of Attorney to be executed and Seller Partys seal to be affixed this day of , 201 .
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On the day of , 201 before me, a Notary Public in and for said State, personally appeared , known to me to be of [ ], the institution that executed the within instrument and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.
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EXHIBIT D
FORM OF ESCROW INSTRUCTION LETTER TO BE PROVIDED BY SELLER BEFORE CLOSING
The escrow instruction letter (the Escrow Instruction Letter) shall also include the following instruction to the Settlement Agent (the Escrow Agent):
Credit Suisse First Boston Mortgage Capital LLC (the Administrative Agent), has agreed to provide funds (Escrow Funds) to AmeriHome Mortgage Company, LLC (Seller) to finance certain mortgage loans and REO properties (the Assets) for which you are acting as Escrow Agent.
You hereby agree that (a) you shall receive such Escrow Funds from Administrative Agent to be disbursed in connection with this Escrow Instruction Letter, (b) you will hold such Escrow Funds in trust, without deduction, set-off or counterclaim for the sole and exclusive benefit of Administrative Agent until such Escrow Funds are fully disbursed on behalf of Administrative Agent in accordance with the instructions set forth herein, and (c) you will disburse such Escrow Funds on the date specified for closing (the Closing Date) only after you have followed the Escrow Instruction Letters requirements with respect to the Assets. In the event that the Escrow Funds cannot be disbursed on the Closing Date in accordance with the Escrow Instruction Letter, you agree to promptly remit the Escrow Funds to Administrative Agent by re-routing via wire transfer the Escrow Funds in immediately available funds, without deduction, set-off or counterclaim, back to the account specified in Administrative Agents incoming wire transfer.
You further agree that, upon disbursement of the Escrow Funds, you will hold all Asset Documents specified in the Escrow Instruction Letter in escrow as agent and bailee for Administrative Agent, and will forward the Asset Documents and original Escrow Instruction Letter in connection with such Assets by overnight courier to the Custodian within five (5) Business Days following the date of origination.
You agree that all fees, charges and expenses regarding your services to be performed pursuant to the Escrow Instruction Letter are to be paid by Seller or its borrowers, and Administrative Agent shall have no liability with respect thereto.
You represent, warrant and covenant that you are not an affiliate of or otherwise controlled by Seller, and that you are acting as an independent contractor and not as an agent of Seller.
The provisions of this Escrow Instruction Letter may not be modified, amended or altered, except by written instrument, executed by the parties hereto and Administrative Agent. You understand that Administrative Agent shall act in reliance upon the provisions set forth in this Escrow Instruction Letter, and that Administrative Agent is an intended third party beneficiary hereof.
Whether or not an Escrow Instruction Letter executed by you is received by the Custodian, your acceptance of the Escrow Funds shall be deemed to constitute your acceptance of the Escrow Instruction Letter.
EXHIBIT E
FORM OF SERVICER NOTICE
[Date]
[ ], as Servicer
[ADDRESS]
Attention:
Re: Second Amended and Restated Master Repurchase Agreement, dated as of May 9, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the Repurchase Agreement), by and among AmeriHome Mortgage Company, LLC (the Seller), [ ] (REO Subsidiary), Credit Suisse First Boston Mortgage Capital LLC (the Administrative Agent) on behalf of Buyers, Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Islands Branch (CS Cayman and a Buyer), Alpine Securitization LTD (Alpine and a Buyer) and other Buyers joined thereto from time to time (the Buyers).
Ladies and Gentlemen:
[ ] (the Servicer) is servicing certain mortgage loans and REO properties for Seller Parties pursuant to that certain Servicing Agreement between the Servicer and Seller Parties. Pursuant to the Repurchase Agreement among Administrative Agent, Buyers and Seller Parties, the Servicer is hereby notified that each Seller Party has pledged to Administrative Agent (on behalf of Buyers) certain mortgage loans and REO properties which are serviced by Servicer which are subject to a security interest in favor of Administrative Agent.
Upon receipt of a Notice of Event of Default from Administrative Agent (Notice of Event of Default) in which Administrative Agent shall identify the mortgage loans and REO properties which are then pledged to Administrative Agent under the Repurchase Agreement (the Assets), the Servicer shall segregate all amounts collected on account of such Assets, hold them in trust for the sole and exclusive benefit of Administrative Agents, and remit such collections in accordance with Administrative Agents written instructions. Following such Notice of Event of Default, Servicer shall follow the instructions of Administrative Agent with respect to the Assets, and shall deliver to Administrative Agent any information with respect to the Assets reasonably requested by Administrative Agent.
Notwithstanding any contrary information which may be delivered to the Servicer by Seller Parties, the Servicer may conclusively rely on any information or Notice of Event of Default delivered by Administrative Agent, and Seller Parties shall indemnify and hold the Servicer harmless for any and all claims asserted against it for any actions taken in good faith by the Servicer in connection with the delivery of such information or Notice of Event of Default.
Please acknowledge receipt of this instruction letter by signing in the signature block below and forwarding an executed copy to Administrative Agent promptly upon receipt. Any notices to Administrative Agent should be delivered to the following addresses: Eleven Madison Avenue, New York, New York 10010; Attention: Margaret Dellafera; Telephone: 212-325-6471.
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EXHIBIT F
NOTICE OF ADDITIONAL BUYER
To: AmeriHome Mortgage Company, LLC
Date:
Re: Second Amended and Restated Master Repurchase Agreement, dated as of May 9, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the Repurchase Agreement), by and among AmeriHome Mortgage Company, LLC (the Seller), AHMC HOLDING I LLC (REO Subsidiary), Credit Suisse First Boston Mortgage Capital LLC (the Administrative Agent) on behalf of Buyers, Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Islands Branch (CS Cayman and a Buyer), Alpine Securitization LTD (Alpine and a Buyer) and other Buyers joined thereto from time to time (the Buyers).
Ladies and Gentlemen:
You are hereby notified that the party identified on Annex I attached hereto shall constitute a Buyer in respect of certain Mortgage Loans and REO properties identified from time to time in the books and records of Administrative Agent that are subject to the Repurchase Agreement. In accordance with the provisions of Section 36 of the Repurchase Agreement, the information set forth on Annex I attached hereto constitutes the notice information with respect to such party. Capitalized terms used but not defined herein shall have the respective meanings assigned to them in the Repurchase Agreement.
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ANNEX I
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NOTICE OF ADDITIONAL BUYER
NOTICE INFORMATION
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EXHIBIT G
[CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC LETTERHEAD]
APPOINTMENT OF BACK-UP ADMINISTRATIVE AGENT NOTICE
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AmeriHome Mortgage Company, LLC
Re: Second Amended and Restated Master Repurchase Agreement, dated as of May 9, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the Repurchase Agreement), by and among AmeriHome Mortgage Company, LLC (the Seller), AHMC HOLDING I LLC (REO Subsidiary), Credit Suisse First Boston Mortgage Capital LLC (the Administrative Agent) on behalf of Buyers, Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Islands Branch (CS Cayman and a Buyer), Alpine Securitization LTD (Alpine and a Buyer) and other Buyers joined thereto from time to time (the Buyers).
Ladies and Gentlemen:
Please be advised that this Back-up Administrative Agent Notice is being issued pursuant to Section 44 of the Repurchase Agreement.
Capitalized terms used herein and not otherwise defined shall have the respective meanings specified in the Repurchase Agreement.
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SUCCESSOR ADMINISTRATIVE AGENT NOTICE
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AmeriHome Mortgage Company, LLC
Re: Second Amended and Restated Master Repurchase Agreement, dated as of May 9, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the Repurchase Agreement), by and among AmeriHome Mortgage Company, LLC (the Seller), AHMC HOLDING I LLC (REO Subsidiary), Credit Suisse First Boston Mortgage Capital LLC (the Administrative Agent) on behalf of Buyers, Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Islands Branch (CS Cayman and a Buyer), Alpine Securitization LTD (Alpine and a Buyer) and other Buyers joined thereto from time to time (the Buyers).
Ladies and Gentlemen:
Pursuant to the Appointment of Back-up Administrative Agent attached hereto, [ ] was previously appointed as Back-up Administrative Agent (the Back-up Administrative Agent) under the Repurchase Agreement. Please be advised that this Successor Administrative Agent Notice is being issued pursuant to Section 44 of the Repurchase Agreement. The Successor Administrative Agent has assumed the role of Administrative Agent under the Repurchase Agreement. Accordingly, the Successor Administrative Agent has assumed all rights and obligations of Administrative Agent under the Repurchase Agreement and Seller shall rely on the directions of the Successor Administrative Agent under the Repurchase Agreement for all directions to be given by Administrative Agent pursuant thereto.
Capitalized terms used herein and not otherwise defined shall have the respective meanings specified in the Repurchase Agreement.
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CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
EXECUTION
AMENDMENT NO. 1
TO SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
Amendment No. 1 to Second Amended and Restated Master Repurchase Agreement, dated as of August 22, 2018 (this Amendment), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (Administrative Agent), CREDIT SUISSE AG, a company incorporated in Switzerland, acting through its CAYMAN ISLANDS BRANCH, ALPINE SECURITIZATION LTD (Buyers), AMERIHOME MORTGAGE COMPANY, LLC (Seller) and AHMC HOLDING I LLC (REO Subsidiary).
RECITALS
Administrative Agent, Buyers, Seller and REO Subsidiary are parties to that certain (a) Second Amended and Restated Master Repurchase Agreement, dated as of May 9, 2018 (the Existing Repurchase Agreement; as amended by this Amendment, the Repurchase Agreement) and (b) Second Amended and Restated Pricing Side Letter, dated as of May 9, 2018 (as amended, restated, supplemented, or otherwise modified from time to time, the Pricing Side Letter). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement and Pricing Side Letter, as applicable.
Administrative Agent, Buyers and Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.
Accordingly, Administrative Agent, Buyers and Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement is hereby amended as follows:
SECTION 1 Definitions. Section 1 of the Existing Repurchase Agreement is hereby amended by:
1.1 adding the following definitions in their proper alphabetical order:
VFN Repurchase Agreement collectively, (i) that certain Master Repurchase Agreement, and (ii) that certain Pricing Side Letter, in each case, dated as of August 13, 2018 between Seller, Administrative Agent and Credit Suisse AG, a company incorporated in Switzerland, acting through its Cayman Islands Branch, as either may be amended, restated, supplemented or otherwise modified from time to time.
1.2 deleting the definitions of Obligations in its entirety and replacing it with the following:
Obligations means (a) all of Sellers indebtedness, obligations to pay the Repurchase Price on the Repurchase Date, the Price Differential on each Price Differential Payment Date, and other obligations and liabilities, to Administrative Agent or Buyers arising under, or in connection with, the Program Agreements, whether now existing or
hereafter arising; (b) any and all sums paid by Administrative Agent, Buyers or Administrative Agent (on behalf of Buyers) in order to preserve any Purchased Asset or Contributed REO Property or its interest therein; (c) in the event of any proceeding for the collection or enforcement of any of Sellers indebtedness, obligations or liabilities referred to in clause (a), the reasonable third party expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on any Purchased Asset or Contributed REO Property, or of any exercise by Administrative Agent or Buyers of their rights under the Program Agreements, including, without limitation, reasonable outside attorneys fees and disbursements and court costs; (d) all of Sellers indemnity obligations to Administrative Agent or Buyers pursuant to the Program Agreements and (e) all of Sellers obligations under the VFN Repurchase Agreement.
SECTION 2 Security Interest. Section 8a. of the Existing Repurchase Agreement is hereby amended by adding the following subsection at the end thereof:
(3) Administrative Agent and Seller hereby agree that in order to further secure Sellers Obligations hereunder, Seller hereby grants to Administrative Agent, for the benefit of Buyer, a security interest in (i) Sellers rights under the VFN Repurchase Agreement, including, without limitation, any rights to receive payments thereunder or any rights to collateral thereunder whether now owned or hereafter acquired, now existing or hereafter created and (ii) all collateral however defined or described under the VFN Repurchase Agreement. Seller shall instruct that upon receipt of a notice of an Event of Default under this Agreement, the buyer thereunder is authorized and instructed to remit to Administrative Agent for the benefit of Buyer hereunder directly any amounts otherwise payable to Seller and to deliver to Administrative Agent for the benefit of Buyer all collateral otherwise deliverable to Seller. In furtherance of the foregoing, the instructions shall also require, upon repayment of the entire obligations under the VFN Repurchase Agreement and the termination of all obligations of the seller thereunder or other termination of the VFN Repurchase Agreement following the repayment of all obligations thereunder, that the buyer thereunder shall surrender the Note and the Series 2018-ADV1 Note (each as defined in the VFN Repurchase Agreement) for exchange in accordance with Section 2.03 of the VFN Repurchase Agreement and the Base Indenture (as defined in the VFN Repurchase Agreement).
SECTION 3 Representations and Warranties. Section 13a of the Existing Repurchase Agreement is hereby amended by:
3.1 deleting subsection 2. thereof in its entirety and replacing it with the following:
2. Licenses. Each Seller Party is duly licensed or is otherwise qualified in each jurisdiction in which it transacts business for the business which it conducts and is not in material violation of any applicable federal, state or local laws, rules and regulations unless, in either instance, the failure to take such action is not reasonably likely (either individually or in the aggregate) to cause a Material Adverse Effect. Each Seller Party has the requisite power and authority and legal right to originate and purchase Mortgage Loans (as applicable) and to own, sell
and grant a lien on all of its right, title and interest in and to the Mortgage Loans, and to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, each Program Agreement and any Transaction Request. Seller is an FHA Approved Mortgagee and VA Approved Lender
3.2 deleting subsection 8. thereof in its entirety and replacing it with the following:
8. No Conflicts. The execution, delivery and performance by each Seller Party of each Program Agreement do not conflict with or violate any term or provision of the formation documents or by-laws of such Seller Party, and will not result in any violation of any mortgage, instrument, agreement or obligation to which such Seller Party is a party or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to such Seller Party of any court, regulatory body, administrative agency or governmental body having jurisdiction over such Seller Party, which conflict or violation would have a Material Adverse Effect.
3.3 deleting subsection 11. thereof in its entirety and replacing it with the following:
11. Litigation. There is no action, proceeding or investigation pending with respect to which any Seller Party has received service of process or, to the best of Sellers knowledge threatened against it before any court, administrative agency or other tribunal (A) asserting the invalidity of any Program Agreement, (B) seeking to prevent the consummation of any of the transactions contemplated any Program Agreement, (C) making a claim individually in an amount greater than $[***] or in an aggregate amount greater than $[***], (D) which requires filing with the Securities and Exchange Commission in accordance with the 1934 Act or any rules thereunder or (E) which might materially and adversely affect the validity of the Purchased Assets or Contributed REO Properties or the performance by it of its obligations under, or the validity or enforceability of any Program Agreement.
3.4 deleting subsection 15. thereof in its entirety and replacing it with the following:
15. Taxes. Each Seller Party and each Seller Partys Subsidiaries have timely filed (which filings shall be considered timely if made pursuant to a validly obtained extension for such filing) all income tax returns and other material tax returns that are required to be filed by them and have paid all material taxes due and payable, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided. The charges, accruals and reserves on the books of such Seller Party and such Seller Partys Subsidiaries in respect of taxes and other governmental charges are, in the opinion of Seller, adequate.
3.5 deleting subsection 18. thereof in its entirety and replacing it with the following:
18. Location of Books and Records. The locations where Seller Parties keep their books and records, including all computer tapes and records relating to the Purchased Assets and Contributed REO Properties and the related Repurchase Assets is its chief executive office or at
the offices of the Eligible Subservicer; provided, however, that electronic records may also be maintained at backup data centers or via cloud-based storage.
SECTION 4 Covenants. Section 14 of the Existing Repurchase Agreement is hereby amended by:
4.1 deleting subsection a. thereof in its entirety and replacing it with the following:
a. Litigation. Seller Parties will promptly, and in any event within ten (10) days after service of process on any of the following, give to Administrative Agent notice of all material litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are, to such Seller Partys knowledge, threatened or pending) or other legal or arbitrable proceedings affecting any Seller Party or affecting any of the Property of any of them before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Program Agreements or any action to be taken in connection with the transactions contemplated hereby, (ii) makes a claim individually in an amount greater than $[***] against Seller or $[***] against the REO Subsidiary or in an aggregate amount greater than $[***] against Seller or $[***] against REO Subsidiary, (iii) makes a claim for an unspecified amount of damages, or (iv) which, individually or in the aggregate, if adversely determined, could be reasonably likely to have a Material Adverse Effect. Seller will promptly provide notice of any judgment, which with the passage of time, could cause an Event of Default hereunder.
4.2 deleting subsection q. thereof in its entirety and replacing it with the following:
q. Taxes. Each Seller Party shall timely file (which filings shall be considered timely if made pursuant to a validly obtained extension for such filing) all tax returns that are required to be filed by them and shall timely pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained.
SECTION 5 Event of Default; Cross-Default. Section 15 of the Existing Repurchase Agreement is hereby amended by:
5.1 deleting subsection a. thereof in its entirety and replaced with the following:
a. Payment Failure. Failure of Seller to (i) make any payment of (A) Price Differential, provided that if such failure is caused by operational mistake, Seller shall have [***] to cure such failure following knowledge thereof, or (B) Repurchase Price or any other sum which has become due, in each case, on a Price Differential Payment Date or a Repurchase Date or otherwise, whether by
acceleration or otherwise, under the terms of this Agreement, any other warehouse and security agreement or any other document evidencing or securing Indebtedness of Seller to Administrative Agent (on behalf of Buyers), or (ii) cure any Margin Deficit when due pursuant to Section 6 hereof.
5.2 deleting subsection b. thereof in its entirety and replaced with the following:
b. Cross Default. Any Seller Party or any of a Seller Partys Affiliates shall be in default under (i) any Indebtedness, including, without limitation, the VFN Repurchase Agreement, in the aggregate, in excess of (x) $[***] with respect to Seller or of such Affiliate or (y) $[***] with respect to REO Subsidiary which default (1) involves the failure to pay a matured obligation past any applicable cure periods provided for under such Indebtedness, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary with respect to such Indebtedness, or (ii) any other contract in excess of (x) $[***] to which Seller or such Affiliate is a party or (y) $[***] to which REO Subsidiary is a party which default (1) involves the failure to pay a matured obligation past any applicable cure periods provided for under such contract, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary of such contract, or (iii) any Indebtedness of Seller owed under a to be allocated (TBA) commitment or a master securities contract which default has resulted in the acceleration of the maturity of all obligations by any other party to or beneficiary with respect to such Indebtedness.
5.3 deleting subsection g. thereof in its entirety and replaced with the following:
g. Breach of Non-Financial Representation or Covenant. A breach by any Seller Party of any other material representation, warranty or covenant set forth in this Agreement (and not otherwise specified in Section 15.f above), or any other Program Agreement, if such breach is not cured within [***] Business Days of such Seller Partys knowledge thereof (other than the representations and warranties set forth in Schedule 1-A, Schedule 1-B and Schedule 1-C, which shall be considered solely for the purpose of determining the Asset Value, the existence of a Margin Deficit and the obligation to repurchase such Purchased Mortgage Loan or REO Property unless (i) such party shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made, (ii) any such representations and warranties have been determined by Administrative Agent in its good faith discretion to be materially false or misleading on a regular basis, or (iii) Administrative Agent, in its good faith discretion, determines that such breach of a material representation, warranty or covenant materially and adversely affects (A) the condition (financial or otherwise) of such party or its Affiliates; or (B) Administrative Agents determination to enter into this Agreement or Transactions with such party, then such breach shall constitute an immediate Event of Default and Seller shall have no cure right hereunder).
5.4 deleting subsection j. thereof in its entirety and replaced with the following:
j. Judgment. A final judgment or judgments for the payment of money in excess of (x) (i) $[***] shall be rendered against Seller or (ii) $[***] in the aggregate shall be rendered against Seller and any of its Affiliates or (y) $[***] against REO Subsidiary by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within [***] days from the date of entry thereof.
SECTION 6 Reports. Section 17 of the Existing Repurchase Agreement is hereby amended by:
6.1 deleting subsection a. thereof in its entirety and replacing it with the following:
a. Default Notices. Seller shall furnish to Administrative Agent (i) promptly, copies of any material and adverse notices (including, without limitation, notices of defaults, termination events, or breaches) and any material adverse financial information that is not otherwise required to be provided by Seller hereunder which is given to Sellers lenders and (ii) immediately, notice of the occurrence of any (A) Event of Default hereunder, (B) default or material breach by Seller or Servicer of any obligation under any Program Agreement, or (C) event or circumstance that such party reasonably expects has resulted in, or will, with the passage of time, result in, a Material Adverse Effect or an Event of Default or such a default or breach by such party.
6.2 deleting subsection b.2. thereof in its entirety and replacing it with the following:
2. as soon as available and in any event no later than the last day of the third month following the end of each fiscal year of Seller, the consolidated balance sheets of Seller and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and members equity and of cash flows for Seller and its consolidated Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall have no going concern qualification and shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of Seller and its respective consolidated Subsidiaries as at the end of, and for, such fiscal year in accordance with GAAP;
6.3 deleting subsection b.5.(b). thereof in its entirety and replacing it with the following:
(b) written summaries of all final written Agency, FHA, VA, and material Governmental Authority audits, examinations, evaluations, monitoring reviews and reports of its operations (including those prepared on a contract basis) which provide for or relate to (i) material corrective action required, (ii) material sanctions proposed, imposed or required, including without limitation notices of defaults, notices of termination of approved status, notices of imposition of supervisory agreements or interim servicing agreements, and notices of probation, suspension, or non-renewal, or (iii) material adverse findings by such Agency or Governmental Authority; provided, that, if such information is subject to a confidentiality requirement, for as long as such information remains confidential, Seller shall (x) disclose to Administrative Agent any portion of such information that is not confidential, (y) notify Administrative Agent of any material event in a level of specificity that would not violate the confidentiality requirements and (z) promptly seek permission to disclose the information from the necessary parties and shall provide Administrative Agent such information to the extent of such permission;
6.4 deleting subsection b.7. thereof in its entirety and replacing it with the following:
7. Seller shall provide Administrative Agent, as part of the Officers Certificate delivered pursuant to Section 17.b(3) above, a list of all (i) material actions, disputes, litigation, notices, proceedings, investigations or suspensions pending with respect to which Seller has received service of process or other form of notice or, to the best of Sellers knowledge, threatened against it, before any court, administrative, Governmental Authority or other regulatory body or tribunal which is reasonably expected, in Sellers good faith discretion, if adversely decided, to have a Material Adverse Effect on Seller, as of such date with such information provided, and (ii) material issues raised upon examination of Seller or Sellers facilities, operations, servicing, origination or correspondent activities by any Governmental Authority; each as noted in the applicable Schedule to Exhibit A of the Pricing Side Letter; provided, that, if such information is subject to a confidentiality requirement, for as long as such information remains confidential, Seller shall (x) disclose to Administrative Agent any portion of such information that is not confidential, (y) notify Administrative Agent of any material event in a level of specificity that would not violate the confidentiality requirements and (z) promptly seek permission to disclose the information from the necessary parties and shall provide Administrative Agent such information to the extent of such permission;
6.5 deleting subsection c.6. thereof in its entirety and replacing it with the following:
6. any material change in the Indebtedness of Seller, including, without limitation, any default, non-renewal, termination, increase in available amount or decrease in available amount related thereto; and
SECTION 7 Notices. Section 20 of the Existing Repurchase Agreement is hereby amended by adding the following at the end thereof:
Notwithstanding the foregoing, the offices of the Seller (to the extent referencing the Woodland Hills address above), shall on or about August 24, 2018, be relocated to 1 Baxter Way, Westlake Village, California 91362. Upon notice from the Seller of such relocation, any further notices which would otherwise be delivered to the Woodland Hills address above shall be provided to the attention of [***], with copies to [***] and the Legal Department, in each case at 1 Baxter Way, Westlake Village, California 91362.
SECTION 8 Periodic Due Diligence Review. Section 34 of the Existing Repurchase Agreement is hereby amended by deleting the last sentence thereof and replacing it with the following:
Seller further agrees that Seller shall pay all reasonable out-of-pocket costs and expenses incurred by Administrative Agent or Buyers in connection with Administrative Agents or Buyers activities pursuant to this Section 34; provided, that, prior to the occurrence of an Event of Default, Seller shall pay for no more than one (1) on-site inspection per calendar year and for an amount not to exceed $15,000 per calendar year.
SECTION 9 Conditions Precedent. This Amendment shall become effective as of August 13, 2018 (the Amendment Effective Date), subject to the satisfaction of the following conditions precedent:
9.1 Delivered Documents. On the Amendment Effective Date, the Administrative Agent on behalf of Buyers shall have received the following documents, each of which shall be satisfactory to the Administrative Agent in form and substance:
(a) this Amendment, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyers and the Seller;
(b) Amendment No. 1 to Second Amended and Restated Pricing Side Letter, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyers, the Seller and the REO Subsidiary; and
(c) such other documents as the Administrative Agent or counsel to the Administrative Agent may reasonably request.
SECTION 10 Representations and Warranties. Seller hereby represents and warrants to the Administrative Agent and Buyers that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that
no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 13 of the Repurchase Agreement.
SECTION 11 Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 12 Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 13 Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment.
SECTION 14 GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.
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ALPINE SECURITIZATION LTD, as a Buyer, by Credit Suisse AG, New York Branch as Attorney-in-Fact | |
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |
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AHMC HOLDING I LCC, as REO Subsidary | |
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EXECUTION
AMENDMENT NO. 2
TO SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
Amendment No. 2 to Second Amended and Restated Master Repurchase Agreement, dated as of May 3, 2019 (this Amendment), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (Administrative Agent), CREDIT SUISSE AG, a company incorporated in Switzerland, acting through its CAYMAN ISLANDS BRANCH, ALPINE SECURITIZATION LTD (Buyers), AMERIHOME MORTGAGE COMPANY, LLC (Seller) and AHMC HOLDING I LLC (REO Subsidiary).
RECITALS
Administrative Agent, Buyers, Seller and REO Subsidiary are parties to that certain (a) Second Amended and Restated Master Repurchase Agreement, dated as of May 9, 2018 (as amended by Amendment No. 1, dated as of August 22, 2018, the Existing Repurchase Agreement; and as further amended by this Amendment, the Repurchase Agreement) and (b) Second Amended and Restated Pricing Side Letter, dated as of May 9, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the Pricing Side Letter). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement and Pricing Side Letter, as applicable.
Administrative Agent, Buyers and Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.
Accordingly, Administrative Agent, Buyers and Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement is hereby amended as follows:
SECTION 1. Representations and Warranties. Schedule 1 to the Existing Repurchase Agreement is hereby amended by deleting paragraph (s) in its entirety and replacing it with the following:
(s) Origination; Payment Terms. The Mortgage Loan was originated by or in conjunction with a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or similar banking institution which is supervised and examined by a federal or state authority. Principal and interest payments on the Mortgage Loan commenced no more than sixty-two (62) days after funds were disbursed in connection with the Mortgage Loan. No Mortgage Loan has a balloon payment feature. Interest on the Mortgage Loan is calculated on the basis of a 360-day year consisting of twelve 30-day months. With respect to adjustable rate Mortgage Loans, the Mortgage Interest Rate is adjusted on each Interest Rate Adjustment Date to equal the Index plus the Gross Margin (rounded up or down to the nearest .125%), subject to the Mortgage Interest Rate Cap. The Mortgage Note is payable on the first day of each month in equal monthly installments of principal and interest,
which installments of interest with respect to adjustable rate Mortgage Loans, are subject to change on the Interest Rate Adjustment Date due to adjustments to the Mortgage Interest Rate on each Interest Rate Adjustment Date with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty (30) years from commencement of amortization.
SECTION 2. Conditions Precedent. This Amendment shall become effective as of the date hereof (the Amendment Effective Date), subject to the satisfaction of the following conditions precedent:
2.1 Delivered Documents. On the Amendment Effective Date, the Administrative Agent on behalf of Buyers shall have received the following documents, each of which shall be satisfactory to the Administrative Agent in form and substance:
(a) this Amendment, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyers and the Seller;
(b) Amendment No. 5 to Second Amended and Restated Pricing Side Letter, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyers, the Seller and the REO Subsidiary; and
(c) such other documents as the Administrative Agent or counsel to the Administrative Agent may reasonably request.
SECTION 3. Representations and Warranties. Seller hereby represents and warrants to the Administrative Agent and Buyers that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 13 of the Repurchase Agreement.
SECTION 4. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 5. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 6. Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment.
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.
[Signature Page Follows]
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written,
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ALPINE SECURIMATION LTD, as a Buyer, by Credit Suisse AG, New York Branch, as Attorney-in-Fact | |
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Signature Page to Amendment No. 2 to Second Amended and Restated Master Repurchase Agreement
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |
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AHMC HOLDING I LLC, as REO Subsidiary | |
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Signature Page to Amendment No. 2 to Second Amended and Restated Master Repurchase Agreement
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
EXECUTION
AMENDMENT NO. 3
TO SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
Amendment No. 3 to Second Amended and Restated Master Repurchase Agreement, dated as of June 19, 2019 (this Amendment), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the Administrative Agent), CREDIT SUISSE AG, a company incorporated in Switzerland, acting through its CAYMAN ISLANDS BRANCH, ALPINE SECURITIZATION LTD (the Buyers), AMERIHOME MORTGAGE COMPANY, LLC (the Seller) and AHMC HOLDING I LLC (the REO Subsidiary).
RECITALS
Administrative Agent, Buyers, Seller and REO Subsidiary are parties to that certain (a) Second Amended and Restated Master Repurchase Agreement, dated as of May 9, 2018 (as amended by Amendment No. 1, dated as of August 22, 2018, and Amendment No. 2, dated as of May 3, 2019, the Existing Repurchase Agreement; and as further amended by this Amendment, the Repurchase Agreement) and (b) Second Amended and Restated Pricing Side Letter, dated as of May 9, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the Pricing Side Letter). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement or Pricing Side Letter, as applicable.
Administrative Agent, Buyers and Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.
Accordingly, Administrative Agent, Buyers and Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement is hereby amended as follows:
SECTION 1. Definitions. Section 2 of the Existing Repurchase Agreement is hereby amended by:
1.1 deleting the definition of Mortgage Loan in its entirety and replacing it with the following:
Mortgage Loan means any residential mortgage loan (including a home equity loan) evidenced by a Mortgage Note and secured by a first or second lien mortgage, which satisfies the requirements set forth in the Underwriting Guidelines and Section 13(b) hereof; provided, however, that Mortgage Loans shall not include any High Cost Mortgage Loans.
1.2 adding the following new definition in its proper alphabetical order:
Scratch and Dent Mortgage Loan means a first lien Mortgage Loan that (i) is a Mortgage Loan that is eligible for a Transaction and is eligible for sale to a Take-out Investor (other than the Agencies) at the time it becomes a Purchased Asset; (ii) has never had a delinquent payment; (iii) has never had any compliance defects; and (iv) is acceptable to Buyers or Administrative Agent in their sole discretion.
SECTION 2. Representations and Warranties. Schedule 1-A to the Existing Repurchase Agreement is hereby amended by deleting paragraphs (nn) and (fff) in their entirety and replacing them with the following, respectively:
(nn) Origination Date. (i) with respect to Mortgage Loans (other than GNMA EBOs, Scratch and Dent Mortgage Loans and correspondent loans), the Purchase Date is no more than [***] days following the origination date and (ii) with respect to correspondent loans (other than GNMA EBOs and Scratch and Dent Mortgage Loans), the Purchase Date is no more than [***] days following the origination date.
(fff) Qualified Mortgage. Notwithstanding anything to the contrary set forth in this Agreement, on and after January 10, 2014 (or such later date as set forth in the relevant regulations), (i) prior to the origination of each Mortgage Loan, the originator made a reasonable and good faith determination that the Mortgagor had a reasonable ability to repay the loan according to its terms, in accordance with 12 CFR 1026.43(c) and (ii) except with respect to Non-Agency Non-QM Mortgage Loans, Scratch and Dent Mortgage Loans or unless otherwise approved in writing by Administrative Agent in its sole discretion, each Mortgage Loan is a Qualified Mortgage Loan.
SECTION 3. Conditions Precedent. This Amendment shall become effective as of the date hereof (the Amendment Effective Date), subject to the satisfaction of the following conditions precedent:
3.1 Delivered Documents. On the Amendment Effective Date, the Administrative Agent on behalf of Buyers shall have received the following documents, each of which shall be satisfactory to the Administrative Agent in form and substance:
(a) this Amendment, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyers and the Seller;
(b) Amendment No. 6 to Second Amended and Restated Pricing Side Letter, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyers, the Seller and the REO Subsidiary;
(c) a filed Form UCC-3 amendment; and
(d) such other documents as the Administrative Agent or counsel to the Administrative Agent may reasonably request.
SECTION 4. Representations and Warranties. Seller hereby represents and warrants to the Administrative Agent and Buyers that it is in compliance with all the terms and
provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 13 of the Repurchase Agreement.
SECTION 5. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 6. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 7. Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment.
SECTION 8. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.
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CREDIT SUISSE FIRST BOSTON MORTGATE CAPITAL LLC, as Administrative Agent | |
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CREDIT SUISSE AG., CAYMAN ISLANDS BRANCH, as Buyer | |
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ALPINE SECURITIZATION LTD, as a Buyer, by Credit Suisse AG, New York Branch as Attorney-in-Fact | |
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Signature Page to Amendment No. 3 to Second Amended and Restated Master Repurchase Agreement
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |
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AHMC HOLDING I LLC, as REO Subsidiary | |
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Signature Page to Amendment No. 3 to Second Amended and Restated Master Repurchase Agreement
EXECUTION
AMENDMENT NO. 4
TO SECOND AMENDED AND RESTATED MASTER REPURCHASE AGREEMENT
Amendment No. 4 to Second Amended and Restated Master Repurchase Agreement, dated as of July 27, 2020 (this Amendment), among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the Administrative Agent), CREDIT SUISSE AG, a company incorporated in Switzerland, acting through its CAYMAN ISLANDS BRANCH, ALPINE SECURITIZATION LTD (the Buyers), AMERIHOME MORTGAGE COMPANY, LLC (the Seller) and AHMC HOLDING I LLC (the REO Subsidiary).
RECITALS
Administrative Agent, Buyers, Seller and REO Subsidiary are parties to that certain (a) Second Amended and Restated Master Repurchase Agreement, dated as of May 9, 2018 (as amended by Amendment No. 1, dated as of August 22, 2018, Amendment No. 2, dated as of May 3, 2019 and Amendment No. 3, dated as of June 19, 2019, the Existing Repurchase Agreement; and as further amended by this Amendment, the Repurchase Agreement) and (b) Second Amended and Restated Pricing Side Letter, dated as of May 9, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the Pricing Side Letter). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement or Pricing Side Letter, as applicable.
Administrative Agent, Buyers and Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.
Accordingly, Administrative Agent, Buyers and Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement is hereby amended as follows:
SECTION 1. Definitions. Section 2 of the Existing Repurchase Agreement is hereby amended by:
1.1 deleting the definition of Change in Control in its entirety and replacing it with the following:
Change in Control means:
(A) any transaction or event as a result of which Aris Mortgage Holding Company, LLC ceases to own, beneficially or of record, 100% of the membership interests of Seller;
(B) the sale, transfer, or other disposition of all or substantially all of Sellers assets (excluding any such action taken in connection with any securitization transaction);
(C) if such Seller Party is a Delaware limited liability company, such Person enters into any transaction or series of transactions to adopt, file, effect or
consummate a Division, or otherwise permits any such Division to be adopted, filed, effected or consummated;
(D) the consummation of a merger or consolidation of Seller with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entitys stock or other equity interests outstanding immediately after such merger, consolidation or such other reorganization is owned by Persons who were not stockholders or other equityholders of Seller immediately prior to such merger, consolidation or other reorganization or
(E) other than in connection with the Transactions under this Agreement, Seller shall fail to own 100% of the REO Subsidiary Interests of the REO Subsidiary.
1.2 adding the following definitions in their proper alphabetical order:
Beneficial Ownership Certification means a certification regarding beneficial ownership required by the Beneficial Ownership Regulation.
Beneficial Ownership Regulation means 31 C.F.R. § 1010.230.
Division shall mean the division of a limited liability company into two or more limited liability companies pursuant to and in accordance with Section 18-217 of Chapter 18 of the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq., as amended.
Reference Rate means LIBOR or a Successor Rate pursuant to Section 5(c) of this Agreement.
Successor Rate means a rate determined by Administrative Agent in accordance with Section 5(c) hereof.
Successor Rate Conforming Changes means with respect to any proposed Successor Rate, any spread adjustments or other conforming changes to the timing and frequency of determining rates and making payments of interest and other administrative matters as may be appropriate, in the discretion of Administrative Agent, to reflect the adoption of such Successor Rate and to permit the administration thereof by Administrative Agent in a manner substantially consistent with market practice.
SECTION 2. Price Differential. Section 5 of the Existing Repurchase Agreement is hereby following subsection at the end thereof:
c. If prior to any Price Differential Payment Date, Administrative Agent determines in its sole discretion that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining LIBOR, LIBOR is no longer in existence, or the administrator of LIBOR or a Governmental Authority having jurisdiction over Administrative Agent has made a public statement identifying a specific date after which LIBOR shall no longer be made available or used for determining the interest rate of loans, Administrative Agent may give same day notice thereof to Seller, whereupon the rate that will replace LIBOR for
such day and for all subsequent periods following such notice (until such notice has been withdrawn by Administrative Agent) shall be the greater of (i) an alternative benchmark rate (including any mathematical or other adjustments to the benchmark rate (if any) incorporated therein) and (ii) zero, together with any proposed Successor Rate Conforming Changes, as determined by Administrative Agent in its sole discretion (any such rate, a Successor Rate).
SECTION 3. Conditions Precedent. Section 10.b.5 of the Existing Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
5. Requirements of Law. Neither Administrative Agent nor Buyers shall have determined that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to Administrative Agent or any Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Administrative Agent or any Buyer to enter into Transactions with a Pricing Rate based on Reference Rate.
SECTION 4. Covenants. Section 14.s of the Existing Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
s. Beneficial Ownership Certification. Seller Parties shall at all times either (i) ensure that the Seller Parties have delivered to Administrative Agent a Beneficial Ownership Certification, if applicable, and that the information contained therein is true and correct in all material respects or (ii) deliver to Administrative Agent an updated Beneficial Ownership Certification within five (5) Business Day following the date on which the information contained in any previously delivered Beneficial Ownership Certification ceases to be true and correct in all respects.
SECTION 5. Non assignability. Section 22(b) of the Existing Repurchase Agreement is hereby amended by deleting such section in its entirety and replacing it with the following:
b. Participations. Any Buyer may sell participations to one or more Persons in or to all or a portion of its rights and obligations under this Agreement and under the Program Agreements; provided, however, that (i) such Buyers obligations under this Agreement and the other Program Agreements shall remain unchanged, (ii) such Buyer shall remain solely responsible to the other parties hereto for the performance of such obligations; and (iii) Seller shall continue to deal solely and directly with Administrative Agent and/or Buyers in connection with such Buyers rights and obligations under this Agreement and the other Program Agreements except as provided in Section 11. Administrative Agent and Buyers may distribute to any prospective or actual participant this Agreement, the other Program Agreements any document or other information delivered to Administrative Agent and/or Buyers by Seller. To the extent that Administrative Agent or any Buyer shall deliver any Seller Confidential Information to a prospective participant, Administrative Agent or such Buyer shall cause such prospective participant to agree to hold such information subject to and in accordance with confidentiality provisions substantively similar to the confidentiality provisions of this Agreement.
SECTION 6. Authorized Representatives. Schedule 2 to the Existing Repurchase Agreement is hereby amended by deleting the Administrative Agent and Buyer Authorized Representatives in their entirety and replacing them with Annex A hereto.
SECTION 7. Conditions Precedent. This Amendment shall become effective as of July 27, 2020 (the Amendment Effective Date), subject to the satisfaction of the following conditions precedent:
7.1 Delivered Documents. On the Amendment Effective Date, the Administrative Agent on behalf of Buyers shall have received the following documents, each of which shall be satisfactory to the Administrative Agent in form and substance:
(a) this Amendment, executed and delivered by the duly authorized officers of the Administrative Agent, the Buyers and the Seller; and
(b) such other documents as the Administrative Agent or counsel to the Administrative Agent may reasonably request.
SECTION 8. Representations and Warranties. Seller hereby represents and warrants to the Administrative Agent and Buyers that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 13 of the Repurchase Agreement.
SECTION 9. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 10. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 11. Counterparts. This Amendment may be executed by each of the parties hereto on any number of separate counterparts, each of which shall be an original and all of which taken together shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment.
SECTION 12. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE CHOICE OF LAW PROVISIONS THEREOF.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.
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CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, | |
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as Administrative Agent | |
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By: |
/s/ Margaret Dellafera |
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Name: Margaret Dellafera |
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Title: Vice President |
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CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as a Buyer | |
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/s/ Margaret Dellafera |
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Name: Margaret Dellafera |
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Title: Vice President |
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/s/ Ernest Calabrese |
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Name: Ernest Calabrese |
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Title: Authorized Signatory |
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ALPINE SECURITIZATION LTD, as a Buyer, by Credit Suisse AG New York Branch as Attorney-in-Fact | |
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/s/ Jason Ruchelsman |
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Name: Jason Ruchelsman |
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Title: Director |
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/s/ Patrick Duggan |
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Name: Patrick Duggan |
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Title: Vice President |
Signature Page to Amendment No. 4 to Second Amended and Restated Master Repurchase Agreement
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |
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/s/ Kathleen Conte |
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Name: Kathleen Conte |
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Title: EVP Capital Markets |
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AMHC HOLDING I LLC, as REO Subsidiary | |
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/s/ Kathleen Conte |
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Name: Kathleen Conte |
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Title: EVP Capital Markets |
Signature Page to Amendment No. 4 to Second Amended and Restated Master Repurchase Agreement
ADMINISTRATIVE AGENT AND BUYER AUTHORIZATIONS
Annex A
Any of the persons whose signatures and titles appear below, including any other authorized officers, are authorized, acting singly, to act for Administrative Agent and/or Buyers under this Agreement:
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Authorized Representatives to Master Repurchase Agreement
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
EXECUTION COPY
MASTER REPURCHASE AGREEMENT
among
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as administrative agent
(Administrative Agent)
and
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as buyer (Buyer)
and
AMERIHOME MORTGAGE COMPANY, LLC, as seller (Seller)
Dated as of August 13, 2018
AMERIHOME GMSR ISSUER TRUST
MSR COLLATERALIZED NOTES,
SERIES 2018-VF1
TABLE OF CONTENTS
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ARTICLE I |
DEFINITIONS |
1 |
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Section 1.01 |
Certain Defined Terms |
1 |
Section 1.02 |
Other Defined Terms |
13 |
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ARTICLE II |
GENERAL TERMS |
14 |
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Section 2.01 |
Transactions |
14 |
Section 2.02 |
Procedure for Entering into Transactions |
14 |
Section 2.03 |
Repurchase; Payment of Repurchase Price |
15 |
Section 2.04 |
Price Differential |
15 |
Section 2.05 |
Margin Maintenance |
15 |
Section 2.06 |
Payment Procedure |
16 |
Section 2.07 |
Application of Payments |
16 |
Section 2.08 |
Use of Purchase Price and Transaction Requests |
17 |
Section 2.09 |
Recourse |
17 |
Section 2.10 |
Requirements of Law |
17 |
Section 2.11 |
Taxes |
18 |
Section 2.12 |
Reserved |
20 |
Section 2.13 |
Additional Balance and Additional Funding |
20 |
Section 2.14 |
Commitment Fee |
20 |
Section 2.15 |
Termination |
20 |
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ARTICLE III |
REPRESENTATIONS AND WARRANTIES |
21 |
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Section 3.01 |
Seller Existence |
21 |
Section 3.02 |
Licenses |
21 |
Section 3.03 |
Power |
21 |
Section 3.04 |
Due Authorization |
21 |
Section 3.05 |
Financial Statements |
21 |
Section 3.06 |
No Event of Default |
22 |
Section 3.07 |
Solvency |
22 |
Section 3.08 |
No Conflicts |
22 |
Section 3.09 |
True and Complete Disclosure |
22 |
Section 3.10 |
Approvals |
22 |
Section 3.11 |
Litigation |
22 |
Section 3.12 |
[Reserved] |
23 |
Section 3.13 |
Ownership |
23 |
Section 3.14 |
The Note |
23 |
Section 3.15 |
Taxes |
24 |
Section 3.16 |
Investment Company |
24 |
Section 3.17 |
Chief Executive Office; Jurisdiction of Organization |
24 |
Section 3.18 |
Location of Books and Records |
24 |
Section 3.19 |
ERISA |
24 |
Section 3.20 |
Financing of Note and Additional Balances |
24 |
Section 3.21 |
Reserved |
25 |
Section 3.22 |
Other Indebtedness |
25 |
Section 3.23 |
No Reliance |
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Section 3.24 |
Plan Assets |
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Section 3.25 |
No Prohibited Persons |
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Section 3.26 |
Compliance with 1933 Act |
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ARTICLE IV |
CONVEYANCE; REPURCHASE ASSETS; SECURITY INTEREST |
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Section 4.01 |
Ownership |
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Section 4.02 |
Security Interest |
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Section 4.03 |
Further Documentation |
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Section 4.04 |
Changes in Locations, Name, etc |
27 |
Section 4.05 |
Performance by Buyer of Sellers Obligations |
27 |
Section 4.06 |
Proceeds |
28 |
Section 4.07 |
Remedies |
28 |
Section 4.08 |
Limitation on Duties Regarding Preservation of Repurchase Assets |
29 |
Section 4.09 |
Powers Coupled with an Interest |
29 |
Section 4.10 |
Release of Security Interest |
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Section 4.11 |
Reinstatement |
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Section 4.12 |
Subordination |
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ARTICLE V |
CONDITIONS PRECEDENT |
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Section 5.01 |
Initial Transaction |
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Section 5.02 |
All Transactions |
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ARTICLE VI |
COVENANTS |
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Section 6.01 |
Litigation |
34 |
Section 6.02 |
Prohibition of Fundamental Changes |
34 |
Section 6.03 |
Reserved |
35 |
Section 6.04 |
Asset Schedule |
35 |
Section 6.05 |
No Adverse Claims |
35 |
Section 6.06 |
Assignment |
35 |
Section 6.07 |
Security Interest |
35 |
Section 6.08 |
Records |
35 |
Section 6.09 |
Books |
36 |
Section 6.10 |
Approvals |
36 |
Section 6.11 |
Material Change in Business |
36 |
Section 6.12 |
Distributions |
36 |
Section 6.13 |
Applicable Law |
36 |
Section 6.14 |
Existence |
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Section 6.15 |
Chief Executive Office; Jurisdiction of Organization |
36 |
Section 6.16 |
Taxes |
36 |
Section 6.17 |
Transactions with Affiliates |
36 |
Section 6.18 |
[Reserved] |
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Section 6.19 |
Indebtedness |
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Section 6.20 |
True and Correct Information |
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Section 6.21 |
No Pledge |
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Section 6.22 |
Plan Assets |
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Section 6.23 |
[Reserved] |
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Section 6.24 |
Modification of the Base Indenture and Series 2018-VF1 Indenture Supplement |
37 |
Section 6.25 |
Reporting Requirements |
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Section 6.26 |
Servicer Administration |
40 |
Section 6.27 |
[Reserved] |
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Section 6.28 |
[Reserved] |
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Section 6.29 |
MSR Valuation |
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ARTICLE VII |
DEFAULTS/RIGHTS AND REMEDIES OF BUYER UPON DEFAULT |
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Section 7.01 |
Events of Default |
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Section 7.02 |
No Waiver |
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Section 7.03 |
Due and Payable |
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Section 7.04 |
Fees |
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Section 7.05 |
Default Rate |
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ARTICLE VIII |
ENTIRE AGREEMENT; AMENDMENTSAND WAIVERS; SEPARATE ACTIONS BY BUYER |
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Section 8.01 |
Entire Agreement |
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Section 8.02 |
Waivers, Separate Actions by Buyer |
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ARTICLE IX |
SUCCESSORS AND ASSIGNS |
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Section 9.01 |
Successors and Assigns |
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Section 9.02 |
Participations and Transfers |
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Section 9.03 |
Buyer and Transaction Register |
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ARTICLE X |
MISCELLANEOUS |
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Section 10.01 |
Survival |
45 |
Section 10.02 |
Indemnification |
46 |
Section 10.03 |
Nonliability of Buyer |
46 |
Section 10.04 |
Governing Law; Submission to Jurisdiction; Waivers |
46 |
Section 10.05 |
Notices |
47 |
Section 10.06 |
Severability |
49 |
Section 10.07 |
Section Headings |
49 |
Section 10.08 |
Counterparts |
49 |
Section 10.09 |
Periodic Due Diligence Review |
50 |
Section 10.10 |
Hypothecation or Pledge of Repurchase Assets |
50 |
Section 10.11 |
Confidentiality; Non-Confidentiality of Tax Treatment |
50 |
Schedule 1 |
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Responsible Officers of Seller |
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Schedule 2 |
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Asset Schedule |
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Schedule 3 |
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Buyer Account |
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Exhibit A |
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Form of Transaction Notice |
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Exhibit B |
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Existing Indebtedness |
MASTER REPURCHASE AGREEMENT
This Master Repurchase Agreement (Agreement) is made as of August 13, 2018, among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (CSFB), as administrative agent (the Administrative Agent), CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (CSCIB), as buyer (Buyer), and AMERIHOME MORTGAGE COMPANY, LLC (AmeriHome), as seller (Seller). Capitalized terms have the meanings specified in Sections 1.01 and 1.02.
W I T N E S S E T H:
WHEREAS, pursuant to the Base Indenture and the Series 2018-VF1 Indenture Supplement, AmeriHome GMSR Issuer Trust (the Issuer) has duly authorized the issuance of a Series of Notes, as a single Class of Variable Funding Notes, known as the AmeriHome GMSR Issuer Trust MSR Collateralized Notes, Series 2018-VF1 (the Note);
WHEREAS, from time to time the parties hereto may enter into Transactions;
WHEREAS, Seller is the owner of the Note;
WHEREAS, Seller wishes to sell the Note to Buyer pursuant to the terms of this Agreement; and
WHEREAS, any proceeds from the Transactions involving the Note may be used for general corporate purposes.
NOW, THEREFORE, in consideration of the mutual agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Buyer and Seller hereby agree as follows.
ARTICLE I
DEFINITIONS
Section 1.01 Certain Defined Terms. Capitalized terms used herein shall have the indicated meanings:
1933 Act means the Securities Act of 1933, as amended from time to time.
1934 Act means the Securities Exchange Act of 1934, as amended from time to time.
Act of Insolvency means, with respect to any Person or its Affiliates, (a) the filing of a petition commencing, or authorizing the commencement of any case or proceeding, or the voluntary joining of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law relating to the protection of creditors, or suffering of any such petition or proceeding to be commenced by another which is consented to, not timely contested or results in entry of an order for relief; (b) the seeking of the appointment of a receiver,
trustee, custodian or similar official for such Person or its Affiliate or any substantial part of the property of either; (c) the appointment of a receiver, conservator, or manager for such Person or its Affiliate by any governmental agency or authority having the jurisdiction to do so; (d) the making or offering by such Person or its Affiliate of a composition with its creditors or a general assignment for the benefit of creditors; (e) the admission by such Person or its Affiliate of its inability to pay its debts or discharge its obligations as they become due or mature; or (f) that any governmental authority or agency or any Person acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of such Person or its Affiliate, or shall have taken any action to displace the management of such Person or its Affiliate or to curtail its authority in the conduct of the business of such Person or any of its Affiliates.
Additional Balance has the meaning set forth in Section 2.13.
Additional Funding has the meaning set forth in Section 2.13.
Additional Repurchase Assets has the meaning set forth in Section 4.02(c).
Administrative Agent has the meaning given to such term in the preamble to this Agreement.
Affiliate means, with respect to any Person, any affiliate of such Person, as such term is defined in the Bankruptcy Code; provided, however, that for purposes of this Agreement, Aris Mortgage Holding Company, LLC shall be deemed to be the only Affiliate of Seller.
Agreement has the meaning given to such term in the preamble to this Agreement.
Amortization Date has the meaning assigned to the term in the Pricing Side Letter.
Amortization Payment Amount has the meaning assigned to the term in the Pricing Side Letter.
AmeriHome has the meaning given to such term in the preamble to this Agreement.
Applicable Lending Office means the lending office of Buyer (or of an Affiliate of Buyer) designated on the signature page hereof or such other office of Buyer (or of an Affiliate of Buyer) as Buyer may from time to time specify to Seller in writing as the office by which the Transactions are to be made and/or maintained.
Asset Schedule means Schedule 2 attached hereto, which lists the Note, as such schedule shall be updated from time to time in accordance with Section 2.02, including in connection with Buyers approval of any Additional Balances pursuant to Section 2.13.
Asset Value has the meaning assigned to such term in the Pricing Side Letter.
Bankruptcy Code means the United States Bankruptcy Code of 1978, as amended from time to time.
Base Indenture means the Base Indenture, dated as of August 13, 2018, among Buyer, Citibank, N.A., as indenture trustee, as calculation agent, as paying agent and as securities intermediary, Seller, as administrator and as servicer, CSFB, as administrative agent, and the Credit Manager, including the schedules and exhibits thereto.
Base Rate means the LIBOR Rate.
Buyer means CSCIB, together with its successors, and any assignee of and Participant or Transferee in the Transaction.
Buyer Account means the account identified on Schedule 3 hereto.
Capital Lease Obligations means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.
Change in Control means:
(A) any transaction or event as a result of which Aris Mortgage Holding Company, LLC ceases to own, beneficially or of record, 100% of the membership interests of Seller;
(B) the sale, transfer, or other disposition of all or substantially all of Sellers assets (excluding any such action taken in connection with any securitization transaction); or
(C) the consummation of a merger or consolidation of Seller with or into another entity or any other corporate reorganization, if more than 50% of the combined voting power of the continuing or surviving entitys stock or other equity interests outstanding immediately after such merger, consolidation or such other reorganization is owned by Persons who were not stockholders or other equityholders of Seller immediately prior to such merger, consolidation or other reorganization.
Closing Date means August 13, 2018.
Code means the Internal Revenue Code of 1986, as amended from time to time.
Commitment means the obligation of Buyer to enter into Transactions with Seller with an aggregate outstanding Purchase Price at any one time not to exceed the Committed Amount.
Commitment Fee has the meaning assigned to the term in the Pricing Side Letter.
Commitment Period means the period from and including the Closing Date to but not including the Termination Date or such earlier date on which the Commitment shall have terminated pursuant to this Agreement.
Committed Amount has the meaning assigned to the term in the Pricing Side Letter.
Confidential Information has the meaning set forth in Section 10.11(b).
Control, Controlling or Controlled means the possession of the power to direct or cause the direction of the management or policies of a Person through the right to exercise voting power or by contract, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise.
Credit Manager means PentAlpha Surveillance LLC and any successor thereto in such capacity.
CSCIB has the meaning given to such term in the preamble to this Agreement.
CSFB has the meaning given to such term in the preamble to this Agreement.
Default means an Event of Default or an event that with notice or lapse of time, or both, would become an Event of Default.
Dollars and $ means dollars in lawful currency of the United States of America.
EO13224 has the meaning set forth in Section 3.25.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time.
ERISA Affiliate means any corporation or trade or business that, together with Seller is treated as a single employer under section 414(b) or (c) of the Code or solely for purposes of section 302 of ERISA and section 412 of the Code is treated as single employer described in section 414 of the Code.
ERISA Event of Termination means with respect to Seller (i) with respect to any Plan, a reportable event, as defined in section 4043 of ERISA, as to which the PBGC has not by regulation waived the requirement of section 4043(a) of ERISA that it be notified within [***] days of the occurrence of such event, or (ii) the withdrawal of Seller or any ERISA Affiliate thereof from a Plan during a plan year in which it is a substantial employer, as defined in section 4001(a)(2) of ERISA, or (iii) the failure by Seller or any ERISA Affiliate thereof to meet the minimum funding standard of section 412 of the Code or section 302 of ERISA with respect to any Plan, including the failure to make on or before its due date a required installment under section 412(m) of the Code (or Section 430(j) of the Code as amended by the Pension Protection Act) or section 302(e) of ERISA (or section 303(j) of ERISA, as amended by the Pension Protection Act), or (iv) the distribution under section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by Seller or any ERISA Affiliate thereof to terminate any plan, or (v) the failure
to meet requirements of Section 436 of the Code resulting in the loss of qualified status under section 401(a)(29) of the Code, or (vi) the institution by the PBGC of proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (vii) the receipt by Seller or any ERISA Affiliate thereof of a notice from a Multiemployer Plan that action of the type described in the previous clause (vi) has been taken by the PBGC with respect to such Multiemployer Plan, or (viii) any event or circumstance exists which may reasonably be expected to constitute grounds for Seller or any ERISA Affiliate thereof to incur liability under Title IV of ERISA or under sections 412(b) or 430(k) of the Code with respect to any Plan.
Event of Default has the meaning assigned to such term in Section 7.01.
Excluded Taxes means any of the following Taxes imposed on or with respect to Buyer or other recipient of any payment hereunder or required to be withheld or deducted from a payment to such Buyer or such other recipient: (a) Taxes based on (or measured by) net income or net profits, franchise Taxes and branch profits Taxes that are imposed on Buyer or other recipient of any payment hereunder as a result of (i) being organized under the laws of, or having its principal office or its Applicable Lending Office located in the jurisdiction imposing such Tax (or any political subdivision thereof), or (ii) a present or former connection between such Buyer or other recipient and the jurisdiction of the Governmental Authority imposing such Tax or any political subdivision or taxing authority thereof (other than connections arising from such Buyer or other recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced under this Agreement or any Program Agreement, or sold or assigned an interest in any Purchased Mortgage Loan); (b) any Tax imposed on Buyer or other recipient of a payment hereunder that is attributable to such Buyers or other recipients failure to comply with relevant requirements set forth in Section 2.11(e); (c) any withholding Tax that is imposed on amounts payable to or for the account of such Buyer or other recipient of a payment hereunder pursuant to a law in effect on the date such person becomes a party to or under this Agreement, or such person changes its lending office, except in each case to the extent that amounts with respect to Taxes were payable either to such persons assignor immediately before such person became a party hereto or to such person immediately before it changed its lending office; and (d) any U.S. federal withholding Taxes imposed under FATCA.
Existing Indebtedness has the meaning specified in Section 3.22.
Expenses means all present and future documented reasonable out-of-pocket expenses incurred by or on behalf of Buyer in connection with the negotiation, execution or enforcement of this Agreement or any of the other Program Agreements and any amendment, supplement or other modification or waiver related hereto or thereto, whether incurred heretofore or hereafter, which expenses shall include the reasonable and documented cost of title, lien, judgment and other record searches; reasonable and documented attorneys fees; any reasonable and documented third-party audit or due diligence costs in connection with valuation, entering into Transactions or determining whether a Margin Deficit may exist; and reasonable and documented costs of preparing and recording any UCC financing statements or other filings necessary to perfect the security interest created hereby, in each case subject to the limitations thereon (if applicable) as specified hereunder or under the other Program Agreements.
FATCA Sections 1471 through 1474 of the Code as of the date of this Agreement (or any amended or successor version that is substantially comparable and not materially more onerous to comply with), any current or future regulations or official interpretations thereof, any agreement entered into pursuant to section 1471(b) of the Code, or any U.S. or non-U.S. fiscal or regulatory legislation, guidance, notes, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such sections of the Code.
FDIA has the meaning assigned to such term in Section 10.13(c).
FDICIA has the meaning assigned to such term in Section 10.13(d).
Fidelity Insurance means insurance coverage with respect to employee errors, omissions, dishonesty, forgery, theft, disappearance and destruction, robbery and safe burglary, property (other than money and securities) and computer fraud in an aggregate amount that is satisfactory to Ginnie Mae.
Financial Statements means the consolidated financial statements of Seller prepared in accordance with GAAP for the year or other period then ended.
GAAP means generally accepted accounting principles in effect from time to time in the United States of America and applied on a consistent basis.
GLB Act has the meaning set forth in Section 10.11(b).
Governmental Actions means any and all consents, approvals, permits, orders, authorizations, waivers, exceptions, variances, exemptions or licenses of, or registrations, declarations or filings with, any Governmental Authority required under any Laws.
Governmental Authority means any nation or government, any state or other political subdivision thereof, or any entity exercising executive, legislative, judicial, regulatory or administrative functions over Seller, the Administrative Agent or Buyer, as applicable.
Guarantee means, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term Guarantee shall not include (a) endorsements for collection or deposit in the ordinary course of business, or (b) obligations to make servicing advances for delinquent taxes and insurance or other obligations in respect of a Mortgage Loan or Mortgaged Property. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. The terms Guarantee and Guaranteed used as verbs shall have correlative meanings.
Indebtedness means, for any Person: at any time, and only to the extent outstanding at such time: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business, so long as such trade accounts payable are payable within ninety (90) days after the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy back agreements or like arrangements, including any Indebtedness arising hereunder; (g) Indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (i) Indebtedness of general partnerships of which such Person is a general partner and (j) with respect to clauses (a) (i) above both on and off balance sheet.
Indemnified Taxes means Taxes, other than Excluded Taxes and Other Taxes, imposed on or with respect to any payment made by or on account of any obligation of Seller hereunder or under any Program Agreement.
Indenture means the Base Indenture, together with the Series 2018-VF1 Indenture Supplement thereto.
Indenture Trustee means Citibank, N.A., its permitted successors and assigns.
IRS has the meaning assigned to such term in Section 2.11(e).
Issuer has the meaning given to such term in the recitals to this Agreement.
Laws means any law (including common law), constitution, statute, treaty, regulation, rule, ordinance, order, injunction, writ, decree or award of any Governmental Authority.
LIBOR means the London interbank offered rate.
LIBOR Determination Date means for each Interest Accrual Period, the second (2nd) London Business Day prior to the commencement of such Interest Accrual Period.
LIBOR Index Rate means for a one-month period, the LIBOR per annum (rounded upward, if necessary, to the next higher one hundred-thousandth of a percentage point) for deposits in U.S. Dollars for a one-month period, which appears on the LIBOR01 Page as of 11:00 a.m. (London, England time) on the LIBOR Determination Date.
LIBOR Rate means, with respect to any Interest Accrual Period with respect to which interest is to be calculated by reference to the LIBOR Rate, (a) the LIBOR Index Rate for a one-month period, if such rate is available, (b) in the event that LIBOR and LIBOR Index Rate are phased out, and a new benchmark intended as a replacement for LIBOR and LIBOR Index Rate is established or administered by the Financial Conduct Authority or ICE Benchmark Administration or other comparable authority, and such new benchmark with a one-month maturity is readily available through Bloomberg or a comparable medium, then the Administrator, with the Administrative Agents written consent, shall direct the Indenture Trustee to utilize such new benchmark with a one-month maturity for all purposes hereof in place of the LIBOR Index Rate, and (c) if the LIBOR Index Rate cannot be determined or has been phased out and no new benchmark under clause (b) has been established, the arithmetic average of the rates of interest per annum (rounded upward, if necessary, to the nearest 1/100 of 1%) at which deposits in U.S. Dollars in immediately available funds are offered to the Administrative Agent at 11:00 a.m. (London, England time) two (2) London Business Days before the beginning of such one-month period by three (3) or more major banks in the interbank Eurodollar market selected by the Administrative Agent for delivery on the first day of and for a period equal to such one-month period and in an amount equal or comparable to the principal amount of the portion of the Note Balance on which the LIBOR Rate is being calculated.
LIBOR01 Page means the display designated as LIBOR01 Page on the Reuters Service (or such other page as may replace the LIBOR01 Page on that service or such other service as may be nominated by the ICE Benchmark Administration as an information vendor for the purpose of displaying ICE Benchmark Administration interest settlement rates for U.S. Dollar deposits).
Lien means, with respect to any property or asset of any Person (a) any mortgage, lien, pledge, charge or other security interest or encumbrance of any kind in respect of such property or asset or (b) the interest of a vendor or lessor arising out of the acquisition of or agreement to acquire such property or asset under any conditional sale agreement, lease purchase agreement or other title retention agreement.
London Business Days means any day on which commercial banks and foreign exchange markets settle payment in both London and New York City.
Margin has the meaning assigned to the term in the Pricing Side Letter.
Margin Call has the meaning set forth in Section 2.05(a).
Margin Deadlines has the meaning set forth in Section 2.05(b).
Margin Deficit has the meaning set forth in Section 2.05(a).
Market Value means, with respect to the Note as of any date of determination, and without duplication, the fair market value of the Note on such date as reasonably determined by the Administrative Agent in its sole discretion.
Material Adverse Effect means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or
prospects of Seller taken as a whole; (b) a material impairment of the ability of Seller to perform under any Program Agreement and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Program Agreement against Seller, in each case which change would materially and adversely affect the ability of Seller to perform its obligations under this Agreement.
Maximum Purchase Price has the meaning assigned to the term in the Pricing Side Letter.
MLRA Pricing Side Letter means that certain Second Amended and Restated Pricing Side Letter, dated as of May 9, 2018, by and among AmeriHome, as seller, CSFB, as administrative agent, CSCIB, as a buyer, Alpine Securitization LTD, as a buyer and other buyers from time to time.
Moodys means Moodys Investors Service, Inc. or any successors thereto.
Mortgage Loan Repurchase Agreement means that certain Second Amended and Restated Master Repurchase Agreement, dated as of May 9, 2018, by and among AmeriHome, as seller, AHMC Holding I LLC, as REO subsidiary, CSFB, as administrative agent, Credit Suisse AG, acting through its Cayman Islands Branch, as a buyer, and Alpine Securitization LTD, as a buyer, and other buyers from time to time.
MSR Excess Spread Participation Agreement means the MSR Excess Spread Participation Agreement, dated as of August 13, 2018, between AmeriHome, as company, and AmeriHome, as initial participant.
Multiemployer Plan means a multiemployer plan defined as such in Section 3(37) of ERISA to which contributions have been or are required to be made by Seller or any ERISA Affiliate and that is covered by Title IV of ERISA.
Non-Recourse Debt means liabilities for which the assets securing such obligations are the only source of repayment, subject to customary, non-recourse carve-outs. For the avoidance of doubt, Non-Recourse Debt shall include securitizations that meet the foregoing criteria.
Note has the meaning given to such term in the recitals to this Agreement.
Notice or Notices means all requests, demands and other communications, in writing (including e-mails), sent by overnight delivery service, electronic transmission or hand-delivery to the intended recipient at the address specified in Section 10.05 or, as to any party, at such other address as shall be designated by such party in a written notice to the other party.
Obligations means (a) all of Sellers indebtedness, obligations to pay the Repurchase Price on the Repurchase Date, the Price Differential on each Price Differential Payment Date, and other obligations and liabilities, to the Administrative Agent or Buyer arising under, or in connection with, the Program Agreements, whether now existing or hereafter arising; (b) any and all sums reasonably incurred and paid by the Administrative Agent, Buyer or the Administrative Agent (on behalf of Buyer) in order to preserve any Repurchase Asset or its interest
therein; (c) in the event of any proceeding for the collection or enforcement of any of Sellers indebtedness, obligations or liabilities referred to in clause (a) of this definition, the reasonable and documented out-of-pocket Expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on any Repurchase Asset, or of any exercise by Buyer of its rights under the Program Agreements, including reasonable external attorneys fees and disbursements and court costs; (d) all of Sellers indemnity obligations to the Administrative Agent or Buyer pursuant to the Program Agreements; and (e) all of Sellers obligations under the Mortgage Loan Repurchase Agreement and other Repurchase Documents.
OFAC has the meaning set forth in Section 3.25.
Officers Compliance Certificate has the meaning assigned to such term in the Pricing Side Letter.
One-Month LIBOR means the LIBOR quotations for one-month Eurodollar deposits for the succeeding Price Differential Period on the basis of the LIBOR Rate.
Other Taxes means any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes or any excise, sales, goods and services or transfer taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Program Agreement.
Participant has the meaning set forth in Section 9.02(a).
PBGC means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
PC Repurchase Agreement means the Master Repurchase Agreement, dated as of August 13, 2018, between the Issuer and Seller.
Pension Protection Act means the Pension Protection Act of 2006, as amended from time to time.
Person means an individual, partnership, corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.
Plan means an employee benefit or other plan established or maintained by any Seller or any ERISA Affiliate and covered by Title IV of ERISA, other than a Multiemployer Plan.
Price Differential means with respect to any Transaction as of any date of determination, an amount equal to the product of (A) the Pricing Rate for such Transaction and (B) the Purchase Price for such Transaction, calculated daily on the basis of a 360 day year for the actual number of days during the Price Differential Period.
Price Differential Payment Date means, for as long as any Obligations shall remain owing by Seller to Buyer, each Payment Date.
Price Differential Period means, the period from and including a Price Differential Payment Date, up to but excluding the next Price Differential Payment Date.
Price Differential Statement Date has the meaning set forth in Section 2.04.
Pricing Rate means Base Rate plus the applicable Margin.
Pricing Side Letter means the letter agreement dated as of the Closing Date, between Buyer, Seller, and the Administrative Agent.
Primary Repurchase Assets has the meaning set forth in Section 4.02(a).
Proceeds means proceeds as defined in Section 9-102(a)(64) of the UCC.
Program Agreements means this Agreement, Subservicer Side Letter Agreement, the Pricing Side Letter, the Base Indenture, the PC Repurchase Agreement, the MSR Excess Spread Participation Agreement and the Series 2018-VF1 Indenture Supplement.
Prohibited Person has the meaning set forth in Section 3.25.
Property means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.
Purchase Date means, subject to the satisfaction of the conditions precedent set forth in Article V, each Funding Date (as defined in the Indenture) on which a Transaction is entered into by Buyer pursuant to Section 2.02 or such other mutually agreed upon date as more particularly set forth in the related Transaction Notice.
Purchase Price means the price at which each Purchased Asset (or portion thereof) is transferred by Seller to Buyer, which shall equal on any date of determination, the difference between:
(i) the sum of (a) the Asset Value of such Purchased Asset on the related Purchase Date, plus (b) the product of the Purchase Price Percentage and the principal amount of any Additional Balances related to such Purchased Asset as of the related Purchase Date for such Additional Balances,
minus
(ii) the sum of (a) any Repurchase Price paid with respect to such Purchased Asset pursuant to Section 2.03, plus (b) any Additional Note Payment made with respect to such Purchased Asset pursuant to Section 4.4(b) or Section 4.5(e) of the Base Indenture, plus (c) any Redemption Amount paid pursuant to Section 13.1 of the Base Indenture, plus (d) any amounts due with respect to such Purchased Asset pursuant to Section 2.05(a).
Purchase Price Percentage has the meaning assigned to the term in the Pricing Side Letter.
Purchased Assets means, collectively, the Note (including all outstanding Additional Balances thereunder) together with the Repurchase Assets related to such Note, in each case transferred by Seller to Buyer in a Transaction hereunder, until such Note has been repurchased by Seller in accordance with the terms of this Agreement.
Records means all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by Seller, or any other person or entity with respect to the Purchased Assets.
Repurchase Assets has the meaning set forth in Section 4.02(c).
Repurchase Date means the earlier of (i) the Termination Date or (ii) the date requested by Seller on which the Repurchase Price is paid pursuant to Section 2.03.
Repurchase Documents means Program Agreements as defined in the Mortgage Loan Repurchase Agreement.
Repurchase Price means the price at which Purchased Assets are to be transferred from Buyer to Seller upon termination of a Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price and the accrued but unpaid Price Differential as of the date of such determination.
Repurchase Rights has the meaning set forth in Section 4.02(c).
Requirement of Law means, with respect to any Person, any law, treaty, rule or regulation or determination of an arbitrator, a court or other Governmental Authority, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
Responsible Officer means as to any Person, the chief executive officer, the chief financial officer, chief accounting officer, treasurer, director of finance, controller of such Person, or any other individual listed on Schedule 1 hereto.
SEC means the U.S. Securities and Exchange Commission, or any successor thereto.
Seller has the meaning assigned to such term in the preamble to this Agreement and includes AmeriHomes permitted successors and assigns.
Seller Termination Option means (a) Buyer has or shall incur costs in connection with those matters provided for in Section 2.10 or 2.11 and (b) Buyer requests that Seller pay to Buyer those costs in connection therewith.
Series 2018-VF1 Indenture Supplement means the Series 2018-VF1 Indenture Supplement, dated as of August 13, 2018, among the Issuer, Citibank, N.A., as indenture trustee, as calculation agent, as paying agent and as securities intermediary, AmeriHome, as administrator and as servicer, and CSFB, as administrative agent.
Subservicer Side Letter Agreement means (a) a side letter agreement, dated as of the Closing Date, among the Servicer, the Subservicer, the Administrative Agent and the Indenture Trustee, and (b) such other side letter agreements as may be entered into from time to time between an Eligible Subservicer and the Servicer, with the consent of the Administrative Agent in its reasonable discretion, relating to the servicing of the Portfolio Mortgage Loans.
Subsidiary means, with respect to any Person, any corporation, limited liability company, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.
Taxes means any and all present or future taxes (including social security contributions and value added taxes), levies, imposts, duties (including stamp duties), deductions, charges (including ad valorem charges), withholdings (including backup withholding), assessments, fees or other charges of any nature whatsoever imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
Termination Date has the meaning assigned to such term in the Pricing Side Letter.
Transaction means a transaction pursuant to which Seller transfers a Note or Additional Balances, as applicable, to Buyer against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer such Note or Additional Balances, as applicable, back to Seller at a date certain or on demand, against the transfer of funds by Seller.
Transaction Notice has the meaning assigned to such term in Section 2.02(a).
Transaction Register has the meaning assigned to such term in Section 9.03(b).
Transferee has the meaning set forth in Section 9.02(b).
Uniform Commercial Code or UCC means the Uniform Commercial Code as in effect on the Closing Date in the State of New York or the Uniform Commercial Code as in effect in the applicable jurisdiction.
U.S. Tax Compliance Certificate has the meaning assigned to such term in Section 2.11(e).
Section 1.02 Other Defined Terms.
(a) Any capitalized terms used and not defined herein shall have the meaning set forth in the Base Indenture or the Series 2018-VF1 Indenture Supplement, as applicable.
(b) The words hereof, herein and hereunder and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. Unless otherwise specified herein, the term or has the inclusive meaning represented by the term and/or and the term including is not limiting. All references to Sections, subsections, Articles and Exhibits shall be to Sections, subsections, and Articles of, and Exhibits to, this Agreement unless otherwise specifically provided.
(c) Reference to and the definition of any document (including this Agreement) shall be deemed a reference to such document as it may be amended or modified from time to time;
(d) In the computation of periods of time from a specified date to a later specified date, unless otherwise specified herein the words commencing on mean commencing on and including, the word from means from and including and the words to and until each means to but excluding.
ARTICLE II
GENERAL TERMS
Section 2.01 Transactions. Subject to the terms and conditions hereof, Buyer agrees to enter into Transactions with Seller for a Purchase Price outstanding at any one time not to exceed the Maximum Purchase Price. During the Commitment Period, Seller may utilize the Commitment by requesting Transactions, Seller may pay the Repurchase Price in whole or in part at any time during such period without penalty, and additional Transactions may be entered into in accordance with the terms and conditions hereof. Buyers obligation to enter into Transactions pursuant to the terms of this Agreement shall terminate on the Termination Date. Notwithstanding the foregoing, Buyer shall have no commitment or obligation to enter into Transactions in connection with the Note to the extent the Purchase Price of such Transaction exceeds the Committed Amount.
Section 2.02 Procedure for Entering into Transactions.
(a) Seller may enter into Transactions with Buyer under this Agreement during the Commitment Period on any Purchase Date; provided, that Seller shall have given Buyer irrevocable notice (each, a Transaction Notice), which notice (i) shall be substantially in the form of Exhibit A, (ii) shall be signed by a Responsible Officer of Seller and be received by Buyer prior to 3:00 p.m. (New York time) one (1) Business Day prior to the related Purchase Date, and (iii) shall specify: (A) the Maximum VFN Principal Balance of the Note; (B) the existing Note Balance of the Note and the Purchase Price requested; (C) Additional Balance of the Note and the Purchase Price thereof; (D) the new Note Balance Outstanding of the Note and the Repurchase Price thereof; (E) the effective Advance Rate of the Note; (F) the Dollar amount of the requested Purchase Price, (G) the Collateral Value of the MSRs, (H) the Series Invested Amount, and (I) any additional terms or conditions of the Transaction not inconsistent with this Agreement. Each Transaction Notice on any Purchase Date shall be in an amount equal to at least $500,000 and shall include an updated Asset Schedule.
(b) If Seller shall deliver to Buyer a Transaction Notice that satisfies the requirements of Section 2.02(a), Buyer will notify Seller of its intent to remit the requested Purchase Price one (1) Business Day prior to the requested Purchase Date. If all applicable conditions precedent set forth in Article V have been satisfied on or prior to the Purchase Date, then subject to the foregoing, on the Purchase Date, Buyer shall remit the amount of the requested Purchase Price in U.S. Dollars and in immediately available funds to the account specified in the Transaction Notice.
(c) Upon entering into each Transaction hereunder, the Asset Schedule shall be automatically updated and replaced with the Asset Schedule attached to the related Transaction Notice.
Section 2.03 Repurchase; Payment of Repurchase Price.
(a) Seller hereby promises to repurchase the Purchased Assets and pay all outstanding Obligations (other than those described in subpart (e) of the definition thereof) on the Termination Date. Upon repurchase of the Purchased Assets and payment in full of all outstanding Obligations, Buyer shall surrender the Note for exchange in accordance with the terms of Section 6.5(b) of the Base Indenture and shall surrender the Series 2018-ADV1 Note for payment and cancellation in accordance with the terms of Section 6.9 of the Base Indenture.
(b) Seller shall be permitted, at its option, to prepay, subject to Section 10.02, the Purchase Price in whole or in part, together with accrued and unpaid interest on the amount so prepaid, at any time; provided, that if the amount to be prepaid exceeds $10,000,000 or, if after giving effect to such prepayment the outstanding Purchase Price would be reduced below $10,000,000, Seller shall notify Buyer at least one (1) Business Day in advance.
(c) On each Price Differential Payment Date following the Amortization Date, Seller shall pay to Buyer in immediately available funds the Amortization Payment Amount.
Section 2.04 Price Differential. On each Price Differential Payment Date, Seller hereby promises to pay to Buyer all accrued and unpaid Price Differential on the Transactions, as invoiced by Buyer to Seller three (3) Business Days prior to the related Price Differential Payment Date (the Price Differential Statement Date); provided, that on each Price Differential Payment Date prior to the occurrence and continuation of an Event of Default, the estimated Price Differential owed hereunder shall be subject to a true-up of the amount determined by Buyer and delivered to Seller one (1) Business Day prior to the related Price Differential Payment Date.
Section 2.05 Margin Maintenance.
(a) If at any time the aggregate outstanding amount of the Purchase Price of the Note is greater than the Asset Value for the related Transaction (such excess, a Margin Deficit), then the Administrative Agent may by notice to Seller require Seller to transfer to the Administrative Agent for the benefit of Buyer cash in an amount at least equal to the Margin Deficit (such requirement, a Margin Call).
(b) Notice delivered pursuant to Section 2.05(a) may be given by any written or electronic means. With respect to a Margin Call, any notice given before 5:00 p.m. (New York
City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the following Business Day. With respect to a Margin Call, any notice given after 5:00 p.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the second (2nd) Business Day following the date of such notice. The foregoing time requirements for satisfaction of a Margin Call are referred to as the Margin Deadlines. The failure of Buyer, on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Buyer to do so at a later date. Seller and Buyer each agree that a failure or delay by Buyer to exercise its rights hereunder shall not limit or waive Buyers rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller.
(c) In the event that a Margin Deficit exists, Buyer may retain any funds received by it to which Seller would otherwise be entitled hereunder, which funds (i) may be held by Buyer against the related Margin Deficit (provided that the Buyer shall pay interest thereon at the overnight federal funds rate), or (ii) may be applied by Buyer or the Administrative Agent on its behalf against the Purchase Price. Notwithstanding the foregoing, Buyer retains the right, in its sole discretion, to make a Margin Call in accordance with the provisions of this Section 2.05.
Section 2.06 Payment Procedure. Seller absolutely, unconditionally, and irrevocably, shall make, or cause to be made, all payments required to be made by Seller hereunder. Seller shall deposit or cause to be deposited all amounts constituting collection, payments and proceeds of the Note (including all fees and proceeds of sale to a third party) to the Buyer Account.
Section 2.07 Application of Payments.
(a) On each Price Differential Payment Date prior to the occurrence of an Event of Default, all amounts received by Buyer from the Issuer in Buyers capacity as VFN Noteholder or that may otherwise be on deposit in the Buyer Account from and after the immediately preceding Price Differential Payment Date (or the Closing Date in connection with the initial Price Differential Payment Date), shall be applied as follows:
(i) first, to the payment of any accrued and unpaid Price Differential owing;
(ii) second, to the payment of Purchase Price outstanding to satisfy any Margin Deficit owing;
(iii) third, to the payment of any unpaid Amortization Payment Amount;
(iv) fourth, to payment of all other costs and fees payable to Buyer pursuant to this Agreement; and
(v) fifth, to the payment of Purchase Price outstanding as a result of any Additional Note Payment made pursuant to Section 4.4(b) or Section 4.5(e) of the Base Indenture; and
(vi) sixth, any remainder to Seller.
(b) Notwithstanding the preceding provisions, if an Event of Default shall have occurred hereunder, all funds related to the Note shall be applied as follows:
(i) first, to the payment of any accrued and unpaid Price Differential owing;
(ii) second, to the payment of Purchase Price until reduced to zero;
(iii) third, to payment of all other costs and fees payable to Buyer pursuant to this Agreement;
(iv) fourth, to the payment of any other Obligations; and
(v) fifth, any remainder to Seller.
Section 2.08 Use of Purchase Price and Transaction Requests. The Purchase Price shall be used by Seller to satisfy its obligations under the Indenture and for general corporate purposes, including financing the acquisition of additional mortgage loans and servicing rights, paying general operating expenses and other indebtedness and, subject to compliance with applicable requirements from time to time, paying dividends to its members.
Section 2.09 Recourse. Notwithstanding anything else to the contrary contained or implied herein or in any other Program Agreement, Buyer shall have full, unlimited recourse against Seller and its assets in order to satisfy the Obligations.
Section 2.10 Requirements of Law.
(a) If Buyer determines in good faith that, due to introduction of, any change in, or the compliance by such Buyer with any Requirement of Law or any change in the interpretation or application thereof or compliance by Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the Closing Date, there shall be a material increase in the cost to Buyer in engaging in the present or any future Transactions, then Seller agrees to pay to Buyer, from time to time, upon demand by the Buyer, the actual cost of additional amounts as specified by Buyer with reasonable supporting documentation in order to compensate it for such increased costs. If Buyer becomes entitled to claim any additional amounts pursuant to this Section 2.10, Seller shall pay such additional amounts to Buyer, and Buyer and Seller shall negotiate in good faith to mutually agree upon modified terms to this Agreement to account for such future additional amounts. If Seller and Buyer cannot agree upon such modified terms within thirty (30) days of Buyers notice to Seller of such changed circumstances, then Seller (i) may terminate this Agreement, and (ii) if it so elects to terminate this Agreement, shall immediately remit the Repurchase Price and any other amounts due and payable hereunder.
(b) If Buyer becomes entitled to claim any additional amounts pursuant to this Section 2.10, it shall promptly notify Seller of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this Section 2.10 containing reasonable detail in support of such amounts that is submitted by Buyer to Seller shall be conclusive in the absence of manifest error.
Section 2.11 Taxes.
(a) Any and all payments by or on behalf of Seller under or in respect of this Agreement or any other Program Agreements to which Seller is a party shall be made free and clear of, and without deduction or withholding for or on account of, any Taxes, unless required by law. If Seller shall be required under any applicable Requirement of Law (as determined in the good faith discretion of the applicable withholding agent) to deduct or withhold any Taxes from or in respect of any sum payable under or in respect of this Agreement or any of the other Program Agreements to Buyer (including for purposes of this Section 2.11, any assignee, successor or participant), (i) Seller shall make all such deductions and withholdings in respect of Taxes, (ii) Seller shall pay the full amount deducted or withheld in respect of Taxes to the relevant taxation authority or other Governmental Authority in accordance with any applicable Requirement of Law, and (iii) to the extent the withheld or deducted Tax is an Indemnified Tax or Other Tax, the sum payable by Seller shall be increased as may be necessary so that after Seller has made all required deductions and withholdings (including deductions and withholdings applicable to additional amounts payable under this Section 2.11) such Buyer receives an amount equal to the sum it would have received had no such deductions or withholdings been made.
(b) In addition, Seller hereby agrees to pay any Other Taxes.
(c) Seller hereby agrees to indemnify Buyer for any Indemnified Taxes or Other Taxes imposed on the Administrative Agent or Buyer (including Indemnified Taxes and Other Taxes imposed or asserted on or attributable to amounts payable under this Section 2.11 and any liability including penalties, additions to tax, interest and reasonable and documented out-of-pocket expenses arising therefrom or with respect thereto). The indemnity by Seller provided for in this Section 2.11 shall apply and be made whether or not the Indemnified Taxes or Other Taxes for which indemnification hereunder is sought have been correctly or legally asserted. Amounts payable by Seller under the indemnity set forth in this Section 2.11(c) shall be paid within ten (10) days from the date on which Buyer makes written demand therefor and provides reasonable supporting documentation in support of such demand.
(d) Without prejudice to the survival of any other agreement of Seller hereunder, each partys obligations contained in this Section 2.11 shall survive the termination of this Agreement and the other Program Agreements. Nothing contained in Section 2.10 or this Section 2.11 shall require any Buyer to make available any of its tax returns or any other information that it deems to be confidential or proprietary.
(e) The Administrative Agent shall and shall cause Buyer to deliver to Seller, at the time or times reasonably requested by Seller, such properly completed and executed documentation reasonably requested by Seller as will permit payments made hereunder to be made without withholding or at a reduced rate of withholding. In addition, the Administrative Agent shall and shall cause Buyer, if reasonably requested by Seller, to deliver such other documentation prescribed by applicable law or reasonably requested by Seller as will enable Seller to determine whether or not the Administrative Agent or such Buyer is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in this Section 2.11, the completion, execution and submission of such documentation (other than such documentation in Section 2.11(e)(A), (B) and (C) below) shall not be required if in Buyers judgment such
completion, execution or submission would subject such Buyer to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Buyer. Without limiting the generality of the foregoing, the Administrative Agent shall and shall cause Buyer to, deliver to Seller to the extent legally entitled to do so:
(A) in the case of Buyer or Buyer assignee or participant which is a U.S. Person as defined in section 7701(a)(30) of the Code, a properly completed and executed Internal Revenue Service (IRS) Form W-9 certifying that it is not subject to U.S. federal backup withholding tax;
(B) in the case of Buyer or Buyer assignee or participant which is not a U.S. Person as defined in Code section 7701(a)(30): (I) a properly completed and executed IRS Form W-8BEN, W-8BEN-E or W-8ECI, as appropriate, evidencing entitlement to a zero percent or reduced rate of U.S. federal income tax withholding on any payments made hereunder, (II) in the case of such non-U.S. Person claiming exemption from the withholding of U.S. federal income tax under Code sections 871(h) or 881(c) with respect to payments of portfolio interest, a duly executed certificate (a U.S. Tax Compliance Certificate) to the effect that such non-U.S. Person is not (x) a bank within the meaning of Code section 881(c)(3)(A), (y) a 10 percent shareholder of Seller or affiliate thereof, within the meaning of Code section 881(c)(3)(B), or (z) a controlled foreign corporation described in Code section 881(c)(3)(C), (III) to the extent such non-U.S. person is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate, IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if such non-U.S. person is a partnership and one or more direct or indirect partners of such non-U.S. person are claiming the portfolio interest exemption, such non-U.S. person may provide a U.S. Tax Compliance Certificate on behalf of each such direct and indirect partner, and (IV) executed originals of any other form or supplementary documentation prescribed by law as a basis for claiming exemption from or a reduction in United States federal withholding tax together with such supplementary documentation as may be prescribed by law to permit Seller to determine the withholding or deduction required to be made.
(C) if a payment made to Buyer or Buyer assignee or participant under this Agreement would be subject to U.S. federal withholding tax imposed by FATCA if such Buyer or assignee or participant were to fail to comply with the applicable reporting requirements of FATCA (including those contained in section 1471(b) or 1472(b) of the Code, as applicable), the Administrative Agent on behalf of such Buyer or assignee or participant shall deliver to Seller at the time or times prescribed by law and at such time or times reasonably requested by Seller such documentation prescribed by applicable law (including as prescribed by section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Seller as may be necessary for Seller to comply with its obligations under FATCA or to determine the amount to deduct and withhold from such
payment. Solely for purposes of this Section 2.11(e), FATCA shall include any amendments made to FATCA after the date of this Agreement.
The applicable IRS forms referred to above shall be delivered by the Administrative Agent on behalf of Buyer or Buyer assignee or participant on or prior to the date on which such person becomes Buyer or Buyer assignee or participant under this Agreement, as the case may be, and upon the obsolescence or invalidity of any IRS form previously delivered by it hereunder.
Section 2.12 Reserved.
Section 2.13 Additional Balance and Additional Funding. In the event that Seller wishes to obtain an increase in the VFN Principal Balance, Seller shall deliver to Buyer a copy of the VFN Note Balance Adjustment Request that is delivered under the Indenture. If the aggregate outstanding Purchase Price, after giving effect to the requested increase, exceeds the Committed Amount, with the consent of the Administrative Agent, in its sole discretion then upon approval in writing by Buyer of such increase in the VFN Principal Balance (such increase, upon such approval, an Additional Balance), (i) the outstanding VFN Principal Balance set forth in the Asset Schedule hereof shall be automatically updated and (ii) Buyer shall thereupon deliver to Seller cash in an amount (the Additional Funding) equal to the product of such Additional Balance and the Purchase Price Percentage.
Section 2.14 Commitment Fee. Seller shall pay the Commitment Fee, each as specified in the Pricing Side Letter. Such payments shall be made in Dollars, in immediately available funds, without deduction, set off or counterclaim, to Buyer at such account designated in writing by Buyer.
Section 2.15 Termination.
(a) Notwithstanding anything to the contrary set forth herein, if a Seller Termination Option occurs, Seller may, upon five (5) Business Days prior written notice of such event, terminate this Agreement and the Termination Date shall be deemed to have occurred (upon the expiration of such five (5) Business Day period).
(b) In the event that a Seller Termination Option as described in clause (a) of the definition thereof has occurred and Seller has notified Buyer in writing of its option to terminate this Agreement, Buyer shall have the right to withdraw such request for payment pursuant to Section 2.10 or Section 2.11 (as applicable) within three (3) Business Days of Sellers notice of its exercise of the Seller Termination Option and Seller shall no longer have the right to terminate this Agreement in connection with such withdrawn request.
(c) Seller shall remain responsible for all costs and expenses incurred by Buyer under this Agreement and under the Indenture prior to termination of this Agreement; provided, that with respect to any increased costs incurred by Buyer pursuant to Section 2.10 and Section 2.11 hereunder, Seller shall remain responsible for such increased costs from the date of the Seller Termination Option until such date that this Agreement terminates due to Sellers exercise thereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer as of the Closing Date and as of each Purchase Date for any Transaction that:
Section 3.01 Seller Existence. Seller has been duly organized and is validly existing as a limited liability company in good standing under the laws of the State of Delaware.
Section 3.02 Licenses. Seller is duly licensed or is otherwise qualified in each jurisdiction in which it transacts business for the business which it conducts and is not in material violation of any applicable federal, state or local laws, rules and regulations unless, in either instance, the failure to take such action is not reasonably likely (either individually or in the aggregate) to cause a Material Adverse Effect. Seller has the requisite power and authority and legal right to own, sell and grant a lien on all of its right, title and interest in and to the Note. Seller has the requisite power and authority and legal right to execute and deliver, engage in the transactions contemplated by, and perform and observe the terms and conditions of, this Agreement, each other Program Agreement and any Transaction Notice.
Section 3.03 Power. Seller has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect.
Section 3.04 Due Authorization. Seller has all necessary corporate or other power, authority and legal right to execute, deliver and perform its obligations under each of the Program Agreements, as applicable. This Agreement, any Transaction Notice and the Program Agreements have been (or, in the case of Program Agreements and any Transaction Notice not yet executed, will be) duly authorized, executed and delivered by Seller, all requisite or other corporate action having been taken, and each is (or will be, in the case of Program Agreements and any Transaction Notice not yet executed) valid, binding and enforceable against Seller in accordance with its terms except as such enforcement may be affected by bankruptcy, by other insolvency laws, or by general principles of equity.
Section 3.05 Financial Statements. Seller has heretofore furnished to Buyer a copy of (a) its balance sheet for the fiscal year of Seller ended December 31, 2017 and the related statements of income for Seller for such fiscal year, with the opinion thereon of PricewaterhouseCoopers LLP and (b) its balance sheet for the quarterly fiscal period of Seller ended March 31, 2018 and the related statements of income for Seller for such quarterly fiscal period. All such financial statements are accurate, complete and correct and fairly present, in all material respects, the financial condition of Seller (subject to normal year-end adjustments) and the results of its operations as at such dates and for such fiscal periods, all in accordance with GAAP applied on a consistent basis, and to the best of Sellers knowledge, do not omit any material fact as of the date(s) thereof. Since March 31, 2018, there has been no material adverse change in the consolidated business, operations or financial condition of Seller from that set forth in said
financial statements nor is Seller aware of any state of facts which (with notice or the lapse of time) would or could result in any such material adverse change. Seller has, on the date of the statements delivered pursuant to this Section, no liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements, and as of the Closing Date or the Purchase Date, as applicable, there are no material unrealized or anticipated losses from any loans, advances or other commitments of Seller except as heretofore disclosed to Buyer in writing.
Section 3.06 No Event of Default. There exists no Event of Default hereunder.
Section 3.07 Solvency. Seller is solvent and will not be rendered insolvent by any Transaction and, after giving effect to such Transaction, will not be left with an unreasonably small amount of capital with which to engage in its business. Seller does not intend to incur, nor believes that it has incurred, debts beyond its ability to pay such debts as they mature and is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of such entity or any of its assets. Seller is not selling and/or pledging any Repurchase Assets with any intent to hinder, delay or defraud any of its creditors.
Section 3.08 No Conflicts. The execution, delivery and performance by of Seller of this Agreement, any Transaction Notice hereunder and the Program Agreements do not conflict with or violate any term or provision of the organizational documents of Seller, and will not result in any violation of any mortgage, instrument, agreement or obligations to which Seller is a party or any law, rule, regulation, order, judgment, writ, injunction or decree applicable to Seller of any court, regulatory body, administrative agency or governmental body having jurisdiction over Seller, which conflict or violation would have a Material Adverse Effect.
Section 3.09 True and Complete Disclosure. All information, reports, exhibits, schedules, financial statements or certificates of Seller or any Affiliate thereof or any of their officers furnished or to be furnished to Buyer in connection with the initial or any ongoing due diligence of Seller or any Affiliate or officer thereof, negotiation, preparation, or delivery of the Program Agreements, taken as a whole, are (or will be, when furnished) true and complete in all material respects and do not (or will not, when furnished) omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading. All financial statements have been prepared in accordance with GAAP.
Section 3.10 Approvals. Other than the approval of Ginnie Mae or other approvals contemplated by the Program Agreements, no consent, approval, authorization or order of, registration or filing with, or notice to any governmental authority or court is required under applicable law in connection with the execution, delivery and performance by Seller of this Agreement, any Transaction Notice and the Program Agreements.
Section 3.11 Litigation. There is no action, proceeding or investigation pending with respect to which Seller has received service of process or, to the best of Sellers knowledge threatened against it before any court, administrative agency or other tribunal (A) asserting the invalidity of this Agreement, any Transaction, Transaction Notice or any Program Agreement,
(B) seeking to prevent the consummation of any of the transactions contemplated by this Agreement, any Transaction Notice or any Program Agreement, (C) makes a claim individually in an amount greater than $[***] or in the aggregate in an amount greater than $[***], (D) which requires filing with the U.S. Securities and Exchange Commission in accordance with the 1934 Act or any rules thereunder or (E) which might materially and adversely affect the validity of the Purchased Assets or the performance by it of its obligations under, or the validity or enforceability of, this Agreement, any Transaction Notice or any Program Agreement.
Section 3.12 [Reserved].
Section 3.13 Ownership. Except as contemplated by the Program Agreements, and in each case subject to the priority interest of the Indenture Trustee and of Ginnie Mae to the extent applicable:
(a) Seller has good title to all of the Repurchase Assets, free and clear of all mortgages, security interests, restrictions, Liens and encumbrances of any kind other than the Liens created hereby or contemplated herein.
(b) Each item of the Repurchase Assets was acquired by Seller in the ordinary course of its business, in good faith, for value and without notice of any defense against or claim to it on the part of any Person.
(c) There are no agreements or understandings between Seller and any other party which would modify, release, terminate or delay the attachment of the security interests granted to Buyer under this Agreement.
(d) The provisions of this Agreement are effective to create in favor of Buyer a valid security interest in all right, title and interest of Seller in, to and under the Repurchase Assets.
(e) Upon the filing of financing statements on Form UCC-1 naming Buyer as Secured Party and Seller as Debtor, and describing the Repurchase Assets, in the recording offices of the Secretary of State of Delaware the security interests granted hereunder in the Repurchase Assets will constitute fully perfected security interests under the Uniform Commercial Code in all right, title and interest of Seller in, to and under such Repurchase Assets to the extent that such security interests can be perfected by filing under the Uniform Commercial Code.
Section 3.14 The Note. Seller has (i) delivered the Note to Buyer, (ii) duly endorsed the Note to Buyer or Buyers designee, (iii) notified the Indenture Trustee of such transfer and (iv) completed all documents required to effect such transfer in the Note Register, including receipt by the Note Registrar of the Rule 144A Note Transfer Certificate and such other information and documents that may be required pursuant to the terms of the Indenture. In addition, Buyer has received all other Program Agreements (including all exhibits and schedules referred to therein or delivered pursuant thereto), all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof and all agreements and other material documents relating thereto, and Seller hereby certifies that the copies delivered to Buyer by Seller are true and complete in all material respects. None of such documents has been amended, supplemented or otherwise modified (including waivers) since the respective dates thereof, except by amendments, copies of which have been delivered to Buyer. Each such
document to which Seller is a party has been duly executed and delivered by Seller and is in full force and effect, and no default or material breach by Seller, and to Sellers knowledge, any other party thereto, has occurred and is continuing thereunder.
Section 3.15 Taxes. Seller and its Subsidiaries have timely filed (which filings shall be considered timely if made pursuant to a validly obtained extension for such filing) all income tax returns and other material tax returns that are required to be filed by them and have paid all material taxes due and payable, except for any such taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided. The charges, accruals and reserves on the books of Seller and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of Seller, adequate.
Section 3.16 Investment Company. Neither Seller nor any of its Subsidiaries is an investment company, or a company controlled by an investment company, within the meaning of the Investment Company Act of 1940, as amended.
Section 3.17 Chief Executive Office; Jurisdiction of Organization. On the Closing Date, Sellers chief executive office, is, and has been, located at 21215 Burbank Boulevard, 4th Floor, Woodland Hills, California 91367-7090. On the Closing Date, Sellers jurisdiction of organization is the State of Delaware. Seller shall provide Buyer with thirty (30) days advance notice of any change in Sellers principal office or place of business or jurisdiction; provided, however, that the Seller intends to, on or about August 24, 2018, relocate its chief executive office to 1 Baxter Way, Westlake Village, California 91362, which relocation shall not require further notice or consent to be provided hereunder. The only trade names used by the Seller are AmeriHome Funding, LLC, AmeriHome Mortgage, and AMC, LLC. Since March 6, 2014, Seller has not been known by or done business under any other name (other than as set forth in the prior sentence), corporate or fictitious, and has not filed or had filed against it any bankruptcy receivership or similar petitions nor has it made any assignments for the benefit of creditors.
Section 3.18 Location of Books and Records. The location where Seller keeps its books and records, including all computer tapes and records relating to the Repurchase Assets is its chief executive office or at the offices of the Eligible Subservicer; provided, however, that electronic records may also be maintained at backup data centers or via cloud-based storage.
Section 3.19 ERISA. Either Seller and its ERISA Affiliates (i) have no Plans in effect, or (ii) except as would not reasonably be expected to result in a Material Adverse Effect, each Plan to which Seller or its Subsidiaries make direct contributions, and, to the knowledge of Seller, each other Plan and each Multiemployer Plan, are in compliance in all material respects with, and have been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other Federal or State law.
Section 3.20 Financing of Note and Additional Balances. Each Transaction will be used to purchase the Note and for funding of the Additional Balances relating thereto as provided herein, which Note will be conveyed and/or sold by Seller to Buyer.
Section 3.21 Reserved.
Section 3.22 Other Indebtedness. All material Indebtedness (other than Indebtedness incurred under the Program Agreements) of Seller existing on the Closing Date is listed on Exhibit B hereto (the Existing Indebtedness).
Section 3.23 No Reliance. Seller has made its own independent decisions to enter into the Program Agreements and each Transaction and as to whether such Transaction is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including legal counsel and accountants) as it has deemed necessary. Seller is not relying upon any advice from Buyer as to any aspect of the Transactions, including the legal, accounting or tax treatment of such Transactions.
Section 3.24 Plan Assets. Seller is not an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in section 4975(e)(1) of the Code, and the Purchased Assets are not plan assets within the meaning of 29 C.F.R. § 2510.3-101, as amended by section 3(42) of ERISA, in Sellers hands, and transactions by or with Seller are not subject to any state or local statute regulating investments or fiduciary obligations with respect to governmental plans within the meaning of section 3(32) of ERISA.
Section 3.25 No Prohibited Persons. Neither Seller nor any of its Affiliates, officers, directors, partners or members, is an entity or person (or to Sellers knowledge, owned or controlled by an entity or person): (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 (EO13224); (ii) whose name appears on the United States Treasury Departments Office of Foreign Assets Control (OFAC) most current list of Specifically Designated National and Blocked Persons (which list may be published from time to time in various mediums including the OFAC website, http:www.treas.gov/ofac/t11sdn.pdf); (iii) who commits, threatens to commit or supports terrorism, as that term is defined in EO13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a Prohibited Person).
Section 3.26 Compliance with 1933 Act. Except as contemplated by the Program Agreements, neither Seller nor anyone acting on its behalf has offered, transferred, pledged, sold or otherwise disposed of the Note, any interest in the Note or any other similar security to, or solicited any offer to buy or accept a transfer, pledge or other disposition of the Note, any interest in the Note or any other similar security from, or otherwise approached or negotiated with respect to the Note, any interest in the Note or any other similar security with, any person in any manner, or made any general solicitation by means of general advertising or in any other manner, or taken any other action which would constitute a distribution of the Note under the 1933 Act or which would render the disposition of the Note a violation of Section 5 of the 1933 Act or require registration pursuant thereto.
ARTICLE IV
CONVEYANCE; REPURCHASE ASSETS; SECURITY INTEREST
Section 4.01 Ownership. Upon payment of the Purchase Price and delivery of the Note to Buyer, Buyer shall become the sole owner of the Note, free and clear of all liens and encumbrances.
Section 4.02 Security Interest.
(a) Although the parties intend (other than for U.S. federal tax purposes) that all Transactions hereunder be sales and purchases and not loans, in the event any such Transactions are deemed to be loans, and in any event, Seller hereby pledges to Buyer as security for the performance by Seller of its Obligations and hereby grants, assigns and pledges to Buyer a fully perfected first priority security interest in all of Sellers right, title and interest in, to and under each of the following items of property, whether now owned or hereafter acquired, now existing or hereafter created and wherever located, is hereinafter referred to as the Primary Repurchase Assets:
(i) the Note identified on the Asset Schedule;
(ii) all rights to reimbursement or payment of the Note and/or amounts due in respect thereof under the Note identified on the Asset Schedule;
(iii) all records, instruments or other documentation evidencing any of the foregoing;
(iv) all general intangibles, accounts, chattel paper, securities accounts, investment property, deposit accounts and money as defined in the Uniform Commercial Code relating to or constituting any and all of the foregoing (including all of Sellers rights, title and interest in and under the Base Indenture and the Series 2018-VF1 Indenture Supplement); and
(v) any and all replacements, substitutions, distributions on or proceeds of any and all of the foregoing.
(b) Reserved.
(c) Subject to the priority interest of the Issuer, Indenture Trustee and Ginnie Mae, as applicable, Buyer and Seller hereby agree that in order to further secure Sellers Obligations hereunder, Seller hereby grants to Buyer a security interest in (i) as of the Closing Date, Sellers rights (but not its obligations) under the Program Agreements including any rights to receive payments thereunder or any rights to collateral thereunder whether now owned or hereafter acquired, now existing or hereafter created (collectively, the Repurchase Rights) and (ii) all collateral however defined or described under the Program Agreements to the extent not otherwise included under the definitions of Primary Repurchase Assets or Repurchase Rights (such collateral, Additional Repurchase Assets, and collectively with the Primary Repurchase Assets
and the Repurchase Rights, the Repurchase Assets). Seller agrees to mark its records to evidence the interests granted to Buyer hereunder.
(d) Seller hereby delivers an irrevocable instruction to the buyer under the Repurchase Documents that upon receipt of notice of an Event of Default under this Agreement, the buyer thereunder is authorized and instructed to remit to Buyer hereunder directly any amounts otherwise payable to Seller and to deliver to Buyer all collateral otherwise deliverable to Seller. In furtherance of the foregoing, upon repayment of the outstanding purchase price under the Mortgage Loan Repurchase Agreement and termination of all obligations of the buyer thereunder or other termination of the Repurchase Documents following repayment of all obligations thereunder, the Repurchase Document buyer is hereby instructed to deliver to Buyer hereunder any collateral (as such term may be defined under the Repurchase Documents) then in its possession or control.
(e) The foregoing provisions of this Section 4.02 are intended to constitute a security agreement or other arrangement or other credit enhancement related to this Agreement and the Transactions hereunder as defined under Sections 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.
Section 4.03 Further Documentation. At any time and from time to time, upon the written request of Buyer, and at the sole expense of Seller, Seller will promptly and duly execute and deliver, or will promptly cause to be executed and delivered, such further instruments and documents and take such further action as Buyer may reasonably request for the purpose of obtaining or preserving the full benefits of this Agreement and of the rights and powers herein granted, including the filing of any financing or continuation statements under the Uniform Commercial Code in effect in any applicable jurisdiction with respect to the Liens created hereby. Seller also hereby authorizes Buyer to file any such financing or continuation statement to the extent permitted by applicable law.
Section 4.04 Changes in Locations, Name, etc. Seller shall not (a) change the location of its chief executive office/chief place of business from that specified in Section 3.17 or (b) change its name or identity, unless it shall have given Buyer at least thirty (30) days prior written notice thereof and shall have delivered to Buyer all Uniform Commercial Code financing statements and amendments thereto as Buyer shall reasonably request and taken all other actions deemed necessary by Buyer to continue its perfected status in the Repurchase Assets with the same or better priority. Notwithstanding the foregoing, the Seller intends to, on or about August 24, 2018, relocate its chief executive office to 1 Baxter Way, Westlake Village, California 91362. No additional notice or consent need be provided in connection with such relocation; provided that Seller shall deliver to Buyer all Uniform Commercial Code financing statements and amendments thereto as Buyer shall reasonably request and take all other actions deemed necessary by Buyer to continue its perfected status in the Repurchase Assets with the same or better priority.
Section 4.05 Performance by Buyer of Sellers Obligations. If Seller fails to perform or comply with any of its agreements contained in the Program Agreements and such failure constitutes a default hereunder, Buyer may itself perform or comply, or otherwise cause performance or compliance, with such agreement, the reasonable (under the circumstances) out-of-pocket expenses of Buyer actually incurred in connection with such performance or compliance,
together with interest thereon at a rate per annum equal to the Pricing Rate shall be payable by Seller to Buyer on demand and shall constitute Obligations. Notwithstanding the foregoing, (1) prior to a default becoming an Event of Default hereunder, the Buyer shall not act on the Sellers behalf pursuant to this Section 4.05 unless (a) it has provided notice to Seller of its intent to act, (b) allowed the Seller the lesser of (i) the applicable cure period for such default hereunder or (ii) three (3) Business Days to investigate the default, and (c) the Seller has failed to advise the Buyer within such applicable period of its good faith efforts which are reasonably anticipated to cure such default prior to it becoming an Event of Default.
Section 4.06 Proceeds. If an Event of Default shall occur and be continuing, (a) all proceeds of Repurchase Assets received by Seller consisting of cash, checks and other liquid assets readily convertible to cash items shall be held by Seller in trust for Buyer, segregated from other funds of Seller, and shall forthwith upon receipt by Seller be turned over to Buyer in the exact form received by Seller and (b) any and all such proceeds received by Buyer (whether from Seller or otherwise) may, in the sole discretion of Buyer, be held by Buyer as collateral security for, and/or then or at any time thereafter may be applied by Buyer against, the Obligations (whether matured or unmatured), such application to be in such order as Buyer shall elect. Any balance of such proceeds remaining after the Obligations shall have been paid in full and this Agreement shall have been terminated shall be paid over to Seller or to whomsoever may be lawfully entitled to receive the same.
Section 4.07 Remedies. If an Event of Default shall occur and be continuing, Buyer may exercise, in addition to all other rights and remedies granted to it in this Agreement and in any other instrument or agreement securing, evidencing or relating to the Obligations, all rights and remedies of a secured party under the Uniform Commercial Code (including Buyers rights to a strict foreclosure under Section 9-620 of the Uniform Commercial Code). Without limiting the generality of the foregoing, Buyer may seek the appointment of a receiver, liquidator, conservator, trustee, or similar official in respect of Seller or any of Sellers property. Without limiting the generality of the foregoing, Buyer may terminate the Participation Interest in accordance with the MSR Excess Spread Participation Agreement. Buyer without demand of performance or other demand, presentment, protest, advertisement or notice of any kind (except any notice required under this Agreement or by law referred to below) to or upon Seller or any other Person (each and all of which demands, presentments, protests, advertisements and notices are hereby waived), may in such circumstances forthwith collect, receive, appropriate and realize upon the Repurchase Assets, or any part thereof, and/or may forthwith sell, lease, assign, give option or options to purchase, or otherwise dispose of and deliver the Repurchase Assets or any part thereof (or contract to do any of the foregoing), in one or more parcels or as an entirety at public or private sale or sales, at any exchange, brokers board or office of Buyer or elsewhere upon such terms and conditions as it may deem advisable and at such prices as it may deem best, for cash or on credit or for future delivery without assumption of any credit risk. Buyer shall have the right upon any such public sale or sales, and, to the extent permitted by law, upon any such private sale or sales, to purchase the whole or any part of the Repurchase Assets so sold, free of any right or equity of redemption in Seller, which right or equity is hereby waived or released. Seller further agrees, at Buyers request, to assemble the Repurchase Assets and make them available to Buyer at places which Buyer shall reasonably select, whether at Sellers premises or elsewhere. Buyer shall apply the net proceeds of any such collection, recovery, receipt, appropriation, realization or sale, after deducting all reasonable (under the circumstances) out-of-
pocket costs and expenses of every kind actually incurred therein or incidental to the care or safekeeping of any of the Repurchase Assets or in any way relating to the Repurchase Assets or the rights of Buyer hereunder, including reasonable external attorneys fees and disbursements, to the payment in whole or in part of the Obligations, in such order as Buyer may elect, and only after such application and after the payment by Buyer of any other amount required or permitted by any provision of law, including Section 9-615 of the Uniform Commercial Code, need Buyer account for the surplus, if any, to Seller. To the extent permitted by applicable law, Seller waives all claims, damages and demands it may acquire against Buyer arising out of the exercise by Buyer of any of its rights hereunder, other than those claims, damages and demands arising from the gross negligence or willful misconduct of Buyer. If any notice of a proposed sale or other disposition of Repurchase Assets shall be required by law, such notice shall be deemed reasonable and proper if given at least ten (10) days before such sale or other disposition. Seller shall remain liable for any deficiency (plus accrued interest thereon as contemplated herein) if the proceeds of any sale or other disposition of the Repurchase Assets are insufficient to pay the Obligations and the documented out-of-pocket fees and disbursements in amounts reasonable under the circumstances, of any external attorneys engaged by Buyer to collect such deficiency. Notwithstanding anything to the contrary herein or in any of the other Program Agreements, the remedies set forth in this Section 4.07 concerning any actions with respect to the MSRs arising under or related to any Servicing Contract shall be subject to the Acknowledgment Agreement entered into with Ginnie Mae.
Section 4.08 Limitation on Duties Regarding Preservation of Repurchase Assets. Buyers duty with respect to the custody, safekeeping and physical preservation of the Repurchase Assets in its possession, under Section 9-207 of the Uniform Commercial Code or otherwise, shall be to deal with it in the same manner as Buyer deals with similar property for its own account. Neither Buyer nor any of its directors, officers or employees shall be liable for failure to demand, collect or realize upon all or any part of the Repurchase Assets or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Repurchase Assets upon the request of Seller or otherwise.
Section 4.09 Powers Coupled with an Interest. All authorizations and agencies herein contained with respect to the Repurchase Assets are irrevocable and powers coupled with an interest.
Section 4.10 Release of Security Interest. Upon the latest to occur of (a) the repayment to Buyer of all Obligations hereunder, and (b) the occurrence of the Termination Date, Buyer shall release its security interest in any remaining Repurchase Assets hereunder and shall promptly execute and deliver to Seller such documents or instruments as Seller shall reasonably request to evidence such release.
Section 4.11 Reinstatement. All security interests created by this Article IV shall continue to be effective, or be reinstated, as the case may be, if at any time any payment, or any part thereof, of any Obligation of Seller is rescinded or must otherwise be restored or returned by Buyer upon the insolvency, bankruptcy, dissolution, liquidation or reorganization of Seller or upon or as a result of the appointment of a receiver, intervener or conservator of, or trustee or similar officer for, Seller or any substantial part of its property, or otherwise, all as if such release had not been made.
Section 4.12 Subordination. Seller shall not seek in any Insolvency Event of the Issuer to be treated as part of the same class of creditors as Buyer and shall not oppose any pleading or motion by Buyer advocating that Buyer and Seller should be treated as separate classes of creditors. Seller acknowledges and agrees that its rights with respect to the Repurchase Assets are and shall continue to be at all times junior and subordinate to the rights of Buyer under this Agreement.
ARTICLE V
CONDITIONS PRECEDENT
Section 5.01 Initial Transaction. The obligation of Buyer to purchase the Note is subject to the satisfaction on or prior to the Closing Date of the following conditions (any or all of which may be waived by Buyer):
(a) Receipt of Information. Buyer shall have received all of the following items, each of which shall be satisfactory to Buyer and its counsel (in their reasonable discretion) in form and substance:
(i) Program Agreements and Note. The Program Agreements and Note, in all instances duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver.
(ii) Security Interest. Evidence that all other actions necessary or, in the opinion of Buyer, desirable to perfect and protect Buyers interest in the Repurchase Assets have been taken, including duly authorized and filed Uniform Commercial Code financing statements on Form UCC-1.
(iii) Organizational Documents. A certificate of the corporate secretary of Seller in form and substance acceptable to Buyer, attaching certified copies of Sellers certificate of formation, operating agreement and corporate resolutions approving the Program Agreements and transactions thereunder (either specifically or by general resolution) and all documents evidencing other necessary corporate action or governmental approvals as may be required in connection with the Program Agreements.
(iv) Good Standing Certificate. A certified copy of a good standing certificate from the jurisdiction of organization of Seller, dated as of no earlier than the date ten (10) Business Days prior to the Closing Date.
(v) Incumbency Certificate. An incumbency certificate of the corporate secretary of Seller, certifying the names, true signatures and titles of the representatives duly authorized to request transactions hereunder and to execute the Program Agreements.
(b) Performance by the Issuer and AmeriHome. All the terms, covenants, agreements and conditions of the Transaction Documents to be complied with, satisfied, observed
and performed by the Issuer, and AmeriHome on or before the Closing Date shall have been complied with, satisfied, observed and performed in all material respects.
(c) Representations and Warranties. Each of the representations and warranties of the Issuer and AmeriHome made in the Transaction Documents shall be true and correct in all material respects (except that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof) as of the Closing Date (except to the extent the representations and warranties expressly relate to an earlier or later time).
(d) Officers Certificate. The Administrative Agent, Buyer and the Indenture Trustee shall have received in form and substance reasonably satisfactory to the Administrative Agent an officers certificate from AmeriHome and a certificate of an Responsible Officer of the Issuer, dated the Closing Date, each certifying to the satisfaction of the conditions set forth in the preceding paragraphs (a) and (b), in each case together with incumbency, by-laws, resolutions and good standing.
(e) Opinions of Counsel to the Issuer and AmeriHome. Counsel to the Issuer and Seller shall have delivered to the Administrative Agent, Buyer and the Indenture Trustee favorable opinions, dated the Closing Date and satisfactory in form and substance to the Administrative Agent and its counsel, relating to corporate matters, enforceability, securities contract, non-consolidation and perfection and an opinion as to which states law applies to security interest and perfection matters. In addition to the foregoing, AmeriHome, as servicer, shall have caused its counsel to deliver to the Issuer, Buyer, as purchaser of the Note hereunder, the Administrative Agent and the Indenture Trustee an opinion as to certain tax matters dated as of the Closing Date, satisfactory in form and substance to the Administrative Agent, Buyer and their respective counsel.
(f) Officers Certificate of Indenture Trustee. The Administrative Agent and Buyer shall have received in form and substance reasonably satisfactory to the Administrative Agent an Officers Certificate from the Indenture Trustee, dated the Closing Date, with respect to the Base Indenture, together with incumbency and good standing; provided, however, that the foregoing shall not be duplicative of any other obligation to deliver such certificate as set forth in the Transaction Documents.
(g) Opinions of Counsel to the Indenture Trustee. Counsel to the Indenture Trustee shall have delivered to the Administrative Agent and Buyer a favorable opinion dated the Closing Date and reasonably satisfactory in form and substance to the Administrative Agent and its counsel related to the enforceability of the Base Indenture; provided, however, that the foregoing shall not be duplicative of any other obligation to deliver such opinion as set forth in the Transaction Documents.
(h) Opinions of Counsel to the Owner Trustee. Delaware counsel to the Owner Trustee of the Issuer shall have delivered to the Administrative Agent and Buyer favorable opinions regarding the formation, existence and standing of the Issuer and of the Issuers execution, authorization and delivery of each of the Transaction Documents to which it is a party and such other matters as the Administrative Agent and Buyer may reasonably request, dated the
Closing Date and reasonably satisfactory in form and substance to the Administrative Agent and Buyer and their respective counsel; provided, however, that the foregoing shall not be duplicative of any other obligation to deliver such opinions as set forth in the Transaction Documents.
(i) Filings and Recordations. The Administrative Agent, Buyer and the Indenture Trustee shall have received evidence reasonably satisfactory to the Administrative Agent of (i) the completion of all recordings, registrations and filings as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to perfect or evidence the assignment by AmeriHome, as Seller, to the Issuer of the ownership interest in the Collateral conveyed pursuant to the PC Repurchase Agreement and the proceeds thereof and (ii) the completion of all recordings, registrations, and filings as may be necessary or, in the reasonable opinion of the Administrative Agent, desirable to perfect or evidence the grant of a first priority perfected security interest in the Issuers ownership interest in the Collateral in favor of the Indenture Trustee, subject to no Liens prior to the Lien created by the Base Indenture, other than those of Ginnie Mae (as applicable).
(j) Documents. The Administrative Agent, Buyer and the Indenture Trustee shall have received a duly executed counterpart of each of the Transaction Documents, in form acceptable to Buyer, the Note and each and every document or certification delivered by any party in connection with any such Transaction Documents or the Note, and each such document shall be in full force and effect.
(k) Actions or Proceedings. No action, suit, proceeding or investigation by or before any Governmental Authority shall have been instituted to restrain or prohibit the consummation of, or to invalidate, any of the transactions contemplated by the Transaction Documents, the Note and the documents related thereto in any material respect.
(l) Approvals and Consents. All Governmental Actions of all Governmental Authorities required with respect to the transactions contemplated by the Transaction Documents, the Note and the documents related thereto shall have been obtained or made.
(m) Fees, Costs and Expenses. Buyer shall have received payment in full of all fees and Expenses (including the Initial Commitment Fee) which are payable hereunder to Buyer on or before the Closing Date, and the fees, costs and expenses payable by the Issuer and AmeriHome on or prior to the Closing Date pursuant to this Agreement or any other Transaction Document shall have been paid in full, provided that in each case such amounts have been invoiced to the Seller or the Issuer, as applicable.
(n) Other Documents. AmeriHome shall have furnished to the Administrative Agent, Buyer and the Indenture Trustee such other opinions, information, certificates and documents as the Administrative Agent may reasonably request.
(o) MSR Valuation Agent. AmeriHome shall have engaged the MSR Valuation Agent pursuant to an agreement reasonably satisfactory to the Administrative Agent.
(p) Proceedings in Contemplation of Sale of the Note. All actions and proceedings undertaken by the Issuer and AmeriHome in connection with the issuance and sale of
the Note as herein contemplated shall be satisfactory in all respects to the Administrative Agent, Buyer and their respective counsel.
(q) Advance Rate Reduction Event, Servicer Termination Events, Events of Default and Funding Interruption Events. No Advance Rate Reduction Event, Servicer Termination Event, Event of Default or Funding Interruption Event shall then be occurring.
(r) Diligence. The Administrative Agent and Buyer shall have completed, to their satisfaction, their due diligence review of the Repurchase Assets, Seller and the Servicer.
(s) Satisfaction of Conditions. Each of the Funding Conditions shall have been satisfied.
Section 5.02 All Transactions. The obligation of Buyer to enter into each Transaction pursuant to this Agreement is subject to the following conditions precedent:
(a) Transaction Notice and Asset Schedule. In accordance with Section 2.02, Buyer shall have received from Seller a Transaction Notice with an Asset Schedule that has been updated to include the Note and any Additional Balance, if applicable, related to a proposed Transaction hereunder as of the date of such Transaction Notice.
(b) No Margin Deficit. After giving effect to each new Transaction, the aggregate outstanding amount of the Purchase Price shall not exceed the Asset Value of the Note then in effect.
(c) No Default. No Default or Event of Default shall have occurred and be continuing.
(d) Requirements of Law. Buyer shall not have determined that the introduction of or a change in any Requirement of Law or in the interpretation or administration of any Requirement of Law applicable to Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Buyer to enter into Transactions with a Pricing Rate based on Base Rate.
(e) Representations and Warranties. Both immediately prior to the related Transaction and also after giving effect thereto and to the intended use thereof, the representations and warranties made by Seller in each Program Agreement shall be true, correct and complete on and as of such Purchase Date in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
(f) Note. Buyer shall have received the Note relating to any Purchased Assets, which is in form and substance satisfactory to Buyer in its sole discretion.
(g) Material Adverse Change. None of the following shall have occurred and/or be continuing:
(A) Buyers corporate bond rating as calculated by S&P or Moodys (if applicable) has been lowered or downgraded to a rating below investment grade by S&P or Moodys;
(B) an event or events shall have occurred in the good faith determination of Buyer resulting in the effective absence of a lending market for financing debt obligations secured by mortgage loans or servicing receivables or securities backed by mortgage loans or servicing receivables or an event or events shall have occurred resulting in Buyer not being able to finance the Note through the lending market with traditional counterparties at rates which would have been reasonable prior to the occurrence of such event or events; or
(C) there shall have occurred a material adverse change in the financial condition of Buyer which affects (or can reasonably be expected to affect) materially and adversely the ability of Buyer to fund its obligations under this Agreement.
(h) Fees. Buyer shall have received payment in full of all fees and Expenses (including any applicable Commitment Fee) which are payable hereunder to Buyer on or before such date, provided that such amounts have been invoiced to the Seller.
ARTICLE VI
COVENANTS
Seller covenants and agrees that until the payment and satisfaction in full of all Obligations, whether now existing or arising hereafter, shall have occurred:
Section 6.01 Litigation. Seller will promptly, and in any event within ten (10) days after service of process on any of the following, give to Buyer notice of all material litigation, actions, suits, arbitrations, investigations (including any of the foregoing which are, to such Sellers knowledge, threatened or pending) or other legal or arbitrable proceedings affecting Seller or any of its Subsidiaries or affecting any of the Property of any of them before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Program Agreements or any action to be taken in connection with the transactions contemplated hereby, (ii) makes a claim individually in an amount greater than $[***] or in the aggregate in an amount greater than $[***], or (iii) which, individually or in the aggregate, if adversely determined, could be reasonably likely to have a Material Adverse Effect. Seller will promptly provide notice of any judgment, which with the passage of time, could cause an Event of Default hereunder.
Section 6.02 Prohibition of Fundamental Changes. Seller shall not enter into any transaction of merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets; provided, that Seller may merge or consolidate with (a) any Person so long as no Change in Control has occurred, or (b) any other Person if Seller is the surviving entity; and provided further, that if after giving effect thereto, no Default would exist hereunder.
Section 6.03 Reserved.
Section 6.04 Asset Schedule. Seller shall at all times maintain a current list (which may be stored in electronic form) of the Note and Additional Balances.
Section 6.05 No Adverse Claims. Seller warrants and will defend the right, title and interest of Buyer in and to all Purchased Assets against all adverse claims and demands.
Section 6.06 Assignment. Except as permitted herein, Seller shall not sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to the Program Agreements), any of the Purchased Assets or any interest therein, provided that this Section 6.06 shall not prevent any transfer or pledge of Purchased Assets in accordance with the Program Agreements.
Section 6.07 Security Interest. Seller shall do all things necessary to preserve the Purchased Assets so that they remain subject to a first priority perfected security interest hereunder, in each case subject to the security interest of the Indenture Trustee and of Ginnie Mae, to the extent applicable. Without limiting the foregoing, Seller will comply with all rules, regulations and other laws of any Governmental Authority and cause the Purchased Assets to comply with all applicable rules, regulations and other laws. Seller will not allow any default for which Seller is responsible to occur under any Purchased Assets or any Program Agreement and Seller shall fully perform or cause to be performed when due all of its obligations under any Purchased Assets and any Program Agreement.
Section 6.08 Records.
(a) Seller shall collect and maintain or cause to be collected and maintained all Records relating to the Purchased Assets in accordance with industry custom and practice for assets similar to the Purchased Assets, including those maintained pursuant to Section 6.09, and all such Records shall be in Sellers or Buyers possession (or in the possession of an Eligible Subservicer) unless Buyer otherwise approves. Seller or an Eligible Subservicer will maintain all such Records in good and complete condition in accordance with industry practices for assets similar to the Purchased Assets and preserve them against loss.
(b) For so long as Buyer has an interest in or lien on any Purchased Assets, Seller will hold or cause to be held all related Records in trust for Buyer. Seller shall notify, or cause to be notified, every other party holding any such Records of the interests and liens in favor of Buyer granted hereby.
(c) Subject to the confidentiality provisions of this Agreement and the other Program Agreements, upon reasonable advance notice from Buyer, Seller shall (x) make any and all such Records available to Buyer to examine any such Records, either by its own officers or employees, or by agents or contractors, or both, and make copies of any reasonably requested portion thereof, and (y) permit Buyer or its authorized agents to discuss the affairs, finances and accounts of Seller with a Responsible Officer of Seller and to discuss the affairs, finances and accounts of Seller with its independent certified public accountants.
Section 6.09 Books. Seller shall keep or cause to be kept in reasonable detail books and records of account of its assets and business and shall clearly reflect therein the transfer of Purchased Assets to Buyer.
Section 6.10 Approvals. Seller shall maintain all licenses, permits or other approvals necessary for Seller to conduct its business and to perform its obligations under the Program Agreements, and Seller shall conduct its business strictly in accordance with applicable law.
Section 6.11 Material Change in Business. Seller shall not engage in any business other than mortgage-related or real estate owned property-related activities unless Seller provides written notice to Administrative Agent and Administrative Agent approves such business in its sole good faith discretion.
Section 6.12 Distributions. If an Event of Default has occurred and is continuing, Seller shall not pay any dividends with respect to any capital stock or other equity interests in such entity, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Seller.
Section 6.13 Applicable Law. Seller shall comply with the requirements of all applicable laws, rules, regulations and orders of any Governmental Authority.
Section 6.14 Existence. Seller shall preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises.
Section 6.15 Chief Executive Office; Jurisdiction of Organization. Seller shall not move its chief executive office from the address referred to in Section 3.17 or change its jurisdiction of organization from the jurisdiction referred to in Section 3.17 unless it shall have provided Buyer at least thirty (30) days prior written notice of such change. For the avoidance of doubt, no additional notice or consent need be provided with respect to the Sellers intended relocation on or about August 24, 2018, of its chief executive office to 1 Baxter Way, Westlake Village, California 91362.
Section 6.16 Taxes. Seller shall timely file (which filings shall be considered timely if made pursuant to a validly obtained extension for such filing) all tax returns that are required to be filed by it and shall timely pay and discharge all material taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained.
Section 6.17 Transactions with Affiliates. Other than the purchase of the Note, Seller will not enter into any transaction, including any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction (a) does not result in a Default hereunder and (b) is upon fair and reasonable terms no less favorable to Seller than it would obtain in a comparable arms length transaction with a Person who is not an Affiliate, or make a payment that is not otherwise permitted by this Section 6.17 to any Affiliate.
Section 6.18 [Reserved].
Section 6.19 Indebtedness. Seller shall not incur any additional material Indebtedness other than (i) the Existing Indebtedness specified on Exhibit B hereto; (ii) Indebtedness incurred with Buyer or its Affiliates; (iii) Indebtedness incurred in connection with new or existing secured lending facilities (including facilities secured by mortgage servicing rights, early buy-out loans, or other mortgage assets) and (iv) usual and customary accounts payable for a mortgage company, without the prior written consent of Buyer (such consent not to be unreasonably withheld).
Section 6.20 True and Correct Information. All information, reports, exhibits, schedules, financial statements or certificates of Seller, any Affiliate thereof or any of their officers furnished to Buyer hereunder and during Buyers diligence of Seller are and will be true and complete in all material respects and will not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading. All required financial statements, information and reports delivered by Seller to Buyer pursuant to this Agreement shall be prepared in accordance with U.S. GAAP, or, if applicable, to SEC filings, the appropriate SEC accounting regulations.
Section 6.21 No Pledge. Except as contemplated by the Program Agreements, Seller shall not pledge, grant a security interest or assign any existing or future rights to service any of the Repurchase Assets or pledge or grant to any other Person any security interest in the Note.
Section 6.22 Plan Assets. Seller shall not be an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in section 4975(e)(1) of the Code that is subject to Section 4975 of the Code. Transactions to or with Seller shall not be subject to any state or local statute regulating investments of or fiduciary obligations with respect to governmental plans within the meaning of section 3(32) of ERISA which would be violated by the Transactions contemplated hereunder.
Section 6.23 [Reserved].
Section 6.24 Modification of the Base Indenture and Series 2018-VF1 Indenture Supplement. Seller shall not consent with respect to any of the Base Indenture and the Series 2018-VF1 Indenture Supplement related to the Purchased Assets, to (i) the modification, amendment or termination of such the Base Indenture and the Series 2018-VF1 Indenture Supplement, (ii) the waiver of any provision of the Base Indenture and the Series 2018-VF1 Indenture Supplement, or (iii) the resignation of AmeriHome as servicer under the Base Indenture and the Series 2018-VF1 Indenture Supplement, or the assignment, transfer, or material delegation of any of its rights or obligations, under such the Base Indenture and the Series 2018-VF1 Indenture Supplement, without the prior written consent of Buyer exercised in Buyers sole discretion.
Section 6.25 Reporting Requirements.
(a) Seller shall furnish to Buyer: (i) promptly, copies of any material and adverse notices (including notices of defaults, termination events, or breaches) and any material
adverse financial information that is not otherwise required to be provided by Seller hereunder which is given to Sellers lenders; (ii) promptly, notice of the occurrence of (1) any Event of Default hereunder, (2) any default or material breach by Seller of any obligation under any Program Agreement or (3) the occurrence of any event or circumstance that such party reasonably expects has resulted in, or will, with the passage of time, result in, a Material Adverse Effect or an Event of Default; and (iii) the following:
(1) as soon as available and in any event within forty (40) calendar days after the end of each calendar month, the unaudited balance sheet of Seller, as at the end of such period and the related unaudited consolidated statements of income for Seller for such period and the portion of the fiscal year through the end of such period, accompanied by a certificate of a Responsible Officer of Seller, which certificate shall state that said consolidated financial statements or financial statements, as applicable, fairly present in all material respects the consolidated financial condition or financial condition, as applicable, and results of operations of Seller in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end adjustments);
(2) as soon as available and in any event no later than the last day of the third month following the end of each fiscal year of Seller, the consolidated balance sheets of Seller and its consolidated Subsidiaries as at the end of such fiscal year and the related consolidated statements of income and members equity and of cash flows for Seller and its consolidated Subsidiaries for such year, setting forth in each case in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall have no going concern qualification and shall state that said consolidated financial statements fairly present the consolidated financial condition and results of operations of Seller and its respective consolidated Subsidiaries as at the end of, and for, such fiscal year in accordance with GAAP;
(3) such other prepared statements that Buyer may reasonably request;
(4) from time to time such other information regarding the financial condition, operations, or business of Seller as Buyer may reasonably request;
(5) as soon as reasonably possible, and in any event within thirty (30) days after a Responsible Officer of Seller has knowledge of the occurrence of any ERISA Event of Termination, stating the particulars of such ERISA Event of Termination in reasonable detail;
(6) as soon as reasonably possible, and in any event within the timeframes specified below, notice of any of the following events:
a. within thirty (30) days of knowledge thereof, any material dispute, litigation, investigation, proceeding or suspension between Seller on the one hand, and any Governmental Authority or any Person;
b. within thirty (30) days of knowledge thereof, any material issues raised upon examination of Seller or Sellers facilities by any Governmental Authority;
c. within five (5) days of knowledge thereof, any material change in the Indebtedness of Seller, including any default, non-renewal, termination, increase in available amount or decrease in available amount related thereto;
d. within five (5) days of knowledge thereof, promptly upon receipt of notice or knowledge of any lien or security interest (other than security interests created hereby or by the other Program Agreements) on, or claim asserted against, any of the Purchased Assets; and
e. within five (5) days of knowledge thereof, any other event, circumstance or condition that has resulted, or has a reasonable possibility of resulting, in a Material Adverse Effect with respect to Seller; and
(7) on a quarterly basis, an update to the historical hedge performance table comparing changes in fair value of MSR to changes in fair value of MSR net of hedges, in a format mutually agreeable to the Buyer and the Seller.
(b) Officers Certificates. Seller will furnish to Buyer, at the time Seller furnishes each set of financial statements pursuant to Section 6.25(a)(iii)(1) or (2) above, an Officers Compliance Certificate of Seller in the form of Exhibit A to the MLRA Pricing Side Letter. As part of such Officers Certificate, the Seller will provide Buyer with a list of (i) any material action, dispute, notice, litigation, investigation, proceeding or suspension pending with respect to which Seller has received service of process or other form of notice or, to the best of Sellers knowledge, threatened against it, before any court, administrative, Governmental Authority or other regulatory body or tribunal which is reasonably expected, in Sellers good faith discretion as of such date with such information available to it, if adversely decided, to have a Material Adverse Effect, and (ii) any material issues raised upon examination of Seller or Sellers facilities by any Governmental Authority, to the extent it may disclose such information without violating confidentiality restrictions related thereto;
(c) Other. Seller shall deliver to Buyer any other reports or information reasonably requested by Buyer and mutually agreed to by the Seller or as otherwise required pursuant to this Agreement and the Indenture (including all reports and information delivered by the Issuer, the Administrator or the Indenture Trustee relating to the Note).
(d) Regulatory Reporting Compliance. Seller shall, on or before the last Business Day of the fifth (5th) month following the end of each of Sellers (or if the Mortgage Loans are subserviced by an Eligible Subservicer, the Subservicers) fiscal years, beginning with the fiscal year ending in 2018, deliver to Buyer a an Officers Certificate that satisfies the requirements of Item 1123 of Regulation AB.
Section 6.26 Servicer Administration. If at any time AmeriHome intends to service the Mortgage Loans directly without a subservicer, AmeriHome shall not less than
[***] prior to the anticipated servicing transfer date, provide notice to the Administrative Agent of such intention and solicit the Administrative Agents prior written consent, which the Administrative Agent shall have [***] from the receipt of the notice to provide and which consent may not be unreasonably withheld. If the Administrative Agent does not respond to the request for consent within the [***] period, such consent shall be deemed to have been provided. If the Administrative Agent denies the request for consent in writing, then AmeriHome shall either continue to service the Mortgage Loans through a subservicer or repurchase the Note not later than the later of (x) the [***] following receipt of the Administrative Agents denial letter or (y) such anticipated servicing transfer date.
Section 6.27 [Reserved].
Section 6.28 [Reserved].
Section 6.29 MSR Valuation. To the extent not otherwise provided pursuant to the terms of the Base Indenture, on each date on which the Officers Compliance Certificate is delivered, Seller shall provide a detailed summary of the Market Value Percentage of MSRs most recently delivered in the Market Value Report.
ARTICLE VII
DEFAULTS/RIGHTS AND REMEDIES OF BUYER UPON DEFAULT
Section 7.01 Events of Default. Each of the following events or circumstances shall constitute an Event of Default:
(a) Payment Failure. Failure of Seller to (i) make any payment of (A) Price Differential, provided that if such failure is caused by operational mistake, Seller shall have [***] to cure such failure following knowledge thereof, or (B) Repurchase Price or any other sum which has become due, in each case, on a Price Differential Payment Date or a Repurchase Date or otherwise, whether by acceleration or otherwise, under the terms of this Agreement, any other warehouse and security agreement or any other document evidencing or securing Indebtedness of Seller to Administrative Agent (on behalf of Buyers) or (ii) cure any Margin Deficit when due pursuant to Section 2.05.
(b) Cross Default. (i) An Event of Default (as defined in the Indenture) has occurred and is continuing under the Indenture or the PC Repurchase Agreement or an Event of Default (as defined in the Mortgage Loan Repurchase Agreement) has occurred and is continuing under any Repurchase Document, or (ii) Seller or Affiliates thereof shall be in default under (A) any Indebtedness, in the aggregate, in excess of $[***] with respect to Seller or of such Affiliate thereof which default (1) involves the failure to pay a matured obligation past any applicable cure periods provided for under such Indebtedness, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary with respect to such Indebtedness, or (B) any other contract in excess of $[***] to which Seller or any Affiliate thereof is a party which default (1) involves the failure to pay a matured obligation past any applicable cure periods provided for under such contract, or (2) permits the acceleration of the maturity of obligations by any other party to or beneficiary of such contract, or (C) any Indebtedness of Seller
owed under a to be allocated (TBA) commitment or a master securities contract which default has resulted in the acceleration of the maturity of all obligations by any other party to or beneficiary with respect to such Indebtedness.
(c) Assignment. Assignment or attempted assignment by Seller of this Agreement or any rights hereunder without first obtaining the specific written consent of Buyer, or the granting by Seller of any security interest, lien or other encumbrances on any Purchased Assets to any person other than Buyer.
(d) Insolvency. An Act of Insolvency shall have occurred with respect to Seller or Aris Mortgage Holding Company, LLC.
(e) Material Adverse Effect. The occurrence of a Material Adverse Effect.
(f) Breach of Financial Representation or Covenant or Obligation. A breach by Seller of any of the representations, warranties or covenants or obligations set forth in Section 2 of the Pricing Side Letter (Financial Covenants), or in Sections 3.01 (Seller Existence (solely as to existence)), 3.07 (Solvency), Section 3.22 (Other Indebtedness), Section 6.02 (Prohibition of Fundamental Changes), Section 6.12 (Distributions), Section 6.14 (Existence (solely as to existence)), Section 6.19 (Indebtedness), Section 6.21 (No Pledge) or Section 6.22 (Plan Assets) of this Agreement.
(g) Additional Breach of Non-Financial Representation or Covenant. A breach by Seller of any other material representation, warranty or covenant set forth in this Agreement (and not otherwise specified in Section 7.01(f) above), or any other Program Agreement, if such breach is not cured within [***] Business Days of Sellers knowledge thereof.
(h) Change in Control. The occurrence of a Change in Control.
(i) Failure to Transfer. Seller fails to transfer the Purchased Assets to Buyer on the applicable Purchase Date (provided Buyer has tendered the related Purchase Price).
(j) Judgment. A final judgment or judgments for the payment of money in excess of $[***] individually or in excess of $[***] in the aggregate shall be rendered against Seller or any of its Affiliates by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within [***] days from the date of entry thereof.
(k) Government Action. Any Governmental Authority or any Person acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of Seller, or shall have taken any action to displace the management of Seller or to curtail its authority in the conduct of the business of Seller or takes any action in the nature of enforcement to remove, limit or restrict the approval of Seller as an issuer, buyer or a seller/servicer of mortgage loans or securities backed thereby, and such action provided for in this subparagraph (k) shall not have been discontinued or stayed within [***] days.
(l) Inability to Perform. A Responsible Officer of Seller shall admit in writing its inability to, or its intention not to, perform any of Sellers Obligations hereunder.
(m) Security Interest. This Agreement shall for any reason cease to create a valid, first priority security interest in any material portion of the Repurchase Assets purported to be covered hereby.
(n) Financial Statements. Sellers audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of Seller as a going concern or a reference of similar import.
(o) Validity of Agreement. For any reason, this Agreement at any time shall not be in full force and effect in all material respects or shall not be enforceable in all material respects in accordance with its terms, or Seller or any Affiliate of Seller shall seek to disaffirm, terminate, limit or reduce (except as may be negotiated in good faith by the parties hereto) its Obligations hereunder.
(p) Reserved.
Section 7.02 No Waiver. An Event of Default shall be deemed to be continuing unless cured or expressly waived by Buyer in writing.
Section 7.03 Due and Payable. Upon the occurrence of any Event of Default which has not been waived in writing by Buyer, Buyer may, by notice to Seller, declare all Obligations to be immediately due and payable, and any obligation of Buyer to enter into Transactions with Seller shall thereupon immediately terminate. Upon such declaration, the Obligations shall become immediately due and payable, both as to Purchase Price outstanding and Price Differential, without presentment, demand, protest or notice of any kind, all of which are hereby expressly waived, anything contained herein or other evidence of such Obligations to the contrary notwithstanding, except with respect to any Event of Default set forth in Section 7.01(d), in which case all Obligations shall automatically become immediately due and payable without the necessity of any notice or other demand, and any obligation of Buyer to enter into Transactions with Seller shall immediately terminate. Buyer may enforce payment of the same and exercise any or all of the rights, powers and remedies possessed by Buyer, whether under this Agreement or any other Program Agreement or afforded by applicable law.
Section 7.04 Fees. The remedies provided for herein are cumulative and are not exclusive of any other remedies provided by law. Seller agrees to pay to Buyer reasonable external attorneys fees and reasonable third party legal expenses incurred in enforcing Buyers rights, powers and remedies under this Agreement and each other Program Agreement.
Section 7.05 Default Rate. Without regard to whether Buyer has exercised any other rights or remedies hereunder, if an Event of Default shall have occurred and be continuing, the applicable Margin in respect of the Pricing Rate shall be increased, to the extent permitted by law, as set forth in clause (ii) of the definition of Margin.
ARTICLE VIII
ENTIRE AGREEMENT;
AMENDMENTSAND WAIVERS; SEPARATE ACTIONS BY BUYER
Section 8.01 Entire Agreement. This Agreement (including the Schedules and Exhibits hereto) constitutes the entire agreement of the parties hereto and supersedes any and all prior or contemporaneous agreements, written or oral, as to the matters contained herein, and no modification or waiver of any provision hereof or any of the Program Agreements, nor consent to the departure by Seller therefrom, shall be effective unless the same is in writing, and then such waiver or consent shall be effective only in the specific instance, and for the purpose, for which it is given.
Section 8.02 Waivers, Separate Actions by Buyer. Any amendment or waiver effected in accordance with this Article VIII shall be binding upon Buyer and Seller; and Buyers failure to insist upon the strict performance of any term, condition or other provision of this Agreement or any of the Program Agreements, or to exercise any right or remedy hereunder or thereunder, shall not constitute a waiver by Buyer of any such term, condition or other provision or Default or Event of Default in connection therewith, nor shall a single or partial exercise of any such right or remedy preclude any other or future exercise, or the exercise of any other right or remedy; and any waiver of any such term, condition or other provision or of any such Default or Event of Default shall not affect or alter this Agreement or any of the Program Agreements, and each and every term, condition and other provision of this Agreement and the Program Agreements shall, in such event, continue in full force and effect and shall be operative with respect to any other then existing or subsequent Default or Event of Default in connection therewith. The occurrence of an Event of Default hereunder or under any of the Program Agreements shall be deemed to be continuing unless and until cured or waived in writing by Buyer.
ARTICLE IX
SUCCESSORS AND ASSIGNS
Section 9.01 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns, any portion thereof, or any interest therein. Seller shall not have the right to assign all or any part of this Agreement or any interest herein without the prior written consent of Buyer.
Section 9.02 Participations and Transfers.
(a) Buyer may in accordance with applicable law at any time sell to one or more banks or other entities (Participants) participating interests in all or a portion of Buyers rights and obligations under this Agreement and the other Program Agreements; provided, that (i) Seller has consented to such sale; provided, however, Sellers consent shall not be required in the event that (A) such Participant is an Affiliate of Buyer or (B) an Event of Default has occurred; (ii) each such sale shall represent an interest in a Transaction in a Purchase Price of $1,000,000 or more and (iii) other than with respect to a participating interest consisting of a pro rata interest in all payments due to Buyer under this Agreement and prior to an Event of Default Buyer receives an
opinion of a nationally recognized tax counsel experienced in such matters that such sale will not result in the Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes or foreign tax purposes. In the event of any such sale by Buyer of participating interests to a Participant, Buyer shall remain a party to the Transaction for all purposes under this Agreement and Seller shall continue to deal solely and directly with Buyer in connection with Buyers rights and obligations under this Agreement.
(b) Buyer may in accordance with applicable law at any time assign, pledge, hypothecate, or otherwise transfer to one or more banks, financial institutions, investment companies, investment funds or any other Person (each, a Transferee) all or a portion of Buyers rights and obligations under this Agreement and the other Program Agreements; provided, that (i) Seller has consented to such assignment, pledge, hypothecation, or other transfer; provided, however, Sellers consent shall not be required in the event that (A) such Transferee is an Affiliate of Buyer or (B) an Event of Default has occurred; (ii) absent an Event of Default, Buyer shall give at least ten (10) days prior notice thereof to Seller; (iii) that each such sale shall represent an interest in the Transactions in an aggregate Purchase Price of $1,000,000 or more and (iv) other than with respect to an assignment, pledge, hypothecation or transfer consisting of a pro rata interest in all payments due to Buyer under this Agreement and prior to an Event of Default Buyer received an opinion of a nationally recognized tax counsel experienced in such matters that such assignment, pledge, hypothecation or transfer will not result in the Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes or foreign tax purposes. In the event of any such assignment, pledge, hypothecation or transfer by Buyer of Buyers rights under this Agreement and the other Program Agreements, Seller shall continue to deal solely and directly with Buyer in connection with Buyers rights and obligations under this Agreement. In addition, nothing under this Section 9.02(b) shall relieve the Buyer of its obligations to transfer Purchased Assets and Repurchase Assets to Seller (and not substitutions thereof) pursuant to the terms hereof.
(c) All actions taken by Buyer pursuant to this Section 9.02 shall be at the expense of Buyer. Buyer may distribute to any prospective assignee any document or other information delivered to Buyer by Seller, in each case provided that such party has agreed in writing to hold in confidence all such information in accordance with the terms of this Agreement.
Section 9.03 Buyer and Transaction Register.
(a) Subject to acceptance and recording thereof pursuant to paragraph (b) of this Section 9.03, from and after the effective date specified in each assignment and acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such assignment and acceptance, have the rights and obligations of Buyer under this Agreement. Any assignment or transfer by Buyer of rights or obligations under this Agreement that does not comply with this Section 9.03 shall be treated for purposes of this Agreement as a sale by such Buyer of a participation in such rights and obligations in accordance with Section 9.02.
(b) Seller or an agent of Seller shall maintain a register (the Transaction Register) on which it will record the Transactions entered into hereunder, and each assignment
and acceptance and participation. The Transaction Register shall include the names and addresses of Buyers (including all assignees, successors and Participants), and the Purchase Price of the Transactions entered into by Buyer. Failure to make any such recordation, or any error in such recordation shall not affect Sellers obligations in respect of such Transactions. If Buyer sells a participation in any Transaction, it shall provide Seller, the information described in this paragraph and permit Seller to review such information as reasonably needed for Seller to comply with its obligations under this Agreement or under any applicable law or governmental regulation or procedure. The entries in the Transaction Register shall be prima facie conclusive and binding, and Seller may treat each Person whose name is recorded in the Transaction Register as the owner of the Transactions recorded therein for purposes of this Agreement. No assignment or participation shall be effective until it is recorded in the Transaction Register.
ARTICLE X
MISCELLANEOUS
Section 10.01 Survival. This Agreement and the other Program Agreements and all covenants, agreements, representations and warranties herein and therein and in the certificates delivered pursuant hereto and thereto, shall survive the entering into of the Transaction and shall continue in full force and effect so long as any Obligations are outstanding and unpaid.
Section 10.02 Indemnification. Seller shall, and hereby agrees to, indemnify, defend and hold harmless Buyer, any Affiliate of Buyer and their respective directors, officers, agents, employees and advisors (each, an Indemnified Party) from and against any and all losses, claims, damages, liabilities, deficiencies, judgments or expenses incurred by any Indemnified Party (except to the extent that the foregoing resulted from the gross negligence or willful misconduct of an Indemnified Party) as a consequence of, or arising out of or by reason of any litigation, investigations, claims or proceedings which arise out of or are in any way related to, (i) this Agreement or any other Program Agreement or the transactions contemplated hereby or thereby, (ii) Sellers servicing practices or procedures; (iii) any actual or proposed use by Seller of the proceeds of the Purchase Price, (iv) a default by Seller in making any prepayment of Repurchase Price after Seller has given a notice thereof in accordance with Section 2.03, and (v) any Default, Event of Default or any other material breach by Seller of any of the provisions of this Agreement or any other Program Agreement, including amounts paid in settlement, court costs and reasonable third-party fees and disbursements of counsel incurred in connection with any such litigation, investigation, claim or proceeding or any advice rendered in connection with any of the foregoing. If and to the extent that any Obligations are unenforceable for any reason, Seller hereby agrees to pay such lesser amount in satisfaction of such Obligations as is permissible under applicable law. Sellers obligations set forth in this Section 10.02 shall survive any termination of this Agreement and each other Program Agreement and the payment in full of the Obligations, and are in addition to, and not in substitution of, any other of its obligations set forth in this Agreement or otherwise. In addition, Seller shall, upon demand, pay to Buyer all reasonable third-party costs and Expenses (including the reasonable third-party fees and disbursements of counsel) paid or incurred by Buyer in (i) enforcing or defending its rights under or in respect of this Agreement or any other Program Agreement, (ii) collecting the Purchase Price outstanding, (iii) foreclosing or otherwise collecting upon any Repurchase Assets and (iv) obtaining any legal, accounting or other advice in connection with any of the foregoing. This Section shall not apply
with respect to Taxes other than Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim.
Section 10.03 Nonliability of Buyer. The parties hereto agree that, notwithstanding any affiliation that may exist between Seller and Buyer, the relationship between Seller and Buyer shall be solely that of arms-length participants. Buyer shall not have any fiduciary responsibilities to Seller. Seller (i) agrees that Buyer shall not have any liability to Seller (whether sounding in tort, contract or otherwise) for losses suffered by Seller in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by this agreement, the other loan documents or any other agreement entered into in connection herewith or any act, omission or event occurring in connection therewith, unless it is determined by a judgment of a court that is binding on Buyer, that such losses were the result of acts or omissions on the part of Buyer constituting gross negligence or willful misconduct and (ii) waives, releases and agrees not to sue upon any claim against Buyer (whether sounding in tort, contract or otherwise), except a claim based upon gross negligence or willful misconduct. Whether or not such damages are related to a claim that is subject to such waiver and whether or not such waiver is effective, Buyer shall not have any liability with respect to, and Seller hereby waives, releases and agrees not to sue upon any claim for, any special, indirect, consequential or punitive damages suffered by Seller in connection with, arising out of, or in any way related to the transactions contemplated or the relationship established by this Agreement, the other loan documents or any other agreement entered into in connection herewith or therewith or any act, omission or event occurring in connection herewith or therewith, unless it is determined by a judgment of a court that is binding on Buyer, that such damages were the result of acts or omissions on the part of Buyer, as applicable, constituting willful misconduct or gross negligence.
Section 10.04 Governing Law; Submission to Jurisdiction; Waivers.
(a) This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Seller acknowledges that the obligations of Buyer hereunder or otherwise are not the subject of any recourse to, any direct or indirect parent or other Affiliate of Buyer. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
(b) EACH OF THE PARTIES HERETO AND BUYER, BY ITS ACCEPTANCE OF THE NOTE, HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT
THEREOF, TO THE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK SITTING IN THE BOROUGH OF MANHATTAN, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH HEREIN OR AT SUCH OTHER ADDRESS OF WHICH EACH OTHER PARTY HERETO SHALL HAVE BEEN NOTIFIED IN WRITING;
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND
(v) WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THE INDENTURE OR THE TRANSACTIONS CONTEMPLATED THEREBY AND HEREBY.
Section 10.05 Notices. Any and all notices (with the exception of Transaction Notices, which shall be delivered via electronic transmission only), statements, demands or other communications hereunder may be given by a party to the other by mail, email, messenger or otherwise to the address specified below, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other. All notices, demands and requests hereunder may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence.
If to Seller:
AmeriHome Mortgage Company, LLC
21215 Burbank Blvd, 4th Floor
Woodland Hills, California 91367-7090
Attention:
Phone Number:
E-mail:
With copies to:
AmeriHome Mortgage Company, LLC
21215 Burbank Blvd, 4th Floor
Woodland Hills, California 91367-7090
Attention:
Phone Number:
E-mail:
and:
AmeriHome Mortgage Company, LLC
21215 Burbank Blvd, 4th Floor
Woodland Hills, California 91367-7090
Attention: Legal Department
E-mail: legal@amerihome.com
If to Buyer:
For Transaction Notice:
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH
c/o Credit Suisse Securities (USA) LLC
One Madison Avenue, 2nd floor
New York, NY 10010
Attention: Christopher Bergs, Resi Mortgage Warehouse Ops
Phone: 212-538-5087
E-mail: christopher.bergs@credit-suisse.com
with a copy to:
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue, 4th Floor
New York, NY 10010
Attention: Margaret Dellafera
Phone Number: 212-325-6471
E-mail: margaret.dellafera@credit-suisse.com
For all other Notices:
CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue, 4th Floor
New York, NY 10010
Attention: Margaret Dellafera
Phone Number: 212-325-6471
E-mail: margaret.dellafera@credit-suisse.com
Notwithstanding the foregoing, the offices of the Seller (to the extent referencing the Woodland Hills address above), shall on or about August 24, 2018, be relocated to 1 Baxter Way, Westlake Village, California 91362. Upon notice from the Seller of such relocation, any further notices which would otherwise be delivered to the Woodland Hills address above shall be provided to the attention of with copies to and the Legal Department, in each case at 1 Baxter Way, Westlake Village, California 91362.
Section 10.06 Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement. In case any provision in or obligation under this Agreement or any other Program Agreement shall be invalid, illegal or unenforceable in any jurisdiction, the validity, legality and enforceability of the remaining provisions or obligations, or of such provision or obligation in any other jurisdiction, shall not in any way be affected or impaired thereby.
Section 10.07 Section Headings. The Article and Section headings in this Agreement are inserted for convenience of reference only and shall not in any way affect the meaning or construction of any provision of this Agreement.
Section 10.08 Counterparts. This Agreement may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Agreement by electronic means shall be effective as delivery of a manually executed counterpart of this Agreement.
Section 10.09 Periodic Due Diligence Review. Seller acknowledges that Buyer has the right to perform continuing due diligence reviews with respect to Seller and the Purchased Assets, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and Seller agree that upon reasonable (but no less than five (5) Business Days) prior written notice unless an Event of Default shall have occurred and be continuing, in which case no notice is required, to Seller, Buyer or its authorized representatives will be permitted during normal business hours, and in a manner that does not unreasonably interfere with the ordinary conduct of Sellers business, to examine, inspect, and make copies and extracts of, any and all documents, records, agreements, instruments or information relating to such Purchased Assets in the possession or under the control of Seller, subject to the confidentiality provisions of this Agreement and the other Program Agreements. Seller also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Purchased Assets. Without limiting the generality of the foregoing, Seller acknowledges that Buyer may enter into a Transaction related to any Purchased Assets from Seller based solely upon the information provided by Seller to Buyer in the Asset Schedule and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Purchased Assets related to a Transaction. Seller agrees to cooperate with Buyer
and any third party underwriter in connection with such underwriting, including providing Buyer and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Purchased Assets in the possession, or under the control, of Seller. So long as an Event of Default shall not have occurred and be continuing, all on-site inspections pursuant to this Section 10.08 (together with any on-site inspections performed pursuant to the Indenture or any other Program Agreements) shall be limited to one (1) per calendar year, and any costs related thereto (together with any on-site inspections performed pursuant to the Indenture or any other Program Agreements) shall not exceed $[***] (any additional cost shall not be deemed a reimbursable Expense hereunder).
Section 10.10 Hypothecation or Pledge of Repurchase Assets. Buyer shall have free and unrestricted use of all Repurchase Assets and nothing in this Agreement shall preclude Buyer from engaging in repurchase transactions with all or a portion of the Repurchase Assets or otherwise pledging, repledging, transferring, hypothecating, or rehypothecating all or a portion of the Repurchase Assets; provided that prior to an Event of Default, such pledge, repledge, transfer, hypothecation or rehypothecation is treated as a financing or hedging transaction for U.S. federal income tax purposes or a pro rata interest in all payments due to Buyer under this Agreement; provided, further that other than with respect to a pro rata interest in all payments due to Buyer under this Agreement and prior to an Event of Default Buyer receives an opinion of a nationally recognized tax counsel experienced in such matters that such repurchase transaction, pledge, repledge, transfer, hypothecation or rehypothecation will not result in the Issuer being subject to tax on its net income as an association (or publicly traded partnership) taxable as a corporation or a taxable mortgage pool taxable as a corporation, each for U.S. federal income tax purposes; provided, further, that nothing under this Section 10.10 shall relieve the Buyer of its obligations to transfer Purchased Assets and Repurchase Assets to Seller (and not substitutions thereof) pursuant to the terms hereof.
Section 10.11 Confidentiality; Non-Confidentiality of Tax Treatment.
(a) This Agreement and its terms, provisions, supplements and amendments, and notices hereunder, are proprietary to Buyer or Seller, as applicable and shall be held by each party hereto, as applicable in strict confidence and shall not be disclosed to any third party without the written consent of Buyer or Seller, except for (i) disclosure to Buyers or Sellers direct and indirect Affiliates and Subsidiaries, attorneys or accountants, but only to the extent such disclosure is necessary and such parties agree to hold all information in strict confidence, or (ii) disclosure required by law, rule, regulation or order of a court or other regulatory body. Notwithstanding the foregoing or anything to the contrary contained herein or in any other Program Agreements, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the Transactions, any fact relevant to understanding the federal, state and local tax treatment of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that no party may not disclose the name of or identifying information with respect to Buyer or Seller or any pricing terms (including the Pricing Rate, the Purchase Price Percentage, the Purchase Price, the Commitment Fee or the Non-Extension Fee, if applicable) or other nonpublic business or financial information (including any sublimits) that is unrelated to the federal, state and local tax treatment of the Transactions and is
not relevant to understanding the federal, state and local tax treatment of the Transactions, without the prior written consent of the affected party.
(b) Notwithstanding anything in this Agreement to the contrary, the parties hereto shall comply with all applicable local, state and federal laws, including all privacy and data protection law, rules and regulations that are applicable to the Repurchase Assets and/or any applicable terms of this Agreement (the Confidential Information). Each party hereto understands that the Confidential Information may contain nonpublic personal information, as that term is defined in Section 509(4) of the Gramm-Leach-Bliley Act (the GLB Act), and agrees to maintain such nonpublic personal information that it receives hereunder in accordance with the GLB Act and other applicable federal and state privacy laws. Each party hereto shall implement such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of the nonpublic personal information of the customers and consumers (as those terms are defined in the GLB Act) of each other party hereto and their Affiliates which such party holds, (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Each party shall implement appropriate measures to meet the objectives of Section 501(b) of the GLB Act and of the applicable standards adopted pursuant thereto, as now or hereafter in effect. Upon request, each party hereto will provide evidence reasonably satisfactory to the other party to confirm that the providing party has satisfied its obligations as required under this Section 10.11. Without limitation, this may include review of audits, summaries of test results, and other equivalent evaluations (in each case to the extent the party asked to disclose such information has the authority to do so). Each party shall notify the other party immediately following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the customers and consumers of the other party or its Affiliates, to the extent such information was provided directly to the notifying party by such affected party or its Affiliate. Each party experiencing such material breach or compromise shall provide such notice by electronic mail or by personal delivery, by overnight courier with confirmation of receipt to the other party.
Section 10.12 Set-off. In addition to any rights and remedies of Buyer hereunder and by law, Buyer shall have the right during the continuation of an Event of Default, without prior notice to Seller, any such notice being expressly waived by Seller to the extent permitted by applicable law to set-off and appropriate and apply against any Obligation from Seller or any Affiliate thereof to Buyer or any of its Affiliates any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other obligation (including to return funds to Seller), credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by or due from Buyer or any Affiliate thereof to or for the credit or the account of Seller or any Affiliate thereof. Buyer agrees promptly to notify Seller after any such set off and application made by Buyer; provided that the failure to give such notice shall not affect the validity of such set off and application.
Section 10.13 Intent.
(a) The parties recognize that each Transaction is a master netting agreement as that term is defined in Section 101 of Title 11 of the United States Code, as amended and a securities contract as that term is defined in Section 741 of Title 11 of the United States Code,
as amended and that all payments hereunder are deemed margin payments or settlement payments as defined in Title 11 of the United States Code.
(b) It is understood that either partys right to liquidate Purchased Assets delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Section 7.03 is a contractual right to liquidate such Transaction as described in Sections 555 and Section 561 of Title 11 of the United States Code, as amended.
(c) The parties agree and acknowledge that if a party hereto is an insured depository institution, as such term is defined in the Federal Deposit Insurance Act, as amended (FDIA), then each Transaction hereunder is a qualified financial contract, as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).
(d) It is understood that this Agreement constitutes a netting contract as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a covered contractual payment entitlement or covered contractual payment obligation, respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a financial institution as that term is defined in FDICIA).
(e) This Agreement is intended to be a securities contract, within the meaning of Section 555 under the Bankruptcy Code, and a master netting agreement, within the meaning of Section 561 under the Bankruptcy Code.
(f) It is the intention of the parties that, for U.S. federal income tax purposes and for accounting purposes, each Transaction constitute a financing with Seller incurring an indebtedness, and that Seller be (except to the extent that Buyer shall have exercised its remedies following an Event of Default) the owner of the Purchased Assets for such purposes. Unless prohibited by applicable law, Seller and Buyer shall treat the Transactions as described in the preceding sentence (including on any and all filings with any U.S. federal, state, or local taxing authority and agree not to take any action inconsistent with such treatment).
IN WITNESS WHEREOF, Seller and Buyer have caused this Master Repurchase Agreement to be executed and delivered by their duly authorized officers or trustees as of the date first above written.
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CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH, as Buyer | |
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/s/ Dominic Obaditch |
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Name: Dominic Obaditch |
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Title: Vice President |
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By: |
/s/ Margaret Dellafera |
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Name: Margaret Dellafera |
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Title: Authorized Signatory |
[Signature Page to Series 2018-VFl Master Repurchase Agreement]
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CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC, as Administrative Agent | |
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By: |
/s/ Dominic Obaditch |
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Name: Dominic Obaditch |
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Title: Vice President |
[Signature Page to Series 2018-VFl Master Repurchase Agreement]
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |
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/s/ Jim Furash |
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Name: Jim Furash |
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Title: CEO |
[Signature Page to Series 2018-VFl Master Repurchase Agreement]
SCHEDULE 1
RESPONSIBLE OFFICERS SELLER
SELLER AUTHORIZATIONS
Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for Seller under this Agreement:
Responsible Officers for execution of Program Agreements and amendments:
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Responsible Officers for execution of Transaction Notices and day-to-day operational functions:
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EXHIBIT A
FORM OF TRANSACTION NOTICE
Dated: [ ]
CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH
c/o Credit Suisse Securities (USA) LLC
Eleven Madison Avenue
New York, NY 10010
Attention: Dominic Obaditch
Email: dominic.obaditch@credit-suisse.com
TRANSACTION NOTICE
Ladies and Gentlemen:
We refer to the Master Repurchase Agreement, dated as of August 13, 2018 (the VF1 Repurchase Agreement), among AmeriHome Mortgage Company, LLC (the Seller), Credit Suisse AG, Cayman Islands Branch (the Buyer) and Credit Suisse First Boston Mortgage Capital LLC (the Administrative Agent). Each capitalized term used but not defined herein shall have the meaning specified in the VF1 Repurchase Agreement. This notice is being delivered by Seller pursuant to Section 2.02 of the VF1 Repurchase Agreement.
Please be notified that Seller hereby irrevocably requests that Buyer enter into the following Transaction(s) with the Seller as follows:
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Effective Advance Rate |
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Seller requests that the proceeds of the Purchase Price be deposited in Sellers account at:
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Attn: |
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Seller hereby represents and warrants that each of the representations and warranties made by Seller in each of the Program Agreements to which it is a party is true and correct in all material respects, in each case, on and as of the date hereof, except to the extent such representations and warranties expressly relate to an earlier date. Attached hereto is a true and complete updated copy of the Asset Schedule.
Asset Schedule
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AmeriHome GMSR Issuer Trust, Class A-VF1 Variable Funding Note |
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VF1 Repurchase Agreement |
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CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
AMENDMENT NO. 1 TO REPURCHASE AGREEMENT
This Amendment No. 1 (this Amendment) to the Repurchase Agreement (as defined below), is entered into as of October 11, 2019, among CREDIT SUISSE FIRST BOSTON MORTGAGE CAPITAL LLC (the Administrative Agent), CREDIT SUISSE AG, CAYMAN ISLANDS BRANCH (the Buyer) and AMERIHOME MORTGAGE COMPANY, LLC (the Seller).
RECITALS
The Administrative Agent, the Buyer and the Seller are parties to that certain Master Repurchase Agreement, dated as of August 13, 2018 (as amended, restated, supplemented or otherwise modified from time to time, the Repurchase Agreement). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Repurchase Agreement.
The Administrative Agent, Buyer and Seller have agreed, subject to the terms and conditions of this Amendment, that the Repurchase Agreement be amended to reflect certain agreed upon revision to the terms of the Repurchase Agreement.
Accordingly, the Administrative Agent, Buyer and Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Repurchase Agreement is hereby amended as follows:
SECTION 1. Amendment to the Repurchase Agreement.
1.1 Section 1.01 of the Repurchase Agreement is hereby amended by deleting the definition of Base Rate in its entirety and replacing it with the following:
Base Rate means the greater of (i) LIBOR Rate and (ii) [***].
SECTION 2. Conditions Precedent. This Amendment shall become effective as of the date hereof upon receipt of this Amendment by the Administrative Agent on behalf of Buyer, executed and delivered by the duly authorized officers of Administrative Agent, the Buyer and the Seller.
SECTION 3. Representations and Warranties. Seller hereby represents and warrants to the Administrative Agent and Buyer that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that no Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Article 3 of the Repurchase Agreement.
SECTION 4. Limited Effect. Except as expressly amended and modified by this Amendment, the Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 5. Counterparts. This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so
executed and delivered shall be an original, but all of which shall together constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Amendment by facsimile or other electronic means shall be effective as delivery of a manually executed counterpart of this Amendment.
SECTION 6. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 7. GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES HERETO, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES HERETO WILL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO THE CONFLICT OF LAW PRINCIPLES THEREOF OTHER THAN SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW) AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK. SIGNATURES FOLLOW.]
IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date first above written.
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CREDIT SUISSE FIRST BOSTON MORTGAGE | |
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CREDIT SUISSE AG, CAYMAN ISLANDS | |
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[AmeriHome GMSR Issuer Trust Amendment No. 1 to Repurchase Agreement]
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AMERIHOME MORTGAGE COMPANY, | |
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By: |
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[AmeriHome GMSR Issuer Trust Amendment No. 1 to Repurchase Agreement]
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
MASTER REPURCHASE AGREEMENT
Dated as of August 17, 2017
Between:
AMERIHOME MORTGAGE COMPANY, LLC, as Seller
and
JPMORGAN CHASE BANK, N.A., as Buyer
1. Applicability
From time to time before the Termination Date, AmeriHome Mortgage Company, LLC (together with its successors and permitted assigns, Seller) and JPMorgan Chase Bank, N.A. (together with its successors and permitted assigns, Buyer and together with Seller, the Parties) may enter into transactions in which Seller agrees to transfer to Buyer Mortgage Loans (including their Servicing Rights) on a servicing released basis against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller those Mortgage Loans (including the Servicing Rights to them) on a servicing released basis at a date certain or on demand, against the transfer of funds by Seller. Each such transaction shall be referred to in this Agreement as a Transaction and shall be governed by this Agreement. Buyer shall have no obligation to enter into any Transaction on or after the Termination Date.
2. Definitions; Interpretation
(a) Definitions. As used in this Agreement and (unless otherwise defined differently therein) in each other Transaction Document, the following terms have these respective meanings.
1934 Act is defined in Section 27(a).
Accounts means, collectively, the Cash Pledge Account, the Funding Account and the Operating Account, each of which is a deposit account held at Financial Institution, all interest accrued on, additions to and proceeds of such deposit accounts and all deposits, payment intangibles, financial assets and other obligations of Financial Institution credited to or comprising a part of such deposit accounts, whether they are demand deposit accounts, or certificated or book entry certificates of deposit (whether negotiable or non-negotiable), investment time deposits, savings accounts, money market accounts, transaction accounts, time deposits, negotiable order of withdrawal accounts, share draft accounts and whether they are evidenced or represented by instruments, general intangibles, payment intangibles, chattel paper or otherwise, and all funds held in or represented by any of the foregoing, and any successor accounts howsoever styled or numbered and all deposit accounts established in renewal, extension or increase or decrease of, or replacement or substitution for, any of the foregoing; and all promissory notes, checks, cash, certificates of deposit, passbooks, deposit receipts, instruments, certificates and other records from time to time representing or evidencing the deposit accounts described above and any supporting obligations relating to any of the foregoing property.
Act of Insolvency means with respect to any Person (a) the commencement by that Person as debtor of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law, or a request by that Person for the appointment of a receiver, trustee, custodian or similar official for that Person or any substantial part of its property; (b) the commencement of any such case or proceeding against that Person, or anothers seeking such appointment, or the filing against that Person of an application for a protective decree that (i) is consented to or not timely contested by that Person, or (ii) results in the entry of an order for relief, such an appointment, the issuance of such a protective decree or the entry of an order having similar effect, or (iii) is not dismissed within [***] days; (c) the making by that Person of a general assignment for the benefit of creditors; (d) the admission in writing by that Person that it is unable to pay its debts as they become due, or the nonpayment of its debts generally as they become due; or (e) the board of directors, managers, members or partners, as the case may be, of that Person taking any action in furtherance of any of the foregoing.
Additional Purchased Mortgage Loans means Mortgage Loans provided by Seller to Buyer pursuant to Section 4(a).
Adjusted LIBO Rate is defined in the Side Letter.
Adjusted Tangible Net Worth means, with respect to Seller and its Subsidiaries on a consolidated basis computed as of the end of the subject calendar month, an amount equal to:
(i) the Tangible Net Worth of Seller and its Subsidiaries on a consolidated basis on that day;
plus (ii) the lesser of (x) [***] of the Outstanding Principal Balances of all Mortgage Loans for which Seller and its Subsidiaries own the Servicing Rights and (y) the capitalized value of Sellers and its Subsidiaries Servicing Rights on that day;
plus (iii) the then unpaid principal amount of all Qualified Subordinated Debt of Seller and its Subsidiaries;
minus (iv) the book value of Mortgage Loans held by Seller and its Subsidiaries for investment purposes net of their reserves against Mortgage Loan investment losses on that day;
plus (v) the lesser of (x) the amount subtracted pursuant to clause (iv) immediately above and (y) [***] of the sum of the Outstanding Principal Balances of Mortgage Loans then held by Seller and its Subsidiaries for investment purposes;
minus (vi) [***] of the book value of REO Property held by Seller and its Subsidiaries net of their reserves against REO Property losses on that day;
minus (vii) [***] of the book value of other illiquid investments (meaning investments that cannot be readily converted to cash within [***] held by Seller and its Subsidiaries net of their reserves against other illiquid investments on that day.
Affiliate means, as to a specified Person, any other Person (a) that directly or indirectly through one or more intermediaries controls, is controlled by or is under common control with the specified Person; (b) that is a director, manager, trustee, general partner or executive officer of the specified Person or serves in a similar capacity in respect of the specified Person; (c) that, directly or indirectly through one or more intermediaries, is the beneficial owner of [***] or more of any class of equity securities of the specified Person or (d) of which the specified Person is directly or indirectly the owner of [***] or more of any class of equity securities (or equivalent equity interests); provided, however, for purposes of the Transaction Documents, Aris Mortgage Holding Company, LLC and each of Sellers Subsidiaries shall be considered the only Affiliates of Seller. For the purposes of this definition, control means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise and the terms controlling, controlled by and under common control with have meanings correlative to the meaning of control.
Aged Loan means, on any day, a Purchased Mortgage Loan whose Purchase Date was more than [***] days but not more than [***] days before that day.
Agency (and, with respect to two or more of the following, Agencies) means FHA, Fannie Mae, Ginnie Mae, Freddie Mac, RHS or VA.
Agency Guidelines means with respect to each Agency, those requirements, standards, policies, procedures and other guidance documents governing such Agencys standards and requirements for their purchase or guaranty of residential mortgage loans, as issued or adopted by such Agency from time to time (as amended by any waivers and/or modifications given in writing by such Agency to Seller from time to time.
Aggregate Purchase Price means, at any time, the sum of the outstanding balances of the Purchase Prices paid by Buyer for all Purchased Mortgage Loans that are subject to outstanding Transactions.
Agreement means this Master Repurchase Agreement (including all supplemental terms and conditions contained in its Exhibits and Schedules and the Side Letter), as supplemented, amended or restated from time to time.
Anti-Corruption Laws means all laws, rules and regulations of any jurisdiction applicable to Seller or its Subsidiaries from time to time concerning or relating to bribery or corruption.
Anti-Money Laundering Laws means federal, state and local anti-money laundering laws, orders and regulations, including the USA Patriot Act of 2001, the Bank Secrecy Act, OFAC regulations and applicable Executive Orders.
Appraised Value Alternative means with respect to (i) refinanced Mortgage Loans underwritten with the use of the Fannie Mae direct underwriting system with respect to which a property inspection waiver has been issued, (ii) Fannie Mae DU Refi Mortgage Loans and (iii) Freddie Mac Open Access Mortgage Loans, the value entered by the originator into Fannie Maes Desktop Underwriter or Freddie Macs Loan Prospector system, as applicable. In the case of FHA streamlined Mortgage Loans, Appraised Value Alternative means the appraised value
reported in the FHA Connection system for the Mortgagors previous loan that is being refinanced by the subject Loan.
Approved Correspondent means a third party Mortgage Loan originator with which Seller currently has a written correspondent loan purchase agreement and that Buyer has approved for purchases of Eligible Mortgage Loans pursuant to this Agreement.
Approved Jumbo Takeout Investor means CL or another Approved Takeout Investor that has been approved in writing by Buyer for purchases of Jumbo Loans.
Approved Takeout Investor means any of (i) Fannie Mae, Freddie Mac, Ginnie Mae and the other entities listed on Schedule I, (ii) an investor added on an update of such schedule from time to time delivered to Buyer by Seller or (iii) CL, provided that Buyer, in its discretion, may disapprove any Approved Takeout Investor (other than an Agency or CL) in its good faith discretion by written notice to Seller, whereupon such investor shall cease to be an Approved Takeout Investor.
Asset File is defined in the Custodial Agreement.
Asset Schedule is defined in the Custodial Agreement.
Assignment of Mortgage means an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to effect the transfer of the Mortgage to the party indicated therein.
Authorized Signers means each of the officers of Seller listed on Schedule II or otherwise designated by the officer of Seller who is Sellers administrator with respect to Mortgage Finance Online, as such schedule may be updated by Seller from time to time with prior written notice to Buyer.
Available Warehouse Facilities means, as the context requires, (i) the aggregate amount at any time of used and unused available warehouse lines of credit, purchase facilities, repurchase facilities, early purchase program facilities, EBO Facilities and off-balance sheet funding facilities (whether committed or uncommitted) to finance Mortgage Loans available to Seller at such time or (ii) such warehouse lines of credit, purchase facilities, repurchase facilities, early purchase program facilities and off-balance sheet funding facilities themselves.
Bailee Letter is defined in the Custodial Agreement.
Bankruptcy Code means Title 11 of the United States Code (11 U.S.C. Section 101 et seq.), as amended by the Bankruptcy Reform Act and as further amended from time to time, or any successor statute.
Bankruptcy Reform Act means the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, effective as of October 17, 2005.
Blanket Bond Required Endorsement means endorsement of Sellers mortgage bankers blanket bond insurance policy to (i) provide that for any loss affecting Buyers interest, Buyer will be named on the loss payable draft as its interest may appear and (ii) provide Buyer access to coverage under the theft of secondary market institutions money or collateral clause of policy.
Business Day means a day (other than a Saturday or Sunday) when (i) banks in Houston, Texas, Los Angeles, California, Santa Ana, California and New York, New York are generally open for commercial banking business and (ii) federal funds wire transfers can be made.
Cash Equivalents means any of the following: (a) marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or issued by any agency thereof and backed by the full faith and credit of the United States, in each case maturing within three (3) months or less after the date of the applicable financial statement reporting such amounts; (b) certificates of deposit, time deposits or Eurodollar time deposits having maturities of three (3) months or less after the date of the applicable financial statement reporting such amounts, or overnight bank deposits, issued by any well-capitalized commercial bank organized under the laws of the United States or any state thereof having combined capital, surplus and retained earnings in excess of [***]; (c) repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than [***] days with respect to securities issued or fully guaranteed or insured by the United States Government; (d) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by S&P or p-1 or the equivalent thereof by Moodys and in either case maturing within [***] days after the day of acquisition; (e) securities with maturities of [***] days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moodys; (f) securities with maturities of [***] days or less from the date of acquisition backed by standby letters of credit issued by any commercial bank satisfying the requirements of clause (b) of this definition, or (g) shares of money market, mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition.
Cash Pledge Account means the blocked Sellers account (under the sole dominion and control of Buyer) with JPM Chase styled as follows:
AmeriHome Mortgage Company
JPMorgan Chase Secured Party
Cash Pledge Account
CFPB means the Consumer Financial Protection Bureau or any successor.
Change in Control means either of the following events (a) the acquisition by any Person, or two or more Persons acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended) of outstanding shares of voting stock (or equivalent equity interests) of Seller
at any time if after giving effect to such acquisition such Person or Persons owns [***] or more of such outstanding voting stock (or equivalent equity interests) or (b) any Person, or any group of two or more Persons, that is the current (direct or indirect) owner of [***] or more of the outstanding shares of voting stock (or equivalent equity interests) of Seller, shall for any reason cease to own and control, directly or indirectly, more than [***] of the outstanding equity interests of Seller (in this definition, control and controlled mean having the power to direct the management and policies of the subject company, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise).
Change in Law means (a) the adoption of a Requirement of Law after the date of this Agreement, (b) any change in a Requirement of Law or (c) compliance by Buyer (or by any applicable lending office of Buyer) with any Requirement of Law made or issued after the date of this Agreement; provided that, notwithstanding anything herein to the contrary, (i) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all rules, regulations, guidelines and directives thereunder, issued in connection therewith or in implementation thereof, and (ii) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, shall in each case be deemed to be a Change in Law regardless of the date enacted, adopted, issued or implemented.
CL, when used as a noun, means JPM Chase, operating through its unincorporated division commonly known as its Correspondent Lending group. When CL is used as an adjective modifying a type of Mortgage Loan, it means that such Mortgage Loan meets CLs underwriting guidelines and is covered by (or becomes covered by) a Takeout Commitment issued by CL.
Combined Loan-to-Value Ratio or CLTV means, for each Mortgage Loan as of its Purchase Date, a fraction (expressed as a percentage) having as its numerator the sum of (i) the original principal amount of the Mortgage Note plus (ii) the original principal amount of each other Mortgage Loan that is secured by a junior Lien against the related Mortgaged Property, and as its denominator the lesser of (x) the sales price of the related Mortgaged Property and (y) either (as applicable) (1) the appraised value of the related Mortgaged Property indicated in the appraisal obtained in connection with the Origination of such Mortgage Loan if an appraisal is required by the relevant Agency Guidelines or Approved Takeout Investor or (2) the value set forth in the Appraised Value Alternative with respect to those Mortgage Loans for which an appraisal is not required under the relevant Agency Guidelines.
Completed Repurchase Advice means with respect to any Purchased Mortgage Loan repurchased, receipt by Buyer of:
(i) funds deposited into the Funding Account in an amount at least equal to (x) the Repurchase Price of such Purchased Mortgage Loan minus (y) any unpaid Price Differential to be paid by Seller on the next Remittance Date, and if a lesser amount is deposited in the Funding Account, confirmation that funds in an amount at least equal to such deficiency are on deposit in the Operating Account and available for withdrawal by Buyer after taking into account all other payments required to be made by Seller from the Operating Account;
(ii) a purchase advice or mortgage loan schedule from the related Approved Takeout Investor (or other purchaser of such Mortgage Loan) in a form reasonably acceptable to Buyer, reflecting that the funds so received in the Funding Account are for the purchase of that Purchased Mortgage Loan; and
(iii) a description of that Purchased Mortgage Loan, in sufficient detail to enable Buyer to identify the specific Mortgage Loan to be removed from the list of Purchased Mortgage Loans subject to outstanding Transactions under this Agreement.
Compliance Certificate means a compliance certificate substantially in the form of Exhibit C, completed, executed by a Responsible Officer of Seller and submitted to Buyer.
Confirmation means a confirmation of Sellers request to Buyer to enter into a Transaction, substantially in the form of Exhibit A or such other form as Buyer and Seller shall agree to use, completed as required by Section 3(c) and submitted to Buyer as Step 3: Validate Entry on the Warehouse Request tab of Mortgage Finance Online.
Conventional Conforming Loan means a Mortgage Loan that conforms to Agency Guidelines. The term Conventional Conforming Loan does not include a Mortgage Loan that is a Government Loan or a Jumbo Loan.
Co-op Corporation, Co-op Loan, Co-op Project, Co-op Shares and Co-op Unit are each defined in the Custodial Agreement.
Correspondent Loan means a Conventional Conforming Loan or a Government Loan originated by an Approved Correspondent and funded with the Approved Correspondents own funds or funds provided by its warehouse or working capital lender (and, for the avoidance of doubt, not table funded with funds provided by Seller or an Affiliate of Seller).
Credit File means, with respect to a Mortgage Loan, all of the paper and documents required to be maintained pursuant to the related Takeout Commitment or the related Hedging Arrangement, as applicable, and all other papers and records of whatever kind or description, whether developed or created by Seller or others, required to Originate or document the Mortgage Loan.
Custodial Agreement means the Custodial Agreement dated on or about the date of this Agreement among Buyer, Seller and Custodian, as supplemented, amended or restated from time to time.
Custodian means Deutsche Bank National Trust Company, the Custodian under the Custodial Agreement, and its successors.
Custodians Asset Schedule and Exception Report is defined in the Custodial Agreement.
Debt means, with respect to any Person, on any day (a) all indebtedness or other obligations of such Person (and, if applicable, that Persons Subsidiaries, on a consolidated basis) that, in accordance with GAAP, should be included in determining total liabilities as shown on the
liabilities side of a balance sheet of such Person at such date, and (b) all indebtedness or other obligations of such Person (and, if applicable, that Persons Subsidiaries, on a consolidated basis) for borrowed money or for the deferred purchase price of property or services; provided that, for purposes of this Agreement, there shall be excluded from Debt on any day loan loss reserves, deferred taxes arising from capitalized excess service fees, operating leases and Qualified Subordinated Debt.
Default means any condition or event that, with the giving of notice or lapse of time or both, would constitute an Event of Default.
Defaulted Loan means a Mortgage Loan (i) as to which any principal or interest payment, escrow payment or part thereof, remains unpaid for [***] days or more from the original due date for such payment (whether or not Seller has allowed any grace period or extended the due date thereof by any means), (ii) as to which another material default has occurred and is continuing, (iii) as to which foreclosure proceedings have commenced, (iv) as to which an Act of Insolvency has occurred with respect to its Mortgagor or any cosigner, guarantor, endorser, surety, assumptor or grantor, or (iv) that, consistent with Sellers collection policies, has been or should be written off as uncollectible in whole or in part.
Defective Mortgage Loan means (i) a Mortgage Loan that is not an Eligible Mortgage Loan or (ii) a Purchased Mortgage Loan in which Buyer does not have a valid and perfected first priority security interest or that is not free and clear of any other Lien.
Delivered Mortgage Loan is defined in the Custodial Agreement.
DTI means the ratio of a Mortgagors recurring monthly debt obligations to his or her gross monthly income.
DU Jumbo Loan is a Jumbo Loan in respect of which the authority to underwrite, process and approve it has been delegated to Seller by an Agency or other related Approved Takeout Investor.
Due Diligence Cap means [***] per each 365-day period, calculated each year from the date of this Agreement.
Early Repurchase Date is defined in Section 3(k)(ii).
EBO Facility is defined in Section 11(l).
Electronic Agent is defined in the definition of Electronic Tracking Agreement.
Electronic Signature means an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign, authenticate or accept such contract or record.
Electronic Tracking Agreement means the Electronic Tracking Agreement dated on or about the date hereof by and among Buyer, Seller, MERS and MERSCORP Holdings, Inc. (the Electronic Agent), as supplemented, amended or restated from time to time.
Eligible Mortgage Loan means, on any date of determination, a Mortgage Loan:
(i) for which each of the applicable representations and warranties set forth on Exhibit B is true and correct as of such date of determination;
(ii) that is either a Conventional Conforming Loan, a Government Loan or a Jumbo Loan;
(iii) if a Correspondent Loan, whose Origination Date was no more than [***] days before the Purchase Date for the initial Transaction in which that Mortgage Loan was purchased by Buyer;
(iv) if a Correspondent Loan, it was acquired by Seller from an Approved Correspondent, or if Seller acquired it from a correspondent that Buyer has not approved, Buyer elects in its sole discretion to purchase such Mortgage Loan;
(v) if not a Correspondent Loan, whose Origination Date was no more than [***] days before the Purchase Date for the initial Transaction in which that Mortgage Loan was purchased by Buyer;
(vi) that is eligible for sale to an Approved Takeout Investor under its Takeout Guidelines;
(vii) that has a scheduled Repurchase Date not later than the following number of days after the Purchase Date for the initial Transaction to which that Mortgage Loan was subject:
Type of Mortgage Loan |
|
Number of days |
Aged Loan |
|
[***] |
Long Aged Loan |
|
[***] |
Conventional Conforming Loan |
|
[***] |
Government Loan |
|
[***] |
Jumbo Loan |
|
[***] |
(viii) that does not have a Combined Loan-to-Value Ratio in excess of (i) [***] in the case of a Conventional Conforming Loan or a Government Loan other than an RHS Loan, (ii) [***] in the case of an RHS Loan, (iii) in the case of a Jumbo Loan other than an Expanded Criteria Jumbo Loan, the applicable maximum CLTV specified on Schedule III or (iv) in the case of an Expanded Criteria Jumbo Loan, [***] (or, in each case, such other percentage determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) and, if its Loan-to-Value Ratio is in excess of [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time), it has private mortgage insurance in an amount required by the applicable Agency Guidelines, unless pursuant to Agency Guidelines in existence at the time such Mortgage Loan was originated, private mortgage insurance is not required for such Mortgage Loan;
(ix) whose Mortgagor has a FICO Score of at least 620, or if it is a Low FICO Government Loan, at least 580, or if it is an Expanded Criteria Jumbo Loan, at least 700 (or in each case such other minimum FICO Score as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time);
(x) for which, on or before its Purchase Date, its Mortgage Loan Schedule has been delivered to Buyer and an Asset Schedule listing it has been delivered to Custodian;
(xi) for which, if not a Wet Loan, a complete Asset File has been delivered to Custodian on or before its Purchase Date and Buyer has received a Custodians Asset Schedule and Exception Report that includes it;
(xii) for which, if a Wet Loan:
(A) on or before its Purchase Date, a written fraud detection report acceptable to Buyer in its sole discretion has been delivered to Buyer;
(B) if requested by Buyer, all applicable items listed in clauses (i) through (iii) of the definition of Loan Eligibility File have been delivered to Buyer on or before its Purchase Date;
(C) and if it is also a Jumbo Loan (whether an Expanded Criteria Jumbo Loan, a CL Jumbo Loan or an OATI Jumbo Loan), the applicable items listed in clause (xxii) of this definition of Eligible Mortgage Loan have been delivered to Buyer on or before its Purchase Date; and
(D) at or before its Wet Delivery Deadline, a complete Asset File has been delivered to Custodian and Buyer has received an updated Custodians Asset Schedule and Exception Report that includes it;
(xiii) if a Wet Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Wet Loans that are then subject to Transactions, is less than or equal to (i) [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount on any day that is one of the first [***] or the last [***] Business Days of any calendar month or (ii) [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount on any other day (Wet Loans are also subject to the sublimits set forth in this definition of Eligible Mortgage Loan for their respective loan types);
(xiv) that, if subject to a Takeout Commitment, (a) is not subject to a Takeout Commitment that has expired or been terminated or cancelled by the Approved Takeout Investor or with respect to which Seller is in default, (b) has not been rejected or excluded for any reason (other than default by Buyer) from such Takeout Commitment by the Approved Takeout Investor;
(xv) that, if subject to a Hedging Arrangement, is not subject to a Hedging Arrangement that has expired or been cancelled by the Hedging Arrangement counterparty or with respect to which Seller is in default or a termination event has occurred;
(xvi) if an RHS Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other RHS Loans that are then subject to Transactions, is less than or equal to [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;
(xvii) if a Second Home Loan or an Investor Loan that is not a Jumbo Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all non-Jumbo Second Home Loans and non-Jumbo Investor Loans that are then subject to Transactions, is less than or equal to [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;
(xviii) if a Low FICO Government Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Low FICO Government Loans that are then subject to Transactions, is less than or equal to [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;
(xix) if an Aged Loan or a Long Aged Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Aged Loans and Long Aged Loans that are then subject to Transactions, is less than or equal to [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to any Seller from time to time) of the Facility Amount;
(xx) if a Long Aged Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Long Aged Loans that are then subject to Transactions, is less than or equal to [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to any Seller from time to time) of the Facility Amount;
(xxi) if a Jumbo Loan, whether an Expanded Criteria Jumbo Loan, a CL Jumbo Loan or an OATI Jumbo Loan, and including Second Home Loans and Investor Loans that are Jumbo Loans, whose Purchase Price, when added to the sum of the Purchase Prices of all other Jumbo Loans that are then subject to Transactions, is less than or equal to [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to any Seller from time to time) of the Facility Amount;
(xxii) if a Jumbo Loan, if requested by Buyer evidence satisfactory to Buyer in its sole discretion that it is either (i) covered by a valid and binding Takeout Commitment issued by CL or by a best efforts takeout commitment issued by another Approved Takeout Investor approved by Buyer for the purchase of OATI Jumbo Loans, which may include a copy of the related Takeout Agreement and such other documents as may be required by Buyer in its sole discretion or (ii) covered by Hedging Arrangements;
(xxiii) if and to the extent that Buyer elects by notice to Seller to review and approve them, for which Mortgage Loan Buyer has approved the underwriting, the Takeout Commitment and other related information;
(xxiv) that is not a Mortgage Loan that Seller has failed to repurchase when required by the terms of this Agreement;
(xxv) for which the related Mortgage Note has not been out of the possession of Custodian pursuant to a Request for Release of Documents (x) for more than [***] days after the date of such Request for Release of Documents if such documents are received by Seller or any subservicer that is an Affiliate of Seller, or (y) for more than [***] days after the date of that Request for Release of Documents if such documents are received by a subservicer that is not an Affiliate of Seller and who has delivered an executed Bailee Letter to Custodian;
(xxvi) for which neither the related Mortgage Note nor the Mortgage has been out of the possession of Custodian pursuant to a Bailee Letter for more than the number of days specified in such Bailee Letter, or if such Bailee Letter does not specify a time limit, for more than [***] Business Days after the related Approved Takeout Investors scheduled purchase date; and
(xxvii) that is not a Defaulted Loan.
ERISA means the Employee Retirement Income Security Act of 1974, all rules and regulations promulgated thereunder and any successor statute, rules and regulations, as amended from time to time.
Event of Default is defined in Section 12.
Expanded Criteria Jumbo Loan means a Jumbo Loan whose (ii) original principal amount is [***] or less, (iii) CLTV is [***] or less, (iv) Mortgagors FICO Score is at least [***] and (v) Mortgagors DTI is [***] or less.
Facility Amount is defined in the Side Letter.
Fannie Mae means the Federal National Mortgage Association or any successor.
FDIA means the Federal Deposit Insurance Act, as amended from time to time.
FDIC means the Federal Deposit Insurance Corporation or any successor.
FDICIA means the Federal Deposit Insurance Corporation Improvement Act of 1991, as amended from time to time.
FHA means the Federal Housing Administration, a subdivision of HUD, or any successor. The term FHA is used interchangeably in this Agreement with the term HUD.
FICO Score means, with respect to any Mortgagor, the statistical credit score prepared by Fair Isaac Corporation, Experian Information Solutions, Inc., TransUnion LLC or such other Person as may be approved in writing by Buyer in its sole discretion.
Financial Institution means JPM Chase in its capacity of the bank at which the Accounts are held.
Flood Laws is defined in the definition of Requirement(s) of Law.
Foreign Buyer is defined in Section 11(f)(ii).
Freddie Mac means the Federal Home Loan Mortgage Corporation or any successor.
FTC Act is defined in the definition of Requirement(s) of Law.
Funding Account means the blocked Sellers account (under the sole dominion and control of Buyer) with JPM Chase styled as follows:
AmeriHome Mortgage Company
JPMorgan Chase Secured Party
Funding Account
GAAP means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and the statements and pronouncements of the Financial Accounting Standards Board.
Ginnie Mae means the Government National Mortgage Association or any successor.
GLB Act means the Gramm-Leach-Bliley Act of 1999 (Public Law 106-102, 113 Stat 1338), as it may be amended from time to time.
Government Loan means a Mortgage Loan that is insured by the FHA or guaranteed by the Department of Veterans Affairs or RHS. The term Government Loan does not include any Mortgage Loan that is a Conventional Conforming Loan or a Jumbo Loan.
Governmental Authority means and includes the government of the United States of America, any other nation or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government, any governmental or quasi-governmental department, commission, board, bureau or instrumentality, any court, tribunal or arbitration panel.
Guarantor means and includes any Person who now or hereafter executes a guaranty to support the obligations of Seller under this Agreement and the other Transaction Documents.
Guaranty means and includes each guaranty executed by a Guarantor in favor of Buyer, in each case, as supplemented, amended or restated from time to time.
Hedging Arrangement means any forward sales contract, forward trade contract, interest rate swap agreement, interest rate cap agreement or other contract pursuant to which Seller has protected itself from the consequences of a loss in the value of a Mortgage Loan or its portfolio
of Mortgage Loans because of changes in interest rates or in the market value of mortgage loan assets.
HUD means the U.S. Department of Housing and Urban Development or any successor department or agency. The term HUD is used interchangeably in this Agreement with the term FHA.
Impound Collection Account means the deposit account designated as an escrow or agency account held or to be established with JPM Chase, styled as follows:
Impound Collection Account for AmeriHome Mortgage Company
Income means, with respect to any Purchased Mortgage Loan, (i) all payments of principal, payments of interest, proceeds of Takeout Commitments, proceeds of Hedging Arrangements, cash collections, dividends, sale or insurance proceeds and other cash proceeds received relating to the Purchased Mortgage Loan and other Mortgage Assets, (ii) any other payments or proceeds received in relation to the Purchased Mortgage Loan and other Mortgage Assets (including any liquidation or foreclosure proceeds with respect to the Purchased Mortgage Loan and payments under any guarantees or other contracts relating to the Purchased Mortgage Loan) and (iii) all other proceeds as defined in Section 9-102(64) of the UCC; provided that Income does not include any escrow withholds or escrow payments for Property Charges.
Income Collection Account means the blocked Sellers account (under the sole dominion and control of Buyer) with JPM Chase styled as follows:
AmeriHome Mortgage Company
JPMorgan Chase Secured Party
Income Collection Account
Indemnified Party is defined in Section 16(b).
Indirect means any change in ownership of a controlling interest of the relevant Persons direct or indirect parent.
Interim Servicing Correspondent is defined in Section 13(a)(ii)
Interim Servicing Term is defined in Section 13(a).
Investor Loan means a Conventional Conforming Loan or a Jumbo Loan that is secured by a 1-4 family residence that is not occupied by the Mortgagor (as either his or her principal residence or second home), and if it is a Jumbo Loan that satisfies the maximum CLTV and minimum FICO Score criteria specified on Schedule III or that has been approved by Buyer on a case-by-case basis.
IRC means the Internal Revenue Code of 1986, as amended from time to time and any successor statute.
IRS means the United States Internal Revenue Service.
JPM Chase means JPMorgan Chase Bank, N.A., a national banking association, in its individual capacity, and its successors and assigns.
Jumbo Loan means a Mortgage Loan that conforms to (i) all of the Agency Guidelines requirements for a Conventional Conforming Loan except that its original principal amount exceeds the maximum allowed by Agency Guidelines and (ii) (only as to Jumbo Loans that are not Expanded Criteria Jumbo Loans) the maximum CLTV and minimum FICO Score criteria specified on Schedule III.
Leverage Ratio means the ratio of a Persons Debt (including off balance sheet financings) to its Adjusted Tangible Net Worth computed as of the end of the subject calendar month.
Lien means any security interest, mortgage, deed of trust, charge, pledge, hypothecation, assignment as security for an obligation, deposit arrangement as security for an obligation, equity, encumbrance, lien (statutory or other), preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever, including any conditional sale or other title retention arrangement, any financing lease arrangement having substantially the same economic effect as any of the foregoing and the security interest evidenced or given notice of by the filing of any financing statement under the UCC (other than any such financing statement filed for informational purposes only) or comparable law of any jurisdiction.
Liquidity means Sellers unencumbered and unrestricted cash and Cash Equivalents (including the balance on deposit in the Cash Pledge Account, but excluding any restricted cash or cash pledged to third parties, other than all unrestricted cash on deposit with Sellers other warehouse lenders) computed as of the end of the subject calendar month.
Litigation means, as to any Person, any material action, lawsuit, investigation, claim, proceeding, judgment, order, decree or resolution against or affecting such Person or the business, operations, properties or assets of such Person before, or by, any Governmental Authority.
Loan Eligibility File means, with respect to each Mortgage Loan, the following documents:
(i) if a Government Loan and if it is requested by Buyer, a valid conditional commitment or eligibility certification from VA, FHA or RHS, as applicable;
(ii) if requested by Buyer, evidence satisfactory to Buyer, in its sole discretion, that such Mortgage Loan is subject to a valid and effective Hedging Arrangement or to a valid and binding Takeout Commitment, and such other documents as may be required by Buyer in its sole discretion;
(iii) if requested by Buyer, a copy of (1) the DU/DO/LP approval cover page, or (2) a copy of the related underwriting approval from the Approved Takeout Investor or, (3) for a Second Home Loan, a copy of the related valid eligibility certificate issued by an Agency or, (4) for an RHS Loan, a copy of the related Conditional Commitment for Single Family Housing Loan Guarantee 1980-18 and (5) such other documents establishing the eligibility for purchase by the
related Approved Takeout Investor as Buyer may reasonably require and specify in a written notice given to Seller from time to time;
(iv) if a Nondelegated Jumbo Loan, evidence satisfactory to Buyer, in its sole discretion, of its underwriting approval by an Approved Takeout Investor;
(v) if a DU Jumbo Loan, evidence reasonably satisfactory to Buyer that the appraisal of the related Mortgaged Property has been reviewed and accepted by an Approved DU Jumbo Takeout Investor and that its underwriting has been internally approved by Seller;
(vi) if, at any point in the future, (i) Buyer determines that the Truth in Lending Act of 1968, as amended, requires Buyer, as a buyer under a residential mortgage warehousing repurchase facility, to give notice letters to Mortgagors setting forth the information regarding Buyer as a new creditor and the other information specified in Section 404 of The Helping Families Save Their Homes Act of 2009, as amended, and (ii) requests that Seller provide Buyer with the information necessary for Buyer to give such notice letters, Seller will promptly provide such information for all Purchased Mortgage Loans then subject to Transactions and the Mortgage Loan Schedule for each subsequently purchased Purchased Mortgage Loan shall include that information; and
(vii) such additional documents, if any, as shall be required by Buyer in its sole discretion from time to time by written notice to Seller.
Loan Level Representation is defined in Section 12(a)(iii).
Loan-to-Value Ratio or LTV means, for each Mortgage Loan as of the related Purchase Date, a fraction (expressed as a percentage) having as its numerator the original principal amount of the Mortgage Note and as its denominator the lesser of (x) the sales price of the related Mortgaged Property and (y) either (1) the appraised value of the related Mortgaged Property indicated in the appraisal obtained in connection with the Origination of such Mortgage Loan if an appraisal is required by the relevant Agency Guidelines or Takeout Investor or (2) the value set forth in the Appraised Value Alternative with respect to those Mortgage Loans for which an appraisal is not required under the relevant Agency Guidelines.
Long Aged Loan means, on any day, a Purchased Mortgage Loan whose Purchase Date was more than [***] days but not more than [***] days before that day.
Low FICO Government Loan means a Government Loan other than an RHS Loan whose Mortgagors FICO Score is [***] or higher but less than [***], and whose underwriting, appraisal and all related documentation meet Agency Guidelines.
Manufactured Home means a single-family home constructed at a factory and shipped in one or more sections to a housing site.
Margin Amount means at any time with respect to any Purchased Mortgage Loan, the amount equal to (a) the applicable Margin Percentage for that Purchased Mortgage Loan at that time multiplied by (b) the Market Value of that Purchased Mortgage Loan at that time.
Margin Deficit is defined in Section 4(a).
Margin Percentage is defined in the Side Letter.
Margin Stock has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.
Market Value means, at any time with respect to any Purchased Mortgage Loan, its fair market value at such time as determined by Buyer in its sole good faith discretion; provided, however, that the methodology for such determination is consistent with Buyers determination with respect to its own portfolio of mortgage loans to which such a determination would be applicable.
Material Adverse Effect means any (i) material adverse effect upon the validity, performance or enforceability of any Transaction Document, (ii) material adverse effect on the properties, business, condition or prospects, financial or otherwise, of Seller (and its Subsidiaries, on a consolidated basis) or any Guarantor, (iii) material adverse effect upon the ability of Seller to fulfill its obligations under this Agreement or the ability of any Guarantor to fulfill its obligations under its Guaranty, or (iv) material adverse effect on the value or salability of the Purchased Mortgage Loans subject to this Agreement, taken as a whole, as determined in each case by Buyer in Buyers sole good faith discretion.
Materially False Representation is defined in Section 12(a)(iii).
MBS means a mortgage pass-through security, collateralized mortgage obligation, real estate mortgage investment conduit or other security that (or, as the context requires, securities each of which) is (i) either issued by Seller and fully guaranteed by Ginnie Mae or issued and fully guaranteed as to timely payment of interest and payment of principal by Fannie Mae or Freddie Mac, (ii) provides for payment by its issuer to its holder of specified principal installments and/or a fixed or floating rate of interest on the unpaid balance and for all prepayments to be passed through to the holder, (iii) issued in book-entry form and (iv) based on and backed by a pool of Mortgage Loans, in substantially the principal amount and with substantially the other terms as specified with respect to such MBS in the related Takeout Commitment.
MERS means Mortgage Electronic Registration Systems, Inc. and its successors and assigns.
MERS Designated Mortgage Loan means a Mortgage Loan that satisfies the definition of the term MERS Designated Mortgage Loan contained in the Electronic Tracking Agreement.
MERS® System has the meaning given that term in the Electronic Tracking Agreement.
MIN means the MERS Identification Number permanently assigned to each MERS Designated Mortgage Loan.
MOM Loan means a MERS Designated Mortgage Loan that was registered on the MERS® System at the time of its Origination and for which MERS appears as the record mortgagee or beneficiary on the related Mortgage.
Moodys means Moodys Investors Service and any successor.
Mortgage means a mortgage, deed of trust or other security instrument creating a Lien on Mortgaged Property.
Mortgage Assets is defined in Section 6(a).
Mortgage Finance Online means the website maintained by Buyer and used by Seller and Buyer to administer the Transactions, the notices and reporting requirements contemplated by the Transaction Documents and other related arrangements.
Mortgage Loan means a whole mortgage loan or Co-op Loan that is secured by a Mortgage on residential real estate, and includes all of its Servicing Rights.
Mortgage Loan Documents means the Mortgage Note, the Mortgage (or, for Co-op Loans, the Proprietary Lease, the Stock Certificate and the Recognition Agreement) and all other documents evidencing, securing, guaranteeing or otherwise related to a Mortgage Loan.
Mortgage Loan Schedule means a data tape or schedule of information prepared and transmitted electronically by Seller to Buyer in the format and with such fields of information set forth in Exhibit H regarding the Purchased Mortgage Loans, as such required format or information fields may be changed from time to time by Buyer with prior written notice to Seller.
Mortgage Note means the original executed promissory note or other primary evidence of indebtedness of a Mortgagor on a Mortgage Loan.
Mortgaged Property means the residential real estate securing the Mortgage Note, that shall be either (i) in the case of a Mortgage Loan that is not a Co-op Loan, a fee simple estate, or in locations where leasehold estates have market acceptance, an Agency-acceptable leasehold estate, in the real property located in any state of the United States (including all buildings, improvements and fixtures thereon and all additions, alterations and replacements made at any time with respect to the foregoing) purchased with the proceeds of the Mortgage Loan or (ii) in the case of a Co-op Loan, the Proprietary Lease and related Co-op Shares.
Mortgagor means the obligor on a Mortgage Note or the grantor or mortgagor on a Mortgage, as the context requires.
Nondelegated is an adjective that, when used to modify a type of Mortgage Loan, means that authority to underwrite, process and approve such Mortgage Loan type has not been delegated to Seller by an Agency or other related Approved Takeout Investor.
OATI is an adjective that, when used to modify a type of Mortgage Loan, means that such Mortgage Loan meets CLs underwriting guidelines and is covered by a Takeout Commitment issued by an Approved Takeout Investor other than CL (and, for OATI Jumbo Loans, whose Approved Takeout Investor has been approved by Buyer for the purchase of Jumbo Loans).
OFAC means the Office of Foreign Assets Control of the U.S. Department of the Treasury.
Officers Certificate means a certificate signed by a Responsible Officer of Seller and delivered to Buyer.
Operating Account means the blocked Sellers account (under the sole dominion and control of Buyer) with JPM Chase styled as follows:
AmeriHome Mortgage Company
JPMorgan Chase Secured Party
Operating Account
Originate or Origination means a Persons actions in taking an application for, underwriting or closing a Mortgage Loan.
Origination Date means the date of the Mortgage Note and the related Mortgage.
Outstanding Principal Balance of a Mortgage Loan means, at any time, the then unpaid outstanding principal balance of such Mortgage Loan.
Party means each of Buyer and Seller.
Permitted Dividend means (a) as to any taxable period of Seller for which Seller, if a corporation, makes an S corporation election, or if a multi-member limited liability company or a partnership, does not makes an election with the Internal Revenue Service to be treated as a corporation, an annual or quarterly distribution necessary to enable each shareholder, partner or member, as applicable, of Seller to pay federal or state income taxes attributable to such shareholder, partner or member resulting solely from the allocated share of income of Seller for such period (Permitted Tax Distributions) and (b) a regular cash dividend or distribution declared by Seller and paid to its shareholders, partners or members, as applicable.
Permitted Tax Distributions is defined in the definition of Permitted Dividend.
Person means an individual, partnership, corporation (including a business trust), joint-stock company, limited liability company, trust, unincorporated association, joint venture, any Governmental Authority or other entity.
Plans is defined in Section 10(a)(xviii).
Post-Origination Period means the period of time between a Mortgage Loans Origination Date and its Repurchase Date.
Price Differential means:
(i) with respect to any Purchased Mortgage Loan and for each month (or portion thereof) during which it is subject to an outstanding Transaction, the sum of the results of the following calculation for each day during that month (or portion thereof): the Pricing Rate for that Purchased Mortgage Loan on such day multiplied by the outstanding Purchase Price for that Purchased Mortgage Loan on such day divided by 360; or
(ii) with respect to any Transaction hereunder, for each month (or portion thereof) during which that Transaction is outstanding, the sum of the results of the following calculation for each day during that month (or portion thereof): the weighted average of the applicable Pricing Rates for all Purchased Mortgage Loans subject to that Transaction on such day multiplied by the sum of the outstanding Purchase Prices for all Purchased Mortgage Loans subject to that Transaction on such day divided by 360.
Pricing Rate means, for any Purchased Mortgage Loan, the per annum percentage rate to be applied to determine the Price Differential, which rate shall be determined in accordance with the Side Letter.
Prime Rate means the rate of interest per annum announced from time to time by Buyer as its prime rate. The Prime Rate is a variable rate and each change in the Prime Rate is effective from and including the date the change is announced as being effective. THE PRIME RATE IS A REFERENCE RATE AND MAY NOT BE BUYERS LOWEST RATE.
Privacy Requirements means (a) Title V of the GLB Act, (b) any applicable federal regulations implementing such act codified at 12 CFR Parts 40, 216, 332 and 573, (c) any of the Interagency Guidelines Establishing Standards For Safeguarding Customer Information codified at 12 CFR Parts 30, 168, 170, 208, 211, 225, 263, 308 and 364 that are applicable and (d) any other applicable federal, state and local laws, rules, regulations and orders relating to the privacy and security of Sellers Customer Information, as such statutes and such regulations, guidelines, laws, rules and orders (the Safeguards Rules) may be amended from time to time.
Property Charges means all taxes, fees, assessments, water, sewer and municipal charges (general or special) and all insurance premiums, leasehold payments or ground rents.
Proprietary Lease is defined in the Custodial Agreement.
Purchase Date means the date with respect to each Transaction on which the Purchase Prices for Mortgage Loans subject to such Transaction are transferred by Buyer to or for the account of Seller on which date all such Mortgage Loans shall be deemed transferred by Seller to Buyer and Seller will take all steps necessary or appropriate to complete such transfer.
Purchase Price is defined in the Side Letter.
Purchased Mortgage Loans means, with respect to any Transaction, the Mortgage Loans sold by Seller to Buyer in such Transaction (each of which sales shall be on a servicing released basis), including any Additional Purchased Mortgage Loans delivered pursuant to Section 4(a) and excluding any Purchased Mortgage Loans repurchased by Seller or transferred to Seller. Except where the context requires otherwise, the term refers to all Purchased Mortgage Loans under all outstanding Transactions.
Qualified Subordinated Debt means, with respect to any Person, all unsecured Debt of such Person, for borrowed money, that is, by its terms or by the terms of a subordination agreement (which terms shall have been approved by Buyer), in form and substance satisfactory to Buyer, effectively subordinated in right of payment to all other present and future obligations and all indebtedness of such Person, of every kind and character, owed to Buyer and which terms or
subordination agreement, as applicable, include, among other things, standstill and blockage provisions approved by Buyer, restrictions on amendments without the consent of Buyer, non-petition provisions and maturity date or dates for any principal thereof at least 395 days after the date hereof.
Recognition Agreement is defined in the Custodial Agreement.
Remittance Date means the 15th day of each month, or if such day is not a Business Day, the next succeeding Business Day.
REO Property means Mortgaged Property acquired by Seller through foreclosure or deed in lieu of foreclosure.
Repurchase Date means, with respect to each Transaction, the date on which Seller is required to repurchase (or the earlier date, if any, on which Seller electively repurchases) from Buyer the Purchased Mortgage Loans that are subject to that Transaction. The Repurchase Date on which Seller is required to so repurchase shall occur (i) for Transactions terminable on a date certain, on the date specified in the Confirmation, (ii) for Transactions, if any, specified in the related Confirmation to be terminable on demand, the earlier to occur of (a) the date specified in Buyers demand or (b) the date specified in the Confirmation on which Seller is required to repurchase the Purchased Mortgage Loans if no demand is sooner made, and (iii) for repurchases of Defective Mortgage Loans under Section 3(k), the Early Repurchase Date; provided that in any case, the Repurchase Date with respect to each Transaction shall occur no later than the earliest of:
(1) the date specified in clause (iv) of the definition of Termination Date;
(2) (i) for each Aged Loan, [***] days after its Purchase Date, (ii) for each Long Aged Loan, [***] after its Purchase Date, or (iii) for each other type of Purchased Mortgage Loan, [***] days after its Purchase Date;
(3) [***] days after the Termination Date specified in a notice, if any, given by either Buyer or Seller to the other of them pursuant to clause (i) of the definition of Termination Date; and
(4) [***] days after the Termination Date specified in a notice, if any, given by Buyer pursuant to clause (ii) of the definition of Termination Date following any Change in Control.
Repurchase Price means, for each Purchased Mortgage Loan on any day, the price for which such Purchased Mortgage Loan is to be resold by Buyer to Seller upon termination of the Transaction in which Buyer purchased it (including a Transaction terminable on demand), which is (x) its Purchase Price minus (y) the sum of all cash, if any, theretofore paid by Seller into the Operating Account to cure the portion of any Margin Deficit that Buyer, using any reasonable method of allocation, attributes to such Purchased Mortgage Loan plus (z) its accrued and unpaid Price Differential on that day; provided that such accrued Price Differential may be paid on a day other than the Repurchase Date in accordance with the terms of this Agreement.
Request for Documents Release is defined in the Custodial Agreement.
Required Amount is defined in Section 5(b).
Requirement(s) of Law means any law, treaty, ordinance, decree, requirement, order, judgment, rule, regulation or licensing requirement (or interpretation of any of the foregoing) of any Governmental Authority having jurisdiction over Buyer, Seller, any of Sellers Subsidiaries and any Guarantor or any of their respective Properties or any agreement with a Governmental Authority by which any of them is bound, as the same may be supplemented, amended, recodified or replaced from time to time, in each case as applicable to such Person as the context requires, including:
· Equal Credit Opportunity Act and Regulation B promulgated thereunder;
· Fair Housing Act;
· Gramm-Leach-Bliley Act and Regulation P promulgated thereunder;
· Fair Credit Reporting Act and Regulation V promulgated thereunder;
· Home Mortgage Disclosure Act and Regulation C promulgated thereunder;
· Federal Unfair, Deceptive, or Abusive Acts or Practices laws (including Section 5 of the Federal Trade Commission Act (the FTC Act));
· Truth In Lending Act and Regulation Z promulgated thereunder;
· Qualified Mortgage/Ability to Repay Rule;
· Real Estate Settlement Procedures Act and Regulation X promulgated thereunder;
· Home Ownership and Equity Protection Act and applicable portions of Regulation Z promulgated thereunder;
· Electronic Fund Transfer Act and Regulation E promulgated thereunder;
· National Flood Insurance Act, Flood Disaster Protection Act of 1973, National Flood Insurance Reform Act of 1994, Biggert-Waters Flood Insurance Act of 2012, Homeowner Flood Insurance Affordability Act (the Flood Laws);
· Servicemembers Civil Relief Act;
· rules, regulations and guidelines promulgated under any of such statutes; and
· any applicable state or local equivalent or similar laws and regulations.
Request for Release of Documents is defined in the Custodial Agreement.
Responsible Officer means, as to any Person, the chief executive officer, president, general partner, managing member, or non-member manager of such Person, or, with respect to financial matters, the chief financial officer, treasurer or controller of such Person; provided that in the event any such officer is unavailable at any time he or she is required to take any action hereunder, Responsible Officer means any officer authorized to act on such officers behalf as demonstrated by a certificate of corporate resolution or similar document and an incumbency certificate.
RHS means the Rural Housing Service of the Rural Development Agency of the United States Department of Agriculture or any successor.
RHS Loan means a Mortgage Loan that conforms to all RHS guidelines and is guaranteed by RHS.
Safeguards Rules is defined in the definition of Privacy Requirements.
Sanctions means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by the U.S. government, including those administered by OFAC or the U.S. Department of State.
Sanctioned Country means, at any time, a country, region or territory that is then the subject or target of any Sanctions.
Sanctioned Person means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by OFAC or the U.S. Department of State, (b) any Person operating, organized or resident in a Sanctioned Country or (c) another Person owned or controlled by any such Person.
Second Home Loan means an Eligible Mortgage Loan that is a Conventional Conforming Loan or a Jumbo Loan secured by a single family residence that is occupied by the Mortgagor but is not the Mortgagors principal residence, and that meets Agency Guidelines requirements for a Conventional Conforming Loan (except with respect to Jumbo Loans that its original principal amount exceeds the maximum allowed by Agency Guidelines).
S&P means Standard and Poors Ratings Services, a division of The McGraw-Hill Companies, Inc., and any successor.
SEC is defined in Section 27(a).
Sellers Accounts means each of the Funding Account and the Operating Account.
Sellers Customer means any natural person who has applied to Seller for a financial product or service, has obtained any financial product or service from Seller or has a Mortgage Loan that is serviced or subserviced by Seller.
Sellers Customer Information means any information or records in any form (written, electronic or otherwise) containing a Sellers Customers personal information or identity, including such Sellers Customers name, address, telephone number, loan number, loan payment
history, delinquency status, insurance carrier or payment information, tax amount or payment information and the fact that such Sellers Customer has a relationship with Seller.
Servicing File means with respect to each Mortgage Loan, all documents relating to its servicing, which may consist of (i) copies of the documents contained in the related Credit File and Loan Eligibility File, as applicable, (ii) the credit documentation relating to the underwriting and closing of such Mortgage Loan(s), (iii) copies of all related documents, correspondence, notes and all other materials of any kind, (iv) copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation and payment history records, (v) all other information or materials necessary or required to board such Mortgage Loan onto the applicable servicing system and (vi) all other related documents required to be delivered pursuant to any of the Transaction Documents.
Servicing Records means all servicing records created and/or maintained by Seller in its capacity as interim servicer for Buyer with respect to a Purchased Mortgage Loan, including any and all servicing agreements, files, documents, records, databases, computer tapes, copies of computer tapes, proof of insurance coverage, insurance policies, appraisals, other closing documentation, payment history records and any other records relating to or evidencing its servicing.
Servicing Rights means all rights and interests of Seller or any other Person, whether contractual, possessory or otherwise, to service, administer and collect Income with respect to Mortgage Loans, and all rights incidental thereto.
Settlement Agent means a title company, title insurance agent, escrow company or attorney that is acceptable to Buyer in its sole discretion and that is (i) unaffiliated with Seller, (ii) a division, subsidiary, licensed agent or authorized agent of a title insurance underwriter reasonably acceptable to Buyer and (iii) insured against errors and omissions in such amounts and covering such risks as are at all times customary for its business and with industry standards, to which the proceeds of any purchase of a Mortgage Loan are to be wired in accordance with local law and practice in the jurisdiction where such Mortgage Loan is being Originated.
Side Letter means the letter agreement dated as of the date hereof between Buyer and Seller, as supplemented, amended or restated from time to time.
SIPA is defined in Section 27(a).
Subservicer is defined in Section 13(a)(ii).
Subservicer Instruction Letter means a letter agreement between Seller and each Subservicer substantially in the form of Exhibit G or such other form as shall be acceptable to Buyer.
Subservicing Agreement is defined in Section 13(a)(ii).
Subsidiary means any corporation, association or other business entity in which more than fifty percent (50%) of the total voting power or shares of stock (or equivalent equity interest) entitled to vote in the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more of the other Subsidiaries of that Person or a combination thereof.
Successor Servicer is defined in Section 13(e).
Takeout Commitment means, with respect to each Approved Takeout Investor, the commitment to purchase a Purchased Mortgage Loan from Seller, and that specifies (a) the type of Purchased Mortgage Loan to be purchased, (b) a purchase date or purchase deadline date and (c) a purchase price or the criteria by which the purchase price will be determined. A Takeout Commitment may take the form of (1) a clear to close approval from the Approved Takeout Investor confirming that such specific Purchased Mortgage Loans are approved for purchase by such Approved Takeout Investor, (2) an automatic underwrite system AUS with a Seller internal clear to close per delegated authorities of the Approved Takeout Investor, (3) a mortgage insurer clear to close per delegated authorities of the Approved Takeout Investor, (4) a clear to close approval issued by an FHA Direct Endorsement underwriter, (5) a to be allocated (TBA) commitment for which the related Purchased Mortgage Loans are allocated, (6) a cash window trade commitment, or (7) any other form approved by Buyer from time to time.
Takeout Guidelines means (i) the eligibility requirements established by the Approved Takeout Investor that must be satisfied by a Mortgage Loan originator to sell Mortgage Loans to the Approved Takeout Investor and (ii) the specifications that a Mortgage Loan must meet, and the requirements that it must satisfy, to qualify for the Approved Takeout Investors program of Mortgage Loan purchases, as such requirements and specifications may be revised, supplemented or replaced from time to time.
Tangible Net Worth means, with respect to any Person on any day, the sum of total shareholders or members equity in such Person (including capital stock or member interests, additional paid-in capital and retained earnings, but excluding treasury stock, if any), each as determined in accordance with GAAP on a consolidated basis; provided that, for purposes of this definition, there shall be excluded from assets the following: the aggregate book value of all intangible assets of such Person (as determined in accordance with GAAP), including goodwill, trademarks, trade names, service marks, copyrights, patents, licenses, franchises, capitalized servicing rights, excess capitalized servicing rights, each to be determined in accordance with GAAP consistent with those applied in the preparation of such Persons financial statements; advances or loans to shareholders or Affiliates, advances or loans to employees (unless such advances are against future commissions), unconsolidated investments in Affiliates, deferred tax assets, assets pledged to secure any liabilities not included in the Debt of such Person and any other assets that would be deemed by Buyer or the Agencies to be unacceptable in calculating tangible net worth.
Termination Date means the earliest of (i) the Business Day, if any, that Seller or Buyer designates as the Termination Date by written notice given to the other Party at least thirty (30) days before such date, (ii) the Business Day, if any, that Buyer designates as the Termination Date by written notice given to Seller at any time after thirty (30) days shall have elapsed after any Change in Control, (iii) the date of declaration of the Termination Date pursuant to Section 12(b)(i) and (iv) three hundred sixty-four (364) days after the date hereof.
Third Party Originator means any Person other than an employee of Seller or an Approved Correspondent who solicits, procures, packages, processes or performs any other Origination function with respect to a Mortgage Loan.
TPO Loan means a Mortgage Loan that has been solicited, procured, packaged, processed or otherwise Originated by a Third Party Originator.
Transaction is defined in Section 1.
Transaction Documents means this Agreement (including all exhibits and schedules attached hereto), the Side Letter, each Guaranty, the Custodial Agreement, the Electronic Tracking Agreement, each Confirmation, Mortgage Loan Schedule, Custodians Asset Schedule and Exception Report, Trust Receipt, Bailee Letter and Request for Documents Release, and each deposit account agreement, other agreement, document or instrument executed or delivered in connection with this Agreement or any other Transaction Document, in each case as supplemented, amended, restated or replaced from time to time.
Transfer is defined in Section 11(o).
Trust Receipt is defined in the Custodial Agreement.
UCC means the Uniform Commercial Code, as amended from time to time, as in effect in the relevant jurisdiction.
VA means the U.S. Department of Veterans Affairs or any successor department or agency.
Wet Funding means the purchase by Buyer of a Mortgage Loan that is Originated by Seller on the Purchase Date under escrow arrangements satisfactory to Buyer pursuant to which Seller is permitted to use the Purchase Price proceeds to close the Mortgage Loan before Custodians receipt of the complete Asset File.
Wet Delivery Deadline means, with respect to any Wet Loan, the [***] Business Day following the Purchase Date for such Wet Loan (counting the Purchase Date as the first Business Day), or such later Business Day as Buyer, in its sole discretion, may specify from time to time.
Wet Loan means a Mortgage Loan that Seller is selling to Buyer on its Origination Date and accordingly for which the completed Asset File will not have been delivered to Custodian before funding of the related Purchase Price.
(b) Interpretation. Headings are for convenience only and do not affect interpretation. The following rules of this Section 2(b) apply unless the context requires otherwise. The singular includes the plural and conversely. A gender includes all genders. Where a word or phrase is defined, its other grammatical forms have a corresponding meaning. Any capitalized term used in the Side Letter and used, but not defined differently, in this Agreement has the same meaning here as there. A reference in this Agreement to a Section, Exhibit or Schedule is, unless otherwise specified, a reference to a Section of, or an Exhibit or Schedule to, this Agreement. Indorse and
correlative terms used in the Uniform Commercial Code may be spelled with an initial e instead of i. A reference to a party to this Agreement or another agreement or document includes the partys successors and permitted substitutes or assigns. A reference to an agreement or document is to the agreement or document as supplemented, amended, novated, restated or replaced, except to the extent prohibited by any Transaction Document. A reference to legislation or to a provision of legislation includes a modification or re-enactment of it, a legislative provision substituted for it and a regulation or statutory instrument issued under it. A reference to writing includes an electronic transmission and any other means that permits the recipient to reproduce words in a tangible and visible form. Delivery of an executed counterpart of a signature page of this Agreement or any other Transaction Document by telecopy, emailed pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement. The words execution, signed, signature, delivery, and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include Electronic Signatures, deliveries or the keeping of records in electronic form, each of which shall have the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act or any other similar state laws based on the Uniform Electronic Transactions Act. A reference to conduct includes an omission, statement or undertaking, whether or not in writing. An Event of Default exists until it has been waived in writing by the appropriate Person or Persons or has been timely cured. The words hereof, herein, hereunder and similar words refer to this Agreement as a whole and not to any particular provision of this Agreement. The term including and correlative terms are not limiting and mean including without limitation, whether or not that phrase is stated. In the computation of periods of time from a specified date to a later specified date, the word from means from and including, the words to and until each mean to but excluding, and the word through means to and including. If a day for payment or performance specified by, or determined in accordance with, the provisions of this Agreement is not a Business Day, then the payment or performance will instead be due on the Business Day next following that day. This Agreement may use several different limitations, tests or measurements to regulate the same or similar matters; all such limitations, tests and measurements are cumulative and each shall be performed in accordance with its terms. Except as otherwise expressly provided herein, all terms of an accounting or financial nature shall be construed in accordance with GAAP, as in effect from time to time; provided that, if either Seller or Buyer gives notice to the other of them that it requests an amendment to any provision hereof to eliminate the effect of any change occurring after the effective date of this Agreement in GAAP or in its application on the operation of such provision, whether any such notice is given before or after such change in GAAP or in its application, then such provision shall be interpreted on the basis of GAAP as in effect and applied immediately before such change shall have become effective until such notice shall have been withdrawn or such provision amended in accordance herewith. Unless otherwise specifically provided, all accounting calculations shall be made on an unconsolidated basis. Except where otherwise provided in this Agreement, references herein to fiscal year and fiscal quarter refer to such fiscal periods of Seller. Except where otherwise provided in this Agreement, any calculation, determination, statement or certificate by Buyer or an authorized officer of Buyer or any of its Affiliates provided for in this Agreement that is made in good faith and in the manner
provided for in this Agreement shall be conclusive and binding on the parties in the absence of manifest error. A reference to an agreement includes a security agreement, guarantee, agreement or legally enforceable arrangement, whether or not in writing. A reference to a document includes an agreement (as so defined) in writing or a certificate, notice, instrument or document or any information recorded on a computer drive or other electronic media form. Where Seller is required by this Agreement to provide any document to Buyer (other than this Agreement including its exhibits and schedules, the Side Letter, the Electronic Tracking Agreement, the Guaranty and their supporting secretarys or company certificates, hard copies of each of which shall be provided to Buyer), such document shall be provided in electronic form unless Buyer requests that it be provided in hard copy form, in which event Seller will provide it in hard copy form. This Agreement and the other Transaction Documents are the result of negotiations between Buyer and Seller (and Sellers related parties) and are the product of all parties. In the interpretation of this Agreement and the other Transaction Documents, no rule of construction shall apply to disadvantage one party on the ground that such party originated, proposed, presented or was involved in the preparation of any particular provision of this Agreement or of any other Transaction, or of this Agreement or such other Transaction Document itself. Seller and Buyer may be party to other mutual agreements and nothing in this Agreement shall be construed to restrict or limit any right or remedy under any such other agreement, and nothing in any such other agreement shall be construed to restrict or limit any right or remedy under this Agreement, except to the extent, if any, specifically provided herein or therein. Except where otherwise expressly stated, Buyer may (i) give or withhold, or give conditionally, approvals and consents, (ii) be satisfied or unsatisfied, and (iii) form opinions and make determinations, in each case in Buyers sole and absolute discretion. A reference to good faith means good faith as defined in §1-201(20) of the UCC as in effect in the State of New York. Any requirement of good faith, reasonableness, discretion or judgment by Buyer shall not be construed to require Buyer to request or await receipt of information or documentation not immediately available from or with respect to Seller or any other Person or the Purchased Mortgage Loans themselves. Buyer may waive, relax or strictly enforce any applicable deadline at any time and to such extent as Buyer shall elect, and no waiver or relaxation of any deadline shall be applicable to any other instance or application of that deadline or any other deadline, and no such waiver or relaxation, no matter how often made or given, shall be evidence of or establish a custom or course of dealing different from the express provisions and requirements of this Agreement.
3. Initiation; Confirmations; Termination
(a) Initiation. Any agreement to enter into a Transaction shall be made in writing at the initiation of Seller through Mortgage Finance Online before the Termination Date. If Seller desires to enter into a Transaction, Seller shall deliver to Buyer no earlier than three (3) Business Days before, and no later than 5:00 p.m. (Eastern time) on, the proposed Purchase Date, a request for Buyer to purchase an amount of Eligible Mortgage Loans on such Purchase Date and if Buyer elects to purchase them, it will purchase them on the Purchase Date; provided that if Sellers request is delivered to Buyer after 5:00 p.m. (Eastern time) on the proposed Purchase Date, Buyer will use commercially reasonable efforts to make such purchase on the proposed Purchase Date; provided further that each purchase shall be wholly discretionary to Buyer and Buyer shall incur no liability whatsoever for failing to purchase, or to timely purchase, any Mortgage Loans. All such purchases shall be on a servicing released basis and shall include the Servicing Rights with respect to such Eligible Mortgage Loan. Such request shall state the Purchase Price and include a
completed Confirmation with an attached Mortgage Loan Schedule for each Mortgage Loans that Seller proposes to sell to Buyer, for Buyer to issue to confirm Buyers acceptance of the proposed Transaction. Buyer shall use commercially reasonable efforts to notify Seller if Buyer elects not to purchase a Mortgage Loan or Mortgage Loans that Seller so proposes that Buyer purchase (but shall incur no liability for failing to do so).
(b) Purchase by Buyer. Subject to the terms of this Agreement and the Side Letter and satisfaction of the conditions precedent set forth in this Section 3 and in Section 7, on the requested Purchase Date for each Transaction, Buyer shall transfer to Seller or its designee for a newly Originated Eligible Mortgage Loan, by transferring funds to the designated Settlement Agent an amount equal to the Purchase Price for purchase of each Eligible Mortgage Loan that is the subject of such Transaction on that Purchase Date, less any amounts to be netted against such Purchase Price in accordance with the Transaction terms. The transfer of funds to the Settlement Agent to be used to fund the Mortgage Loan, and if applicable, the netting of amounts for value, on the Purchase Date for any Transaction will constitute full payment by Buyer of the Purchase Price for such Mortgage Loan. Within five (5) Business Days following the Purchase Date, Seller shall (i) take such steps as are necessary and appropriate to effect the transfer to Buyer on the MERS® System of the Purchased Mortgage Loans so purchased, and to cause Buyer to be designated as Interim Funder on the MERS® System with respect to each such Purchased Mortgage Loan and (ii) in the case of a Wet Funding, deliver all remaining items of the related Asset File to Custodian. Notwithstanding anything to the contrary in this Agreement or any other Transaction Document, Buyer shall have no obligation to enter into any Transaction on or after the Termination Date. Seller may (i) initially request less than [***] of the Purchase Price for any one or more Purchased Mortgage Loans, (ii) repay part of the Purchase Price therefor to Buyer or (iii) both, and may subsequently request that Buyer fund (or re-fund) the balance of the Purchase Price to Seller, and in either case so long as both (x) no Default or Event of Default has occurred and is continuing, and (y) Buyer, in its sole discretion, elects to do so, Buyer will fund (or re-fund) so much of such balance as Seller shall request.
(c) Confirmations. The Confirmation for each Transaction shall (i) include the Mortgage Loan Schedule with respect to each Mortgage Loans subject to such Transaction, (ii) identify Buyer and Seller and (iii) specify (A) the Purchase Date, (B) the Purchase Price, (C) the Repurchase Date, (D) the Pricing Rates applicable to the Transaction and (E) any additional terms or conditions of the Transaction mutually agreeable to Buyer and Seller. In the event of any conflict between the terms of a Confirmation that has been affirmatively accepted by Buyer and this Agreement, such accepted Confirmation shall prevail.
(d) Failed Fundings. Seller agrees to report to Buyer by facsimile transmission or electronic mail as soon as practicable, but in no event later than two (2) Business Days after the day when Buyer wires its Purchase Price to the related Settlement Agent, any Mortgage Loan that failed to be funded to the related Mortgagor, otherwise failed to close for any reason or failed to be purchased hereunder. Seller further agrees to (i) return, or cause the Settlement Agent to return, to the Funding Account, for refunding to Buyer, the portion of the Purchase Price allocable to each such Mortgage Loan as soon as practicable, but in no event later than two (2) Business Day after the day when Buyer wires its Purchase Price to the related Settlement Agent, and (ii) indemnify Buyer for any loss, cost or expense incurred by Buyer as a result of the failure of such Mortgage Loans to close or to be delivered to Buyer.
(e) Accrual and Payment of Price Differential. The Price Differential for each Transaction shall accrue during the period commencing on (and including) the day when the Purchase Price is transferred into the Funding Account (or otherwise paid to Seller) for such Transaction and ending on (but excluding) the day when the Repurchase Price is paid to Buyer. Accrued Price Differential for each Purchased Mortgage Loan shall be due and payable (i) on each Remittance Date and (ii) when any Event of Default has occurred and is continuing, on demand.
(f) Repurchase Required. Seller shall repurchase from Buyer Purchased Mortgage Loans conveyed to Buyer on or before each related scheduled Repurchase Date and may electively sooner repurchase Purchased Mortgage Loans, without penalty or premium. Each obligation to repurchase exists without regard to any prior or intervening liquidation or foreclosure with respect to any Purchased Mortgage Loan. Seller is obligated to obtain the Purchased Mortgage Loans from Custodian at Sellers expense on the related Repurchase Date.
(g) Termination of Transaction by Repurchase; Transfer of Repurchased Mortgage Loans. On the Repurchase Date, termination of the Transaction will be effected by resale by Buyer to Seller or its designee of the Purchased Mortgage Loans on a servicing released basis against Sellers submission to Buyer of a Completed Repurchase Advice, all in form and substance satisfactory to Buyer. After receipt of the payment of the Repurchase Price from Seller, Buyer shall transfer such Purchased Mortgage Loans to Seller or its designee and Custodian shall deliver to Seller or its designee all such Mortgage Loan Documents that were previously delivered to Custodian and take such steps as are necessary and appropriate to effect the transfer of the Purchased Mortgage Loan to Seller or its designee on the MERS® System. All such transfers to Seller or its designee are and shall be without recourse and without any of the transfer warranties of UCC §3-417 or other warranty, express or implied.
(h) No Obligation to Transfer Purchased Mortgage Loans after Buyers Section 12(d) Election. Notwithstanding the foregoing or any other provision to the contrary in this Agreement or any other Transaction Document, Buyer shall not be obligated to transfer any Purchased Mortgage Loans to Seller or any designee of Seller if, pursuant to Section 12(d) after an Event of Default, Buyer has elected either to sell them or to give Seller credit for them.
(i) Completed Repurchase Advice. If Buyer receives the Completed Repurchase Advice with respect to a Purchased Mortgage Loan at or before 4:00 p.m. (Eastern time) on any Business Day (or 5:30 p.m. (Eastern time) with respect to Purchased Mortgage Loans that have been pooled into MBS and for which Buyer and Seller are both parties to a joint securities account control agreement under which such repurchases will be governed), then the Repurchase Date for that Purchased Mortgage Loan will be that same day. If Buyer receives the Completed Repurchase Advice with respect to any Purchased Mortgage Loan after 4:00 p.m. (Eastern time) on any Business Day (or 5:30 p.m. as described above), Buyer shall use commercially reasonable efforts to credit such amount to Seller on such Business Day (but shall incur no liability for failing to do so), and if so, the Repurchase Date for that Purchased Mortgage Loan will be that same day, or if not, then the Repurchase Date will be the next Business Day. In connection with any repurchase pursuant to a Completed Repurchase Advice, Buyer will debit the Funding Account and the Operating Account, if applicable, for the amount of the Repurchase Price (less any amount of Price Differential to be paid on the next Remittance Date). Without limiting Sellers obligations hereunder, at any time after the occurrence and during the continuance of a Default or an Event of
Default, except for repurchases of individual Mortgage Loans or pools of Mortgage Loans being sold to Approved Takeout Investors, Seller shall not be permitted to repurchase less than all of the Purchased Mortgage Loans without the prior written consent of Buyer, which may be granted or withheld in Buyers sole discretion.
(j) Reliance. With respect to any Transaction, Buyer may conclusively rely upon, and shall incur no liability to Seller in acting upon, any request or other communication that Buyer reasonably believes to have been given or made by an Authorized Signer or other Person authorized by Seller in writing to take such actions.
(k) Defective Mortgage Loans.
(i) If, after Buyer purchases a Mortgage Loan, Buyer determines or receives notice (whether from Seller or otherwise) that a Purchased Mortgage Loan is (or has become) a Defective Mortgage Loan, Buyer shall promptly notify Seller, and Seller shall repurchase such Purchased Mortgage Loan at the Repurchase Price on the Early Repurchase Date (as such term is defined below).
(ii) If Seller becomes obligated to repurchase a Mortgage Loan pursuant to Section 3(k)(i), Buyer shall promptly give Seller notice of such repurchase obligation and a calculation of the Repurchase Price therefor. On the same day Seller receives such notice if given at or before 11:00 a.m. (Eastern time) or on the next Business Day if such notice is given after 11:00 a.m. (such day, the Early Repurchase Date), Seller shall repurchase the Defective Mortgage Loan by paying Buyer the Repurchase Price therefor, and shall submit a Completed Repurchase Advice. Buyer is authorized to charge any of Sellers Accounts for such amount unless the Parties have agreed in writing to a different method of payment and Seller has paid such amount by such agreed method. If Sellers Accounts do not contain sufficient funds to pay in full the amount due Buyer under this Section 3(k)(ii), or if the amount due is not paid by any applicable alternative method of payment previously agreed to by the Parties, Seller shall promptly deposit funds in the Operating Account sufficient to pay such amount due Buyer and notify Buyer of such deposit. After receipt of the payment of the Repurchase Price therefor from Seller, Buyer shall transfer such Purchased Mortgage Loans to Seller or its designee and deliver, or cause to be delivered, to Seller or such designee all documents for the Mortgage Loan previously delivered to Buyer or its designee and take such steps as are necessary and appropriate to effect the transfer of the Purchased Mortgage Loan to Seller on the MERS® System.
4. Margin Maintenance
(a) Margin Deficit. If at any time the sum of the Margin Amounts of all Purchased Mortgage Loans then subject to Transactions is less than the sum of their Repurchase Prices, a margin deficit (Margin Deficit) will exist and Buyer, by notice to Seller (a Margin Call), may require Seller to transfer to Buyer (x) cash, or (y) if Buyer is willing to accept them in lieu of cash, additional Eligible Mortgage Loans reasonably acceptable to Buyer (Additional Purchased Mortgage Loans), or (z) a combination, to the extent (if any) acceptable to Buyer, of cash and Additional Purchased Mortgage Loans, so that immediately after such transfer(s) the sum of (i) such cash, if any, so transferred to Buyer plus (ii) the aggregate of the Margin Amounts of all Purchased Mortgage Loans for all Transactions outstanding at that time, including any such
Additional Purchased Mortgage Loans, will be at least equal to the sum of the Repurchase Prices of all Purchased Mortgage Loans then subject to outstanding Transactions.
(b) Margin Maintenance. If the notice to be given by Buyer to Seller under Section 4(a) is given at or before 11:00 a.m. (Eastern time) on a Business Day, Seller shall transfer cash and/or, if acceptable to Buyer, Additional Purchased Mortgage Loans to Buyer before 6:00 p.m. (Eastern time) on the date of such notice, and if such notice is given after 11:00 a.m. (Eastern time), Seller shall transfer such cash and/or Additional Purchased Mortgage Loans before 10:30 a.m. (Eastern time) on the Business Day following the date of such notice. All cash required to be delivered to Buyer pursuant to this Section 4(b) shall be deposited by Seller into the Operating Account and, provided that no Event of Default has occurred and is continuing, if received by 3:30 p.m. (Eastern Time) shall be applied by Buyer on the Business Day received to reduce pro rata the Purchase Prices of all Purchased Mortgage Loans that are then subject to outstanding Transactions, or if received after such time, will be held by Buyer in the Operating Account as security for the Obligations until the next Business Day after such deposit, when it will be so applied. Following the occurrence and during the continuance of any Event of Default, any such cash may be applied to reduce the Repurchase Price of such Purchased Mortgage Loans as Buyer shall select, with the amount to be applied to the Repurchase Price of any particular Purchased Mortgage Loan to be determined by Buyer, using such reasonable method of allocation as Buyer shall elect in its sole discretion at the time. Buyers election, in its sole and absolute discretion, not to make a Margin Call at any time there is a Margin Deficit shall not in any way limit or impair its right to make a Margin Call at any other time a Margin Deficit exists (or still exists).
(c) Margin Excess. If on any day after Seller has transferred cash or Additional Purchased Mortgage Loans to Buyer pursuant to Section 4(b), the sum of (i) the cash paid to Buyer and (ii) the aggregate of the Margin Amounts of all Purchased Mortgage Loans for all Transactions at that time, including any such Additional Purchased Mortgage Loans, exceeds the Aggregate Purchase Price, then at the request of Seller, Buyer shall return a portion of the cash or Additional Purchased Mortgage Loans to Seller so that the remaining sum of (i) and (ii) does not exceed the Aggregate Purchase Price; provided that the sum of the cash plus the value of Additional Purchased Mortgage Loans returned shall be strictly limited to an amount, after the return of which, no Margin Deficit will exist.
(d) Market Value Determinations. Buyer may determine the Market Value of any or all Purchased Mortgage Loans from time to time and with such frequency (which, for the avoidance of doubt, may be daily), and taking into consideration such factors, as it may elect in its sole good faith discretion, including current market conditions and the fact that the Purchased Mortgage Loans may be sold or otherwise disposed of under circumstances where Seller is in default under this Agreement; provided that a Market Value of zero shall be assigned to any Purchased Mortgage Loan that, at the time of determination, is not an Eligible Mortgage Loan. Buyers determination of Market Value of Purchased Mortgage Loans will be made using Buyers customary methods for determining the price of comparable mortgage loans under the market conditions and Sellers status prevailing at the time of determination, will not be equivalent to a determination of the fair market value of the Purchased Mortgage Loans made by obtaining competing bids under circumstances where the bidders have adequate opportunity to perform customary mortgage loan and servicing due diligence and, if (1) any Default or Event of Default has occurred and is continuing, (2) Buyer in good faith believes that a secondary market Mortgage
Loan purchaser would materially discount the likelihood of realization on any of Sellers Mortgage Loan transfer warranties or (3) the market for comparable Mortgage Loans is illiquid or otherwise disorderly at the time, such determination will not be equivalent to a determination by Buyer of the Market Value of the Purchased Mortgage Loans made when, as applicable in the circumstances, (A) the originator/servicer is not in default, (B) the likelihood of realization on Sellers transfer warranties is not materially discounted and/or (C) the market for comparable Mortgage Loans is not illiquid or otherwise disorderly. Upon Sellers written request made at or after payment of any Margin Call, Buyer will use commercially reasonable efforts to promptly provide Seller a list of Purchased Mortgage Loans then subject to Transactions and the Market Value of each as determined by Buyer; provided that (i) Buyers failure to timely provide such list, Buyers determination of the Market Value of any one or more Purchased Mortgage Loans or the means or methods used by Buyer to determine such Market Values shall not give rise to any liability of Buyer or waive, excuse or defer performance of any obligation of Seller, (ii) Seller may not delay payment of any Margin Call or payment or performance of any other obligation on account of (x) Buyers delayed delivery or nondelivery of such list or (y) Buyers determination of or Sellers disagreement with any such Market Value, and (iii) without regard to whether any such list shall be requested or furnished, Buyers good faith determination of Market Value shall be conclusive and binding on the parties unless and until adjusted by Buyer because of an error, if any, in such determination, and no such error or adjustment shall give rise to any liability of Buyer or waive, excuse or defer performance of any obligation of Seller.
5. Accounts; Income Payments
(a) Accounts. Seller agrees to establish or cause to be established (i) each of the Accounts at Financial Institution on or before the date hereof and (ii) the Impound Collection Account and the Income Collection Account if and when required by Buyer for the purposes of Sections 12(b)(iii) and/or 12(b)(iv). Sellers taxpayer identification number will be designated as the taxpayer identification number for each Account, the Impound Collection Account and the Income Collection Account, and Seller shall be responsible for reporting and paying taxes on any income earned with respect to the Accounts, the Impound Collection Account and the Income Collection Account. Each such deposit account shall be under the sole dominion and control of Buyer, and Seller agrees that (i) Seller shall have no right or authority to withdraw or otherwise give any directions with respect to any of such deposit accounts or the disposition of any funds held in such deposit accounts; provided that Seller may cause amounts to be deposited into any such deposit account at any time, and (ii) Financial Institution may comply with instructions originated by Buyer directing disposition of the funds in such deposit accounts without further consent of Seller. Only employees of Buyer shall be signers with respect to such deposit accounts. Pursuant to Section 6, Seller has pledged, assigned, transferred and granted a security interest to Buyer in the Accounts in which Seller has rights or power to transfer rights and all such deposit accounts in which Seller later acquires ownership, other rights or the power to transfer rights. Seller and Buyer hereby agree that Buyer has control of such deposit accounts within the meaning of Section 9-104 of the UCC. Any provision hereof to the contrary notwithstanding and for the avoidance of doubt, Seller agrees and acknowledges that Buyer is not required to return to Seller funds on deposit in an Account or the Income Collection Account to the extent any amounts are owed hereunder to Buyer by Seller.
(b) Cash Pledge Account. On or before the date hereof, Seller shall deposit an amount equal to [***] of the Facility Amount (the Required Amount) into the Cash Pledge Account. Seller shall cause an amount not less than the Required Amount to be on deposit in the Cash Pledge Account at all times. If on any Remittance Date, the amount on deposit in the Cash Pledge Account is greater than the Required Amount, provided that no Default or Event of Default has occurred and is continuing, upon Sellers request such excess will be disbursed to Seller on such Remittance Date after application by Buyer to the payment of any amounts owing by Seller to Buyer on such date. At any time after the occurrence and during the continuance of an Event of Default, Buyer, in its sole discretion, may apply the amounts on deposit in the Cash Pledge Account in accordance with the provisions of Section 5(f).
(c) Funding Account. The Funding Account shall be used for fundings of the Purchase Price and the Repurchase Price with respect to each Purchased Mortgage Loan in accordance with Section 3. Except with respect to repurchases of Purchased Mortgage Loans that have been pooled into MBS and for which Buyer and Seller are both parties to a joint securities account control agreement under which such repurchases will be governed. Seller shall cause all amounts to be paid in respect of the Takeout Commitments to be remitted by the Approved Takeout Investors directly to the Funding Account without any requirement for any notice to or consent of Seller. On each Repurchase Date that occurs pursuant to Section 3(f) with respect to any Purchased Mortgage Loan, Buyer will apply the applicable amounts on deposit in the Funding Account to the unpaid Repurchase Price due to Buyer for such Purchased Mortgage Loan and, unless an Event of Default has occurred and is continuing, Buyer will transfer the remaining balance, if any, in the Funding Account to the Operating Account. At any time after the occurrence and during the continuance of an Event of Default, Buyer, in its sole discretion, may apply the amounts on deposit in the Funding Account in accordance with the provisions of Section 5(f).
(d) Operating Account.
(i) The Operating Account shall be used for the purposes of (1) Sellers payment of Price Differential and any other amounts owing to Buyer under this Agreement, the Side Letter or any other Transaction Document, (2) Sellers funding of any shortfall between (x) the proceeds of an Eligible Mortgage Loan being purchased by Buyer that are to be disbursed at its Origination and (y) the Purchase Price to be paid by Buyer for that Eligible Mortgage Loan, (3) Sellers payment of any difference between the Repurchase Price and the amount received by Buyer from the applicable Approved Takeout Investor in connection with the repurchase of a Purchased Mortgage Loan pursuant to Section 3(i) and (4) for any cash payments made by Seller to satisfy Margin Calls pursuant to Section 4(b).
(ii) On or before the fourth (4th) Business Day before each Remittance Date, Buyer will notify Seller in writing of the Price Differential and other amounts due Buyer on that Remittance Date. On or before the Business Day preceding each Remittance Date, Seller shall deposit into the Operating Account such cash, if any, as shall be required to make the balance in the Operating Account sufficient to pay all amounts due Buyer on that Remittance Date. On each Remittance Date, Buyer shall withdraw funds from the Operating Account to effect such payment to the extent of funds then available in the Operating Account. If the funds on deposit in the Operating Account are insufficient to pay the amounts then due Buyer in full, Seller shall pay the deficiency amount on the date such payment is due by wire transfer of such amount to the
Operating Account, and Buyer shall withdraw the funds so deposited to pay such deficiency to the extent of the funds deposited.
(iii) Funds deposited by Seller in the Operating Account to cover the shortfall, if any, referred to in clause (2) of Section 5(d)(i) will be disbursed by Buyer to the Settlement Agent along with the Purchase Price of the related Eligible Mortgage Loan being purchased by Buyer to fund the Origination of such Mortgage Loan as provided in Section 3(b).
(iv) At any time after a Margin Call, if Seller fails to satisfy such Margin Call in accordance with the provisions of Section 4, Buyer may withdraw funds from the Operating Account to pay such Margin Call and shall apply the funds so withdrawn for that purpose to reduce the Repurchase Prices of Purchased Mortgage Loans then subject to outstanding Transactions as provided in Section 4(b). At any time after the occurrence and during the continuance of an Event of Default, Buyer, in its sole discretion, may apply the amounts on deposit in the Operating Account in accordance with the provisions of Section 5(f).
(v) Unless (1) a Default or an Event of Default has occurred and is continuing or (2) any amounts are then owing to Buyer or any Indemnified Party under this Agreement or another Transaction Document, on Sellers request, Buyer will transfer the Operating Account balance to an account designated by Seller.
(e) Income Collection Account. Pursuant to Section 6, Seller has pledged, assigned and transferred the Income Collection Account to Buyer and granted Buyer a security interest in the Income Collection Account. No funds other than Income shall be deposited in the Income Collection Account. Where a particular Transactions term extends over the date on which Income is paid by the Mortgagor on any Purchased Mortgage Loan subject to that Transaction, that Income will be the property of Buyer until Seller has paid Buyer the full Repurchase Price in respect of such Transaction. Notwithstanding the foregoing, and provided no Default or Event of Default has occurred and is continuing and no Margin Deficit then exists, Buyer agrees that Seller or its designee shall be entitled to receive and retain that Income to the full extent it would have been so entitled if the Purchased Mortgage Loans had not been sold to Buyer; provided that any Income received by Seller while the related Transaction is outstanding shall be deemed to be held by Seller or Subservicer (as the case may be) solely in trust for Buyer pending the payment of the Repurchase Price in respect of such Transaction and the repurchase of the related Purchased Mortgage Loans, and if a Default or an Event of Default has occurred and is continuing, or a Margin Deficit exists that Seller has not satisfied in accordance with the provisions of Section 4, Buyer may direct Seller in writing to deposit into the Income Collection Account (or such other account as Buyer may direct) (i) all Income then held by Seller or Subservicer in respect of Purchased Mortgage Loans subject to outstanding Transactions and (ii) all future Income in respect of Purchased Mortgage Loans subject to new or outstanding Transactions when received by Seller or any Subservicer, and upon receipt of any such direction, Seller shall immediately cause all such Income then held to be deposited, and all such future Income to be deposited within [***] after its receipt by Seller or Subservicer or such other time period as is provided in the applicable Subservicer Instruction Letter, into the Income Collection Account or to such other account as Buyer may direct.
(f) Application of Funds. After the occurrence and during the continuance of an Event of Default, at such times as Buyer may direct in its sole discretion, Buyer shall apply all Income and other amounts on deposit in all or any of the Accounts, other than mortgagors actual escrow payments held in any account and required to be used for the payment of Property Charges in respect of any Purchased Mortgage Loan, in the same order and manner as is provided in Section 12(e) for proceeds of dispositions of Purchased Mortgage Loans not repurchased by Seller.
(g) Sellers Obligations. The provisions of this Section 5 shall not relieve Seller from its obligations to pay the Repurchase Price on the applicable Repurchase Date and to satisfy any other payment obligation of Seller hereunder or under any other Transaction Document.
6. Security Interest; Assignment of Takeout Commitments
(a) Security Interest. Although the Parties intend that all Transactions hereunder be absolute sales and purchases and not loans, to secure the payment and performance by Seller of its obligations, liabilities and indebtedness under each such Transaction and Sellers obligations, liabilities and indebtedness under this Agreement and the other Transaction Documents, Seller hereby pledges, assigns, transfers and grants to Buyer a security interest in the Mortgage Assets in which Seller has rights or power to transfer rights and all of the Mortgage Assets in which Seller later acquires ownership, other rights or the power to transfer rights. Mortgage Assets means (i) the Purchased Mortgage Loans with respect to all Transactions hereunder (including, without limitation, all Servicing Rights with respect thereto), (ii) all Servicing Records, Loan Eligibility Files, Asset Files, Mortgage Loan Documents, including, without limitation, the Mortgage Note and Mortgage, and all of Sellers claims, liens, rights, title and interests in and to the Mortgaged Property in each case related to such Purchased Mortgage Loans, (iii) all Liens securing repayment of such Purchased Mortgage Loans, (iv) all Income with respect to such Purchased Mortgage Loans, (v) the Accounts, (vi) the Takeout Commitments to the extent Sellers rights thereunder relate to the Purchased Mortgage Loans (excluding, however, any Takeout Commitments that by their express terms prohibit Sellers assigning, pledging or granting a security interest in them if and to the extent that such prohibition is not made ineffective by UCC §§ 9-406 or 9-408); provided that Buyer does not assume and shall not be deemed to have assumed any of Seller obligations under any Takeout Commitment, (vii) all Hedging Arrangements to the extent relating to the Purchased Mortgage Loans, excluding, however, any Hedging Arrangements that by their express terms prohibit Sellers assigning, pledging or granting a security interest in them if and to the extent that such prohibition is not made ineffective by UCC §§ 9-406 or 9-408, (viii) the Income Collection Account, together with all interest on the Income Collection Account, all modifications, extensions and increases of the Income Collection Account and all sums now or at any time hereafter on deposit in the Income Collection Account or represented by the Income Collection Account and (ix) all proceeds of the foregoing including, without limitation, all MBS that are, in whole or in part, based on, backed by or created from Purchased Mortgage Loans for which the full Repurchase Price has not been received by Buyer, and the right to have such MBS delivered when issued to a securities intermediary for Buyer and for any other Persons whose Mortgage Loans are part of the base or backing for such MBS, irrespective of whether such Purchased Mortgage Loans have been released from this security interest. Seller hereby authorizes Buyer to file such financing statements and amendments relating to the Mortgage Assets as Buyer may deem appropriate, and irrevocably appoints Buyer as Sellers attorney-in-fact to take such other actions as Buyer deems necessary or appropriate to perfect and continue the Lien granted hereby
and to protect, preserve and realize on the Mortgage Assets. Seller shall pay all fees and expenses associated with perfecting such Liens including the cost of filing financing statements and amendments under the UCC, registering each Purchased Mortgage Loan with MERS and recording assignments of the Mortgages delivered pursuant to Section 11(m) as and when required by Buyer in its sole discretion. The Parties intend that this Section 6(a) is a security agreement or arrangement or other credit enhancement, as defined and described in Sections 101(47)(A)(v) and 741(7)(A)(ix) of the Bankruptcy Code, related to the repurchase agreement and securities contract established and evidenced by this Agreement and the Transactions hereunder.
(b) Assignment of Takeout Commitment. The sale of each Mortgage Loan to Buyer shall include Sellers rights (but none of the obligations) under the applicable Takeout Commitment to deliver the Mortgage Loan to the Approved Takeout Investor and to receive the net sum therefor specified in the Takeout Commitment from the Approved Takeout Investor. Effective on and after the Purchase Date for each Mortgage Loan purchased by Buyer hereunder, Seller assigns to Buyer, free and clear of any Lien, all of Sellers right, title and interest in any applicable Takeout Commitment for such Mortgage Loan (excluding, however, any Takeout Commitments that by their express terms prohibit Sellers assigning, pledging or granting a security interest in them if and to the extent that such prohibition is not made ineffective by UCC §§ 9-406 or 9-408); provided that Buyer shall not assume or be deemed to have assumed any of the obligations of Seller under any Takeout Commitment; provided, further, that Buyer shall not undertake to enforce any such Takeout Commitment unless an Event of Default has occurred and is continuing.
7. Conditions Precedent
(a) Conditions Precedent to the Effectiveness of this Agreement. The effectiveness of this Agreement shall be subject to the satisfaction of each of the following conditions precedent (any of which Buyer may electively waive, in Buyers sole discretion):
(i) on or before the date hereof, Seller shall deliver or cause to be delivered each of the documents listed on Exhibit D in form and substance satisfactory to Buyer and its counsel;
(ii) as of the date hereof, there has been no Material Adverse Effect on the financial condition of Seller or any Guarantor since the most recent financial statements of such Person delivered to Buyer;
(iii) as of the date hereof, no material action, proceeding or investigation shall have been instituted or, to Buyers or Sellers knowledge, threatened, nor shall any material order, judgment or decree have been issued or, to Buyers or Sellers knowledge, proposed to be issued by any Governmental Authority with respect to Seller or any Guarantor;
(iv) Seller shall have delivered to Buyer the opinions of counsel set forth in Exhibit E, in form and substance satisfactory to Buyer and its counsel;
(v) Seller shall have delivered to Buyer such other documents and certificates as Buyer may reasonably request;
(vi) Seller shall have established the Accounts at Financial Institution and shall have deposited the Required Amount to the Cash Pledge Account;
(vii) Seller shall have acquired licenses to Originate Mortgage Loans in all states where it is required to have a license to do so, except where any failure to obtain such a license would not cause or be likely to cause a Material Adverse Effect or impair the enforceability of any Purchased Mortgage Loan;
(viii) on or before the date hereof, Seller shall have paid to the extent due all fees and out-of-pocket costs and expenses reasonably incurred (including due diligence fees and expenses, subject to the Due Diligence Cap, and reasonable legal fees and expenses of outside counsel) required to be paid under this Agreement or any other Transaction Document and for which Seller has received an invoice on or before thirty (30) days before the date hereof;
(ix) Buyer shall have received such other documents, information, reports and certificates as it shall have reasonably requested.
(b) Conditions Precedent to Transactions. Buyers obligation to pay the Purchase Price for each Transaction shall be subject to the satisfaction of each of the following conditions precedent, as applicable:
(i) Buyer shall have received from Seller a Confirmation and the Mortgage Loan Schedules for all Mortgage Loans to be purchased in such Transaction;
(ii) Custodian shall have received the Asset Schedule listing all Mortgage Loans to be purchased by Buyer in such Transaction and, for all such Mortgage Loans that are not Wet Loans, their Asset Files;
(iii) Buyer shall have received a current Custodians Asset Schedule and Exception Report listing all of such Delivered Mortgage Loans subject to such Transaction as well as all other Delivered Mortgage Loans then subject to Transactions;
(iv) no Default or Event of Default shall have occurred and be continuing;
(v) Buyer, in the exercise of its sole and absolute discretion, shall have made an affirmative election to fund the proposed Transaction;
(vi) no Margin Deficit shall exist either before or after giving effect to such Transaction;
(vii) this Agreement and each of the other Transaction Documents shall be in full force and effect, and the Termination Date shall not have occurred;
(viii) each Mortgage Loan subject to such Transaction shall be an Eligible Mortgage Loan;
(ix) Sellers and each Guarantors representations and warranties in this Agreement (other than Loan Level Representations, any breach of which shall, except as otherwise
provided in clause (A) of Section 12(a)(iii)), only have the effect of causing the related Mortgage Loan to not be an Eligible Mortgage Loan) and each of the other Transaction Documents to which it is a party and in any Officers Certificate delivered to Buyer in connection therewith shall be true and correct in all material respects on and as of the date hereof and such Purchase Date, with the same effect as though such representations and warranties had been made on and as of such date (except for those representations and warranties and Officers Certificates that are specifically made only as of a different date, which representations and warranties and Officers Certificates shall be correct in all material respects on and as of the date made), and Seller and each Guarantor shall have complied with all the agreements and satisfied all the conditions under this Agreement, each of the other Transaction Documents and the Mortgage Loan Documents to which it is a party on its part to be performed or satisfied at or before the related Purchase Date;
(x) no applicable Requirement of Law shall prohibit the consummation of any transaction contemplated hereby, or shall impose limits on the amounts that Buyer may legally receive;
(xi) no action, proceeding or investigation shall have been instituted or, to Buyers or Sellers knowledge, threatened, nor shall any order, judgment or decree have been issued or proposed to be issued by any Governmental Authority to set aside, restrain, enjoin or prevent the consummation of any Transaction contemplated hereby or seeking material damages against Buyer in connection with the transactions contemplated by the Transaction Documents;
(xii) Buyer shall have determined that the amounts on deposit in the Operating Account are sufficient to fund any shortfall between (x) the amount Seller is to fund to Originate or otherwise acquire each Mortgage Loan to be purchased by Buyer in such Transaction and (y) the Purchase Price to be paid by Buyer therefor, after taking into account all other obligations of Seller that are to be satisfied with the amounts on deposit in the Operating Account on such Transactions Purchase Date;
(xiii) after giving effect to such Transaction, the Aggregate Purchase Price for all outstanding Transactions will not exceed the Facility Amount;
(xiv) within ninety (90) days after the Effective Date of this Agreement and annually thereafter during the term of this Agreement, an audit of Seller, either by Buyer or by a third party selected by Buyer, in form and substance satisfactory to Buyer, at Sellers expense in an amount not to exceed the Due Diligence Cap in any calendar year (provided that the Due Diligence Cap shall not be applicable to audit expenses incurred when an Event of Default has occurred and is continuing), shall have been submitted to and approved by Buyer;
(xv) Buyer shall have received such other documents, information, reports and certificates as it shall have reasonably requested; and
(xvi) Seller shall have deposited the amount required by Section 5 into the Cash Pledge Account.
The acceptance by Seller, or by any Settlement Agent at the direction of Seller, of any Purchase Price proceeds shall be deemed to constitute a representation and warranty by Seller that the foregoing conditions have been satisfied.
8. Change in Law
(a) If any Change in Law shall:
(i) impose, modify or deem applicable any reserve, special deposit, liquidity or similar requirement against assets of, deposits with or for the account of, or credit extended by, Buyer (except any such reserve requirement reflected in the Adjusted LIBO Rate); or
(ii) impose on Buyer or the London interbank market any other condition affecting this Agreement or Transactions entered into by Buyer; and the result of any of the foregoing shall be to increase the cost to Buyer of making or maintaining any purchase hereunder (or of maintaining its obligation to enter into any Transaction) or to increase the cost or to reduce the amount of any sum received or receivable by Buyer (whether of Repurchase Price, Price Differential or otherwise), then Seller will pay to Buyer such additional amount or amounts as will compensate Buyer for such additional costs incurred or reduction suffered.
(b) If Buyer reasonably determines that any Change in Law regarding capital requirements has or would have the effect of reducing the rate of return on Buyers capital or on the capital of Buyers holding company as a consequence of this Agreement or the purchases made by Buyer under this Agreement to a level below that which Buyer or Buyers holding company could have achieved but for such Change in Law (taking into consideration Buyers policies with respect to capital adequacy) by an amount deemed by Buyer in good faith to be material, then from time to time Seller will pay to Buyer such additional amount or amounts as will compensate Buyer or Buyers holding company for any such reduction suffered.
(c) A certificate of Buyer setting forth the amount or amounts necessary to compensate Buyer or its holding company, as the case may be, as specified in Section 8(a) or 8(b), and including a reasonable explanation of how such amount or amounts were calculated and determined, shall be delivered to Seller and shall be conclusive absent manifest error. Seller shall pay Buyer, the amount shown as due on any such certificate within ten (10) Business Days after receipt thereof.
(d) Failure or delay on the part of Buyer to demand compensation pursuant to this Section 8 shall not constitute a waiver of Buyers right to demand such compensation; provided that Seller shall not be required to compensate Buyer pursuant to this Section 8 for any increased costs or reductions incurred more than two hundred seventy (270) days before the date that Buyer notifies Seller of the Change in Law giving rise to such increased costs or reductions and of Buyers intention to claim compensation therefor; provided further that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the 270-day period referred to above shall be extended to include the period of retroactive effect thereof.
9. Segregation of Documents Relating to Purchased Mortgage Loans
Seller shall, and shall cause any other holder on Sellers behalf, including any custodian and any financial or securities intermediary, to identify on its books and records, all documents relating to Purchased Mortgage Loans that are in the possession of Seller or such other holder, as subject to this Agreement. All of Sellers interest in the Purchased Mortgage Loans (including the Servicing Rights) shall pass to Buyer on the Purchase Date and nothing in this Agreement shall
preclude Buyer from engaging in repurchase transactions with the Purchased Mortgage Loans or otherwise selling, transferring, pledging or hypothecating the Purchased Mortgage Loans, but no such transaction shall relieve Buyer of its obligations to transfer the exact same Purchased Mortgage Loans back to Seller pursuant to Section 3(f), Section 3(k)(ii), Section 4(c) or Section 21(b). Seller shall not be responsible for any additional obligations, costs, fees or expenses in connection with any such transactions by Buyer.
10. Representations and Warranties of Seller
(a) To induce Buyer to enter into this Agreement and the Transactions hereunder, Seller represents and warrants on the date of this Agreement and, except where otherwise expressly provided, as of each Purchase Date, as follows:
(i) Representations and Warranties Concerning Purchased Mortgage Loans. By each delivery of a Confirmation, Seller shall be deemed, as of the Purchase Date of the described sale of each Purchased Mortgage Loan (or, if another date is expressly provided in such representation or warranty, as of such other date), and as of each day thereafter that such Purchased Mortgage Loan continues to be subject to an outstanding Transaction, to represent and warrant that such Purchased Mortgage Loan is an Eligible Mortgage Loan and to make the representations and warranties regarding it that are set forth in Exhibit B.
(ii) Organization and Good Standing; Subsidiaries. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction under which it was organized, has full legal power and authority to own its property and to carry on its business as currently conducted, and is duly qualified as a foreign entity to do business and is in good standing in each jurisdiction in which the transaction of its business makes such qualification necessary, except in jurisdictions, if any, where a failure to be in good standing has no material adverse effect on the business, operations, assets or financial condition of Seller or any such Subsidiary. For the purposes hereof, good standing shall include qualification for any and all licenses and payment of any and all taxes required in the jurisdiction of its organization and in each jurisdiction in which Seller or a Subsidiary transacts business. Seller has no Subsidiaries except those listed in Exhibit G, as such exhibit has been most recently updated by a revision delivered by Seller to Buyer. With respect to Seller and each such Subsidiary, Exhibit G correctly states its name as it appears in its articles of formation filed in the jurisdiction of its organization, address, place of organization, each state in which it is qualified as a foreign corporation or entity, and in the case of the Subsidiaries, the percentage ownership (direct or indirect) of Seller in such Subsidiary.
(iii) Authority and Capacity. Seller has all requisite power, authority and capacity to enter into this Agreement and each other Transaction Document and to perform the obligations required of it hereunder and thereunder. This Agreement constitutes a valid and legally binding agreement of Seller enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, moratorium, reorganization, conservatorship and similar laws, and by equitable principles. No consent, approval, authorization, license or order of or registration or filing with, or notice to, any Governmental Authority is required under any applicable Requirement of Law before the execution, delivery and performance of or compliance by Seller with this Agreement or any other Transaction Document or the consummation by Seller
of any transaction contemplated thereby, except for those that have already been obtained by Seller, and the filings and recordings in respect of the Liens created pursuant to this Agreement and the other Transaction Documents. If Seller is a depository institution, this Agreement is a part of, and will be maintained in, Sellers official records.
(iv) No Conflict. Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated by this Agreement, nor compliance with its terms and conditions, shall conflict with or result in the breach of, or constitute a default under, or result in the creation or imposition of any Lien (other than Liens created pursuant to this Agreement and the other Transaction Documents) of any nature upon the properties or assets of Seller under, any of the terms, conditions or provisions of Sellers organizational documents, or any mortgage, indenture, deed of trust, loan or credit agreement or other agreement or instrument to which Seller is now a party or by which it is bound (other than this Agreement).
(v) Performance. Seller does not believe, nor does it have any reason or cause to believe, that it cannot perform, and Seller intends to perform, each and every covenant that it is required to perform under this Agreement and the other Transaction Documents.
(vi) Ordinary Course Transaction. The consummation of the transactions contemplated by this Agreement are in the ordinary course of business of Seller, and neither the sale, transfer, assignment and conveyance of Mortgage Loans to Buyer nor the pledge, assignment, transfer and granting of a security interest to Buyer in the Mortgage Assets, by Seller pursuant to this Agreement is subject to the bulk transfer or any similar Requirement of Law in effect in any applicable jurisdiction.
(vii) Litigation; Compliance with Laws. There is no Litigation pending or, to Sellers knowledge threatened, that could reasonably be expected to cause a Material Adverse Effect or that could reasonably be expected to materially and adversely affect the Mortgage Loans sold or to be sold pursuant to this Agreement. Seller has not violated any Requirement of Law applicable to Seller that, if violated, would materially and adversely affect the Mortgage Loans to be sold pursuant to this Agreement or could reasonably be expected to have a Material Adverse Effect.
(viii) Statements Made. The information, reports, financial statements, exhibits and schedules furnished in writing by or on behalf of Seller to Buyer in connection with the negotiation, preparation or delivery of this Agreement and the other Transaction Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by or on behalf of Seller to Buyer in connection with this Agreement and the other Transaction Documents and the transactions contemplated hereby and thereby will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no fact known to a Responsible Officer that, after due inquiry, could reasonably be expected to have a Material Adverse Effect that has not been disclosed herein, in the other Transaction Documents or in a report, financial statement, exhibit, schedule,
disclosure letter or other writing furnished to Buyer for use in connection with the transactions contemplated hereby or thereby.
(ix) Approved Company. Seller currently holds all approvals, authorizations and other licenses from the Agencies required under the Agency Guidelines (or otherwise) to Originate, purchase, hold, service and sell Mortgage Loans of the types to be offered for sale to Buyer hereunder.
(x) Fidelity Bonds. Seller has purchased fidelity bonds and policies of insurance, all of which are in full force and effect, insuring Seller, Buyer and the successors and assigns of Buyer in the greatest of (a) [***], (b) the amount required for Seller by any Agency and (c) the amount required for Seller by any other Approved Takeout Investor that has issued a currently outstanding Takeout Commitment for any of Sellers Mortgage Loans, against loss or damage from any breach of fidelity by Seller or any officer, director, employee or agent of Seller, and against any loss or damage from loss or destruction of documents, fraud, theft or misappropriation, or errors or omissions.
(xi) Solvency. Both as of the date hereof and immediately after giving effect to each Transaction hereunder, the fair value of Sellers assets is greater than the fair value of Sellers liabilities (including contingent liabilities if and to the extent required to be recorded as liabilities on the financial statements of Seller in accordance with GAAP), and Seller (1) is not insolvent (as defined in 11 U.S.C. § 101(32)), (2) is able to pay and intends to pay its debts as they mature and (3) does not have an unreasonably small capital to engage in the business in which it is engaged and proposes to engage. Seller does not intend to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Seller is not transferring any Loans with any intent to hinder, delay or defraud any Person.
(xii) Reporting. In its financial statements, Seller intends to report each sale of a Mortgage Loan hereunder as a financing in accordance with GAAP. Seller has been advised by or confirmed with its independent public accountants that such sales can be so reported under GAAP on its financial statements.
(xiii) Financial Condition. The balance sheets of Seller provided to Buyer pursuant to Section 11(h) (and, if applicable, its Subsidiaries, on a consolidated and consolidating basis) as of the dates of such balance sheets, and the related statements of income, changes in stockholders equity and cash flows for the periods ended on the dates of such balance sheets heretofore furnished to Buyer, fairly present in all material respects the financial condition of Seller and its Subsidiaries as of such dates and the results of its and their operations for the periods ended on such dates. On the dates of such balance sheets, Seller had no known material liabilities, direct or indirect, fixed or contingent, matured or unmatured, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against on, said balance sheets and related statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of Seller except as heretofore disclosed to Buyer in writing. Said financial statements were prepared in accordance with GAAP applied on a consistent basis throughout the periods involved. Since the date of the balance sheet most recently provided, there has been no Material Adverse Effect, nor is Seller aware of any state of facts
particular to Seller that (with or without notice or lapse of time or both) could reasonably be expected to result in any such Material Adverse Effect.
(xiv) Regulation U. Seller is not engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying margin stock, and no part of the proceeds of any sales made hereunder will be used to purchase or carry any margin stock or to extend credit to others for the purpose of purchasing or carrying any margin stock.
(xv) Investment Company Act. Neither Seller nor any of its Subsidiaries is required to register as an investment company under the Investment Company Act of 1940, as amended.
(xvi) Agreements. Neither Seller nor any of its Subsidiaries is a party to any agreement, instrument or indenture, or subject to any restriction, that has, or could reasonably be expected to have, a Material Adverse Effect. None of Sellers Subsidiaries is subject to any dividend restriction imposed by a Governmental Authority other than those under applicable statutory law. Neither Seller nor any of its Subsidiaries is in default in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement, instrument or indenture which default could reasonably be expected to result in a Material Adverse Effect. No holder of any Debt of Seller or of any of its Subsidiaries has given notice of any alleged default thereunder, or, if given, the same has been cured or will be cured by Seller or the relevant Subsidiary within the cure period provided therein. No Act of Insolvency with respect to Seller, any of its Subsidiaries or any Guarantor, or any of their respective properties is pending, contemplated or, to the knowledge of Seller, threatened.
(xvii) Title to Properties. Seller and each Subsidiary of Seller has good, valid, insurable (in the case of real property) and marketable title to all of its properties and assets (whether real or personal, tangible or intangible) reflected on the financial statements described in Section 11(h), and all such properties and assets are free and clear of all Liens except (i) the lien of current (nondelinquent) real and personal property taxes and assessments, (ii) covenants, conditions and restrictions, rights of way, easements and other similar matters to which like properties and assets are commonly subject that do not materially interfere with the use of the property or asset as it is currently being used, (iii) such other Liens as are disclosed in such financial statements and not prohibited under this Agreement and (iv) Liens arising from Sellers origination, purchase or servicing of Mortgage Loans and Servicing Rights utilizing warehouse, gestation and other credit facilities (x) against Purchased Mortgage Loans, in favor only of Buyer or (y) against Mortgage Loans other than Purchased Mortgage Loans originated utilizing other such facilities, in favor of the respective counterparties under such other facilities.
(xviii) ERISA. All plans (Plans), if any, of a type described in Section 3(3) of ERISA in respect of which Seller or any Subsidiary of Seller has been an employer, as defined in Section 3(5) of ERISA, are in substantial compliance with ERISA, and none of such Plans is insolvent or in reorganization, has an accumulated or waived funding deficiency within the meaning of Section 412 of the IRC, and neither Seller nor any Subsidiary of Seller has incurred any material liability (including any material contingent liability) to or on account of any such Plan pursuant to Sections 4062, 4063, 4064, 4201 or 4204 of ERISA. Neither Seller nor any Subsidiary
of Seller is currently an employer in respect of any Plan. No proceedings have been instituted to terminate any such Plan, and no condition exists that presents a material risk to Seller or a Subsidiary of Seller of incurring a liability to or on account of any such Plan pursuant to any of the foregoing Sections of ERISA. No material liability exists with respect to any Plan in which Seller, any Subsidiary of Seller or any Guarantor was an employer, or any trust forming a part thereof, that has been terminated since December 1, 1974.
(xix) Proper Names. Seller does not operate in any jurisdiction under a trade name, division, division name or name other than those names set forth in Exhibit J. The only names used by Seller in its tax returns for the last three (3) years are set forth in Exhibit J.
(xx) Tax Returns and Payments. All federal, state and local income, excise, property and other tax returns required to be filed with respect to Sellers operations and those of its Subsidiaries in any jurisdiction have been filed on or before the due date thereof (plus any applicable extensions); all such returns are true and correct; all taxes, assessments, fees and other governmental charges upon Seller, and Sellers Subsidiaries and upon their respective properties, income or franchises, that are, or should be shown on such tax returns to be, due and payable have been paid, including all Federal Insurance Contributions Act (FICA) payments and withholding taxes, if appropriate, other than those that are being contested in good faith by appropriate proceedings, diligently pursued and as to which Seller has established adequate reserves determined in accordance with GAAP, consistently applied. The amounts reserved, as a liability for income and other taxes payable, in the financial statements described in Section 11(h) are sufficient for payment of all unpaid federal, state and local income, excise, property and other taxes, whether or not disputed, of Seller and its Subsidiaries, accrued for or applicable to the period and on the dates of such financial statements and all years and periods prior thereto and for which Seller and Sellers Subsidiaries may be liable in their own right or as transferee of the assets of, or as successor to, any other Person.
(xxi) No Warrants; Shares Valid, Paid and Non-assessable. Seller has not issued, and does not have outstanding, any warrants, options, rights or other obligations to issue or purchase any shares of its capital stock or other securities (or other equity equivalent). The outstanding shares of capital stock (or other equity equivalent) of Seller have been duly authorized and validly issued and are fully paid and non-assessable.
(xxii) Credit Information. Seller has full right and authority and is not precluded by law or contract from furnishing to Buyer the applicable consumer report (as defined in the Fair Credit Reporting Act, Public Law 91-508) and all other credit information relating to each Purchased Mortgage Loan sold hereunder.
(xxiii) No Discrimination. Seller makes credit accessible to all qualified applicants in accordance with all applicable Requirements of Law. Seller has not discriminated, and will not discriminate, against credit applicants on the basis of any prohibited characteristic, including race, color, religion, national origin, sex, marital or familial status, age (provided that the applicant has the ability to enter into a binding contract), handicap, sexual orientation or because all or part of the applicants income is derived from a public assistance program or because of the applicants good faith exercise of rights under the Federal Consumer Protection Act. Furthermore, Seller has not discouraged, and will not discourage, the completion of any credit application based on any of
the foregoing prohibited bases. In addition, Seller has complied with all anti-redlining provisions and equal credit opportunity laws applicable under all applicable Requirements of Law.
(xxiv) Home Ownership and Equity Protection Act. There is no Litigation, or other material proceeding or governmental investigation, existing or pending or to the knowledge of Seller threatened, or any order, injunction or decree outstanding against or relating to Seller, relating to any violation of the Home Ownership and Equity Protection Act or any state, city or district high cost home mortgage or predatory lending law, that has not been disclosed in writing to Buyer.
(xxv) In Compliance with Applicable Laws. Seller and its Subsidiaries each complies in all material respects with all Requirements of Law applicable to it. Without limiting the foregoing, Seller and its Subsidiaries each complies in all material respects with all applicable (1) Agency Guidelines, (2) Privacy Requirements, including the GLB Act and Safeguards Rules promulgated thereunder, (3) consumer protection laws and regulations, (4) licensing and approval requirements applicable to Sellers and its Subsidiaries Origination of Mortgage Loans and (5) other laws and regulations referenced in the definition of Requirement(s) of Law, in item (gg) of Exhibit B or in both of such places.
(xxvi) Place of Business and Formation. The principal place of business of Seller is located at the address set forth for Seller in Section 15. As of the date hereof, and during the four (4) months immediately preceding that date, the chief executive office of Seller and the office where it keeps its financial books and records relating to its property and all contracts relating thereto and all accounts arising therefrom is and has been located at the address set forth for Seller in Section 15. As of the date hereof, Sellers jurisdiction of organization is the State of Delaware.
(xxvii) No Adverse Selection. Seller used no selection procedures that identified the Purchased Mortgage Loans offered to Buyer for purchase hereunder as being less desirable or valuable than other comparable Mortgage Loans owned by Seller.
(xxviii) MERS. Unless Seller has notified Buyer in writing that Seller is no longer a member of MERS, Seller is a member of MERS in good standing.
(xxix) Seller is Principal. Seller is engaging in the Transactions as a principal.
(xxx) No Default. No Default or Event of Default has occurred and is continuing.
(xxxi) No Sanctioned Persons. Neither Seller, its Subsidiaries nor any of its or their directors, members, managers, partners, officers, employees, brokers or agents acting or benefiting in any capacity in connection with this Agreement or any other transaction involving any Buyer or, to the best of Sellers knowledge, any Buyers Affiliate, is a Sanctioned Person.
(xxxii) Anti-Money Laundering Laws. Seller and its Affiliates each complies with all Anti-Money Laundering Laws applicable to it and each has implemented and maintains in effect policies and procedures to ensure compliance by it, and by its Subsidiaries and their respective directors, members, managers, officers, employees and agents, with all applicable Anti-Money Laundering Laws.
(xxxiii) Anti-Corruption Laws and Sanctions. Seller has implemented and maintains in effect policies and procedures designed to ensure compliance by Seller, its Subsidiaries and their respective directors, members, managers, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and Seller, its Subsidiaries and their respective directors, members, managers, partners, officers and employees, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. No use of proceeds of any Transaction nor any other transaction contemplated by the Transaction Documents will violate Anti-Corruption Laws or applicable Sanctions.
(b) Representations as to Additional Mortgage Loans. Subject to the proviso stated in Section 12(a)(iii), on and as of the date of transfer of each Mortgage Loan transferred from Seller to Buyer as an Additional Purchased Mortgage Loan and on each day thereafter before it is repurchased by Seller, Seller shall be deemed to represent to Buyer that each Additional Purchased Mortgage Loan is an Eligible Mortgage Loan and to make the representations and warranties in respect thereof that are set forth in Exhibit B.
(c) Copies. Each time Seller delivers or causes to be delivered to Buyer a copy (instead of the original) of any document pursuant or relating to this Agreement, any other Transaction Document or any Transaction, Seller shall be deemed to warrant, represent and certify to Buyer at the time of delivery that such copy is a true, correct and complete copy of the original of that document unless such document is accompanied by Sellers written statement that such document is incorrect or incomplete in the manner specified in such statement.
(d) Survival of Representations. All the representations and warranties made by Seller to Buyer in this Agreement are binding on Seller regardless of whether the subject matter thereof was under the control of Seller or a third party. Seller acknowledges that Buyer will rely upon all such representations and warranties with respect to each Purchased Mortgage Loan purchased by Buyer hereunder, and Seller makes such representations and warranties in order to induce Buyer to purchase the Mortgage Loans. The representations and warranties by Seller in this Agreement with respect to a Purchased Mortgage Loan shall be unaffected by, and shall supersede and control over, any provision in any existing or future endorsement of any Purchased Mortgage Loan or in any assignment with respect to such Purchased Mortgage Loan to the effect that such endorsement or assignment is without recourse or without representation or warranty. All Seller representations and warranties shall survive delivery of the Loan Eligibility Files, the Asset Files and the Confirmations, purchase by Buyer of Purchased Mortgage Loans, transfer of the servicing for the Purchased Mortgage Loans to a successor servicer, delivery of Purchased Mortgage Loans to an Approved Takeout Investor, repurchases of the Purchased Mortgage Loans by Seller and termination of this Agreement. The representations and warranties of Seller in this Agreement shall inure to the benefit of Buyer and its successors and assigns, notwithstanding any examination by Buyer of any Mortgage Loan Documents, related files or other documents delivered to Buyer.
11. Sellers Covenants
Seller shall perform, and shall cause each of its Subsidiaries to perform, the following duties at all times during the term of this Agreement:
(a) Maintenance of Existence; Conduct of Business. Seller and each of its Subsidiaries shall preserve and maintain its existence in good standing and all of its rights, privileges, licenses and franchises necessary in the normal conduct of its business, including its eligibility as lender, seller/servicer and issuer described under Section 10(a)(ix) and make no material change in the nature or character of its business or engage in any business substantially different from the mortgage origination and servicing business and financial services related to mortgage banking and mortgage products without Buyers prior written consent. Seller will not make any material change in its accounting treatment and reporting practices except as required by GAAP.
(b) Compliance with Applicable Laws. Seller shall comply, and shall cause each of its Subsidiaries to comply, with all applicable Requirements of Law, a breach of which would, or could reasonably be expected to, adversely affect the Purchased Mortgage Loans or the Mortgage Loans to be sold pursuant to this Agreement, or that could reasonably be expected to result in a Material Adverse Effect except where contested in good faith and by appropriate proceedings and with adequate book reserves determined in accordance with GAAP, consistently applied, established therefor. Without limiting the foregoing, Seller shall comply, and cause its Subsidiaries to comply, in all material respects with all applicable (1) Agency Guidelines, (2) Privacy Requirements, including the GLB Act and Safeguards Rules promulgated thereunder, (3) consumer protection laws and regulations, (4) licensing and approval requirements applicable to Sellers and its Subsidiaries Origination of Mortgage Loans and (5) other applicable laws and regulations referenced in the definition of Requirement(s) of Law, in item (gg) of Exhibit B or in both of such places.
(c) Compliance with Anti-Corruption Laws. Seller shall, and shall cause each of its Subsidiaries to, maintain in effect and enforce policies and procedures designed to ensure compliance by Seller, its Subsidiaries and their respective directors, members, managers, partners, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions.
(d) Inspection of Properties and Books. Upon no less than five (5) Business Days advance written notice from Buyer to Seller (unless a Default or an Event of Default has occurred and is continuing, in which event advance notice shall not be required), Seller shall permit authorized representatives of Buyer to (i) discuss the business, operations, assets and financial condition of Seller and Sellers Subsidiaries with their officers and employees and to examine their books of account, records, reports and other papers and make copies or extracts thereof, (ii) inspect all of Sellers property and all related information and reports, and (iii) audit Sellers operations to ensure compliance with the terms of the Transaction Documents, the GLB Act and other privacy laws and regulations, all at Sellers expense in an amount not to exceed the Due Diligence Cap in any calendar year (provided that the Due Diligence Cap shall not be applicable to audit expenses incurred when an Event of Default has occurred and is continuing), in each case during normal business hours and upon reasonable prior notice, and without undue interference with Sellers business. Seller will provide its accountants with a photocopy of this Agreement promptly after the execution hereof and will instruct its accountants to answer candidly any and all questions that
the officers of Buyer or any authorized representatives of Buyer may address to them in reference to the financial condition or affairs of Seller and Sellers Subsidiaries. Seller may have its representatives in attendance at any meetings between the officers or other representatives of Buyer and Sellers accountants held in accordance with this authorization.
(e) Notices. Seller will promptly notify Buyer of the occurrence of any of the following and shall provide such additional documentation and cooperation as Buyer may reasonably request with respect to any of the following:
(i) any change in the business address and/or telephone number of Seller, any Subsidiary of Seller or any Guarantor;
(ii) any of Sellers current Chief Executive Officer, Chief Investment Officer or Chief Operating Officer ceases for any reason to hold that office, or to continuously perform the duties of that office;
(iii) Seller has actual knowledge that a Change in Control has occurred;
(iv) any change of the name or jurisdiction of organization of Seller, any Subsidiary of Seller or any Guarantor;
(v) any material adverse change in the financial position of Seller, any Subsidiary of Seller or any Guarantor;
(vi) receipt by Seller, any Subsidiary of Seller or any Guarantor of notice from the holder of any of its Debt of [***] or more, of any alleged default thereunder;
(vii) entry of any court judgment or regulatory order in which Seller, any Subsidiary of Seller or any Guarantor is or may be required to pay a claim or claims that could have a material adverse effect on the financial condition of Seller, any Subsidiary of Seller or any Guarantor, on the ability of Seller, any Subsidiary of Seller or any Guarantor to perform its obligations under any Transaction Document, or on the ability of Seller, any Subsidiary of Seller or any Guarantor to continue its operations in a manner similar to its current operations;
(viii) the filing of any petition, claim, lawsuit or governmental investigation, or any order, injunction or decree against or relating to Seller, relating to any violation of the Home Ownership and Equity Protection Act or any state, city or district high cost home mortgage or predatory lending law;
(ix) the filing of any petition, claim or lawsuit against Seller, any Subsidiary of Seller or any Guarantor that could reasonably be expected to have a Material Adverse Effect;
(x) Seller, any Subsidiary of Seller or any Guarantor admits to committing, or is found to have committed, a material violation of any applicable Requirement of Law relating to its business operations, including its loan generation, sale or servicing operations;
(xi) the initiation of any investigations, audits, examinations or reviews of Seller, any Subsidiary of Seller or any Guarantor by any Agency or Governmental Authority relating to the Origination, sale or servicing of mortgage loans by Seller, any Subsidiary of Seller or any Guarantor or the business operations of Seller, any Subsidiary of Seller or any Guarantor, with the exception of routine and normally scheduled audits or examinations by the Agencies or by the regulators of Seller, any Subsidiary of Seller or any Guarantor;
(xii) any disqualification or suspension of Seller, any Subsidiary of Seller or any Guarantor by an Agency, including any notification or knowledge, from any source, of any disqualification or suspension, or any credible warning of a threatened or impending disqualification or suspension that could reasonably be expected to occur is Seller or such Subsidiary or Guarantor fails to take appropriate preventative or remedial action;
(xiii) a Responsible Officer of Seller learns of the occurrence of any actions, inactions or events in respect of which an Agency, acting in accordance with Agency Guidelines, could reasonably be expected to disqualify or suspend Seller or any Subsidiary of Seller as a seller or servicer, including (if Seller is or becomes a Freddie Mac-approved seller or servicer) those events or reasons for disqualification or suspension enumerated in Chapter 5 of the Freddie Mac Single Family Seller/Servicer Guide and (if Seller is or becomes a Fannie Mae-approved seller or servicer) any breach of Sellers Lender Contract (as defined in the Fannie Mae Single Family 2010 Selling Guide) with Fannie Mae including the breaches described or referred to in Section A2-3, 1-01 Lender Breach of Contract of the Fannie Mae Single Family 2010 Selling Guide;
(xiv) the filing, recording or assessment of any federal, state or local tax Lien in excess of [***] against Seller, any Subsidiary of Seller or any Guarantor, or any of their assets;
(xv) the occurrence of any Event of Default hereunder or the occurrence of any Default;
(xvi) the suspension, revocation or termination of any licenses or eligibility as described under Section 10(a)(ix) of Seller, any Subsidiary of Seller or any Guarantor (other than voluntary terminations or resignations that do not affect any Purchased Mortgage Loans);
(xvii) Sellers ceasing to be a member of MERS in good standing;
(xviii) any other action, event or condition of any nature that could reasonably be expected to result in a Material Adverse Effect or that, with or without notice or lapse of time or both, will constitute a default under any other agreement, instrument or indenture to which Seller, any Subsidiary of Seller or any Guarantor is a party or to which its properties or assets may be subject; or
(xix) any alleged breach by Buyer of any provision of this Agreement or of any of the other Transaction Documents.
(f) Payment of Debt, Taxes, etc.
(i) Seller shall pay and perform all obligations and Debt of Seller, and cause to be paid and performed all obligations and Debt of its Subsidiaries in accordance with the terms thereof, and pay and discharge or cause to be paid and discharged all taxes, assessments and governmental charges or levies imposed upon Seller, its Subsidiaries, or upon their respective income, receipts or properties, before the same shall become past due, as well as all lawful claims for labor, materials or supplies or otherwise that, if unpaid, might become a Lien upon such properties or any part thereof; provided that Seller and its Subsidiaries shall not be required to pay obligations, Debt, taxes, assessments or governmental charges or levies or claims for labor, materials or supplies for which Seller or its Subsidiaries shall have obtained an adequate bond or adequate insurance or that are being contested in good faith and by proper proceedings that are being reasonably and diligently pursued, if such proceedings do not involve any likelihood of the sale, forfeiture or loss of any such property or any interest therein while such proceedings are pending and if adequate book reserves determined in accordance with GAAP, consistently applied, are established therefor.
(ii) (A) All payments made by Seller under this Agreement shall be made free and clear of, and without deduction or withholding for or on account of, any present or future taxes, levies, imposts, deductions, charges or withholdings, and all liabilities (including penalties, interest and additions to tax) with respect thereto imposed by any Governmental Authority, excluding taxes imposed on (or measured by) Buyers net income (however denominated) or capital, branch profits taxes, franchise taxes or any other tax imposed on the net income by the United States, a state or a foreign jurisdiction under the laws of which Buyer is organized or of its applicable lending office, or any political subdivision thereof (collectively, Taxes), all of which shall be paid by Seller for its own account not later than the date when due. If Seller is required by any applicable Requirement of Law to deduct or withhold any Taxes from or in respect of any amount payable hereunder, it shall (a) make such deduction or withholding, (b) pay the amount so deducted or withheld to the appropriate Governmental Authority not later than the date due, (c) deliver to Buyer, promptly, original tax receipts and other evidence satisfactory to Buyer of the payment when due of the full amount of such Taxes and (d) pay to Buyer such additional amounts as may be necessary so that such Buyer receives, free and clear of all Taxes, a net amount equal to the amount it would have received under this Agreement, as if no such deduction or withholding had been made.
(B) In addition, Seller agrees to pay to the relevant Governmental Authority in accordance with all applicable Requirements of Law any current or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies (including mortgage recording taxes, transfer taxes and similar fees) imposed by the United States or any taxing authority thereof or therein that arise from any payment made hereunder or from the execution, delivery or registration of, or otherwise with respect to, this Agreement (Other Taxes).
(C) Seller agrees to indemnify Buyer for the full amount of Taxes and Other Taxes (including additional amounts with respect thereto), and the full amount of Taxes of any kind imposed by any jurisdiction on amounts payable under this Section 11(f), and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, provided that
Buyer shall have provided Seller with evidence, reasonably satisfactory to Seller, of payment of Taxes or Other Taxes, as the case may be.
(D) Any assignee of Buyer that is not incorporated or otherwise created under the laws of the United States, any State thereof, or the District of Columbia (a Foreign Buyer) shall provide Seller with properly completed IRS Form W-8BEN or W-8ECI or any successor form prescribed by the IRS, certifying (X) that such Foreign Buyer is either (1) entitled to benefits under an income tax treaty to which the United States is a party that eliminates United States withholding tax under Sections 1441 through 1442 of the Code on payments to it or (2) otherwise fully exempts from United States withholding tax under Sections 1441 through 1442 of the Code on payments to it, or (Y) that the income receivable pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States, on or before the date upon which each such Foreign Buyer becomes a purchaser of Mortgage Loans hereunder. Each Foreign Buyer will resubmit the appropriate form on the earliest of (x) the third anniversary of the prior submission or (y) on or before the expiration of thirty (30) days after there is a change in circumstances with respect to such Foreign Buyer as defined in Treas. Reg. Section 1.1441(e)(4)(ii)(D). For any period with respect to which a Foreign Buyer has failed to provide Seller with the appropriate form or other relevant document pursuant to this Section 11(f)(ii) (unless such failure is due to a change in any Requirement of Law occurring subsequent to the date on which a form originally was required to be provided), such Foreign Buyer shall not be entitled to any gross-up of Taxes or indemnification under this Section 11(f) with respect to Taxes imposed by the United States; provided that should a Foreign Buyer, that is otherwise exempt from a withholding tax, become subject to Taxes because of its failure to deliver a form required hereunder, Seller shall take such steps as such Foreign Buyer shall reasonably request to assist such Foreign Buyer to recover such Taxes.
(E) Without prejudice to the survival or any other agreement of Seller hereunder, the agreements and obligations of Seller contained in this Section 11(f) shall survive the termination of this Agreement. Nothing contained in this Section 11(f) shall require Buyer to make available any of its tax returns or other information that it deems to be confidential or proprietary.
(F) Each Party acknowledges that it is its intent, for purposes of U.S. federal, state and local income and franchise taxes only, to treat each purchase transaction hereunder as indebtedness of Seller that is secured by the Purchased Mortgage Loans and that the Purchased Mortgage Loans are owned by Seller in the absence of an Event of Default by Seller. All Parties agree to such treatment and agree to take no action inconsistent with this treatment unless required by law.
(g) Insurance. Seller shall maintain, and shall cause its Subsidiaries to maintain, at no cost to Buyer (a) errors and omissions insurance or mortgage impairment insurance and blanket bond coverage, with such companies and in such amounts as to satisfy the requirements of prevailing Agency Guidelines applicable to a qualified mortgage originating institution, and shall cause Sellers policy to be endorsed with the Blanket Bond Required Endorsement and (b) liability insurance and fire and other hazard insurance on its properties, with responsible insurance companies reasonably acceptable to Buyer, in such amounts and against such risks as is customarily carried by similar businesses operating in the same vicinity. Copies of certificates of
insurance shall be furnished to Buyer at no cost to Buyer upon Sellers or its Subsidiaries obtaining such coverage or any renewal of or modification to such coverage, and upon Buyers request, copies of such policies shall be furnished to Buyer at no cost to Buyer within thirty (30) days thereafter.
(h) Financial Statements and Other Reports. Seller shall deliver or cause to be delivered to Buyer:
(i) as soon as available and in any event not later than thirty (30) days after the end of each calendar month, statements of income and changes in stockholders equity and cash flow of Seller (and, if applicable, Sellers Subsidiaries on a consolidated and consolidating basis) for the immediately preceding month, and related balance sheet as of the end of the immediately preceding month, all in reasonable detail, prepared in accordance with GAAP applied on a consistent basis, and certified as to the fairness of presentation by the chief financial officer, treasurer or controller of Seller, subject, however, to normal year-end audit adjustments;
(ii) as soon as available and in any event not later than ninety (90) days after Sellers fiscal year end, statements of income, changes in stockholders equity and cash flows of Seller (and, if applicable, Sellers Subsidiaries on a consolidated basis) for the preceding fiscal year, the related balance sheet as of the end of such year (setting forth in comparative form the corresponding figures for the preceding fiscal year), all in reasonable detail, prepared in accordance with GAAP applied on a consistent basis throughout the periods involved, and accompanied by an opinion in form and substance satisfactory to Buyer (without a going concern or like qualification, commentary or exception and without any qualification or exception as to the scope of such audit) and prepared by an accounting firm reasonably satisfactory to Buyer, or other independent certified public accountants of recognized standing selected by Seller and acceptable to Buyer, each stating that said financial statements fairly present in all material respects the financial condition, cash flows and results of operations of Seller (and, if applicable, Sellers Subsidiaries on a consolidated basis) as of the end of, and for, such year;
(iii) together with each delivery of financial statements required in this Section 11(h), a Compliance Certificate executed by Sellers chief financial officer, treasurer or controller;
(iv) photocopies or electronic copies of all financial and other reports, if any, other than annual SEC Form 10K reports and quarterly SEC Form 10Q reports, that Seller, any Subsidiary of Seller or any Guarantor shall file with the SEC or any other Governmental Authority (other than routine tax and corporate or organizational filings), not later than five (5) Business Days after filing, except to the extent that any applicable Requirement of Law, or any contract with such Agency or Governmental Authority, prohibits disclosure thereof to Buyer;
(v) upon Buyers request, a listing of Agency or regulatory examinations completed in the preceding twelve (12) months;
(vi) within five (5) Business Days after Sellers receipt thereof, a copy of any material findings resulting from the audit of Seller by any Agency or regulatory authority, except
to the extent that any applicable Requirement of Law, or any contract with such Agency or Governmental Authority, prohibits disclosure thereof to Buyer;
(vii) not less frequently than once every week (and more often if reasonably requested by Buyer), a report in form and substance satisfactory to Buyer summarizing the Hedging Arrangements, if any, then in effect with respect to all Mortgage Loans then owned by Buyer and interim serviced by Seller (or a Successor Servicer); and
(viii) from time to time, with reasonable promptness, such further information regarding the Mortgage Assets, or the business, operations, properties or financial condition of Seller and any Guarantor as Buyer may reasonably request.
(i) Limits on Distributions. Without Buyers prior written consent, Seller shall not pay, make or declare or incur any liability to pay, make or declare any dividend (excluding stock dividends) or other distribution, direct or indirect, on or on account of any shares of its stock (or equivalent equity interest) or any redemption or other acquisition, direct or indirect, of any shares of its stock (or equivalent equity interest) or of any warrants, rights or other options to purchase any shares of its stock (or equivalent equity interest), nor purchase, acquire, redeem or retire any stock (or equivalent equity interest) in itself whether now or hereafter outstanding, except that, so long as no Default or Event of Default exists at such time or will occur as a result of such payment, Seller may pay Permitted Dividends without Buyers prior written consent.
(j) Use of Chases Name. Seller shall and shall cause its Subsidiaries to, confine its use of Buyers logo and the JPMorgan and Chase names to those uses specifically authorized by Buyer in writing. Except where required by the federal Real Estate Settlement Procedures Act or the CFPBs Regulation X thereunder, or the Helping Families Save Their Homes Act of 2009, as amended from time to time, or another applicable Requirement of Law, in no instance may Seller or any of its Subsidiaries disclose to any prospective Mortgagor, or the agents of the Mortgagor, that such Mortgagors Mortgage Loan will be offered for sale to Buyer. None of Seller or its Subsidiaries may use Buyers name or logo to obtain any mortgage-related services without the prior written consent of Buyer.
(k) Reporting. In its financial statements, Seller will report each sale of a Mortgage Loan hereunder as a financing in accordance with GAAP.
(l) Transactions with Affiliates. Seller will not and will not permit any of its Subsidiaries to (i) enter into any transaction, including any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted under this Agreement or (b) in the ordinary course of Sellers or such Subsidiarys business and upon fair and reasonable terms no less favorable to Seller or such Subsidiary than it would obtain in a comparable arms-length transaction with a Person that is not an Affiliate, or (ii) make any payment to an Affiliate that is not otherwise permitted by this Section 11; provided that the provisions of this Section 11(l) shall not prohibit any transactions with, or payments to or from, any special purpose Subsidiary or Seller formed specifically for the purpose of holding, managing, liquidating and disposing of REO Property in connection with a facility financing Sellers early buyout transactions (each, an EBO Facility) so long as such activities are undertaken pursuant to and in compliance with the related EBO Facility agreement(s).
(m) Delivery of Assignments in Blank. If Seller shall cease to be a member of MERS, Seller will deliver assignments executed in blank to Buyer or its designee for each Purchased Mortgage Loan then held by Buyer within ten (10) Business Days following such termination of Sellers MERS membership.
(n) Defense of Title; Preservation of Mortgage Assets. Seller warrants and will defend the right, title and interest of Buyer in and to all Mortgage Assets against all adverse claims and demands of all Persons whomsoever. Seller shall do all things necessary to preserve the Mortgage Assets so that such Mortgage Assets remain subject to a first priority perfected Lien hereunder, excluding Hedging Arrangements that cover, and MBS created from, both Purchased Mortgage Loans and Mortgage Loans that are subject to another Available Warehouse Facility, as to which Seller will do all things necessary to keep Buyers Lien pari passu with the Lien of the counterparty to such other Available Warehouse Facility. Seller will not allow any default to occur for which Seller is responsible under any Mortgage Assets or any Transaction Documents and Seller shall fully perform or cause to be performed when due all of its obligations under any Mortgage Assets and the Transaction Documents.
(o) Limitation on Sale of Assets. Seller shall not convey, sell, lease, assign, transfer or otherwise dispose of (collectively, Transfer), all or substantially all of its property, business or assets (including receivables and leasehold interests) whether now owned or hereafter acquired or allow any of its Subsidiaries to Transfer all or substantially all of its assets to any Person.
(p) No Amendment or Compromise. Unless required by any applicable Requirement of Law, neither Seller nor anyone acting on Sellers behalf shall, without Buyers prior written consent, amend or modify, or waive any term or condition of, or settle or compromise any claim in respect of, any Purchased Mortgage Loan, any related Mortgage Document or any related rights if such amendment, modification, waiver, settlement or compromise could reasonably be expected to adversely affect the value of such Purchased Mortgage Loan.
(q) Loan Determined to be Defaulted or Defective. Upon discovery by Seller that any Purchased Mortgage Loan is a Defaulted Loan or a Defective Mortgage Loan, Seller shall promptly give notice of such discovery to Buyer.
(r) Further Assurances. Seller agrees to do such further acts and things and to execute and deliver to Buyer such additional assignments, acknowledgments, agreements, powers and instruments as are reasonably required by Buyer to carry into effect the intent and purposes of this Agreement and the other Transaction Documents, to perfect the interests of Buyer in the Mortgage Assets or to better assure and confirm unto Buyer its rights, powers and remedies hereunder and thereunder.
(s) Hedging Arrangements. Seller shall maintain Hedging Arrangements with respect to all Mortgage Loans not the subject of Takeout Commitments reasonably satisfactory to Buyer, with reputable registered broker-dealers or other Persons reasonably satisfactory to Buyer, in order to mitigate the risk that the Market Value of any such Mortgage Loan will change as a result of a change in interest rates or the market for mortgage loan assets before the Mortgage Loan is purchased by an Approved Takeout Investor or repurchased by Seller.
(t) Only Permitted Debt. Seller shall not, and shall not permit any of its Subsidiaries to, incur, permit to exist or commit to incur any Debt that has not been approved by Buyer in writing in advance, except the following (collectively, Permitted Debt):
(i) Sellers obligations under this Agreement and the other Transaction Documents;
(ii) Sellers and its Subsidiaries obligations under other Available Warehouse Facilities;
(iii) obligations to pay taxes;
(iv) liabilities for accounts payable, non-capitalized equipment or operating leases and similar liabilities, but only if incurred in the ordinary course of business;
(v) accrued expenses, deferred credits and loss contingencies that are properly classified as liabilities under GAAP;
(vi) non-speculative Hedging Arrangements incurred in the ordinary course of business;
(vii) warehouse, repurchase or similar facilities, including EBO Facilities, for the financing of its Mortgage Loans or facilities for financing Servicing Rights or servicing advances;
(viii) liabilities relating to transactions in which Seller sells pools of Mortgage Loans and has an obligation to repurchase such Mortgage Loans from their purchaser, securitize them and deliver the resulting MBS to such purchaser in exchange therefor, in each case that are properly classified as liabilities under GAAP;
(ix) other Debt not exceeding [***] in the aggregate at any time outstanding; and
(x) the Debt described in Exhibit I and such additional Debt, if any, as Buyer shall approve in writing from time to time (Buyer shall have no obligation to approve any additional Debt, and may approve or disapprove it, in writing or otherwise, in Buyers sole and absolute discretion).
(u) No Guaranties. Without the prior written consent of Buyer, Seller shall not, and shall not permit any of its Subsidiaries to, guaranty any Debt other than Debt incurred by a Subsidiary for a warehouse or repurchase facility for Mortgage Loans or a facility for financing Servicing Rights.
(v) Underwriting Guidelines. Seller will underwrite Eligible Mortgage Loans in compliance with its underwriting guidelines in effect on the date hereof. Seller will provide notices to Buyer of all material changes to its underwriting guidelines, which notice shall be provided at least five (5) Business Days before the Purchase Date of any Purchased Mortgage Loan whose underwriting is affected by any material change in such underwriting guidelines, and Seller shall not submit any affected Mortgage Loan for purchase by Buyer before the sixth (6th) Business Day
after notice to Buyer of the material change(s) affecting such Mortgage Loan) in order that Buyer will have the opportunity to determine, in its sole discretion, whether not to purchase any such affected Mortgage Loan(s). Seller will provide Buyer such details as Buyer shall request from time to time on Sellers underwriting guidelines for Sellers employee or friends and family mortgage loan programs under which loans are available to all of Sellers eligible employees
(w) Mergers, Acquisitions, Subsidiaries. Without the prior written consent of Buyer, Seller will not, and will not permit any of its Subsidiaries to, consolidate or merge with or into any entity (unless Seller is the surviving entity and any of Sellers Subsidiaries may merge with or into Seller or another Subsidiary of Seller), consolidate, acquire any interest in any Person or create, form or acquire any Subsidiary not listed in Exhibit G.
(x) UCC. Seller will not change its name, organizational type or location (within the meaning of Section 9-307 of the UCC) unless it shall have (i) given Buyer at least thirty (30) days prior written notice thereof and (ii) delivered to Buyer all financing statements, amendments, instruments, legal opinions and other documents reasonably requested by Buyer in connection with such change. Seller will keep its principal place of business and chief executive office at the location specified in Section 15, and the office where it maintains any physical records of the Purchased Mortgage Loans at a corporate facility of Seller, or, in any such case, upon thirty (30) days prior written notice to Buyer, at another location within the United States.
(y) Takeout Commitments. Except to the extent superseded by this Agreement, Seller covenants that (i) it shall continue to perform all of its duties and obligations to the Approved Takeout Investor, under any applicable Takeout Commitment and otherwise, with respect to a Purchased Mortgage Loan as if such Mortgage Loan were still owned by Seller and to be sold directly by Seller to the Approved Takeout Investor pursuant to such Takeout Commitment on the date provided therein without the intervening ownership of Buyer pursuant to this Agreement, and (ii) Seller shall make all representations and warranties required to be made to the Approved Takeout Investor under the applicable Takeout Commitment, in order that such Approved Takeout Investor will honor such Takeout Commitment.
(z) Financial Covenants.
(i) Leverage Ratio. Seller shall not permit the Leverage Ratio of Seller (and, if applicable, its Subsidiaries, on a consolidated basis) to exceed [***] computed as of the end of each calendar month.
(ii) Minimum Adjusted Tangible Net Worth. Seller shall not permit the Adjusted Tangible Net Worth of Seller (and, if applicable, its Subsidiaries, on a consolidated basis), computed as of the end of each calendar month, to be less than [***].
(iii) Maintenance of Liquidity. Seller shall have unencumbered Liquidity as of the end of each calendar month of at least [***]; provided that if Sellers Liquidity is less than [***] but is at least [***] on the last day of any calendar month and Seller (x) increases its Liquidity to at least [***] before the close of business on the first Business
Day of the following month, and (y) if requested by Buyer, promptly provides Buyer copies of account statements or other acceptable evidence that Sellers unrestricted cash and Cash Equivalents balances on such first Business Day were at least [***], Seller shall be deemed to be in compliance with this Section 11(z).
(iv) Maintenance of Available Warehouse Facilities. Seller shall maintain at all times Available Warehouse Facilities from buyers and lenders other than Buyer such that the Available Warehouse Facility under this Agreement constitutes no more than [***] of Sellers aggregate Available Warehouse Facilities.
(v) Net Income (Loss). Seller shall not permit its net income before taxes, for any period of four (4) consecutive fiscal quarters, to be less than One Dollar ($1) or have a net loss before taxes for more than two (2) consecutive fiscal quarters.
(aa) Use of Proceeds. Seller (i) will not request any Transaction, and (ii) will not use, and will ensure that its Subsidiaries and its and their respective directors, members, managers, partners, officers, employees and agents do not use, the proceeds of any Transaction, (x) in furtherance of an offer, payment, promise to pay or authorization of the payment or giving of money or anything else of value to any Person in violation of the Anti-Corruption Laws, (y) for the purpose of funding, financing or facilitating any activities, business or transaction of or with any Sanctioned Person or in any Sanctioned Country or (z) in any manner that would result in the violation of any Sanctions.
(bb) Government Regulation. Seller will not (1) be or become subject at any time to any Requirement of Law (including the U.S. Office of Foreign Asset Control list) that prohibits or limits Buyer from entering into any Transaction, or otherwise conducting business, with Seller or (2) fail to provide documentary and other evidence of Sellers identity as may be requested by Buyer at any time to enable Buyer to verify Sellers identity or to comply with any applicable Requirement of Law, including Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318 and the Anti-Corruption Laws.
(cc) Wholesale Originations. Seller shall Originate no more than [***] of its total Mortgage Loan originations in any calendar month through wholesale or broker originations.
12. Events of Default; Remedies.
(a) Each of the following events shall, upon its occurrence and during its continuance, be an Event of Default:
(i) Seller fails to remit any Price Differential, fees, Repurchase Price or any other amount due to Buyer pursuant to the terms hereof or any other Transaction Document or fails to cure any Margin Deficit as provided in Section 4; or
(ii) Seller fails to repurchase any Purchased Mortgage Loan at the time and for the amount required hereunder; or
(iii) (A) any representation or warranty made by Seller or any Guarantor in this Agreement or any other Transaction Document (x) is untrue, inaccurate or incomplete in any material respect (each such representation or warranty, a Materially False Representation) on or as of the date made and, (y) only as to Materially False Representations not made with intent to mislead or deceive Buyer, such Materially False Representation is not cured by correcting its untruth, inaccuracy or incompleteness within [***] Business Days after any Responsible Officer of Seller has actual knowledge that such Materially False Representation was untrue, inaccurate or incomplete in any material respect on or as of the date made; provided that if any representation or warranty in Section 10(a)(i) or Section 10(b) or on Exhibit B (a Loan Level Representation) was when made, or has become, a Materially False Representation, then that Materially False Representation will not constitute a Default or an Event of Default although such Materially False Representation will cause each affected Purchased Mortgage Loan to cease to be an Eligible Mortgage Loan and Seller shall be obligated to repurchase it from Buyer promptly after learning from any source of its ineligibility unless both (1) such Loan Level Representation relates to [***] or more Purchased Mortgage Loans and (2) when such Loan Level Representation was made, a Responsible Officer of Seller had actual knowledge that it was being made and that it was untrue, inaccurate or incomplete in a material respect, in which event such Materially False Representation will constitute an Event of Default; or
(B) any material information contained in any written statement, report, financial statement or certificate made or delivered by Seller or any Guarantor (either before or after the date hereof) to Buyer pursuant to the terms of this Agreement or any other Transaction Document is untrue or incorrect in any material respect as of the date when made or deemed made, and if any such information was untrue or incorrect because of a bona fide clerical error of mistake in communicating such information to Buyer, such error or mistake and all of its material consequences is not corrected and remedied within [***] Business Days of the day when Seller first learns of such error or mistake; or
(iv) Seller shall fail to comply with any of the requirements set forth in Section 11(d) (Inspection of Properties and Books) or Section 11(z) (Financial Covenants); provided that if Sellers Liquidity is less than [***] but is at least [***] on the last day of any calendar month, and Seller (x) increases its Liquidity to at least [***] before the close of business on the first Business Day of the following month and (y) if requested by Buyer, promptly provides Buyer copies of account statements or other acceptable evidence that Sellers unrestricted cash and Cash Equivalents balances on such first Business Day were at least [***], Seller shall be deemed to be in compliance with the requirements of Section 11(z)(iii); or
(v) Seller or any Guarantor, as applicable, shall fail to observe, keep or perform any duty, responsibility or obligation imposed or required by this Agreement or any other Transaction Document other than one of the Events of Default specified or described in another section of this Section 12(a)), and such failure continues unremedied for a period of [***] days; or
(vi) any Act of Insolvency occurs with respect to Seller, any of its Subsidiaries or any Guarantor; or
(vii) one or more final judgments or decrees are entered against Seller, any of its Subsidiaries or any Guarantor involving claims not paid for more than [***] or not fully covered by insurance and the same are not vacated, discharged or satisfied, or stayed or bonded pending appeal, within [***] days from the date of entry thereof, and Seller, such Subsidiary or Guarantor, as applicable, shall not within said period of [***] days or such longer period during which execution of same shall have been stayed by court order or by written agreement with the judgment creditor, perfect appeal therefrom and cause execution thereof to be stayed during such appeal; or
(viii) any Agency, private investor or any other Person seizes or takes control of the servicing portfolio of Seller, any of its Subsidiaries or any Subservicer for breach of any servicing agreement applicable to such servicing portfolio or otherwise for cause; or
(ix) any Agency or Governmental Authority revokes or materially restricts the authority of Seller or any of Sellers Subsidiaries to Originate, purchase, sell or service Mortgage Loans or the authority of any Subservicer to service Mortgage Loans, or Seller, any of Sellers Subsidiaries or any Subservicer shall fail to meet all requisite servicer eligibility qualifications promulgated by any Agency for which it services Purchased Mortgage Loans and only if a Subservicer (and not Seller or any of its Subsidiaries) is the affected Person, Seller has not appointed a successor Subservicer acceptable to such Agency or Governmental Authority and Buyer within [***] days; or
(x) there is a default under any agreement other than a Transaction Document that Seller or any Guarantor, or any of their respective Affiliates or Subsidiaries, has entered into with Buyer or any of its Affiliates or Subsidiaries; or
(xi) Seller, any Guarantor or any of their respective Subsidiaries fails to pay when due any other Debt in excess of [***], individually or in the aggregate, beyond any period of grace provided, or there occurs any breach or default with respect to any material term of any such Debt, if the effect of such failure, breach or default is to cause, or to permit the holder or holders thereof (or a trustee on behalf of such holder or holders) to cause, such Debt of such Person to become or be declared due before its stated maturity (upon the giving or receiving of notice, lapse of time or both, or satisfaction of any other condition to acceleration, whether or not any such condition to acceleration has been satisfied); or
(xii) there is a Material Adverse Effect; or
(xiii) there is an event of default (however denominated in the agreement for such repurchase or lending arrangement) by Seller or any of its Subsidiaries under (x) any mortgage loan repurchase arrangement similar to the arrangement provided for in this Agreement, including off balance sheet repurchase arrangements, or (y) any warehouse lending arrangement, including off balance sheet warehouse lending arrangements, that Seller or a Subsidiary may have with any other Person, including both (1) any Default (however denominated in such agreement) for which no notice or grace period is specified and that therefore is an Event of Default (however denominated in such agreement) immediately upon its occurrence, and (2) any Default for which such agreement provides for notice, a grace period or both and that has continued uncured by Seller or such Subsidiary (as the case may be) and unwaived by the counterparty to such agreement
beyond the applicable notice and grace periods, which default or failure results in acceleration or mandatory prepayment, or entitles any party to accelerate or require prepayment, of any indebtedness thereunder, and such default or failure has not been waived by such party; or
(xiv) (A) Seller or any Guarantor shall assert in writing or in a public announcement that any material Transaction Document is not in full force and effect or shall otherwise seek to terminate (other than a termination of this Agreement or any Transaction Document that is expressly permitted by this Agreement), or disaffirm its material obligations under, any such Transaction Document at any time following the execution thereof or (B) any material Transaction Document ceases to be in full force and effect, or any of Sellers or any Guarantors material obligations under any Transaction Document shall cease to be in full force and effect (other than as a result of any termination of this Agreement or any Transaction Document that is expressly permitted by this Agreement), or the enforceability thereof shall be contested by Seller or any Guarantor; or
(xv) any Governmental Authority or any trustee, receiver, conservator or similar official acting or purporting to act under Governmental Authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the assets of Seller, any of its Subsidiaries or any Guarantor, or shall have taken any action to displace the management of Seller, any of its Subsidiaries or any Guarantor or to curtail its authority in the conduct of the business of Seller, any of its Subsidiaries or any Guarantor, or to restrict the payment of dividends to Seller by any Subsidiary of Seller, and such action shall not have been discontinued or stayed within [***] days; or
(xvi) any Guarantor defaults under its Guaranty, or a default or an event of default by any Guarantor shall have occurred and continued beyond any applicable cure period under any Transaction Document; or
(xvii) any Change in Control of Seller, any of its Subsidiaries or any Guarantor shall have occurred without Buyers prior written consent; or
(xviii) any failure by Seller to deliver assignments executed in blank to Buyer or its designee for each Purchased Mortgage Loan then held by Buyer within [***] Business Days following any termination of Sellers MERS membership; or
(xix) if Seller or any of its Subsidiaries shall be servicing Mortgage Loans for another Person or Persons, a downgrade of any of Sellers or any of its Subsidiaries servicer ratings below Moodys rating of SQ3 or S&Ps rating of Average; or
(xx) the initiation of any investigation or proceeding in respect of Seller or any Guarantor by any Governmental Authority, that is reasonably likely to have a material effect on Sellers or any Guarantors ability to perform its obligations under this Agreement or the other Transaction Documents; or
(xxi) Seller shall become subject to registration as an investment company as defined in, or subject to regulation under, the Investment Company Act of 1940, as amended; or
(xxii) Buyer shall fail for any reason other than Buyers own act or omission to have a valid and perfected first priority security interest in [***] or more of the Purchased Mortgage Loans, including the Servicing Rights thereto, or any related Mortgage Assets, in each case free and clear of any other Lien (excluding Hedging Arrangements that cover both Purchased Mortgage Loans and Mortgage Loans that are subject to another Available Warehouse Facility, as to which it will be an Event of Default if Buyers Lien shall fail or cease to be pari passu with the Lien of the counterparty to any such other Available Warehouse Facility);
provided that Sellers failure to pay by its due date any amount referred to in Section 12(a)(i) or Section 12(a)(ii) shall not be an Event of Default if such failure arises solely by reason of an error, omission or failure of an administrative or operational nature made on Sellers behalf by any bank, broker-dealer, clearing operation or other similar financial intermediary holding funds, securities or other property for Seller (each, a Paying Agent), if all of the following conditions are satisfied: (1) such failure is cured by no later than the same time as when it was due on the next Business Day following the day when Seller is notified by Buyer or learns from any source of such failure; (2) Seller demonstrates to the reasonable satisfaction of Buyer that funds, securities or property were available to such Paying Agent(s) to enable it (or them) to make the relevant payment or delivery, and all other payments and deliveries concurrently due to Sellers other obligees, when due and (3) Seller has provided Buyer with such additional information as Buyer shall have reasonably requested in order to satisfy itself that such failure occurred solely as a result of an error or omission as described above, which may include a prime broker or custodian bank statement or other evidence demonstrating that Seller has cash and immediately available funds or other collateral necessary to satisfy Sellers obligations when due and federal wire reference numbers demonstrating attempted delivery of securities or cash and documents or communications from the financial intermediary demonstrating the administrative or operational nature of the failure.
(b) If an Event of Default occurs, Buyer, at its option, may at any time or times thereafter while such Event of Default is continuing, elect by written notice to Seller to do any or all of the following:
(i) accelerate the Repurchase Date of each outstanding Transaction whose Repurchase Date has not already occurred and cancel the Purchase Date for any Transaction whose Purchase Date has not yet occurred;
(ii) terminate and replace Seller as interim servicer with respect to any Mortgage Assets at the cost and expense of Seller;
(iii) direct Seller to cause all Income to be transferred into the Income Collection Account and all escrow payments received to be deposited in the Impound Collection Account within [***] after receipt by Seller or any Subservicer or as otherwise set forth in the applicable Subservicing Instruction Letter;
(iv) direct or cause its Subservicer to direct, all Mortgagors to remit all Income directly to an account specified by Buyer; and
(v) terminate any commitment of Buyer to purchase Mortgage Loans under this Agreement or otherwise.
(c) If Buyer has exercised its option under Section 12(b)(i), then (i) Sellers obligations hereunder to repurchase all Purchased Mortgage Loans then subject to outstanding Transactions shall thereupon become immediately due and payable, (ii) to the extent permitted by applicable law, the Repurchase Price with respect to each such Transaction shall be increased by the aggregate amount obtained by daily application of (x) the greater of (i) the Pricing Rate for such Transaction and (ii) the Prime Rate plus [***] to (y) the Repurchase Price for such Transaction as of the accelerated Repurchase Date as determined pursuant to Section 12(b) (decreased as of any day by (A) any amounts retained by Buyer with respect to such Repurchase Price pursuant to Section 12(b)(iii) and 12(b)(iv) and (B) any proceeds from the sale of Purchased Mortgage Loans pursuant to Section 12(d), on a 360 day per year basis for the actual number of days during the period from and including the date of the Event of Default giving rise to such option to but excluding the date of payment of the Repurchase Price as so increased, (iii) all Income paid after such exercise or deemed exercise shall be paid over to and retained by Buyer and shall be applied to the aggregate unpaid Repurchase Prices and all other amounts owed by Seller to Buyer or any other Indemnified Party under the Transaction Documents, (iv) in accordance with Sections 4 and 5, all amounts on deposit in the Accounts, shall be applied by Buyer to the aggregate unpaid Repurchase Prices and all other amounts owed by Seller to Buyer or any other Indemnified Party under the Transaction Documents, (v) Seller shall, if directed by Buyer in writing, immediately deliver to Buyer any documents then in Sellers possession relating to any Purchased Mortgage Loans subject to such Transactions and (vi) Buyer may, by notice to Seller, declare the Termination Date to have occurred.
(d) Upon the exercise by Buyer of its option under Section 12(b)(i), without prior notice to Seller, Buyer may (A) immediately sell, on a servicing released or servicing retained basis as Buyer deems desirable, in a recognized market at such price or prices as Buyer may in its sole discretion deem satisfactory, any or all Purchased Mortgage Loans subject to such Transactions and apply the proceeds thereof to the aggregate unpaid Repurchase Prices and any other amounts owing by Seller to Buyer or any other Indemnified Party under the Transaction Documents or (B) in its sole discretion elect, in lieu of selling all or a portion of such Purchased Mortgage Loans, to give Seller credit for such Purchased Mortgage Loans in an amount equal to the Market Value therefor on such date against the aggregate unpaid Repurchase Prices and any other amounts owing by Seller to Buyer or any other Indemnified Party under the Transaction Documents.
(e) The proceeds of any disposition or the amount of any credit described above shall be applied first, to the out-of-pocket costs and expenses reasonably incurred by Buyer in connection with or as a result of an Event of Default (including reasonable legal fees of outside counsel and consulting fees, accounting fees, file transfer and inventory fees, costs and expenses reasonably incurred in respect of a transfer of the servicing of the Purchased Mortgage Loans and costs and expenses reasonably incurred in connection with a disposition of the Purchased Mortgage Loans); second, to costs of cover and/or related hedging transactions; third, to the aggregate and accrued Price Differential owed hereunder, fourth, to the remaining aggregate Repurchase Prices owed hereunder; fifth, to any other accrued and unpaid obligations of Seller hereunder and under the other Transaction Documents and sixth, any remaining proceeds shall be paid to Seller or other Person determined by a court of competent jurisdiction to be legally entitled thereto.
(f) The Parties acknowledge and agree that:
(i) Buyer has no desire or intention to hold any of the Purchased Mortgage Loans for investment under any circumstances, and if (x) Seller fails to repurchase any Purchased Mortgage Loan when required to do so by this Agreement, whether before or after its termination, or (y) any Event of Default has occurred and is continuing, and (z) Buyer has not made an affirmative election under the circumstances then prevailing to retain such Purchased Mortgage Loan pursuant to clause (B) of Section 12(d), Buyer will sell it (i) if practicable and if the sale can be made without Buyers having to undertake representation, warranty or other obligations that Buyer, acting in its sole discretion, considers unacceptable, to the relevant Approved Takeout Investor (if any), or (ii) by private sale to another Person in the secondary mortgage market or securities market, as applicable, undertaking only such representation, warranty and other obligations, if any, to such Person as Buyer, acting in its sole discretion, considers acceptable, at the earliest reasonable opportunity and for such price as Buyer, acting in its sole discretion, determines to be the optimal price available at the time of such sale; provided that if at any time Buyer determines that the secondary market for residential mortgage loans is illiquid, disrupted or dysfunctional, Buyer may elect to postpone sales of Purchased Mortgage Loans for so long as Buyer determines that any such market conditions persist, and no such delay shall be construed to constitute or require a change in the classification of the Purchased Mortgage Loans in Buyers hands from held for sale to held for investment, and in all cases, to the maximum extent not prohibited by applicable law, their Market Value shall be the only reasonable determinant of value of Purchased Mortgage Loans for purposes of Section 562 of the Bankruptcy Code;
(ii) in the absence (whether because of market disruptions or for any other reason whatsoever) of a generally recognized source for secondary mortgage market prices of, or for bid or offer quotations for, any one or more Purchased Mortgage Loans at any time, whether before or after any termination of this Agreement, Buyer may determine the Market Values of such Purchased Mortgage Loans using such means, methods, averaging, weighting, calculations and assumptions as it shall determine in its sole discretion to be appropriate, and Buyers determination shall be conclusive and binding, absent manifest error, for all purposes, it being the Parties specific intention to include therein the purposes of Sections 559 and 562 of the Bankruptcy Code;
(iii) except to the extent, if any, contrary to market practice, in determining values of Purchased Mortgage Loans, Buyer shall include all related accrued Income available either to be transferred to a secondary market purchaser or to be retained by Buyer to reduce their Repurchase Prices; and
(iv) in determining the Market Value of any Purchased Mortgage Loans, it is reasonable for Buyer to use and rely on the Mortgage Loan Schedule provided by Seller pursuant to Section 3(a) without being required to check or verify the accuracy or completeness of such information.
(g) The Parties further recognize that if, under the circumstances described in clause (x) or clause (y) of Section 12(f)(i), Buyer has elected to sell Purchased Mortgage Loans, the market for Mortgage Loans may then be insufficiently liquid or dysfunctional in other respects, they agree that Buyer may elect the time and manner of liquidating any Purchased Mortgage Loan, and nothing contained herein shall obligate Buyer (i) to liquidate any Purchased Mortgage Loan
immediately after Sellers failure to repurchase it when required by this Agreement, the occurrence of an Event of Default or any termination of this Agreement, or (ii) to liquidate all Purchased Mortgage Loans in the same manner or on the same day, and no exercise by Buyer of any right or remedy shall constitute a waiver of any other right or remedy. Seller shall be liable to Buyer for (i) the amount of all reasonable legal fees of outside counsel and other expenses reasonably incurred by Buyer in connection with or as a result of an Event of Default, (ii) damages in an amount equal to the cost (including all fees, expenses and commissions reasonably incurred) of entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default and (iii) any other loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default.
(h) To the extent permitted by applicable law, Seller shall be liable to Buyer for interest on any amount owing by Seller hereunder that Seller has failed to pay when due, from the date such amount became due and payable until such amount is (i) paid in full by or on behalf of Seller or (ii) satisfied in full by the exercise of Buyers rights hereunder. Interest on any sum payable by Seller to Buyer under this Section 12(h) shall be at a rate equal to the greater of (x) the Pricing Rate for the relevant Transaction and (y) the Prime Rate plus [***].
(i) If an Event of Default occurs and is continuing, Buyer shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement entered into in connection with the Transactions contemplated by this Agreement, under applicable law or in equity.
(j) Seller hereby acknowledges, admits and agrees that Sellers obligations under this Agreement are recourse obligations of Seller.
13. Servicing Rights Are Owned by Buyer; Interim Servicing of the Purchased Mortgage Loans
(a) As a condition of purchasing an Eligible Mortgage Loan, Buyer hereby engages Seller to interim service such Purchased Mortgage Loan as agent for Buyer for a term (the Interim Servicing Term) commencing on the Purchase Date of such Purchased Mortgage Loan and ending on the first Remittance Date thereafter, as such term may be renewed from time to time as provided in Section 13(a)(v), on the following terms and conditions:
(i) Seller shall interim service and temporarily administer the Purchased Mortgage Loan on behalf of Buyer in accordance with prudent mortgage loan servicing standards and procedures generally accepted in the mortgage banking industry and in accordance with all applicable requirements of the Agencies, applicable Requirements of Law, the provisions of any applicable servicing agreement, and, if and as required by, the requirements of, any applicable Takeout Commitment and the Approved Takeout Investor, so that the eligibility of the Purchased Mortgage Loan for purchase under such Takeout Commitment is not voided or reduced by such interim servicing and temporary administration;
(ii) Buyer acknowledges and agrees that with respect to Eligible Mortgage Loans that Seller acquires from an Approved Correspondent pursuant to Sellers correspondent program, such Eligible Mortgage Loans may be interim serviced by such correspondent (each, an
Interim Servicing Correspondent) for a short transition period pursuant to Sellers Correspondent Seller Guide while the servicing is being transferred to Seller. If any Eligible Mortgage Loan that is proposed to be sold on a Purchase Date is serviced by a servicer other than Seller or any of its Affiliates or an Interim Servicing Correspondent (a Subservicer), or if the interim servicing of any Purchased Mortgage Loan is to be transferred to a Subservicer, Seller shall provide a copy of the related subservicing agreement and a Subservicer Instruction Letter executed by such Subservicer (collectively, the Subservicing Agreement) to Buyer before such Purchase Date or interim servicing transfer date, as applicable. Each such Subservicing Agreement shall be in form and substance approved by Buyer. In addition, Seller shall have obtained the prior written consent of Buyer for such Subservicer to subservice the Purchased Mortgage Loans, which consent may be withheld in Buyers sole discretion. Buyer hereby approves of LoanCare, LLC and Cenlar FSB as approved Subservicers under this Agreement. In no event shall Sellers use of an Interim Servicing Correspondent or a Subservicer relieve Seller of its obligations hereunder, and Seller shall remain liable under this Agreement as if Seller were interim servicing such Purchased Mortgage Loans directly. Any termination of Seller as interim servicer shall automatically terminate each Subservicer. If any Agency or Governmental Authority revokes or materially restricts any Subservicers authority to service Mortgage Loans, or if any Subservicer shall fail to meet all requisite servicer eligibility qualifications promulgated by any Agency, Buyer may direct Seller to terminate such Subservicer as a subservicer of any or all of the Purchased Mortgage Loans and Seller shall cause the termination of such Subservicer as directed by Buyer and find a replacement Subservicer within [***] of Sellers receipt of such notice from Buyer.
(iii) Seller acknowledges that it has no right, title or interest in the Servicing Rights for any Purchased Mortgage Loan, and agrees that Seller may not transfer or assign any rights to master service, service, interim service, subservice or administer any Purchased Mortgage Loan before Sellers repurchase thereof from Buyer (by payment to Buyer of the Repurchase Price therefor) other than an interim servicing transfer to a Subservicer approved by Buyer pursuant to a Subservicing Agreement approved by Buyer as described above in this Section 13.
(iv) Seller shall deliver all physical and contractual servicing materials, files and records for the servicing of each Purchased Mortgage Loan, together with all of the related Servicing Records that are not already in Buyers or Custodians possession, to Buyers designee upon the earliest of (x) the occurrence of a Default or Event of Default hereunder unless Buyer gives written notice to Seller that the Interim Servicing Term is renewed and specifying the renewal term, or (y) the expiration (and non-renewal) of the Interim Servicing Term. Sellers transfer of the Servicing Records and the physical and such contractual servicing materials, files and records under this Section 13(a)(iv) shall be in accordance with customary standards in the industry and such transfer shall include the transfer of the gross amount of all escrows held for the related mortgagors (without reduction for unreimbursed advances or negative escrows).
(v) The Interim Servicing Term will be deemed renewed (when it would otherwise expire) on each Remittance Date following the second Remittance Date after the related Purchase Date for a renewal term extending to the next succeeding Remittance Date unless (i) Buyer has appointed a successor interim servicer in accordance with Section 13(e), or (ii) an Event of Default has occurred and is continuing, in which latter event the Interim Servicing Term will expire on the earlier of (x) the termination date specified in a Buyers notice to Seller
terminating the Interim Servicing Term or (y) such Remittance Date unless Buyer gives written notice to Seller that the Interim Servicing Term is renewed and specifying the renewal term.
(vi) The Interim Servicing Term will automatically terminate and Seller shall have no further obligation to interim service such Purchased Mortgage Loan as agent for Buyer or to make the delivery of documents required under this Section 13, upon receipt by Buyer of the Repurchase Price therefor.
(vii) Buyer has no obligation to pay Seller a fee for the interim servicing obligations Seller agrees to assume hereunder, no fee or other compensation will ever accrue or be or become owing, due or payable for or on account of such interim servicing and such interim servicing rights have no monetary value.
(b) During the period Seller is interim servicing the Purchased Mortgage Loans as agent for Buyer, Seller agrees that Buyer is the owner of the related Servicing Rights, Credit Files and Servicing Records and Seller, acting as interim servicer, shall at all times maintain and safeguard, and cause any Subservicer to maintain and safeguard, the Credit File for the Purchased Mortgage Loan (including photocopies or images of the documents delivered to Buyer), and accurate and complete records of its interim servicing of the Purchased Mortgage Loan, Sellers possession of the Credit Files and Servicing Records being for the sole purpose of interim servicing such Purchased Mortgage Loans and such retention and possession by Seller being in a temporary custodial capacity only.
(c) Seller further covenants as follows:
(i) Buyer may, at any time during Sellers business hours on no less than five (5) Business Days advance written notice (provided that after the occurrence and during the continuance of a Default or an Event of Default, no notice shall be required), examine and make copies of all such documents and records relating to interim servicing and administration of the Purchased Mortgage Loans;
(ii) at Buyers request, Seller shall promptly deliver to Buyer reports regarding the month-end unpaid principal balance, interest paid to date and next payment date of any Purchased Mortgage Loan being interim serviced by Seller, in each case as of the calendar month immediately preceding such request; and
(iii) Seller shall immediately notify Buyer if Seller becomes aware of any payment default that occurs under any Purchased Mortgage Loan.
(d) Seller shall release the contents of any Credit File or any Asset File only (i) pursuant to the provisions of this Agreement and the Custody Agreement, (ii) in accordance with the written instructions of Buyer, (iii) to a Subservicer approved by Buyer, (iv) when such release is required as incidental to Sellers servicing of the Purchased Mortgage Loan, or is required to complete its sale to an Approved Takeout Investor or comply with the Takeout Guidelines or (iv) as required by any applicable Requirement of Law.
(e) Following the occurrence and during the continuance of any Default or Event of Default or the failure of any Subservicer to perform its material obligations under its Subservicing
Agreement, Buyer reserves the right to appoint a successor interim servicer, or a regular servicer, at any time to service any Purchased Mortgage Loan (each a Successor Servicer) in its sole discretion; provided that if no Default or Event of Default has occurred and is continuing, Seller shall have the right to approve such successor interim servicer or regular servicer, which approval shall not be unreasonably withheld, conditioned or delayed. If Buyer elects to make such an appointment after the occurrence of a Default or an Event of Default, Seller shall be assessed all out-of-pocket costs and expenses reasonably incurred by Buyer associated with transferring the physical and contractual servicing materials, files and records for the servicing of each Purchased Mortgage Loan, together with all related Servicing Records, to the Successor Servicer. In the event of such an appointment, Seller shall perform all acts and take all action so that any part of the Credit File and related Servicing Records held by Seller, together with any and all mortgagors escrow payments held in any account and all other receipts relating to such Purchased Mortgage Loan, are promptly delivered to the Successor Servicer, and shall otherwise fully cooperate with Buyer in effectuating such transfer. Seller shall have no claim for lost interim servicing income, any termination fee, lost profits or other damages if Buyer appoints a Successor Servicer hereunder. Buyer may, in its sole discretion if an Event of Default shall have occurred and be continuing, without payment of any termination fee or any other amount to Seller or any Subservicer, sell any or all of the Purchased Mortgage Loans on a servicing released basis, at the sole cost and expense of Seller.
(f) In the event Seller is terminated as interim servicer of any Purchased Mortgage Loan, whether by expiry of the Interim Servicing Term or pursuant to Section 12(b)(ii) or Section 13(e), Seller shall cooperate with Buyer in effecting such termination and transferring all authority to interim service such Purchased Mortgage Loan to the Successor Servicer. Without limiting the generality of the foregoing, Seller shall, in the manner and at such times as the Successor Servicer or Buyer shall reasonably request (i) promptly transfer all data in its possession relating to the applicable Purchased Mortgage Loans and other Mortgage Assets to the Successor Servicer in such electronic format as the Successor Servicer may reasonably request, (ii) promptly transfer to the Successor Servicer, Buyer or Buyers designee all other files, records, correspondence and documents relating to the applicable Purchased Mortgage Loans and other Mortgage Assets and (iii) fully cooperate and coordinate with the Successor Servicer and/or Buyer to comply with any applicable so-called goodbye letter requirements, notices or other applicable requirements of the Real Estate Settlement Procedures Act or other Requirements of Law applicable to the transfer of the servicing of the applicable Purchased Mortgage Loans. Seller agrees that if Seller fails to cooperate with Buyer or any Successor Servicer in effecting the termination of Seller as servicer of any Purchased Mortgage Loan or the transfer of all authority to service such Purchased Mortgage Loan to such Successor Servicer in accordance with the terms hereof, Buyer will be irreparably harmed and entitled to injunctive relief and shall not be required to post bond.
(g) Notwithstanding anything to the contrary in any Transaction Document, Seller and Buyer agree that all Servicing Rights with respect to the Purchased Mortgage Loans are being transferred hereunder to Buyer on the applicable Purchase Date, the Purchase Price for the Purchased Mortgage Loans includes full and fair consideration for such Servicing Rights and such Servicing Rights will be conclusively deemed to be transferred by Buyer to Seller upon Sellers payment of the Repurchase Price for such Purchased Mortgage Loans.
14. Single Agreement
Buyer and Seller acknowledge that, and have entered into this Agreement and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder, together with the provisions of the Side Letter, constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder and its obligations under the Side Letter, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder or any obligations under the Side Letter and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction or any agreement under the Side Letter shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder or any agreement under the Side Letter, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted.
15. Notices and Other Communications
Except as otherwise expressly provided herein, all such notices, statements, demands or other communications shall be in writing and shall be deemed to have been duly given and received (i) if emailed, upon confirmation of receipt by the recipient (including by the recipients replying to the email or by the senders receiving a read receipt when the sender has chosen MS Outlooks request a read receipt option, or a substantially similar option under another email program, for the email when sent), provided that if such transmission-confirmed email is sent or such read receipt is received outside of the recipients normal business hours, the emailed communication shall be deemed received at the opening of business on the next Business Day, or (ii) if hand delivered, when delivery to the address below is made, as evidenced by a confirmation from the applicable courier service of delivery to such address, but without any need of evidence of receipt by the named individual required and (iii) if mailed by Express Mail or sent by overnight courier, on the following Business Day, in each case addressed as follows:
if to Seller:
AmeriHome Mortgage Company, LLC
[***]
With a copy to:
AmeriHome Mortgage Company, LLC
[***]
[***]
and to:
AmeriHome Mortgage Company, LLC
[***]
if to Buyer:
JPMorgan Chase Bank, N.A.
(for mail, courier and fax deliveries)
712 Main Street, 5th Floor North
Houston, Texas 77002
[***]
with copies to:
JPMorgan Chase Bank, N.A.
Mortgage Warehouse Finance Operations
Attn: MWF Operations Team
TX1-0022
14800 Frye Road, 2nd Floor
Fort Worth, TX 76155
[***]
Either Party may revise any information relating to it by notice in writing to the other Party given in accordance with the provisions of this Section 15.
16. Fees and Expenses; Indemnity
(a) Seller will pay its own legal and accounting fees and other costs incurred in respect of this Agreement, the other Transaction Documents and this facility. Seller will pay promptly, and in no event later than thirty (30) days after billing, all out-of-pocket costs and expenses reasonably incurred by Buyer, including reasonable attorneys fees of outside counsel, in connection with (i) preparation, negotiation, and documentation of this Agreement and the other
Transaction Documents, (ii) Buyers administration of this Agreement and the other Transaction Documents and any amendment or waiver thereto and purchase and resale of Mortgage Loans by Buyer hereunder, provided that Buyer has given Seller thirty (30) days advance notice before incurring such costs and expenses described or referred to in this clause (ii), (iii) protection of the Purchased Mortgage Loans (including all costs of filing or recording any assignments, financing statements, amendments and other documents), (iv) subject to the Due Diligence Cap, performance of due diligence and audits in respect of Mortgage Loans purchased or proposed for purchase hereunder and Sellers and any Guarantors business and finances, by Buyer or any agent of Buyer, conducted before and after the date hereof (provided that the Due Diligence Cap shall not be applicable to due diligence and audit expenses incurred when an Event of Default has occurred and is continuing), (v) enforcement of Buyers rights hereunder and under any other Transaction Document (including costs and expenses suffered or incurred by Buyer in connection with any Act of Insolvency related to Seller or any Guarantor, appeals and any anticipated post-judgment collection services), (vi) entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default, including all fees, expenses and commissions reasonably incurred, and (vii) any cost or expense reasonably incurred, directly or arising or resulting from the occurrence of an Event of Default.
(b) In addition to its other rights hereunder, Seller shall indemnify Buyer and Buyers Affiliates and Subsidiaries and their respective directors, officers, agents, advisors and employees (each, an Indemnified Party and collectively, the Indemnified Parties) against, and hold Buyer and each of them harmless from, any losses, liabilities, damages, claims, out-of-pocket costs and expenses (including reasonable attorneys fees and disbursements of outside counsel) suffered or incurred by any Indemnified Party (Losses) relating to or arising out of this Agreement, any other Transaction Document or any other related document, or any transaction contemplated hereby or thereby or any use or proposed use of proceeds thereof and amendment or waiver thereof, or any breach by Seller, any Guarantor or any Subservicer engaged by Seller, or by Custodian, of any covenant, representation or warranty contained in any of such documents, or arising out of, resulting from, or in any manner connected with, the purchase by Buyer of any Mortgage Loan, the servicing of any Purchased Mortgage Loans by Seller or any Subservicer or the delivery, custody, possession, review, certification, handling, shipping, delivery or production by Custodian of any Asset File or Mortgage Loan Documents, or any incompleteness or inaccuracy of any Trust Receipt or any Custodians Asset Schedule and Exception Report issued by Custodian; provided that Seller shall not be required to indemnify any Indemnified Party (x) to the extent that such Losses result from an act or omission of the Custodian and the Custodian performs its indemnity obligations to the Indemnified Parties or (y) to the extent that such Losses result from the gross negligence or willful misconduct of such Indemnified Party. The provisions of this Section 16 shall survive the termination of this Agreement.
17. Shipment to Approved Takeout Investor
If Seller desires that Custodian send an Asset File to an Approved Takeout Investor in connection with Sellers repurchase of the related Purchased Mortgage Loan, then Seller shall prepare and send to Custodian written shipping instructions pursuant to the Custodial Agreement instructing Custodian when and how to send such Asset File to such Approved Takeout Investor or its designee. If Seller instructs Custodian to send an Asset File before the Repurchase Date, Custodian will send the Mortgage Note and related Mortgage under a Bailee Letter as provided in
the Custodial Agreement. If Seller does not provide Custodian with shipping instructions with respect to a Mortgage Loan before its Repurchase Price is paid to Buyer, Custodian shall send the Asset File to Seller or its designee after Buyer receives the Repurchase Price therefor.
18. Buyer as Attorney-in-Fact
Buyer is hereby appointed the attorney-in-fact of Seller for the purpose of carrying out the provisions of this Agreement and taking any action and executing any instruments that Buyer may, in good faith, deem necessary or advisable to accomplish the purposes hereof, including (i) receiving, endorsing and collecting all checks made payable to the order of Seller representing any Income on any of the Purchased Mortgage Loans and giving full discharge for the same, (ii) perfecting and continuing the Lien granted by this Agreement and (iii) protecting, preserving and realizing on the Mortgage Assets, which appointment as attorney-in-fact is irrevocable and coupled with an interest. Buyer agrees to not exercise the power granted by this Section 18 unless an Event of Default has occurred and is continuing; provided that Buyer may, and may delegate to Custodian the power to, (i) add and amend endorsements in Sellers name of Mortgage Notes either in blank or to any Approved Takeout Investor or its designee, cancel endorsements and re-endorse Mortgage Notes in Sellers name and (ii) take such actions as it deems in good faith to be necessary or appropriate to accomplish the purposes hereof, to perfect and continue the Lien granted hereby and to protect and preserve the Mortgage Assets, at any time after a Default shall have occurred.
19. Wire Instructions
(a) Unless otherwise specified in this Agreement, any amounts to be transferred by Buyer to Seller hereunder shall be sent by wire transfer in immediately available funds to the account of Seller at:
Bank:
ABA No.:
Account Name:
Acct. No.:
Attn:
(b) Any amounts to be transferred by Seller to Buyer hereunder shall be sent by wire transfer in immediately available funds to the account of Buyer at:
Bank:
ABA No.:
Account Name:
Acct. No.:
Attn:
(c) Except where otherwise expressly provided in this Agreement, amounts received after 4:00 p.m. (Eastern time) on any Business Day shall be deemed to have been paid and received on the next succeeding Business Day.
20. Entire Agreement; Severability
This Agreement, as supplemented by the Side Letter, supersedes any existing agreements between the Parties containing terms and conditions for repurchase transactions. If there is any conflict between the provisions of this Agreement and the Side Letter, the terms of the Side Letter shall control. Each provision and agreement of this Agreement and the other Transaction Documents shall be treated as separate and independent from any other provision or agreement of this Agreement and the other Transaction Documents and shall be enforceable notwithstanding the unenforceability of any of such other provisions or agreements. Without limiting the generality of the foregoing, if any phrase or clause of any Transaction Document would render any provision or agreement of that (or any other) Transaction Document unenforceable, such phrase or clause shall be disregarded and deemed deleted, and such provision or agreement shall be enforced as fully as if the offending phrase or clause had never appeared.
21. Assignments; Termination
(a) The rights and obligations of Seller under this Agreement and under any Transaction shall not be assigned by Seller without the prior written consent of Buyer and any such assignment without the prior written consent of Buyer shall be null and void.
(b) Buyer may assign all or any portion of its rights, obligations and interest under this Agreement and in the Mortgage Assets at any time without the consent of any Person, provided that any such assignment, other than an assignment to an Affiliate of Buyer, is subject to the prior written consent of Seller so long as an Event of Default or Default has not occurred and is not continuing. Any such assignment shall be in a minimum amount of at least [***] unless otherwise consented to by Seller; provided that Sellers consent shall not be required if an Event of Default or Default has occurred and is continuing. Resales of Purchased Mortgage Loans by Buyer (subject to (i) Sellers right to repurchase the Purchased Mortgage Loans before termination of this Agreement or Buyers liquidation of the Purchased Mortgage Loans pursuant to Section 12 and (ii) Buyers obligation to deliver the same exact Purchased Mortgage Loans back to Seller or its designee upon receipt of the Repurchase Price therefor) in accordance with applicable law, shall be permitted without restriction. Buyer may sell participation interests in all or any portion of its rights, obligations and interest under this Agreement and in the Mortgage Assets to any Person at any time without the consent of any Person. In connection with any assignment of, or sale of participation interests in, Buyers rights, obligations and interest under this Agreement, Buyer shall maintain, solely for this purpose as a non-fiduciary agent of Seller, for review by Seller upon written request, a register of assignees and participants (the Register), a copy of an executed assignment or participation agreement by Buyer and such assignee or participant (an Assignment and Acceptance), specifying the percentage or portion of such rights, obligations and interest assigned or participated, and Seller shall only be required to deal directly with Buyer with respect to any participation or assignment of less than all of Buyers rights, obligations and interest under this Agreement.
(c) In addition to the foregoing, Buyer may, at any time in its sole discretion, pledge or grant a Lien in all or any portion of its rights under this Agreement (including any rights to Mortgage Assets and any rights to payment of the Repurchase Price) to secure obligations to a Federal Reserve Bank or Federal Home Loan Bank, without notice to or consent of Seller; provided
that no such pledge or grant of a security interest would release Buyer from any of its obligations under this Agreement, or substitute any such pledgee or grantee for Buyer as a party to this Agreement; provided, further, that notwithstanding any such pledge or grant of security interest Buyer shall remain obligated to deliver the exact same Purchased Mortgage Loans back to Seller upon payment of the related Repurchase Price.
(d) Subject to the foregoing, this Agreement and any Transactions shall bind and benefit the Parties and their respective successors and assigns.
(e) Notwithstanding any of the foregoing provisions of this Section 21, Buyer shall not be precluded from assigning, charging or otherwise dealing with all or any part of its interest in any sum payable to it under Section 12.
(f) This Agreement and all Transactions outstanding hereunder shall terminate automatically without any requirement for notice on the date occurring on or after the Termination Date on which all Repurchase Prices and all other obligations of Seller under the Transaction Documents have been paid in full.
22. Counterparts; Signatures
(a) This Agreement may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.
(b) Delivery of an executed counterpart of a signature page of this Agreement or any other Transaction Document by telecopy, emailed pdf or any other electronic means that reproduces an image of the actual executed signature page shall be effective as delivery of a manually executed counterpart of this Agreement. The words execution, signed, signature, delivery and words of like import in or relating to any document to be signed in connection with this Agreement and the transactions contemplated hereby shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other similar state laws based on the Uniform Electronic Transactions Act; provided that nothing herein shall require Buyer to accept electronic signatures in any form or format without its prior written consent.
23. GOVERNING LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF (EXCEPT FOR SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL OBLIGATIONS LAW).
(b) SELLER HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND OF ANY NEW YORK STATE COURT SITTING IN THE CITY OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. SELLER HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING IN THIS SECTION 23 SHALL AFFECT THE RIGHT OF BUYER TO BRING ANY ACTION OR PROCEEDING AGAINST EITHER SELLER OR ITS PROPERTY IN THE COURTS OF OTHER JURISDICTIONS. EACH PARTY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO IT AT ITS ADDRESS FOR NOTICES HEREUNDER SPECIFIED IN SECTION 15.
(c) EACH OF SELLER AND BUYER (BY ITS ACCEPTANCE HEREOF) HEREBY VOLUNTARILY, KNOWINGLY, IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE (WHETHER BASED ON CONTRACT, TORT, OR OTHERWISE) BETWEEN SELLER AND BUYER ARISING OUT OF OR IN ANY WAY RELATED TO THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENT. THIS PROVISION IS A MATERIAL INDUCEMENT TO BUYER TO PROVIDE THE FACILITY PROVIDED FOR IN THIS AGREEMENT.
24. No Waivers, Etc.
No express or implied waiver of any Event of Default by Buyer shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by Buyer shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any Party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the Parties hereto. Without limitation on any of the foregoing, the failure to give a notice pursuant to Section 4(a) will not constitute a waiver of any right to do so at a later date.
25. Use of Employee Plan Assets
(a) If assets of an employee benefit plan subject to any provision of ERISA are intended to be used by Seller in a Transaction, Seller shall so notify Buyer before the Transaction. Seller shall represent in writing to Buyer that the Transaction does not constitute a prohibited transaction under ERISA or is otherwise exempt therefrom, and Buyer may proceed in reliance thereon but shall not be required so to proceed.
(b) Subject to the last sentence of Section 25(a), any such Transaction shall proceed only if Seller furnishes or has furnished to Buyer its most recent available audited statement of its financial condition and its most recent subsequent unaudited statement of its financial condition.
(c) By entering into a Transaction pursuant to this Section 25, Seller shall be deemed (i) to represent to Buyer that since the date of Sellers latest such financial statements, there has been no material adverse change in Sellers financial condition that Seller has not disclosed to Buyer, and (ii) to agree to provide Buyer with future audited and unaudited statements of its financial condition as they are issued, so long as any such Transaction is outstanding.
26. Intent
(a) The Parties intend and acknowledge that each Transaction is a repurchase agreement as that term is defined in Section 101 of the Bankruptcy Code, and a securities contract as that term is defined in Section 741 of the Bankruptcy Code. Seller hereby agrees that it shall not challenge the characterization of this Agreement as a repurchase agreement as that term is defined in Section 101 of the Bankruptcy Code, or as a securities contract as that term is defined in Section 741 of the Bankruptcy Code in any dispute or proceeding.
(b) It is understood that either Partys right to accelerate or terminate this Agreement or to liquidate Mortgage Loans delivered to it in connection with Transactions hereunder, or to exercise any other remedies pursuant to Section 12, is a contractual right to accelerate, terminate or liquidate this Agreement or such Transaction as described in Sections 555 and 559 of the Bankruptcy Code.
(c) The Parties agree and acknowledge that if a Party hereto is an insured depository institution, as such term is defined in the FDIA each Transaction hereunder is a qualified financial contract, as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).
(d) It is understood that this Agreement constitutes a netting contract as defined in and subject to Title IV of the FDICIA and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a covered contractual payment entitlement or covered contractual payment obligation, respectively, as defined in and subject to FDICIA (except insofar as one or both of the Parties is not a financial institution as that term is defined in FDICIA).
(e) It is understood and agreed that this Agreement constitutes a master netting agreement as that term is defined in Section 101 of the Bankruptcy Code, and that either Partys right to cause the termination, liquidation, or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with, this Agreement or any Transaction is a contractual right to cause the termination, liquidation, or acceleration of, or to offset net termination values, payment amounts or other transfer obligations arising under or in connection with, this Agreement or any Transaction as described in Section 561 of the Bankruptcy Code.
27. Disclosure Relating to Certain Federal Protections
The Parties acknowledge that they have been advised that:
(a) in the case of Transactions in which one of the Parties is a broker or dealer registered with the Securities and Exchange Commission (SEC) under Section 15 of the Securities Exchange Act of 1934 (1934 Act), the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 (SIPA) do not protect the other Party with respect to any Transaction hereunder;
(b) in the case of Transactions in which one of the Parties is a government securities broker or a government securities dealer registered with the SEC under Section 15C of the 1934 Act, SIPA will not provide protection to the other Party with respect to any Transaction hereunder; and
(c) in the case of Transactions in which one of the Parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder other than funds on deposit in an Account are not a deposit and therefore are not insured by either the FDIC or the National Credit Union Share Insurance Fund.
28. Confidentiality
(a) Confidential Terms. The Parties hereby acknowledge and agree that all written or computer-readable information provided by one Party to any other regarding the terms set forth in any of the Transaction Documents or the Transactions contemplated thereby (the Confidential Terms) shall be kept confidential and shall not be divulged to any Person without the prior written consent of such other Party except to the extent that (i) such Person is an Affiliate, Subsidiary, division, or parent holding company of a Party or a director, officer, employee or agent (including an accountant, legal counsel and other advisor) of a Party or such Affiliate, division or parent holding company, (ii) in such Partys opinion it is necessary to do so in working with legal counsel, auditors, taxing authorities or other governmental agencies or regulatory bodies (including any self-regulatory authority, such as the National Association of Insurance Commissioners) or in order to comply with any applicable federal or state laws or regulations, (iii) any of the Confidential Terms are in the public domain other than due to a breach of this covenant, (iv) in the event of a Default or an Event of Default Buyer reasonably determines such information to be necessary or desirable to disclose in connection with the marketing and sales of the Purchased Mortgage Loans or otherwise to enforce or exercise Buyers rights hereunder (provided that any such disclosures are subject to agreements of confidentiality substantially similar to the provisions herein), or (v) in Buyers opinion, it is necessary or appropriate to disclose it to Custodian, or in connection with an assignment or participation under Section 21 or in connection with any hedging transaction related to Purchased Mortgage Loans (provided that any such disclosures are subject to agreements of confidentiality substantially similar to the provisions herein). Notwithstanding the foregoing or anything to the contrary contained herein or in any other Transaction Document, the Parties may disclose to any and all Persons, without limitation of any kind, the U.S. federal, state and local tax treatment of the Transactions, any fact that may be relevant to understanding the U.S. federal, state and local tax treatment of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such U.S. federal, state and local tax treatment
and that may be relevant to understanding such tax treatment, and the Parties may disclose information pertaining to this Agreement routinely provided by arrangers to data service providers, including league table providers, that serve the financing industry; provided that Seller may not disclose (except as provided in clauses (i) through (iii) of this Section 28(a)) the name of or identifying information with respect to Buyer or any pricing terms (including the Pricing Rate, Facility Fee or other fee, Purchase Price Percentage and Purchase Price) or other nonpublic business or financial information (including any sublimits and financial covenants) that is unrelated to the U.S. federal, state and local tax treatment of the Transactions and is not relevant to understanding the U.S. federal, state and local tax treatment of the Transactions, without the prior written consent of Buyer. Any Person required to maintain the confidentiality of Confidential Terms as provided in this Section 28(a) shall be considered to have complied with its obligation to do so if such Person has exercised the same degree of care to maintain the confidentiality of such Confidential Terms as such Person would accord to its own confidential information. The provisions set forth in this Section 28(a) shall survive the termination of this Agreement for a period of two (2) years following such termination.
(b) Privacy of Customer Information.
(i) Sellers Customer Information in the possession of Buyer, other than information independently obtained by Buyer and not derived in any manner from or using information obtained under or in connection with this Agreement, is and shall remain confidential and proprietary information of Seller. Except in accordance with this Section 28(b), Buyer shall not use any Sellers Customer Information for any purpose, including the marketing of products or services to, or the solicitation of business from, Customers, or disclose any Sellers Customer Information to any Person, including any of Buyers employees, agents or contractors or any third party not affiliated with Buyer and shall otherwise comply with the Privacy Requirements, including without limitation the GLB Act. Buyer may use or disclose Sellers Customer Information only to the extent necessary (1) for examination and audit of Buyers activities, books and records by Buyers regulatory authorities, (2) to protect or exercise Buyers rights and privileges or (3) to carry out Buyers express obligations under this Agreement and the other Transaction Documents (including providing Sellers Customer Information to Approved Takeout Investors), and for no other purpose; provided that Buyer may also use and disclose Sellers Customer Information as expressly permitted by Seller in writing, to the extent that such express permission is in accordance with the Privacy Requirements. Buyer shall take commercially reasonable steps to ensure that each Person to which Buyer intends to disclose Sellers Customer Information, before any such disclosure of information, agrees to keep confidential any such Sellers Customer Information and to use or disclose such Sellers Customer Information only to the extent necessary to protect or exercise Buyers rights and privileges, or to carry out Buyers express obligations, under this Agreement and the other Transaction Documents (including providing Sellers Customer Information to Approved Takeout Investors). Buyer agrees to maintain an information security program and to assess, manage and control risks relating to the security and confidentiality of Sellers Customer Information pursuant to such program in the same manner as Buyer does in respect of its own customers information, and shall implement the standards relating to such risks in the manner set forth in the Interagency Guidelines Establishing Standards for Safeguarding Company Customer Information set forth in 12 CFR Parts 30, 168, 170, 208, 211, 225, 263, 308 and 364. Without limiting the scope of the foregoing sentence, Buyer shall use at least the same physical and other security measures to protect all of Sellers Customer
Information in its possession or control as it uses for its own customers confidential and proprietary information.
(ii) Each Party shall indemnify the Indemnified other Party (and, in the case of Sellers indemnity, the other Indemnified Parties) against, and hold them harmless from, any losses, liabilities, damages, claims, out-of-pocket costs and expenses (including reasonable outside attorneys fees and disbursements) suffered or incurred by any Indemnified Party relating to or arising out of the indemnifying partys loss, improper disclosure or misuse of any Sellers Customer Information.
29. Setoff
Except to the extent specifically permitted herein, Seller hereby irrevocably and unconditionally waives all right to setoff that it may have under contract (including this Agreement), applicable law, in equity or otherwise with respect to any funds or monies of Buyer (or any disclosed principal for which Buyer is acting as agent) at any time held by or in the possession of Seller.
Seller agrees that, if any Event of Default shall have occurred and be continuing, Buyer may set off any funds or monies of Seller at any time held by or in the possession of Buyer in connection with this Agreement or any other Transaction Document or otherwise, against any amounts Seller owes to Buyer, or against any amounts Seller owes to any other Indemnified Party, pursuant to the terms of this Agreement or any other Transaction Document.
30. WAIVER OF SPECIAL DAMAGES.
SELLER WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT SELLER MAY HAVE TO CLAIM OR RECOVER FROM BUYER IN ANY LEGAL ACTION OR PROCEEDING ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES.
31. USA PATRIOT ACT NOTIFICATION.
The following notification is provided to Seller pursuant to Section 326 of the USA Patriot Act of 2001, 31 U.S.C. Section 5318:
IMPORTANT INFORMATION ABOUT PROCEDURES FOR OPENING A NEW ACCOUNT. To help the government fight the funding of terrorism and money laundering activities, federal law requires all financial institutions to obtain, verify, and record information that identifies each person or entity that opens an account, including any deposit account, treasury management account, loan, other extension of credit, or other financial services product. What this means for Seller: When Seller opens an account, if Seller is an individual, Buyer will ask for Sellers name, taxpayer identification number, residential address, date of birth, and other information that will allow Buyer to identify Seller, and if Seller is not an individual, Buyer will ask for Sellers name, taxpayer identification number, business address, and other information that will allow Buyer to identify Seller. Buyer may also ask, if Seller is an individual, to see Sellers drivers license or other identifying
documents, and if Seller is not an individual to see Sellers legal organizational documents or other identifying documents.
(The remainder of this page is intentionally blank; counterpart signature pages follow)
JPMORGAN CHASE BANK, N.A |
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By: |
/S/ Carolyn Johnson |
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Carolyn Johnson |
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Authorized Officer |
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AMERIHOME MORTGAGE COMPANY, LLC |
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By: |
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Signature Page to Master Repurchase Agreement between JPMorgan Chase Bank, N.A., as Buyer, and Amerihome Mortgage Company, LLC, as Seller
JPMORGAN CHASE BANK, N.A. |
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By: |
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Carolyn Johnson |
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Authorized Officer |
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AMERIHOME MORTGAGE COMPANY, |
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/S/ Josh Adler |
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Signature Page to Master Repurchase Agreement between JPMorgan Chase Bank, NA., as Buyer, and Amerihome Mortgage Company, LLC, as Seller
List of Exhibits and Schedules
Exhibit A |
Form of Confirmation |
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Exhibit B |
Mortgage Loan Representations and Warranties |
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Exhibit C |
Form of Compliance Certificate |
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Exhibit D |
Conditions Precedent Documents |
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Exhibit E |
Required Opinions of Counsel |
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Exhibit F |
Subsidiary Information |
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Exhibit G |
Form of Subservicer Letter |
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Exhibit H |
Mortgage Loan Schedule fields |
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Exhibit I |
Certain Permitted Debt |
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Exhibit J |
Seller Names from Tax Returns |
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Schedule I |
Approved Takeout Investors |
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Schedule II |
Sellers Authorized Signers |
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Schedule III |
CLTV/FICO Score Criteria |
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Schedule IV |
Approved Correspondents |
Signature Page to Master Repurchase Agreement between JPMotgan Chase Bank, NA., as Buyer, and Amerihome Mortgage Company, LLC, as Seller
EXHIBIT A
FORM OF CONFIRMATION
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AmeriHome Mortgage Company, LLC |
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JPMorgan Chase Bank, N.A. |
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Confirmation under Master Repurchase Agreement (the Agreement) between JPMorgan Chase Bank, N.A. and AmeriHome Mortgage Company, LLC |
JPMorgan Chase Bank, N.A. (Buyer) is pleased to confirm your sale and its purchase of the Mortgage Loans described below and listed on the attached Mortgage Loan Schedules pursuant to the Agreement under the following terms and conditions:
ORIGINAL PRINCIPAL AMOUNTS OF MORTGAGE LOANS: |
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As set forth on the attached Mortgage Loan Schedules |
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CURRENT PRINCIPAL AMOUNTS OF MORTGAGE LOANS: |
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As set forth on the attached Mortgage Loan Schedules |
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PURCHASE DATE: |
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The date specified as the Purchase Date in the Transaction request related to this Confirmation |
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REPURCHASE DATE: |
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after the Purchase Date or such other number of days after the Purchase Date as is specified in the Agreement for the applicable Mortgage Loan type |
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PURCHASE PRICE: |
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The applicable Purchase Price as is specified in the Side Letter for the applicable Mortgage Loan type |
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PRICING RATE: |
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The applicable per annum percentage rate set forth in the Side Letter for the applicable Mortgage Loan type For each whole or partial calendar month during which the Transaction is outstanding, the sum of the following amount for each day during that whole or partial month): the weighted average of the applicable Pricing Rates for such day multiplied by the Aggregate Purchase Price outstanding on that day divided by 360. The Price Differential for the Transaction shall accrue during the period commencing on (and including) the day when the Purchase Price is transferred into the Funding Account (or otherwise paid to or for the account of Seller) for the Transaction and ending on (but excluding) the day the Repurchase Price is paid. |
The Agreement is incorporated by reference into this Confirmation and made a part hereof as if it were fully set forth herein. All capitalized terms defined in the Agreement and not defined differently in this Confirmation have the same meanings here as there.
EXHIBIT B
MORTGAGE LOAN
REPRESENTATIONS AND WARRANTIES
With respect to each Mortgage Loan, (i) as of the Purchase Date for the purchase of any Purchased Mortgage Loans by Buyer from Seller and as of the date of this Agreement and any Transaction hereunder, and (ii) at all times while the Transaction Documents or any Transaction hereunder is in force and effect, Seller represents and warrants to Buyer that each of the statements set forth as lettered items of this Exhibit B is true and correct. For purposes of this Exhibit B and the representations and warranties set forth herein, a breach of a representation or warranty shall be deemed to have been cured with respect to a Mortgage Loan if and when Seller has taken or caused to be taken action such that the event, circumstance or condition that gave rise to such breach no longer adversely affects such Mortgage Loan. With respect to each Loan Level Representation that is made to Sellers knowledge, if it is discovered by Seller or Buyer that the substance of such Loan Level Representation is inaccurate, notwithstanding Sellers lack of knowledge with respect to the substance of such representation and warranty, such inaccuracy shall be deemed a breach of that Loan Level Representation.
(a) Mortgage Loans as Described. The information set forth in the related Mortgage Loan Schedule is complete, true and correct in all material respects.
(b) Valid First Lien. The Mortgage is properly recorded (or, as to newly-Originated Mortgage Loans, is in the process of being recorded) and is a valid, existing and enforceable first Lien with respect to each Mortgage Loan that is indicated by Seller to be a first Lien on the Mortgaged Property, including all improvements on the Mortgaged Property, free and clear of all adverse claims, and Liens having priority over the Lien of the Mortgage, subject only to (i) the Lien of current real property taxes and assessments not yet due and payable, (ii) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording being acceptable to mortgage lending institutions generally and specifically referred to in the lenders title insurance policy delivered to Seller and that do not adversely affect the purchase by, or the purchase price to be paid by, the Approved Takeout Investor, and (iii) other matters to which like properties are commonly subject that do not individually or in the aggregate materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property. Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, existing and enforceable first lien and first priority security interest securing the related Mortgage Loan on the property described therein and Seller has full right to sell and assign the related Mortgage Assets to Buyer.
(c) Validity of Mortgage Documents. With respect to each Mortgage Loan, Seller or its designee has in its possession all Servicing Files except for those Servicing Files that Seller has disclosed to Buyer are outstanding. The Mortgage Note and the related Mortgage are original and genuine and each is the legal, valid and binding obligation of the Mortgagor thereof, enforceable in all respects in accordance with its terms except as enforceability may be limited by (i) bankruptcy, insolvency, liquidation, receivership, moratorium, reorganization or other similar laws affecting the enforcement of the rights of creditors and (ii) general principles of equity,
whether enforcement is sought in a proceeding in equity or at law, and Seller has taken all action necessary to transfer such rights of enforceability to Buyer. Neither the operation of any of the terms of any Mortgage or Mortgage Note, nor the exercise by any holder of any right thereunder, will render the Mortgage or Mortgage Note unenforceable, in whole or in part, or subject to any right of rescission, setoff, counterclaim or defense, and no such right of rescission, setoff, counterclaim or defense has been asserted with respect thereto. All parties to the Mortgage Note and the Mortgage had the legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note and the Mortgage, and the Mortgage Note and the Mortgage have been duly and properly executed by such parties. All items required to be delivered pursuant to this Agreement shall be delivered to Buyer, within the time frames set forth in this Agreement, and if a document is delivered in imaged format, such images must be of sufficient quality to be readable and able to be copied. There is only one original executed Mortgage Note with respect to such Mortgage Loan. Without Buyers prior written consent, Seller has not amended or modified the Mortgage Loan Documents, or waived any term or condition of them, or settled or compromised any claim in respect of any item of the Purchased Mortgage Loans, any related rights or any of the Mortgage Loan Documents, except only such amendments, modifications, waivers, settlements or compromises, if any, that (a) do not (i) affect the amount or timing of any payment of principal or interest payable with respect to such Purchased Mortgage Loan (other than corrections for clerical errors), (ii) extend its scheduled maturity date, modify its interest rate or constitute a cancellation or discharge of its outstanding principal balance or (iii) materially and adversely affect the liability of any maker, guarantor or insurer or the security afforded by the real property, furnishings, fixtures, or equipment securing the Purchased Mortgage Loan, (b) have been approved by the insurer under the related private mortgage insurance policy, if any, and by the title insurer under the related lenders title insurance policy, to the extent required to avoid affecting or impairing the coverage of such policy or policies, and (c) are in accordance with accepted servicing practices and the Agency Guidelines.
(d) Customary Provisions. The Mortgage and related Mortgage Note contain customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including (i) in the case of a Mortgage designated as a deed of trust, by trustees sale, and (ii) otherwise by judicial foreclosure. Upon default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustees sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage Loan will be able to deliver good and merchantable title to the Mortgaged Property. There is no homestead or other exemption or right available to the Mortgagor or any other person that would interfere with the right to sell the Mortgaged Property at a trustees sale or the right to foreclose the Mortgage. The Mortgage Note and Mortgage are on forms that are conforming to the Agency Guidelines and the Takeout Guidelines, as applicable.
(e) Original Terms Unmodified. The terms of the Mortgage Note and the Mortgage have not been impaired, waived, altered or modified in any respect, except by written instruments that (a) have been or are in the process of being recorded in the applicable public recording office if required by law or if necessary to maintain the lien priority of the Mortgage and (b) have been or will be delivered to Buyer; the substance of any such waiver, alteration or modification has been approved by the insurer under the private mortgage insurance policy, if any, and by the title insurer, to the extent required by the related policy provided by Seller and is reflected appropriately on any and all documentation or data and is true and accurate in all material respects. No other instrument
of waiver, alteration or modification has been executed, and no Mortgagor has been released, in whole or in part, except in connection with an assumption agreement approved by the insurer under the private mortgage insurance policy, if any, and by the title insurer, to the extent required by the policy, and which assumption agreement is a part of the Asset File. As of the Purchase Date, the full original principal amount of each Mortgage Loan has been fully disbursed as provided for in the Mortgage Loan Documents, and there is no requirement for any future advances.
(f) No Defenses. The Mortgage Note and the Mortgage are not subject to any right of rescission, set off, counterclaim or defense, including the defense of usury, nor will the operation of any of the terms of the Mortgage Note and the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set off, counterclaim or defense, including the defense of usury, and no such right of rescission, set off, counterclaim or defense has been asserted with respect thereto; and neither the Mortgagor nor the Mortgaged Property is as of the Purchase Date or was as of the Origination Date, subject to an Act of Insolvency.
(g) No Outstanding Charges. There are no defaults by Seller or any Subservicer in complying with the terms of the Mortgage, and (1) all taxes, ground rents, special assessments, governmental assessments, insurance premiums, leasehold payments, water, sewer and municipal charges that previously became due and owing have been paid, or escrow funds have been established in an amount sufficient to pay for every such escrowed item that remains unpaid and that has been assessed but is not yet due and payable before any economic loss dates (or if payments were made after any economic loss date, then Seller has paid any penalty out of Sellers funds) and (2) all flood and hazard insurance premiums and private mortgage insurance premiums that are due have been paid. As of the Purchase Date, no event that, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration under a Mortgage Loan has occurred, including a material violation of applicable law, local ordinances or city codes resulting from a deterioration or defect existing in any Mortgaged Property, and neither Seller nor its predecessors have waived any default, breach, violation or event of acceleration. Seller has received no notice of, and has no knowledge of, any event, including the bankruptcy filing or death of a Mortgagor, that may or could give rise to a Mortgagor default under the Mortgage Note or Mortgage. None of Seller or any Subservicer has advanced funds, or induced, solicited or knowingly received any advance from any Person other than the Mortgagor, directly or indirectly, for the payment of any amount due under the Mortgage Loan, unless otherwise permitted in the Takeout Guidelines.
(h) No Satisfaction of Mortgage. The Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in part, and the Mortgaged Property has not been released from the Lien of the Mortgage, in whole or in part, nor has any instrument been executed that would effect any such satisfaction, cancellation, subordination, rescission or release. Neither Seller nor any Subservicer has waived the performance by the Mortgagor of any action, if the Mortgagors failure to perform such action would cause the Mortgage Loan to be in default, and neither Seller nor any Subservicer has waived any default.
(i) No Default. There is no default, breach, violation or event of acceleration existing under the Mortgage or the Mortgage Note and no event that, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or
event permitting acceleration, and neither Seller nor any Subservicer has waived any default, breach, violation or event permitting acceleration. With respect to each Mortgage Loan (i) the first Lien securing the Mortgage Loan is in full force and effect, (ii) there is no default, breach, violation or event of acceleration existing under such first Lien Mortgage or the related Mortgage Note, and (iii) no event that, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration thereunder.
(j) Full Disbursement of Proceeds. The Mortgage Loan has been closed and the proceeds of the Mortgage Loan have been fully disbursed to or for the account of the Mortgagor and there is no obligation for the mortgagee to advance additional funds thereunder and any and all requirements as to completion of any on site or off site improvement and as to disbursements of any escrow funds therefor have been complied with. All costs, fees, and expenses incurred in making or closing the Mortgage Loan and the recording of the Mortgage have been paid, and the Mortgagor is not entitled to any refund of any amounts paid or due to the mortgagee pursuant to the Mortgage Note or Mortgage with exception to escrow holdbacks.
(k) No Mechanics Liens. There are no mechanics or similar Liens or claims filed for work, labor or material (and no rights are outstanding that under law could give rise to such a Lien) affecting the related Mortgaged Property that are or may be Liens prior to, or equal or coordinate with, the Lien of the related Mortgage.
(l) No Additional Collateral. The Mortgage Note is not and has not been secured by any collateral except the Lien of the corresponding Mortgage on the Mortgaged Property and the security interest of any applicable security agreement.
(m) Origination; Payment Terms. The Mortgage Loan was originated by Seller, which is a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or other similar institution that is supervised and examined by a federal or state authority or duly licensed by state licensing authority, if applicable. Seller and all other parties that have had any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) in compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and either (1) organized under the laws of such state, (2) qualified to do business in such state, (3) federal savings and loan associations or national banks having principal offices in such state or (4) not doing business in such state. Principal payments on the Mortgage Loan commenced or will commence no more than [***] days after the proceeds of the Mortgage Loan were disbursed. The Mortgage Loan requires interest payable in arrears on the first day of the month. Each Mortgage Note requires a monthly payment that is sufficient (i) during the period before the first adjustment to the Mortgage interest rate, to amortize the original principal balance fully over the original term thereof (unless otherwise provided in the applicable Agency Guidelines) and to pay interest at the related Mortgage interest rate, and (ii) during the period following each interest rate adjustment date in the case of each adjustable rate Mortgage Loan, to amortize the outstanding principal balance fully as of the first day of such period over the then remaining term of such Mortgage Note and to pay interest at the related Mortgage interest rate. The Mortgage Note does not permit negative amortization. Interest on the Mortgage Note is calculated on the basis of a 360 day year consisting
of twelve 30-day months. The Mortgage Loan is not a simple interest Mortgage Loan (meaning a Mortgage Loan on which interest is calculated daily). The Mortgage Loan does not require a balloon payment upon the maturity thereof. The Mortgage Note does not by its terms provide for the capitalization or forbearance of interest.
(n) Ownership. Immediately before Buyers payment of the Purchase Price, Seller was the sole owner and holder of the Mortgage Loan and the indebtedness evidenced by the Mortgage Note. The Mortgage Loan, including the Mortgage Note and the Mortgage, were not assigned or pledged by Seller and Seller had good and marketable title thereto, and Seller had full right to transfer and sell the Mortgage Loan to Buyer free and clear of any Lien, participation interest, equity, pledge or claim and had full right and authority subject to no interest or participation in, or agreement with any other Person to sell or otherwise transfer the Mortgage Loan. Following the sale of the Mortgage Loan, Buyer will own such Mortgage Loan and the other Mortgage Assets free and clear of any Lien and shall have a valid and perfected first priority security interest in such Mortgage Loan and the other Mortgage Assets then existing and thereafter arising in each case free and clear of any Lien. After the related Purchase Date, Seller will not have any right to modify or alter the terms of the sale of the Mortgage Loan and Seller will not have any obligation or right to repurchase the Mortgage Loan, except as provided in this Agreement or as otherwise agreed to by Seller and Buyer. Seller has full right to sell, assign and transfer the Mortgage Loan without the consent of the related Mortgagor or any other Person.
(o) Transfer of Mortgage Loan. The Mortgage Loan is a MERS Designated Mortgage Loan. The original Mortgage was recorded in the appropriate jurisdictions wherein such recordation is necessary to perfect the Lien thereof as against creditors of Seller, or is in the process of being recorded. Seller has designated Buyer as the Interim Funder on the MERS® System with respect to such Mortgage Loan (or is in the process of designating Buyer and such designation shall be completed within [***] Business Days after the Purchase Date) and unless otherwise authorized by Buyer, no Person is listed as interim funder on the MERS® System with respect to such Mortgage Loan.
(p) Hazard Insurance; Flood Insurance. All buildings or other customarily insured improvements upon the Mortgaged Property are insured by an insurer generally acceptable under the Agency Guidelines and to prudent mortgage lending institutions against loss by fire, hazards of extended coverage and such other hazards as are required in the Agency Guidelines pursuant to an insurance policy conforming to the requirements of Agency Guidelines and providing coverage in an amount at least equal to the minimum amount required by applicable Agency Guidelines. All such insurance policies are in full force and effect and contain a standard mortgagee clause naming the originator of the Mortgage Loan, its successors and assigns as mortgagee and all premiums thereon have been paid. Before the Origination closing of the Mortgage Loan, Seller or the originating Approved Correspondent (if any) determined whether the Mortgaged Property is located in a Special Flood Hazard Area using the Standard Flood Hazard Determination Form developed by the U.S. Department of Homeland Security Federal Emergency Management Agency. If the Mortgaged Property is in a Special Flood Hazard Area (and such flood insurance has been made available), a flood insurance policy meeting the requirements of the Flood Laws is in effect which policy conforms to the requirements of the Agency Guidelines. The Mortgage obligates the Mortgagor thereunder to maintain all such insurance at the Mortgagors cost and expense, and on the Mortgagors failure to do so, authorizes the holder of the Mortgage to maintain
such insurance at the Mortgagors cost and expense and to seek reimbursement therefor from the Mortgagor. Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance, provided the policy is not a master or blanket hazard insurance policy covering the common facilities of a planned unit development. The hazard insurance policy is the valid and binding obligation of the insurer, is in full force and effect, and will be in full force and effect and inure to the benefit of Buyer upon the consummation of the transactions contemplated by this Agreement. Seller has not engaged in, and has no knowledge of the Mortgagor, any Subservicer or any prior servicer having engaged in, any act or omission that would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of either, including no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other person or entity, and no such unlawful items have been received, retained or realized by Seller.
(q) Title Insurance. The Mortgage Loan is covered by an ALTA, CLTA or TLTA lenders title insurance policy, acceptable to the applicable Agency or as mandated by applicable state law, if any, issued by a title insurer acceptable to the applicable Agency or qualified as required under applicable state law and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring Seller, its successors and assigns the first priority of the lien of the Mortgage in the original principal amount of the Mortgage Loan and, if such Mortgage Loan is an adjustable rate Mortgage Loan, against any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of the Mortgage providing for adjustment in the Mortgage interest rate or monthly payment. Where required by state law or regulation, the Mortgagor has been given the opportunity to choose the carrier of the required mortgage title insurance. Additionally, such lenders title insurance policy affirmatively insures ingress and egress, and against encroachments by or upon the Mortgaged Property or any interest therein. The title policy does not contain any special exceptions (other than the standard exclusions) for zoning and uses. Seller and its successors and assigns are the sole insureds of such lenders title insurance policy, and such lenders title insurance policy is in full force and effect and will be in full force and effect upon the consummation of the transactions contemplated by this Agreement and will inure to the benefit of Buyer and its assigns without any further act. No claims have been made under such lenders title insurance policy, and Seller has not done, by act or omission, anything that would impair the coverage of such lenders title insurance policy.
(r) Escrow Letter. With respect to any newly Originated Eligible Mortgage Loan, there is a valid and enforceable escrow letter duly executed by the related Settlement Agent if required by any applicable Requirement of Law.
(s) Private Mortgage Insurance Policy. If required by applicable Agency Guidelines or Takeout Guidelines, the Mortgage Loan has a valid and transferable private mortgage insurance policy. Unless the private mortgage insurance policy for a Mortgage Loan was cancelled at the request of the Mortgagor or automatically terminated, in either case in accordance with applicable law, all premiums have been paid and all provisions of such private mortgage insurance policy have been and are being materially complied with. With respect to a purchase money Mortgage Loan, both the original appraised value and the purchase price are accurately depicted as such on Sellers (or, as applicable, Subservicers) servicing system. Where a Mortgage Loan was closed as a streamlined refinance and a new appraisal was not required, the prior appraised value that was
relied on in making the credit decision for the Mortgage Loan is accurately depicted on Sellers (or, as applicable, Subservicers) servicing system. The Mortgage interest rate for the Mortgage Loan is net of any private mortgage insurance policy premium.
(t) Optional Insurance. No single payment credit life insurance or other optional insurance product that has been considered predatory by Fannie Mae or Freddie Mac has been obtained in connection with such Mortgage Loan. If such Mortgage Loan involved any type of optional insurance, such insurance was properly serviced including by use of the proper application and collection of premiums, the maintenance of complete and accurate records, processing and payment of claims and the handling of correspondence. The Mortgage Loan does not involve an optional insurance product that was or is being provided free of charge to the Mortgagor.
(u) Insurance. All policies of required insurance, of whatever type, remain in full force and effect. Seller has not engaged in, and has no knowledge of the Mortgagors having engaged in, any act or omission that would impair the coverage validity or binding effect of any such policies. No action, inaction, or event has occurred and no state of facts exists or has existed that has resulted or will result in the exclusion from, denial of, or defense to coverage under any applicable special hazard insurance policy, private mortgage insurance policy or bankruptcy bond, irrespective of the cause of such failure of coverage. In connection with the placement of any such insurance, no commission, fee, or other compensation has been or will be received by Seller or any Subservicer or any designee of Seller or any Subservicer or any corporation in which Seller, any Subservicer or any officer, director, or employee of Seller or any Subservicer had a financial interest at the time of placement of such insurance.
(v) Mortgaged Property Undamaged; No Condemnation Proceedings. As of the related Purchase Date, there are no uninsured casualty losses or casualty losses where coinsurance has been, or Seller has reason to believe will be, claimed by the insurance company or where the loss, exclusive of contents, is, or will be, greater than the recovery (less actual costs and expenses incurred in connection with such recovery) from the insurance carrier. No casualty insurance proceeds have been used to reduce Mortgage Loan balances or for any other purpose except to make repairs to the Mortgaged Property, except as allowed pursuant to applicable law and the Mortgage Loan documents. All damage with respect to which casualty insurance proceeds have been received by or through Seller has been properly repaired or is in the process of being repaired using such proceeds. There is no damage to the Mortgaged Property from waste, fire, windstorm, flood, tornado, earthquake or earth movement, hazardous or toxic substances, other casualty, or any other property related circumstances or conditions that would adversely affect the value or marketability of any Mortgage Loan or Mortgaged Property. There is no proceeding pending or, to the best of Sellers knowledge, threatened for the partial or total condemnation of the Mortgaged Property that would adversely affect the Mortgage Loan.
(w) Location of Improvements; No Encroachments. All improvements subject to the Mortgage that were considered in determining the appraised value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property (and wholly within the project with respect to a condominium unit) and no improvements on adjoining properties encroach upon the Mortgaged Property except those that are insured against by the title insurance policy referred to in section (q) above and all improvements on the Mortgaged Property comply with all applicable zoning and subdivision laws and ordinances.
(x) Appraisal. The Servicing File contains an appraisal or an underwriting property valuation using an automated valuation model of the related Mortgaged Property, or an Appraised Value Alternative, in each case, in form and substance acceptable under and consistent with applicable Agency Guidelines, and in the case of an appraisal, made and signed, before the approval of the Mortgage Loan application, by a qualified appraiser, duly appointed by the originator, who had no interest, direct or indirect in the Mortgaged Property or in any loan made on the security thereof, whose compensation is not affected by the approval or disapproval of the Mortgage Loan and who met the minimum qualifications of the applicable Agency. Each appraisal of the Mortgage Loan was made in conformity with the Uniform Standards of Professional Appraisal Practice and Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989, as amended (12 U.S.C. 3331 et seq.) and the regulations promulgated thereunder, and if such Mortgage Loan is a higher priced mortgage loan as defined in 12 CFR § 1026.35(a)(1), the requirements of 12 CFR § 1026.35(c)(3) and (4), including their requirements, if applicable, for a second appraisal for higher priced mortgage loans to finance a consumers acquisition of his or her principal dwelling that was acquired by its seller within [***] days before consummation of such mortgage loan, for more than, [***] respectively, of the sellers acquisition price), all as in effect on the Date of Origination of the Mortgage Loan.
(y) Construction Defects. To Sellers knowledge, any home or other improvement included within the Mortgaged Property was constructed in a workmanlike manner, and was accepted by the original homeowner or Mortgagor in good and habitable condition and working order, and conforms with all warranties, express or implied, representations, legal obligations, and local, state and federal requirements and codes concerning the condition, construction, and placement of the home or improvement.
(z) Occupancy of the Mortgaged Property. The Mortgaged Property is lawfully occupied under applicable law. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including certificates of occupancy, have been made or obtained from the appropriate authorities and no improvement located on or part of the Mortgaged Property is in violation of any zoning law or regulation.
(aa) Type of Mortgaged Property. The Mortgaged Property is located in the United States and consists of a single parcel of real property with a detached single family residence erected thereon, a townhouse or a two to four family dwelling, or an individual condominium unit, or an individual unit in a planned unit development or a de minimis planned unit development, or a Co-op Unit in a Co-op Project; provided that any condominium project or planned unit development generally conforms to the applicable Agency Guidelines regarding such dwellings. As of the date of origination, to Sellers knowledge, no portion of the Mortgaged Property was used for commercial purposes, and since the date of origination, to Sellers knowledge, no portion of the Mortgaged Property has been used for commercial purposes; provided that Mortgaged Properties that contain a home office shall not be considered as being used for commercial purposes as long as the Mortgaged Property has not been altered for commercial purposes and is not storing any chemicals or raw materials other than those commonly used for homeowner repair, maintenance and/or household purposes. If the Mortgaged Property is a condominium unit or a planned unit development (other than a de minimis planned unit development) such condominium
or planned unit development project is acceptable to the Agencies. The Mortgaged Property is not a Manufactured Home or a mobile home.
(bb) Environmental Matters. There is no pending action or proceeding directly involving any Mortgaged Property of which Seller is aware in which compliance with any environmental law, rule or regulation is an issue and nothing further remains to be done to satisfy in full all requirements of each such law, rule or regulation constituting a prerequisite to use and enjoyment of said property. The Mortgaged Property is free from any and all toxic or hazardous substances and there exists no material violation of any local, state or federal environmental law, rule or regulation.
(cc) Unacceptable Investment. Seller has no knowledge of any circumstances or condition with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagors credit standing that could reasonably be expected to cause investors to regard the Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to become delinquent or materially adversely affect the value or the marketability of the Mortgage.
(dd) Servicemembers Civil Relief Act. The Mortgagor has not notified Seller or any Subservicer, and Seller has no knowledge of any relief requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act of 2003, as amended, or other similar state or federal law.
(ee) No Fraud. No fraud, error, omission, misrepresentation, negligence or similar occurrence with respect to the Mortgage Loan has taken place on the part of Seller, and to Sellers knowledge, any Approved Correspondent, Subservicer or any other Person involved in taking applications for, offering, arranging, assisting a consumer in obtaining, making, underwriting or closing the Mortgage Loan or in the application for any insurance in relation to such Mortgage Loan, including the Mortgagor, any builder or developer or any appraiser. The documents, instruments and agreements submitted for loan underwriting were not falsified and contain no untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the information and statements therein not misleading. Seller has reviewed all of the documents constituting the Asset File and the Loan Eligibility File and has made such inquiries as it deems necessary to make and confirm the accuracy of the representations set forth herein.
(ff) Delinquency. All payments required to be made before the related Purchase Date for such Mortgage Loan under the terms of the Mortgage Note have been made, the Mortgage Loan has not been dishonored or declared to be in default and no payment has ever been more than [***] days past due.
(gg) Compliance with Applicable Laws. Any and all requirements of any applicable federal, state or local law or regulation including usury, truth in lending, ability to repay, real estate settlement procedures, consumer credit protection, consumer privacy, fair credit billing, fair credit reporting, fair debt collection practices, flood insurance, predatory and abusive lending laws and regulations, equal credit opportunity, fair housing and home mortgage disclosure laws and regulations or unfair, deceptive and abusive practices laws applicable to the origination and servicing of the Mortgage Loan including any provisions relating to prepayment penalties, have
been complied with in all material respects and the consummation of the transactions contemplated hereby will not involve the material violation of any such laws or regulations. Seller maintains, and shall maintain, evidence of such compliance as required by applicable law or regulation and shall make such evidence available for inspection at Sellers office during normal business hours upon reasonable advance notice. Each Mortgage Loan at the time it was made complied in all material respects with applicable local, state, and federal laws, including all applicable predatory and abusive lending laws.
(hh) Disclosure and Rescission Materials. The Mortgagor has received all disclosure materials required by applicable law with respect to the making of mortgage loans of the same type as the Mortgage Loan and rescission materials required by applicable law and has acknowledged receipt of such materials to the extent required by applicable law and such documents will remain in the Asset File or the Servicing File, as applicable, to be available as needed to establish compliance with disclosures and notice of rescission rights under applicable law.
(ii) Texas Refinance Loans. Each Mortgage Loan originated in the State of Texas pursuant to Article XVI, Section 50(a)(6) of the Texas Constitution (a Texas Refinance Loan) has been originated in compliance with the provisions of Article XVI, Section 50(a)(6) of the Texas Constitution, Texas Civil Statutes and the Texas Finance Code. With respect to each Texas Refinance Loan that is a cash out refinancing, the related Mortgage Loan Documents state that the Mortgagor may prepay such Texas Refinance Loan in whole or in part without incurring a prepayment penalty. Seller does not collect any such prepayment penalties in connection with any such Texas Refinance Loan.
(jj) Anti-Money Laundering Laws. Seller and its agents have at all times complied with all applicable Anti-Money Laundering Laws, in respect of the origination and servicing of each Mortgage Loan; Seller has established an anti-money laundering compliance program as and to the extent required by the Anti-Money Laundering Laws, has conducted the requisite due diligence in connection with the origination and servicing of each Mortgage Loan for purposes of the Anti-Money Laundering Laws to the extent applicable to Seller, and, to the extent required by applicable law, maintains, and will maintain, either directly or through third parties, sufficient information to identify the applicable Mortgagor for purposes of the Anti-Money Laundering Laws. No Mortgage Loan is subject to nullification pursuant to Executive Order 13224 (the Executive Order) or the regulations promulgated by OFAC (the OFAC Regulations) or in violation of the Executive Order or the OFAC Regulations, and no Mortgagor is subject to the provisions of such Executive Order or the OFAC Regulations nor listed as a blocked person for purposes of the OFAC Regulations.
(kk) Predatory Lending Regulations. The Mortgage Loan is not classified as (a) a high cost loan under the Home Ownership and Equity Protection Act of 1994 (HOEPA) or (b) a high cost, threshold, covered or predatory loan under any other applicable state, federal or local law. The Mortgage Loan does not have an annual percentage rate or total points and fees payable by the related Mortgagor (as each such term is calculated under HOEPA) that exceed the thresholds set forth by HOEPA and its implementing regulations, including 12 C.F.R. § 226.32(a)(1)(i). No predatory or deceptive lending practices, including the extension of credit without regard to the ability of the Mortgagor to repay and the extension of credit that has no
apparent benefit to the Mortgagor, were employed in the origination of the Mortgage Loan. No term or condition of, and no practice used in connection with the Origination of, such Mortgage Loan has been categorized as an unfair or deceptive term, condition or practice under any applicable federal, state or local law (or regulation promulgated thereunder) and the Mortgage Loan does not have any terms that expose Buyer to regulatory action or enforcement proceedings, penalties or other sanctions.
(ll) State Laws. No Mortgage Loan is a High-Cost Home Loan as defined in the Arkansas Home Loan Protection Act effective July 16, 2003 (Act 1340 of 2003); no Mortgage Loan is a High-Cost Home Loan as defined in the Kentucky high-cost home loan statute effective June 24, 2003 (Ky. Rev. Stat. Section 360.100); no Mortgage Loan is a High-Cost Home Loan as defined in the New Jersey Home Ownership Act effective November 27, 2003 (N.J.S.A. 46:10B-22 et seq.); no Mortgage Loan is a High-Cost Home Loan as defined in the New Mexico Home Loan Protection Act effective January 1, 2004 (N.M. Stat. Ann. §§ 58-21A-1 et seq.); no Mortgage Loan is a High-Risk Home Loan as defined in the Illinois High-Risk Home Loan Act effective January 1, 2004 (815 Ill. Comp. Stat. 137/1 et seq.); no Mortgage Loan is a High-Cost Home Mortgage Loan as defined in the Massachusetts Predatory Home Loan Practices Act, effective November 7, 2004 (Mass. Ann. Laws Ch. 183C); no Mortgage Loan is a High Cost Home Loan as defined in the Indiana Home Loan Practices Act, effective January 1, 2005 (Ind. Code Ann. Sections 24-9-1 through 24-9-9); no Mortgage Loan that was originated on or after October 1, 2002 and on or before March 7, 2003 is secured by property located in the State of Georgia; no Mortgage Loan that was originated after March 7, 2003 is a high cost home loan as defined under the Georgia Fair Lending Act, as amended; no Mortgage Loan is a high cost home loan, as defined in Section 6 L of the New York State Banking Law; and no Mortgage Loan is a covered loan as contemplated in the California Predatory Lending Act set forth in California Finance Code Sections 4970 to 4979.8.
(mm) Arbitration. The Mortgagor is not subject to mandatory arbitration to resolve any dispute arising out of or relating in any way to the mortgage loan transaction.
(nn) Higher Cost Products. The Mortgagor was not encouraged or required to select a Mortgage Loan product offered by the Mortgage Loans originator that is a higher cost product designed for less creditworthy Mortgagors, unless at the time of the Mortgage Loans origination, such Mortgagor did not qualify taking into account such facts as the Mortgage Loans requirements and the Mortgagors credit history, income, assets and liabilities and debt-to-income ratios for a lower-cost credit product then offered by the Mortgage Loans originator or any affiliate of the Mortgage Loans originator. If, at the time of loan application, the Mortgagor may have qualified for a lower-cost credit product then offered by any mortgage lending affiliate of the Mortgage Loans originator, the Mortgage Loans originator referred the Mortgagors application to such affiliate for underwriting consideration. For a Mortgagor who seeks financing through a Mortgage Loan originators higher-priced nonprime lending channel, the Mortgagor was directed towards or offered the Mortgage Loan originators standard mortgage line if the Mortgagor was able to qualify for one of the standard products.
(oo) Underwriting Methodology. With respect to delegated underwritten loans, the methodology used in underwriting the extension of credit for each Mortgage Loan does not rely solely on the extent of the Mortgagors equity in the collateral as the principal determining factor
in approving such extension of credit. The methodology employed objective criteria such as the Mortgagors income, assets and liabilities, to the proposed mortgage payment and, based on such methodology, the Mortgage Loans originator made a reasonable determination that at the time of origination the Mortgagor had the ability to make timely payments on the Mortgage Loan.
(pp) Points and Fees. No Mortgagor was charged points and fees as defined in 12 CFR § 1026.32(b)(1), whether or not financed, in an amount greater than (i) of the total loan amount or, for Mortgage Loans of less than (indexed for inflation), such different amount as is specified in 12 CFR § 1026.43(e)(3) of any Mortgage Loan that is an ATR Covered Loan (i.e., a Mortgage Loan that is subject to the Truth in Lending Act of 1968, as amended, and is not exempt from the ability to repay requirements of Regulation Z (12 CFR § 1026.43(a) or (d)), or (ii) of the principal amount of any Mortgage Loan that is an ATR Exempt Loan (i.e., a Mortgage Loan that is either not subject to the Truth in Lending Act of 1968, as amended, or is exempt from such ability to repay requirements in Regulation Z). All fees and charges (including finance charges), whether or not financed, assessed, collected or to be collected in connection with the origination and servicing of each Mortgage Loan, have been disclosed in writing to the Mortgagor in accordance with applicable state and federal law and regulation.
(qq) Prepayment Penalties. With respect to any Mortgage Loan that contains a provision permitting imposition of a penalty upon a prepayment before maturity: (i) the Mortgage Loan provides some benefit to the Mortgagor (e.g., a rate or fee reduction) in exchange for accepting such prepayment penalty, (ii) the Mortgage Loans originator had a written policy of offering the Mortgagor the option of obtaining a mortgage loan that did not require payment of such a penalty, (iii) the prepayment penalty was adequately disclosed to the Mortgagor in the mortgage loan documents pursuant to applicable state, local and federal law, and (v) notwithstanding any state or federal law to the contrary, neither Seller nor any Subservicer shall impose such prepayment premium in any instance when the mortgage debt is accelerated as the result of the Mortgagors default in making the loan payments.
(rr) Single Premium Credit Insurance Policies. The Mortgagor was not required to purchase, and no proceeds of the Mortgage Loan were paid towards the purchase of, a single premium credit insurance policy (e.g., life, mortgage, disability, accident, unemployment, or health insurance product) or debt cancellation agreement in connection with the origination of the Mortgage Loan or as a condition to the extension of credit.
(ss) Origination Practices; Servicing. The origination practices used by the originator and the collection and servicing practices used by each servicer with respect to each Mortgage Loan have been in all material respects legal and customary in the mortgage origination and servicing industry and the collection and servicing practices used by Seller and any Subservicer have been consistent with customary servicing procedures. The Mortgage Loan satisfies, and has been originated and underwritten in accordance with, all applicable requirements of Sellers underwriting guidelines. Either the originator, an Approved Correspondent, Seller or a Subservicer has serviced the Mortgage Loan at all times since its origination.
(tt) Escrow Payments. With respect to escrow deposits and payments that Seller is entitled to collect, all such payments are in the possession of, or under the control of Seller or
Sellers Subservicer, and to Sellers knowledge there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. All escrow payments have been collected in full compliance with state and federal law and the provisions of the related Mortgage Note and Mortgage. As to any Mortgage Loan that is the subject of an escrow, escrow of funds is not prohibited by applicable law and has been established in an amount sufficient to pay for every escrowed item that remains unpaid and has been assessed but is not yet due and payable. No escrow deposits or other charges or payments due under the Mortgage Note have been capitalized under any Mortgage or the related Mortgage Note.
(uu) Interest on Escrows. As of the related Purchase Date, Seller has credited or, as to interest not yet paid will credit, to the account of the related Mortgagor under the Mortgage Loan all interest required to be paid by applicable law or by the terms of the related Mortgage Note on any escrow account. Evidence of such credit shall be provided to Buyer upon request.
(vv) Escrow Analysis. Within any time frame required by applicable law, Seller has properly conducted, or will properly conduct, an escrow analysis for each escrowed Mortgage Loan in accordance with applicable law. All books and records with respect to each Mortgage Loan comply with applicable law and regulations, and have been adjusted to reflect the results of the escrow analyses. Except as allowed by applicable law, no inflation factor was used in the escrow analysis. Seller has delivered notification to the Mortgagor(s) under each Mortgage Loan of all adjustments resulting from such escrow analyses.
(ww) Escrow Holdbacks. The Mortgage Loan is not subject to outstanding escrow holdbacks except those as allowed under the Agency Guidelines or Takeout Guidelines, as applicable.
(xx) Credit Reporting. To the extent, if any, that Seller is required to do so by the Fair Credit Reporting Act and its implementing regulations, Seller has caused to be fully furnished, in accordance with such Act and regulations, accurate and complete information (i.e., favorable and unfavorable) on its Mortgagor loan files to Equifax, Experian, and Trans Union Credit Information Company (three of the credit repositories), on a monthly basis. Seller has promptly corrected any discrepancies regarding consumer addresses of which Seller has received notice.
(yy) Interest Rate Adjustments. If applicable, with respect to each adjustable rate Mortgage Loan, all interest rate adjustments have been made in compliance in all material respects with state and federal law and the terms of the related Mortgage Note. If required by applicable Requirements of Law, the Mortgagor has executed a statement to the effect that the Mortgagor has received all disclosure materials required by applicable law with respect to the making of adjustable rate mortgage loans.
(zz) Regarding the Mortgagor. The Mortgagor is one or more natural persons and/or trustees for an Illinois land trust or a trustee under a living trust and such living trust is in compliance with Agency Guidelines for such trusts. The Mortgagor is not a Guarantor, an owner, officer, director or agent of Seller or any Guarantor, or an Affiliate of Seller or any Guarantor. The Mortgagor is not the direct or indirect owner of of more of the beneficial ownership of Seller and is not a senior officer or a director of Seller. The Mortgagor is also not an employee of Seller or any Guarantor, or a relative of an employee of Seller unless (i) the Mortgage
Loan was made in compliance with generally applied standards and requirements of Sellers employee or friends and family mortgage loan programs under which loans are available to all of Sellers eligible employees and (ii) such Mortgage Loan is otherwise an Eligible Mortgage Loans. The Mortgagor is not a government or a governmental subdivision or agency. The Mortgagor occupies the Mortgaged Property unless the Mortgaged Property secures an Investor Loan.
(aaa) Fannie Mae Takeout Guidelines Announcement 95-19. As applicable, Seller will transmit full file credit reporting data for each Mortgage Loan pursuant to Fannie Mae Announcement 95-19 and that for each Mortgage Loan, Seller agrees it shall report one of the following statuses each month as follows: new origination, current, delinquent (days), foreclosed, or charged-off.
(bbb) Tax Identification/Back Up Withholding. All tax identifications for individual Mortgagors, have been certified as required by law. Seller has complied with all IRS requirements regarding the obtainment and solicitation of taxpayer identification numbers.
(ccc) IRS Forms. All IRS forms, including Forms 1099, 1098, 1041 and K-1, as appropriate, that are required to be filed with respect to activity occurring on or before the year in which the Purchase Date occurs and have been filed or will be filed in accordance with applicable law.
(ddd) Electronic Drafting of Payments. If Seller or a Subservicer drafts monthly payments electronically from the Mortgagors bank account, such drafting occurs in compliance with applicable federal, state, and local laws and regulations.
(eee) Third Party Originators and TPO Loans. The Mortgage Loan is not a TPO Loan, nor was it originated by a Third Party Originator.
(fff) U.S. Loan; Mortgagor. The Mortgage Loan is denominated and payable only in United States dollars within the United States and the related Mortgagor is a United States citizen or resident alien or, only if the Mortgagor is a trustee as described in item (zz) in this Exhibit B that is not a natural person, Mortgagor is a corporation or other legal entity organized under the laws of the United States or any state thereof or the District of Columbia.
(ggg) Representations and Warranties to Approved Takeout Investor. Any representations or warranties made by Seller to the Approved Takeout Investor upon final sale of the Mortgage Loan are hereby incorporated into this Agreement, and Seller is deemed to make the same representations and warranties to Buyer, as if such representations and warranties were fully set forth herein.
(hhh) Takeout Commitment or Hedging Arrangement. The Mortgage Loan is subject to (a) a legally valid and binding Takeout Commitment and satisfies all of the requirements related to such Takeout Commitment or (b) a legally valid and binding Hedging Arrangement and satisfies all of the requirements related to such Hedging Arrangement.
(iii) Takeout Guidelines. The Mortgage Loan satisfies, and has been originated in accordance with, all applicable requirements of the applicable Agency Guidelines or Takeout Guidelines;
(jjj) Whole Loan. The Mortgage Loan is a whole loan and not a participation interest.
(kkk) UCC Characterization. The Mortgage Loan is an account, chattel paper, promissory note or payment intangible within the meaning of Article 9 of the UCC of all applicable jurisdictions;
(lll) Bankruptcy Code Characterization. The Mortgage Loan is a mortgage loan within the meaning of the Bankruptcy Code.
(mmm) No Previous Financing. The Mortgage Loan may have been previously financed by any other Person but is an Eligible Mortgage Loan.
(nnn) Ineligible Loan Types. The Mortgage Loan is not (i) a negative amortization loan, (ii) a second lien loan, (iii) a home equity line of credit or similar loan, (iv) a reverse mortgage, (v) a subprime Mortgage Loan or alt-A Mortgage Loan or (vi) considered an Expanded Approval loan or a similar loan such as is described in the applicable Agencys eligibility certification.
(ooo) No Equity Participation. No document relating to the Mortgage Loan provides for any contingent or additional interest in the form of participation in the cash flow of the Mortgaged Property or a sharing in the appreciation of the value of the Mortgaged Property. The indebtedness evidenced by the Mortgage Note is not convertible to an ownership interest in the Mortgaged Property or the Mortgagor and Seller has not financed nor does it own directly or indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.
(ppp) Condominiums/ Planned Unit Developments. If the Mortgage Loan is a condominium loan, the related residential dwelling is a condominium unit or a unit in a planned unit development (other than a de minimis planned unit development) and such condominium or planned unit development project meets the eligibility requirements of Fannie Mae or Freddie Mac.
(qqq) Downpayment. The source of the down payment with respect to such Mortgage Loan has been fully verified by Seller, or if a Correspondent Loan, by the related Approved Correspondent or the originator.
(rrr) Due on Sale. The related Mortgage contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the mortgagee thereunder.
(sss) Flood Certification Contract. Seller has obtained a life of loan, transferable flood certification contract for such Mortgage Loan and such contract is assignable without penalty, premium or cost to Buyer.
(ttt) No Construction Loans. The Mortgage Loan was not made in connection with (a) the construction or rehabilitation of a Mortgaged Property or (b) facilitating the trade-in or exchange of a Mortgaged Property.
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
COMPLIANCE CERTIFICATE
SELLER: |
AMERIHOME MORTGAGE COMPANY, LLC |
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BUYER: |
JPMORGAN CHASE BANK, N.A. |
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TODAYS DATE: |
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REPORTING PERIOD ENDED: |
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This certificate is delivered to Buyer under the Master Repurchase Agreement dated as of August 17, 2017 between Buyer and Seller (as amended, the Agreement), all the defined terms of which have the same meanings when used herein.
I hereby certify that: (a) I am, and at all times mentioned herein have been, the duly elected, qualified, and acting Chief Financial Officer of Seller; (b) to the best of my knowledge, the Financial Statements of Seller from the period shown above (the Reporting Period) and that accompany this certificate were prepared in accordance with GAAP and present fairly in all material respects the financial condition of Seller as of the end of the Reporting Period and the results of its operations for Reporting Period; (c) a review of the Agreement and of the activities of Seller during the Reporting Period has been made under my supervision with a view to determining Sellers compliance with the covenants, requirements, terms and conditions of the Agreement, and such review has not disclosed the existence during or at the end of the Reporting Period (and I have no knowledge of the existence as of the date hereof) of any Default or Event of Default, except as disclosed herein (which disclosure specifies the nature and period of existence of each Default or Event of Default, if any, and what action Seller has taken, is taking and proposes to take with respect to each); (d) the calculations described on the pages attached hereto evidence that Seller is in compliance with the requirements of the Agreement at the end of the Reporting Period (or if Seller is not in compliance, showing the extent of noncompliance and specifying the period of noncompliance and what actions Seller proposes to take with respect thereto) and (e) Seller was, as of the end of the Reporting Period, in compliance with the applicable net worth requirements of, and in good standing with, CL, Fannie Mae, Ginnie Mae, Freddie Mac and HUD.
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EXHIBIT D
CONDITIONS PRECEDENT DOCUMENTS
1. Master Repurchase Agreement
2. Side Letter
3. Custodial Agreement
4. Electronic Tracking Agreement executed by Seller and Buyer
5. Certified organizational documents of Seller
6. Company Certificate of Seller
7. UCC, tax lien and judgment searches, state of Sellers organization and county where Sellers chief executive office is located
8. UCC-1 Financing Statements
9. Opinions of Counsel
10. Errors and omissions insurance policy or mortgage impairment insurance policy or evidence of insurance in lieu of policy
11. Blanket bond coverage policy or evidence of insurance in lieu of policy endorsed to (i) provide that for any loss affecting Buyers interest, Buyer will be named on the loss payable draft as its interest may appear and (ii) provide Buyer access to coverage under the theft of secondary market institutions money or collateral clause of such insurance policy
12. If applicable, any Subservicing Agreement and a Subservicer Instruction Letter between Seller and Subservicer
EXHIBIT E
REQUIRED OPINIONS OF COUNSEL
1. Seller has been legally incorporated or otherwise created under the laws of the State of Delaware and is validly existing and in good standing under the laws of that State, and has the requisite entity power and authority to execute and deliver each Transaction Document to which it is a party and to perform its obligations thereunder.
2. Each of the execution, delivery and performance by Seller of the Transaction Documents to which it is a party has been duly authorized by all requisite company action on the part of Seller.
3. Each Transaction Document to which Seller is a party has been duly executed and delivered by a duly authorized officer of Seller.
4. Each Transaction Document to which Seller is a party constitutes the valid and binding obligation of Seller under the laws of the State of New York, enforceable against Seller in accordance with its terms.(1)
5. With respect to Seller, the execution, delivery and performance of its obligations under each of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby will not result in (i) any breach or violation of its organizational documents, (ii) any breach, violation or acceleration of or default under any indenture, loan or credit agreement, lease, mortgage, security agreement or other material agreement or instrument to which it is a party or by which it is bound(2), (iii) any breach or violation of any order, writ, judgment, injunction or decree of any court, agency or other governmental body, or (iv) any breach or violation of any United States federal or State of New York statute or regulation that is normally applicable to transactions of the type contemplated by the Transaction Documents.
6. With respect to Seller, there is no legal action, suit, proceeding or investigation before any court, agency or other governmental body pending or, to my knowledge, threatened against it that, either in one instance or in the aggregate, (a) could reasonably be expected to have a material adverse effect on its business, operations, properties or condition (financial or otherwise) or (b) draws into question the validity of, seeks to prevent the consummation of any of the transactions contemplated by or would impair materially its ability to perform its obligations under any of the Transaction Documents to which it is a party.
7. With respect to Seller, the execution, delivery and performance of its obligations under each of the Transaction Documents to which it is a party and the consummation of the transactions contemplated thereby do not require any consent, approval, authorization or order of, filing with or notice to any United States federal, State of California or State of New York court, agency or
(1) Enforceability opinion (no. 4) to be given by outside counsel competent to opine on New York law.
(2) Noncontravention opinion (clause (ii) of no. 5) to be given by outside counsel. An officer of Seller is to certify to outside counsel and JPM (the last page of this Exhibit is a form of such certificate) that the list of agreements to be attached to such certificate are all of the indentures, leases, credit agreements, repos and other material agreements to which Seller or its parent (if any) is subject or a party.)
other governmental body under any United States federal, State of California or State of New York statute or regulation that is normally applicable to transactions of the type contemplated by the Transaction Documents, except such as may be required under the securities laws of any State of the United States or such as have been obtained, effected or given.
8. Seller is not required to register as an investment company under the Investment Company Act of 1940, as amended.
9. The Repurchase Agreement creates, for the benefit of Buyer, a valid security interest that will attach to all right, title and interest of Seller in and to the Mortgage Assets and their proceeds.(3)
10. The Buyers security interest in each Mortgage Note and its proceeds will be perfected by possession upon delivery of such Mortgage Note to Custodian in the State of California pursuant to and in accordance with the Transaction Documents.
11. The Buyers security interest in the Mortgage Assets in which a security interest can be perfected by filing, and in their proceeds, will be perfected upon filing of the applicable financing statement in the filing office located in the State of Delaware, which is the proper place to file against Seller.(4)
(3) Creation opinion (no. 9) to be given by outside counsel competent to opine on New York law.
(4) Perfection opinions (nos. 10 and 11) to be given by outside counsel.
COMPANY CERTIFICATE
I hereby certify to JPMorgan Chase Bank, N.A. (Chase), the buyer under the Master Repurchase Agreement dated as of August 17, 2017 between the Buyer and AmeriHome Mortgage Company, LLC (Company), as seller (as amended, the Master Repurchase Agreement) and to [Name of counsel rendering opinion], for purposes of such counsels legal opinion to Chase regarding the Master Repurchase Agreement and related matters, that:
(1) I am the duly elected and acting Secretary or Assistant Secretary, as indicated below, of the Company and am authorized to execute and deliver this Company Certificate (Certificate);
(2) I am custodian of the Companys records and have personal knowledge of the Companys records and each of the matters specified in this certificate; and
(3) the attached list of agreements are all of the indentures, leases, credit agreements, repos and other material agreements to which Seller is subject or a party.
IN WITNESS WHEREOF, I have hereunto set my hand to be effective as of August 17, 2017.
AFFIANT:
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Exhibit A List of agreements
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SWORN TO AND SUBSCRIBED BEFORE ME on , to certify which witness my hand and seal of office.
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EXHIBIT G
FORM OF SUBSERVICER INSTRUCTION LETTER
Subservicer Instruction Letter
, 201
, as Subservicer
Attention:
Re: Master Repurchase Agreement dated as of August 17, 2017 (Repurchase Agreement) by and between JPMorgan Chase Bank, N.A. (Buyer) and AmeriHome Mortgage Company, LLC (Seller)
Ladies and Gentlemen:
As Subservicer (referenced herein as You) of those mortgage loans described on Schedule 1 hereto, which may be amended or updated from time to time (the Mortgage Loans) pursuant to that Subservicing Agreement, between You and the undersigned Seller, as amended or modified, attached hereto as Exhibit A (the Subservicing Agreement), you are hereby notified that the undersigned Seller has sold to Buyer such Mortgage Loans pursuant to the above-referenced Repurchase Agreement.
You agree to service the Mortgage Loans in accordance with the terms of the Subservicing Agreement for the benefit of Buyer and, except as otherwise provided herein, Buyer shall have all of the rights of Seller under the Subservicing Agreement including, without limitation, rights to payment of any indemnification or reimbursement or payment of any servicing fees or any other fees and rights to examine and inspect Your servicing operations and records in respect of the Mortgage Loans, but none of the duties or obligations of Seller under the Subservicing Agreement. No subservicing relationship shall be hereby created between You and Buyer.
Upon your receipt of written notification by Buyer that a Default has occurred under the Agreement (the Default Notice), you, as Subservicer, hereby agree to remit all payments or distributions made with respect to such Mortgage Loans, net of the servicing fees and advances reimbursements payable to you with respect thereto, immediately in accordance with Buyers wiring instructions provided below, or in accordance with other instructions that may be delivered to you by Buyer:
Bank:
ABA No.:
Account Name:
Acct. No.:
Attn:
You agree that, following your receipt of such Default Notice, under no circumstances will you remit any such payments or distributions in accordance with any instructions delivered to you by the undersigned Seller, except if Buyer instructs you in writing otherwise.
You further agree that, upon receipt written notification by Buyer that an Event of Default has occurred under the Agreement (Event of Default Notice), Buyer shall assume all of the rights and obligations of Seller under the Subservicing Agreement, except as otherwise provided herein. Subject to the terms of the Subservicing Agreement, You shall (x) follow the instructions of Buyer with respect to the Mortgage Loans and deliver to Buyer any information with respect to the Mortgage Loans reasonably requested by Buyer, and (y) treat this letter agreement as a separate and distinct servicing agreement between You and Buyer (incorporating the terms of the Subservicing Agreement by reference), subject to no setoff or counterclaims arising in Your favor (or the favor of any third party claiming through You) under any other agreement or arrangement between You and Seller or otherwise. Notwithstanding anything to the contrary herein or in the Subservicing Agreement, in no event shall Buyer be liable for any fees, indemnities, costs, reimbursements or expenses incurred by You before receipt of such Event of Default Notice or otherwise owed to You in respect of the period of time before receipt of such Event of Default Notice; provided that the foregoing disclaimer shall not affect your ability to retain servicing fees and advances reimbursements in accordance with the third paragraph of this letter.
[NO FURTHER TEXT ON THIS PAGE]
Please acknowledge receipt of this instruction letter by signing in the signature block below and forwarding an executed copy to Buyer promptly upon receipt. Any notices to Buyer should be delivered to the following address: [ ], Attention: [ ], phone: [ ], fax [ ], email [ ].
Very truly yours,
AMERIHOME MORTGAGE COMPANY, LLC
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Acknowledged and Agreed as of this day of , 20 :
[SUBSERVICER]
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EXHIBIT H
MORTGAGE LOAN SCHEDULE FIELDS
Each Mortgage Loan Schedule shall include the following fields, accurately completed for each Mortgage Loan proposed to be purchased by Buyer:
Loan Number
Correspondent Loan Number (required only if Mortgage Loan was originated by an Approved
Correspondent)
Primary Borrower Last Name
Primary Borrower First Name
Property Address
Property City
Property State
Property Zip
Property County
Note Amount
Investor
Commitment Number
Commitment Price
Commitment Expiration
Original LTV
Original CLTV
Interest Rate
Mortgage Date
Primary SSN
Secondary SSN
Coborrower Last Name
Coborrower First Name
Primary Borrower DOB
DU/LP Approval Number
Warehouse Amount
Loan Term
Loan Purpose
DTI
Product
Lien Type
Balloon Flag
Property Type
Occupancy Code
Borrower Mid FICO Score
Coborrower Mid FICO Score
Units
MIN
Primary Borrower Current Address
Primary Borrower Current City
Primary Borrower Current State
Primary Borrower Current Zip
Wire Comments
Payee Name
Payee Address
Payee City
Payee State
Payee Zip
Payee Bank Name
Funding Type
Payee Account Number
ABA Number
Funding Amount
Further Credit Bank Name or ABA
Further Credit Account Number
Amortization Type
Document Type
Mortgage Insurance
First Payment Due
Maturity Date
Prepay Months
Prepayment Penalty Description
Sales Price
Margin
Ceiling / Max Rate
First ARM Cap
Period ARM Cap
Next Rate Adjustment
Next Payment Adjustment
Frequency Payment Adjustment
ARM Index
Original Mortgagee or Beneficiary (required only if Mortgage Loan was originated by an Approved Correspondent)
Closing Agent Phone Number
Number of Borrowers
Program Description
Escrow Indicator / Impound Balance
Annual Income
Fixed Period
Interest Rate Adjustment Frequency
Interest Only Term
Exhibit G, Page 2
Full Appraisal Type
Self-Employed Flag
External Fund Date (required only if Mortgage Loan was originated by an Approved Correspondent)
AVM Model
1st Lien Type
Program Code
LPMI % Fee
Agency Program
Such other fields as Buyer requires from time to time in its sole discretion with notice to Seller
EXHIBIT I
CERTAIN PERMITTED DEBT
SCHEDULE I
APPROVED TAKEOUT INVESTORS
SCHEDULE II
SELLERS AUTHORIZED SIGNERS
SCHEDULE III
CLTV/FICO SCORE CRITERIA
SCHEDULE IV
APPROVED CORRESPONDENTS
Table of Contents
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1. |
Applicability |
1 |
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2. |
Definitions; Interpretation |
1 |
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3. |
Initiation; Confirmations; Termination |
28 |
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4. |
Margin Maintenance |
31 |
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5. |
Accounts; Income Payments |
33 |
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6. |
Security Interest; Assignment of Takeout Commitments |
36 |
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7. |
Conditions Precedent |
37 |
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8. |
Change in Law |
39 |
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9. |
Segregation of Documents Relating to Purchased Mortgage Loans |
40 |
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10. |
Representations and Warranties of Seller |
41 |
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11. |
Sellers Covenants |
47 |
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12. |
Events of Default; Remedies |
58 |
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13. |
Servicing Rights Are Owned by Buyer; Interim Servicing of the Purchased Mortgage Loans |
65 |
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14. |
Single Agreement |
68 |
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15. |
Notices and Other Communications |
69 |
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16. |
Fees and Expenses; Indemnity |
70 |
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17. |
Shipment to Approved Takeout Investor |
71 |
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18. |
Buyer as Attorney-in-Fact |
72 |
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19. |
Wire Instructions |
72 |
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20. |
Entire Agreement; Severability |
72 |
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21. |
Assignments; Termination |
73 |
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22. |
Counterparts; Signatures |
74 |
23. |
Governing Law; Consent to Jurisdiction; Waiver of Jury Trial |
74 |
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24. |
No Waivers, Etc |
75 |
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25. |
Use of Employee Plan Assets |
75 |
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26. |
Intent |
76 |
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27. |
Disclosure Relating to Certain Federal Protections |
76 |
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28. |
Confidentiality |
77 |
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29. |
Setoff |
79 |
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30. |
WAIVER OF SPECIAL DAMAGES |
79 |
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31. |
USA PATRIOT ACT NOTIFICATION |
79 |
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
FIRST AMENDMENT TO MASTER REPURCHASE AGREEMENT
Dated as of July 2, 2018
Between:
AMERIHOME MORTGAGE COMPANY, LLC, as Seller
and
JPMORGAN CHASE BANK, N.A., as Buyer
1. THIS AMENDMENT
The Parties agree hereby to amend the Master Repurchase Agreement dated August 17, 2017 between AmeriHome Mortgage Company, LLC and JPMorgan Chase Bank, N.A. (the Original MRA, as amended hereby and supplemented, further amended or restated hereafter from time to time, the MRA) to extend the latest Termination Date, and they hereby amend the Original MRA as follows.
All capitalized terms used in the Original MRA and used, but not defined differently, in this amendment (the First Amendment to MRA or within itself only, this Amendment) have the same meanings here as there.
The numbered Paragraphs of this Amendment are numbered to correspond with the numbers of the Paragraphs of the Original MRA amended hereby and are consequently sometimes nonsequential.
2. Definitions; Interpretation
(a) Definitions
The definition of Termination Date is amended to read as follows:
Termination Date means the earliest of (i) the Business Day, if any, that Seller or Buyer designates as the Termination Date by written notice given to the other Party at least [***] days before such date, (ii) the Business Day, if any, that Buyer designates as the Termination Date by written notice given to Seller at any time after [***] days shall have elapsed after any Change in Control, (iii) the date of declaration of the Termination Date pursuant to Section 12(b)(i) and (iv) September 20, 2018.
(The remainder of this page is intentionally blank)
As amended hereby, the MRA remains in full force and effect, and the Parties hereby ratify and confirm it.
JPMORGAN CHASE BANK, N.A. |
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AMERIHOME MORTGAGE COMPANY, LLC |
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CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
SECOND AMENDMENT TO MASTER REPURCHASE AGREEMENT
Dated as of September 20, 2018
Between:
AMERIHOME MORTGAGE COMPANY, LLC, as Seller
and
JPMORGAN CHASE BANK, N.A., as Buyer
1. THIS AMENDMENT
The Parties agree hereby to amend the Master Repurchase Agreement dated August 17, 2017 between AmeriHome Mortgage Company, LLC and JPMorgan Chase Bank, N.A. (the Original MRA, as amended by the First Amendment to Master Repurchase Agreement dated July 2, 2018 (the Amended MRA) and as amended hereby and supplemented, further amended or restated hereafter from time to time, the MRA) to extend the latest Termination Date, revise the form of the Compliance Certificate and update Sellers notices address, and they hereby further amend the Amended MRA as follows.
All capitalized terms used in the Amended MRA and used, but not defined differently, in this amendment (the Second Amendment to MRA or within itself only, this Amendment) have the same meanings here as there.
The Sections of this Amendment are numbered to correspond with the numbers of the Sections of the Amended MRA amended hereby.
2. Definitions; Interpretation
(a) Definitions
The following definitions are amended to read as follows:
Compliance Certificate means a compliance certificate substantially in the form of Exhibit C to the Second Amendment to MRA, completed, executed by a Responsible Officer of Seller and submitted to Buyer.
Termination Date means the earliest of (i) the Business Day, if any, that Seller or Buyer designates as the Termination Date by written notice given to the other Party at least [***] days before such date, (ii) the Business Day, if any, that Buyer designates as the Termination Date by written notice given to Seller at any time after [***] days shall have elapsed after any Change in Control, (iii) the date of declaration of the Termination Date pursuant to Section 12(b)(i) and (iv) September 19, 2019.
15. Notices
Sellers addresses for notices are amended to read as follows:
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, CA 91362-3888
With a copy to:
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, CA 91362-3888
and to:
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, CA 91362-3888
Attention: Legal Department
email: legal@amerihome.com
(The remainder of this page is intentionally blank; counterpart signature pages follow)
As amended hereby, the MRA remains in full force and effect, and the Parties hereby ratify and confirm it.
JPMORGAN CHASE BANK, N.A. |
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Carolyn W. Johnson |
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AMERIHOME MORTGAGE COMPANY, LLC |
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Signature page to Second Amendment to Master Repurchase Agreement between
JPMorgan Chase Bank, N.A. and Amerihome Mortgage Company LLC
EXHIBIT C
FORM OF COMPLIANCE CERTIFICATE
COMPLIANCE CERTIFICATE
SELLER: AMERIHOME MORTGAGE COMPANY, LLC
BUYER: JPMORGAN CHASE BANK, N.A.
TODAYS DATE: / /
REPORTING PERIOD ENDED: month(s) ended / /
This certificate is delivered to Buyer under the Master Repurchase Agreement dated as of August 17, 2017 between Buyer and Seller (as amended, the Agreement), all the defined terms of which have the same meanings when used herein.
I hereby certify that: (a) I am, and at all times mentioned herein have been, the duly elected, qualified, and acting Chief Financial Officer of Seller; (b) to the best of my knowledge, the Financial Statements of Seller from the period shown above (the Reporting Period) and that accompany this certificate were prepared in accordance with GAAP and present fairly in all material respects the financial condition of Seller as of the end of the Reporting Period and the results of its operations for Reporting Period; (c) a review of the Agreement and of the activities of Seller during the Reporting Period has been made under my supervision with a view to determining Sellers compliance with the covenants, requirements, terms and conditions of the Agreement, and such review has not disclosed the existence during or at the end of the Reporting Period (and I have no knowledge of the existence as of the date hereof) of any Default or Event of Default, except as disclosed herein (which disclosure specifies the nature and period of existence of each Default or Event of Default, if any, and what action Seller has taken, is taking and proposes to take with respect to each); (d) the calculations described on the pages attached hereto evidence that Seller is in compliance with the requirements of the Agreement at the end of the Reporting Period (or if Seller is not in compliance, showing the extent of noncompliance and specifying the period of noncompliance and what actions Seller proposes to take with respect thereto) and (e) Seller was, as of the end of the Reporting Period, in compliance with the applicable net worth requirements of, and in good standing with, CL, Fannie Mae, Ginnie Mae, Freddie Mac and HUD.
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15. Notices
Sellers addresses for notices are amended to read as follows:
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, CA 91362-3888
Attention: Kathleen Conte
Phone: (747) 800-4235
email: kathleen.conte@amerihome.com
With a copy to:
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, CA 91362-3888
Attention: Josh Adler
phone: (747) 800-4232
email: josh.adler@amerihome.com
and to:
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, CA 91362-3888
Attention: Legal Department
email: legal@amerihome.com
(The remainder of this page is intentionally blank; counterpart signature pages follow)
As amended hereby, the MRA remains in full force and effect, and the Parties hereby ratify and confirm it.
JPMORGAN CHASE BANK, N.A. |
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AMERIHOME MORTGAGE COMPANY, LLC |
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CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
THIRD AMENDMENT TO MASTER REPURCHASE AGREEMENT
Dated as of September 19, 2019
Between:
AMERIHOME MORTGAGE COMPANY, LLC, as Seller
and
JPMORGAN CHASE BANK, N.A., as Buyer
1. THIS AMENDMENT
The Parties agree hereby to amend the Master Repurchase Agreement dated August 17, 2017 between AmeriHome Mortgage Company, LLC and JPMorgan Chase Bank, N.A. (the Original MRA, as amended by the First Amendment to Master Repurchase Agreement dated July 2, 2018, and the Second Amendment to Master Repurchase Agreement dated September 20, 2018 (the Amended MRA) and as amended hereby and supplemented, further amended or restated hereafter from time to time, the MRA) to extend the latest Termination Date, revise the form of the Compliance Certificate and update Sellers notices address, and they hereby further amend the Amended MRA as follows.
All capitalized terms used in the Amended MRA and used, but not defined differently, in this amendment (the Third Amendment to MRA or within itself only, this Amendment) have the same meanings here as there.
The Sections of this Amendment are numbered to correspond with the numbers of the Sections of the Amended MRA amended hereby.
2. Definitions; Interpretation
(a) Definitions
The following definitions are amended to read as follows:
Termination Date means the earliest of (i) the Business Day, if any, that Seller or Buyer designates as the Termination Date by written notice given to the other Party at least [***] days before such date, (ii) the Business Day, if any, that Buyer designates as the Termination Date by written notice given to Seller at any time after [***] days shall have elapsed after any Change in Control, (iii) the date of declaration of the Termination Date pursuant to Section 12(b)(i), and (iv) September 17, 2020.
Exhibit B
The third grammatical sentence of Exhibit B, Section (m) of the MRA is hereby amended to read as follows:
Principal payments on the Mortgage Loan commenced or will commence no more than [***] days after the proceeds of the Mortgage Loan were disbursed.
(The remainder of this page is intentionally blank; counterpart signature pages follow)
As amended hereby, the MRA remains in full force and effect, and the Parties hereby ratify and confirm it.
JPMORGAN CHASE BANK, N.A. |
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Signature page to Third Amendment to Master Repurchase Agreement between JPMorgan
Chase Bank, NA. and Amerihome Mortgage Company LLC
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
May 1, 2020
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, CA 91362-3888
Attention: Kathleen Conte
Re: Omnibus Letter Agreement between JPMORGAN CHASE BANK, N.A. (Buyer), and AMERIHOME MORTGAGE COMPANY, LLC (Seller) Amending Terms of the Master Repurchase Agreement and Side Letter
Ladies and Gentlemen:
Please refer to the Master Repurchase Agreement dated as of August 17, 2017 (as supplemented, amended, or restated, the Agreement), between Buyer and Seller. Capitalized terms defined in the Agreement and used but not defined differently in this letter have the same meanings here as in the Agreement.
Amendment to Master Repurchase Agreement
The Agreement is amended as provided in Schedule 1 attached hereto (Schedule 1).
Amendment to Side Letter
The Side Letter dated as of August 17, 2017 (as supplemented, amended, or restated, the Side Letter), between Buyer and Seller, is amended as provided in Schedule 2 attached hereto (Schedule 2).
If there is any conflict or inconsistency between the Agreement and Schedule 1, Schedule 1 shall prevail and control. If there is any conflict or inconsistency between the Side Letter and Schedule 2, Schedule 2 shall prevail and control. The Parties hereby ratify and confirm the Agreement and the Side Letter to be in full force and effect.
Please sign and return a copy of this letter to us to confirm your receipt of it and to ratify and confirm the Agreement and the Side Letter, as amended.
(Remainder of page left intentionally blank; counterpart signature page follows.)
AmeriHome Mortgage Company, LLC
Omnibus Letter Agreement Counterpart Signature Page
Please confirm our mutual agreement as set forth herein and acknowledge receipt of this Omnibus Letter Agreement by executing the enclosed copy of this letter and returning it to JPMorgan Chase Bank, N.A., 221 W. Sixth Street, 2nd Floor, Austin, Texas 78701, Attention: Carolyn Johnson (email carolyn.w.johnson@chase.com or fax (512) 479-2774). If you have any questions concerning this matter, please contact me by email or by phone at (512) 479-5890.
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CONFIRMED AND ACKNOWLEDGED:
AMERIHOME MORTGAGE COMPANY, LLC, as Seller
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SCHEDULE 1
Amendments to Master Repurchase Agreement
A. The definitions of Eligible Mortgage Loan, Government Loan, Long Aged Loan and Requirement(s) of Law are amended in their entirety to read as follows:
Eligible Mortgage Loan means, on any date of determination, a Mortgage Loan:
(i) for which each of the applicable representations and warranties set forth on Exhibit B is true and correct as of such date of determination;
(ii) that is either a Conventional Conforming Loan or a Government Loan;
(iii) if a Correspondent Loan, whose Origination Date was no more than [***]days before the Purchase Date for the initial Transaction in which the Mortgage Loan was purchased by Buyer;
(iv) if a Correspondent Loan, it was acquired by Seller from an Approved Correspondent, or if Seller acquired it from a correspondent that Buyer has not approved, Buyer elects in its sole discretion to purchase such Mortgage Loan;
(v) if not a Correspondent Loan, whose Origination Date was no more than [***]days before the Purchase Date for the initial Transaction in which that Mortgage Loan was purchased by Buyer;
(vi) that is eligible for sale to an Approved Takeout Investor under its Takeout Guidelines;
(vii) that has a scheduled Repurchase Date not later than the following number of days after the Purchase Date for the initial Transaction to which that Mortgage Loan was subject:
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(viii) that does not have a Combined Loan-to-Value Ratio in excess of [***]in the case of a Conventional Conforming Loan or a Government Loan (or, in each case, such other percentage determined by Buyer in its sole discretion and
specified in a written notice from Buyer to Seller from time to time) and, if its Loan-to-Value Ratio is in excess of [***](or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time), it has private mortgage insurance in an amount required by the applicable Agency Guidelines, unless pursuant to Agency Guidelines in existence at the time such Mortgage Loan was originated, private mortgage insurance is not required for such Mortgage Loan;
(ix) if a Government Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all Government Loans that are then subject to Transactions, is less than or equal to [***](or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;
(x) for which, on or before its Purchase Date, its Mortgage Loan Schedule has been delivered to Buyer and an Asset Schedule listing it has been delivered to Custodian;
(xi) for which, if not a Wet Loan, a complete Asset File has been delivered to Custodian on or before its Purchase Date and Buyer has received a Custodians Asset Schedule and Exception Report that includes it;
(xii) for which, if a Wet Loan:
(A) on or before its Purchase Date, if requested by Buyer pursuant to Section 5 of the Side Letter as a condition precedent, a written fraud detection report acceptable to Buyer in its sole discretion has been delivered to Buyer;
(B) if requested by Buyer, all applicable items listed in clauses (i) through (iii) of the definition of Loan Eligibility File have been delivered to Buyer on or before its Purchase Date;
(C) at or before its Wet Delivery Deadline, a complete Asset File has been delivered to Custodian and Buyer has received an updated Custodians Asset Schedule and Exception Report that includes it;
(xiii) if a Wet Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Wet Loans that are then subject to Transactions, is less than or equal to (i) [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount on any day that is [***]Business Days of any calendar month or (ii) [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount on any other day (Wet Loans are also subject to the sublimits set forth in this definition of Eligible Mortgage Loan for their respective loan types);
Schedule 1, Page 2
(xiv) that, if subject to a Takeout Commitment, (a) is not subject to a Takeout Commitment that has expired or been terminated or cancelled by the Approved Takeout Investor or with respect to which Seller is in default, (b) has not been rejected or excluded for any reason (other than default by Buyer) from such Takeout Commitment by the Approved Takeout Investor;
(xv) that, if subject to a Hedging Arrangement, is not subject to a Hedging Arrangement that has expired or been cancelled by the Hedging Arrangement counterparty or with respect to which Seller is in default or a termination event has occurred;
(xvi) [Reserved];
(xvii) [Reserved];
(xviii) [Reserved];
(xix) [Reserved];
(xx) if a Long Aged Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all Long Aged Loans that are then subject to Transactions, is less than or equal to [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;
(xxi) [Reserved];
(xxii) [Reserved];
(xxiii) if and to the extent that Buyer elects by notice to Seller to review and approve them, for which Mortgage Loan Buyer has approved the underwriting [***];
(xxiv) that is not a Mortgage Loan that Seller has failed to repurchase when required by the terms of this Agreement;
(xxv) for which the related Mortgage Note has not been out of the possession of Custodian pursuant to a Request for Release of Documents (x) for more than [***] after the date of such Request for Release of Documents if such documents are received by Seller or any subservicer that is an Affiliate of Seller, or (y) for more than [***] after the date of that Request for Release of Documents if such documents are received by a subservicer that is not an Affiliate of Seller and who has delivered an executed Bailee Letter to Custodian;
(xxvi) for which neither the related Mortgage Note nor the Mortgage has been out of the possession of Custodian pursuant to a Bailee Letter for more than the number of days specified in such Bailee Letter, or if such Bailee Letter does not
Schedule 1, Page 3
specify a time limit, for more than [***] Business Days after the related Approved Takeout Investors scheduled purchase date;
(xxvii) that is not a Defaulted Loan;
(xxviii) whose Mortgagor has a FICO Score of at least (or such other minimum FICO Score as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time);
(xxix) for which, if not a Wet Loan, a complete Loan File has been delivered to Buyer on or before its Purchase Date; and
(xxx) that is not a [***].
Government Loan means a Mortgage Loan that is insured by the FHA or guaranteed by the Department of Veterans Affairs. The term Government Loan does not include any Mortgage Loan that is a Conventional Conforming Loan or that is guaranteed by RHS.
Long Aged Loan means, on any day, a Purchased Mortgage Loan whose Purchase Date was more than [***] days but not more than [***] before that day.
Requirement(s) of Law means any applicable law, treaty, ordinance, decree, requirement, order, judgment, rule, regulation or licensing requirement (or interpretation of any of the foregoing) of any Governmental Authority having jurisdiction over Buyer, Seller, any of Sellers Subsidiaries and any Guarantor or any of their respective Properties or any agreement with a Governmental Authority by which any of them is bound, as the same may be supplemented, amended, recodified or replaced from time to time, in each case as applicable to such Person as the context requires, including:
· Equal Credit Opportunity Act and Regulation B promulgated thereunder;
· Fair Housing Act;
· Gramm-Leach-Bliley Act and Regulation P promulgated thereunder;
· Fair Credit Reporting Act and Regulation V promulgated thereunder;
· Home Mortgage Disclosure Act and Regulation C promulgated thereunder;
· Federal Unfair, Deceptive, or Abusive Acts or Practices laws (including Section 5 of the Federal Trade Commission Act (the FTC Act));
· Truth In Lending Act and Regulation Z promulgated thereunder;
· Qualified Mortgage/Ability to Repay Rule;
· Real Estate Settlement Procedures Act and Regulation X promulgated thereunder;
Schedule 1, Page 4
· Home Ownership and Equity Protection Act and applicable portions of Regulation Z promulgated thereunder;
· Electronic Fund Transfer Act and Regulation E promulgated thereunder;
· National Flood Insurance Act, Flood Disaster Protection Act of 1973, National Flood Insurance Reform Act of 1994, Biggert-Waters Flood Insurance Act of 2012, Homeowner Flood Insurance Affordability Act (the Flood Laws);
· Servicemembers Civil Relief Act;
· CARES Act;
· rules, regulations and guidelines promulgated under any of such statutes; and
· any applicable state or local equivalent or similar laws and regulations.
B. The following definitions are added to Section 2(a) of the Agreement in alphabetical order:
CARES Act means the Coronavirus Aid, Relief, and Economic Security Act.
Cash Out Refinancing Loan means a Mortgage Loan (x) that refinances an existing Mortgage Loan, (y) whose proceeds exceed the unpaid balance of such existing Mortgage Loan (and related closing costs) and (z) part or all of such excess is paid out to its Mortgagor or its Mortgagors designee(s).
Moderately Aged Loan means, on any day, a Purchased Mortgage Loan whose Purchase Date was more than [***] days but not more than [***] days before that day.
C. Section 11(z)(iv) of the Agreement is amended in its entirety to read as follows:
(iv) Maintenance of Available Warehouse Facilities. Seller shall maintain at all times Available Warehouse Facilities from buyers and lenders other than Buyer such that the Available Warehouse Facility under this Agreement constitutes no more than (i) [***] of Sellers aggregate Available Warehouse Facilities until [***], (ii) [***] of Sellers Aggregate Available Warehouse Facilities thereafter until the Termination Date, or such lesser or greater percentage as Buyer shall in its sole discretion specify from time to time in a written notice given to Seller at least [***] days before the effective date specified in such notice.
D. 21. Assignments; Termination; No Third Party Beneficiaries
The caption of Section 21 is amended to read as above, and Section 21(d) is amended in its entirety to read as follows:
Schedule 1, Page 5
(d) Subject to the foregoing, this Agreement and any Transactions shall bind and benefit the Parties and their respective successors and assigns; provided that nothing in this Agreement, express or implied, shall be construed to confer any legal or equitable right, remedy or claim under or by reason of this Agreement or otherwise upon any Person other than the following Persons:
(i) the parties hereto;
(ii) their respective successors and their respective assigns permitted by this Agreement;
(iii) purchasers of participation interests;
(iv) buyers of Purchased Mortgage Loans resold by Buyer in accordance with applicable law (and subject to the provisions of Section 21(b);
(v) assignees by written assignment executed by Buyer of Buyers rights to enforce this Agreement which assignee concurrently or subsequently purchases such Mortgage Loan from Buyer or provides financing to Buyer with respect to such Mortgage Loan; and
(vi) any Federal Reserve Bank or Federal Home Loan Bank to which Buyer shall have pledged or granted a Lien in any of its rights under this Agreement.
E. Clause (e) of Exhibit B of the Agreement is amended by adding the following sentence to the end of it:
Forbearance, whether under the CARES Act or otherwise, has been neither requested nor granted in respect of any Mortgage Loan.
F. Clause (nnn) of Exhibit B of the Agreement is amended in its entirety to read as follows:
(nnn) Ineligible Loan Types. The Mortgage Loan is not (i) a negative amortization loan, (ii) a second lien loan, (iii) a home equity line of credit or similar loan, (iv) a reverse mortgage, (v) a subprime Mortgage Loan or alt-A Mortgage Loan or (vi) considered an Expanded Approval loan or a similar loan such as is described in the applicable Agencys eligibility certification. For the avoidance of doubt, even if specified or referenced in the definition of Eligible Mortgage Loan under this Agreement as amended and in effect before the effective date of the Omnibus Letter Agreement to which this Schedule 2 is attached, the following Loan Types are ineligible for inclusion in any Transaction entered into on or after that effective date:
Low FICO Government Loans, Manufactured Home loans, Second Home Loans, Investor Loans, Jumbo Loans and RHS Loans
Schedule 1, Page 6
SCHEDULE 2
Amendments to Side Letter
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
FOURTH AMENDMENT TO MASTER REPURCHASE AGREEMENT
Dated as of September 15, 2020
Between:
AMERIHOME MORTGAGE COMPANY, LLC, as Seller
and
JPMORGAN CHASE BANK, N.A., as Buyer
1. THIS AMENDMENT
The Parties agree hereby to amend the Master Repurchase Agreement dated August 17, 2017 between AmeriHome Mortgage Company, LLC and JPMorgan Chase Bank, N.A. (the Original MRA, as amended by the First Amendment to Master Repurchase Agreement dated July 2, 2018, the Second Amendment to Master Repurchase Agreement dated September 20, 2018, the Third Amendment to Master Repurchase Agreement dated September 19, 2019, and the Omnibus Letter Agreement dated May 1, 2020 (the Omnibus Letter Agreement, and the Original MRA as so amended, the Amended MRA) and as amended hereby and supplemented, further amended or restated hereafter from time to time, the MRA) to extend the latest Termination Date, revise the definition of Eligible Mortgage Loan, and amend Ineligible Loan Types and they hereby further amend the Amended MRA as follows.
All capitalized terms used in the Amended MRA and used, but not defined differently, in this amendment (the Fourth Amendment to MRA or within itself only, this Amendment) have the same meanings here as there.
The Sections of this Amendment are numbered to correspond with the numbers of the Sections of the Amended MRA amended hereby.
2. Definitions; Interpretation
(a) Definitions
The following definitions are amended to read as follows:
Eligible Mortgage Loan means, on any date of determination, a Mortgage Loan:
(i) for which each of the applicable representations and warranties set forth on Exhibit B is true and correct as of such date of determination;
(ii) that is either a Conventional Conforming Loan or a Government Loan;
(iii) if a Correspondent Loan, whose Origination Date was no more than [***]before the Purchase Date for the initial Transaction in which the Mortgage Loan was purchased by Buyer;
(iv) if a Correspondent Loan, it was acquired by Seller from an Approved Correspondent, or if Seller acquired it from a correspondent that Buyer has not approved, Buyer elects in its sole discretion to purchase such Mortgage Loan;
(v) if not a Correspondent Loan, whose Origination Date was no more than [***]before the Purchase Date for the initial Transaction in which that Mortgage Loan was purchased by Buyer;
(vi) that is eligible for sale to an Approved Takeout Investor under its Takeout Guidelines;
(vii) that has a scheduled Repurchase Date not later than the following number of days after the Purchase Date for the initial Transaction to which that Mortgage Loan was subject:
Type of Mortgage Loan |
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Conventional Conforming Loan |
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[***] |
Government Loan |
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Moderately Aged Loan |
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[***] |
Long Aged Loan |
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[***] |
(viii) that does not have a Combined Loan-to-Value Ratio in excess of [***]in the case of a Conventional Conforming Loan or a Government Loan (or, in each case, such other percentage determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) and, if its Loan-to-Value Ratio is in excess of [***](or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time), it has private mortgage insurance in an amount required by the applicable Agency Guidelines, unless pursuant to Agency Guidelines in existence at the time such Mortgage Loan was originated, private mortgage insurance is not required for such Mortgage Loan;
(ix) if a Government Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all Government Loans that are then subject to Transactions, is less than or equal to [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount; provided that the sum of the Purchase Prices of all Government Loans that are also Cash Out Refinancing Loans and that are then subject to Transactions shall not exceed [***];
(x) if a Cash Out Refinancing Loan that is a Conventional Conforming Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all Conventional Conforming Cash Out Refinancing Loans that are then subject to Transactions, is less than or equal to [***](or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;
(xi) if a Second Home Loan or Investor Loan that is a Conventional Conforming Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all Conventional Conforming Second Home Loans and Investor Loans that are then subject to Transactions, is less than or equal to [***](or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;
(xii) for which, on or before its Purchase Date, its Mortgage Loan Schedule has been delivered to Buyer and an Asset Schedule listing it has been delivered to Custodian;
(xiii) for which, if not a Wet Loan, a complete Asset File has been delivered to Custodian on or before its Purchase Date and Buyer has received a Custodians Asset Schedule and Exception Report that includes it;
(xiv) for which, if a Wet Loan:
(A) on or before its Purchase Date, if requested by Buyer pursuant to Section 5 of the Side Letter as a condition precedent, a written fraud detection report acceptable to Buyer in its sole discretion has been delivered to Buyer;
(B) if requested by Buyer, all applicable items listed in clauses (i) through (iii) of the definition of Loan Eligibility File have been delivered to Buyer on or before its Purchase Date;
(C) at or before its Wet Delivery Deadline, a complete Asset File has been delivered to Custodian and Buyer has received an updated Custodians Asset Schedule and Exception Report that includes it;
(xv) if a Wet Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all other Wet Loans that are then subject to Transactions, is less than or equal to (i) [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount on any day that is [***]Business Days of any calendar month or (ii) [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount on any other day (Wet Loans are also subject to the sublimits set forth in this definition of Eligible Mortgage Loan for their respective loan types);
(xvi) that, if subject to a Takeout Commitment, (a) is not subject to a Takeout Commitment that has expired or been terminated or cancelled by the Approved Takeout Investor or with respect to which Seller is in default, (b) has not been rejected or excluded for any reason (other than default by Buyer) from such Takeout Commitment by the Approved Takeout Investor;
(xvii) that, if subject to a Hedging Arrangement, is not subject to a Hedging Arrangement that has expired or been cancelled by the Hedging Arrangement counterparty or with respect to which Seller is in default or a termination event has occurred;
(xviii) if a Long Aged Loan, whose Purchase Price, when added to the sum of the Purchase Prices of all Long Aged Loans that are then subject to Transactions, is less than or equal to [***] (or such other percentage as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time) of the Facility Amount;
(xix) if and to the extent that Buyer elects by notice to Seller to review and approve them, for which Mortgage Loan Buyer has approved the underwriting [***];
(xx) that is not a Mortgage Loan that Seller has failed to repurchase when required by the terms of this Agreement;
(xxi) for which the related Mortgage Note has not been out of the possession of Custodian pursuant to a Request for Release of Documents (x) for more than [***]after the date of such Request for Release of Documents if such documents are received by Seller or any subservicer that is an Affiliate of Seller, or (y) for more than [***]after the date of that Request for Release of Documents if such documents are received by a subservicer that is not an Affiliate of Seller and who has delivered an executed Bailee Letter to Custodian;
(xxii) for which neither the related Mortgage Note nor the Mortgage has been out of the possession of Custodian pursuant to a Bailee Letter for more than the number of days specified in such Bailee Letter, or if such Bailee Letter does not specify a time limit, for more than [***]after the related Approved Takeout Investors scheduled purchase date;
(xxiii) that is not a Defaulted Loan;
(xxiv) whose Mortgagor has a FICO Score of at least [***] (or such other minimum FICO Score as may be determined by Buyer in its sole discretion and specified in a written notice from Buyer to Seller from time to time); and
(xxv) for which, if not a Wet Loan, a complete Loan File has been delivered to Buyer on or before its Purchase Date;
Termination Date means the earliest of (i) the Business Day, if any, that Seller or Buyer designates as the Termination Date by written notice given to the other Party at least [***]before such date, (ii) the Business Day, if any, that Buyer designates as the Termination Date by written notice given to Seller at any time after [***]shall have elapsed after any Change in Control, (iii) the date of declaration of the Termination Date pursuant to Section 12(b)(i) and (iv) December 16, 2020.
Exhibit B
Clause (nnn) of Exhibit B of the Agreement is amended in its entirety to read as follows:
(nnn) Ineligible Loan Types. The Mortgage Loan is not (i) a negative amortization loan, (ii) a second lien loan, (iii) a home equity line of credit or similar loan, (iv) a reverse mortgage, (v) a subprime Mortgage Loan or alt-A Mortgage Loan or (vi) considered an Expanded Approval loan or a similar loan such as is described in the applicable Agencys eligibility certification. For the avoidance of doubt, even if specified or referenced in the definition of Eligible Mortgage Loan under this Agreement as amended and in effect before the [***]effective date of the Omnibus Letter Agreement, the following Loan Types are ineligible for inclusion in any Transaction entered into on or after that effective date:
Low FICO Government Loans, Manufactured Home Loans, Jumbo Loans and RHS Loans
(The remainder of this page is intentionally blank; counterpart signature pages follow)
As amended hereby, the MRA remains in full force and effect, and the Parties hereby ratify and confirm it.
JPMORGAN CHASE BANK, N.A. |
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By: |
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Carolyn W. Johnson |
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Authorized Officer |
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AMERIHOME MORTGAGE COMPANY, LLC |
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By: |
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Name: |
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Signature page to Fourth Amendment to Master Repurchase Agreement between
JPMorgan Chase Bank, N.A. and Amerihome Mortgage Company LLC
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
EXECUTION
MASTER REPURCHASE AGREEMENT
Between:
ROYAL BANK OF CANADA, as Buyer
and
AMERIHOME MORTGAGE COMPANY, LLC, as Seller
Dated as of August 16, 2019
TABLE OF CONTENTS
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SECTION 1. |
APPLICABILITY |
1 |
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SECTION 2. |
DEFINITIONS |
1 |
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SECTION 3. |
INITIATION; TERMINATION |
19 |
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SECTION 4. |
MARGIN AMOUNT MAINTENANCE |
23 |
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SECTION 5. |
PRICE DIFFERENTIAL; INCOME PAYMENTS |
24 |
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SECTION 6. |
REQUIREMENTS OF LAW |
25 |
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SECTION 7. |
TAXES |
26 |
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SECTION 8. |
SECURITY INTEREST; BUYERS APPOINTMENT AS ATTORNEY-IN-FACT |
28 |
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SECTION 9. |
PAYMENT, TRANSFER AND CUSTODY |
31 |
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SECTION 10. |
REPRESENTATIONS |
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SECTION 11. |
COVENANTS |
36 |
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SECTION 12. |
EVENTS OF DEFAULT |
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SECTION 13. |
REMEDIES |
45 |
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SECTION 14. |
INDEMNIFICATION AND EXPENSES; RECOURSE |
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SECTION 15. |
SERVICING |
48 |
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SECTION 16. |
DUE DILIGENCE |
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SECTION 17. |
ASSIGNABILITY |
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SECTION 18. |
TRANSFER AND MAINTENANCE OF REGISTER. |
51 |
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SECTION 19. |
HYPOTHECATION OR PLEDGE OF PURCHASED ASSETS |
52 |
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SECTION 20. |
TAX TREATMENT |
52 |
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SECTION 21. |
SET-OFF |
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SECTION 22. |
TERMINABILITY |
52 |
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SECTION 23. |
NOTICES AND OTHER COMMUNICATIONS |
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SECTION 24. |
ENTIRE AGREEMENT; SEVERABILITY; SINGLE AGREEMENT |
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SECTION 25. |
GOVERNING LAW |
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SECTION 26. |
SUBMISSION TO JURISDICTION; WAIVERS |
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SECTION 27. |
NO WAIVERS, ETC. |
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SECTION 28. |
RESERVED |
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SECTION 29. |
CONFIDENTIALITY |
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SECTION 30. |
INTENT |
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SECTION 31. |
[RESERVED] |
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SECTION 32. |
AUTHORIZATIONS |
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SECTION 33. |
AGENT |
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SECTION 34. |
MISCELLANEOUS |
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SECTION 35. |
GENERAL INTERPRETIVE PRINCIPLES |
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EXHIBITS
SCHEDULE 1 |
Representations and Warranties Re: Eligible Mortgage Loans |
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SCHEDULE 2 |
Current Indebtedness |
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SCHEDULE 3 |
Seller Notices; Authorized Representatives of Seller |
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SCHEDULE 4 |
Wire Instructions |
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EXHIBIT A |
Transaction Confirmation |
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EXHIBIT B |
Reserved |
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EXHIBIT C |
Form of Secretarys Certificate and Resolutions |
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EXHIBIT D |
Form of Power of Attorney |
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EXHIBIT E |
Form of Warehouse Lenders Release Letter |
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EXHIBIT F |
Form of Servicer Notice |
MASTER REPURCHASE AGREEMENT
This is a MASTER REPURCHASE AGREEMENT, dated as of August 16, 2019, between AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company (including its successors in interest and permitted assigns, Seller) and ROYAL BANK OF CANADA, a Canadian chartered bank, acting through a New York Branch (including its successors in interest and permitted assigns and, with respect to Section 17, its participants, Buyer).
SECTION 1. APPLICABILITY
From time to time the parties hereto may enter into transactions in which Seller agrees to transfer Mortgage Loans to Buyer on a servicing released basis against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Mortgage Loans on a servicing released basis at a date certain after the related Purchase Date which in no event will exceed one (1) year following the Purchase Date, against the transfer of funds by Seller. Each such transaction will be referred to herein as a Transaction and will be governed by this Repurchase Agreement (including any supplemental terms or conditions contained in any Transaction Confirmation or schedules or exhibits identified herein, as applicable hereunder), unless otherwise agreed in writing. For the avoidance of doubt, and for administrative and tracking purposes, the purchase and sale of each Mortgage Loan hereunder shall be deemed a separate Transaction. This Repurchase Agreement is not a commitment by Buyer to enter into Transactions with Seller but rather sets forth the procedures to be used in connection with periodic requests for Buyer to enter into Transactions with Seller. Seller hereby acknowledges that Buyer is under no obligation to agree to enter into, or to enter into, any Transaction pursuant to this Repurchase Agreement.
SECTION 2. DEFINITIONS
As used herein, the following terms will have the following meanings (all terms defined in this Section 2 or in other provisions of this Repurchase Agreement in the singular to have the same meanings when used in the plural and vice versa):
1934 Act has the meaning set forth in Section 31(a) hereof.
Accepted Servicing Practices means, with respect to any Mortgage Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located.
Actual Price Differential has the meaning set forth in Section 5(a) hereof. Additional Purchased Assets means Eligible Mortgage Loans and Cash Margin.
Additional Purchased Assets means Eligible Mortgage Loans and Cash Margin.
Adjusted Tangible Net Worth has the meaning assigned to such term in the Pricing Side Letter.
Affiliate means with respect to any Person, any affiliate of such Person, as such term is defined in the Bankruptcy Code; provided, however, that for purposes of this Repurchase Agreement, Aris Mortgage Holding Company, LLC shall be deemed to be the only Affiliate of Seller.
Agency means Freddie Mac, Fannie Mae or GNMA, as applicable.
Agency Approval has the meaning set forth in Section 11(aa) hereof.
Agency Eligible Loan means a Mortgage Loan (other than a Government Loan) that is originated in compliance with the applicable Agency Guidelines (other than for exceptions to the Agency Guidelines provided by the applicable Agency to Seller) and is eligible for sale to or securitization by (or guaranty of securitization by) an Agency.
Agency Guidelines means the GNMA Guide, the Fannie Mae Guide and/or the Freddie Mac Guide, the FHA Regulations and/or the VA regulations, as the context may require, in each case as such guidelines have been or may be amended, supplemented or otherwise modified from time to time by GNMA, Fannie Mae or Freddie Mac, FHA or VA, as applicable.
Agency Mortgage Loan means a Conforming Mortgage Loan, FHA Loan, USDA Loan or VA Loan.
Agency Security means a mortgage-backed security issued by an Agency.
Anti-Money Laundering Laws has the meaning set forth in Section 10(z) hereof.
Appraised Value means the value set forth in an appraisal made in connection with the origination of the related Mortgage Loan as the value of the Mortgaged Property.
Asset Value has the meaning assigned to such term in the Pricing Side Letter.
Assignment and Acceptance has the meaning set forth in Section 17 hereof.
Assignment of Mortgage means an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the sale of the Mortgage to Buyer.
Authorized Representative means, for the purposes of this Repurchase Agreement only, an agent or Responsible Officer of Seller listed on Schedule 3 hereto, as such Schedule 3 may be amended from time to time.
Bailee Letter has the meaning assigned to such term in the Custodial and Disbursement Agreement.
Bankruptcy Code means the United States Bankruptcy Code of 1978, as amended from time to time.
Business Day means a day other than (i) a Saturday or Sunday, or (ii) any day on which banking institutions are authorized or required by law, executive order or governmental decree to be closed in the States of New York or California.
Buyer has the meaning given to such term in the preamble to this Repurchase Agreement.
Capital Lease Obligations means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Repurchase Agreement, the amount of such obligations is the capitalized amount thereof, determined in accordance with GAAP.
Cash Equivalents means (a) securities with maturities of [***] days or less after the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of [***] days or less after the date of acquisition and overnight bank deposits of any commercial bank, which commercial bank is organized under the laws of the United States of America or any state thereof, having capital and surplus in excess of [***], (c) repurchase obligations of any commercial bank satisfying the requirements of clause (b) of this definition and (d) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moodys and in either case maturing within [***] days after the day of acquisition, provided that the commercial paper is United States Dollar denominated and amounts payable thereunder are not subject to any withholding imposed by any non-United States jurisdiction and is not issued by an asset backed commercial paper conduit or structured investment vehicle.
Cash Margin means cash or Cash Equivalents with maturities of [***] days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof.
Change in Control means any of the following events:
(a) any transaction or event as a result of which Aris Mortgage Holding Company, LLC ceases to own, directly or indirectly, at least fifty-one percent (51%) of Seller;
(b) the sale, transfer, or other disposition of all or substantially all of Sellers assets (excluding any such action taken in connection with any securitization transaction);
(c) the consummation of a merger or consolidation of Seller with or into another entity or any other corporate reorganization, if more than fifty percent (50%) of the combined voting power of the continuing or surviving entitys stock outstanding immediately after such merger, consolidation or such other reorganization is owned by Persons who were not stockholders, partners, certificateholders or members of Seller immediately prior to such merger, consolidation or other reorganization; or
(d) the termination or cessation of substantially all of Sellers existing business as conducted on the date of this Repurchase Agreement.
Code means the Internal Revenue Code of 1986, as amended from time to time.
Collection Account means, upon the occurrence and during the continuance of an Event of Default, the account into which all collections and proceeds on and subject to the Mortgage Loans shall be deposited by Seller or the applicable Servicer, in accordance with Section 5 hereof.
Concentration Limit has the meaning assigned to such term in the Pricing Side Letter.
Confidential Information has the meaning set forth in Section 29(b) hereof.
Confidential Terms has the meaning set forth in Section 29(a) hereof.
Conforming Mortgage Loan means a first lien Mortgage Loan originated in accordance with the criteria of an Agency for purchase of Mortgage Loans, including, without limitation, conventional Mortgage Loans.
Costs has the meaning set forth in Section 14(a) hereof.
Custodial and Disbursement Agreement means the Custodial and Disbursement Agreement, dated as of the date hereof, among Seller, Buyer, Custodian and Disbursement Agent as the same may be amended, restated, supplemented or otherwise modified from time to time.
Custodial Loan Schedule and Exception Report has the meaning set forth in the Custodial and Disbursement Agreement.
Custodian means Deutsche Bank National Trust Company, or any successor thereto under the Custodial and Disbursement Agreement.
Delaware LLC Act means Chapter 18 of the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101 et seq., as amended.
Disbursement Account has the meaning set forth in the Custodial and Disbursement Agreement.
Disbursement Agent means Deutsche Bank National Trust Company, or any successor thereto under the Custodial and Disbursement Agreement.
Division/Series Transaction means, with respect to any Person that is a limited liability company organized under the laws of the State of Delaware, that any such Person (a) divides into two (2) or more Persons (whether or not the original Person or Subsidiary thereof survives such division) or (b) creates, or reorganizes into, one (1) or more series, in each case, as contemplated under the laws of the State of Delaware, including without limitation Section 18-217 of the Delaware LLC Act.
Dollars or $ means lawful money of the United States of America.
Due Date means the day of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.
Due Diligence Cap has the meaning set forth in the Pricing Side Letter.
Due Diligence Costs has the meaning set forth in Section 16 hereof.
Due Diligence Review means the performance by Buyer of any or all of the reviews permitted under Section 16 hereof with respect to any or all of the Mortgage Loans, as desired by Buyer from time to time.
Electronic Tracking Agreement means an Electronic Tracking Agreement among Buyer, Seller, MERS and MERSCORP Holdings, Inc., to the extent applicable, as the same may be amended from time to time.
Eligible Mortgage Loan means a Mortgage Loan which complies with the representations and warranties set forth on Schedule 1 hereto and is otherwise identified as an Eligible Mortgage Loan Product in the Pricing Side Letter.
Eligible Mortgage Loan Product has the meaning assigned to such term in the Pricing Side Letter.
ERISA means the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor thereto, and the regulations promulgated and administrative rulings issued thereunder.
ERISA Affiliate means, with respect to any Person, any Person which is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code is treated as a single employer described in Section 414 of the Code.
Escrow Payments means, with respect to any Mortgage Loan, the amounts constituting ground rents, taxes, assessments, water rates, sewer rents, municipal charges, mortgage insurance premiums, fire and hazard insurance premiums and any other payments required to be escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
Event of Default has the meaning specified in Section 12 hereof.
Event of ERISA Termination means, with respect to Seller, (i) with respect to any Plan, a reportable event, as defined in Section 4043 of ERISA, as to which the PBGC has not by regulation waived the reporting of the occurrence of such event, or (ii) the withdrawal of Seller or any ERISA Affiliate thereof from a Plan during a plan year in which it is a substantial employer, as defined in Section 4001(a)(2) of ERISA, or (iii) the failure by Seller or any ERISA Affiliate thereof to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA with respect to any Plan, including, without limitation, the failure to make on or before its due date
a required installment under Section 412(m) of the Code (or Section 430(j) of the Code, as amended by the Pension Protection Act) or Section 302(e) of ERISA (or Section 303(j) of ERISA, as amended by the Pension Protection Act), or (iv) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by Seller or any ERISA Affiliate thereof to terminate any Plan, or (v) the failure to meet the requirements of Section 436 of the Code resulting in the loss of qualified status under Section 401(a)(29) of the Code, or (vi) the institution by the PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or (vii) the receipt by Seller or any ERISA Affiliate thereof of a notice from a Multiemployer Plan that action of the type described in the previous clause (vi) has been taken by the PBGC with respect to such Multiemployer Plan, or (viii) any event or circumstance exists which may reasonably be expected to constitute grounds for Seller or any ERISA Affiliate thereof to incur liability under Title IV of ERISA or under Sections 412(b) or 430(k) of the Code with respect to any Plan.
Excluded Taxes means any of the following Taxes imposed on or with respect to Buyer or other recipient of any payment hereunder or required to be withheld or deducted from a payment to Buyer or such other recipient: (a) Taxes based on (or measured by) net income or net profits (however denominated), franchise Taxes and branch profits Taxes, in each case, that are imposed on Buyer or other recipient of any payment hereunder (i) as a result of being organized under the laws of, or having its principal office or its applicable lending office located in the jurisdiction imposing such Tax (or any political subdivision thereof), or (ii) a present or former connection between such Buyer or other recipient and the jurisdiction of the Governmental Authority imposing such Tax or any political subdivision thereof (other than connections arising from such Buyer or other recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced under this Repurchase Agreement or any Facility Document, or sold or assigned an interest in any Purchased Asset); (b) any Tax imposed on Buyer or other recipient of a payment hereunder that is attributable to such Buyers or other recipients failure to comply with relevant requirements set forth in Section 7 hereof; (c) any withholding Tax that is imposed on amounts payable to or for the account of Buyer or other recipient of a payment hereunder pursuant to a law in effect on the date such person becomes a party to or under this Repurchase Agreement, or such person changes its lending office, except in each case to the extent that amounts with respect to Taxes were payable either to such persons assignor immediately before such person became a party hereto or to such person immediately before it changed its lending office; and (d) any U.S. federal withholding Taxes imposed under FATCA.
Expenses means all present and future reasonable and documented out-of-pocket expenses incurred by or on behalf of Buyer in connection with this Repurchase Agreement or any of the other Facility Documents and any amendment, supplement or other modification or waiver related hereto or thereto, whether incurred heretofore or hereafter, which expenses include the cost of title, lien, judgment and other record searches; reasonable external attorneys fees; and costs of preparing and recording any UCC financing statements or other filings necessary to perfect the security interest created hereby.
Extended Facility Termination Date has the meaning assigned thereto in Section 3(e) hereof.
Facility Documents means this Repurchase Agreement, each Transaction Confirmation, the Custodial and Disbursement Agreement, the Joint Securities Agreement, the Intercreditor Agreement, the Electronic Tracking Agreement, the Pricing Side Letter, any Servicer Notice and the Power of Attorney.
Facility Extension Request Date has the meaning assigned thereto in Section 3(e) hereof.
Facility Period has the meaning set forth in the Pricing Side Letter.
Facility Termination Date has the meaning assigned thereto in Section 3(e) hereof.
Fannie Mae means the Federal National Mortgage Association, or any successor thereto.
Fannie Mae Guide means the Fannie Mae MBS Selling and Servicing Guide, as the same may hereafter from time to time be amended.
FATCA means Sections 1471 through 1474 of the Code, any current or future regulations or official interpretations thereof, any agreement entered into pursuant to Section 1471(b) of the Code, or any fiscal or regulatory legislation, rules or practices adopted pursuant to any intergovernmental agreement entered into in connection with the implementation of such Sections of the Code.
FDIA has the meaning set forth in Section 30(c) hereof.
FDICIA has the meaning set forth in Section 30(d) hereof.
FHA means the Federal Housing Administration, an agency within HUD, or any successor thereto, and including the Federal Housing Commissioner and the Secretary of Housing and Urban Development where appropriate under the FHA Regulations.
FHA Approved Mortgagee means a corporation or institution approved as a mortgagee by the FHA under the National Housing Act, as amended from time to time, and applicable FHA Regulations, and eligible to own and service mortgage loans such as the FHA Loans.
FHA Loan means a Mortgage Loan which is the subject of an FHA Mortgage Insurance Contract.
FHA Mortgage Insurance means, mortgage insurance authorized under the National Housing Act, as amended from time to time, and provided by the FHA.
FHA Mortgage Insurance Contract means the contractual obligation of the FHA with respect to the insurance of a Mortgage Loan.
FHA Regulations means the regulations promulgated by HUD under the National Housing Act, as amended from time to time and codified in 24 Code of Federal Regulations, and other HUD issuances relating to FHA Loans, including the related handbooks, circulars, notices and mortgagee letters.
FICO means Fair Isaac & Co., or any successor thereto.
Fidelity Insurance means insurance coverage with respect to employee errors, omissions, dishonesty, forgery, theft, disappearance and destruction, robbery and safe burglary, property and computer fraud in an aggregate amount acceptable to Sellers regulators.
Financial Statements means the consolidated financial statements of Seller prepared in accordance with GAAP for the year or other period then ended.
Freddie Mac means the Federal Home Loan Mortgage Corporation or any successor thereto.
Freddie Mac Guide means the Freddie Mac Single-Family Seller/Servicer Guide, as the same may hereafter from time to time be amended.
GAAP means generally accepted accounting principles in the United States of America, applied on a consistent basis and applied to both classification of items and amounts, and includes, without limitation, the official interpretations thereof by the Financial Accounting Standards Board, its predecessors and successors.
GLB Act has the meaning set forth in Section 29(b) hereof.
GNMA means the Government National Mortgage Association and any successor thereto.
GNMA Guide means the Ginnie Mae Mortgage-Backed Securities Guide I or II, as applicable, as the same may hereafter from time to time be amended.
Government Loan means a Mortgage Loan, other than an Agency Eligible Loan, that is (a) an FHA Loan; (b) a VA Loan; (c) a USDA Loan or (d) is otherwise eligible for inclusion in a GNMA mortgage-backed security pool.
Governmental Authority means any nation or government, any state, county, municipality or other political subdivision thereof or any governmental body, agency, authority, department or commission (including, without limitation, any taxing authority) or any instrumentality or officer of any of the foregoing (including, without limitation, any court or tribunal) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation, partnership or other entity directly or indirectly owned by or controlled by the foregoing.
Guarantee means, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such
Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term Guarantee does not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee of a Person will be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. The terms Guarantee and Guaranteed used as verbs have correlative meanings.
High Cost Mortgage Loan means a Mortgage Loan (a) classified as a high cost loan under the Home Ownership and Equity Protection Act of 1994; or (b) classified as a high cost, threshold, covered, or predatory loan under any other applicable state, federal or local law (or a similarly classified loan using different terminology under a law, regulation or ordinance imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees).
HUD means the United States Department of Housing and Urban Development.
Income means, with respect to any Mortgage Loan at any time, any principal thereof then payable and all interest, dividends or other distributions payable thereon.
Indebtedness means, with respect to any Person, (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business, so long as such trade accounts payable are payable within ninety (90) days of the date the respective goods are delivered or the respective services are rendered; (c) Indebtedness of others secured by a Lien on the Property of such Person, whether or not the respective Indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy-back agreements or like arrangements; (g) obligations of such Person under Interest Rate Protection Agreements, hedging transactions, swap agreements or like arrangements; (h) Indebtedness of others Guaranteed by such Person; (i) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (j) Indebtedness of general partnerships of which such Person is a general partner and (k) with respect to clauses (a)-(j) above both on and off balance sheet.
Indemnified Party has the meaning set forth in Section 14(a) hereof.
Indemnified Taxes means Taxes other than Excluded Taxes imposed on or with respect to any payment or accrual made by or on account of any obligation of Seller hereunder or under any other Facility Document and Other Taxes.
Initial Facility Termination Date has the meaning assigned thereto in Section 3(e) hereof.
Insolvency Event means, for any Person:
(a) that such Person or any Affiliate discontinues or abandons operation of its business; or
(b) that such Person or any Affiliate fails generally to, or admit in writing its inability to, pay its debts as they become due; or
(c) a proceeding has been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of such Person or any Affiliate in an involuntary case under any applicable bankruptcy, insolvency, liquidation, reorganization or other similar law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person or any Affiliate, or for any substantial part of its property, or for the winding-up or liquidation of its affairs; or
(d) the commencement by such Person or any Affiliate of a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or such Persons or any Affiliates consent to the entry of an order for relief in an involuntary case under any such law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person, or for any substantial part of its property, or any general assignment for the benefit of creditors; or
(e) that such Person or any Affiliate becomes insolvent; or
(f) if such Person or any Affiliate is a corporation, such Person or any Affiliate, or any of their Subsidiaries, takes any corporate action in furtherance of, or the action of which would result in any of the actions set forth in the preceding clause (a), (b), (c), (d) or (e).
Intercreditor Agreement means that certain Intercreditor Agreement, dated as of August 29, 2014, among Seller, and the other parties thereto, as joined by Buyer, as the same may be amended from time to time.
Interest Period means each calendar month.
Interest Rate Adjustment Date means the date on which an adjustment to the Mortgage Interest Rate with respect to each Mortgage Loan becomes effective.
Interest Rate Protection Agreement means, with respect to any or all of the Mortgage Loans, any short sale of a United States Treasury Security, or futures contract, or mortgage related security, or eurodollar futures contract, or options related contract, or interest rate swap, cap or collar agreement or Takeout Commitment, or similar arrangement providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations,
either generally or under specific contingencies, entered into by Seller and an Affiliate of Buyer, and acceptable to Buyer.
Joint Securities Account means the account established, into which certain Agency Securities will be delivered and settled as set forth in the Joint Securities Agreement.
Joint Securities Agreement means that certain Joint Securities Account Control Agreement, dated as of June 19, 2014, among Seller, the Securities Intermediary and the other parties thereto, as joined by Buyer, as the same may be amended from time to time.
Late Payment Fee means the excess of the Price Differential paid as a result of its calculation at the Post-Default Rate over the Price Differential as would have been calculated at the Pricing Rate.
LIBOR Rate has the meaning assigned to such term in the Pricing Side Letter.
Lien means any lien, claim, charge, restriction, pledge, security interest, mortgage, deed of trust or other encumbrance.
Loan-to-Value Ratio or LTV means with respect to any Mortgage Loan, the ratio of the original outstanding principal amount of the Mortgage Loan to the lesser of (a) the Appraised Value of the Mortgaged Property at origination and (b) if the Mortgaged Property was purchased within twelve (12) months of the origination of the Mortgage Loan, the purchase price of the Mortgaged Property.
Margin Call has the meaning specified in Section 4(b) hereof.
Margin Deficit has the meaning specified in Section 4(b) hereof.
Market Value means, as of any date with respect to any Mortgage Loan, the price at which such Purchased Asset could readily be sold as determined by Buyer in its sole good faith discretion.
Material Adverse Effect means a material adverse (as determined by Buyer in its sole good faith discretion) effect on (a) the Property, business, operations, condition (financial or otherwise) or prospects of Seller or any Affiliate; (b) the ability of Seller or any Affiliate to perform its obligations under any of the Facility Documents to which it is a party; (c) the validity or enforceability of any of the Facility Documents; (d) the rights and remedies of Buyer or any Affiliate under any of the Facility Documents or (e) the timely payment of any amounts payable under the Facility Documents.
Maximum Facility Amount has the meaning assigned to such term in the Pricing Side Letter.
MERS means Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.
Minimum Facility Amount has the meaning assigned to such term in the Pricing Side Letter.
Minimum Price Differential means, on any day, the greater of the aggregate amount obtained by daily application of the Weighted Average Pricing Rate (or, during the continuation of an Event of Default, by daily application of the Weighted Average Post-Default Rate) to the Minimum Facility Amount on a 360 day per year basis for the actual number of days during the period commencing on (and including) the first day of the prior calendar month and ending on (but excluding) the last day of such prior calendar month; provided, however, that on and after the date on which Buyer has refused to purchase any Eligible Mortgage Loan properly submitted by Seller pursuant to a Transaction Request with respect to which all conditions precedent have been satisfied, the Minimum Price Differential shall be equal to zero.
Monthly Payment means the scheduled monthly payment of principal and interest on a Mortgage Loan.
Moodys means Moodys Investors Service, Inc. or any successors thereto.
More Favorable Agreement has the meaning specified in Section 11(bb) hereof.
Mortgage means each mortgage, assignment of rents, security agreement and fixture filing, or deed of trust, assignment of rents, security agreement and fixture filing, deed to secure debt, or similar instrument creating and evidencing a first lien on real property and other property and rights incidental thereto.
Mortgage File means, with respect to a Mortgage Loan, the documents and instruments relating to such Mortgage Loan and set forth in the Custodial and Disbursement Agreement.
Mortgage Interest Rate means the rate of interest borne on a Mortgage Loan from time to time in accordance with the terms of the related Mortgage Note.
Mortgage Loan means any mortgage loan that is an Eligible Mortgage Loan Product.
Mortgage Loan Schedule means with respect to any Transaction as of any date, a mortgage loan schedule in the form of a computer tape or other electronic medium generated by Seller and delivered to Buyer and Custodian, which provides information (including, without limitation, the information set forth on the related exhibit to the Custodial and Disbursement Agreement) relating to the Eligible Mortgage Loans proposed to be subject to a Transaction in a format acceptable to Buyer.
Mortgage Note means the promissory note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage.
Mortgaged Property means the real property securing repayment of the debt evidenced by a Mortgage Note.
Mortgagor means the obligor or obligors on a Mortgage Note, including any Person who has assumed or guaranteed the obligations of the obligor thereunder.
Multiemployer Plan means, with respect to any Person, a multiemployer plan as defined in Section 3(37) of ERISA which is (or was at any time during the current year or the immediately preceding five (5) years) contributed to (or required to be contributed to) by such Person or any ERISA Affiliate thereof on behalf of its employees and which is covered by Title IV of ERISA.
Net Income means, for any Person for any period, the net income of such Person for such period as determined in accordance with GAAP.
Obligations means any amounts owed by Seller to Buyer in connection with a Transaction hereunder, together with interest thereon (including interest which would be payable as post-petition interest in connection with any bankruptcy or similar proceeding) and all other fees or expenses which are payable hereunder or under any of the Facility Documents.
OFAC has the meaning set forth in Section 10(z) hereof.
Originator means an originator of a Mortgage Loan.
Other Taxes means any and all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes or any excise, sales, goods and services or transfer taxes, charges or similar levies arising from any payment made hereunder or from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Facility Document.
Participation Register has the meaning specified in Section 18(c) hereof.
Payment Date means with respect to each Purchased Asset, [***] Business Days following the date Buyers invoice was electronically sent to Seller; provided that the final Payment Date shall be the Facility Termination Date; and provided, further, that if any Payment Date would fall on a day which is not a Business Day, such Payment Date shall be the next succeeding Business Day.
PBGC means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
Pension Protection Act means the Pension Protection Act of 2006.
Person means any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, trust, unincorporated association or government (or any agency, instrumentality or political subdivision thereof) including, but not limited to, Seller.
Plan means, with respect to Seller, any employee benefit or similar plan that is (or was at any time during the current year or immediately preceding five (5) years) established,
maintained or contributed to by Seller or any ERISA Affiliate thereof and that is covered by Title IV of ERISA, other than a Multiemployer Plan.
Pooled Mortgage Loan means any Mortgage Loan certified by the applicable Agency for backing an Agency Security.
Post-Default Rate has the meaning assigned to such term in the Pricing Side Letter.
Power of Attorney means a power of attorney substantially in the form of Exhibit D hereto.
Price Differential means, with respect to any Transaction hereunder as of any date, the aggregate amount obtained by daily application of the Pricing Rate (or, during the continuation of an Event of Default, by daily application of the Post-Default Rate) for such Transaction to the Purchase Price for such Transaction on a 360-day per year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the Repurchase Date (reduced by any amount of such Price Differential previously paid by Seller to Buyer with respect to such Transaction).
Pricing Rate has the meaning assigned to such term in the Pricing Side Letter.
Pricing Side Letter means the pricing side letter, between the Seller and Buyer, dated as of the date hereof, as the same may be amended, restated, supplemented or otherwise modified.
Pricing Spread has the meaning assigned to such term in the Pricing Side Letter.
Prohibited Person has the meaning set forth in Section 10(z) hereof.
Property means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.
Purchase Date means the date on which Purchased Assets are transferred by Seller to Buyer.
Purchase Price means, with respect to each Purchased Asset:
(a) the Asset Value of such Purchased Asset on the Purchase Date;
(b) on any day after the Purchase Date, except where Buyer and Seller agree otherwise, the amount determined under the immediately preceding clause (a) decreased by the amount of any cash transferred by Seller to Buyer and applied to reduce the Obligations under this Repurchase Agreement.
Purchase Price Percentage has the meaning assigned to such term in the Pricing Side Letter.
Purchased Assets means the Mortgage Loans sold by Seller to Buyer in a Transaction as evidenced by the related Transaction Confirmation and the Trust Receipt.
Qualified Insurer means a mortgage guaranty insurance company duly authorized and licensed where required by law to transact mortgage guaranty insurance business and acceptable under the Underwriting Guidelines.
Qualified Mortgage Loan means a Mortgage Loan which is a Qualified Mortgage as defined in 12 CFR 1026.43(e).
Records means all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by Seller or any other person or entity with respect to a Purchased Asset. Records shall include the Mortgage Notes, any Mortgages, the Mortgage Files, the credit files related to the Purchased Asset and any other instruments necessary to document or service a Mortgage Loan.
Register has the meaning set forth in Section 18(b) hereof.
Regulations D, T, U and X means Regulations D, T, U and X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time.
Reportable Event means any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty (30) day notice period is waived under PBGC Reg. § 4043.
Repurchase Agreement means this Master Repurchase Agreement between Buyer and Seller, dated as of the date hereof, as the same may be further amended, restated, supplemented or otherwise modified from time to time in accordance with the terms hereof.
Repurchase Assets has the meaning set forth in Section 8(a) hereof.
Repurchase Date means, with respect to any Purchased Asset, the earliest to occur of (i) the date on which Seller is to repurchase such Purchased Asset subject to a Transaction from Buyer as specified in the related Transaction Confirmation, as further set forth in Section 3(e) hereof, (ii) the Facility Termination Date if no Extended Facility Termination Date is agreed to, or (iii) any Extended Facility Termination Date if no subsequent Extended Facility Termination Date occurs.
Repurchase Price means the price at which Purchased Assets are to be transferred from Buyer to Seller upon termination of a Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price and the accrued and unpaid Price Differential as of the date of such determination.
Requirement of Law means as to any Person, any law, treaty, rule, regulation, procedure or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject, including, without limitation, (i) all requests, rules, guidelines,
requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or by United States or foreign regulatory authorities, in each case pursuant to Basel III, and (ii) the Dodd Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder or issued in connection therewith or in implementation thereof.
Responsible Officer means as to any Person, the chief executive officer or, with respect to financial matters, the chief financial officer of such Person, or with respect to Seller any additional officer of Seller listed on Schedule 3 hereto (and as authorized therein), as such Schedule 3 may be amended from time to time.
S&P means Standard & Poors Ratings Services, a Standard & Poors Financial Services LLC business or any successor thereto.
SEC means the Securities and Exchange Commission or any successor thereto.
Securities Intermediary means Deutsche Bank National Trust Company, or any successor thereto under the Joint Securities Agreement.
Seller has the meaning set forth in the preamble to this Repurchase Agreement.
Sellers Compliance Certificate means the certificate delivered by Seller pursuant to Section 11(d) hereof substantially in the form of Exhibit B to the Pricing Side Letter.
Servicer means Seller, Cenlar, FSB, Loan Care, LLC, or any third party servicer acceptable to Buyer in its sole discretion and any of their successors or permitted assigns.
Servicer Account means, with respect to the Purchased Assets serviced by the Servicer, the account into which Servicer deposits or collects on account of the Purchased Assets for the benefit of Seller.
Servicer Notice means a notice acknowledged by a third party Servicer substantially in the form of Exhibit F hereto.
Servicing Agreement means any servicing agreement entered into between Seller and a third party Servicer, as the same may be amended from time to time.
Servicing Rights means the rights of any Person to administer, service or subservice, the Purchased Assets or to possess related Records.
Settlement Account means the account listed on Schedule 4 hereto.
Single-Employer Plan means a single-employer plan as defined in Section 4001(a)(15) of ERISA which is subject to the provisions of Title IV of ERISA.
SIPA has the meaning set forth in Section 31(a) hereof.
Statement Date has the meaning set forth in Section 10(c) hereof.
Streamline Refinance Loan means an FHA Loan originated and underwritten in accordance with the FHA streamline refinance program and FHA Regulations or a VA Loan originated and underwritten in accordance with the VA streamline refinance program and VA regulations.
Subsidiary means, with respect to any Person, any corporation, limited liability company, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity has or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one (1) or more Subsidiaries of such Person or by such Person and one (1) or more Subsidiaries of such Person.
Successor Rate means a rate determined by Buyer in accordance with Section 5(h) hereof.
Successor Rate Conforming Changes means with respect to any proposed Successor Rate, any spread adjustments or other conforming changes to the timing and frequency of determining rates and making payments of interest and other administrative matters as may be appropriate, in the discretion of Buyer, to reflect the adoption of such Successor Rate and to permit the administration thereof by Buyer in a manner substantially consistent with market practice.
Takeout Commitment means a commitment of Seller to sell one (1) or more Mortgage Loans to a Takeout Investor, and the corresponding Takeout Investors commitment back to Seller to effectuate the foregoing.
Takeout Investor means any institution which has made a Takeout Commitment and has been approved by Buyer.
Tax Compliance Certificate has the meaning set forth in Section 7(b)(ii) hereof.
Taxes means any and all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.
TILA-RESPA Integrated Disclosure Rule means the Truth-in-Lending Act and Real Estate Settlement Procedures Act Integrated Disclosure Rule, adopted by the Consumer Financial Protection Bureau, which is effective for residential mortgage loan applications received on or after October 3, 2015.
Transaction has the meaning specified in Section 1 hereof.
Transaction Confirmation means a confirmation of the terms of each Transaction substantially in the form of Exhibit A hereto.
Transaction Request means a request from Seller to Buyer to enter into a Transaction.
Trust Receipt has the meaning set forth in the Custodial and Disbursement Agreement.
Underwriting Guidelines means the Underwriting Guidelines of Seller.
Uniform Commercial Code and UCC means the Uniform Commercial Code as in effect from time to time in the State of New York; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any Repurchase Assets or the continuation, renewal or enforcement thereof is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, Uniform Commercial Code means the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions hereof relating to such perfection or effect of perfection or non-perfection.
USDA Loan means a first lien Mortgage Loan originated in accordance with the criteria established by and guaranteed by the United States Department of Agriculture pursuant to the USDA Loan Guaranty Agreement.
USDA Loan Guaranty Agreement means the obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the Mortgagor.
VA means the U.S. Department of Veterans Affairs, an agency of the United States of America, or any successor thereto including the Secretary of Veterans Affairs.
VA Approved Lender means a lender which is approved by the VA to act as a lender in connection with the origination of VA Loans.
VA Loan means a Mortgage Loan which is subject of a VA Loan Guaranty Agreement as evidenced by a loan guaranty certificate.
VA Loan Guaranty Agreement means the obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the Mortgagor pursuant to the Servicemens Readjustment Act, as amended.
Warehouse Lender means a lender under a repurchase or warehouse facility with Seller.
Warehouse Lenders Release Letter means a letter in the form of Exhibit E hereto or such other form approved by Buyer in its good faith discretion, issued by a Warehouse Lender.
Warehouse Payoff Amount means the amount necessary for a Warehouse Lender to release its lien pursuant to a Warehouse Lenders Release Letter or otherwise.
Warehouse Payoff Amount Shortage has the meaning specified in Section 3(c)(ii) hereof.
Weighted Average Post-Default Rate means as of any day of calculation, the Weighted Average Pricing Rate plus the Post-Default Rate.
Weighted Average Pricing Rate means for any period, the average of the Pricing Rate for each day in such period, weighted on the basis of the Purchase Price of each Transaction outstanding during such period.
Wind Down Period shall have the meaning provided in Section 3 hereof.
Wire-Out Account has the meaning set forth in the Custodial and Disbursement Agreement.
SECTION 3. INITIATION; TERMINATION
(a) Conditions Precedent to Initial Transaction. Buyers agreement to enter into the initial Transaction hereunder is subject to the satisfaction, immediately prior to or concurrently with the making of such Transaction, of the condition precedent that Buyer has received from Seller any fees and expenses payable hereunder and for which Seller has received an invoice reasonably in advance of such initial Transaction, and all of the following documents, each of which is satisfactory in form and substance to Buyer and its counsel:
(i) Facility Documents. The Facility Documents duly executed by the parties thereto, including joinders to the Securities Account Control Agreement and the Intercreditor Agreement, joining Buyer as a party thereto.
(ii) Opinions of Counsel. An opinion or opinions of counsel to Seller in form and substance acceptable to Buyer, covering corporate matters, enforceability, creation and perfection of security interest, the Investment Company Act and bankruptcy safe harbors.
(iii) Seller Organizational Documents. An officers certificate of Seller, substantially in the form of Exhibit C hereto, attaching and certifying to (A) a certificate of corporate existence of Seller; (B) certified copies of the organizational documents of Seller; (C) resolutions or other company authority for Seller, with respect to the execution, delivery and performance of the Facility Documents and each other document to be delivered by Seller from time to time in connection herewith; (D) an incumbency certificate of the corporate secretary of Seller, which sets forth the names, true signatures and titles of the representatives duly authorized to request transactions hereunder and to execute the Facility Documents and (E) a certified copy of a good standing certificate from the jurisdiction of organization of Seller, dated as of no earlier than the date ten (10) Business Days prior to the Effective Date.
(iv) Security Interest. Evidence that all actions necessary or, in the opinion of Buyer, desirable to perfect and protect Buyers interest in the Purchased Assets and other Repurchase Assets have been taken, including, without limitation, UCC searches and duly authorized and filed Uniform Commercial Code financing statements on Form UCC-1.
(v) Underwriting Guidelines. A true and correct copy of the Underwriting Guidelines.
(vi) Insurance. Evidence that Seller has added Buyer as an additional insured and loss payee under Sellers Fidelity Insurance.
(vii) Reserved.
(viii) Other Documents. Such other documents as Buyer may reasonably request, in form and substance reasonably acceptable to Buyer.
(b) Conditions Precedent to all Transactions. Upon satisfaction of the conditions set forth in this Section 3(b), Buyer may, in its sole discretion, enter into a Transaction with Seller. Buyers agreement to enter into each Transaction (including the initial Transaction) is subject to the satisfaction of the following further conditions precedent, both immediately prior to entering into such Transaction and also after giving effect thereto:
(i) Due Diligence Review. Without limiting the generality of Section 16 hereof, Buyer has completed, to its satisfaction, its due diligence review of the related Mortgage Loans and Seller.
(ii) No Default. No Event of Default has occurred and be continuing under the Facility Documents.
(iii) Representations and Warranties. The representations and warranties in Section 10 hereof, are true, correct and complete on and as of such Purchase Date in all material respects (or all respects to the extent any such representation and warranty is already qualified by materiality or words of like import) with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
(iv) No Margin Deficit. After giving effect to the requested Transaction, the Asset Value of all Purchased Assets exceeds the aggregate Repurchase Price for such Transactions.
(v) Transaction Request and Transaction Confirmation. On or prior to 4:00 p.m. (New York time) on the related Purchase Date, Seller has delivered to Buyer (A) a Transaction Request; and (B) a Mortgage Loan Schedule; it being understood that to the extent the foregoing is received after 4:00 p.m. (New York time) Buyer will use commercially reasonable efforts to enter into the related Transaction on the same calendar day.
(vi) Delivery of Mortgage File. Pursuant to the terms of the Custodial and Disbursement Agreement, (A) Seller has delivered to Custodian the Mortgage File with respect to each Purchased Asset and (B) Custodian has issued a Trust Receipt with respect to each such Purchased Asset to Buyer.
(vii) Servicer Notice. Seller shall provide promptly to Buyer a Servicer Notice addressed to and agreed to by the Servicer of the related Purchased Assets, advising such Servicer of such matters as Buyer may reasonably request, including, without limitation, recognition by the Servicer of Buyers interest in such Purchased Assets and the Servicers agreement that upon receipt of notice of an Event of Default from Buyer, it will follow the instructions of Buyer with respect to the Purchased Assets and any related Income with respect thereto.
(viii) Maximum Facility Amount. The sum of (i) the unpaid Repurchase Price (excluding accrued but unpaid Price Differential) for all prior outstanding Transactions and (ii) the requested Purchase Price for the pending Transaction, in each case, does not exceed the Maximum Facility Amount.
(ix) No Material Adverse Change. None of the following have occurred and/or be continuing:
(A) an event or events have occurred in the good faith determination of Buyer resulting in the effective absence of a repo market or comparable lending market for financing debt obligations secured by securities or an event or events have occurred resulting in Buyer not being able to finance Purchased Assets through the repo market or lending market with traditional counterparties at rates which would have been reasonable prior to the occurrence of such event or events;
(B) an event or events have occurred resulting in the effective absence of a securities market for securities backed by mortgage loans or an event or events have occurred resulting in Buyer not being able to sell securities backed by mortgage loans at prices which would have been reasonable prior to such event or events;
(C) there has occurred a material adverse change in the financial condition of Buyer which affects (or can reasonably be expected to affect) materially and adversely the ability of Buyer to fund its obligations under this Repurchase Agreement; or
(D) there has occurred (i) a material change in financial markets, an outbreak or escalation of hostilities or a material change in national or international political, financial or economic conditions; (ii) a general suspension of trading on major stock exchanges or (iii) a disruption in or moratorium on commercial banking activities or securities settlement services.
(x) No Wind Down Period. The Wind Down Period has not commenced as of the related proposed Purchase Date.
Each Transaction Request delivered by Seller hereunder will constitute a certification by Seller that all the conditions set forth in this Section 3(b) have been satisfied (both as of the date of such notice or request and as of Purchase Date).
(c) Initiation.
(i) Seller will deliver a Transaction Request to Buyer on or prior to the date and time set forth above prior to entering into any Transaction. Such Transaction Request will include a Mortgage Loan Schedule with respect to the Mortgage Loans to be sold in such requested Transaction. Buyer will confirm the terms of such Transaction by sending a Transaction Confirmation to Seller. Each Transaction Confirmation, together with this Repurchase Agreement, is conclusive evidence of the terms of the Transaction(s) covered thereby.
(ii) If such Mortgage Loan to be sold in a requested Transaction is subject to the lien of a Warehouse Lender, Buyer has received from Seller (A) a Warehouse Lenders Release and (B) the excess, if any, of the Warehouse Payoff Amount due such Warehouse Lender over the Purchase Price for such Mortgage Loan (Warehouse Payoff Amount Shortage).
(iii) Subject to the terms and conditions of this Repurchase Agreement, during such period Seller may sell, repurchase and resell Eligible Mortgage Loans hereunder.
(iv) No later than the date and time set forth above, Seller shall deliver to Custodian the Mortgage File pertaining to each Eligible Mortgage Loan to be purchased by Buyer.
(v) Subject to the provisions of this Section 3, the Purchase Price will then be made available to Seller by Buyer transferring, via wire transfer, in the aggregate amount of such Purchase Price in funds immediately available.
(d) Repurchase. With respect to each Transaction, the Repurchase Date for such Transaction shall be the earlier to occur of (i) the then-effective Facility Termination Date, or (ii) the applicable Aging Limit for the related Repurchased Asset as set forth in the Pricing Side Letter, which shall be confirmed in the Transaction Confirmation delivered by Buyer to Seller. On the Repurchase Date, termination of the Transaction will be effected by reassignment to Seller or its designee of the Purchased Assets against the simultaneous transfer of the Repurchase Price to an account of Buyer; provided, however, that with respect to any Purchased Asset sold to a Takeout Investor, so long as no Event of Default has occurred or is continuing and Buyer has received at least the full Purchase Price for such Purchased Asset, all Liens of Buyer in such Purchased Asset shall be deemed released and of no further force and effect. For the avoidance of doubt, with respect to any Purchased Asset if any remaining Pricing Differential remains due and owing as of the related Repurchase Date, Seller shall pay such amount in full on the next Payment Date. Such obligation to repurchase exists without regard to any prior or intervening liquidation with respect to any Purchased Asset (but liquidation proceeds received by Buyer will be applied to reduce the Repurchase Price for such Purchased Asset on each Repurchase Date except as otherwise provided herein). Seller is obligated to obtain the Mortgage Files from Buyer at Sellers expense on the Repurchase Date.
(e) Facility Termination Date; Extension. With respect to the initial Transaction hereunder, Seller shall indicate the requested initial termination date for this
Agreement in the related Transaction Request, which shall be confirmed in the Transaction Confirmation delivered by Buyer to Seller for such Transaction, and which fixed date (the Initial Facility Termination Date) shall be the Facility Period. On the date that is [***] days following such initial Purchase Date and every [***] day thereafter (each such [***] day, a Facility Extension Request Date), Seller may request, and Buyer may agree, to extend this Agreement for an additional Facility Period beginning on such Facility Extension Request Date (each such extended date, an Extended Facility Termination Date, and at any time during the term of this Agreement the then-effective Initial Facility Termination Date or Extended Facility Termination Date, as applicable, shall be referred to herein as the Facility Termination Date) pursuant to the terms of a trade confirmation mutually agreed to and executed by Buyer and Seller; provided that in the event Seller requests an extension of this Agreement and Buyer fails to respond within three (3) Business Days, such failure to respond shall be deemed a rejection of such request. In the event that Buyer does not agree to the extension of this Agreement beyond the then-effective Facility Termination Date, so long as no Event of Default has occurred and is continuing, Seller may notify Buyer following such rejection (and in any event by no later than one (1) Business Day prior to the expiration of the then-effective Facility Termination Date) of its one-time election to extend the then-effective Facility Termination Date for an additional [***] days from the then-effective Facility Termination Date, and upon such election the then-effective Facility Termination Date shall be extended for an additional [***] days from the then-effective Facility Termination Date (such [***] day period, the Wind Down Period). In addition, and notwithstanding the foregoing, Seller may at any time, in its sole discretion, elect to terminate this Agreement and begin a Wind Down Period upon no less than one (1) Business Day advance written notice to Buyer.
SECTION 4. MARGIN AMOUNT MAINTENANCE
(a) Buyer determines the Asset Value of the Purchased Assets at such intervals as determined by Buyer in its sole discretion.
(b) If at any time the aggregate Asset Value of all related Purchased Assets subject to all Transactions is less than the aggregate Purchase Price for all such Transactions (a Margin Deficit), then Buyer may by notice to Seller (as such notice is more particularly set forth below, a Margin Call), require Seller to pay such Margin Deficit or to transfer to Buyer Additional Purchased Assets approved by Buyer in its sole discretion so that the aggregate Asset Value of the Purchased Assets, including any such Additional Purchased Assets, will thereupon equal or exceed the aggregate Purchase Price for all Transactions. If Buyer delivers a Margin Call to Seller on or prior to 10:00 a.m. (New York City time) on any Business Day, then Seller shall transfer Additional Purchased Assets to Buyer no later than 10:00 a.m. (New York City time) the succeeding Business Day. In the event Buyer delivers a Margin Call to Seller after 10:00 a.m. (New York City time) on any Business Day, Seller will be required to transfer Additional Purchased Assets no later than 10:00 a.m. (New York City time) on the second (2nd) succeeding Business Day.
(c) Buyers election, in its sole and absolute discretion, not to make a Margin Call at any time there is a Margin Deficit will not in any way limit or impair its right to make a Margin Call at any time a Margin Deficit exists.
(d) Any Additional Purchased Assets transferred to Buyer pursuant to Section 4(b) above will be processed by Buyer as a curtailment of the particular Purchased Asset(s) as identified by Buyer as having the lower Asset Value(s) causing the Margin Deficit, as determined by Buyer in its sole discretion.
SECTION 5. PRICE DIFFERENTIAL; INCOME PAYMENTS
(a) On each Payment Date, Seller shall pay, or cause to be paid, to Buyer the accrued and unpaid Price Differential plus the amount of any unpaid Margin Deficit, in each case accrued as of the last day of the calendar month preceding such Payment Date. To the extent the aggregate Price Differential paid by Seller to Buyer (the Actual Price Differential) is less than the Minimum Price Differential, Seller shall pay to Buyer each calendar month on a date to be agreed between the parties, in immediately available funds, the excess of the Actual Price Differential over the Minimum Price Differential, in each case, for such calendar month. With respect to each Payment Date, Buyer shall deliver Seller a statement relating to such Payment Date by no later than the fifth (5th) day of the month of such Payment Date detailing the amounts of Price Differential and Margin Deficit due and payable on such Payment Date. For the avoidance of doubt, notwithstanding any shortfall with respect to the Price Differential relating to any Purchased Asset sold to a Takeout Investor, so long as no Event of Default has occurred or is continuing and Buyer has received at least the full Purchase Price for such Purchased Asset, all Liens of Buyer in such Purchased Asset shall be deemed released and of no further force and effect; provided that Seller shall remain obligated to pay all such Price Differential pursuant to the terms hereof on the next Payment Date (and failure of Seller to pay such amounts after any applicable notice and cure period will remain an Event of Default hereunder).
(b) If Income is paid in respect of any Mortgage Loan during the term of a Transaction, such Income shall be the property of Buyer. Seller shall hold for the benefit of, and in trust for, Buyer all Income (which constitutes the property of Buyer (acknowledging that such Income is treated as property of Seller for tax purposes pursuant to Sections 7(e) and 20 hereof).
(c) Seller shall, and shall cause the Servicer to, deposit all Income with respect to the Mortgage Loans into the Servicer Account within [***] following receipt and identification thereof by the Servicer. Upon the occurrence and during the continuance of an Event of Default, Seller shall, and shall cause the Servicer to, remit to Buyer all Income held in the Servicer Account no less frequently than funds are required to be remitted to Seller under the Servicing Agreement; provided that notwithstanding anything to the contrary in the Servicing Agreement, in no event shall such remittance be less than monthly.
(d) [reserved].
(e) [reserved].
(f) [reserved].
(g) In connection with a sale, transfer, conveyance and assignment, on or prior to each Purchase Date, Seller shall deliver or cause to be delivered and released to Custodian, on Buyers behalf, the Mortgage File for the related Purchased Assets pursuant to the Custodial and Disbursement Agreement.
(h) If Buyer determines in its sole discretion that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining the LIBOR Rate, the LIBOR Rate is no longer in existence, or the administrator of the LIBOR Rate or a Governmental Authority having jurisdiction over Buyer has made a public statement identifying a specific date after which the LIBOR Rate shall no longer be made available or used for determining the interest rate of loans, Buyer may give prompt notice thereof to Seller, whereupon the Base Rate for such period, and for all subsequent periods until such notice has been withdrawn by Buyer, shall be an alternative benchmark rate (including any mathematical or other adjustments to the benchmark rate (if any) incorporated therein) (any such rate, a Successor Rate), together with any proposed Successor Rate Conforming Changes, as determined by Buyer in its sole good faith discretion but consistent with its determination with respect to other financings of this type administered through the Buyers New York Central Funding group.
SECTION 6. REQUIREMENTS OF LAW
(a) If any Requirement of Law or any change in the interpretation or application thereof or compliance by Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:
(i) subjects Buyer to any Tax (other than Indemnified Taxes, Other Taxes and Taxes described in clauses (b) through (d) of the definition of Excluded Taxes) with respect to this Repurchase Agreement or any Transaction on payments to Buyer in respect thereof;
(ii) imposes, modifies or holds applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, or other extensions of credit by, or any other acquisition of funds by, any office of Buyer which is not otherwise included in the determination of the LIBOR Rate hereunder; or
(iii) imposes on Buyer any other condition affecting this Repurchase Agreement or Transactions entered into hereunder by Buyer;
and the result of any of the foregoing is to increase the cost to Buyer, by an amount which Buyer deems to be material, of entering, continuing or maintaining any Transaction or to reduce any amount due or owing hereunder in respect thereof, then, in any such case, upon request of Buyer with a statement setting forth its calculations as to increased costs, Seller shall promptly pay Buyer such additional amount or amounts as calculated by Buyer in good faith as will compensate Buyer for such increased cost or reduced amount receivable. Nothing in this Section 6(a) shall be construed to limit the Buyers right to reimbursement, gross-up or payment under any other section of this Repurchase Agreement.
(b) If Buyer has determined that the adoption of or any change in any Requirement of Law regarding capital adequacy or liquidity or in the interpretation or application thereof or compliance by Buyer or any corporation controlling Buyer with any request or directive regarding capital adequacy or liquidity (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof has the effect of reducing the rate of return on Buyers or such corporations capital as a consequence of its obligations hereunder to a
level below that which Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration Buyers or such corporations policies with respect to capital adequacy and liquidity) by an amount deemed by Buyer in good faith to be material, then from time to time, upon request of Buyer with a statement setting forth its calculation of any such reduction, Seller shall promptly pay to Buyer such additional amount or amounts as will compensate Buyer for such reduction.
(c) If Buyer becomes entitled to claim any additional amounts pursuant to this Section, it shall promptly notify Seller of the event by reason of which it has become so entitled. A certificate as to any additional amounts payable pursuant to this Section submitted by Buyer to Seller will be conclusive in the absence of manifest error. Buyer agrees that it will exercise its rights under this provision in good faith and agrees not to exercise any rights under this provision for any amount unbilled for more than [***] days after the Buyer first learned of its claim under this provision.
(d) Notwithstanding anything in this Repurchase Agreement to the contrary for purposes of this Section 6, (i) all requests, rules, guidelines, requirements and directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or by United States or foreign regulatory authorities, in each case pursuant to Basel III, and (ii) the Dodd Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines, requirements and directives thereunder or issued in connection therewith or in implementation thereof, is deemed to have been introduced and adopted after the date of this Repurchase Agreement.
SECTION 7. TAXES
(a) Any payments made by Seller to Buyer or a Buyer assignee hereunder or under any Facility Document will be made free and clear of and without deduction or withholding for any Taxes, except as required by Requirement of Law. If Seller is required by Requirement of Law (as determined in the good faith discretion of the applicable withholding agent) to deduct or withhold any Tax from any sums payable to Buyer or a Buyer assignee, then (i) Seller shall make such deductions or withholdings and pay the full amount deducted to the relevant Governmental Authority in accordance with Requirement of Law; (ii) to the extent the withheld or deducted Tax is an Indemnified Tax or Other Tax, the sum payable will be increased as necessary so that after making all required deductions and withholdings (including deductions and withholdings applicable to additional sums payable under this Section 7) Buyer or Buyer assignee receives an amount equal to the sum it would have received had no such deductions or withholdings been made; and (iii) Seller shall notify Buyer or Buyer assignee of the amount paid and shall provide the original or a certified copy of a receipt issued by the relevant Governmental Authority evidencing such payment within [***] Business Days thereafter. Seller shall otherwise indemnify Buyer, within [***] Business Days after demand therefor (along with supporting documentation), for any Indemnified Taxes or Other Taxes imposed on Buyer (including Indemnified Taxes and Other Taxes imposed or asserted on or attributable to amounts payable under this Section 7) and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority.
(b) Buyer and any Buyer assignee shall deliver to Seller, at the time or times reasonably requested by Seller, such properly completed and executed documentation reasonably requested by Seller as will permit payments made hereunder to be made without withholding or at a reduced rate of withholding. In addition, Buyer and any Buyer assignee, if reasonably requested by Seller, shall deliver such other documentation prescribed by Requirement of Law or reasonably requested by Seller as will enable Seller to determine whether or not such Buyer or Buyer assignee is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in this Section 7, the completion, execution and submission of such documentation (other than such documentation in Sections 7(b)(i), (ii) and (iii) below) will not be required if in Buyers or Buyers assignees judgment such completion, execution or submission would subject such Buyer or Buyer assignee to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Buyer or Buyer assignee. Without limiting the generality of the foregoing, Buyer or Buyer assignee shall deliver to Seller, to the extent legally entitled to do so:
(i) in the case of a Buyer or Buyer assignee which is a U.S. Person as defined in Section 7701(a)(30) of the Code, a properly completed and executed Internal Revenue Service (IRS) Form W-9 (or any successor form) certifying that it is not subject to U.S. federal backup withholding tax.
(ii) in the case of a Buyer or Buyer assignee which is not a U.S. Person as defined in Section 7701(a)(30) of the Code, whichever of the following is applicable: (I) in the case of such non-U.S. Person claiming the benefits of an income tax treaty to which the United States is a party, a properly completed and executed IRS Form W-8BEN or W-8BEN-E (or any successor forms), as appropriate, evidencing entitlement to a zero percent or reduced rate of U.S. federal income tax withholding on any payments made hereunder, (II) a properly completed and executed IRS Form W-8ECI (or any successor form), (III) in the case of such non-U.S. Person claiming exemption from the withholding of U.S. federal income tax under Sections 871(h) or 881(c) of the Code with respect to payments of portfolio interest, a duly executed certificate (a Tax Compliance Certificate) to the effect that such non-U.S. Person is not (x) a bank within the meaning of Section 881(c)(3)(A) of the Code, (y) a 10 percent shareholder of Seller or affiliate thereof, within the meaning of Section 881(c)(3)(B) of the Code, or (z) a controlled foreign corporation described in Section 881(c)(3)(C) of the Code, along with properly completed and duly executed IRS Form W-8BEN or W-8BEN-E (or any successor forms), as appropriate, (IV) to the extent such non-U.S. person is not the beneficial owner, a properly completed and executed IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, IRS Form W-8BEN-E, a Tax Compliance Certificate, IRS Form W-9 (and any successor forms), and/or other certification documents from each beneficial owner, as applicable; provided that if such non-U.S. person is a partnership and one (1) or more direct or indirect partners of such non-U.S. person are claiming the portfolio interest exemption, such non-U.S. person may provide a Tax Compliance Certificate on behalf of each such direct and indirect partner, and (V) executed originals of any other form or supplementary documentation prescribed by law as a basis for claiming exemption from or a reduction in United States federal withholding tax together with such supplementary documentation as may be prescribed by law to permit Seller to determine the withholding or deduction required to be made.
(iii) if a payment made to a Buyer or Buyer assignee under this Repurchase Agreement would be subject to U.S. federal withholding tax imposed by FATCA if such Buyer or assignee were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Buyer or assignee shall deliver to Seller at the time or times prescribed by law and at such time or times reasonably requested by Seller such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Seller as may be necessary for Seller to comply with their obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this Section 7, FATCA includes any amendments made to FATCA after the date of Repurchase Agreement.
The applicable IRS forms referred to above shall be delivered by each applicable Buyer or Buyer assignee on or prior to the date on which such person becomes a Buyer or Buyer assignee under this Repurchase Agreement, as the case may be. Buyer and each Buyer assignee agree that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Seller in writing of its legal inability to do so.
(c) Any indemnification payable by Seller to Buyer or any Buyer assignee for Indemnified Taxes or Other Taxes that are imposed on Buyer or a Buyer assignee, as described in Section 7(a) hereof, shall be paid by Seller within [***] days after demand therefor (along with supporting documentation). A certificate as to the amount of such payment or liability delivered to Seller by Buyer or a Buyer assignee is conclusive absent manifest error.
(d) Each partys obligations under this Section 7 will survive any assignment of rights by, or the replacement of, Buyer or a Buyer assignee, and the repayment, satisfaction or discharge of all obligations under any Facility Document.
(e) Each party to this Repurchase Agreement acknowledges that it is its intent for purposes of U.S. federal, state and local income and franchise Taxes to treat each Transaction as indebtedness of Seller that is secured by the Purchased Assets that, in the absence of an Event of Default by Seller and Buyers exercise of remedies hereunder, the Purchased Assets are owned by Seller. All parties to this Repurchase Agreement agree to such treatment and agree to take no action inconsistent with this treatment unless required by law or upon a final determination by any taxing authority that the Transactions are not loans for tax purposes.
SECTION 8. SECURITY INTEREST; BUYERS APPOINTMENT AS ATTORNEY-IN-FACT
(a) Security Interest. On each Purchase Date, Seller hereby sells, assigns and conveys all rights and interests in the Purchased Assets identified on the related Mortgage Loan Schedule and the Repurchase Assets. Although the parties intend that all Transactions hereunder be sales and purchases (other than for accounting and tax purposes) and not loans, in the event any such Transactions are deemed to be loans, and in any event, Seller hereby pledges to Buyer as security for the performance by Seller of its Obligations and hereby grants, assigns and pledges to
Buyer a fully perfected first priority security interest in the Purchased Assets, any Agency Security or right to receive such Agency Security when issued in any case to the extent backed by any of the Purchased Assets (but only to the extent of Buyers interest therein determined pursuant to the Joint Securities Agreement), the Records, and all Servicing Rights, related to the Purchased Assets, the Facility Documents (to the extent such Facility Documents and Sellers rights thereunder relate to the Purchased Assets), the Servicer Account, the Joint Securities Account (but only to the extent of Buyers interest therein determined pursuant to the Joint Securities Agreement), any Property relating to any Purchased Asset or the related Mortgaged Property, any Takeout Commitments relating to any Purchased Asset, all insurance policies and insurance proceeds relating to any Purchased Asset or the related Mortgaged Property, including but not limited to any payments or proceeds under any related primary insurance or hazard insurance, FHA Mortgage Insurance Contracts, USDA Loan Guaranty Agreements and VA Loan Guaranty Agreements (if any), any Income relating to any Purchased Asset, the benefits from any Interest Rate Protection Agreements (but only to the extent allocable to any Purchased Asset), and any other contract rights, accounts (excluding escrow accounts) and any other payments, rights to payment (including payments of interest or finance charges) and general intangibles to the extent that the foregoing relates to any Purchased Asset and any other assets to the extent relating to the Purchased Assets (including, without limitation, any other accounts) or any interest in the Purchased Assets, and all substitutions or replacements of any and all of the foregoing and any proceeds (including Buyers interest in the related securitization proceeds determined pursuant to the Joint Securities Agreement) and distributions and any other property, rights, title or interests as are specified on a Trust Receipt and Custodial Loan Schedule and Exception Report with respect to any of the foregoing, in all instances, whether now owned or hereafter acquired, now existing or hereafter created (collectively, the Repurchase Assets).
Seller acknowledges that it has no rights to service the Purchased Asset. Without limiting the generality of the foregoing and in the event that Seller is deemed to retain any residual Servicing Rights, and for the avoidance of doubt, Seller grants, assigns and pledges to Buyer a security interest in the Servicing Rights and proceeds related thereto and in all instances, whether now owned or hereafter acquired, now existing or hereafter created. The foregoing provision is intended to constitute a security agreement or other arrangement or other credit enhancement related to the Repurchase Agreement and Transactions hereunder as defined under Sections 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code.
Seller hereby authorizes Buyer to file such financing statement or statements relating to the Repurchase Assets as Buyer, at its option, may reasonably deem appropriate. Seller shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 8.
(b) Buyers Appointment as Attorney in Fact. Seller hereby irrevocably constitutes and appoints Buyer and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Seller and in the name of Seller or in its own name, for the purpose of carrying out the terms of this Repurchase Agreement, to take any and all appropriate action and to execute any and all documents and instruments which may be reasonably necessary or desirable to accomplish the purposes of this Repurchase Agreement. The Buyer hereby agrees that it shall not have the right to exercise the powers conferred upon the Buyer hereunder unless there shall have occurred an
Event of Default. Without limiting the generality of the foregoing, Seller hereby gives Buyer the power and right, on behalf of Seller, without assent by, but with notice to, Seller, if an Event of Default has occurred and be continuing, to do the following:
(i) in the name of Seller, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any other Repurchase Assets and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Buyer for the purpose of collecting any and all such moneys due with respect to any other Repurchase Assets whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on or threatened against the Repurchase Assets;
(iii) (A) to direct any party liable for any payment under any Repurchase Assets to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer shall direct; (B) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Repurchase Assets; (C) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Repurchase Assets; (D) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Repurchase Assets or any proceeds thereof and to enforce any other right in respect of any Repurchase Assets; (E) to defend any suit, action or proceeding brought against Seller with respect to any Repurchase Assets; (F) to settle, compromise or adjust any suit, action or proceeding described in clause (E) above and, in connection therewith, to give such discharges or releases as Buyer may deem appropriate; and (G) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Repurchase Assets as fully and completely as though Buyer were the absolute owner thereof for all purposes, and to do, at Buyers option and Sellers expense, at any time, and from time to time, all acts and things which Buyer deems necessary to protect, preserve or realize upon the Repurchase Assets and Buyers Liens thereon and to effect the intent of this Repurchase Agreement, all as fully and effectively as Seller might do.
Seller hereby ratifies all that said attorneys lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and is irrevocable. Seller also authorizes Buyer, if an Event of Default has occurred and is continuing, from time to time, to execute, in connection with any sale provided for in Section 13 hereof, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Repurchase Assets.
The powers conferred on Buyer hereunder are solely to protect Buyers interests in the Repurchase Assets and do not impose any duty upon it to exercise any such powers. Buyer will be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents are responsible to Seller for any act or failure to act hereunder, except for its or their own gross negligence, bad faith or willful misconduct.
SECTION 9. PAYMENT, TRANSFER AND CUSTODY
(a) Unless otherwise mutually agreed in writing, all transfers of funds to be made by Seller hereunder will be made in Dollars, in immediately available funds, without deduction, set off or counterclaim, to Buyer at the Settlement Account detailed in Schedule 4 hereto no later than 5:00 p.m. (New York City time), on the date on which such payment is due (and each such payment made after such time will be deemed to have been made on the next succeeding Business Day). Seller acknowledges that it has no rights of withdrawal from the foregoing account and that any withdrawals must be made from the Wire-Out Account (to the extent of excessive funds held therein pursuant to the Custodial and Disbursement Agreement).
(b) On the Purchase Date for each Transaction, ownership of the Purchased Assets is transferred to Buyer against the simultaneous transfer of the Purchase Price from the Disbursement Account detailed in Schedule 4 hereto and disbursement to Seller or its designee pursuant to the Custodial and Disbursement Agreement, simultaneously with the delivery to Buyer of the Purchased Assets relating to each Transaction.
(c) In connection with such sale, transfer, conveyance and assignment, on or prior to each Purchase Date, Seller shall deliver or cause to be delivered and released to Buyer the Mortgage File for the related Purchased Assets.
SECTION 10. REPRESENTATIONS
Seller represents and warrants to Buyer that as of the Purchase Date for any Purchased Assets by Buyer from Seller and as of the date of this Repurchase Agreement and any Transaction hereunder and as of each date while the Facility Documents and any Transaction hereunder are in full force and effect:
(a) Acting as Principal. Seller will engage in such Transactions as principal (or, if agreed in writing in advance of any Transaction by Buyer, as agent for a disclosed principal).
(b) No Broker. Seller has not dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Assets pursuant to this Repurchase Agreement.
(c) Financial Statements. Seller has heretofore furnished to Buyer a copy of its Financial Statements for the fiscal year ended December 31, 2018 and the related consolidated statements of income and retained earnings and of cash flows for Seller and its consolidated Subsidiaries for such fiscal year, setting forth in each case in comparative form the figures for the previous year. All such Financial Statements are complete and correct and fairly present, in all material respects, the consolidated financial condition of Seller and its Subsidiaries and the consolidated results of their operations as at such dates and for such fiscal periods, all in accordance with GAAP applied on a consistent basis. Since December 31, 2018, there has been no material adverse change in the consolidated business, operations or financial condition of Seller and its consolidated Subsidiaries taken as a whole from that set forth in said financial statements which would constitute a Material Adverse Effect, nor is Seller aware of any state of facts which (without notice or the lapse of time) would or could have a Material Adverse Effect. Seller does not have, on the date of the statements delivered pursuant to this section (the Statement Date),
any liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements.
(d) Organization, Etc. Seller is a limited liability company duly organized, validly existing and in good standing under the laws of Delaware. Seller (a) has all requisite limited liability company power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect; (b) is qualified to do business and is in good standing in all other jurisdictions in which the nature of the business conducted by it makes such qualification necessary, except where failure so to qualify would not be reasonably likely (either individually or in the aggregate) to have a Material Adverse Effect; and (c) has requisite limited liability company power and authority to execute, deliver and perform its obligations under the Facility Documents.
(e) Authorization, Compliance, Etc. The execution and delivery of, and the performance by Seller of its obligations under, the Facility Documents to which it is a party (a) are within Sellers powers; (b) have been duly authorized by all requisite action; (c) do not violate any provision of applicable law, rule or regulation, or any order, writ, injunction or decree of any court or other Governmental Authority, or its organizational documents; (d) do not violate any material indenture, agreement, document or instrument to which Seller is a party, or by Seller or any of its properties, any of the Repurchase Assets is bound or to which any of them is subject and (e) are not in conflict with, do not result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or except as may be provided by any Facility Document, result in the creation or imposition of any Lien upon any of the property or assets of Seller pursuant to, any such indenture, agreement, document or instrument. Seller is not required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any Governmental Authority in connection with or as a condition to the consummation of the Transactions contemplated herein and the execution, delivery or performance of the Facility Documents to which it is a party.
(f) Litigation. There are no actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending or to the knowledge of Seller, threatened) or other legal or arbitrable proceedings where there is a party adverse to Seller or any of its Subsidiaries or affecting any of the Repurchase Assets or any of the other properties of Seller before any Governmental Authority which (i) questions or challenges the validity or enforceability of the Facility Documents or any action to be taken in connection with the transactions contemplated hereby, (ii) except with respect to foreclosures in the ordinary course of Sellers business, and except as disclosed to Buyer, makes a claim or claims in an aggregate amount greater than [***] of Sellers Net Worth, (iii) individually or in the aggregate, if adversely determined, would have a Material Adverse Effect, or (iv) requires filing with the SEC in accordance with its regulations.
(g) Purchased Assets.
(i) [Reserved].
(ii) The provisions of this Repurchase Agreement are effective to either constitute a sale of Purchased Assets to Buyer or to create in favor of Buyer a valid security interest in all right, title and interest of Seller in, to and under the Repurchase Assets.
(h) Chief Executive Office/Jurisdiction of Organization. On the Effective Date, Sellers chief executive office is, and has been, located at 1 Baxter Way, Suite 300, Thousand Oaks, California 91362. Sellers jurisdiction of organization is Delaware.
(i) Reserved.
(j) Enforceability. This Repurchase Agreement and all of the other Facility Documents executed and delivered by Seller in connection herewith are legal, valid and binding obligations of Seller and are enforceable against Seller in accordance with their terms except as such enforceability may be limited by (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors rights generally and (ii) general principles of equity.
(k) Ability to Perform. Seller does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in the Facility Documents to which it is a party on its part to be performed.
(l) No Default. No Event of Default has occurred and is continuing.
(m) Underwriting Guidelines. The Underwriting Guidelines provided to Buyer are the true and correct Underwriting Guidelines of Seller.
(n) No Adverse Selection. Seller has not selected the Purchased Assets in a manner so as to adversely affect Buyers interests.
(o) [Reserved].
(p) Indebtedness. As of the Effective Date, Seller does not have any material Indebtedness, except as disclosed on Schedule 2 to this Repurchase Agreement or as amended via written notice from Seller to Buyer from time to time.
(q) Accurate and Complete Disclosure. The information contained in reports, financial statements, exhibits, schedules and certificates furnished in writing by or on behalf of Seller to Buyer in connection with the negotiation, preparation or delivery of this Repurchase Agreement and the other Facility Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or omit to state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. All written information furnished after the date hereof by or on behalf of Seller to Buyer in connection with this Repurchase Agreement and the other Facility Documents and the transactions contemplated hereby and thereby including without limitation, the information set forth in the related Mortgage Loan Schedule, will be true, complete and accurate in every material respect, or (in the case of projections) based on reasonable estimates, on the date as of which such information is stated or certified. There is no fact known to Seller, after due inquiry, that could reasonably be expected to
have a Material Adverse Effect that has not been disclosed herein, in the other Facility Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to Buyer for use in connection with the transactions contemplated hereby or thereby.
(r) Reserved.
(s) Investment Company. Neither Seller nor any of its Subsidiaries is an investment company or a company controlled by an investment company within the meaning of the Investment Company Act of 1940, as amended.
(t) Solvency. As of the date hereof and immediately after giving effect to each Transaction, the fair value of the assets of Seller is greater than the fair value of the liabilities (including, without limitation, contingent liabilities if and to the extent required to be recorded as a liability on the financial statements of Seller in accordance with GAAP) of Seller and Seller is solvent and, after giving effect to the transactions contemplated by this Repurchase Agreement and the other Facility Documents, will not be rendered insolvent or left with an unreasonably small amount of capital with which to conduct its business and perform its obligations. Seller does not intend to incur, nor does it believe that it has incurred, debts beyond its ability to pay such debts as they mature. Seller is not contemplating the commencement of an insolvency, bankruptcy, liquidation, or consolidation proceeding or the appointment of a receiver, liquidator, conservator, trustee, or similar official in respect of itself or any of its property.
(u) ERISA.
(i) No liability under Section 4062, 4063, 4064 or 4069 of ERISA has been or is expected by Seller to be incurred by Seller or any ERISA Affiliate thereof with respect to any Plan which is a Single-Employer Plan in an amount that could reasonably be expected to have a Material Adverse Effect.
(ii) No Plan which is a Single-Employer Plan had an accumulated funding deficiency, whether or not waived, as of the last day of the most recent fiscal year of such Plan ended prior to the date hereof, and no such plan which is subject to Section 412 of the Code failed to meet the requirements of Section 436 of the Code as of such last day. Neither Seller nor any ERISA Affiliate thereof is subject to a Lien in favor of such a Plan as described in Section 430(k) of the Code or Section 303(k) of ERISA.
(iii) Each Plan of Seller, each of its Subsidiaries and each of its ERISA Affiliates is in compliance with the applicable provisions of ERISA and the Code, except where the failure to comply would not result in any Material Adverse Effect.
(iv) Neither Seller nor any of its Subsidiaries has incurred a tax liability under Chapter 43 of the Code or a penalty under Section 502 of ERISA which has not been paid in full, except where the incurrence of such tax or penalty would not result in a Material Adverse Effect.
(v) Neither Seller nor any of its Subsidiaries nor any ERISA Affiliate thereof has incurred or reasonably expects to incur any withdrawal liability under Section 4201 of
ERISA as a result of a complete or partial withdrawal from a Multiemployer Plan in an amount that could reasonably be expected to have a Material Adverse Effect.
(v) Taxes. Seller has timely filed all material income, franchise and other tax returns that are required to be filed by it and has timely paid all material Taxes due and payable by it or imposed with respect to any of its property, except for any such Taxes as are being appropriately contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided. There are no Liens for Taxes, except for statutory liens for Taxes not yet due and payable.
(w) No Reliance. Seller has made its own independent decisions to enter into the Facility Documents and each Transaction and as to whether such Transaction is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including without limitation, legal counsel and accountants) as it has deemed necessary. Seller is not relying upon any advice from Buyer as to any aspect of the Transactions, including without limitation, the legal, accounting or tax treatment of such Transactions.
(x) Plan Assets. Seller is not an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code, and the Purchased Assets are not plan assets within the meaning of 29 CFR § 2510.3 101, as modified by Section 3(42) of ERISA, and transactions by or with Seller are not subject to any state or local statute regulating investments of, or fiduciary obligations with respect to governmental plans within the meaning of Section 3(32) of ERISA or church plans within the meaning of Section 3(33) of ERISA.
(y) No Prohibited Persons. Neither Seller nor any of its Affiliates, officers, directors, partners or members, is an entity or person (or to Sellers knowledge, owned or controlled by an entity or person): (i) that is listed in the Annex to, or is otherwise subject to the provisions of Executive Order 13224 issued on September 24, 2001 (EO13224); (ii) whose name appears on the United States Treasury Departments Office of Foreign Assets Control (OFAC) most current list of Specifically Designated National and Blocked Persons (which list may be published from time to time in various mediums including, but not limited to, the OFAC website, https://www.treasury.gov/ofac/downloads/sdnlist.pdf); (iii) who commits, threatens to commit or supports terrorism, as that term is defined in EO13224; or (iv) who is otherwise affiliated with any entity or person listed above (any and all parties or persons described in clauses (i) through (iv) above are herein referred to as a Prohibited Person).
(z) Anti-Money Laundering Laws. Seller has complied with all applicable anti money laundering laws and regulations, including without limitation the USA PATRIOT Act of 2001 (collectively, the Anti-Money Laundering Laws); Seller has established an anti-money laundering compliance program as required by the Anti-Money Laundering Laws, has conducted the requisite due diligence in connection with the origination of each Mortgage Loan for purposes of the Anti-Money Laundering Laws, including with respect to the legitimacy of the applicable Mortgagor and the origin of the assets used by the said Mortgagor to purchase the property in question, and maintains, and will maintain, sufficient information to identify the applicable Mortgagor for purposes of the Anti-Money Laundering Laws.
(aa) Agency Approvals. With respect to each Agency Security and to the extent necessary, Seller is an FHA Approved Mortgagee, a VA Approved Lender and approved by GNMA as an approved issuer. Seller is also approved by Fannie Mae as an approved seller/servicer and Freddie Mac as an approved seller/servicer, and, to the extent necessary, approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act. In each such case, Seller is in good standing, with no event having occurred or Seller having any reason whatsoever to believe or suspect will occur, including, without limitation, a change in insurance coverage which would either make Seller unable to comply with the eligibility requirements for maintaining all such applicable approvals or require notification to the relevant Agency. Seller has adequate financial standing, servicing facilities (including through use of third party subservicers), procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same types as may from time to time constitute Mortgage Loans and in accordance with Accepted Servicing Practices.
(bb) Assessment and Understanding. Seller is capable of assessing the merits of (on its own behalf or through independent professional advice), and understands and accepts, the terms, conditions and risks associated with this Repurchase Agreement and the Transactions associated therewith. In addition, Seller is capable of assuming and does assume the risks of this Repurchase Agreement, the other Facility Documents and the Transactions associated herewith and therewith.
(cc) Status of Parties. Seller agrees that Buyer is not acting as a fiduciary for Seller or as an advisor to Seller in respect of this Repurchase Agreement, the other Facility Documents or the Transactions associated therewith.
SECTION 11. COVENANTS
On and as of the date of this Repurchase Agreement and each Purchase Date and at all times until this Repurchase Agreement is no longer in force, Seller covenants as follows:
(a) Preservation of Existence; Compliance with Law. Seller shall:
(i) Preserve and maintain its legal existence and all of its material rights, privileges and franchises necessary for the operation of its business;
(ii) Comply with the material requirements of all Requirements of Law, rules, regulations and orders, whether now in effect or hereafter enacted or promulgated by any applicable Governmental Authority (including, without limitation, all environmental laws);
(iii) Maintain all material licenses, permits or other approvals necessary for Seller to conduct its business and to perform its obligations under the Facility Documents, and shall conduct its business in all material respects in accordance with applicable law;
(iv) Keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied; and
(v) Permit representatives of Buyer, upon reasonable notice (unless an Event of Default has occurred and is continuing, in which case, no prior notice is required), during normal business hours, to examine, copy and make extracts from its books and records, to inspect any of its Properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by Buyer.
(b) Taxes. Seller shall timely file (including extensions) all material income, franchise and other tax returns that are required to be filed by it and shall timely pay all Taxes due and payable by them, except for any such Taxes the amount or validity of which is being contested in good faith by appropriate proceedings diligently conducted with respect to which adequate reserves have been provided.
(c) Notice of Proceedings or Adverse Change. Seller shall give notice to Buyer:
(i) immediately after a Responsible Officer of Seller has any knowledge of:
(A) the occurrence of any Event of Default;
(B) any (a) event of default under any Indebtedness of Seller in excess of [***] of Sellers Net Worth; (b) litigation, investigation, regulatory action or proceeding that is pending or, to the knowledge of Seller, threatened by or against Seller in any federal or state court or before any Governmental Authority which, if not cured or if adversely determined, would reasonably be expected to have a Material Adverse Effect or constitute an Event of Default, and (c) any Material Adverse Effect with respect to Seller;
(C) any litigation or proceeding that is, to the knowledge of Seller, pending or threatened against (a) Seller in which the amount involved exceeds [***] of Sellers Net Worth and is not covered by insurance, in which injunctive or similar relief is sought, or which, would reasonably be expected to have a Material Adverse Effect and (b) any litigation or proceeding that is pending or, to Sellers knowledge, threatened, in connection with any of the Repurchase Assets, which, if adversely determined, would reasonably be expected to have a Material Adverse Effect;
(ii) as soon as reasonably possible:
(A) a material and adverse change in the insurance coverage of Seller, with a copy of evidence of same attached;
(B) any material change in accounting policies or financial reporting practices of Seller;
(C) the termination for cause of any existing mortgage loan repurchase or warehouse facility for assets similar to the Purchased Assets (other than an ordinary course termination by Seller or non-renewal);
(D) Seller becoming aware of any Lien or security interest (other than security interests created hereby or under any other Facility Document) on, or claim asserted against, any of the Repurchase Assets and such Repurchase Asset is not scheduled to be repurchased by Seller within two (2) Business Days of obtaining such knowledge; and
(E) any other event, circumstance or condition that has resulted, or is reasonably likely to result in a Material Adverse Effect.
(d) Financial Reporting. Seller shall maintain a system of accounting established and administered in accordance with GAAP, and furnish to Buyer:
(i) Within ninety (90) days after the close of each fiscal year, Financial Statements, including a statement of income and changes in shareholders equity of Seller for such year, and the related balance sheet as at the end of such year, all in reasonable detail and accompanied by an opinion of an accounting firm as to said financial statements;
(ii) Reserved;
(iii) Within thirty (30) days after the end of each calendar month, the unaudited balance sheets of Seller as at the end of such period and the related unaudited consolidated statements of income and retained earnings and of cash flows for Seller for such period and the portion of the fiscal year through the end of such period, subject, however, to year-end adjustments;
(iv) Simultaneously with the furnishing of each of the Financial Statements to be delivered pursuant to subsection (i)-(iii) above, or monthly upon Buyers request, a Sellers Compliance Certificate and certified by a Responsible Officer of Seller;
(v) [Reserved]; and
(vi) Promptly, from time to time, such other information regarding the business affairs, operations and financial condition of Seller as Buyer may reasonably request.
(e) Visitation and Inspection Rights. Seller shall permit Buyer to inspect, and take all other actions permitted under Section 16 hereof.
(f) Reimbursement of Expenses. Seller shall promptly reimburse Buyer for all expenses as the same are incurred by Buyer as required by Section 14(b) hereof.
(g) Further Assurances. Seller shall execute and deliver to Buyer all further documents, financing statements, agreements and instruments, and take all further action that may be required by Requirement of Law, or that Buyer may reasonably request, in order to effectuate the transactions contemplated by this Repurchase Agreement and the Facility Documents or, without limiting any of the foregoing, to grant, preserve, protect and perfect the validity and first-priority of the security interests created or intended to be created hereby. Seller shall do all things necessary to preserve the Repurchase Assets so that they remain subject to a first priority perfected security interest hereunder.
(h) True and Correct Information. All information contained in reports, exhibits, schedules, financial statements or certificates furnished by or on behalf of Seller or any of its Affiliates thereof or any of their officers furnished to Buyer hereunder and during Buyers diligence of Seller is and will be true and complete in all material respects and does not (or will not) omit to disclose any material facts necessary to make the statements therein or therein, in light of the circumstances in which they are made, not materially misleading. All required financial statements, information and reports delivered by Seller to Buyer pursuant to this Repurchase Agreement shall be prepared in accordance with GAAP, or as applicable, to SEC filings, the appropriate SEC accounting requirements.
(i) ERISA Events.
(i) Promptly upon becoming aware of the occurrence of any Event of ERISA Termination which together with all other Events of ERISA Termination occurring within the prior twelve (12) months involve a payment of money by or a potential aggregate liability of Seller or any ERISA Affiliate thereof or any combination of such entities in excess of [***] Seller shall give Buyer a written notice specifying the nature thereof, what action Seller or any ERISA Affiliate thereof has taken and, when known, any action taken or threatened by the Internal Revenue Service, the Department of Labor or the PBGC with respect thereto;
(ii) Promptly upon receipt thereof, Seller shall furnish to Buyer copies of (i) all notices received by Seller or any ERISA Affiliate thereof of the PBGCs intent to terminate any Plan or to have a trustee appointed to administer any Plan; (ii) all notices received by Seller or any ERISA Affiliate thereof from the sponsor of a Multiemployer Plan pursuant to Section 4202 of ERISA involving withdrawal liability in excess of [***]; and (iii) all funding waiver requests filed by Seller or any ERISA Affiliate thereof with the Internal Revenue Service with respect to any Plan, the accrued benefits of which exceed the present value of the plan assets as of the date the waiver request is filed, and all communications received by Seller or any ERISA Affiliate thereof from the Internal Revenue Service with respect to any such funding waiver request.
(j) Financial Condition Covenants. Seller shall comply with each of the financial covenants set forth in the Pricing Side Letter as set forth therein.
(k) Hedging. Seller shall hedge all Purchased Assets in accordance with Sellers hedging policies in effect from time to time.
(l) No Adverse Selection. Seller shall not select Eligible Mortgage Loans to be sold to Buyer as Purchased Assets using any type of adverse selection or other selection criteria which would adversely affect Buyer.
(m) Servicer Approval. Seller shall not cause the Mortgage Loans to be serviced by any servicer other than a servicer expressly approved in writing by Buyer, which approval will be deemed granted by Buyer with respect to Seller, Cenlar, FSB, and Loan Care, LLC with the execution of this Repurchase Agreement.
(n) Insurance. Seller shall continue to maintain Fidelity Insurance in an aggregate amount acceptable to Fannie Mae or Freddie Mac. Seller shall maintain Fidelity Insurance in respect of its officers, employees and agents, with respect to any claims made in connection with all or any portion of the Repurchase Assets.
(o) Books and Records. Seller shall, to the extent practicable, maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing the Repurchase Assets in the event of the destruction of the originals thereof), and keep and maintain or obtain, as and when required, all documents, books, records and other information reasonably necessary or advisable for the collection of all Repurchase Assets.
(p) Illegal Activities. Seller shall not engage in any conduct or activity that could subject its assets to forfeiture or seizure.
(q) Material Change in Business. Seller shall not make any material change in the nature of its business as carried on at the date hereof without Buyers reasonable consent; provided that the foregoing shall not prohibit Seller from extending or developing its current lines of business or adding existing business lines reasonably similar, ancillary or complementary thereto.
(r) Limitation on Dividends and Distributions. At any time following the occurrence and during the continuation of an Event of Default, Seller shall not make any payment on account of, or set apart assets for, a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of any equity interest of Seller, whether now or hereafter outstanding, or make any other distribution or dividend in respect of any of the foregoing or to any shareholder or equity owner of Seller, either directly or indirectly, whether in cash or property or in obligations of Seller or any of Sellers consolidated Subsidiaries in any calendar year in excess of [***] of the net income of Seller for such calendar year (determined in accordance with GAAP).
(s) Disposition of Assets; Liens. Seller shall not create, incur, assume or suffer to exist any mortgage, pledge, Lien, charge or other encumbrance of any nature whatsoever on any of the Repurchase Assets, whether real, personal or mixed, now or hereafter owned, other than the Liens created in connection with the transactions contemplated by this Repurchase Agreement;
nor shall Seller cause any of the Purchased Assets to be sold, pledged, assigned or transferred, except as permitted hereunder.
(t) Transactions with Affiliates. Seller shall not enter into any transaction, including, without limitation, the purchase, sale, lease or exchange of property or assets or the rendering or accepting of any service with any Affiliate, unless such transaction is (a) not otherwise prohibited in this Repurchase Agreement, (b) in the ordinary course of Sellers business and (c) upon fair and reasonable terms no less favorable to Seller, as the case may be, than it would obtain in a comparable arms length transaction with a Person which is not an Affiliate.
(u) ERISA Matters.
(i) Seller shall not permit any event or condition which is described in the definition of Event of ERISA Termination to occur or exist with respect to any Plan or Multiemployer Plan if such event or condition, together with all other events or conditions described in the definition of Event of ERISA Termination occurring within the prior twelve (12) months, involves the payment of money by or an incurrence of liability of Seller or any ERISA Affiliate thereof, or any combination of such entities in an amount in excess of[***].
(ii) Seller shall not be an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code and Seller shall not use plan assets within the meaning of 29 CFR §2510.3 101, as modified by Section 3(42) of ERISA, to engage in this Repurchase Agreement or the Transactions hereunder, and transactions by or with Seller are not subject to any state or local statute regulating investments of, or fiduciary obligations with respect to, any governmental plans within the meaning of Section 3(32) of ERISA or church plans within the meaning of Section 3(33) of ERISA.
(v) Consolidations, Mergers and Sales of Assets. Seller shall not (i) consolidate or merge with or into any other Person (unless Seller is the surviving entity from any such consolidation or merger), or (ii) sell, lease or otherwise transfer all or substantially all of its assets to any other Person.
(w) Monthly Servicing Report. On the eighth (8th) day of each calendar month (or if such day is not a Business Day, the immediately following Business Day) or with such greater frequency as requested by Buyer, Seller will furnish to Buyer a monthly report covering, with respect to the Purchased Assets as of the last day of the prior calendar month, the unpaid principal balance, interest paid to date, and next payment date.
(x) Guarantees. Other than in connection with any Debt incurred by a Subsidiary for a warehouse or repurchase facility for Mortgage Loans or a facility for financing Servicing Rights, Seller shall not create, incur, assume or suffer to exist any Guarantees, except (i) to the extent reflected in Sellers financial statements or notes thereto and (ii) to the extent the aggregate Guarantees of Seller do not exceed [***].
(y) Underwriting Guidelines. In the event that Seller makes any material amendment or modification to the Underwriting Guidelines, Seller shall deliver to Buyer a
complete copy of the amended or modified such Underwriting Guidelines; provided, for the avoidance of doubt, Buyer will not purchase any Mortgage Loans originated pursuant to Underwriting Guidelines that have not been approved by Buyer.
(z) Agency Approvals; Servicing. Unless otherwise approved in writing by Buyer in advance, Seller shall maintain its status (to the extent previously approved) with Fannie Mae, Freddie Mac and GNMA as an approved lender and Freddie Mac as an approved seller/servicer, in each case in good standing (each such approval, an Agency Approval). Should Seller, for any reason, cease to possess all such applicable Agency Approvals, Seller shall so notify Buyer immediately in writing. Notwithstanding the preceding sentence, Seller shall take all necessary action to maintain all of its applicable Agency Approvals (to the extent previously approved) at all times during the term of this Repurchase Agreement and each outstanding Transaction.
(aa) Takeout Payments. With respect to each Purchased Asset subject to a Takeout Commitment, Seller shall arrange that all payments under the related Takeout Commitment be paid either (i) directly to Buyer to the account set forth in Schedule 4 hereto or (ii) directly to the Securities Intermediary under the Joint Securities Agreement or (iii) to an account approved by Buyer in writing prior to such payment.
(bb) Most Favored Status. Seller agrees that should Seller or any Affiliate thereof enter into a repurchase agreement or credit facility with any Person other than Buyer or an Affiliate of Buyer which by its terms provides more favorable terms to such Person with respect to any guaranties or financial covenants (a More Favorable Agreement), the terms of this Repurchase Agreement shall be deemed automatically amended to include such more favorable terms contained in such More Favorable Agreement; provided that in the event that such More Favorable Agreement is terminated, upon notice by Seller to Buyer of such termination, the original terms of this Repurchase Agreement shall be deemed to be automatically reinstated. Seller further agrees to execute and deliver any additional guaranties, agreements or amendments to this Repurchase Agreement evidencing such more favorable terms; provided that the execution of such guaranties, agreements or amendments will not be a precondition to the effectiveness thereof, but will merely be for the convenience of the parties hereto. Promptly upon Seller or any Affiliate thereof entering into any such repurchase agreement, credit facility or other comparable agreement with any Person other than Buyer, Seller shall deliver to Buyer a summary of any more favorable terms contained in such More Favorable Agreement.
(cc) No Division/Series Transactions. Notwithstanding anything to the contrary contained in this Repurchase Agreement or any other Facility Document, (i) no Seller that is a limited liability company organized under the laws of the State of Delaware shall enter into (or agree to enter into) any Division/Series Transaction, or permit any of its Subsidiaries to enter into (or agree to enter into), any Division/Series Transaction and (ii) none of the provisions in this Repurchase Agreement nor any other Facility Document, shall be deemed to permit any Division/Series Transaction.
SECTION 12. EVENTS OF DEFAULT
If any of the following events (each an Event of Default) occurs, Seller and Buyer have the rights set forth in Section 13 hereof, as applicable:
(a) Payment Default. Seller fails to make any payment of (i) Repurchase Price when due (other than Price Differential) or Margin Deficit when due, whether by acceleration, mandatory repurchase or otherwise and with respect to this clause (i) only, such failure is unremedied for more than [***], (ii) Price Differential when due, under the terms of the Facility Documents, and with respect to this clause (ii) only, such default is unremedied for more than [***] Business Days, or (iii) any sum (other than Repurchase Price, Price Differential or Margin Deficit) when due under the terms of the Facility Documents and such failure continues for more than [***] Business Days.
(b) Immediate Representation, Warranty and Covenant Default. The failure of Seller to perform, comply with or observe any term, covenant or agreement applicable to Seller contained in any of Sections 10(g) (Purchased Assets), (p) (Indebtedness), (t) (Solvency) or Sections 11(a) (Preservation of Existence), (h) (True and Correct Information) solely to the extent such information is intentionally or materially false and misleading or is materially false or misleading on a persistent basis, (j) (Financial Condition Covenants), (p) (Illegal Activities), (r) (Limitation on Dividends and Distributions), (s) (Disposition of Assets; Liens), (t) (Transactions with Affiliates), (u) (ERISA Matters), (v) (Consolidations, Mergers and Sales of Assets), (x) (Guarantees), (z) (Agency Approvals) or (aa) (Takeout Payments) solely to the extent such event of default is intentional or on a persistent basis.
(c) Representation and Warranty Breach. Any representation, warranty or certification made or deemed made herein or in any other Facility Document (and not covered by clause (b) of this Section) by Seller or any certificate furnished to Buyer pursuant to the provisions hereof or thereof or any information with respect to the Mortgage Loans furnished in writing by or on behalf of Seller (other than the representations and warranties set forth in Schedule 1 hereto, which are considered solely for the purpose of determining the Market Value of the Purchased Assets; provided that unless such breach is knowing and intentional, if any such breach is capable of being cured, Seller shall have [***] calendar days to cure such breach.
(d) Additional Covenant Defaults. Seller fails to observe or perform any other covenant or agreement contained in this Repurchase Agreement (and not covered by clause (b) of this Section) or any other Facility Document; and, if such default is capable of being remedied, such failure to observe or perform continues unremedied for a period of [***] calendar days.
(e) Judgments. A judgment or judgments for the payment of money in excess of [***] in the aggregate is rendered against Seller or any Affiliate thereof by one (1) or more courts, administrative tribunals or other bodies having jurisdiction and the same is not satisfied, discharged (or provision is not made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within [***] days from the date of entry thereof, and Seller or any Affiliate thereof will not, within said period of [***] days, or such longer period during which execution of the same has been stayed or bonded, appeal therefrom and cause the execution thereof to be stayed during such appeal.
(f) RBC Cross-Default. Any event of default or any other default which permits a demand for, or requires, the early repayment of obligations due by Seller or any Affiliate under any agreement with Buyer or any of its Affiliates (after the expiration of any applicable grace period under any such agreement) relating to any Indebtedness of Seller or any of its Affiliates owing to Buyer or any of its Affiliates, as applicable, shall have occurred.
(g) Third Party Cross Default. Any event of default or any other default which permits a demand for, or requires, the early repayment of obligations due by Seller or any of its Affiliates under any other agreement (after the expiration of any applicable grace period under any such agreement) relating to any other Indebtedness of Seller or any of its Affiliates, in excess of [***] shall have occurred and such event of default or other default is not cured or waived by the counterparty prior to the expiration of the applicable grace period under any such agreement; or
(h) Insolvency Event. An Insolvency Event has occurred with respect to Seller.
(i) Enforceability. For any reason, this Repurchase Agreement at any time shall not be in full force and effect or ceases to be enforceable in accordance with its terms, or any Lien granted pursuant thereto shall fail to be perfected and of first priority, or Seller or any Affiliate of Seller shall contest the validity, enforceability, perfection or priority of any Lien granted pursuant thereto, Seller or any Affiliate of Seller shall seek to disaffirm, terminate, limit or reduce its obligations hereunder; and all Obligations outstanding are not paid in full within [***].
(j) [Reserved].
(k) Material Adverse Effect. A Material Adverse Effect shall have occurred.
(l) ERISA. (i) Seller engages in any prohibited transaction (as defined in Section 406 of ERISA or Section 4975 of the Code) involving any Plan, (ii) any accumulated funding deficiency (as defined in Section 304 of ERISA), whether or not waived, exists with respect to any Plan or any Lien in favor of the PBGC or a Plan arises on the assets of Seller or any ERISA Affiliate, (iii) a Reportable Event occurs with respect to, or proceedings commence to have a trustee appointed, or a trustee is appointed, to administer or to terminate, any Plan, which Reportable Event or commencement of proceedings or appointment of a trustee is likely to result in the termination of such Plan for purposes of Title IV of ERISA, (iv) any Plan terminates for purposes of Title IV of ERISA, (v) Seller or any ERISA Affiliate will, or in the reasonable opinion of Buyer is likely to, incur any liability in connection with a withdrawal from, or the insolvency or reorganization of, a Multiemployer Plan or (vi) any other event or condition occurs or exists with respect to a Plan; and in each case in clauses (i) through (vi) above, such event or condition, together with all other such events or conditions, if any, would reasonably be expected to have a Material Adverse Effect.
(m) Change in Control. A Change in Control has occurred without the prior written consent of Buyer.
(n) [Reserved].
(o) Government Action. Any Governmental Authority or any Person acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of Seller, or shall have taken any action to displace the management of Seller or to curtail its authority in the conduct of the business of Seller, or takes any action in the nature of enforcement to remove, limit or restrict the approval of Seller as an issuer, buyer or a seller/servicer of Purchased Assets or securities backed thereby, and such action provided for in this Section 12(o) shall not have been discontinued or stayed within [***] days.
SECTION 13. REMEDIES
(a) If an Event of Default occurs, the following rights and remedies are available to Buyer; provided that an Event of Default is deemed to be continuing unless expressly waived by Buyer in writing.
(i) At the option of Buyer, exercised by written notice to Seller, the Repurchase Date for each Transaction hereunder, if it has not already occurred, shall be deemed to occur.
(ii) If Buyer exercises the option referred to in subsection (a)(i) of this Section,
(A) Sellers obligations in such Transactions to repurchase all Purchased Assets, at the Repurchase Price therefor on the Repurchase Date determined in accordance with subsection (a)(i) of this Section, (1) thereupon becomes immediately due and payable; (2) all Income paid after such exercise or deemed exercise is retained by Buyer and applied to the aggregate unpaid Repurchase Price and any other amounts owed by Seller hereunder and (3) Seller will immediately deliver to Buyer any Purchased Assets subject to such Transactions then in Sellers possession or control;
(B) to the extent permitted by applicable law, the Repurchase Price with respect to each such Transaction is increased by the aggregate amount obtained by daily application of, on a 360-day-per-year basis for the actual number of days during the period from and including the date of the exercise or deemed exercise of such option to but excluding the date of payment of the Repurchase Price as so increased, (x) the Post-Default Rate in effect following an Event of Default to (y) the Repurchase Price for such Transaction as of the Repurchase Date as determined pursuant to subsection (a)(i) of this Section (decreased as of any day by (i) any amounts actually received by Buyer pursuant to clause (C) of this subsection, and (ii) any proceeds from the sale of Purchased Assets applied to the Repurchase Price pursuant to subsection (a)(iv) of this Section; and
(C) all Income actually received by Buyer pursuant to Section 5 hereof (excluding any Late Payment Fees paid pursuant to Section 5(a) hereof) is applied to the aggregate unpaid Repurchase Price owed by Seller.
(iii) Upon the occurrence of one (1) or more Events of Default, Buyer has the right to obtain physical possession of all files of Seller relating to the Purchased Assets and
the Repurchase Assets and all documents relating to the Purchased Assets which are then or may thereafter come in to the possession of Seller or any third party acting for Seller and Seller shall deliver to Buyer such assignments as Buyer requests.
(iv) At any time on the Business Day following notice to Seller (which notice may be the notice given under subsection (a)(i) of this Section) or on any Business Day thereafter, in the event Seller has not repurchased all Purchased Assets, Buyer may (A) sell, without demand or further notice of any kind, at a public or private sale and at such price or prices as Buyer may deem satisfactory any or all Purchased Assets and the Repurchase Assets subject to a such Transactions hereunder and apply the proceeds thereof to the aggregate unpaid Repurchase Prices and any other amounts owing by Seller hereunder or (B) in its sole good faith discretion elect, in lieu of selling all or a portion of such Purchased Assets, to give Seller credit for such Purchased Assets and the Repurchase Assets in an amount equal to the Market Value of the Purchased Assets against the aggregate unpaid Repurchase Price and any other amounts owing by Seller hereunder. The date of sale or giving such credit by Buyer may be determined by Buyer in its sole good faith discretion and such date shall be considered the date of liquidation hereunder for all purposes, including without limitation Section 562 of the Bankruptcy Code. Such credit shall be applied to the Repurchase Price as determined by Buyer in its sole good faith discretion.
(v) Seller will be liable to Buyer for (i) the amount of all reasonable and documented external legal or other expenses (including, without limitation, all out-of-pocket costs and expenses of Buyer in connection with the enforcement of this Repurchase Agreement or any other agreement evidencing a Transaction, whether in action, suit or litigation or bankruptcy, insolvency or other similar proceeding affecting creditors rights generally, further including but not limited to, the reasonable fees and expenses of external counsel incurred in connection with or as a result of an Event of Default, (ii) damages in an amount equal to the cost (including all reasonable and documented out-of-pocket fees, expenses, commissions) of entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default, and (iii) any other reasonable and documented out-of-pocket loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default in respect of a Transaction.
(vi) Buyer has, in addition to its rights hereunder, any rights otherwise available to it under any other Facility Document or applicable law.
(vii) The parties recognize that it may not be possible to sell or value all of the Purchased Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner because the market for such Purchased Assets may not be liquid. In view of the nature of the Purchased Assets the parties agree that sale or valuation of a Transaction or the underlying Purchased Assets may take a period of time following the accelerated Repurchase Date and does not require a public purchase or sale and that any good faith private purchase or sale shall be deemed to have been made in a commercially reasonable manner. Accordingly, Buyer may elect the time and manner of selling any Purchased Asset and nothing contained herein shall obligate Buyer to sell or value any
Purchased Asset on the accelerated Repurchase Date or to sell or value all Purchased Assets in the same manner or on the same Business Day or shall constitute a waiver of any right or remedy of Buyer.
(viii) To the extent permitted by applicable law, Seller waives all claims, damages and demands it may acquire against Buyer arising out of the exercise by Buyer of any rights hereunder after an Event of Default, other than those claims, damages and demands arising from the gross negligence, bad faith or willful misconduct of Buyer.
(b) Buyer may exercise one (1) or more of the remedies available hereunder upon the occurrence of an Event of Default and/or at any time thereafter without notice to Seller. All rights and remedies arising under this Repurchase Agreement as amended from time to time hereunder are cumulative and not exclusive of any other rights or remedies which Buyer may have.
(c) Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require Buyer to enforce its rights by judicial process. Seller also waives any defense (other than a defense of payment or performance) Seller might otherwise have arising from the use of nonjudicial process, enforcement and sale of all or any portion of the Repurchase Assets, or from any other election of remedies. Seller recognizes that nonjudicial remedies are consistent with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arms length.
(d) To the extent permitted by applicable law, Seller is liable to Buyer for interest on any amounts owing by Seller hereunder, from the date Seller becomes liable for such amounts hereunder until such amounts are (i) paid in full by Seller or (ii) satisfied in full by the exercise of Buyers rights hereunder. Interest on any sum payable by Seller to Buyer under this Section 13(d) is at a rate equal to the Post-Default Rate.
(e) Without limiting the rights of Buyer hereto to pursue all other legal and equitable rights available to Buyer for Sellers failure to perform its obligations under this Repurchase Agreement, Seller acknowledges and agrees that the remedy at law for any failure to perform Obligations hereunder would be inadequate and Buyer is entitled to seek equitable remedies in the event of any such failure. The availability of these remedies does not prohibit Buyer from pursuing any other remedies for such breach, including the recovery of monetary damages. Following the exercise of remedies pursuant to this Section 13, if Purchased Assets are sold, Buyer shall give written notice to Seller of the amount at which such Purchased Assets were disposed and how such proceeds were applied.
SECTION 14. INDEMNIFICATION AND EXPENSES; RECOURSE
(a) Seller shall hold Buyer, and its Affiliates and their officers, directors, employees, agents and advisors (each an Indemnified Party) harmless from and indemnify any Indemnified Party against all liabilities, losses, damages, judgments, costs and expenses of any kind (including reasonable fees of external counsel) which may be imposed on, incurred by or asserted against such Indemnified Party (collectively, Costs), relating to or arising out of this Repurchase Agreement, any other Facility Document or any transaction contemplated hereby or
thereby, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Repurchase Agreement, any other Facility Document or any transaction contemplated hereby or thereby, that, in each case, results from anything other than the Indemnified Partys gross negligence, bad faith or willful misconduct. Without limiting the generality of the foregoing, Seller shall hold each Indemnified Party harmless from and indemnify such Indemnified Party against all Costs with respect to all Mortgage Loans relating to or arising out of any Taxes incurred or assessed in connection with the ownership of the Mortgage Loans, that, in each case, results from anything other than the Indemnified Partys gross negligence, bad faith or willful misconduct. Seller also shall reimburse an Indemnified Party as and when billed by such Indemnified Party for all of the Indemnified Partys costs and expenses incurred in connection with the enforcement or the preservation of Buyers rights under this Repurchase Agreement, any other Facility Document or any transaction contemplated hereby or thereby, including without limitation the reasonable fees and disbursements of external counsel.
(b) Seller shall pay, within forty-five (45) days of Sellers receipt of an invoice from Buyer, all of the reasonable and documented out-of-pocket costs and expenses incurred by Buyer in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Repurchase Agreement, any other Facility Document or any other documents prepared in connection herewith or therewith; provided that any attorneys fees to be paid by Seller in connection with such development, preparation and execution of, this Repurchase Agreement, any other Facility Document or any other documents prepared in connection herewith or therewith on or prior to the Effective Date shall not exceed the Legal Fee Cap; and provided further that such Legal Fee Cap shall not apply with respect to any amendment, modification or any other legal fees incurred following the Effective Date. Subject to the foregoing, Seller shall pay as and when billed by Buyer all of the reasonable out-of-pocket costs and expenses incurred in connection with the consummation and administration of the transactions contemplated hereby and thereby including without limitation filing fees and all the reasonable fees, disbursements and expenses of counsel to Buyer. Subject to the limitations set forth in Section 16 hereof, Seller shall pay Buyer all the reasonable out-of-pocket due diligence, inspection, testing and review costs and expenses incurred by Buyer with respect to Mortgage Loans submitted by Seller for purchase under this Repurchase Agreement, including, but not limited to, those out-of-pocket costs and expenses incurred by Buyer pursuant to Sections 14(b) and 16 hereof.
(c) The obligations of Seller from time to time to pay the Repurchase Price and all other amounts due under this Repurchase Agreement are full recourse obligations of Seller.
SECTION 15. SERVICING
(a) Seller, on Buyers behalf, shall contract with Servicer to, or if Seller is the Servicer, it shall, service the Mortgage Loans consistent with the degree of skill and care that Seller customarily requires with respect to similar Mortgage Loans owned or managed by it and in accordance with Accepted Servicing Practices. The Servicer shall (i) comply with all applicable Federal, State and local laws and regulations, (ii) maintain all state and federal licenses necessary for it to perform its servicing responsibilities hereunder and (iii) not impair the rights of Buyer in any Mortgage Loans or any payment thereunder. Buyer may terminate the servicing of any Mortgage Loan with the then existing Servicer in accordance with Section 15(e) hereof.
(b) Seller shall cause the Servicer to hold or cause to be held all escrow funds collected by Seller with respect to any Purchased Assets in trust accounts and shall apply the same for the purposes for which such funds were collected.
(c) Upon the occurrence of an Event of Default, Seller shall upon notice from Buyer to Seller, cause the Servicer to deposit all collections received by Seller on account of the Purchased Assets in the account set forth in Section 9 hereof at such time as the Servicer is required to remit such amounts to Seller pursuant to the applicable Servicing Agreement.
(d) [Reserved].
(e) Upon the occurrence of an Event of Default hereunder Buyer has the right to immediately terminate the Servicers right to service the Purchased Assets without payment of any penalty or termination fee. Seller shall cooperate in transferring the servicing of the Purchased Assets to a successor servicer appointed by Buyer in its sole discretion.
(f) If Seller should discover that, for any reason whatsoever, any entity responsible to Seller by contract for managing or servicing any such Purchased Asset has failed to perform fully Sellers obligations under the Facility Documents or any of the obligations of such entities with respect to the Purchased Assets, Seller shall promptly notify Buyer.
(g) For the avoidance of doubt, Seller retains no economic rights to the servicing of the Purchased Assets; provided that Seller shall continue to service the Purchased Assets hereunder as part of its Obligations hereunder. As such, Seller expressly acknowledges that the Purchased Asset are sold to Buyer on a servicing released basis.
SECTION 16. DUE DILIGENCE
(a) Seller acknowledges that Buyer has the right to perform continuing due diligence reviews with respect to the Mortgage Loans and Seller, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and Seller agrees that upon reasonable prior notice (but no less than five (5) Business Days) unless an Event of Default has occurred, in which case no notice is required, to Seller, Buyer or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Mortgage Files and any and all documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession or under the control of Seller and/or Custodian. Seller also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Mortgage Files and the Mortgage Loans. Without limiting the generality of the foregoing, Seller acknowledges that Buyer may purchase Mortgage Loans from Seller based solely upon the information provided by Seller to Buyer in the Mortgage Loan Schedule and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Mortgage Loans purchased in a Transaction, including, without limitation, ordering brokers price opinions, new credit reports and new appraisals on the related Mortgaged Properties and otherwise re-generating the information used to originate such Mortgage Loan as of the date such Mortgage Loan was originated. Buyer may underwrite such Mortgage Loans itself or engage a mutually agreed upon third party underwriter
to perform such underwriting. Seller agrees to cooperate with Buyer and any third party underwriter in connection with such underwriting, including, but not limited to, providing Buyer and any third party underwriter with access to any and all documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession, or under the control, of Seller; provided that any such third party underwriter shall have first agreed to confidentiality provisions substantially similar to Section 29 hereof. Seller further agrees that Seller shall pay all reasonable and documented out-of-pocket costs and expenses incurred by Buyer in connection with Buyers activities pursuant to this Section 16 (Due Diligence Costs) in an amount not exceed the Due Diligence Cap; provided that such Due Diligence Cap shall not apply upon the occurrence of an Event of Default.
SECTION 17. ASSIGNABILITY
The rights and obligations of the parties under this Repurchase Agreement and under any Transaction shall not be assigned by Seller without the prior written consent of Buyer. Subject to the foregoing, this Repurchase Agreement and any Transactions will be binding upon and will inure to the benefit of the parties and their respective successors and assigns. Nothing in this Repurchase Agreement express or implied, gives to any Person, other than the parties to this Repurchase Agreement and their successors hereunder, any benefit of any legal or equitable right, power, remedy or claim under this Repurchase Agreement. Buyer may from time to time assign all or a portion of its rights and obligations under this Repurchase Agreement and the other Facility Documents with Sellers consent not to be unreasonably withheld; provided, however that such consent shall not be required if Buyer assigns its rights and obligations (i) to an Affiliate of Buyer or (ii) after the occurrence and during the continuance of an Event of Default; pursuant to an executed assignment and acceptance by Buyer and assignee (Assignment and Acceptance), specifying the percentage or portion of such rights and obligations assigned. Upon such assignment, (a) such assignee is a party hereto and to each of the other Facility Documents to the extent of the percentage or portion set forth in the Assignment and Acceptance, and will succeed to the applicable rights and obligations of Buyer hereunder (including the rights and obligations under Section 7 hereof (including the provision of tax forms), and (b) Buyer will, to the extent that such rights and obligations have been so assigned by it be released from its obligations hereunder and under the other Facility Documents. Unless otherwise stated in the Assignment and Acceptance, Seller shall continue to take directions solely from Buyer unless otherwise notified by Buyer in writing. Buyer may distribute to any prospective assignee this Repurchase Agreement, any Facility Document, and any other document or other information delivered to Buyer by Seller; provided that such assignee agrees to hold such information subject to the confidentiality provisions of this Repurchase Agreement.
Buyer may sell participations to one (1) or more Persons in or to all or a portion of its rights and obligations under this Repurchase Agreement and the other Facility Documents; provided, however, that (i) Buyers obligations under this Repurchase Agreement will remain unchanged (including without limitation returning the exact Purchased Assets and the related Repurchase Assets to Seller and not substitutes therefor), (ii) Buyer will remain solely responsible to Seller for the performance of such obligations; (iii) Seller shall continue to deal solely and directly with Buyer in connection with Buyers rights and obligations under this Repurchase Agreement and the other Facility Documents except as provided in Section 7 hereof; and (iv)
provided that such participant agrees to hold any confidential information it receives in connection therewith subject to the confidentiality provisions of this Repurchase Agreement.
Buyer may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 17, disclose to the assignee or participant or proposed assignee or participant, as the case may be, any information relating to Seller or any of its Subsidiaries or to any aspect of the Transactions that has been furnished to Buyer by or on behalf of Seller or any of its Subsidiaries; provided that such assignee or participant agrees to hold such information subject to the confidentiality provisions of this Repurchase Agreement.
In the event Buyer assigns all or a portion of its rights and obligations under this Repurchase Agreement, the parties hereto agree to negotiate in good faith an amendment to this Repurchase Agreement to add agency provisions similar to those included in repurchase agreements for similar syndicated repurchase facilities; provided that Buyer shall reimburse Seller for all reasonable and documented out-of-pocket expenses related to any such amendment; provided, further, that any such amendment shall not increase the obligations or curtail the rights of Seller hereunder.
SECTION 18. TRANSFER AND MAINTENANCE OF REGISTER.
(a) Subject to acceptance and recording thereof pursuant to paragraph (b) of this Section 18, from and after the effective date specified in each Assignment and Acceptance the assignee thereunder is a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of Buyer under this Repurchase Agreement. Any assignment or transfer by Buyer of rights or obligations under this Repurchase Agreement that does not comply with this Section 18 will be treated for purposes of this Repurchase Agreement as a sale by such Buyer of a participation in such rights and obligations in accordance with Section 17 hereof.
(b) Buyer, on Sellers behalf, shall maintain a register (the Register) on which it will record the Transactions outstanding hereunder and each Assignment and Acceptance. The Register will include the name and address of Buyer (including all assignees and successors) and the percentage or portion of such rights and obligations assigned. The entries in the Register will be conclusive absent manifest error, and Seller shall treat each Person whose name is recorded in the Register as a buyer for all purposes of this Repurchase Agreement.
(c) Buyer shall as agent of Seller, for review by Seller upon written request, maintain a participation register (the Participation Register) on which it shall record each participation. The Participation Register will include the names and addresses of Buyer (including all participants) and the percentage or portion of such rights and obligations participated. The entries in the Participation Register will be conclusive absent manifest error, and Seller shall treat each Person whose name is recorded in the Participation Register as a buyer for all purposes of this Repurchase Agreement. If Buyer sells a participation in its rights hereunder, it shall provide Seller, or maintain as agent of Seller, the information described in this paragraph and permit Seller to review such information as reasonably needed for Seller to comply with its obligations under this Repurchase Agreement or under any applicable Requirement of Law.
SECTION 19. HYPOTHECATION OR PLEDGE OF PURCHASED ASSETS
Nothing in this Repurchase Agreement shall preclude Buyer from pledging its interest in the Purchased Assets and the related Repurchase Assets as permitted by the Facility Documents; provided, however, that no such pledge will relieve Buyer of any of its obligations hereunder, including but not limited to, its obligation to return to Seller the exact Purchased Assets and the related Repurchase Assets and not substitutes therefor. No such pledge shall relieve Buyer of its obligations under the Facility Documents, including, without limitation, Buyers obligation to transfer Purchased Assets to Seller pursuant to the terms of the Facility Documents. Nothing contained in this Repurchase Agreement obligates Buyer to segregate any Purchased Assets or Repurchase Assets delivered to Buyer by Seller. Seller shall not be responsible for any additional obligations, costs, fees or expenses in connection with such transactions of Buyer.
SECTION 20. TAX TREATMENT
Each party to this Repurchase Agreement acknowledges that it is its intent for purposes of U.S. federal, state and local income and franchise taxes, to treat each Transaction as indebtedness of Seller that is secured by the Purchased Assets and that, in the absence of an Event of Default and Buyers exercise of remedies hereunder, the Purchased Assets are owned by Seller. All parties to this Repurchase Agreement agree to such treatment and agree to take no action inconsistent with this treatment, unless required by law.
SECTION 21. SET-OFF
In addition to any rights and remedies of Buyer hereunder and by law, Buyer has the right, without prior notice to Seller, any such notice being expressly waived by Seller to the extent permitted by applicable Requirements of Law to set-off and appropriate and apply against any Obligation from Seller or any Affiliate thereof to Buyer or any of its Affiliates any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other obligation (including to return excess margin), credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by or due from Buyer or any Affiliate thereof to or for the credit or the account of Seller or any Affiliate thereof. Buyer agrees promptly to notify Seller after any such set off and application made by Buyer (including reasonable detail thereof); provided that the failure to give such notice will not affect the validity of such set off and application.
At all times, Buyer has the right, in each case until such time as Buyer determines otherwise, to retain, to suspend payment or performance of, or to decline to remit, any amount or property that Buyer would otherwise be obligated to pay, remit or deliver to Seller hereunder if an Event of Default has occurred and be continuing with respect to Seller.
SECTION 22. TERMINABILITY
Each representation and warranty made or deemed to be made by entering into a Transaction, herein or pursuant hereto, will survive the making of such representation and warranty, and Buyer will not be deemed to have waived any Event of Default that may arise because any such representation or warranty has proved to be false or misleading in any material respect, notwithstanding that Buyer may have had notice or knowledge or reason to believe that
such representation or warranty was false or misleading at the time the Transaction was made. Notwithstanding the occurrence of such Event of Default, all of the representations and warranties and covenants hereunder will continue and survive. The obligations of Seller under Sections 6, 7 and 14 and Seller and Buyer under Section 29 hereof will survive the termination of this Repurchase Agreement and the repayment of all Obligations; provided that the Obligations under Section 29(a) hereof shall survive for two (2) years thereafter.
SECTION 23. NOTICES AND OTHER COMMUNICATIONS
Except as otherwise expressly permitted by this Repurchase Agreement, all notices, requests and other communications provided for herein (including without limitation any modifications of, or waivers, requests or consents under, this Repurchase Agreement) shall be given or made in writing (including without limitation electronically by email) delivered to the intended recipient at the Address for Notices below its name on the signature page hereof and on Schedule 3 as may be updated from time to time; or, as to any party, at such other address as designated by such party in a written notice to each other party. Except as otherwise provided in this Repurchase Agreement and except for notices given under Section 3 hereof (which is effective only on receipt), all such communications are deemed to have been duly given when transmitted electronically or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid. In all cases, to the extent that the related individual set forth in the respective Attention line is no longer employed by the respective Person, such notice may be given to the attention of a Responsible Officer of the respective Person or to the attention of such individual or individuals as subsequently notified in writing by a Responsible Officer of the respective Person or as indicated on the then-current version of Schedule 3.
SECTION 24. ENTIRE AGREEMENT; SEVERABILITY; SINGLE AGREEMENT
This Repurchase Agreement, together with the other Facility Documents, constitutes the entire understanding between Buyer and Seller with respect to the subject matter they cover and supersedes any existing agreements between the parties containing general terms and conditions for repurchase transactions involving Purchased Assets. By acceptance of this Repurchase Agreement, Buyer and Seller acknowledge that they have not made, and are not relying upon, any statements, representations, promises or undertakings not contained in this Repurchase Agreement or any other Facility Document. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
Buyer and Seller acknowledge that, and have entered into this Repurchase Agreement and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and that each has been entered into in consideration of the other Transactions. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations (after any applicable notice and cure period) constitutes a default by it in respect of all Transactions hereunder, (ii) that each of them is entitled to set off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transaction hereunder; (iii) that
payments, deliveries, and other transfers made by either of them in respect of any Transaction is deemed to have been made in consideration of payments, deliveries, and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries, and other transfers may be applied against each other and netted and (iv) to promptly provide notice to the other after any such set off or application.
SECTION 25. GOVERNING LAW
THIS REPURCHASE AGREEMENT IS GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE EFFECTIVENESS, VALIDITY AND ENFORCEABILITY OF ELECTRONIC CONTRACTS, OTHER RECORDS, ELECTRONIC RECORDS AND ELECTRONIC SIGNATURES USED IN CONNECTION WITH ANY ELECTRONIC TRANSACTION BETWEEN BUYER AND SELLER SHALL BE GOVERNED BY E-SIGN.
SECTION 26. SUBMISSION TO JURISDICTION; WAIVERS
EACH OF BUYER AND SELLER HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS REPURCHASE AGREEMENT AND THE OTHER FACILITY DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH BUYER WILL HAVE BEEN NOTIFIED;
(iv) AGREES THAT NOTHING HEREIN AFFECTS THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR LIMITS THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND
(v) IRREVOCABLY WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS REPURCHASE AGREEMENT, ANY OTHER FACILITY DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 27. NO WAIVERS, ETC.
No failure on the part of either party to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any Facility Document operates as a waiver thereof, nor does any single or partial exercise of any right, power or privilege under any Facility Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. An Event of Default will be deemed to be continuing unless expressly waived by Buyer in writing.
SECTION 28. RESERVED
SECTION 29. CONFIDENTIALITY
(a) Buyer and Seller hereby acknowledge and agree that all written or computer-readable information provided by one party to the other regarding the disclosing partys confidential or proprietary information and the terms set forth in any of the Facility Documents or the Transactions contemplated thereby (the Confidential Terms) will be kept confidential and will not be divulged to any party without the prior written consent of such other party except to the extent that (i) it is necessary to do so in working with legal counsel, auditors, subcontractors, potential third-party back-up servicers, taxing authorities or other governmental agencies or regulatory bodies or in order to comply with any applicable Requirements of Law, (ii) any of the Confidential Terms are in the public domain other than due to a breach of the provisions of this Section 29, or (iii) in the event of an Event of Default Buyer in good faith determines such information to be necessary or desirable to disclose to potential buyers in connection with the marketing and sales of the Purchased Assets or otherwise to enforce or exercise Buyers rights hereunder; provided that any such potential buyer shall have first agreed to confidentiality provisions substantially similar to Section 29 hereof. Notwithstanding the foregoing or anything to the contrary contained herein or in any other Facility Document, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the Transactions, any fact relevant to understanding the federal, state and local tax treatment of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that Seller may not disclose the name of or identifying information with respect to Buyer or any pricing terms (including, without limitation, the Pricing Rate, Purchase Price Percentage and Purchase Price) or other nonpublic business or financial information (including any Concentration Limits and financial covenants) that is unrelated to the federal, state
and local tax treatment of the Transactions and is not relevant to understanding the federal, state and local tax treatment of the Transactions, without the prior written consent of Buyer.
(b) Notwithstanding anything in this Repurchase Agreement to the contrary, Buyer and Seller shall each comply with all applicable local, state and federal laws, including, without limitation, all privacy and data protection law, rules and regulations that are applicable to the Purchased Assets and/or any applicable terms of this Repurchase Agreement (the Confidential Information). Buyer and Seller each understands and agrees that the Confidential Information may contain nonpublic personal information, as that term is defined in Section 509(4) of the Gramm-Leach-Bliley Act (the GLB Act), and agrees to maintain such nonpublic personal information that it receives hereunder in accordance with the GLB Act and other applicable federal and state privacy laws. Buyer and Seller shall each implement such physical and other security measures necessary to (a) ensure the security and confidentiality of the nonpublic personal information of the customers and consumers (as those terms are defined in the GLB Act) of Buyer and Seller and each of their respective affiliates, as applicable, (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Buyer and Seller shall each, at a minimum establish and maintain such data security program as is necessary to meet the objectives of the Interagency Guidelines Establishing Standards for Safeguarding Customer Information as set forth in the Code of Federal Regulations at 12 C.F.R. Parts 30, 208, 211, 225, 263, 308, 364, 568 and 570. Upon request, Buyer or Seller shall each provide evidence reasonably satisfactory to allow the other party as applicable, to confirm that Buyer or Seller, as applicable, has satisfied its obligations as required under this Section. Without limitation, this may include each of Buyer and Sellers review of audits, summaries of test results, and other equivalent evaluations of the other party. Each of Buyer and Seller shall notify the other party immediately following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the customers and consumers of Buyer or Seller or any of their respective affiliates provided directly to Buyer or Seller, as applicable, by Buyer or Seller, as applicable, or such Affiliate. Buyer and Seller shall each provide such written notice to the other party by personal delivery, by electronic communication with confirmation of receipt, or by overnight courier with confirmation of receipt to the applicable requesting individual.
SECTION 30. INTENT
(a) The parties recognize that this Repurchase Agreement, together with each Transaction hereunder, is a repurchase agreement as that term is defined in Section 101 of Title 11 of the United States Code, as amended, a securities contract as that term is defined in Section 741 of Title 11 of the United States Code, as amended, and a master netting agreement as that term is defined in Section 101(38A)(A) of the Bankruptcy Code, that all payments hereunder are deemed margin payments or settlement payments as defined in Title 11 of the United States Code, and that the pledge of the Repurchase Assets constitutes a security agreement or other arrangement or other credit enhancement that is related to the Repurchase Agreement and Transactions hereunder within the meaning of Sections 101(38A)(A), 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code. Seller and Buyer further recognize and intend that this Repurchase Agreement is an agreement to provide financial accommodations and is not subject to assumption pursuant to Bankruptcy Code Section 365(a).
(b) Buyers right to liquidate the Purchased Assets delivered to it in connection with the Transactions hereunder or to accelerate or terminate this Repurchase Agreement or otherwise exercise any other remedies pursuant to Section 13 hereof is a contractual right to liquidate, accelerate or terminate such Transaction as described in Bankruptcy Code Sections 555, 559 and 561; any payments or transfers of property made with respect to this Repurchase Agreement or any Transaction to satisfy a Margin Deficit is considered a margin payment as such term is defined in Bankruptcy Code Section 741(5).
(c) The parties agree and acknowledge that if a party hereto is an insured depository institution, as such term is defined in the Federal Deposit Insurance Act, as amended (FDIA), then each Transaction hereunder is a qualified financial contract, as that term is defined in FDIA and any rules, orders or policy statements thereunder (except insofar as the type of assets subject to such Transaction would render such definition inapplicable).
(d) Reserved.
(e) This Repurchase Agreement is intended to be a repurchase agreement and a securities contract, within the meaning of Section 101(47), Section 546, Section 555, Section 559 and Section 741 under the Bankruptcy Code.
(f) Each party agrees that this Repurchase Agreement is intended to create mutuality of obligations between the parties, and as such, this Repurchase Agreement constitutes a contract which (i) is between both of the parties and (ii) places each party in the same right and capacity.
SECTION 31. [RESERVED]
SECTION 32. AUTHORIZATIONS
The persons whose signatures and titles appear on Schedule 3 hereto are authorized, acting singly, to act for Seller or Buyer, as the case may be, under this Repurchase Agreement in the capacities as described on Schedule 3 hereto.
SECTION 33. AGENT
Royal Bank of Canada is not registered as a broker dealer under the U.S. Securities Exchange Act of 1934. RBC Capital Markets, LLC will act solely as agent for the parties to this Repurchase Agreement for Transactions and will have no obligations, by way of issuance, endorsement, guarantee or otherwise with respect to the performance of either party under such Transactions. Royal Bank of Canada is not a member of the Securities Investor Protection Corporation.
SECTION 34. MISCELLANEOUS
(a) Counterparts. This Repurchase Agreement may be executed in any number of counterparts, all of which taken together constitutes one and the same instrument, and each party hereto may execute this Repurchase Agreement by signing any such counterpart.
(b) Captions. The captions and headings appearing herein are for included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Repurchase Agreement.
(c) Acknowledgment. Seller hereby acknowledges that:
(i) it has been advised by counsel in the negotiation, execution and delivery of this Repurchase Agreement and the other Facility Documents;
(ii) Buyer has no fiduciary relationship to Seller; and
(iii) no joint venture exists between Buyer and Seller.
(d) Documents Mutually Drafted. Seller and Buyer agree that this Repurchase Agreement and each other Facility Document prepared in connection with the Transactions set forth herein have been mutually drafted and negotiated by each party, and consequently such documents will not be construed against either party as the drafter thereof.
(e) Conflicts. In the event of any conflict between the terms of this Repurchase Agreement, any other Facility Document and any Transaction Confirmation, the documents control in the following order of priority: first, the terms of the Transaction Confirmation prevail, then the terms of this Repurchase Agreement prevail, and then the terms of the other Facility Documents prevail.
SECTION 35. GENERAL INTERPRETIVE PRINCIPLES
For purposes of this Repurchase Agreement, except as otherwise expressly provided or unless the context otherwise requires:
(a) the terms defined in this Repurchase Agreement have the meanings assigned to them in this Repurchase Agreement and include the plural as well as the singular, and the use of any gender herein are deemed to include the other gender;
(b) accounting terms not otherwise defined herein have the meanings assigned to them in accordance with generally accepted accounting principles;
(c) references herein to Articles, Sections, Subsections, Paragraphs and other subdivisions without reference to a document are to designated Articles, Sections, Subsections, Paragraphs and other subdivisions of this Repurchase Agreement;
(d) a reference to a Subsection without further reference to a Section is a reference to such Subsection as contained in the same Section in which the reference appears, and this rule also applies to Paragraphs and other subdivisions;
(e) the words herein, hereof, hereunder and other words of similar import refer to this Repurchase Agreement as a whole and not to any particular provision;
(f) the terms include or including mean without limitation by reason of enumeration;
(g) all times specified herein or in any other Facility Document (unless expressly specified otherwise) are local times in New York, New York unless otherwise stated; and
(h) all references herein or in any other Facility Document to good faith means good faith as defined in Section 5-102(7) of the UCC as in effect in the State of New York.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the parties have entered into this Repurchase Agreement as of the date set forth above.
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BUYER: | |
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ROYAL BANK OF CANADA | |
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By: |
/C/ Johnathan King |
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Name: JOHNATHAN KING |
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Title: MANAGING DIRECTOR |
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Address for Notices: | |
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Royal Bank of Canada | |
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200 Vesey Street | |
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New York, New York 10281 | |
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Attention: Marc Flamino | |
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Telecopier No.: (212) 858-7437 | |
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Telephone No.: (212) 618-2523 |
Signature Page to Master Repurchase Agreement
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SELLER: | |
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AMERIHOME MORTGAGE COMPANY, LLC | |
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By: |
/S/ Josh Adler |
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Name: Josh Adler |
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Title: MD Capital Markets |
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Address for Notices: | |
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AmeriHome Mortgage Company, LLC | |
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1 Baxter Way, Suite 300 | |
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Thousand Oaks, California 91362 | |
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With copies to: | |
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AmeriHome Mortgage Company, LLC | |
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1 Baxter Way, Suite 300 | |
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Thousand Oaks, California 91362 | |
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and | |
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AmeriHome Mortgage Company, LLC | |
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1 Baxter Way, Suite 300 | |
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Thousand Oaks, California 91362 | |
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Attention: Legal Department | |
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Email: legal@amerihome.com |
Signature Page to Master Repurchase Agreement
SCHEDULE 1
REPRESENTATIONS AND WARRANTIES RE: ELIGIBLE MORTGAGE LOANS
Seller represents and warrants to Buyer, with respect to each Mortgage Loan, that as of the date specified in such representation and warranty, or if not so specified as of the Purchase Date for such Purchased Asset by Buyer from Seller and as so long as such Mortgage Loan is a Purchased Asset under the Facility Documents that the statements set out below are true and correct. For purposes of this Schedule 1 and the representations and warranties set forth herein, a breach of a representation or warranty will be deemed to have been cured with respect to a Mortgage Loan if and when Seller has taken or caused to be taken action such that the event, circumstance or condition that gave rise to such breach no longer adversely affects such Mortgage Loan. With respect to those representations and warranties which are made to Sellers knowledge, if it is discovered by Seller or Buyer that the substance of such representation and warranty is inaccurate, notwithstanding Sellers lack of knowledge with respect to the substance of such representation and warranty, such inaccuracy will be deemed a breach of the applicable representation and warranty.
(a) Mortgage Loans as Described. The information set forth in the related Mortgage Loan Schedule is complete, true and correct in all material respects as of the date or dates on which such information is furnished.
(b) Payments Current. All payments required to be made up to the close of business on the Purchase Date for such Mortgage Loan under the terms of the Mortgage Note have been made and credited, it being understood that a payment is not required to be made until the last day of the month in which the related Due Date for such payment occurs. No payment required under the Mortgage Loan is [***] or more delinquent nor has any payment under the Mortgage Loan been [***] or more delinquent at any time since the origination of the Mortgage Loan (in each case it being understood that payment is delinquent after the expiration of any applicable grace period). The first Monthly Payment shall be made, or has been made, with respect to the Mortgage Loan in accordance with the terms of the related Mortgage Note, it being understood that a payment is not required to be made until the last day of the month in which the related Due Date for such payment occurs.
(c) No Outstanding Charges. All taxes, ground rents, water charges, sewer rents, governmental assessments, municipal charges, insurance premiums, leasehold payments, including assessments payable in future installments or other outstanding charges affecting the related Mortgaged Property, in each case which previously became due and owing, have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable. Except with respect to buydown loans, Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any principal and/or interest amount required under the Mortgage Loan, except for interest accruing from the date of the Mortgage Note or date of disbursement of the Mortgage Loan proceeds, whichever is later, to the day which precedes by [***] the Due Date of the first installment of principal and interest.
(d) Original Terms Unmodified. The terms of the Mortgage Note and the Mortgage have not been impaired, waived, altered or modified in any respect, except by written instruments, recorded in the applicable public recording office if necessary to maintain the lien priority of the Mortgage, and which have been delivered (or a copy of the Mortgage has been delivered if the original has not yet been returned from the recording office) to the related Custodian; the substance of any such waiver, alteration or modification has been approved by the insurer under the primary mortgage guaranty insurance policy, if any, and the title insurer, to the extent required by the related policy, and is reflected on the related final Mortgage Loan Schedule. No instrument of waiver, alteration or modification has been executed, and no Mortgagor has been released, in whole or in part, except in connection with an assumption agreement approved by the insurer under the primary mortgage guaranty insurance policy, if any, the title insurer, to the extent required by the policy, and which assumption agreement has been delivered to Custodian and the terms of which are reflected in the related final Mortgage Loan Schedule.
(e) No Defenses. To Sellers knowledge, the Mortgage Note and the Mortgage are not subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto, and no Mortgagor in respect of the Mortgage Loan was a debtor in any state or federal bankruptcy or insolvency proceeding at the time the Mortgage Loan was originated.
(f) Hazard Insurance. Pursuant to the terms of the Mortgage, the Fannie Mae guide, the Freddie Mac guide and any additional requirements set forth in the Approved Underwriting Guidelines, all buildings or other improvements upon the Mortgaged Property are insured by a generally acceptable insurer against loss by fire, hazards of extended coverage and such other hazards. If required by the National Flood Insurance Act of 1968, as amended, each Mortgage Loan is covered by a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration as in effect which policy conforms to Fannie Mae and Freddie Mac, as well as all additional requirements set forth in the Servicing Agreement. All individual insurance policies contain a standard mortgagee clause naming Seller and its successors and assigns as mortgagee, and all premiums thereon have been paid. The Mortgage obligates the Mortgagor thereunder to maintain the hazard insurance policy at the Mortgagors cost and expense, and on the Mortgagors failure to do so, authorizes the holder of the Mortgage to obtain and maintain such insurance at such Mortgagors cost and expense, and to seek reimbursement therefor from the Mortgagor. Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance; provided that the policy is not a master or blanket hazard insurance policy covering a condominium, or any hazard insurance policy covering the common facilities of a planned unit development. The hazard insurance policy is the valid and binding obligation of the insurer, is in full force and effect, and will be in full force and effect and inure to the benefit of Buyer upon the consummation of the transactions contemplated by this Repurchase Agreement. Seller has not engaged in, and has no knowledge of the Originators, Mortgagors or any servicers having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of such policy, including,
without limitation, to Sellers knowledge, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other person or entity, and no such unlawful items have been received, retained or realized by Seller.
(g) Compliance with Applicable Law. To Sellers knowledge, any and all requirements of any federal, state or local law including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity and disclosure laws and unfair and deceptive practices laws applicable to the Mortgage Loan have been complied with, the consummation of the transactions contemplated hereby will not involve the violation of any such laws or regulations, and Seller, if required by such laws or regulations, shall maintain or shall cause its agent to maintain in its possession, available for the inspection of Buyer, and shall deliver to Buyer, upon demand, evidence of compliance with all such requirements set forth herein.
(h) No Satisfaction of Mortgage. The Mortgage has not been satisfied, cancelled, subordinated or rescinded, in whole or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part, nor has any instrument been executed that would affect any such satisfaction, cancellation, subordination, rescission or release. Seller has not waived the performance by the Mortgagor of any action, if the Mortgagors failure to perform such action would cause the Mortgage Loan to be in default, nor has Seller waived any default resulting from any action or inaction by the Mortgagor.
(i) Valid Lien. The Mortgage is a valid, subsisting, enforceable and perfected with respect to each first lien Mortgage Loan, first priority lien and first priority security interest, on the real property included in the Mortgaged Property, including all buildings on the Mortgaged Property and all installations and mechanical, electrical, plumbing, heating and air conditioning systems located in or annexed to such buildings, and all additions, alterations and replacements made at any time with respect to the foregoing. The lien of the Mortgage is subject only to the following (collectively, Permitted Encumbrances):
(i) the lien of current real property taxes and assessments not yet due and payable;
(ii) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to prudent mortgage lending institutions generally and specifically referred to in Buyers title insurance policy or title commitment delivered to the Originator of the Mortgage Loan and (a) referred to or otherwise considered in the appraisal made for the Originator of the Mortgage Loan or (b) which do not adversely affect the Appraised Value of the Mortgaged Property set forth in such appraisal; and
(iii) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, subsisting and enforceable first lien and first priority security interest on the property described therein and Seller has full right to pledge and assign the same to Buyer. The Mortgaged Property was not, as of the date of origination of the Mortgage Loan, subject to a mortgage, deed of trust, deed to secure debt or other security instrument creating a lien subordinate to the lien of the Mortgage.
(j) Validity of Mortgage Documents. The Mortgage Note and the Mortgage and any other agreement executed and delivered by a Mortgagor or guarantor, if applicable, in connection with a Mortgage Loan are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, receivership or other similar laws affecting creditors rights generally from time to time in effect and general principles of equity. All parties to the Mortgage Note, the Mortgage and any other related agreement had legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note, the Mortgage and any such agreement, and the Mortgage Note, the Mortgage and any other such related agreement have been duly and properly executed by the applicable related parties. No fraud, error, omission, misrepresentation, negligence or similar occurrence with respect to a Mortgage Loan has taken place on the part of Seller, or to Sellers knowledge any other Person, including, without limitation, the Mortgagor, any appraiser, any builder or developer, or any other party involved in the origination of the Mortgage Loan. Seller has reviewed all of the documents constituting the Mortgage File and has made such inquiries as it deems necessary to make and confirm the accuracy of the representations set forth herein.
(k) Full Disbursement of Proceeds. Except as set forth on the Mortgage Loan Schedule (and which shall be in conformity with the Underwriting Guidelines), there is no further requirement for future advances under the Mortgage Loan, except in connection with any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor not to exceed the amounts allowed by the applicable Agency. All costs, fees and expenses incurred in making or closing the Mortgage Loan and the recording of the Mortgage have been paid, and the Mortgagor is not entitled to any refund of any amounts paid or due to the mortgagee pursuant to the Mortgage Note or Mortgage.
(l) Ownership. Seller is the sole owner of record and holder of the Mortgage Loan and the indebtedness evidenced by each Mortgage Note and upon the sale of the Mortgage Loan to Buyer, Seller will retain the Mortgage Files or any part thereof with respect thereto not delivered to Custodian or Buyer, in trust only for the purpose of servicing and supervising the servicing of each Mortgage Loan. The Mortgage Loan is not assigned or pledged, and Seller has good, indefeasible and marketable title thereto, and has full right to transfer and sell the Mortgage Loan to Buyer free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest, and has full right and authority subject to no interest or participation of, or agreement with, any other party, to sell and assign each Mortgage Loan pursuant to this Repurchase Agreement and following the sale of each Mortgage Loan, Buyer will own such Mortgage Loan free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest except for the security interest created pursuant to the terms of this Repurchase Agreement.
(m) Doing Business. All parties which have had any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (i) in compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and (ii) either (A) organized under the laws of such state, (B) qualified to do business in such state, (C) a federal savings and loan association, a savings bank or a national bank having a principal office in such state, or (D) not doing business in such state.
(n) Title Insurance. The Mortgage Loan is covered by an American Land Title Association buyers title insurance policy, or with respect to any Mortgage Loan for which the related Mortgaged Property is located in California, a California Land Title Association buyers title insurance policy or other generally acceptable form of policy or insurance acceptable to Fannie Mae or Freddie Mac and each such title insurance policy is issued by a title insurer acceptable to Fannie Mae or Freddie Mac and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring Seller, its successors and assigns, as to the first priority lien of the Mortgage, as applicable in the original principal amount of the Mortgage Loan (or to the extent a Mortgage Note provides for negative amortization, the maximum amount of negative amortization in accordance with the Mortgage), subject only to Permitted Encumbrances, and in the case of adjustable rate Mortgage Loans, against any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of the Mortgage providing for adjustment to the Mortgage Interest Rate and Monthly Payment. Where required by state law or regulation, the Mortgagor has been given the opportunity to choose the carrier of the required mortgage title insurance. Additionally, such lenders title insurance policy affirmatively insures ingress and egress and against encroachments by or upon the Mortgaged Property or any interest therein. Seller, its successors and assigns, are the sole insureds of such lenders title insurance policy, and such buyers title insurance policy is valid and remains in full force and effect and will be in force and effect upon the consummation of the Transactions contemplated by this Repurchase Agreement. No claims have been made under such buyers title insurance policy, and Seller, and to Sellers knowledge, no prior holder of the related Mortgage, has done, by act or omission, anything which would impair the coverage of such lenders title insurance policy, including, without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other Person, and no such unlawful items have been received, retained or realized by Seller.
(o) No Defaults. Other than payments due but not yet [***] days or more delinquent, to Sellers knowledge there is no default, breach, violation or event which would permit acceleration existing under the Mortgage or the Mortgage Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event which would permit acceleration, and neither Seller nor any of its affiliates nor any of their respective predecessors, have waived any default, breach, violation or event which would permit acceleration.
(p) No Mechanics Liens. There are no mechanics or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under law could give rise to such liens) affecting the related Mortgaged Property which are or may be liens prior to, or which rank equally with, the lien of the related Mortgage.
(q) Location of Improvements; No Encroachments. At the origination of the Mortgage, all improvements which were considered in determining the Appraised Value of the related Mortgaged Property lay wholly within the boundaries and building restriction lines of the Mortgaged Property, and no improvements on adjoining properties encroach upon the Mortgaged Property (except those encroachments which the title insurer has affirmatively insured over). To Sellers knowledge, no improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning law or regulation.
(r) Origination. The Mortgage Loan was originated by or in conjunction with a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or similar banking institution which is supervised and examined by a federal or state authority. The Mortgage Interest Rate as well as the lifetime rate cap and the periodic cap, as applicable, are as set forth on the Mortgage Loan Schedule. The Mortgage Note is payable in equal monthly installments of principal and interest, which installments of interest, with respect to adjustable rate Mortgage Loans, are subject to change due to the adjustments to the Mortgage Interest Rate on each Interest Rate Adjustment Date, with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty (30) years from commencement of amortization. The origination date is no earlier than [***] days prior to the related Purchase Date.
(s) Payment Provisions. Principal payments on the Mortgage Loan commenced no more than [***] days after the proceeds of the Mortgage Loan were disbursed. The Mortgage Loan bears interest at the Mortgage Interest Rate. With respect to each Mortgage Loan, the Mortgage Note is payable on the first (1st) day of each month in Monthly Payments, which, in the case of a fixed rate Mortgage Loan, are sufficient to fully amortize the original principal balance over the original term thereof and to pay interest at the related Mortgage Interest Rate, and, in the case of an adjustable rate Mortgage Loan, are changed on each adjustment date, and in any case, are sufficient to fully amortize the original principal balance over the original term thereof and to pay interest at the related Mortgage Interest Rate. Except as allowed by the applicable Agency or otherwise as expressly approved in writing by Buyer, (i) with respect to adjustable rate Mortgage Loans, the Mortgage Note does not permit negative amortization, and (ii) there are no convertible Mortgage Loans which contain a provision allowing the Mortgagor to convert the Mortgage Note from an adjustable interest rate Mortgage Note to a fixed interest rate Mortgage Note.
(t) Customary Provisions. The Mortgage Note has a stated maturity. The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (i) in the case of a Mortgage designated as a deed of trust, by trustees sale, and (ii) otherwise by judicial or non-judicial foreclosure. Upon default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustees sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage Loan will be able to deliver good and merchantable title to the Mortgaged Property. There is no homestead or other exemption or
other right available to the Mortgagor or any other person, or restriction on Seller or any other person, including without limitation, any federal, state or local, law, ordinance, decree, regulation, guidance, attorney general action, or other pronouncement, whether temporary or permanent in nature, that would interfere with, restrict or delay, either (y) the ability of Seller, Buyer or any servicer or any successor servicer to sell the related Mortgaged Property at a trustees sale or otherwise, or (z) the ability of Seller, Buyer or any servicer or any successor servicer to foreclose on the related Mortgage. The Mortgage Note and Mortgage are on forms acceptable to the applicable Agency or Buyer.
(u) Collection Practices; Escrow Deposits; Interest Rate Adjustments. The origination and collection practices used by Seller, and to Sellers knowledge, Originator and each servicer with respect to the Mortgage Note and Mortgage have been in all respects legal, proper and in compliance with Accepted Servicing Practices. The Mortgage Loan has been serviced by Seller or Servicer and to Sellers knowledge, any predecessor servicer in accordance with the terms of the Mortgage Note. With respect to escrow deposits and Escrow Payments, if any, all such payments are in the possession of, or under the control of, Seller or Servicer and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. No escrow deposits or Escrow Payments or other charges or payments due Seller have been capitalized under any Mortgage or the related Mortgage Note and except as set forth in the Mortgage Loan Schedule, no such escrow deposits or Escrow Payments are being held by Seller for any work on a Mortgaged Property which has not been completed. All Mortgage Interest Rate adjustments have been made in strict compliance with state and federal law and the terms of the related Mortgage Note. Any interest required to be paid pursuant to state and local law has been properly paid and credited.
(v) Bankruptcy; Foreclosure. With respect to the Mortgage Loan, the Mortgaged Property has not been subject to any bankruptcy proceeding or foreclosure proceeding and Seller has no knowledge nor has it received any notice that any Mortgagor in respect of the Mortgage Loan is a debtor in any state or federal bankruptcy or insolvency proceeding.
(w) Conformance with Underwriting Standards. The Mortgage Loan was underwritten generally in accordance with the Underwriting Guidelines in effect at the time the Mortgage Loan was originated.
(x) No Additional Collateral. The Mortgage Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage on the Mortgaged Property and the security interest of any applicable security agreement or chattel mortgage referred to in (i) above.
(y) Appraisal. Except with respect to an Agency Mortgage Loan and as permitted by the applicable Agency guide, the Mortgage File contains, as applicable, (i) an appraisal of the related Mortgaged Property which satisfied the standards of the applicable Agency or Buyer, and was made and signed, prior to the approval of the Mortgage Loan application, by a qualified appraiser, duly appointed by Seller, who had no interest, direct or indirect in the Mortgaged Property or in any loan made on the security thereof, whose compensation is not affected by the approval or disapproval of the Mortgage Loan and who met the minimum qualifications of the applicable Agency all as in effect on the date the Mortgage Loan was
originated or (ii) a duly executed property inspection waiver, fieldwork waiver or other such similar document, accepted by the applicable Agency. Each appraisal of the Mortgage Loan was made in accordance with the requirements of Title XI of the Federal Institutions Reform, Recovery, and Enforcement Act of 1989 and the regulations promulgated thereunder, all as in effect on the date the Mortgage Loan was originated.
(z) Deeds of Trust. In the event the Mortgage constitutes a deed of trust, a trustee, authorized and duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by Buyer to the trustee under the deed of trust, except in connection with a trustees sale after default by the Mortgagor or reconveyance of the deed of trust.
(aa) Delivery of Mortgage Documents. The Mortgage Note, the Mortgage and any other documents required to be delivered under the Custodial and Disbursement Agreement for each Mortgage Loan have been delivered to Custodian. Seller, or Sellers custodian, is in possession of a complete, true and accurate Mortgage File, except for such documents the originals of which have been delivered to Custodian or Buyer or which have been submitted for recording and not yet returned.
(bb) Buydown Provisions; No Graduated Payments or Contingent Interests. Except with respect to a Mortgage Loan as noted in the Mortgage Loan Schedule, no Mortgage Loan contains provisions pursuant to which Monthly Payments are (a) paid or partially paid with funds deposited in any separate account established by Seller, the Mortgagor, or anyone on behalf of the Mortgagor, (b) paid by any source other than the Mortgagor or (c) contains any other similar provisions which may constitute a buydown provision. The Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan does not have a shared appreciation or other contingent interest feature.
(cc) Mortgagor Acknowledgment. To the extent required by law, the Mortgagor has executed a statement to the effect that the Mortgagor has received all disclosure materials required by applicable law with respect to the making of fixed rate mortgage loans and adjustable rate mortgage loans and rescission materials with respect to refinanced Mortgage Loans.
(dd) No Construction Loans. No Mortgage Loan was made in connection with (a) the construction or rehabilitation of a Mortgaged Property or (b) facilitating the trade-in or exchange of a Mortgaged Property.
(ee) Acceptable Investment. Seller has no knowledge of any circumstances or condition with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagors credit standing that can reasonably be expected to cause the Mortgage Loan to be an unacceptable investment, cause the Mortgage Loan to become delinquent, or materially and adversely affect the value of the Mortgage Loan.
(ff) LTV; PMI Policy. No Mortgage Loan has an LTV (loan-to-value ratio) or CLTV (combined loan-to-value ratio) in excess of the applicable Maximum LTV. Each Mortgage Loan with an LTV at origination in excess of 100% is and will be subject to a primary mortgage guaranty insurance policy, issued by a Qualified Insurer, which insures that portion of
the Mortgage Loan in excess of the portion of the Appraised Value of the Mortgaged Property required by the applicable Agency. All provisions of such primary mortgage guaranty insurance policy have been and are being complied with, such policy is in full force and effect, and all premiums due thereunder have been paid. Any Mortgage subject to any such primary mortgage guaranty insurance policy obligates the Mortgagor thereunder to maintain such insurance and to pay all premiums and charges in connection therewith. The Mortgage Interest Rate for the Mortgage Loan does not include any such insurance premium.
(gg) Capitalization of Interest. The Mortgage Note does not by its terms provide for the capitalization or forbearance of interest.
(hh) No Equity Participation. No document relating to the Mortgage Loan provides for any contingent or additional interest in the form of participation in the cash flow of the Mortgaged Property or a sharing in the appreciation of the value of the Mortgaged Property. The indebtedness evidenced by the Mortgage Note is not convertible to an ownership interest in the Mortgaged Property or the Mortgagor and Seller has not financed nor does it own directly or indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.
(ii) Proceeds of Mortgage Loan. The proceeds of the Mortgage Loan have not been and shall not be used to satisfy, in whole or in part, any debt owed or owing by the Mortgagor to Seller or any Affiliate or correspondent of Seller, except in connection with a refinanced Mortgage Loan.
(jj) Origination Date. The origination date is no earlier than [***] days prior to the related Purchase Date.
(kk) No Exception. Custodian has not noted any material exceptions on a Custodial Loan Schedule and Exception Report with respect to the Mortgage Loan which would materially adversely affect the Mortgage Loan or Buyers interest in the Mortgage Loan.
(ll) Occupancy of Mortgaged Property. As of the date of origination of the Mortgage Loan, the Mortgaged Property was lawfully occupied under applicable law; as of the date of origination, all inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy, have been made or obtained from the appropriate authorities.
(mm) [Reserved].
(nn) Transfer of Mortgage Loans. Except with respect to Mortgage Loans registered with MERS, the Assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located.
(oo) Consolidation of Future Advances. Any principal advances made to the Mortgagor prior to the Purchase Date have been consolidated with the outstanding principal amount secured by the Mortgage, and the secured principal amount, as consolidated, bears a single
interest rate and single repayment term. The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan.
(pp) No Balloon Payment. No Mortgage Loan has a balloon payment feature.
(qq) [Reserved].
(rr) Down payment. The source of the down payment with respect to each Mortgage Loan has been fully verified by Seller as required by the Agencies and Underwriting Guidelines.
(ss) Calculation of Interest. Interest on each Mortgage Loan is calculated on the basis of a 360-day year consisting of twelve (12) thirty (30) day months.
(tt) Mortgaged Property Undamaged; No Condemnation Proceedings. As of origination of the Mortgage Loan, and to Sellers knowledge as of the Purchase Date, (i) there is no proceeding pending or threatened for the total or partial condemnation of the Mortgaged Property, and (ii) the Mortgaged Property is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty so as to affect adversely the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended and each Mortgaged Property is in good repair.
(uu) No Violation of Environmental Laws. To Sellers knowledge, there does not exist on the Mortgaged Property any hazardous substances, as such term is defined in the Comprehensive Environmental Response Compensation and Liability Act, 42 U.S.C. 9601 et seq., the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq., or other applicable federal, state or local environmental laws including, without limitation, asbestos, in each case in excess of the permitted limits and allowances set forth in such environmental laws to the extent such laws are applicable to the Mortgaged Property and to Sellers knowledge, there exists no violation of any local, state or federal environmental law, rule or regulation with respect to such Mortgaged Property. To Sellers knowledge, there is no pending action or proceeding directly involving the Mortgaged Property in which compliance with any environmental law, rule or regulation is an issue; and nothing further remains to be done to satisfy in full all requirements of each such law, rule or regulation constituting a prerequisite to use and enjoyment of said property.
(vv) Location and Type of Mortgaged Property. The Mortgaged Property is a fee simple property located in the state identified in the Mortgage Loan Schedule and consists of a parcel of real property with a detached single family residence erected thereon, or a two- to four-family dwelling, or an individual condominium unit in a low-rise condominium project, or an individual unit in a planned unit development; provided, however, that any condominium project or planned unit development conforms with the applicable Agency requirements regarding such dwellings or shall conform to the Underwriting Guidelines, and no residence or dwelling is a mobile home or a manufactured dwelling. No portion of the Mortgaged Property is used for commercial purposes; provided that the Mortgaged Property may be a mixed-use property if such Mortgaged Property conforms to the Underwriting Guidelines.
(ww) Due on Sale. The Mortgage contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the mortgagee thereunder.
(xx) Servicemembers Civil Relief Act of 2003. The Mortgagor has not notified Seller, and Seller has no knowledge of any relief requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act of 2003.
(yy) Reserved.
(zz) Reserved.
(aaa) Leaseholds. If the Mortgage Loan is secured by a long-term residential lease, such lease conforms to the applicable Agency guidelines and Underwriting Guidelines.
(bbb) Prepayment Penalty. No Mortgage Loan is subject to a prepayment penalty.
(ccc) Predatory Lending Regulations; High Cost Loans. No Mortgage Loan (i) is classified as a High Cost Mortgage Loan, or (ii) is subject to Section 226.32 of Regulation Z or any similar state law (relating to high interest rate credit/lending transactions).
(ddd) Tax Service Contract. Seller has obtained a life of loan, transferable real estate tax service contract with an approved tax service contract provider on each Mortgage Loan and such contract is assignable without penalty, premium or cost to Buyer.
(eee) Flood Certification Contract. If the Mortgage Loan is located in a flood zone (where coverage is required by the Flood Disaster Protection Act of 1973, as amended), Seller has obtained a life of loan, transferable flood certification contract for each Mortgage Loan and such contract is assignable to Buyer.
(fff) Recordation. Each original Mortgage was sent for recordation and is recorded or in the process of recordation and, except for those Mortgage Loans subject to the MERS identification system, all subsequent assignments of the original Mortgage (other than the assignment to Buyer) have been recorded in the appropriate jurisdictions wherein such recordation is necessary to perfect the lien thereof as against creditors of Seller, or is in the process of being recorded. Except with respect to Mortgage Loans registered with MERS, the Assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located.
(ggg) Simple Interest Mortgage Loans. To Sellers knowledge, none of the Mortgage Loans is a simple interest mortgage loan.
(hhh) Compliance with Anti-Money Laundering Laws. With respect to each Mortgage Loan originated by Seller, Seller has complied with all applicable Anti-Money Laundering Laws; Seller has established an anti-money laundering compliance program as required by the Anti-Money Laundering Laws, has conducted the requisite due diligence in connection with the origination of each Mortgage Loan for purposes of the Anti-Money
Laundering Laws, including with respect to the legitimacy of the applicable Mortgagor and the origin of the assets used by the said Mortgagor to purchase the property in question, and maintains, and will maintain, sufficient information to identify the applicable Mortgagor for purposes of the Anti-Money Laundering Laws. With respect to each Mortgage Loan acquired by Seller from a third party, Seller has obtained assurances that such third party has complied with all applicable Anti-Money Laundering Laws; has established an anti-money laundering compliance program as required by the Anti-Money Laundering Laws, has conducted the requisite due diligence in connection with the origination of each Mortgage Loan for purposes of the Anti-Money Laundering Laws, including with respect to the legitimacy of the applicable Mortgagor and the origin of the assets used by the said Mortgagor to purchase the property in question, and maintains, and will maintain, sufficient information to identify the applicable Mortgagor for purposes of the Anti-Money Laundering Laws.
(iii) Located in U.S. No collateral (including, without limitation, the related real property and the dwellings thereon and otherwise) relating to a Purchased Asset is located in any jurisdiction other than in one (1) of the fifty (50) states of the United States of America or the District of Columbia.
(jjj) [Reserved].
(kkk) Single-Premium Credit Life Insurance. None of the proceeds of the Mortgage Loan were used to finance single-premium credit insurance policies at origination.
(lll) FICO. No Mortgage Loan has a FICO score below the requirement set forth in the Underwriting Guidelines.
(mmm) [Reserved].
(nnn) Litigation. There is no litigation, proceeding, governmental investigation or class action lawsuit existing or pending with respect to which Seller has received service of process or to the knowledge of Seller threatened, or any order, injunction, decree or settlement agreement outstanding, relating to or arising out of the Mortgage Loan that could reasonably be expected to have a material adverse effect on the Mortgage Loan or Buyers interest therein.
(ooo) FHA Mortgage Insurance; VA Loan Guaranty; USDA Loan Guaranty. With respect to the FHA Loans, the FHA Mortgage Insurance Contract is, or is eligible to be, in full force and effect and there exists no impairment to full recovery without indemnity to the Department of Housing and Urban Development or the FHA under FHA Mortgage Insurance. With respect to the VA Loans, the VA Loan Guaranty Agreement is, or is eligible to be, in full force and effect to the maximum extent stated therein. With respect to the USDA Loans, such USDA Loan is guaranteed, or is eligible to be guaranteed, by an USDA Guaranty, under the USDA Regulations and there exists no impairment to full recovery without indemnity to the USDA under the USDA Guaranty. There are no defenses, counterclaims, or rights of setoff affecting the validity or enforceability of any private mortgage insurance or FHA insurance applicable to the Mortgage Loans or any VA guaranty or USDA guaranty with respect to the Mortgage Loans. Each FHA Loan, VA Loan and USDA Loan was originated in accordance with the criteria of an Agency for purchase of such Mortgage Loans.
(ppp) Ability to Repay. Notwithstanding anything to the contrary set forth in this Repurchase Agreement, on and after January 10, 2014 (or such later date as the relevant regulations may go into effect) (i) before the consummation of each Mortgage Loan, the Originator made a reasonable and good faith determination that the Mortgagor has a reasonable ability to repay the loan according to its terms, and that at a minimum, the Originator underwrote the loan in accordance with the underwriting factors set forth in 12 CFR 1026.43(c); and (ii) each Mortgage Loan is a Qualified Mortgage as defined in 12 CFR 1026.43(e).
(qqq) Additional Requirements. Each Mortgage Loan complies with any additional requirements set forth in the Pricing Side Letter.
(rrr) TRID Compliance. With respect to each Mortgage Loan where the Mortgagors loan application for the Mortgage Loan was taken on or after October 3, 2015, such Mortgage Loan was originated in compliance with the TILA-RESPA Integrated Disclosure Rule.
SCHEDULE 3
NOTICES; AUTHORIZED REPRESENTATIVES
SELLER NOTICES
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, California 91362
With copies to:
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, California 91362
and
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, California 91362
Attention: Legal Department
Email: legal@amerihome.com
BUYER NOTICES
Royal Bank of Canada
200 Vesey Street
New York, New York 10281
Attention: Marc Flamino
Telecopier No.: (212) 858-7437
Telephone No.: (212) 618-2523
SELLER AUTHORIZATIONS
Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for Seller Parties under this Repurchase Agreement:
Authorized Representatives for execution of Program Agreements and amendments:
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SCHEDULE 4
WIRING INSTRUCTIONS
Sellers Wire Instructions:
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Buyers Wire Instructions:
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These wiring instructions may not be changed except by an authorized representative of Buyer or Seller, as applicable. Buyer shall be entitled to rely on these wiring instructions without further inquiry or verification.
EXHIBIT A
TRANSACTION CONFIRMATION
[ ] [ ], 20[ ]
AMERIHOME MORTGAGE COMPANY, LLC
1 Baxter Way, Suite 300
Thousand Oaks, California 91362
Attention: Kathleen Conte
Confirmation No.:
Ladies/Gentlemen:
This letter confirms our agreement to purchase from you the Eligible Mortgage Loans listed in Appendix I hereto, pursuant to the Master Repurchase Agreement governing purchases and sales of Mortgage Loans between us, dated as of August 16, 2019 (the Repurchase Agreement), as follows:
Purchase Date: ,
Mortgage Loans to be Purchased: See Appendix I hereto.
Aggregate Principal Amount of Purchased Assets:
Aggregate Asset Value:
Aggregate Purchase Price:
Weighted Average Pricing Rate:
Weighted Average Post-Default Rate:
Weighted Average Purchase Price Percentage:
LIBOR Rate:
Weighted Average Pricing Spread:
Repurchase Date:
Aggregate Repurchase Price:
EXHIBIT C
FORM OF SECRETARYS CERTIFICATE AND RESOLUTIONS
CERTIFICATE OF AN OFFICER OF SELLER
The undersigned, of AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company (the Seller), hereby certifies as follows:
Attached hereto as Exhibit A is a true, correct and complete copy of the formation documents of Seller, as certified by the Secretary of State of the State of Delaware.
Neither any amendment to the formation documents of Seller nor any other charter document with respect to Seller has been filed, recorded or executed since , 20 , and no authorization for the filing, recording or execution of any such amendment or other charter document is outstanding.
Attached hereto as Exhibit B is a true, correct and complete copy of the By-laws of Seller as in effect as of the date hereof and at all times since , 20 .
Attached hereto as Exhibit C is a true, correct and complete copy of resolutions adopted by the Board of Directors of Seller by unanimous written consent on , 20 (the Resolutions). The Resolutions have not been further amended, modified or rescinded and are in full force and effect in the form adopted, and they are the only resolutions adopted by the Board of Directors of Seller or by any committee of or designated by such Board of Directors relating to the execution and delivery of, and performance of the transactions contemplated by the Master Repurchase Agreement dated as of August 16, 2019 (the Repurchase Agreement), between Seller and Royal Bank of Canada (the Buyer) and the Custodial and Disbursement Agreement dated as of August 16, 2019, among Seller, Buyer and Deutsche Bank National Trust Company, as custodian and disbursement agent (in each of such capacities, the Custodian or the Disbursement Agent).
The Repurchase Agreement and the Custodial and Disbursement Agreement are substantially in the form approved by the Resolutions or pursuant to authority duly granted by the Resolutions.
The undersigned, as officers of Seller or as attorney-in-fact, are authorized to and have signed manually the Repurchase Agreement, the Custodial and Disbursement Agreement or any other document delivered in connection with the transactions contemplated thereby, were duly elected or appointed, were qualified and acting as such officer or attorney-in-fact at the respective times of the signing and delivery thereof, and were duly authorized to sign such document on behalf of Seller, and the signature of each such person appearing opposite such persons name below is the genuine signature of each such person.
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IN WITNESS WHEREOF, the undersigned has hereunto executed this Certificate as of the day of , 20 .
EXHIBIT D
FORM OF POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that AmeriHome Mortgage Company, LLC (Seller) hereby irrevocably constitutes and appoints Royal Bank of Canada (Buyer) and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Seller and in the name of Seller or in its own name or otherwise, from time to time in Buyers good faith discretion:
(a) to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any assets purchased by Buyer under the Master Repurchase Agreement (as amended, restated, supplemented or otherwise modified from time to time) dated August 16, 2019 (the Assets) and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Buyer for the purpose of collecting any and all such moneys due with respect to such Assets whenever payable;
(b) to pay or discharge taxes and liens levied or placed on or threatened against the Assets;
(c) (i) to direct any party liable for any payment under any Assets to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer directs; (ii) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Assets; (iii) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Assets; (iv) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Assets or any proceeds thereof and to enforce any other right in respect of any Assets; (v) to defend any suit, action or proceeding brought against Seller with respect to any Assets; (vi) to settle, compromise or adjust any suit, action or proceeding described in clause (v) above and, in connection therewith, to give such discharges or releases as Buyer may deem appropriate; and (vi) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Assets as fully and completely as though Buyer were the absolute owner thereof for all purposes, and to do, at Buyers option and Sellers expense, at any time, and from time to time, all acts and things which Buyer deems necessary to protect, preserve or realize upon the Assets and Buyers Liens thereon and to effect the intent of the Repurchase Agreement, all as fully and effectively as Seller might do;
(d) for the purpose of carrying out the transfer of servicing with respect to the Assets from Seller to a successor servicer appointed by Buyer in its sole discretion and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such transfer of servicing, and, without limiting the generality of the foregoing, Seller hereby gives Buyer the power and right, on behalf of Seller, without assent by Seller, to, in the name of Seller or its own name, or otherwise, prepare and send or cause to be
sent good-bye letters to all mortgagors under the Assets, transferring the servicing of the Assets to a successor servicer appointed by Buyer in its sole discretion; and
(e) for the purpose of delivering any notices of sale to mortgagors or other third parties, including without limitation, those required by law.
Seller hereby ratifies all that said attorneys lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and is irrevocable.
Seller also authorizes Buyer, from time to time, to execute, in connection with any sale, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Assets.
The powers conferred on Buyer hereunder are solely to protect Buyers interests in the Assets and do not impose any duty upon it to exercise any such powers. Buyer is accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents are responsible to Seller for any act or failure to act hereunder, except for its or their negligence, bad faith or willful misconduct.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF IS INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION HAS BEEN RECEIVED BY SUCH THIRD PARTY.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed as a deed this day of , 20 .
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On the day of , 20 before me, a Notary Public in and for said State, personally appeared , known to me to be of AmeriHome Mortgage Company, LLC, the institution that executed the within instrument and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.
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EXHIBIT E
FORM OF WAREHOUSE LENDERS RELEASE LETTER
Attention:
Facsimile:
Re: Certain Mortgage Loans Identified on Schedule A hereto and owned by
The undersigned hereby releases all right, interest, lien or claim of any kind with respect to the mortgage loan(s) described in the attached Schedule A, such release to be effective automatically without any further action by any party upon payment in one or more installments, in immediately available funds of , which shall constitute the Payoff Amount, as defined in the Bailee Letter, dated [ ], between Deutsche Bank National Trust Company and [ ], in accordance with the following wire instructions:
Bank: [ ]
ABA: [ ]
Reference: [ ]
Acct #: [ ]
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EXHIBIT F
FORM OF SERVICER NOTICE
[Date]
[ ], as Servicer
[ADDRESS]
Attention:
Re: Master Repurchase Agreement, dated as of August 16, 2019 (as amended, restated, supplemented or otherwise modified from time to time, the Repurchase Agreement), by and between AmeriHome Mortgage Company, LLC (the Seller) and Royal Bank of Canada (the Buyer).
Ladies and Gentlemen:
[ ] (the Servicer) is servicing certain mortgage loans (the Mortgage Loans) owned by the Seller pursuant to the Servicing Agreement (the Servicing Agreement). The Servicer is hereby notified that pursuant to the Repurchase Agreement, the Seller has pledged to Buyer certain mortgage loans which are serviced by Servicer and which are subject to a security interest in favor of Buyer.
Section 1. Remittance to Collection Account; Notice of Default.
(a) The Servicer shall segregate all amounts (the Servicing Income) collected on account of the Mortgage Loans which are then pledged to Buyer under the Repurchase Agreement (the Subject Mortgage Loans), hold them in trust for the sole and exclusive benefit of Buyer, and remit such collections in accordance with the below instructions. Servicer shall follow the instructions only of Buyer with respect to the Subject Mortgage Loans, and shall deliver to Buyer any information with respect to the Subject Mortgage Loans reasonably requested by Buyer. Upon the occurrence and during the continuance of an Event of Default under the Repurchase Agreement, upon Buyers direction the Servicer shall remit to Buyer all Servicing Income in accordance with Buyers written instructions no later than [***] following receipt thereof.
(b) Upon written notice following the occurrence and during the continuance of an Event of Default, Buyer will have the right to immediately terminate Servicers right to service the Subject Mortgage Loans without payment of any penalty or termination fee under the Servicing Agreement. Upon receipt of such notice, Seller and the Servicer shall cooperate in transferring the applicable servicing of the Subject Mortgage Loans to a successor servicer appointed by Buyer in its sole discretion.
(c) Notwithstanding anything set forth in the Servicing Agreement, Seller shall bear all responsibility for all fees, reimbursements and expenses due to Servicer and will not be entitled to withdraw such amounts from the Servicer Account established under the Servicing Agreement.
(d) Buyer is an intended third party beneficiary of the Servicing Agreement and has the right to terminate the Servicing Agreement with full enforcement rights thereunder.
(e) Notwithstanding any contrary information which may be delivered to the Servicer by Seller, the Servicer may conclusively rely on any information or notice delivered by Buyer.
Section 2. Servicer as Bailee. Servicer hereby acknowledges and agrees that on receipt of any Asset File, it shall hold such Asset File as bailee for Buyer.
Section 3. Counterparts. This Servicer Notice may be executed in any number of counterparts, all of which taken together constitutes one and the same instrument, and each party hereto may execute this Servicer Notice by signing any such counterpart.
Section 4. Entire Agreement. This Servicer Notice, together with the other Facility Documents, constitutes the entire understanding between Buyer, Seller and Servicer with respect to the subject matter they cover and supersedes any existing agreements between the parties relating to the matters provided for herein and therein. No alteration, waiver, amendments, or change or supplement hereto will be binding or effective unless the same is set forth in writing by a duly authorized representative of each party hereto.
Section 5. Governing Law; Jurisdiction; Waiver of Trial by Jury.
(f) THIS SERVICER NOTICE IS GOVERNED BY THE LAW OF THE STATE OF NEW YORK.
(g) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS SERVICER NOTICE AND THE OTHER FACILITY DOCUMENTS, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY
REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH UNDER ITS SIGNATURE BELOW OR AT SUCH OTHER ADDRESS OF WHICH BUYER WILL HAVE BEEN NOTIFIED;
(iv) AGREES THAT NOTHING HEREIN AFFECTS THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR LIMITS THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND
(v) WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS SERVICER NOTICE, ANY OTHER FACILITY DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
Please acknowledge receipt of this instruction letter by signing in the signature block below and forwarding an executed copy to Buyer promptly upon receipt.
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CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
MORTGAGE WAREHOUSE AGREEMENT
by and between
AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY,
and
TEXAS CAPITAL BANK, NATIONAL ASSOCIATION
AGREEMENT DATE:
JULY 29, 2020
AGREEMENT NO.:
4905
MORTGAGE WAREHOUSE AGREEMENT
THIS MORTGAGE WAREHOUSE AGREEMENT (this Agreement) is made and entered into as of JULY 29, 2020 (the Agreement Date) (but effective as of the Effective Date) between AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY (Seller) and TEXAS CAPITAL BANK, NATIONAL ASSOCIATION (Bank).
RECITALS
A. Seller is actively engaged in Mortgage Loan Activities (as defined below).
B. Seller is seeking additional funding sources for its Mortgage Loan Activities through the sale of Participation Interests (as defined below) in Mortgage Loans (as defined below) generated by such Mortgage Loan Activities.
C. Bank is, among other things, in the business of purchasing participation interests in Mortgage Loans.
D. Seller shall have no obligation to offer for sale, and Bank shall have no obligation to purchase, Participation Interests in such Mortgage Loans. However, Seller and Bank desire to set forth the terms under which such offers and purchases, if any, can be made
AGREEMENT
NOW, THEREFORE, for and in consideration of the covenants, representations, warranties and agreements contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the following terms shall have the meanings set forth below:
Accepted Lending Practices shall mean the loan origination practices to be observed by the originators of the Mortgage Loans, which practices shall be conducted: (a) in a commercially reasonable manner and in good faith; (b) in accordance with the provisions of this Agreement; (c) in accordance with all applicable Laws; (d) in accordance with the requirements (if any) of the Warehouse Program Guide (as amended by this Agreement); and (e) in a manner consistent with customary and usual standards of practice of prudent originators of residential mortgage loans.
Accepted Servicing Practices shall mean the loan servicing practices to be observed by Seller in connection with Participated Mortgage Loans, which practices shall be conducted: (a) in a commercially reasonable manner and in good faith; (b) in accordance with the provisions of this Agreement; (c) in accordance with all applicable Laws; and (d) in a manner consistent with customary and usual standards of practice of prudent servicers of residential mortgage loans.
Account or Accounts shall mean any of the deposit accounts to be established and maintained pursuant to this Agreement, including: (a) the Participation Account; (b) the Pledged Account; (c) the Remittance Account; (d) the Repayment Account; and (e) such other accounts as Bank may require Seller to establish pursuant to or in connection with this Agreement or any other Warehouse Document. For the avoidance of doubt, the term Account shall not include any servicing or escrow accounts.
Advance shall mean each payment of funds by Bank to Seller pursuant to the terms of this Agreement to pay the Purchase Price for the purchase of a Participation Interest. Such payment by Bank to Seller of the Purchase Price for a Participation Interest shall be effected through the delivery by Bank on behalf of Seller of the proceeds of the related Advance directly to the applicable Funding Recipient, which proceeds shall be applied towards satisfying Sellers obligations with respect to the applicable Mortgage Loan Transaction. With respect to any Participated Mortgage Loan, an Advance shall be deemed to be made on the date on which funds are wired or otherwise transferred by Bank to the related Funding Recipient regardless of whether funds are actually received by such Funding Recipient on the date of the initiation of such wire or other transfer.
Advance Request Termination Date shall mean the final date on which Seller may submit to Bank a Request, which date shall be the earlier to occur of: (a) the date which is twelve (12) months after the Sellers execution date; or (b) the date on which Sellers rights hereunder to submit any and all Requests to Bank shall terminate pursuant to the provisions of this Agreement or any other Warehouse Document (including, pursuant to Sections 5.2, 5.3 or 9.2).
Aged Participated Mortgage Loan shall mean any Participated Mortgage Loan which does not constitute a Retired Participated Mortgage Loan on or after the sixtieth (60th) day after the Purchase Date for such Participated Mortgage Loan.
Agency shall mean FHA, FHLMC, FNMA, GNMA, VA or USDA.
Agency Approvals shall mean: (a) all approvals and requirements of FNMA necessary for Seller to sell Eligible Mortgage Loans to FNMA and/or to service Eligible Mortgage Loans; (b) all approvals and requirements of FHLMC necessary for Seller to sell Eligible Mortgage Loans to FHLMC and/or to service Eligible Mortgage Loans; and (c) all approvals and requirements of GNMA for Seller to be an approved issuer of securities comprising any Eligible Mortgage Loans.
Agreement Date shall have the meaning given to such term in the first paragraph of this Agreement. The Agreement Date is for reference purposes only in order to identify in the Warehouse Documents the date of this Agreement. The effective date of this Agreement shall be the Effective Date.
Agreement Termination Date shall mean the date on which this Agreement shall terminate and cease to be in force and effect (except with respect to the provisions of this Agreement which expressly survive termination). The Agreement Termination Date is the earlier to occur of: (a) the date on which this Agreement shall terminate pursuant to Section 5.2(c); or (b) the date on which this Agreement shall otherwise terminate in accordance with the express terms of this Agreement or any other Warehouse Document.
Bailee Letter shall mean a letter, in form and substance as set forth in Exhibit 10 to the Custodial Agreement, delivered or caused to be delivered by Bank to any Take-Out Purchaser in connection with the proposed purchase of a Participated Mortgage Loan by such Take-Out Purchaser or its designee, which letter, among other things, directs such Take-Out Purchaser to hold, as bailee for Bank, the Mortgage Loan Documents for such Participated Mortgage Loan.
Bank shall mean TEXAS CAPITAL BANK, NATIONAL ASSOCIATION, and its successors and assigns.
Bank Document Deliverables shall mean, with respect to any Participated Mortgage Loan, (a) the original of the fully executed Mortgage Note for such Participated Mortgage Loan, together with the Required Endorsements related thereto (including, without limitation, each original executed allonge required by Bank in connection therewith), (b) the Required Custodian Deliverables (as defined in the Section of Exhibit F entitled Third-Party Custodian) related to such Participated Mortgage Loan, but only if (and only during such time as) Seller is permitted pursuant to such Section to deliver or cause to be delivered to the Custodian any Bank Document Deliverables, and (c) any other agreements, files, records and other documents related to such Participated Mortgage Loan which are required to be delivered to Bank in connection with the purchase of the Participation Interest in such Participated Mortgage Loan pursuant to the Warehouse Program Guide (as amended by this Agreement) in effect as of the related Purchase Date.
Bank Payment Deliverables shall mean any and all checks, commercial paper, notes, cash or other forms of payment of any and all sums: (a) required to be paid to Bank hereunder but which have been received by Seller (including any and all proceeds received by Seller from the sale of any Participated Mortgage Loan to a Take-Out Purchaser); or (b) received by Seller during the occurrence of an Event of Default which sums relate to any Participated Mortgage Loan.
Bankruptcy Code shall mean Title 11 of the United States Code, as now or hereafter in effect.
Blanket Assignment shall mean an assignment agreement in the form of Exhibit I, or in such other form required by Bank, executed and acknowledged by Seller and Bank, which evidences, among other things, the sale, transfer, assignment and conveyance by Seller to Bank of any and all Participation Interests in the Participated Mortgage Loans and the Mortgage loan Documents related thereto now or hereafter purchased by Bank from Seller upon the occurrence and continuation of an Event of Default.
Borrower shall mean any Person who is an obligor on or under a Mortgage Loan.
Broker Originated Mortgage Loan shall mean any Mortgage Loan which: (a) is closed in the name of a mortgage broker as lender; and (b) is transferred and assigned by such mortgage broker to Seller, and upon such transfer and assignment Seller shall be the holder of the Mortgage Note for such Mortgage Loan and otherwise own all right, title and interest in and to such Mortgage Loan.
Business Day shall mean any day other than a Saturday, Sunday or day on which commercial banks are authorized or required to be closed under the Laws of the States of California or Texas. Unless otherwise provided herein, the term day means a calendar day.
Collateral shall have the meaning given to such term in the UCC-1 financing statement attached hereto as Exhibit D.
Correspondent Originated Mortgage Loan shall mean any Mortgage Loan which: (a) was not originated by Seller; (b) is not a Broker Originated Mortgage Loan; and (c) has or will be purchased by Seller from the holder of the Mortgage Note for such Mortgage Loan, and upon such purchase Seller shall be the holder of the Mortgage Note for such Mortgage Loan and otherwise own all right, title and interest in and to such Mortgage Loan.
Custodial Agreement shall mean that certain Custodial Agreement dated as of August 29, 2014, executed by Bank, Seller and the Custodian, as such agreement may be amended, supplemented, replaced or modified from time to time pursuant to the provisions of this Addendum.
Custodian shall mean Deutsche Bank National Trust Company or other Person designated by Bank and mutually acceptable to Seller, as Banks payment agent in connection with the transactions contemplated by this Agreement.
Effective Date shall mean the date this Agreement has been fully executed by both Seller and Bank, as set forth below their respective signature blocks hereto.
Eligible Mortgage Loan shall mean any Mortgage Loan: (a) that is a Seller Originated Mortgage Loan or a Third-Party Originated Mortgage Loan; (b) that is in all material respects in compliance with the provisions of this Agreement or the Warehouse Program Guide (as amended by this Agreement) applicable to such Mortgage Loan; (c) for which all of the representations and warranties set forth in Section 6.10 shall be true, complete and correct on and as of the Purchase Date of a Participation Interest in such Mortgage Loan and at all times thereafter; and (d) which is otherwise acceptable to Bank in its commercially reasonable discretion on and as of such Purchase Date.
Escrow Agent shall mean, with respect to any Mortgage Loan, the title company or agency, approved in advance by Bank in its commercially reasonable discretion, which is responsible for the closing and funding of such Mortgage Loan.
Event of Default shall mean any of the events specified in Section 9.1.
FHA shall mean the Federal Housing Administration, or its successor.
FHLMC shall mean the Federal Home Loan Mortgage Corporation, or its successor.
FNMA shall mean the Federal National Mortgage Association, or its successor.
Funding Recipient shall mean, with respect to any Participated Mortgage Loan, Seller or such other Person to whom Bank shall directly pay the Purchase Price for the purchase of a Participation Interest in such Participated Mortgage Loan, as set forth in the related Request.
Generally Accepted Accounting Principles or GAAP shall mean those generally accepted accounting principles and practices which are recognized as such by the American Institute of Certified Public Accountants acting through its Accounting Principles Board or by the Financial Accounting Standards Board or through other appropriate boards or committees thereof and which are consistently applied for all applicable periods, except that any accounting principle or practice required to be changed by the said Accounting Principles Board or Financial Accounting Standards Board (or other appropriate board or committee of the said Boards) in order to continue as a generally accepted accounting principle or practice may be so changed.
GNMA shall mean the Government National Mortgage Association, or its successor.
Governmental Authority shall mean any and all federal, state, county, municipal, city or other government department, commission, board, court, agency or any other instrumentality of any of them (including any Agency) having jurisdiction over Bank, Seller, the Mortgage Loans or any of the transactions contemplated herein.
Law or law shall mean any and all present and future law, statute, code, ordinance, order, rule, regulation, judgment, decree, injunction, franchise, permit, certificate, license, guideline, authorization or other direction or requirement of any Governmental Authority. The terms Law and law include (a) the Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. Law No. 111-203, 124 Stat. 1376 (2010), and any and all Laws issued thereunder or in connection therewith, as may be amended from time to time (collectively, the Dodd-Frank Act), (b) the Interagency Appraisal and Evaluation Guidelines jointly issued on December 2, 2010 by the Office of the Comptroller of Currency, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, and the National Credit Union Administration, as the same may be amended from time to time (collectively, the Interagency Appraisal Guidelines), (c) the S.A.F.E. Mortgage Licensing Act of 2008 (12 U.S.C. §§ 5101 et seq.) and any and all applicable state Laws related thereto, as may be amended from time to time (collectively, the S.A.F.E. Act), and (d) any and all similar Laws from time to time in effect.
Lien shall mean any lien, mortgage, security interest, assignment, tax lien, pledge or encumbrance, or conditional sale or title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, or any other interest in Property designed to secure the repayment of indebtedness.
Loan Application shall mean a completed application for the applicable Mortgage Loan in its final form, signed by all applicable Borrowers, and which is in compliance with all applicable Laws.
Material Adverse Effect shall mean any set of circumstances or events which with respect to Seller: (a) could reasonably be expected to have a material adverse effect upon the validity, performance, or enforceability of any Warehouse Document against such Seller; (b) is or
could reasonably be expected to have a material adverse effect upon the condition (financial or otherwise), properties, liabilities (actual or contingent), business operations or prospects of Seller; or (c) could reasonably be expected to materially impair the ability of Seller to perform its obligations under any Warehouse Document to which it is a party.
Maximum Judgment Amount shall mean the lesser of: (a) [***]; or (b) at any particular time, the amount equal to [***] of the sum of Sellers cash, cash equivalents (certificates of deposit and other depository accounts established at FDIC-insured banks), United States government-issued securities and other registered, unrestricted equity or debt securities which are publicly traded on a recognized United States exchange and have been approved by Bank, in its commercially reasonable discretion and which, in all events, are held in Sellers name and are free and clear of all Liens (except Liens in favor of Bank).
Maximum Participation Amount shall mean an amount equal to THREE HUNDRED MILLION and No/100 Dollars ($300,000,000.00); provided, however, that during any Overline Period, the Maximum Participation Amount shall be the amount set forth for the same in the related Overline Confirmation for such Overline Period.
Minimum Pledged Balance shall mean good funds in an amount not less than [***]; provided, however, that during any Overline Period, the Minimum Pledged Balance shall be the amount set for the same in the related Overline Confirmation for such Overline Period.
Mortgage Loan shall mean a residential mortgage loan evidenced by a Mortgage Note and secured by a Security Instrument.
Mortgage Loan Activities shall mean the purchasing, processing, origination, administration, servicing and selling of Mortgage Loans by Seller and any other business activities related thereto or contemplated by this Agreement (including any activities related to Mortgage Loan Transactions).
Mortgage Loan Collections shall mean all checks, instruments, funds, and other property from time to time paid on, under or with respect to any Participated Mortgage Loan under any Mortgage Loan Document or otherwise related thereto, including, without limitation, all payments of principal, interest, fees, charges, costs, expenses, indemnities and other amounts, and all proceeds of sale of such Participated Mortgage Loan.
Mortgage Loan Documents shall mean, with respect to any Mortgage Loan, the Mortgage Note evidencing such Mortgage Loan, the Security Instrument securing such Mortgage Loan, and all other agreements, instruments and documents governing, evidencing, guaranteeing or relating to such Mortgage Loan, Mortgage Note or Security Instrument.
Mortgage Loan File shall mean, with respect to any Participated Mortgage Loan, any and all Mortgage Loan Documents and other agreements, files, records and other documents related to such Participated Mortgage Loan (including the related credit file and underwriting standards under which Seller approved such Participated Mortgage Loan).
Mortgage Loan Transaction shall mean: (a) with respect to any Mortgage Loan that is a Seller Originated Mortgage Loan, the closing and funding of such Mortgage Loan by the applicable Escrow Agent; and (b) with respect to any Mortgage Loan that is a Third-Party Originated Mortgage Loan, the purchase and sale transaction pursuant to which Seller shall have purchased, fully paid for and shall own all right, title and interest in and to such Mortgage Loan (if a Correspondent Originated Mortgage Loan).
Mortgage Note shall mean, with respect to any Mortgage Loan, a promissory note evidencing such Mortgage Loan and secured by a Security Instrument.
Mortgaged Property shall mean, with respect to any Mortgage Loan, the Residential Real Property subject to a Security Instrument securing such Mortgage Loan.
Outstanding Participation Balance shall mean, at any given time, an amount equal to the aggregate sum of the outstanding Advances hereunder made by Bank for the purchase of Participation Interests in Participated Mortgage Loans which do not at such time constitute Retired Participated Mortgage Loans.
Participated Mortgage Loan shall mean any Mortgage Loan in which Bank has elected to purchase a Participation Interest from Seller pursuant to the terms and conditions of this Agreement. A Mortgage Loan in which Bank has purchased a Participation Interest shall cease to be a Participated Mortgage Loan hereunder at such time as such Mortgage Loan is a Retired Participated Mortgage Loan.
Participation Account shall mean the deposit account established and maintained by Seller at Bank for the purpose of holding funds of Seller to be used to pay Sellers Funding Amounts. The account number for the Participation Account is identified in Schedule 1 to the Pledge Agreement.
Participation Interest shall mean, with respect to any Mortgage Loan, an undivided percentage ownership interest in all right, title and interest in, to and under such Mortgage Loan (including, all Mortgage Loan Collections payable on, and with respect to such Mortgage Loan, all of such Mortgage Loan Documents and all other obligations thereunder, all claims, suits, causes of action, and any other rights, known or unknown, against any of the related Borrower, guarantor or other Person relating to any of the foregoing, all collateral, guarantees and other security of or provided by any of the related Borrower or any other Person of any kind for or in respect to any and all of the foregoing, and all proceeds of any and all of the foregoing) purchased by Bank from Seller hereunder and owned by Bank. The undivided percentage ownership interest of Bank in any such Mortgage Loan shall be equal to the Participation Percentage for such Mortgage Loan in effect from time to time.
Participation Interest Rate shall mean, with respect to any Participated Mortgage Loan, the per annum rate of interest payable to Bank in connection with such Participated Mortgage Loan and its Participation Interest therein, which rate shall be calculated as a variable rate equal to the greater of: (a) the LIBOR Rate as of the related Purchase Date, as the LIBOR Rate may vary from day to day thereafter, plus [***]; or (b) the Participation Interest Rate Floor; provided, however, that the Participation Interest Rate
for any Participated Mortgage Loan shall not at any time be greater than the maximum rate permitted under applicable Law. For purposes of determining the Participation Interest Rate for any Participated Mortgage Loan, the LIBOR Rate means, with respect to a period of thirty (30) days, the London Interbank Offered Rate for deposits in United States Dollars (expressed as a percentage per annum) that is published or announced from time to time by Bloomberg or such other recognized commercial service selected by Bank, in its sole discretion; provided, however, if such rate is not available, the LIBOR Rate will be determined by an alternate method mutually acceptable to Bank and Seller. Notwithstanding anything herein to the contrary, in no event shall the LIBOR Rate be less than zero percent (0.00%) per annum. All interest hereunder shall be calculated on the basis of a three hundred sixty (360) day year and shall accrue on the actual number of days elapsed for any whole or partial month in which interest is being calculated.
Participation Interest Rate Floor shall mean an interest rate equal to [***] per annum.
Participation Percentage shall mean, with respect to any Participation Interest in a Participated Mortgage Loan, a percentage of undivided ownership interest in such Participated Mortgage Loan equal to: (a) the Standard Participation Percentage; or (b) if Bank elects, in its sole discretion, to make an Advance for the purchase of such Participation Interest which is greater or less than the amount equal to the Standard Participation Percentage multiplied by the outstanding principal amount of such Participated Mortgage Loan as of the related Purchase Date, then the amount of such Advance divided by such outstanding principal amount, expressed as a percentage; as the Participation Percentage for such Participated Mortgage Loan. Upon any repurchase of all or any portion of Banks outstanding Participation Interest in any Participated Mortgage Loan by Seller hereunder, Banks then-current Participation Percentage in such Participated Mortgage Loan shall be adjusted pursuant to this Agreement to give effect to such repurchase.
Party shall mean each of Seller and Bank.
Permitted Custodian Deliverables shall mean, with respect to any Participated Mortgage Loan, such agreements, files, records and other documents related to such Participated Mortgage Loan (other than any Required Custodian Deliverables) permitted to be delivered to the Custodian pursuant to the Custodial Agreement.
Permitted Encumbrances shall mean, with respect to any Mortgage Loan: (a) the Lien of current real property taxes and assessments not yet due and payable; (b) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording being acceptable pursuant to Accepted Lending Practices and specifically referred to in the lenders title insurance policy delivered to the originator of such Mortgage Loan and which do not adversely affect the appraised value of the Mortgaged Property for such Mortgage Loan; and (c) other matters to which like properties are commonly subject which are acceptable pursuant to Accepted Lending Practices and do not, individually or in the aggregate, materially interfere with the benefits of the security intended to be provided by the Security Instrument for such Mortgage Loan or the use, enjoyment, value or marketability of the related Mortgaged Property.
Person shall mean any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof, or any other form of entity.
Pledge Agreement shall mean, individually and collectively, each pledge or security agreement, in such form and content required by Bank, now or hereafter executed for the benefit of Bank in connection with this Agreement and the transactions contemplated hereby, including each agreement attached hereto as Exhibit B.
Pledged Account shall mean the depository account or accounts established and maintained by Seller at Bank for the purpose of holding funds of Seller to be used as a source of funds to pay the Repurchase/Sale Obligations. The account number for the Pledged Account is identified in Schedule 1 to the Pledge Agreement.
Proceeding means any action, claim, investigation, lawsuit or other proceeding.
Property shall mean any interest in any kind of property or asset, whether real, personal or mixed, or tangible or intangible.
Purchase Date shall mean, with respect to any Participated Mortgage Loan, the date and time of the Advance for the purchase by Bank of a Participation Interest in such Participated Mortgage Loan.
Purchase Price shall mean, with respect to a Participation Interest in any Mortgage Loan to be purchased by Bank, an amount equal to the outstanding principal amount of such Mortgage Loan on the related Purchase Date multiplied by the Banks Participation Percentage for such Participation Interest in such Mortgage Loan.
Repayment Account shall mean the deposit account established, owned and controlled by Bank, into which all proceeds from each sale of any Participated Mortgage Loan by Bank and Seller to a Take-Out Purchaser shall be funded and deposited, and such account and all funds deposited or maintained therein shall be disbursed and applied by Bank pursuant to the terms of this Agreement. The account number for the Repayment Account is ********* or such other deposit account number designated by Bank from time to time as the Repayment Account in a written notice delivered by Bank to Seller pursuant to this Agreement.
Remittance Account shall mean the deposit account established and maintained by Seller at Bank into which Bank shall deposit all amounts, if any, which are required to be paid by Bank to Seller hereunder.
Repurchase Price shall mean, with respect to a Participation Interest in any Participated Mortgage Loan, the amount to be paid by Seller to Bank for the repurchase of such Participation Interest which is required by Bank to be repurchased by Seller from Bank pursuant to Section 4.8, which amount shall be equal to: (a) the Purchase Price originally paid by Bank for the Participation Interest in such Participated Mortgage Loan, plus (b) all accrued and unpaid interest with respect to such Participation Interest at the Participation Interest Rate, plus (c) any charges incurred by or properly payable to Bank pursuant this Agreement, (d) all amounts (if any) received and applied
by Bank hereunder, as of the date of such repurchase, towards payment of any of the foregoing with respect to such Participated Mortgage Loan.
Repurchase/Sale Obligations shall mean: (a) any and all obligations of Seller, whether now existing or hereafter arising, to (i) arrange for the sale by and on behalf of the Parties of each Participated Mortgage Loan to a Take-Out Purchaser, and complete each such sale, as and when required pursuant to the terms and conditions of this Agreement, or (ii) repurchase all or any portion of Banks Participation Interest in each Participated Mortgage Loan as and when required pursuant to the terms and conditions of this Agreement; (b) any and all liabilities of Seller to Bank in connection with the obligations described in clause (a) of this sentence; and (c) any and all costs and expenses incurred by Bank in connection with the collection, administration or enforcement of all or any part of the obligations and liabilities described in clauses (a) and (b) of this sentence or the protection or preservation of, or realization upon, any collateral securing all or any part of such liabilities and obligations, including, without limitation, all reasonable external attorneys fees.
Request shall mean any request by Seller to Bank for the purchase by Bank from Seller of a Participation Interest in an Eligible Mortgage Loan and the Advance by Bank of funds for the Purchase Price for such Participation Interest, which Request shall be delivered by Seller to Bank in such manner and shall contain such information as may be required by Bank from time to time.
Required Custodian Deliverables shall mean, with respect to any Participated Mortgage Loan, such agreements, files, records and other documents related to such Participated Mortgage Loan required to be delivered to the Custodian pursuant to the Custodial Agreement.
Required Endorsements shall mean: (a) with respect to any Mortgage Note related to a Third-Party Originated Mortgage Loan, the endorsement pursuant to applicable Law of such Mortgage Note by the original payee and any and all subsequent holders thereof prior to the purchase of such Mortgage Note by Seller; and (b) with respect any Mortgage Note related to a Third-Party Originated Mortgage Loan or a Seller Originated Mortgage Loan, at Banks election, either (i) the endorsement pursuant to applicable Law of such Mortgage Note in blank by Seller (which may, in Banks discretion, be evidenced by an original allonge, in form and content acceptable to Bank, executed by Seller and affixed to such Mortgage Note) or (ii) no endorsement of such Mortgage Note by Seller, if Bank shall have received and accepted a valid power of attorney, in form and content satisfactory to Bank, authorizing Bank to endorse such Mortgage Note for and on behalf of Seller.
Residential Real Property shall mean a single platted lot of land improved with a one-to-four family residence, or a condominium or planned unit development.
Restricted Accounts shall mean the Participation Account and the Pledged Account.
Retained Percentage shall mean, with respect to any Participated Mortgage Loan, the percentage of undivided ownership interest retained by Seller in such Participated Mortgage Loan, after giving effect to the sale by Seller and purchase by Bank of such Participation Interest hereunder, which percentage shall be, for any such Mortgage Loan, equal to the difference of one hundred percent (100.0%) less the Banks Participation Percentage in such Participated Mortgage
Loan. Upon any repurchase of all or any portion of Banks outstanding Participation Interest in any Participated Mortgage Loan by Seller hereunder, Sellers then-current Retained Percentage in such Participated Mortgage Loan shall be adjusted to give effect to such repurchase.
Retired Participated Mortgage Loan shall mean any Mortgage Loan in which Bank has purchased a Participation Interest: (a) which has been subsequently sold in its entirety to a Take-Out Purchaser and the full amount of the Take-Out Purchase Price for such sale has been received and applied by Bank, all pursuant to the terms of this Agreement; (b) for which the Participation Interest in such Mortgage Loan has been subsequently repurchased in its entirety by Seller from Bank and the full amount of the Repurchase Price for such repurchase has been received and applied by Bank, all pursuant to the terms of this Agreement; or (c) for which the entire principal balance and all accrued interest for such Mortgage Loan has been subsequently paid in full by the related Borrower, and Banks pro rata share of such amounts (determined in accordance with Banks Participation Percentage and the Participation Interest Rate in effect from time to time with respect to such Mortgage Loan) have been received and applied by Bank, all pursuant to the terms of this Agreement.
Security Instrument shall mean, with respect to any Mortgage Loan, a full recourse mortgage or deed of trust securing such Mortgage Loan and granting a perfected first priority lien on the Residential Real Property related thereto.
Seller shall mean AMERIHOME MORTGAGE COMPANY, LLC, and its successors and assigns.
Sellers Funding Amount shall mean, with respect to any Participated Mortgage Loan and the related Mortgage Loan Transaction, the total amount to be paid by Seller (through sources other than an Advance) in connection with such Mortgage Loan Transaction, which Sellers Funding Amount shall be equal to the Total Funding Amount for such Participated Mortgage Loan less the Purchase Price for the Participation Interest therein.
Seller Originated Mortgage Loan shall mean any Mortgage Loan: (a) originated by Seller and closed in the name of Seller as lender; or (b) with respect to which Seller is (or shall be upon the closing thereof) the holder of the Mortgage Note for such Mortgage Loan and otherwise owns all right, title and interest in and to such Mortgage Loan.
Standard Participation Percentage shall mean a percentage equal to One Hundred Percent (100.00%).
Take-Out Purchase Agreement shall mean, with respect to any Participated Mortgage Loan to be sold by Seller to any Take-Out Purchaser, a current, valid, binding and enforceable commitment issued by such Take-Out Purchaser in favor of Seller, and/or other written agreement or arrangement between such Take-Out Purchaser and Seller, to purchase such Participated Mortgage Loan (including any such commitment or agreement which does not specifically identify such Participated Mortgage Loan but which contemplates the purchase of Mortgage Loans by such Take-Out Purchaser from time to time), which Take-Out Purchase Agreement provides for a purchase price to be paid by such Take-Out Purchaser for such Participated Mortgage Loan.
Take-Out Purchase Price shall mean, with respect to any Participated Mortgage Loan to be sold by Seller to a Take-Out Purchaser pursuant to a Take-Out Purchase Agreement, the amount paid by such Take-Out Purchaser with respect to such Participated Mortgage Loan. For the avoidance of doubt, if the Take-Out Purchase Price for any Participated Mortgage Loan is less than the Repurchase Price for the Participation Interest relating to such Participated Mortgage Loan, Seller shall be responsible for such shortfall and shall pay such amount to Bank pursuant to the terms of this Agreement.
Take-Out Purchaser shall mean (a) any Agency, (b) any Person approved in advance by Bank in its commercially reasonable discretion, who purchases or agrees to purchase any Participated Mortgage Loan pursuant to an Take-Out Purchase Agreement.
Third-Party Originated Mortgage Loan shall mean any Correspondent Originated Mortgage Loan or any Broker Originated Mortgage Loan.
Title Policy shall mean, an ALTA Loan Policy of Title Insurance, a standard Texas form of Loan Policy of Title Insurance, or such other insurance policy which is acceptable to an Agency, with such standard endorsements as may be reasonably required by Bank, issued by a nationally recognized title insurance company acceptable to an Agency.
Total Funding Amount shall mean, with respect to any Participated Mortgage Loan and the related Mortgage Loan Transaction, the total amount to be paid by Seller in connection with such Mortgage Loan Transaction (including amounts to be provided on behalf of Seller by Bank through the making of an Advance for the purchase of a Participation Interest in such Participated Mortgage Loan), as set forth in the related Request.
UCC shall mean the Uniform Commercial Code of the State of Texas or other applicable jurisdiction, as it may be amended from time to time.
USDA shall mean the United States Department of Agriculture, or its successor.
VA shall mean the United States Department of Veterans Affairs, or its successor.
Warehouse Documents shall mean this Agreement, the Blanket Assignment, the Pledge Agreement and any and all other agreements, instruments and documents evidencing, securing or pertaining to Banks discretionary purchase of Participation Interests in Mortgage Loans from Seller hereunder, as shall from time to time be executed and delivered to Bank by Seller or any other Person pursuant to or in connection with this Agreement or the transactions contemplated hereby, including each addendum to this Agreement (if any) executed by Bank and Seller, any future amendments hereto, or restatements hereof, together with any and all renewals, extensions, and restatements of, and amendments and modifications to, any such agreements, documents and instruments.
Warehouse Program Guide shall mean, collectively, (a) the Warehouse Lending Program Guide issued by Bank and made available to Seller prior to execution of this Agreement, and (b) any amendments, modifications or supplements thereto from time to time by Bank, and including any notices or bulletins issued by Bank concerning the guidelines, procedures and
requirements for the transactions contemplated by this Agreement, in each case as reasonably approved by Seller. For the avoidance of doubt, any amendment, modification or supplement to the Warehouse Program Guide shall only be effective with respect to Requests made after Sellers approval of such amendment, modification or supplement.
1.2 Other Defined Terms. In addition to the terms defined in Section 1.1, as used in this Agreement, other capitalized terms contained in this Agreement shall have the meanings assigned to them.
1.3 Other Definitional Provisions.
(a) All terms defined in this Agreement shall have the herein defined meanings when used in any document, certificate, report or other document, instrument, or writing made or delivered pursuant to this Agreement or any other Warehouse Document, unless the context therein shall otherwise require.
(b) Words used herein in the singular, where the context so permits, shall be deemed to include the plural and vice versa. The definitions of words in the singular herein shall apply to such words when used in the plural where the context so permits and vice versa.
(c) The words herein, hereof, hereunder and other similar compounds of the word here when used in this Agreement shall refer to the entire Agreement and not to any particular provision or section; and the word including, as used herein, shall mean including, without limitation.
(d) All references herein to Articles and Sections are, unless specified otherwise, references to articles and sections of this Agreement. All references herein to an Exhibit, Schedule or Addendum are references to exhibits, schedules or addenda attached hereto, all of which are made a part hereof for all purposes, the same as if set forth herein verbatim, it being understood that if any exhibit, schedule or addendum attached hereto, which is to be executed and delivered, contains blanks, the same shall be completed correctly and in accordance with the terms and provisions contained and as contemplated herein prior to or at the time of the execution and delivery thereof.
ARTICLE 2
PURCHASE OF PARTICIPATION INTERESTS
2.1 Request for Purchase.
(a) At any time prior to the Advance Request Termination Date, Seller may submit a Request to Bank for Bank to purchase a Participation Interest in one or more Eligible Mortgage Loans from Seller hereunder by delivering or causing to be delivered to Bank, by electronic data submission, as may be required by Bank from time to time, the information and other items for such Eligible Mortgage Loans required by Bank pursuant to the Warehouse Program Guide (as amended by this Agreement).
(b) To assist Bank in making its decision whether to purchase a Participation Interest in any particular Eligible Mortgage Loan, Seller will timely provide Bank or Banks agents with the information and other items for such Eligible Mortgage Loan required by Bank pursuant to the Warehouse Program Guide (as amended by this Agreement).
(c) Each submission of a Request shall be deemed to constitute a representation and warranty by Seller to Bank on the date of such Request and on the date of an Advance made by Bank to purchase a Participation Interest in any Mortgage Loan in connection with such Request that: (i) such Request relates to an Eligible Mortgage Loan; and (ii) the information and materials submitted to Bank in connection with such Mortgage Loan and such Request are true, correct and complete in all material respects.
(d) Each submission of a Request shall constitute Sellers agreement, such that, if Bank elects to purchase from Seller a Participation Interest in the Mortgage Loan referenced in such Request, then effective upon payment by Bank to Seller of the Purchase Price for such Participation Interest pursuant to the terms of this Agreement, Seller shall have (and shall be conclusively deemed to have) irrevocably and unconditionally sold, transferred, assigned and conveyed to Bank, and Bank shall have (and shall be conclusively deemed to have) purchased and accepted from Seller, all of Sellers right, title, and interest in, to and under such Participation Interest in such Mortgage Loan and the related Mortgage Loan Documents, and such sale, transfer, assignment and conveyance shall be evidenced by this Agreement.
2.2 Decision to Purchase. Each decision of Bank whether to purchase any Participation Interest in any Mortgage Loan from Seller hereunder shall be made by Bank in its sole and absolute discretion. Bank shall be under no obligation hereunder to purchase any Participation Interest in any Mortgage Loan nor shall Bank have any obligation hereunder to purchase any minimum amount of Participation Interests in Mortgage Loans. In each instance where a Request is submitted to Bank, Bank will make an independent decision whether to purchase a Participation Interest in any Mortgage Loan contemplated by the Request. Bank may decline to purchase any Participation Interest in any Mortgage Loan for any reason. The election of Bank to purchase a Participation Interest in any Mortgage Loan shall be evidenced by the making of an Advance by Bank for the payment of the Purchase Price related thereto. If for any reason whatsoever Bank fails to make an Advance for the payment of the Purchase Price for a Participation Interest in any Mortgage Loan, then it shall be conclusive evidence of Banks election not to purchase a Participation Interest in such Mortgage Loan.
2.3 Conditions to Each Purchase. As a condition precedent to any purchase of a Participation Interest by Bank from Seller hereunder, in addition to all other requirements set forth herein, Seller shall deliver to Bank all of the following, each being duly executed, endorsed, notarized where applicable and delivered and in form and content satisfactory to Bank in its commercially reasonable discretion:
(a) The information and other items required to be delivered to Bank pursuant to Section 2.1;
(b) The representations and warranties of Seller contained in this Agreement and each other Warehouse Document (other than those representations and warranties which are, by their terms, expressly limited to the date of the agreement in which they were initially made) are true and correct in all material respects on and as of the date of such purchase;
(c) If requested by Bank, a written certification from Seller that no Event of Default has occurred or is continuing as of the date of the Advance;
(d) Seller has adequate available funds on deposit in the Participation Account in an amount not less than Sellers Funding Amount for such Mortgage Loan; and
(e) Such other documents as Bank may reasonably request at any time at or prior to the date of the first Advance hereunder or as a condition to any subsequent Advance hereunder, including any and each Pledge Agreement required by Bank to be executed in connection with the transactions contemplated by this Agreement.
Each submission of a Request shall be deemed to constitute a representation and warranty by Seller to Bank on the date of the applicable Advance made to purchase a Participation Interest in connection with such Request as to the facts and statements specified in clauses (a), (b), (c) and (d) immediately above and in Sections 5.1(e), (g) and (h) are true and correct in all material respects. It is understood and agreed that Bank shall not make any Advance for the Purchase Price of any Participation Interest unless with respect thereto Bank is in receipt of all agreements and documents required to be delivered to Bank under this Agreement and all other conditions precedent and requirements set forth herein are satisfied or waived by Bank in writing.
All conditions precedent hereunder to the purchase of a Participation Interest are solely for the benefit of Bank. Banks election, in its sole discretion, to waive any condition precedent hereunder for the purchase of any Participation Interest shall not constitute a waiver of the satisfaction of such condition precedent for any subsequent purchase of any other Participation Interest. No such condition precedent shall be deemed waived unless waived in writing by Bank.
2.4 Funding of Mortgage Loan Transactions; Purchase of Participation Interests. With respect to each Participated Mortgage Loan, Bank and Seller agree that:
(a) Bank shall (and is authorized to) debit funds from the Participation Account in an amount equal to Sellers Funding Amount for such Participated Mortgage Loan and deliver on behalf of Seller by wire transfer such funds directly to the account of the Funding Recipient designated in the related Request (provided, however, if such Funding Recipient is an Escrow Agent, then such account shall be an escrow account) or deliver such funds on behalf of Seller to such Funding Recipient in any other manner acceptable to Bank. Bank shall not make an Advance for the purchase of a Participation Interest in any Mortgage Loan unless Seller has good funds on deposit in the Participation Account in an amount not less than Sellers Funding Amount for such Mortgage Loan;
(b) As payment by Bank to Seller for the purchase of a Participation Interest in such Participated Mortgage Loan, Bank shall make an Advance in an amount equal to the
related Purchase Price. Seller hereby irrevocably and unconditionally instructs Bank, with respect to any such Advance, to deliver by wire transfer the proceeds of such Advance on behalf of Seller directly to the account of the Funding Recipient designated in the related Request or to deliver such proceeds on behalf of Seller to such Funding Recipient in any other manner acceptable to Bank; and
(c) Upon the making of an Advance by Bank to or on behalf of Seller for the purchase of a Participation Interest in such Participated Mortgage Loan as described above in this Section: (i) Bank shall immediately have purchased such Participation Interest from Seller, and shall immediately have become fully vested with, an undivided percentage ownership interest in all of Sellers right, title and interest in and to such Participated Mortgage Loan and the related Mortgage Loan Documents, which undivided percentage ownership interest shall equal the Participation Percentage for such Participated Mortgage Loan; and (ii) Seller shall immediately make proper entries on its books and records disclosing the absolute sale by Seller to Bank of such Participation Interest in such Participated Mortgage Loan and the related Mortgage Loan Documents. The purchase and sale of a Participation Interest in any Participated Mortgage Loan hereunder shall be conclusively established by the making of an Advance by Bank for the Purchase Price for such Participation Interest as and in the manner provided in this Section.
2.5 Failure to Complete Mortgage Loan Transaction. Each Advance made by Bank to purchase a Participation Interest from Seller in a Mortgage Loan is intended by Bank and Seller to be made in connection with a Mortgage Loan Transaction, which Mortgage Loan Transaction is to occur on or about the date on which the related Request for such Advance is submitted by Seller to Bank for Bank to purchase a Participation Interest in such Mortgage Loan or on such date otherwise specified in such Request. With respect to any Mortgage Loan for which Seller has submitted a Request to Bank for Bank to purchase a Participation Interest therein, if the Mortgage Loan Transaction related thereto is not expected by Seller to occur or fails to occur within two (2) Business Days of such Request then Seller shall immediately provide notice thereof to Bank. Should the Mortgage Loan Transaction related to any Mortgage Loan not be expected by Seller to occur or fail to occur within two (2) Business Days of the Request to Bank for Bank to purchase a Participation Interest therein and Bank shall have delivered on behalf of Seller to the related Funding Recipient the proceeds of the Advance for the purchase by Bank of such Participation Interest, then: (a) the proceeds of such Advance shall immediately be returned directly to Bank and Bank may instruct such Funding Recipient to immediately return such proceeds directly to Bank; and (b) Seller shall (i) immediately instruct and cause such Funding Recipient to return the proceeds of such Advance directly to Bank and (ii) cooperate with Bank to effect the immediate return of the proceeds of such Advance directly to Bank and, at the request of Bank, take such actions and do such things deemed necessary or appropriate by Bank to effect the immediate return directly to Bank of the proceeds of such Advance.
2.6 Reserved.
2.7 Maximum Participation Amount. Notwithstanding anything to the contrary contained herein, Bank shall not purchase and hold, at any one time, Participation Interests such that the Outstanding Participation Balance exceeds the Maximum Participation Amount; provided,
however, that Bank may, in its sole and absolute discretion, elect to temporarily increase the Maximum Participation Amount upon written notice to Seller pursuant to Section 2.8. Nothing contained in this Section shall limit, impair or affect the provisions of Section 2.2.
2.8 Overline Facility Increases. Upon Sellers request from time to time, Bank may, in its sole and absolute discretion, elect to temporarily increase the amount of the Maximum Participation Amount (each, an Overline Facility Increase) by providing written notice thereof to Seller (each, an Overline Confirmation). Each Overline Confirmation shall set forth the terms on which Bank agrees to temporarily increase the Maximum Participation Amount, including: (a) the amount to which the Maximum Participation Amount will be temporarily increased; (b) the date on which such temporary increase in the Maximum Participation Amount shall commence and terminate (the Overline Period); and (c) the amount to which the Minimum Pledged Balance shall be increased in connection with such Overline Facility Increase. As a condition precedent to the effectiveness of any Overline Facility Increase, Seller shall deposit into the Pledged Account good funds in such amount required in order to maintain therein the Minimum Pledged Balance set forth in the related Overline Confirmation. During any Overline Period, the Maximum Participation Amount and Minimum Pledged Balance shall equal the respective amounts set forth on the Overline Confirmation and, upon the expiration of the Overline Period, the Maximum Participation Amount and Minimum Pledged Balance shall automatically be reduced to the respective amounts in effect prior to the commencement of any Overline Period.
ARTICLE 3
DELIVERY OF BANK DOCUMENT DELIVERABLES
3.1 Documents to be Delivered to the Custodian After an Advance. Subject to Sections 3.2 and 3.3, within five (5) Business Days after the Purchase Date for any Participated Mortgage Loan, Seller shall deliver or cause to be delivered to the Custodian all of the Bank Document Deliverables for such Participated Mortgage Loan. Bank reserves the right to reasonably request copies of any of the Bank Document Deliverables for review prior to making any Advance for the purchase of a Participation Interest in any specific Mortgage Loan.
3.2 Procedure for Delivery of Bank Document Deliverables. Seller shall cause the Bank Document Deliverables for each Participated Mortgage Loan to be: (i) delivered directly to Seller (and, in the event that the applicable Funding Recipient for such Participated Mortgage Loan is or is required hereunder to be an Escrow Agent, such Bank Document Deliverables shall be delivered directly to Seller from escrow by the Escrow Agent for such Participated Mortgage Loan); and (ii) thereafter, delivered directly to the Custodian by Seller within five (5) Business Days after the Purchase Date for such Participated Mortgage Loan, unless otherwise expressly provided by Bank in writing to Seller with respect to such Participated Mortgage Loan (it being understood that any such writing from Bank shall only apply to the specific Participated Mortgage Loan referenced therein).
3.3 Bank Document Deliverables Held By Seller. Without limiting the requirements set forth in Section 3.2, Seller acknowledges and agrees that each and every Bank Document Deliverable for any Participated Mortgage Loan which is at any time in the custody, possession or control of Seller after Banks purchase of a Participation Interest in such Participated Mortgage
Loan shall be held and delivered to the Custodian pursuant to the terms and conditions of Section 5.12. Nothing contained in this Section authorizes or permits the delivery to Seller or any other Person (other than the Custodian) of any of the Bank Document Deliverables which are required to be delivered directly to the Custodian pursuant to the provisions of this Section.
3.4 Custodian and Payment Agent Provisions.
(a) Seller, Bank and Custodian have entered into a custodial agreement in such form and content acceptable to Bank and Seller (the Custodial Agreement), pursuant to which Custodial Agreement, among other things, Custodian shall agree to hold the Bank Document Deliverables in custody for the benefit of, and as bailee and agent for, Bank.
(b) Seller, Bank, Custodian and such other Persons required by Bank and Seller have entered into a joint custodial securities account control agreement in such form and content acceptable to Custodian, Bank and Seller and such other Persons (Joint Securities Account Agreement), pursuant to which Joint Securities Account Agreement, among other things, Custodian shall agree to serve as custodian of certain cash and securities for the other parties to the Joint Securities Account Agreement.
(c) Seller, Bank and such other Persons required by Bank have entered into an intercreditor agreement in such form and content acceptable to Bank (Intercreditor Agreement), pursuant to which Intercreditor Agreement, among other things, the parties define their respective rights to the proceeds from the sale of certain Mortgage Loans.
(d) Until such time as Bank shall provide written notice to Seller to the contrary, Custodian shall constitute Banks designee hereunder. Bank reserves the right to at any time remove Custodian or any other Person as its designee and to appoint any Person as its designee upon no less than sixty (60) days prior written notice and the consent of Seller, which consent shall not be unreasonably withheld, and such removal or appointment shall be effective as of the dates set for in such notice (provided, notwithstanding the foregoing, should an Event of Default have occurred and be continuing, Sellers consent shall not be required if Bank elects to remove the Custodian and appoint itself or another Person as designee for purposes of this Agreement).
(e) Subject to the provisions of Subsection (f) of this Section, Seller shall deliver or cause to be delivered to the Custodian the Bank Document Deliverables for each Participated Mortgage Loan pursuant to the provisions of Section 3.1 and the Custodial Agreement. All Bank Document Deliverables (including all Required Custodian Deliverables), Permitted Custodian Deliverables and other Mortgage Loan Files (without implying that Seller is permitted to deliver any such other Mortgage Loan Files to the Custodian other than pursuant to the provisions of this Section and the Warehouse Agreement) delivered to the Custodian shall be held by the Custodian, as custodian and bailee for Bank, for the exclusive use and benefit of Bank, pursuant to the provisions of the Custodial Agreement and this Agreement.
(f) Notwithstanding anything herein to the contrary:
(i) Seller shall not be permitted to deliver or cause to be delivered to the Custodian any Bank Document Deliverables (including any Required Custodian Deliverables) or Permitted Custodian Deliverables until such time as Bank shall have received a fully executed copy of the Custodial Agreement, in such form and content acceptable to Bank.
(ii) If the Custodial Agreement shall terminate (including if Bank shall terminate the Custodial Agreement in accordance with its terms), then effective as the date of such termination (without any further action by, or notice to, any Party): (A) Seller shall not be permitted to deliver or cause to be delivered to the Custodian any Bank Document Deliverables (including any Required Custodian Deliverables) or Permitted Custodian Deliverables; and (B) (I) all Bank Document Deliverables shall be delivered to Bank (and not the Custodian) pursuant to the provisions of this Agreement, and (II) all other Mortgage Loan Files (excluding any portions thereof which constitute Bank Document Deliverables) shall be delivered to, and held and maintained by, Seller (and not the Custodian) pursuant to the provisions of this Agreement.
(iii) Upon the occurrence and during the continuance of an Event of Default, Bank may, in its commercially reasonable discretion, require that Seller cease delivering or causing to be delivered to the Custodian any and all Bank Document Deliverables (including any Required Custodian Deliverables) and Permitted Custodian Deliverables by providing written notice thereof to Seller, in which case, effective as of the date set forth in such written notice: (A) Seller shall not be permitted to deliver or cause to be delivered to the Custodian any Bank Document Deliverables (including any Required Custodian Deliverables) or Permitted Custodian Deliverables; and (B) (I) all Bank Document Deliverables shall be delivered to Bank (and not the Custodian) pursuant to the provisions of the Warehouse Agreement and (II) all other Mortgage Loan Files (excluding any portions thereof which constitute Bank Document Deliverables) shall be delivered to, and held and maintained by, Seller (and not the Custodian) pursuant to the provisions of the Warehouse Agreement.
(iv) Upon the occurrence and during the continuance of an Event of Default, Bank may, in its commercially reasonable discretion, require that any or all of the Bank Document Deliverables (including any Required Custodian Deliverables), Permitted Custodian Deliverables and other Mortgage Loan Files (without implying that Seller is permitted to deliver any such other Mortgage Loan Files to the Custodian other than pursuant to the provisions of this Section and the Warehouse Agreement) (A) in the possession of the Custodian be released by the Custodian directly to Bank, in which case Bank shall be deemed to be the Custodian for such items, or (B) in the custody, possession or control of Seller pursuant to Section 5.12(b) be delivered directly to Bank (and not the Custodian) by Seller, in which case Bank shall be deemed to be the Custodian for such items.
(g) Seller agrees to cooperate with Bank, and take such actions and do such other things deemed necessary or advisable by Bank, in connection with effecting the provisions of Subsections (f)(ii), (iii) and (iv) of this Section.
(h) Seller shall at all times comply with the provisions of the Custodial Agreement. Notwithstanding anything in the Custodial Agreement to the contrary, the Custodial Agreement or any other agreement related thereto shall not: (i) be amended, supplemented, replaced or modified or terminated without the prior written consent of Bank; and (ii) adversely affect or impair Sellers duties, obligations or agreements under this Agreement.
(i) SELLER WILL RELEASE, HOLD HARMLESS AND INDEMNIFY EACH INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL LOSSES WHICH ARE RELATED TO THE CUSTODIAL AGREEMENT.
ARTICLE 4
SALE OF LOANS TO TAKE-OUT PURCHASERS;
AGED LOANS; REPURCHASE OBLIGATIONS
4.1 Short Term Nature of Investment.
(a) It is understood that each Participation Interest which Bank purchases in any Participated Mortgage Loan shall be purchased by Bank for its own account for the short term investment of its capital and in reliance of Sellers agreement hereunder that: (i) Seller shall arrange and complete the sale by and on behalf of the Parties of the related Participated Mortgage Loan as and when required pursuant to the terms of this Agreement; or (ii) repurchase all or any portion of such Participation Interest on or prior to the date required pursuant to the terms of this Agreement, if such sale is not arranged and completed by Seller as and when required pursuant to the terms of this Agreement. In order to secure the prompt and complete performance by Seller of its Repurchase/Sale Obligations, Seller does hereby pledge, assign and grant to Bank a continuing security interest in and to the Collateral. For this purpose, this Agreement shall constitute a security agreement in accordance with the UCC, and Bank shall have all the rights of a secured creditor with respect to such security.
(b) For each Participated Mortgage Loan, it is the intention of Bank and Seller that such Participated Mortgage Loan and the related Mortgage Loan Documents will be sold and delivered to a Take-Out Purchaser or repurchased by Seller, and for such Take-Out Purchaser and/or Seller to have paid the full amount of the Repurchase Price for the Participation Interest related to such Participated Mortgage Loan, within [***] days of the Purchase Date for such Participated Mortgage Loan. Notwithstanding the foregoing, it is understood and agreed that Bank shall not have and does not undertake any duty, obligation or liability arising from or related to any Take-Out Purchase Agreement or any Take-Out Purchaser.
4.2 Sale of Participated Mortgage Loans to Take-Out Purchasers.
(a) The sale of each Participated Mortgage Loan by Seller and Bank to any Take-Out Purchaser shall be in accordance with the terms of the related Take-Out Purchase Agreement. If a Take-Out Purchaser fails to perform or anticipatorily breaches its obligations under a Take-Out Purchase Agreement to purchase any Participated Mortgage Loan, then Seller shall promptly locate and consummate the sale by Bank and Seller of such Participated Mortgage Loan to another Take-Out Purchaser; provided, however, that the foregoing shall not limit or qualify any other rights or remedies available to Bank hereunder with respect to such Participated Mortgage Loan or any Participation Interest therein.
(b) Notwithstanding anything to the contrary in any Take-Out Purchase Agreement, the procedures of sale to a Take-Out Purchaser by Seller and Bank of any Participated Mortgage Loan shall be as follows:
(i) Seller shall deliver to the Take-Out Purchaser the Mortgage Loan Documents for such Participated Mortgage Loan (other than the related Mortgage Note and other Mortgage Loan Documents, if any, which are then being held by the Custodian). Such Mortgage Loan Documents shall be delivered by Seller to the Take-Out Purchaser under the provisions of the Take-Out Purchase Agreement which govern the Take-Out Purchasers custody and possession of such Mortgage Loan Documents or under such other written custodial or similar bailment agreement between Seller and the Take-Out Purchaser acceptable to Bank.
(ii) Bank shall deliver or cause to be delivered to the Take-Out Purchaser, under a Bailee Letter, the Mortgage Loan Documents for such Participated Mortgage Loan which are then held by the Custodian pursuant to this Agreement, including the original Mortgage Note for such Participated Mortgage Loan accompanied by: (A) the Required Endorsements; and (B) if such Mortgage Note was not endorsed in blank by Seller, an allonge endorsed in blank by Bank, as agent for Seller, pursuant to (and if and to the extent that Bank shall have received and accepted) a valid power of attorney, in form and content satisfactory to Bank, authorizing Bank to endorse such Mortgage Note for and on behalf of Seller.
(c) Within no more than thirty (30) days after the delivery by the Custodian to the Take-Out Purchaser of the Mortgage Note evidencing such Participated Mortgage Loan, Seller shall cause the Take-Out Purchaser to pay or cause to be paid directly to Bank, as payment to Seller and Bank for the purchase by the Take-Out Purchaser of such Participated Mortgage Loan, immediately available funds in an amount equal to the Take-Out Purchase Price for such Participated Mortgage Loan. If the Take-Out Purchase Price for such Participated Mortgage Loan is less than the Repurchase Price for the related Participation Interest, then Seller shall pay to Bank in immediately available funds the amount of such shortfall such that the total amount received from the Take-Out Purchaser and Seller shall be an amount equal to the related Repurchase Price.
(d) All of the proceeds from the sale by Seller of a Participated Mortgage Loan to a Take-Out Purchaser shall be paid directly to Bank pursuant to Section 4.3 and shall be applied by Bank on behalf of Bank and Seller in accordance with Section 4.4.
(e) Subject to Section 4.4(b), Bank and Sellers ownership interests in any Participated Mortgage Loan to be sold to a Take-Out Purchaser shall continue in full force and effect, and Bank and Seller shall not have (and shall not be deemed to have) sold such Participated Mortgage Loan to a Take-Out Purchaser unless and until such time as Bank shall have received immediately available funds from the Take-Out Purchaser and/or Seller for such sale in an amount not less than the Repurchase Price for the Participation Interested in such Participated Mortgage Loan.
4.3 Payments From Take-Out Purchasers. In connection with each sale of a Participated Mortgage Loan by Seller and Bank to a Take-Out Purchaser, Seller shall cause the Take-Out Purchase Price to be paid by the Take-Out Purchaser for the purchase of the Participated Mortgage Loan to be paid by the Take-Out Purchaser, in immediately available funds, directly to Bank into the Repayment Account. Bank shall promptly notify Seller of the receipt of funds deposited into the Repayment Account by a Take-Out Purchaser or from Banks custodian or other designee that may be in receipt of such funds from time to time (each a Take-Out Purchaser Payment). If the Take-Out Purchaser Payment for such Participated Mortgage Loan is less than the Repurchase Price for the related Participation Interest, then Seller shall deposit to the Repayment Account the amount of such shortfall such that the total amount received from the Take-Out Purchaser and Seller shall be an amount equal to the related Repurchase Price.
4.4 Processing Payments From Take-Out Purchasers. With respect to any Take-Out Purchaser Payment:
(a) Seller shall promptly confirm to Bank the Participated Mortgage Loan to which such Take-Out Purchaser Payment (along with any shortfall deposited by Seller pursuant to Section 4.3) applies.
(b) In addition, Bank reserves the right, in its sole discretion, to not post any Take-Out Purchaser Payment for credit to Seller in the event that insufficient funds were delivered by the Take-Out Purchaser to Bank to fully pay the Repurchase Price for the Participation Interested related to the Participated Mortgage Loan to which the Take-Out Purchaser Payment applies, but only after notice to Seller and allowing Seller [***] to cure any such defect by funding, or causing to be funded, any such shortfalls. Seller acknowledges and agrees that (i) with respect to any Take-Out Purchaser Payment for which insufficient funds were delivered, Banks related Participation Interest shall not have been sold (and shall be deemed to not have been sold) to such Take-Out Purchaser unless and until Seller has caused sufficient funds to be deposited in the Repayment Account, and Seller shall immediately either deposit such funds or notify such Take-Out Purchaser that no sale of such Participated Mortgage Loan by Bank and Seller to such Take-Out Purchaser has occurred and coordinate return of the Take-Out Purchaser Payment; and (ii) with respect to a Take-Out Purchaser Payment for which insufficient funds were delivered (after notice to Seller and [***] to cure as set forth
above), Bank shall have the right, in its sole discretion, to offset any amounts in any Account in order to effect full payment of the related Repurchase Price; and
(c) The proceeds of each Take-Out Purchaser Payment (along with any shortfall deposited by Seller pursuant to Section 4.3) shall be applied by Bank pursuant to Section 5.13.
All notices to be given and actions to be taken pursuant to this Section shall be effectuated electronically or in such other manner, as required by Bank from time to time pursuant to the Warehouse Program Guide (as amended by this Agreement).
4.5 Reserved.
4.6 Participation Interest Rate for Aged Participated Mortgage Loans.
(a) With respect to any Aged Participated Mortgage Loan, to the extent permitted by applicable Law, Bank may from time to time, in its sole discretion, increase the then-current Participation Interest Rate with respect to such Aged Participated Mortgage Loan by an amount, as determined by Bank, in accordance with the following:
Number of days elapsed since |
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Maximum aggregate total |
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Date on which the |
[***] |
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[***] |
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(b) Notwithstanding anything herein to the contrary, the Participation Interest Rate for any Participated Mortgage Loan shall not at any time exceed the maximum rate permitted under applicable Law.
(c) The provisions of this Section shall not limit or qualify any rights or remedies of Bank hereunder (including, without limitation, any rights or remedies of Bank under Section 4.8).
4.7 Reserved.
4.8 Repurchase of Participation Interests.
(a) With respect to any specific Participated Mortgage Loan, Seller may at any time, at Sellers sole option, repurchase from Bank, in its entirety, all of Banks then-outstanding Participation Interest in such Participated Mortgage Loan at the related Repurchase Price. With respect to any specific Participated Mortgage Loan, Bank shall have the right to require Seller, upon demand by Bank, to repurchase from Bank, in its entirety, all of Banks then-outstanding Participation Interest in such Participated Mortgage Loan, if Bank reasonably determines at any time, that: (i) any representation or warranty
made or deemed made by Seller to Bank under Sections 2.1 or 6.10 as to such Participated Mortgage Loan was false, misleading, or erroneous in any material respect at the time on or as of the Purchase Date for such Participated Mortgage Loan and such breach has an adverse material effect on such Participated Mortgage Loan or Banks rights therein; (ii) such Participated Mortgage Loan was not an Eligible Mortgage Loan on or as of the Purchase Date for such Participated Mortgage Loan or no longer qualifies as an Eligible Mortgage Loan anytime thereafter; (iii) any Mortgage Loan Document related to such Participated Mortgage Loan was erroneous, unsigned or incomplete in any material respect on the Purchase Date for such Participated Mortgage Loan and such error, lack of signature or incompleteness has not been corrected to the reasonable satisfaction of Bank within a commercially reasonable time period following such Purchase Date; (iv) any fraud occurred on the part of Seller or its agents or employees or of Borrower or any other Person with respect to the origination, underwriting, closing or funding of such Mortgage Loan; or (v) any of the Bank Document Deliverables for such Participated Mortgage Loan have not been delivered to the Custodian as and when required pursuant to the provisions of this Agreement. In addition, if an Event of Default shall have occurred and be continuing, Bank shall have the right to require Seller, upon demand by Bank, to repurchase from Bank, in their entirety, all of Banks then-outstanding Participation Interests in the Participated Mortgage Loans identified in such demand.
(b) In Banks sole and absolute discretion, Seller shall be required to immediately repurchase from Bank, in its entirety, all of Banks then-outstanding Participation Interest in any Aged Participated Mortgage Loan on the [***] day after the Purchase Date for such Participation Interest if such Aged Participated Mortgage Loan does not constitute a Retired Participated Mortgage Loan by such [***] day. In addition, Seller shall automatically be required, whether or not Bank has made demand therefor, to immediately repurchase from Bank, in their entirety, all of Banks then-outstanding Participation Interests in any and all Participated Mortgage Loan upon the occurrence and continuation of an Event of Default under Sections 9.1(e) or (f) with respect to Seller.
(c) To effect the repurchase of any Participation Interest required under this Section, Seller shall pay to Bank an amount equal to the applicable Repurchase Price for such Participation Interest, which amount shall be due and payable: (i) on the date Bank has made demand for the repurchase of such Participation Interest, if such repurchase is required pursuant to Section 4.8(a); or (ii) on the [***] day after the Purchase Date for such Participation Interest, if such repurchase is required pursuant to Section 4.8(b). Bank shall have the right to offset any amounts in the Pledged Account in order to effect full payment of any Repurchase Price when due and payable under this Section, and upon any such offset, Seller shall immediately deposit funds into the Pledged Account in the amount required to fully restore the Minimum Pledged Balance.
(d) Upon Banks receipt from Seller of the full amount of the Repurchase Price for the Participation Interest in any Participated Mortgage Loan to be repurchased in its entirety by Seller from Bank pursuant to this Section, and so long as such payment is not disgorged or revoked by a court of competent jurisdiction: (i) effective as of the date of
receipt of such funds and the application by Bank of such funds pursuant to the terms of this Agreement, Seller shall have repurchased from Bank such Participation Interest in its entirety, and Banks respective Participation Percentage in such Participated Mortgage Loan and Sellers respective Retained Percentage in such Participated Mortgage Loan shall be correspondingly adjusted such that Seller shall own 100% of such Mortgage Loan and such Mortgage Loan shall no longer be a Participated Mortgage Loan hereunder; and (ii) Bank shall thereafter deliver or cause to be delivered to Seller the Mortgage Note and any other Mortgage Loan Documents for such Participated Mortgage Loan then in the Custodians possession.
(e) The provisions of this Section shall not limit or qualify any rights or remedies of Bank hereunder (including, without limitation, any rights or remedies of Bank under Section 4.6).
4.9 Banks Direct Contact with Take-Out Purchasers. Upon the occurrence and during the continuance of an Event of Default, Seller irrevocably authorizes Bank and its agents and representatives to directly deliver all pertinent documentation to, and communicate with, disclose to, receive from and share information with, any Take-Out Purchaser, which is related to any Participated Mortgage Loan which is to be purchased or has been purchased by such Take-Out Purchaser.
ARTICLE 5
GENERAL PROVISIONS
5.1 Conditions to Effectiveness of Agreement. As a condition precedent to effectiveness of this Agreement, in addition to all other requirements set forth herein, Seller shall deliver to Bank all of the following, each being duly executed, endorsed, notarized where applicable and delivered and in form and content satisfactory to Bank in its commercially reasonable discretion:
(a) This Agreement, the Blanket Assignment, and the Pledge Agreement;
(b) One (1) or more limited power of attorney in the form of Exhibit A executed by Seller;
(c) All financing statements required by Bank, including a UCC-1 financing statement identifying Seller, as debtor, and Bank, as secured party, which covers the Collateral, and Seller hereby authorizes Bank and its representatives to execute, deliver and file of record all such financing statements;
(d) Such signature cards, depository account agreements, USA PATRIOT Act forms and information, and such other documents and instruments, as Bank may require for Seller to establish at Bank, the Pledged Account, the Participation Account and the Remittance Account or to otherwise implement the arrangements contemplated herein;
(e) Evidence that all necessary action on the part of Seller has been taken with respect to the execution and delivery of the Warehouse Documents and the performance of
the matters contemplated thereby, so that this Agreement and all of the other Warehouse Documents shall be valid and binding upon each Person executing and delivering the same. Such evidence shall include organizational documents, resolutions, and a certificate of incumbency for Seller;
(f) For Seller, true, complete and correct copies of the documents evidencing the formation and governance of the operations and affairs of such entity, together with all amendments thereto;
(g) For Seller, a certificate of existence and good standing showing that such entity is in good standing under the Laws of the state of its formation and certificates indicating that such entity has qualified to transact business and is in good standing in all other states where it transacts business;
(h) Evidence that Seller has received any and all licenses, permits, approvals and other consents under any and all applicable Laws to permit Seller to lawfully engage in the Mortgage Loan Activities, and evidence that the same are currently in existence and good standing; and
(i) Such other documents, information and materials as Bank may reasonably require to be delivered or caused to be delivered by Seller to Bank prior to the execution of this Agreement by Bank.
5.2 Termination; Burn-Down.
(a) Sellers rights hereunder to submit any Request to Bank shall automatically terminate on the Advance Request Termination Date.
(b) Notwithstanding anything herein to the contrary, and without limiting Banks rights and remedies under Section 9.2, prior to the Advance Request Termination Date, either Party may immediately terminate for any reason whatsoever Sellers rights hereunder to submit any Request to Bank to purchase a Participation Interest by providing written notice thereof to the other Party. It is understood that the Parties intend the continuation of this Agreement by Bank (and, accordingly, the continuation of Sellers rights hereunder to submit any Request to Bank for Bank to purchase a Participation Interest) will be based upon the quality of the Mortgage Loans owned by Seller and Sellers performance of its obligations in connection therewith and herewith and also based upon market conditions and the business objectives of Bank and Seller which may change from time to time.
(c) Any and all outstanding Participation Interests in Participated Mortgage Loans owned by Bank on or before the Advance Request Termination Date shall continue to be subject to the terms and conditions of this Agreement. Unless extended by a written agreement executed by Seller and Bank, this Agreement shall automatically terminate and cease to be in force and effect (except with respect to the provisions of this Agreement which expressly survive termination) without any action or notice upon such time as: (i) Seller shall no longer have any rights hereunder to submit any Request to Bank to
purchase a Participation Interest; (ii) each Participated Mortgage Loan constitutes a Retired Participated Mortgage Loan; (iii) Bank has received full, final and indefeasible payment of all other amounts due and payable by Seller to Bank pursuant to the terms hereof and any other Warehouse Document; (iv) Seller has fully performed and discharged each of its duties, covenants and obligations under each Warehouse Document; and (v) Bank has remitted to Seller all amounts, if any, required hereunder to be remitted by Bank to Seller hereunder.
5.3 Reserved.
5.4 Sellers Accounts.
(a) Seller shall at all times during the term of this Agreement maintain each Restricted Account with Bank. With respect to each Restricted Account, Seller may deposit funds into the Restricted Account, however Seller shall not be permitted to withdraw, transfer or otherwise exercise any rights to access any funds held therein and Seller shall have no rights to exercise dominion or control over the Restricted Account.
(b) Seller shall at all times during the term of this Agreement maintain the Remittance Account with Bank. Subject to the terms and conditions of this Agreement and the other Warehouse Documents, Seller shall be permitted to withdraw, transfer and otherwise exercise rights to access any funds held therein; provided, that notwithstanding the foregoing, upon the occurrence of an Event of Default, Seller shall not be permitted to withdraw, transfer or otherwise exercise any rights to access any funds held therein and Seller shall have no rights to exercise dominion or control over the Remittance Account.
(c) Concurrently with the execution hereof Seller shall deposit into the Pledged Account, and thereafter for the duration of this Agreement Seller shall maintain in the Pledged Account, good funds in an amount not less than the Minimum Pledged Balance. Seller shall replenish funds in the Pledged Account, such that the Pledged Account is fully restored to the Minimum Pledged Balance, in the event Bank shall offset or apply funds from the Pledged Account in accordance with the terms of this Agreement.
(d) In order to secure the prompt and complete performance by Seller of its Repurchase/Sale Obligations, Seller does hereby pledge, assign and grant to Bank a continuing security interest in and to the Restricted Accounts, the Remittance Account and the other Collateral. For this purpose, this Agreement shall constitute a security agreement in accordance with the UCC, and Bank shall have all the rights of a secured creditor with respect to such security, and Bank shall have the right to hold and freeze such Accounts and the funds maintained therein upon the occurrence of an Event of Default. Without limiting any rights and remedies available to Bank hereunder, upon the occurrence and continuation of an Event of Default, Bank may exercise the right to offset and apply all or any portion of the funds of Seller held in one or more of the Accounts towards the payment of all or any portion of any amount due and payable by Seller to Bank hereunder in connection with Sellers Repurchase/Sale Obligations. Bank is hereby authorized to debit funds from the Accounts in accordance with the provisions of this Agreement without any notice to or permission from Seller, provided that any funds in excess of amounts necessary
to pay Bank any amounts due pursuant to this Agreement or any other Warehouse Document shall be returned to Seller upon Sellers request.
5.5 Subordination. It is expressly understood and agreed that all of Sellers right, title and interest in and to any Participated Mortgage Loan (including Sellers servicing rights, if any) are subordinate and inferior to Banks Participation Interest in such Participated Mortgage Loan, from and after the Purchase Date for such Participated Mortgage Loan, until such Participated Mortgage Loan becomes a Retired Participated Mortgage Loan.
5.6 Power of Attorney. Upon the occurrence and continuation of an Event of Default, Seller hereby irrevocably appoints Bank and each officer of Bank as its attorney-in-fact, with full power of substitution, for, on behalf of, and in the name of Seller, to: (a) endorse and deliver to any Person any notes, checks, drafts, money orders or other instruments of payment coming into Banks possession and representing any payment made on or with respect to any Participated Mortgage Loan or otherwise received in connection with any Participated Mortgage Loan (including the proceeds from the sale of any such Participated Mortgage Loan received from a Take-Out Purchaser), and any collateral and any Take-Out Purchase Agreement therefor; (b) prepare, complete, execute, deliver and record, and do anything else necessary or desirable to effect, (i) any endorsement to Bank, any Take-Out Purchaser or any other Person, of any Mortgage Note evidencing a Participated Mortgage Loan, or (ii) any transfer, assignment or conveyance to Bank, any Take-Out Purchaser or any other Person, of any or all right, title and interest in and to any Mortgage Note and the Mortgage Loan Documents related thereto in which Bank has purchased a Participation Interest (including servicing rights); (c) do anything necessary or desirable to effect the sale, transfer, assignment or conveyance, of any or all right, title and interest of Seller and/or Bank in and to any Participated Mortgage Loan and the related Mortgage Loan Documents related thereto to any Take-Out Purchaser or any other Person; (d) commence, prosecute, settle, discontinue, defend, or otherwise dispose of any claim relating to any Take-Out Purchase Agreement or any Participated Mortgage Loan; (e) sign Sellers name wherever appropriate, as determined by Bank, to effectuate the purposes of this Agreement; and (f) to take any such further action as Bank may deem appropriate, and to act under changed circumstances, the exact nature of which may not be currently foreseen or foreseeable, in order to fully and completely effectuate Banks rights under this Agreement. The powers and authorities herein conferred on Bank may be exercised by Bank through any Person who, at the time of the execution of a particular instrument, is an officer of Bank. The limited power of attorney conferred by this Section is granted for a valuable consideration and is coupled with an interest and, therefore, is irrevocable so long as any duties or obligations to Bank under this Agreement or any other Warehouse Document, or any part thereof, shall remain unpaid or otherwise unsatisfied, and so long as Bank may elect to purchase any Participation Interests hereunder. The limited power of attorney conferred hereunder shall not be affected by any subsequent disability or incapacity of the principal or by the lapse of time. To facilitate processing, Bank may request that Seller execute and deliver a separate, limited power of attorney in such form and content required by Bank, but any failure of Bank to request or obtain any such separate power of attorney instrument shall not mitigate or undermine the rights and powers conferred under this Section.
5.7 Private Recording Systems. Bank reserves the right to require that any or all Participated Mortgage Loans be registered and processed on the MERS® System.
5.8 Regulatory Compliance. With respect to each Participated Mortgage Loan, Seller hereby represents, warrants and certifies to Bank that such Participated Mortgage Loan and each related Mortgage Loan Document was originated, made, negotiated, executed and delivered pursuant to and in accordance with the applicable terms and provisions of the Federal Truth in Lending Act, the Real Estate Settlement Procedures Act, the Equal Credit Opportunity Act, Dodd-Frank Act, the Interagency Appraisal Guidelines, and all other applicable Laws relating to the financing of Residential Real Property, each of which Laws have been fully satisfied and strictly complied with by Seller and such other applicable parties, and that Bank shall have no obligation with respect to the compliance with any such Laws, or the filing of any reports, certifications or other documents or items with or to any Borrower, any Governmental Authority, or any other Person whatsoever (other than any obligations Bank may have to its regulators). IN THIS RESPECT, SELLER WILL RELEASE, HOLD HARMLESS AND INDEMNIFY EACH INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL LOSSES WHICH ARE INCURRED BY OR ASSERTED AGAINST BANK IN CONNECTION WITH ANY BREACH OR INACCURACY OF THE TERMS CONTAINED IN THIS SECTION.
5.9 Verifications. After such Mortgage Loan has become a Participated Mortgage Loan, Bank shall have the right and authority to re-verify all information obtained by Seller regarding the related Borrower, including verification of employment, verification of deposit and all information included in each related Loan Application. Seller shall cooperate with Bank in such re-verification process. Further, Bank shall have full right and authority to obtain an updated credit report on any Borrower, provided that if Bank shall obtain any such credit report it shall utilize a query that does not in any way negatively impact the related Borrowers credit score. In such verification process, Seller shall, upon the request of Bank, supply a copy of Borrowers handwritten, typed or signed Loan Application.
5.10 Servicing Responsibilities. Seller will have the responsibility for the administration and servicing of each Participated Mortgage Loan until such Mortgage Loan is sold to an Take-Out Purchaser or otherwise becomes a Retired Participated Mortgage Loan. With respect to each Participated Mortgage Loan, Seller shall be responsible for the period from and after the purchase of the Participation Interest in such Participated Mortgage Loan for the execution of all appropriate notices and all other acts necessary to protect title in Seller and Bank, or their respective successors or assignees, as the case may be, as to the ownership of such Participated Mortgage Loan and for preserving all rights in and to such Participated Mortgage Loan and administering it in all material respects consistent with applicable Law, and for servicing the same in a manner consistent with industry practices and Agency guidelines.
5.11 Remittance. In connection with Sellers servicing of the Participated Mortgage Loans, upon the occurrence and continuation of any Event of Default, Seller will, or will cause its subservicer to, forward directly to Bank, Banks pro rata share of all funds received under each such Mortgage Loan on or before the remittance date on which Seller would be entitled to remittances as specified in Sellers servicing or subservicing agreement. Nothing contained in this Section authorizes or permits payment to Seller of any amounts which are otherwise required under this Agreement to be paid directly to Bank (including any and all funds paid by an Take-Out Purchaser for the purchase of a Participated Mortgage Loan). All funds received by Seller pursuant to this Section shall be held in accordance with Section 5.12.
5.12 Trust Provisions.
(a) Any and all amounts required hereunder to be paid to Bank shall be paid to Bank pursuant to the terms and conditions of this Agreement. Without limiting the foregoing, any and all Bank Payment Deliverables received by Seller at any time (and any and all Bank Payment Deliverables that are or are deemed to be in or under the custody, possession or control of Seller at any time) shall be held in trust by Seller as the property and for the benefit of Bank. In such event, Seller shall (i)hold in trust, as the property and for the benefit of Bank, the Bank Payment Deliverables and (ii) (A)immediately turn over and deliver to Bank each Bank Payment Deliverable, in kind, and in the exact form received, no later than three (3) Business Days after receipt thereof (or, if an Event of Default has occurred and is continuing, no later than one (1) Business Day after receipt thereof), and concurrently, endorse to Bank any instrument or other form of payment payable to Seller, but which is to be paid to Bank under this Agreement, and (B) not release any Bank Payment Deliverable to any other Person without Banks prior written consent. Nothing contained in this Section authorizes or permits payment to Seller or any other Person (other than Bank) of any amounts which are required under this Agreement to be paid directly to Bank.
(b) Any and all Bank Document Deliverables required hereunder to be delivered to the Custodian shall be delivered to the Custodian pursuant to the terms and conditions of this Agreement. Without limiting the foregoing, any and all Bank Document Deliverables received by Seller at any time (and any and all Bank Document Deliverables that are or are deemed to be in or under the custody, possession or control of Seller at any time) shall be held in trust by Seller as the property and for the benefit of Bank. In such event, Seller shall (i)hold in trust for Bank, and as the property and for the benefit of Bank, the Bank Document Deliverables and (ii) (A)immediately turn over and deliver to the Custodian each Bank Document Deliverable no later than three (3) Business Days after receipt thereof (or, if an Event of Default has occurred and is continuing, no later than one (1) Business Day after receipt thereof) (except that Seller may deliver the applicable Bank Document Deliverables to the Custodian by such later time, if any, permitted by the express terms of this Agreement or the Custodial Agreement) and (B) not release any Bank Document Deliverable to any Person (other than the Custodian). Nothing contained in this Section authorizes or permits the delivery to Seller or any other Person (other than the Custodian) of any Bank Document Deliverables which are required under this Agreement and the Custodial Agreement to be delivered directly to the Custodian.
(c) The Mortgage Loan Files for Participated Mortgage Loans (other than any portions thereof which constitute Bank Document Deliverables or which have been delivered to Bank) shall be held in trust by Seller as the property and for the benefit of Bank. Seller shall (i) hold in trust for Bank, and as the property and for the benefit of Bank, such Mortgage Loan Files and (ii) (A) upon the occurrence and during the continuance of an Event of Default, turn over and deliver to Bank such Mortgage Loan Files no later than three (3) Business Days after Banks request, and (B) not release such Mortgage Loan Files to any Person (other than Bank) except as otherwise expressly permitted hereunder.
5.13 Application of Payments. Any and all sums received by Bank in connection with any Participation Interest in a Participated Mortgage Loan (including, subject to Section 4.4, the proceeds from the sale to a Take-Out Purchaser of a Participated Mortgage Loan) shall be applied and disbursed by Bank in the following order upon Banks actual receipt of such sums:
(a) To the payment of all outstanding fees, costs and expenses assessed or incurred by Bank and chargeable under this Agreement or any other Warehouse Document with respect to such Participated Mortgage Loan;
(b) To the payment of Banks accrued but unpaid interest with respect to such Participated Mortgage Loan at the Participation Interest Rate;
(c) To the payment of all outstanding principal under such Participated Mortgage Loan allocable to Banks Participation Interest therein;
(d) Upon the occurrence and continuation of an Event of Default only, if required by Bank, to the payment of any outstanding amounts set forth in clauses (a), (b) and (c) of this Section with respect to any other Participated Mortgage Loan, to be applied and disbursed by Bank in the order set forth in such clauses above;
(e) To any other amounts due by Seller to Bank hereunder, including any amounts necessary to replenish the Pledged Account in order to maintain the Minimum Pledged Balance; and
(f) Thereafter, as otherwise required to be in compliance with this Agreement.
If the amount received by Bank in connection with the sale of a Participated Mortgage Loan to a Take-Out Purchaser is insufficient to pay any and all amounts payable to Bank under clauses (a), (b) and (c) of this Section with respect to such Mortgage Loan, then Bank shall be entitled to offset and apply available funds in the Pledged Account to satisfy the deficiency in such amounts payable to Bank. In such event, if after resorting to the foregoing described sources of payment, any amounts remain payable to Bank under clauses (a), (b) or (c) of this Section with respect to such Participated Mortgage Loan, then Seller shall immediately pay such amounts to Bank on demand.
In the event that Bank offsets or applies any funds in the Pledged Account to satisfy amounts payable to Bank, then Seller shall immediately deposit funds into the Pledged Account in the amount required to fully restore the Minimum Pledged Balance. Bank shall be under no duty at any time to apply any amounts due from any Take-Out Purchaser or from any other Person with respect to any purchase of any Participated Mortgage Loan until Bank has actually received such amounts in immediately available funds. Further, notwithstanding anything herein to the contrary, Bank shall be under no duty at any time to apply any amounts representing Take-Out Purchaser Payments except pursuant to the procedures set forth in this Section and Section 4.4.
5.14 Warehouse Program Guide.
(a) Seller agrees to materially comply at all times with all of the provisions of the Warehouse Program Guide (as amended by this Agreement) in effect from time to time. Notwithstanding anything herein to the contrary, each Participated Mortgage Loan: (i) shall be subject to the provisions of the Warehouse Program Guide (as amended by this Agreement) in effect as of the Purchase Date for such Participated Mortgage Loan; and (ii) shall not be subject to any material amendment, modification or supplement to the Warehouse Program Guide which occurs after the Purchase Date for such Participated Mortgage Loan. The Warehouse Program Guide (as amended by this Agreement) is hereby incorporated into this Agreement by reference as if it was fully set forth herein.
(b) Bank shall make available to Seller the Warehouse Program Guide by: (i) emailing it to Seller; or (ii) by providing a written copy of the Warehouse Program Guide to Seller, in each case Bank will make a commercially reasonable effort to provide notice prior to the proposed effective date of such version of the Warehouse Program Guide. Bank may, in its sole discretion, amend, modify or supplement the Warehouse Program Guide from time to time. If Bank shall have provided to Seller written copies of any amendments, modifications or supplements to the Warehouse Program Guide, then such amendments, modifications or supplements to the Warehouse Program Guide shall become effective as to Seller upon Sellers receipt thereof.
(c) Notwithstanding the foregoing or any other provision of this Agreement or the Warehouse Program Guide to the contrary, the Warehouse Program Guide is hereby amended with respect to Seller as follows:
(i) The entire section of the Warehouse Program Guide entitled Lending Guidelines (and any similar section included in any future version of, or amendments to, the Warehouse Program Guide relating to lending or underwriting guidelines) is hereby deleted in its entirety and replaced with the following:
Each Participated Mortgage Loans will be underwritten in accordance with the applicable Agency guidelines in effect as of the date of origination of such Participated Mortgage Loan, or if such Participated Mortgage Loan would not be eligible for sale to any Agency, Sellers underwriting guidelines as approved by Bank and in effect as of the date of origination of such Participated Mortgage Loan.
(ii) Notwithstanding any provision of the Warehouse Program Guide, Seller shall not be obligated to upload any borrower application to Banks systems.
(d) Each submission of a Request by Seller to Bank shall constitute: (i) the ratification by Seller of the provisions of the Warehouse Program Guide in effect as of the Purchase Date (as amended by this Agreement) for the Mortgage Loan that is the subject of the Request; and (ii) the agreement by Seller to be bound by all of the provisions of the Warehouse Program Guide in effect as of such Purchase Date (as amended by this Agreement) applicable to the Mortgage Loan that is the subject of the Request.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Bank, to Sellers knowledge and belief, after due inquiry, as of the Effective Date and on the date of each Advance hereunder:
6.1 Organization and Good Standing. Seller is duly organized, validly existing, and in good standing under the Laws of the state of its formation, and is duly qualified to transact business and is in good standing in each jurisdiction where the nature and extent of Sellers business and property requires the same, except where failure to so qualify would not be reasonably likely (individually or in the aggregate) to have a Material Adverse Effect.
6.2 Authorization and Power. Seller has: (a) the requisite power and authority to, and has taken all action necessary to authorize it to, execute, deliver and perform this Agreement, the other Warehouse Documents to which Seller is a party, and all of the other documents herein contemplated to be executed by Seller or otherwise to be executed by Seller from time to time in connection herewith; (b) all requisite authority, power, licenses, permits and franchises to conduct its business; and (c) received, has in its possession, and will maintain in full force and effect and in good standing, any and all federal, state and local licenses or approvals which may be necessary for Seller to undertake the actions required of it pursuant to this Agreement and to conduct its business. No consent or approval of any Person is required (other than such consents and approvals already obtained by Seller) in order for Seller to legally execute, deliver, and comply with the terms of the Warehouse Documents to which it is a party.
6.3 No Conflicts. Not the execution and delivery of this Agreement, the other Warehouse Documents to which Seller is a party, or any other documents to be executed in connection herewith, nor the consummation of any of the transactions herein or therein contemplated, nor compliance with the terms and provisions hereof or with the terms and provisions thereof, will contravene or materially conflict with any applicable Law, or any loan agreement, lease, promissory note, indenture, mortgage, deed of trust, or other agreement or instrument to which Seller is a party or by which Seller or any of its Property may be bound or be subject, or violate any provision of the documents creating or governing Seller.
6.4 Enforceable Obligations. This Agreement and each other Warehouse Document to which Seller is or will become a party are or upon execution will be the legal, valid and binding obligations of Seller, are enforceable in accordance with their respective terms, except as limited by bankruptcy, insolvency or other Laws of general application relating to the enforcement of creditors rights.
6.5 Financial Condition. Seller has delivered to Bank copies of its most recent balance sheet, and the related statements of income, stockholders equity and changes in financial position for the year ending on the date indicated therein, audited by independent certified public accountants; such financial statements are true and correct in all material respects, fairly present the financial condition of Seller as of such date and have been prepared in accordance with GAAP as of the date hereof; there are no obligations, liabilities or indebtedness (including contingent and indirect liabilities and obligations or unusual forward or long term commitments) of Seller which
are not reflected in such financial statements; and no change having a material adverse effect has occurred in the financial condition or business of Seller since the date of such financial statements.
6.6 Material Agreements. To Sellers knowledge, Seller is not in default under any loan agreement, mortgage, security agreement or other material agreement or obligation to which it is a party or by which any of its Properties is bound, and the execution of this Agreement and the other Warehouse Documents to which Seller is a party, and Sellers performance of its duties and obligations hereunder and thereunder, will not cause a default under any loan agreement, mortgage, security agreement or other material agreement or obligation to which Seller is a party or by which any of its Properties is bound.
6.7 Disclosure of Proceedings. Except as previously disclosed to Bank in writing prior to the Effective Date or pursuant to Section 7.15, there are no: (a) (i) Proceedings by any Governmental Authority pending, or to the knowledge of Seller, threatened against Seller or (ii) any other Proceedings pending, or to the knowledge of Seller, threatened against Seller which, if determined adversely to Seller, would have a Material Adverse Effect; or (b) outstanding or unpaid judgments against Seller that will have a Material Adverse Effect.
6.8 Taxes. All tax returns required to be filed by Seller in any jurisdiction have been filed. All taxes, assessments, fees and other governmental charges upon Seller or upon any of its Properties, income or franchises (which, if unpaid, would have a Material Adverse Effect on Seller or its ability conduct its business or perform its obligations under this Agreement or any other Warehouse Document) have been paid (if applicable, prior to the time that such taxes, assessments, fees or other governmental charges could give rise to a Lien), other than those being protested in good faith by appropriate proceedings, with respect to which Seller has set aside reasonable and appropriate reserves.
6.9 No Approvals Required. Neither the execution and delivery by Seller of this Agreement and the other Warehouse Documents to which Seller is a party, nor the consummation by Seller of any of the transactions contemplated hereby or thereby, requires the consent or approval of, the giving of notice to, or the registration, recording or filing of any document with, or the taking of any other action in respect of, any Governmental Authority or other Person.
6.10 Representations Regarding Participated Mortgage Loans. Each Participated Mortgage Loan is in all material respects in compliance with the provisions of the Warehouse Program Guide (as amended by this Agreement). Without limiting the generality of the foregoing, Seller hereby represents and warrants to Bank with respect to each Participated Mortgage Loan:
(a) (i) Seller has acquired all right, title and interest in and to the Participated Mortgage Loan, free and clear of any Liens or other interest of any Person (other than Seller) in and to the Participated Mortgage Loan; (ii) the related Mortgage Note contains all necessary endorsements required to render such Mortgage Note payable to the order of Seller, and such endorsements are valid and enforceable under applicable Law, except where such enforceability may be limited by bankruptcy or other similar federal or state laws limiting the rights of creditors generally, whether in law or in equity; and (iii) all right, title and interest in and to the documents evidencing the Participated Mortgage Loan have been transferred and assigned to Seller, free and clear of any Liens or other interests of any
Person (other than Seller), and such transfer and assignment is valid and enforceable under applicable Law, except where such enforceability may be limited by bankruptcy or other similar federal or state laws limiting the rights of creditors generally, whether in law or in equity.
(b) The Mortgage Loan Documents for such Participated Mortgage Loan have been duly executed by the Borrower, and where applicable, acknowledged, and recorded; and the Participated Mortgage Loan is valid and complies with all applicable lending Laws and Laws applicable to the sale of the Participated Mortgage Loan to Seller.
(c) There has been no assignment, sale or hypothecation of the Participated Mortgage Loan by Seller, and Seller owns the Participated Mortgage Loan free and clear of all Liens and other encumbrances.
(d) The full amount of the Participated Mortgage Loan has been funded in immediately available funds; the outstanding principal balance of the Participated Mortgage Loan is as stated in the Request; all costs, fees and expenses incurred in making, closing and recording the Participated Mortgage Loan has been paid; no part of the related Mortgaged Property has been released from the Lien of the Security Instrument; the terms of the Participated Mortgage Loan have in no way been changed or modified from that represented in the Request.
(e) The related Mortgaged Property is in good repair and is free from substantial damage.
(f) All applicable Laws have been complied with, including (as applicable) the S.A.F.E. Act, the Dodd Frank Act, the Interagency Appraisal Guidelines, the Real Estate Settlement Procedures Act, Regulation X, the Equal Credit Opportunity Act and Regulation B, the Fair Credit Reporting Act, the Fair Housing Act, the Flood Disaster Protection Act, the Federal Truth in Lending Act of 1968 and Regulation Z, the Depository Institutions Deregulation and Monetary Control Act of 1980, the Garn St. Germain Depository Institutions Acts of 1982, the Cranston Gonzales Affordable Housing Act, the Home Mortgage Disclosures Act, and regulations issued pursuant thereto, usury limitations, and all conditions within the control of Seller as to the validity of the insurance or guaranty as required by the National Housing Act of 1934, and the rules and regulations thereunder, or as required by the Servicemens Readjustment Act of 1944, and the rules and regulations thereunder, or by the mortgage insurers and other insurers, have been properly satisfied, and said insurance or guaranty is valid and enforceable or is in process.
(g) The endorsement of the related Mortgage Note in blank by or on behalf of Seller (whether executed by Seller or by Bank pursuant to the power of attorney herein granted in connection with any Event of Default) and the assignment of the related Mortgage Note, Security Instrument and the other Participated Mortgage Loan documents (whether executed by Seller or by Bank pursuant to the power of attorney herein granted in connection with any Event of Default) will be valid and enforceable under all applicable Law.
(h) At the time the Participated Mortgage Loan was originated or purchased by Seller, such Participated Mortgage Loan complied fully with Sellers underwriting guidelines, which have been approved in writing in advance by Bank, in effect as of the origination (with respect to any Participated Mortgage Loan originated by Seller) or purchase date (with respect to any Participated Mortgage Loan purchased by Seller) of such Participated Mortgage Loan.
(i) All conditions as to the validity of the applicable insurance as required by all applicable Laws and by private mortgage insurance companies or other insurers, if and to the extent applicable, will have been properly satisfied and said insurance is valid and enforceable.
(j) Seller has obtained, and has in its possession, in due form, all documentation (except those documents executed at the closing of the Participated Mortgage Loan, which are or will be, at such time, in the possession of the Escrow Agent, or has been submitted for recording and not yet returned to Seller and except for the original executed Mortgage Note, which is either in the possession of the Escrow Agent or has been shipped or delivered by Seller or Escrow Agent to the custody of Custodian) required to legally effect such Participated Mortgage Loan prior to or upon closing, and all such documentation will be held and delivered to Bank or its designee pursuant to the terms and conditions of this Agreement.
(k) Other than payments due but not yet [***] days or more delinquent, no default will exist as to the Participated Mortgage Loan.
(l) The Participated Mortgage Loan is valid and, to Sellers knowledge, secured by a valid first Lien on the related Mortgaged Property, and the related Mortgaged Property is free and clear of all Liens, claims and encumbrances having priority over the Lien of the Participated Mortgage Loan except for Permitted Encumbrances. A Title Policy will be furnished to Bank or its designee and will insure Seller its successors and/or assigns) as the holder of the Mortgage Note for the Participated Mortgage Loan, and its successors and assigns, with respect to the Participated Mortgage Loan, without exceptions other than Permitted Encumbrances, as holding the first Lien against the related Mortgaged Property for the full amount of the Participated Mortgage Loan.
(m) No payment required under the Participated Mortgage Loan is [***] days or more delinquent nor has any payment under the Participated Mortgage Loan been [***] days or more delinquent at any time since the origination of the Participated Mortgage Loan; there are no defaults by the Borrower or, to Sellers knowledge, the maker of the Participated Mortgage Loan or any of its successors or assigns in complying with the terms of the Participated Mortgage Loan; to Sellers knowledge, all taxes, governmental assessments, insurance premiums, water, sewer and municipal charges relating to any of the related Mortgaged Property which previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid.
(n) Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds by a Person other than the Borrower, directly or indirectly, for the payment of any amount required by the Participated Mortgage Loan, except for interest accruing from the date of the Mortgage Note or date of disbursement of the Participated Mortgage Loan proceeds, whichever is greater, to the day which precedes by one month the due date of the first installment of principal and interest.
(o) To Sellers knowledge, all of the improvements which are included for the purpose of determining the appraised value of the related Mortgaged Property lie wholly within the boundaries of the Mortgaged Property and do not encroach upon building restriction lines, and no improvements on adjoining properties encroach upon the Mortgaged Property (except those encroachments which the title insurer has affirmatively insured over).
(p) With respect to each Correspondent Originated Mortgage Loan in which Bank elects to purchase a Participation Interest, Seller represents and warrants to Bank that: (i) Seller is not a mortgage originator or loan originator under applicable Law with respect to such Correspondent Originated Mortgage Loan; and (ii) the originator of such Correspondent Originated Mortgage Loan is a registered and licensed mortgage originator and loan originator under applicable Law with respect to such Correspondent Originated Mortgage Loan, and to Sellers knowledge, such originator is in compliance with all other applicable Laws with respect to such Correspondent Originated Mortgage Loan.
(q) With respect to each Broker Originated Mortgage Loan, Seller represents and warrants to Bank that: (i) the originator and the related mortgage loan broker are each a mortgage originator or loan originator under applicable Law with respect to such Broker Originated Mortgage Loan; and (ii) the mortgage loan broker for such Broker Originated Mortgage Loan is a registered and licensed mortgage originator and loan originator under applicable Law with respect to such Broker Originated Mortgage Loan, and to Sellers knowledge, such mortgage loan broker is in compliance with all other applicable Laws with respect to such Broker Originated Mortgage Loan.
For purposes of this Section 6.10 and the representations and warranties set forth in this Section, a breach of a representation or warranty shall be deemed to have been cured with respect to a Mortgage Loan if and when (i) the event, circumstance or condition that gave rise to such breach no longer exists at the time Seller shall have obtained knowledge of such breach, (ii) such representation or warranty is in all material respects true and correct, and (iii) such breach no longer adversely effects the applicable Mortgage Loan, Banks Participation Interest therein or the other transactions contemplated hereby. Except for breaches of any representations or warranties that are deemed to be cured pursuant to the preceding sentence, Seller shall notify Bank promptly and as soon as practicable after obtaining knowledge of any breach of a representation or warranty set forth in this Section.
6.11 Other Warehousing Facilities. Any and all mortgage warehousing facilities of Seller (other than with Bank) in effect as of the Effective Date hereof are identified on Exhibit G.
6.12 Affiliate Escrow Agents. Any and all title companies and other Persons that provide closing services in connection with residential mortgage loan transactions which are directly or indirectly owned or controlled by Seller or under common ownership or control with Seller (each an Affiliate Escrow Agent) as of the Effective Date are identified on Exhibit H. Seller has delivered to Bank true, correct and complete copies of the financial statements for each Affiliate Escrow Agent.
6.13 Survival of Representations. All representations and warranties by Seller herein shall survive the termination or expiration of this Agreement and the making of any and all Advances. Any and all investigations at any time made by or on behalf of Bank shall not limit, impair or diminish Banks right to rely on any and all representations and warranties by Seller herein.
ARTICLE 7
AFFIRMATIVE COVENANTS
At all times prior to the Agreement Termination Date (and thereafter if expressly required hereunder), Seller covenants and agrees with Bank that:
7.1 Financial Statements and Reports. Seller shall furnish to Bank the following, all in form and detail satisfactory to Bank:
(a) Promptly after becoming available, and in any event within ninety (90) days after the close of each fiscal year of Seller, an audited balance sheet of Seller as of the end of such year, and an audited statement of income and retained earnings of Seller for such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, accompanied by the related report of independent certified public accountants acceptable to Bank, which report shall be to the effect that such statements have been prepared in accordance with GAAP;
(b) If requested by Bank, on or before the last day of any calendar month, a statement of income and expenses of Seller for the prior calendar month;
(c) Promptly after becoming available, and in any event within forty-five (45) days after the close of each fiscal quarter of Seller, a balance sheet of Seller as of the end of such fiscal quarter, a statement of income and retained earnings for such fiscal quarter and an operating statement of Seller for such fiscal quarter setting forth in comparative form the corresponding figures for the corresponding fiscal quarter of the preceding fiscal year, prepared in accordance with GAAP and certified by the principal financial officer of Seller (provided that Bank agrees that Sellers timely delivery of the Compliance Certificate in the form set forth in Exhibit E-1 hereof shall satisfy such requirement);
(d) Weekly hedging reports, in such form and content required by Bank; and
(e) Such other information concerning the business, Properties or financial condition of Seller, or regarding any Participated Mortgage Loan, as Bank may reasonably request.
7.2 Taxes and Other Liens. Seller shall timely pay and discharge all taxes, assessments and governmental charges or levies imposed upon it or upon its income or upon any of its Property as well as all claims of any kind (including claims for labor, materials, supplies and rent) which, if unpaid, might become a Lien upon any or all of its Property (and have a Material Adverse Effect) or the Mortgage Loans; provided, however, Seller shall not be required to pay any such tax, assessment, charge, levy or claim regarding its Property (other than with respect to Participated Mortgage Loans) if the amount, applicability or validity thereof shall currently be contested in good faith by appropriate proceedings diligently conducted by or on behalf of Seller and if Seller shall have set up reserves therefor adequate under GAAP.
7.3 Maintenance. Seller shall: (a) maintain its existence and all of its licenses, permits, franchises, qualifications and rights that are necessary in order for Seller to conduct its business; and (b) observe and comply in all material respects with all applicable Laws. Without limiting the generality of the foregoing, Seller shall at all times maintain all Agency Approvals required with respect to the Participated Mortgage Loans in good standing.
7.4 Further Assurances. Seller shall promptly cure any defects in the execution and delivery of this Agreement and any other Warehouse Document. Seller shall, at its expense, promptly execute and deliver to Bank, upon Banks reasonable request, all such other and further documents, agreements and instruments in compliance with or accomplishment of the covenants and agreements of Seller in this Agreement, the other Warehouse Documents and all documents executed in connection herewith. In addition, Seller will provide Bank with any reasonable documentation and information required by Bank relating to the business and background of Seller and its directors, officers, employees and representatives, and any certifications reasonably required by Bank to verify Sellers compliance with any applicable Laws.
7.5 Accounts. To facilitate the transfer of funds contemplated by this Agreement, Seller shall establish and maintain at Bank each of the Accounts.
7.6 Use of Electronic Platform. Seller shall be required to use the Internet-based electronic platform established by Bank (as modified, replaced, enhanced or upgraded by Bank from time to time, the Electronic Platform) in connection with the purchase and sale of Participation Interests and the other transactions contemplated in this Agreement, subject to the following:
(a) Bank hereby grants to Seller a revocable, non-exclusive, non-transferable license to access and use the Electronic Platform solely for the limited purpose of facilitating the sale by Seller to Bank of Participation Interests and the other transactions contemplated by this Agreement. Seller shall not permit any Person to utilize the Electronic Platform other than employees or agents of Seller who have been approved in advance by Bank in writing (each an Authorized User).
(b) Seller shall take all reasonable precautions to prevent unauthorized Persons from obtaining access to or use of the Electronic Platform. Bank shall have the right to rely upon any information received in the Electronic Platform from any Person using a password assigned to an Authorized User, and will incur no liability for such reliance. Seller shall be responsible for securing such passwords and shall be responsible for any actions taken using such passwords. In the event of any breach of the security measures established by Bank, including use of the Electronic Platform by any unauthorized Person, Bank shall have the right to immediately terminate or suspend access to the affected portion of the Electronic Platform by Seller and their Authorized Users until such time such breach has been secured to Banks satisfaction.
(c) Bank shall not be required to perpetually license, maintain, service or support the Electronic Platform. Bank may at any time discontinue the Electronic Platform by providing written notice thereof to Seller. In addition, Bank may at any time terminate the license granted to Seller to use, and Sellers access to, the Electronic Platform by providing written notice thereof to Seller. Bank reserves the right to modify, replace, enhance or upgrade the Electronic Platform from time to time in Banks sole discretion. If Bank elects to terminate the Electronic Platform, it shall give Seller no less than sixty (60) days advance written notice of such intention and provide Seller with replacement procedures, reasonably acceptable to Seller, for conducting business pursuant to this Agreement.
(d) SELLER UNDERSTANDS AND AGREES THAT THE ELECTRONIC PLATFORM IS BEING LICENSED, DELIVERED AND MADE AVAILABLE AS IS, WHERE IS, WITH ALL FAULTS, AND WITH ANY AND ALL LATENT AND PATENT DEFECTS, WITHOUT ANY EXPRESS OR IMPLIED REPRESENTATION OR WARRANTY BY BANK, AND BANK HEREBY DISCLAIMS AND SELLER HEREBY WAIVES ANY AND ALL IMPLIED REPRESENTATIONS, WARRANTIES AND COVENANTS. EXCEPT AS EXPRESSLY STATED HEREIN, BANK HAS NOT MADE AND DOES NOT HEREBY MAKE ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR CHARACTER WHATSOEVER, EXPRESS OR IMPLIED, INCLUDING, WITHOUT LIMITATION, ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, AND BANK HEREBY DISCLAIMS AND RENOUNCES ANY AND ALL SUCH REPRESENTATIONS AND WARRANTIES.
(e) Seller is fully aware of the inherent security risks of any Internet-based application (such as the Electronic Platform) and, in particular, the risk that unauthorized third-parties may through unauthorized use, hacking, Trojan horses, viruses or otherwise be able to access and manipulate the use of the Electronic Platform and the data made available thereby without Bank in any way being aware that the user is not Seller. Seller voluntarily assumes all such risks. SELLER WILL RELEASE HOLD HARMLESS AND INDEMNIFY EACH INDEMNIFIED PARTY FROM AND AGAINST ANY AND ALL LOSSES WHICH ARE RELATED TO ANY UNAUTHORIZED PARTYS ACCESS, OBTAINED AS A RESULT OF SELLERS ACCESS TO THE ELECTRONIC PLATFORM THAT RESULTS IN THE DIVERSION, MISAPPROPRIATION OR USE
OF THE INFORMATION MADE AVAILABLE THROUGH THE ELECTRONIC PLATFORM OR SELLERS FUNDS AT BANK OR OTHERWISE. PROVIDED HOWEVER, THAT SELLER SHALL BE UNDER NO OBLIGATION TO HOLD HARMLESS AND INDEMNIFY THE INDEMNIFIED PARTY FOR ANY LOSSES THAT ARE A RESULT OF WILLFUL MISCONDUCT OR NEGLIGENCE BY THE BANK AND/OR ITS AGENTS.
(f) Notwithstanding anything in this Section to the apparent contrary, the provisions of this Section shall not be deemed to limit or release Bank from its obligations under Section 10.26.
7.7 Reimbursement of Expenses. Seller shall pay, upon demand by Bank, any and all reasonable and documented out-of-pocket fees and expenses incurred by Bank in negotiating or entering into, or in administering or enforcing its rights or remedies, under this Agreement or any other Warehouse Document, which amounts shall include all court costs, reasonable external attorneys fees (including for trial, appeal or other proceedings), reasonable fees of auditors and accountants, and investigation expenses reasonably incurred by Bank in connection with any such matters. Seller and Bank shall otherwise each be responsible for their own out -of -pocket expenses unless expressly provided otherwise in this Agreement or any other Warehouse Document. For the avoidance of doubt, the parties acknowledge and agree that Seller shall be responsible for paying directly to the Custodian all fees and expenses required to be paid by Seller to the Custodian under the Custodial Agreement, and Seller shall not be required to pay to Bank any amounts in connection with the custodial services provided by the Custodian thereunder unless otherwise expressly set forth in the Custodial Agreement.
7.8 Insurance. Seller shall at all times maintain in force and effect such insurance required under the Warehouse Program Guide (as amended by this Agreement). Without limiting the generality of the foregoing, such insurance shall be issued by such insurers, insure against such risks, be in such form, have such coverage amounts, deductibles, limits and retentions, contain such endorsements and otherwise be in such form, as required under the Warehouse Program Guide (as amended by this Agreement).
7.9 Accounts and Records. Seller shall keep books of record and account in which full, true and correct entries will be made of all dealings or transactions in relation to its business and activities, including the sale of any Participation Interests to Bank, in accordance with GAAP.
7.10 Books and Records. Seller agrees to maintain customary books and records relating to the Participation Interests sold by Seller to Bank hereunder. Upon request, Seller shall furnish to Bank copies of any of Sellers books and records and financial statements relating to the Participation Interests purchased by Bank from Seller hereunder.
7.11 Mortgage Loan Files. Except as expressly permitted or required hereunder, and subject to the provisions of Section 5.12, at all times after the Purchase Date for any Participated Mortgage Loan, Seller shall have and maintain the Mortgage File for such Participated Mortgage Loan.
7.12 Document Retention. With respect to each Participated Mortgage Loan, Seller will maintain in its files all records relating to such Participated Mortgage Loan for the period of time required by applicable Law. Within five (5) Business Days following any demand therefor (or, if an Event of Default has occurred and is continuing, immediately upon demand, Seller will supply Bank with copies (which may be delivered electronically) and/or originals of any such records.
7.13 Right of Inspection. Seller shall permit any officer, employee, agent or representative of Bank during normal business hours: (a) with at least five (5) Business Days written notice (or, if an Event of Default has occurred and is continuing, without any notice), to examine Sellers books and records, accounts and any and all files, records and documents relating to the Mortgage Loans in which Bank has purchased Participation Interests (including any in-file credit reports), and to make copies and extracts of any and all of the foregoing; and (b) to discuss the affairs, finances, books and records, and accounts of Seller with Sellers officers, accountants and auditors and other representatives.
7.14 Audit. Seller shall permit any third-party consultant engaged by Bank and acceptable to Seller (each an Auditor), at the expense of Seller, to inspect and conduct an audit of Sellers business operations and records related thereto during normal business hours and upon no less than thirty (30) days notice; provided, however, if such audit is conducted by Bank more than once during any fiscal year, and such additional audit is not the result of the occurrence of an Event of Default, Bank shall be responsible for the fee payable to the Auditor that performed such additional audit. In connection with each audit, Seller shall cooperate with the Auditor and will cause Sellers employees, agents and contractors to cooperate with the Auditor, and Seller shall furnish or cause to be furnished to the Auditor such information and documentation the Auditor may consider necessary or useful in connection with the performance of the audit.
7.15 Notice from Seller of Certain Events.
(a) Seller shall promptly, but in any event within [***] days of obtaining knowledge thereof (or by such earlier time if expressly required hereunder), notify Bank in writing of any event or circumstance or notice thereof which has had, or could reasonably be expected to have, a Material Adverse Effect. Without limiting the generality of the foregoing, Seller shall promptly, but in any event within [***] days of receipt, deliver to Bank copies of all notices and other documents and correspondence from any Governmental Authority regarding any alleged or potential material non-compliance with the Dodd-Frank Act or any other applicable Law related to the financing and sale of Mortgage Loans, provided that Seller shall not be obligated to deliver copies of any such notices and other documents and correspondence to the extent restricted by obligations of confidentiality or applicable law.
(b) Seller shall furnish to Bank immediately upon becoming aware of the existence of any Event of Default, a written notice specifying the nature and period of existence thereof and the action which Seller is taking or proposes to take with respect thereto.
(c) Seller shall promptly, but in any event within [***] days of obtaining knowledge thereof, notify Bank in writing regarding: (a) any new mortgage warehousing facilities after the Effective Date; and (b) any mortgage warehousing facility of Seller with respect to any material change to the maximum amount of any such facility and as to any termination, suspension or non-renewal of any such facility, or any default by Seller under any such mortgage warehousing facility.
(d) Seller shall promptly, but in any event within [***] days of obtaining knowledge thereof, notify Bank in writing regarding any new Affiliate Escrow Agents arising after the Effective Date.
(e) Seller shall promptly, but in any event within [***] days of obtaining knowledge thereof, notify Bank in writing regarding any unauthorized use of the Electronic Platform.
(f) Seller shall promptly, but in any event within [***] days of obtaining knowledge thereof, notify Bank if any of Sellers current Chief Executive Officer, Chief Investment Officer or Chief Operating Officer ceases for any reason to hold that office, or to continuously perform the duties of that office, and within a reasonable period of time Seller has not found an executive to fill such vacant office with at least the same level of experience and ability as the person being replaced.
7.16 Compliance with Warehouse Documents. Seller shall promptly and fully perform, observe and comply with any and all provisions of this Agreement and the other Warehouse Documents to which Seller is a party.
7.17 Financial Covenants. At all times prior to the Agreement Termination Date (and thereafter if expressly required), Seller shall promptly and fully perform, observe and comply with the provisions set forth in Exhibit E.
7.18 INDEMNIFICATION. SELLER SHALL INDEMNIFY, DEFEND, PROTECT AND HOLD HARMLESS BANK AND ITS SUCCESSORS AND ASSIGNS, EACH AFFILIATE OF BANK, AND EACH OF ITS AND THEIR RESPECTIVE DIRECTORS, OFFICERS, EMPLOYEES, REPRESENTATIVES, AGENTS, AND ATTORNEYS (COLLECTIVELY, THE INDEMNIFIED PARTIES) FROM AND AGAINST ANY AND ALL LOSSES, LIABILITIES, DAMAGES, CLAIMS, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS AND EXPENSES (INCLUDING REASONABLE OUT OF POCKET ATTORNEYS FEES AND EXPENSES), ACTIONS, PROCEEDINGS, OR DISPUTES INCURRED OR SUFFERED OR TO WHICH ANY INDEMNIFIED PARTY MAY BECOME SUBJECT (COLLECTIVELY, INDEMNIFIABLE COSTS) WHICH DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO THIS AGREEMENT, THE OTHER WAREHOUSE DOCUMENTS, THE PARTICIPATED MORTGAGE LOANS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY, INCLUDING DUE TO THE UNMARKETABILITY OF ANY PARTICIPATED MORTGAGE LOAN RESULTING FROM: (A) ANY NEGLIGENT OR FRAUDULENT ACT OR OMISSION OF SELLER OR ITS AGENTS OR EMPLOYEES; (B) ANY BREACH BY SELLER OF ANY MATERIAL WARRANTY OR REPRESENTATION CONTAINED HEREIN; (C) ANY BREACH BY
SELLER OF ANY MATERIAL TERM OR CONDITION OF THIS AGREEMENT; (D)ANY MISCALCULATIONS AND OTHER ERRORS WHICH RESULT FROM SELLERS INDEPENDENT PROCESSING PROCEDURES OR ITS MISUSE OR ALTERATION OF ANY FORMS OR DOCUMENTS PROVIDED OR APPROVED BY BANK; OR (E) ANY FAILURE BY SELLER TO COMPLY WITH ANY LAW IN PERFORMING ITS OBLIGATIONS UNDER THIS AGREEMENT OR LAW RELATED TO THE ORIGINATION, SERVICING OR ADMINISTRATION ANY PARTICIPATED MORTGAGE LOAN, EXCEPT, IN EACH CASE, TO THE EXTENT SUCH INDEMNIFIABLE COSTS RESULT FROM AN INDEMNIFIED PARTYS BAD FAITH, NEGLIGENCE OR WILLFUL MISCONDUCT. BANK MAY EMPLOY AN ATTORNEY OR ATTORNEYS TO PROTECT OR ENFORCE ITS RIGHTS, REMEDIES AND RECOURSES UNDER THIS AGREEMENT AND THE OTHER WAREHOUSE DOCUMENTS, AND TO ADVISE AND DEFEND BANK WITH RESPECT TO ANY SUCH ACTIONS AND OTHER MATTERS. SELLER SHALL REIMBURSE BANK FOR ITS REASONABLE OUT-OF-POCKET ATTORNEYS FEES AND EXPENSES (INCLUDING EXPENSES AND COSTS FOR EXPERTS) WHEN BILLED FOR THE SAME, WHETHER ON A MONTHLY OR OTHER TIME INTERVAL, AND WHETHER OR NOT AN ACTION IS ACTUALLY COMMENCED OR CONCLUDED. ALL OTHER AMOUNTS FOR INDEMNIFIED COSTS SHALL BECOME DUE AND PAYABLE WHEN ACTUALLY INCURRED BY THE APPLICABLE INDEMNIFIED PARTY AND UPON PRESENTMENT OF REASONABLE BACKUP DOCUMENTATION TO THE INDEMNIFYING PARTY. THE PROVISIONS OF THIS SECTION SHALL SURVIVE THE TERMINATION OF THIS AGREEMENT.
7.19 Interest Rate Hedging. Seller shall at all times hedge against the interest rate risk associated with any and all Mortgage Loans owned in whole or in part by Seller in accordance with Sellers interest rate risk policies.
ARTICLE 8
NEGATIVE COVENANTS
At all times prior to the Agreement Termination Date (and thereafter if expressly required hereunder), Seller covenants and agrees with Bank that:
8.1 Transfer of Ownership Interest. Without the prior written consent of Bank, which consent shall not be unreasonably withheld or delayed, no transfer, assignment or hypothecation to any Person of the direct ownership interest in Seller shall occur if such transfer, assignment or hypothecation shall result in such Person holding [***] or more of the direct ownership interest in Seller.
8.2 No Merger, etc. Without the prior written consent of Bank, Seller shall not: (a) become a party to any merger or consolidation; (b) purchase or otherwise acquire all or any part of the assets or shares or other evidence of beneficial ownership of any Person; (c) sell or otherwise transfer all or substantially all of the assets or Properties of Seller to any other Person; or (e) wind-up, dissolve or liquidate; provided, however, that Seller may, without the prior written consent of Bank, and provided that an Event of Default is not existing and will not occur as a result thereof: (i) merge or consolidate with any Person if Seller is the surviving and controlling entity,
(ii) in the ordinary course of Sellers mortgage banking business, sell equipment that is uneconomic or obsolete, and (ii) buy and sell Mortgage Loans, mortgage servicing rights and related assets. If Seller takes such action while no sums are outstanding hereunder, such action must be disclosed to Bank in writing and approved by Bank in writing prior to Bank making any further Advances hereunder.
8.3 Fiscal Year; Method of Accounting. Seller shall not, without giving prior written notice to Bank, change its fiscal year or method of accounting.
8.4 Actions with respect to Mortgage Loans. Seller shall not:
(a) Release the Lien of any Security Instrument of any Participated Mortgage Loan;
(b) Grant, create, incur, permit or suffer to exist any Lien upon the Mortgaged Property which is security for any Participated Mortgage Loan, except for the Lien granted under the Security Instrument for such Participated Mortgage Loan; or
(c) Sell, transfer or assign any of Sellers right, title and interest in or to any Participated Mortgage Loan to any Person except as expressly provided in this Agreement, or otherwise with the prior written consent of Bank.
8.5 Compliance with Material Agreements. Seller shall not permit any default to occur with respect to any material agreement, indenture, mortgage or document binding on it or affecting its Property or business, if such default may have a Material Adverse Effect.
8.6 Representations Regarding Interests Sold. Seller will not represent to any Person that Seller owns all or any portion of the Participation Interests purchased by Bank under this Agreement.
ARTICLE 9
EVENTS OF DEFAULT;
CERTAIN RIGHTS AND REMEDIES OF BANK
9.1 Events of Default. An Event of Default shall exist if any one or more of the following occurs:
(a) Seller shall fail to punctually make any payment of fees or other sums when due hereunder, or under any other Warehouse Document to which it is a party or other document executed in connection herewith, and such failure shall continue for a period of [***] Business Days following written notice to Seller of such delinquency (provided that Bank shall not be required to provide any such [***] Business day grace period more than [***] times in any [***] month period);
(b) The failure or refusal of Seller to perform, observe or comply with any covenant or agreement contained in this Agreement, any other Warehouse Document or any other document executed in connection herewith, which failure or refusal is not
otherwise addressed in this Section, and such failure or refusal continues for a period of [***] days following written notice to Seller of such breach (provided that Bank shall not be required to provide any such [***] day grace period more than [***] times in any [***] month period);
(c) Any material statement, warranty or representation made at any time by Seller in this Agreement, any other Warehouse Document or any document executed in connection herewith, or in any writing, or any statement or representation made in any certificate, report, or opinion delivered to Bank pursuant to any Warehouse Document, is false, misleading or erroneous in any material respect at the time made, and such breach (to the extent such breach is capable of cure) continues uncured for a period of [***] days following written notice to Seller of such breach (provided that Bank shall not be required to provide any such [***] day grace period more than three [***] in any [***] month period). Notwithstanding the foregoing, if such breach is intentionally false or calculated to mislead, then such [***] day grace period shall not apply;
(d) Default shall occur (after the expiration of any applicable grace and cure periods) (i) in the punctual payment of any material indebtedness of Seller owing to any Person (other than Bank), or in the performance, observance or compliance with any other covenant, agreement or obligation of any agreement executed in connection therewith, in each such case, which permits a demand for, or requires, the early repayment of obligations due by Seller and such other Person has exercised such acceleration under any such documents; or (ii) under any financial accommodations extended by any Person (other than Bank) to Seller in order to finance the origination by Seller of residential mortgage loans on a short-term basis until such time as such mortgage loans are sold to third parties, which default permits the termination of such financial accommodations or requires the repurchase of the mortgage loans financed thereunder, and such Person has terminated such financial accommodations or has required the repurchase of such mortgage loans in connection with such default;
(e) Seller shall: (i) apply for or consent to the appointment of a receiver, trustee, custodian, intervenor or liquidator of such Person or of all or a substantial part of its assets; (ii) file a voluntary petition in bankruptcy, admit in writing that it is unable to pay its debts as they become due or generally not pay its debts as they become due; (iii) make a general assignment for the benefit of creditors; (iv) file a petition or answer seeking reorganization or an arrangement with creditors or to take advantage of any bankruptcy or insolvency laws; (v) file an answer admitting the material allegations of, or consent to, or default in answering, a petition filed against it in any bankruptcy, reorganization or insolvency proceeding; or (vi) take any action for the purpose of effecting any of the foregoing;
(f) An involuntary petition or complaint shall be filed against Seller seeking bankruptcy or reorganization of such Person or the appointment of a receiver, custodian, trustee, intervenor or liquidator of it, or of all or substantially all of its assets, and such petition or complaint shall not have been dismissed within [***] days of the filing thereof; or an order, order for relief, judgment or decree shall be entered by any court of
competent jurisdiction or other competent authority approving a petition or complaint seeking reorganization of such Person or appointing a receiver, custodian, trustee, intervenor or liquidator of such Person, or of all or substantially all of its assets, and such order, judgment or decree shall continue unstayed and in effect for a period of [***] days;
(g) Seller shall fail within [***] days to pay, bond or otherwise discharge any judgment or order for payment of money in excess of the Maximum Judgment Amount that is not otherwise being satisfied in accordance with its terms and is not stayed on appeal or otherwise being contested in good faith;
(h) Any default or event of default shall occur (after the expiration of any applicable grace and cure periods) under any documents evidencing, securing or pertaining to any indebtedness of Seller to Bank, in each such case, which permits a demand for, or requires, the early repayment of obligations due by Seller and Bank has exercised such acceleration under such documents;
(i) Any Person shall levy on, seize, or attach all or any material portion of the Property of Seller which is not permanently dismissed or discharged within [***] days after commencement of such action;
(j) The failure of Seller to repurchase any Participation Interest in a Mortgage Loan due to failure to deliver any Closing Deliverables pursuant to the provisions of this Agreement;
(k) The dissolution of Seller; or
(l) Any material adverse change in the financial condition of Seller from the condition shown on the financial statements submitted to Bank and relied upon by Bank in connection with the execution of this Agreement, which change would materially and adversely affect the ability of Seller to perform the obligations of any such party to Bank under any Warehouse Document, the materiality and adverse effect of such change in financial condition to be reasonably determined by Bank in accordance with its credit standards and underwriting practices in effect at the time of making such determination.
9.2 Default Remedies. Upon the occurrence and continuation of an Event of Default, without any presentment, demand, protest, notice of protest and nonpayment, or other notice of any kind, all of which are hereby expressly waived by Seller, Bank may, in its sole and absolute discretion, immediately: (a) terminate or suspend Sellers right hereunder to submit any Request to Bank for Bank to purchase Participation Interests; (b) pursuant to the power of attorney conferred to Bank by Seller in connection with this Agreement (and in reliance of Section 10.18 in the event that Bank exercises the following remedy after the occurrence of an Event of Default specified in Sections 9.1(e) or (f)), sell in a recognized market (or otherwise in a commercially reasonable manner) at such price or prices as Bank shall reasonably deem satisfactory, any or all right, title and interest of Bank and Seller in and to any or all Participated Mortgage Loans and apply the proceeds thereof to the aggregate outstanding Advances made by Bank in connection with such Participated Mortgage Loans and to any other amounts payable to Bank in connection
with this Agreement or any other Warehouse Document, in such order and amounts determined by Bank; (c) exercise its rights and remedies under any Pledge Agreement, or other Warehouse Document; and/or (d) exercise any other right or remedy otherwise available to Bank under this Agreement or any other Warehouse Document or at law or in equity. Notwithstanding the foregoing, if an Event of Default specified in Sections 9.1(e) or (f) occurs, fees and other sums due hereunder shall become automatically and immediately due and payable, both without any action by Bank and without presentment, demand, protest, notice of protest and nonpayment, notice of acceleration or of intent to accelerate, or any other notice of any kind, all of which are hereby expressly waived, notwithstanding anything contained herein to the contrary.
9.3 Option to Purchase Retained Percentage. Without limiting the generality of Section 9.2, upon the occurrence of an Event of Default, Bank shall have the right at any time, in its sole and absolute discretion, to purchase from Seller the Retained Percentage in any or all Participated Mortgage Loans (the Retained Interest Purchase Option). To effect the purchase by Bank from Seller of the Retained Percentage in any Participated Mortgage Loan in connection with Banks exercise of the Retained Interest Purchase Option, Bank shall pay to Seller an amount (the Retained Interest Purchase Price) equal to (a) the then -outstanding principal balance of such Participated Mortgage Loan, as of the date of the exercise by Bank of the Retained Interest Purchase Option, less (b) the amount of Banks pro rata share of any and all principal payments (which are allocable to Banks Participation Interest in such Participated Mortgage Loan), determined in accordance with Banks Participation Percentage in effect from time to time for such Participated Mortgage Loan, made on such Participated Mortgage Loan during the period of time commencing on the Purchase Date for such Participated Mortgage Loan and ending on the date of the exercise by Bank of the Retained Interest Purchase Option, but that have not been previously paid to Bank, less (c) the amount of Banks pro rata share of any and all interest payments (which are allocable to Banks Participation Interest in such Participated Mortgage Loan), determined in accordance with the Participation Interest Rate in effect from time to time for such Participated Mortgage Loan, made on such Participated Mortgage Loan during the period of time commencing on the Purchase Date for such Participated Mortgage Loan and ending on the date of the exercise by Bank of the Retained Interest Purchase Option, but that have not been previously paid to Bank, less (d) any other amounts due and payable by Seller to Bank hereunder as of the date of the exercise by Bank of the Retained Interest Purchase Option, by depositing the Retained Interest Purchase Price into the Remittance Account. Effective immediately upon Banks deposit into the Remittance Account of the Retained Interest Purchase Price for the Retained Percentage in any Participated Mortgage Loan, without any further action by or notice to any Person, Bank shall have purchased from Seller such Retained Percentage.
ARTICLE 10
MISCELLANEOUS
10.1 Accounting Principles. Where the character or amount of any asset or liability or item of income or expense is required to be determined or other financial or accounting computation is required to be made for the purposes of this Agreement or any other Warehouse Document, such determination shall be made in accordance with GAAP. In addition, any accounting term used in this Agreement or any other Warehouse Document shall have, unless
otherwise specifically provided therein, the meaning customarily given to such term in accordance with GAAP or other method of accounting acceptable to Bank.
10.2 Time. Time is of the essence of each and every term of this Agreement and the other Warehouse Documents.
10.3 Titles of Articles, Sections and Subsections. All titles or headings to articles, sections, subsections or other divisions of this Agreement or any other Warehouse Document or the exhibits or addenda hereto or thereto are only for the convenience of the parties and shall not be construed to have any effect or meaning with respect to the content of such articles, sections, subsections or other divisions, such content being controlling as to the agreement between the parties hereto.
10.4 Sellers Status. It is agreed that the relationship of Seller and Bank hereunder shall be that of the seller and purchaser of interests in Mortgage Loans. Seller and Bank are not partners or joint venturers, and nothing contained herein shall be construed to create a partnership, joint venture or similar relationship between the parties. Seller shall not act as or hold itself out to the public as being an agent for Bank, but is to act in all loan origination, administration and servicing matters hereunder for itself and in its name only, except to the extent that Seller is required under this Agreement to act as a trustee with fiduciary duties to hold for the benefit of Bank the Participated Mortgage Loans and the related Mortgage Loan Documents, and any and all funds and receipts, whether as principal, interest, escrows or otherwise, in respect of any Participated Mortgage Loan, and to make the remittances of any and all such documents and funds as specified in this Agreement. It further is agreed that Seller, as trustee, shall not assign its responsibilities under this Agreement except in accordance with this Agreement.
10.5 Notices. Any and all notices, requests and other communications required or permitted to be given under or in connection with this Agreement or any other Warehouse Document, except as otherwise provided herein or therein, shall be in writing and mailed or sent by electronic mail to the respective address, and to the attention of the designated recipient, provided below and provided again on the signature page of this Agreement for Seller (or to such other address or to such designated recipient, as either party may designate in a written notice to the other party furnished pursuant to this Section). Such notices, requests and other communications so sent shall be deemed to have been given immediately if made by electronic mail (confirmed by concurrent written notice sent first class U.S. mail, postage prepaid), or one (1) day after sending by recognized national overnight courier company, signature of recipient required if to Seller or Bank; any notice, request and other communication sent by any other means shall be deemed made when actually received in writing by the designated recipient of the party to which notice is provided in accordance with this Section. Notwithstanding the foregoing, Requests or communications related to a Request shall not be effective until actually received by Bank.
Banks address for notices is:
TEXAS CAPITAL BANK, N.A.
2221 Lakeside Boulevard, Suite 800
Richardson, Texas 75082
Attention: Bruce Karda
Email: bruce.karda@texascapitalbank.com
Sellers address for notices is:
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, CA 91362-3888
With copies to:
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, CA 91362-3888
and
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, CA 91362-3888
Attention: Legal Department
Email: legal@amerihome.com
10.6 Amendments and Waivers. Subject to Section 10.7, any provision of this Agreement or any other Warehouse Document may be amended or waived if, but only if, such amendment or waiver is in writing and is signed by all the parties to this Agreement, such Warehouse Document or such other documents, as the case may be. The acceptance of Bank at any time and from time to time of part payment on any amounts payable to Bank hereunder shall not be deemed to be a waiver of the balance of such amounts. No waiver by Bank of any Event of Default shall be deemed to be a waiver of any other then-existing or subsequent Event of Default. No waiver by Bank of any of its rights or remedies under this Agreement, any other Warehouse Document, or otherwise, shall be considered a waiver of any other or subsequent right or remedy of Bank. No delay or omission by Bank in exercising any right or remedy under this Agreement or any other Warehouse Document shall impair such right or remedy or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such right or remedy preclude other or further exercise thereof, or the exercise of any other right or remedy under this Agreement, any other Warehouse Document or otherwise.
10.7 Amendment Due to Government Regulation. Both Bank and Seller understand that Bank is subject to the supervision of various Governmental Authorities. Should any
Governmental Authority direct Bank to discontinue any practice set forth herein or to amend the terms hereof, Bank shall take immediate action to do so and shall notify Seller of such action. Seller hereby consents to such action and agrees to enter into any amendment or termination hereof as may be reasonably required by Bank to bring Bank into full compliance with applicable Laws.
10.8 Participations. Seller agrees that Bank may elect, at any time and in its sole discretion, to sell, assign and convey an undivided percentage ownership interest, or grant an undivided participation interest, in all or any portion of the Participation Interests (or any portion of any such Participation Interest) to one or more financial institutions, private investors and/or other Persons (collectively, Participants). In the event that Bank elects to include Participants, bank shall either (i) cause such Participant to agree to the provisions of Section 10.26, or (ii) cause such Participant to enter into such other agreement relating to confidentiality as Bank and Seller shall mutually agree upon, in each case prior to Bank disclosing any confidential or proprietary information of Seller protected by this Agreement (including without limitation as described in Section 10.26).
10.9 Invalidity. In the event that any one or more of the provisions contained in this Agreement or any other Warehouse Document, for any reason, be held invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Agreement or the other Warehouse Documents.
10.10 Survival. All covenants, agreements, representations and warranties made herein and in any other Warehouse Document shall continue in full force and effect as long as Bank has the right to purchase Participation Interests hereunder and until all obligations to Bank hereunder and thereunder have been fully satisfied and discharged. Without limiting the generality of the foregoing, termination of this Agreement by either party pursuant to the terms of this Agreement shall not relieve Seller of: (a) its duties, obligations, representations, warranties, covenants, agreements or indemnities which accrued under this Agreement prior to the Advance Request Termination Date or the Agreement Termination Date; or (b) performance of its duties and obligations hereunder so long as there is any Participated Mortgage Loan which does not constitute a Retired Participated Mortgage Loan.
10.11 Successors and Assigns. All covenants and agreements contained by or on behalf of Seller in this Agreement or any Warehouse Document shall bind Sellers successors and assigns and shall inure to the benefit of Bank and its successors and assigns. Seller shall not, however, have the right to assign its rights under this Agreement or any interest herein, without the prior written consent of Bank, which consent shall not be unreasonably withheld.
10.12 Renewal. If, as of the Effective Date, Bank holds any outstanding undivided percentage ownership interests (each an Existing Participation Interest) in any Mortgage Loan purchased by Bank from Seller pursuant to a written mortgage warehouse agreement or similar written agreement executed by Bank and Seller prior to the Effective Date (as amended or modified from time to time, the Existing Warehouse Agreement), then, as of the Effective Date, unless expressly agreed to otherwise by Seller and Bank in writing after the date of the Existing Warehouse Agreement: (a) Seller shall not have any rights under the Existing Warehouse Agreement to request Bank to purchase additional undivided percentage ownership interests in
Mortgage Loans, and any and all such requests and purchases on or after the Effective Date shall be governed by the terms and conditions of this Agreement; (b) any and all Existing Participation Interests shall continue but shall be subject to the terms and conditions of this Agreement from and after the Effective Date; and (c) the Existing Warehouse Agreement shall automatically terminate and cease to be in force and effect (except with respect to the provisions of the Existing Warehouse Agreement which expressly survive termination) without any action or notice. The terms of this Section supersede and modify any and all inconsistent provisions in any Existing Warehouse Agreement.
10.13 Consent or Approval. Except where a standard has been otherwise expressly provided in this Agreement or the other Warehouse Documents (sole discretion, reasonable, commercially reasonable, etc.), in any instance under this Agreement or the other Warehouse Documents where the approval, consent or the exercise of judgment of a party is required: (a) the granting or denial of such approval or consent and the exercise of such judgment shall be (i) within the sole and absolute discretion of such party and (ii) deemed to have been given only by a specific writing intended for that purpose and executed by such party; and (b) in order to be effective, such approval, consent or exercise of judgment must be given by such party prior to the applicable action to be taken by requiring approval, consent or exercise of judgment, unless otherwise agreed to in writing by such party. Each provision for consent, approval, inspection, review, or verification by a party is for such partys own purposes and benefit only.
10.14 Cumulative Rights. The rights and remedies of Bank under this Agreement and any other Warehouse Document shall be cumulative, and shall be in addition to any rights and remedies of Bank at law or in equity.
10.15 Governing Law. Seller has signed this Agreement and submits it to Bank for acceptance at Banks offices in Richardson, Collin County, Texas. Seller and Bank shall make all payments and perform all other obligations arising hereunder at Collin County, Texas, and this Agreement is made and entered into at Collin County, Texas. This Agreement and all of the terms and conditions hereof and the rights of the parties hereto shall be governed by and interpreted in accordance with the Laws of the State of Texas and venue for any legal action brought hereunder shall lie in Collin County, Texas or Dallas County, Texas.
10.16 Sellers Understanding. Seller has read this Agreement and has had the opportunity to seek and/or receive counsel from an attorney of Sellers choice as to the effects hereof.
10.17 Nature of Transactions.
(a) The relationship established by this Agreement and the other Warehouse Documents between Bank and Seller is that of a seller and purchaser of Participation Interests in Mortgage Loans, and not that of a lender and borrower. Subject to Section 10.17(b), it is the intention of Bank and Seller that: (i) the purchase and sale of each Participation Interest hereunder shall be treated and construed as a sale by Seller to Bank, and the purchase by Bank from Seller, of a certain undivided percentage ownership interest in the related Mortgage Loan and the related Mortgage Loan Documents; and (ii) each sale of a Participation Interest by Seller to Bank, and each purchase of a
Participation Interest by Bank from Seller, is a sale of an undivided interest in a promissory note to Bank, and that pursuant to Section 9.109 of the UCC of the State of Texas, Bank and Sellers characterization of each such sale and purchase of a Participation Interest as a purchase and sale of such Participation Interest shall be conclusive that (A) the transaction is a sale and is not a secured transaction and (B) legal and equitable title has passed to Bank in the Mortgage Loan and Mortgage Loan Documents in which Bank acquired such Participation Interest.
(b) Neither Party has made or hereby makes any representations or warranties to the other Party, and hereby disclaims any such representations or warranties, regarding the accounting or tax treatment to be applied to any Participation Interest (including whether any such Participation Interest qualifies for sale treatment under any applicable accounting rules, regulations or standards). Each Party hereby agrees that it has and will make its own independent determination regarding the accounting and tax treatment to be applied to each Participation Interest, and has not relied upon the other Party in any manner in making such determination. The accounting or tax treatment applied by any Party with respect to any Participation Interest shall not be binding upon the other Party, shall not be used by the other Party in any manner inconsistent with, and shall not affect, the Parties intent hereunder that any and all transactions pursuant to which Bank pays a Purchase Price to Seller is (other than for accounting purposes) a sale by Seller to Bank, and the purchase by Bank from Seller, of a certain undivided percentage ownership interest in the related Mortgage Loan and Mortgage Loan Documents and that legal and equitable title has passed to Bank in the Mortgage Loan in which Bank acquired such Participation Interest.
(c) If any court of competent jurisdiction shall deem any transaction involving Bank, Seller or any Participation Interest governed by this Agreement to be a loan, extension of credit or a secured financing, or if any court of competent jurisdiction shall determine that any purported Participation Interest in any purported Participated Mortgage Loan (or any portion thereof) is the property of Seller or shall otherwise not have been sold by Seller to, and purchased by, Bank, as contemplated herein, then notwithstanding anything herein or in any other Warehouse Document to the contrary: (i) as of the Effective Date, Bank shall have (and Seller shall have been deemed to have pledged, assigned and granted to Bank) a first priority security interest in and to the Collateral to secure the prompt and complete payment and performance of any and all of Sellers indebtedness and obligations to Bank under this Agreement and the other Warehouse Documents; and (ii) any and all amounts received by Bank with respect to any Participated Mortgage Loan may be applied in such order and priority as Bank may determine. For this purpose, this Agreement shall constitute a security agreement in accordance with the UCC, and Bank shall have all the rights of a secured creditor with respect to such security.
10.18 Repurchase Agreement. It is expressly stipulated to be the intent of Bank and Seller, and understood and agreed by Bank and Seller, that (a) this Agreement constitutes a repurchase agreement under Section 101(47) of the Bankruptcy Code and (b) pursuant to Sections 362(b), 555 and 559 of the Bankruptcy Code, the rights of Bank under this Agreement related to the sale and repurchase of Mortgage Loans (including, the rights of Bank hereunder, upon the occurrence of an Event of Default, to liquidate and/or foreclose on the Mortgage Loans
in which it holds Participation Interests) shall not be stayed, avoided or otherwise limited by the operation of any provision of the Bankruptcy Code.
10.19 Usury Savings Provision. It is expressly stipulated to be the intent of Bank and Seller, and understood and agreed by Bank and Seller, that this Agreement: (a) does not represent a loan from Bank to Seller; and (b) allows Bank to purchase the Participation Interests for its own account and for a short term investment. If, notwithstanding the foregoing or the terms of this Agreement, a court of competent jurisdiction establishes a loan or extension of credit within this Agreement from Bank to Seller, then the parties to this Agreement hereby understand, acknowledge and agree that in such event: (a) Seller shall be the underlying obligor of that loan or extension of credit established by such court of competent jurisdiction; (b) Seller is utilizing the proceeds of that loan or extension of credit established by such court of competent jurisdiction for business, commercial, investment, or similar purposes; and (c) Seller has determined that it is beneficial to use any and all proceeds of that loan or extension of credit established by such court of competent jurisdiction to establish collateral for that loan or extension of credit established by such court of competent jurisdiction by: (i) making deposits at Bank; (ii) purchasing certificates of deposit from Bank; and/or (iii) establishing other accounts at Bank. Additionally, it is the stipulated, understood and agreed to be the intent of Bank and Seller that this Agreement shall at all times comply strictly with the applicable Texas law governing the maximum rate or amount of interest payable on the Indebtedness (as hereinafter defined), if any, or applicable United States federal law to the extent that such law permits Bank to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law. For purposes of this provision, Indebtedness shall mean all indebtedness, if any, evidenced, referenced, described, or established by a court of competent jurisdiction under this Agreement, and all amounts payable in the performance of any covenant or obligation in any of the other documents or any other communication or writing by or between Bank and Seller related to the transaction or transactions that are the subject matter of this Agreement, or any part of such Indebtedness, if any. If the applicable law is ever judicially interpreted so as to render usurious any amount contracted for, charged, taken, reserved or received in respect of the Indebtedness, if any, including by reason of the acceleration of the maturity or the prepayment thereof, then it is Banks and Sellers express intent that all amounts charged in excess of the Maximum Lawful Rate (as hereinafter defined), if any, shall be automatically canceled, ab initio, and all amounts in excess of the Maximum Lawful Rate theretofore collected by Bank, if any, shall be credited on the principal balance of the Indebtedness, if any, or, if the Indebtedness, if any, has been or would thereby be paid in full, refunded to Seller, and the provisions of this Agreement and any underlying documents shall immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable laws, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder; provided, however, if the Indebtedness has been paid in full before the end of the stated term hereof, then Bank and Seller agree that Bank shall, with reasonable promptness after Bank discovers or is advised by Seller that interest was received in an amount in excess of the Maximum Lawful Rate, either credit such excess interest against the Indebtedness then owing by Seller to Bank and/or refund such excess interest to Seller. If and to the extent Indebtedness is determined to exist by a court of competent jurisdiction, then Seller hereby agrees that as a condition precedent to any claim seeking usury penalties against Bank, Seller will provide written notice to Bank, advising Bank in reasonable detail of the nature and amount of the violation, and Bank shall have sixty (60) days after receipt
of such notice in which to correct such usury violation, if any, by either refunding such excess interest to Seller or crediting such excess interest against the Indebtedness, if any, then owing by Seller to Bank. All sums contracted for, charged, taken, reserved or received by Bank for the use, forbearance or detention of Indebtedness, if any, shall, to the extent permitted by applicable law, be amortized, prorated, allocated or spread, using the actuarial method, throughout the stated term of this Agreement (including any and all renewal and extension periods) until payment in full so that the rate or amount of interest on account of the Indebtedness, if any, does not exceed the Maximum Lawful Rate from time to time in effect and applicable to the Indebtedness, if any, for so long as debt is outstanding. In no event shall the provisions of Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts and revolving tri-party accounts) apply to this Agreement or any other part of the Indebtedness, if any. If and to the extent any Indebtedness is determined to exist under this Agreement by a court of competent jurisdiction, then notwithstanding anything to the contrary contained herein or in any of underlying documents referenced herein, it is not the intention of Bank to accelerate the maturity of any interest, if any, that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration. If and to the extent any Indebtedness is determined to exist under this Agreement by a court of competent jurisdiction, then the terms and provisions of this paragraph shall control and supersede every other term, covenant or provision contained herein, in any of the other underlying documents referenced within this Agreement or in any other document or instrument pertaining to the Indebtedness. As used herein, the term Maximum Lawful Rate shall mean the maximum lawful rate of interest which may be contracted for, charged, taken, received or reserved in accordance with the applicable Laws of the State of Texas (or applicable United States federal law to the extent that such law permits Bank to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law), taking into account all fees, charges and any other value whatsoever made in connection with the transaction evidenced by this Agreement. To the extent United States federal law permits contracting for, charging, taking, receiving or reserving a greater amount of interest than under Texas law, then such United States federal law will be relied upon instead of Texas law for the purpose of determining the Maximum Lawful Rate. Additionally, if and to the extent any Indebtedness is determined to exist under this Agreement by a court of competent jurisdiction, to the extent permitted by applicable law now or hereafter in effect, Bank may, at its option and from time to time utilize any other method of establishing the Maximum Lawful Rate under Texas law or under other applicable law by giving notice, if required, to Seller as provided by such applicable law now or hereafter in effect.
10.20 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, SELLER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER WAREHOUSE DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY OR THE ACTIONS OF BANK IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
10.21 Joint and Several Liability. The liability of all Persons obligated to Bank in any manner under this Agreement shall be joint and several. If more than one Person shall execute this Agreement as Seller, then the term Seller as used herein and in the other Warehouse Documents shall refer both to each such Person individually and to all such Persons collectively.
10.22 Reserved.
10.23 Electronic Transmission of Data. Bank and Seller agree that certain data related to Mortgage Loans (including confidential information, documents, applications and reports) and the transactions contemplated by this Agreement may be transmitted electronically, including over the Internet and/or through the use of the Electronic Platform. This data may be transmitted to, received from or circulated among agents and representatives of Seller and/or Bank and their affiliates, and other Persons involved with the subject matter of this Agreement subject to and in accordance with Section 10.26. Seller and Bank each acknowledges and agrees that there are risks associated with the use of electronic transmission and that neither Party controls the method of transmittal or third party service providers and that neither party has any obligation or responsibility whatsoever and assumes no duty or obligation for the security, receipt, or third party interception of such transmissions.
10.24 Force Majeure. Neither Party shall be responsible for any failure or delay of its performance hereunder by reason of fire, flood or other natural disasters, lockout, acts of public enemy, riot, insurrection or any interruption, failure or defects in internet, telephone or other interconnection service or in electronic or mechanical equipment or any other cause beyond the reasonable control of such Party (Force Majeure Event). During the duration of any Force Majeure Event, each affected Party will use commercially reasonable efforts to avoid or remove such Force Majeure Event and will take reasonable steps to resume its performance under this Agreement with the least possible delay.
10.25 Limitation of Liability. Neither Bank nor any other Indemnified Party shall have any liability with respect to, and Seller hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, consequential or punitive damages suffered or incurred by Seller in connection with, arising out of, or in any way related to, this Agreement or any of the other Warehouse Document, or any of the transactions contemplated by this Agreement or any of the Warehouse Document.
10.26 Confidentiality.
(a) Confidential Information. Bank and Seller hereby acknowledge and agree that all information provided before or after the date hereof by one party to any other in connection with any Warehouse Document or the transactions contemplated hereby which the receiving party knows or reasonably should know is the confidential or proprietary information of the disclosing party (for the avoidance of doubt consumer or other non-public personal and financial information of any Borrower or Seller shall always be considered confidential information), whether furnished by or on behalf of Bank or Seller or any of their representatives including without limitation: (i) all knowledge or information concerning the business, operations and assets of Bank or Seller or their respective affiliates, which for the avoidance of doubt, shall include, without limitation, internal operating procedures; methodologies; investment strategies; hedging strategies; structuring strategies and concepts; trade secrets; sales data; vendor data and customer lists (existing and potential); financial plans, projections and reports; product strategies; and investment strategies; (ii) all property owned, licensed and/or developed by or for Bank or
Seller or their respective affiliates, such as computer systems, programs, software and devices, plus information about the design, methodology and documentation therefor; (iii) information about or personal to Bank or Seller or their respective affiliates, insureds, employees, agents and applicants (for jobs or products) of any of the foregoing and (iv) information, materials, products or any other tangible or intangible assets in the possession or the control of Bank or Seller or their respective affiliates, which is proprietary to, or confidential to or about, any other person or entity (the Confidential Information) shall be kept confidential and shall not be divulged to any party without the prior written consent of such other party except to the extent set forth in clause (b) below. Confidential Information shall not include information that (A) is or becomes part of the public domain through no fault of Bank or Seller, as applicable, or its Permitted Recipients (as defined below) in violation of this Agreement; (B) is already known to Bank or Seller, as applicable, or any of its Permitted Recipients on a non-confidential basis prior to disclosure of such information by either party; (C) is subsequently received by Bank or Seller, as applicable, or its Permitted Recipients from a third party who Bank or Seller, as applicable, or its Permitted Recipients is not aware of any restriction on the disclosure of such information by a contractual, legal, fiduciary or other obligation owed to Bank or Seller, as applicable.
(b) Permitted Disclosures. Notwithstanding clause (a) above, Bank and Seller, as applicable, shall be permitted to disclose, on a confidential basis, Confidential Information to the extent that (i) it is necessary in connection with any Warehouse Document or Participation Interests to do so in working with its affiliates, legal counsel, actuaries, auditors, directors, officers, employees (Permitted Recipients); (ii) taxing authorities or other governmental agencies or regulatory bodies or in order to comply with any applicable federal or state laws; or (iii) in the event of an Event of Default, Bank determines such information to be necessary or desirable to disclose in connection with the marketing and sales of the Participation Interests, the related Mortgage Loans or otherwise to enforce or exercise Banks rights hereunder. Further, notwithstanding clause (a) above, Bank shall may permitted to disclose Confidential Information to actual and potential Sub Participants pursuant to, and in compliance with, the provisions of Section 10.8.
(c) Involuntary Disclosures. If Bank or Seller shall at any time be involved in any litigation, arbitration, administrative, legal, regulatory or other proceeding or if Bank or Seller and/or its respective Permitted Recipients is otherwise required by law, regulation or other legal process, in each case, in which such party and/or its Permitted Recipient, on the advice of its own legal counsel, may be or becomes required to disclose any Confidential Information in violation of this Agreement (a Legal Proceeding), whether in discovery or otherwise, including by any oral question, subpoena, interrogatory, deposition, request for documents or information, order, writ, rule, regulatory, or other legal process, such party and/or its Permitted Recipients shall, if such party and/or its Permitted Recipients may lawfully do so, promptly notify the other party of the receipt of such Legal Proceeding whereupon such other party may seek an appropriate protective order or other relief at such other partys own expense. Bank or Seller and its respective Permitted Recipients, as applicable, shall cooperate with the other party, at such other partys expense, to obtain a protective order or other remedy or reasonable assurance that
confidential treatment will be afforded the Confidential Information in the Legal Proceeding. Bank or Seller and/or its respective Permitted Recipients may disclose any Confidential Information in accordance with such Legal Proceeding in the event that the other party fails to timely obtain any protective order or other relief but shall use its reasonable efforts to disclose only that portion of the Confidential Information which is necessary to comply with such Legal Proceeding after taking commercially reasonable steps to ensure that the portion of the Confidential Information so disclosed will be treated confidentially by the party to which it has been so disclosed. Notwithstanding the foregoing, no notice or other action by Bank or Seller, as applicable, or any of their respective Permitted Recipients shall be required where disclosure of Confidential Information is made in connection with a routine request, or an audit or examination, by a bank examiner, auditor, regulatory authority or supervisory authority that has jurisdiction over the business of Bank or Seller, as applicable.
(d) Treatment of Confidential Information.
(i) Bank understands that the Confidential Information may contain information that is subject to, and accordingly Bank represents and warrants to Seller that Bank is subject to internal policies and processes that require Bank and its Permitted Recipients to receive, maintain, store and dispose of such Confidential Information in compliance with, any and all applicable federal, state and local laws, rules, regulations and ordinances governing or relating to privacy rights in connection with its performance under this Agreement including, without limitation, the Gramm Leach Bliley Act (the GLB Act). Such policies and procedures include the implementation of such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of any nonpublic personal information that is disclosed to Bank in any manner or for any purpose and that pertains to any customers or consumers (as all such terms are defined in the GLB Act) of Seller, (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Bank further understands that Seller is relying on Banks representation and warranty in disclosing the Confidential Information. Upon written request from Seller, Bank will provide written confirmation of the continued accuracy of this representation and warranty, it being understood that disclosure of information pertaining to specific policies or processes may require a confidentiality undertaking from Seller.
(ii) Seller represents and warrants to Bank that Seller has implemented measures designed to protect the security and confidentiality of the Confidential Information of Bank against any anticipated threats or hazards to the security or integrity of such Confidential Information that could result in substantial harm or inconvenience to Bank.
(e) Notwithstanding the foregoing or anything to the contrary contained herein or in any other Warehouse Document, the parties hereto may disclose to any and all
Persons, without limitation of any kind, the federal, state and local tax treatment of the transactions contemplated herein, any fact relevant to understanding the federal, state and local tax treatment of the transactions contemplated herein, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided, that Seller may not disclose the name of or identifying information with respect to Bank or any other Indemnified Party, or any pricing terms or other nonpublic business or financial information (including any financial covenants) that is unrelated to the federal, state and local tax treatment of the transactions contemplated herein and is not relevant to understanding the federal, state and local tax treatment of the transactions contemplated herein, without the prior written consent of Bank.
(f) The provisions set forth in this Section shall survive the termination of this Agreement.
10.27 Reserved.
10.28 Inconsistencies. To the extent of any conflict between the provisions of this Agreement and the provisions of any other Warehouse Document, the provisions of this Agreement shall govern and control. To the extent of any conflict between the provisions of any Warehouse Document and the provisions of the Warehouse Program Guide, subject to Section 5.14, the provisions of the Warehouse Program Guide shall govern and control.
10.29 Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all Persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single agreement. It shall not be necessary in making proof of this Agreement to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.
10.30 ENTIRE AGREEMENT. THIS WRITTEN AGREEMENT AND THE OTHER WAREHOUSE DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature Pages Follow]
EXECUTED by Seller to be effective as of the Effective Date.
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SELLER: | |
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AMERIHOME MORTGAGE COMPANY, LLC, A | |
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DELAWARE LIMITED LIABILITY COMPANY | |
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By: |
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Name: |
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Title: |
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Execution Date: ,20 |
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Sellers Contact Information for Notices: |
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AMERIHOME MORTGAGE COMPANY, LLC |
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1 BAXTER WAY, SUITE 300 |
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THOUSAND OAKS, CA 91362 |
With Copies to:
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AMERIHOME MORTGAGE COMPANY, LLC |
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1 BAXTER WAY, SUITE 300 |
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THOUSAND OAKS, CA 91362 |
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AMERIHOME MORTGAGE COMPANY, LLC | |
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1 BAXTER WAY, SUITE 300 | |
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THOUSAND OAKS, CA 91362 | |
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Attention: |
LEGAL DEPARTMENT |
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E-mail: |
LEGAL@AMERIIIOME.COM |
See Attached
[NOTARY STAMP]
[Banks Signature Page Follows]
ACKNOWLEDGMENT
A notary public or other officer completing this
certificate verifies only the identity of the individual
who signed the document to which this certificate is
attached, and not the truthfulness, accuracy, or
validity of that document.
State of California
County of |
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On |
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before me, |
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(insert name and title of the officer) | |||||
personally appeared
who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
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(Seal) |
ACCEPTED AND AGREED to by Bank at Richardson, Collin County, Texas, and executed to be effective as the Effective Date.
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BANK: | |||
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TEXAS CAPITAL BANK, | |||
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NATIONAL ASSOCIATION | |||
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By: |
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Name: |
Bruce Karda | ||
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Title: |
Senior Vice President | ||
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Execution Date: |
8/19/2020 |
, 20 | |
EXHIBIT LIST
Exhibit A |
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Power of Attorney |
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Exhibit B |
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Pledge Agreement |
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Exhibit C |
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Reserved |
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Exhibit D |
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UCC-1 Financing Statement |
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Exhibit E |
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Financial Covenants Addendum |
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Exhibit F |
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Supplemental Provisions Addendum |
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Exhibit G |
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List of Current Warehouse Facilities |
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Exhibit H |
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List of Current Affiliate Escrow Agents |
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Exhibit I |
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Blanket Assignment |
EXHIBIT A
(TO MORTGAGE WAREHOUSE AGREEMENT)
POWER OF ATTORNEY
[Follows This Cover Page]
LIMITED POWER OF ATTORNEY
Pursuant to that certain Mortgage Warehouse Agreement (as amended or modified from time to time, the Warehouse Agreement) entered into as of JULY 29, 2020 by the undersigned (the undersigned are each individually and collectively referred to herein as Seller) and TEXAS CAPITAL BANK. NATIONAL ASSOCIATION (Bank) relating to Banks discretionary purchase of Participation Interests in Mortgage Loans. Seller hereby irrevocably appoints Bank and each officer of Bank as its attorney-in-fact, with hill power of substitution, for, on behalf of, and in the name of Seller, upon the occurrence and continuation of an Event of Default under the Warehouse Agreement, to: (a) endorse and deliver to any Person any notes. checks, drafts, money orders or other instruments of payment coming into Banks possession and representing any payment made on or with respect to any Participated Mortgage Loan or otherwise received in connection with any Participated Mortgage Loan (including the proceeds from the sale of any such Participated Mortgage Loan received from a Take-Out Purchaser), and any collateral and any Take-Out Purchase Agreement therefor; (b) prepare, complete, execute, deliver and record, and do anything else necessary or desirable to effect. (i) any endorsement to Bank, any Take-Out Purchaser or any other Person, of any Mortgage Note evidencing a Participated Mortgage Loan, or (ii) any transfer, assignment or conveyance to Bank, any Take-Out Purchaser or any other Person, of arty or all right, title and interest in and to any Mortgage Note and the Mortgage Loan Documents related thereto in which Bank has purchased a Participation Interest (including servicing rights); (c) do anything necessary or desirable to effect the sale, transfer, assignment or conveyance, of any or all right, title and interest of Seller and/or Bank in and to any Participated Mortgage Loan and the related Mortgage Loan Documents related thereto to any Take-Out Purchaser or any other Person: di commence, Prosecute, settle, discontinue, defend, or otherwise dispose of any claim relating to any Take-Out Purchase Agreement or any Participated Mortgage Loan; (e) sign Sellers name wherever appropriate, as determined by Bank, to effectuate the purposes of the Warehouse Agreement; and (f) to take any such further action as Bank may deem appropriate, and to act under changed circumstances, the exact nature of which may not be currently foreseen or foreseeable, in order to fully and completely effectuate Banks rights under the Warehouse Agreement. Capitalized terms not otherwise defined herein shall have the meanings set forth in the Warehouse Agreement.
The powers and authorities herein conferred on Bank may he exercised by Bank through any Person who, at the time of the execution of a particular instrument, is an officer of Bank. The limited power of attorney conferred herein is granted for a valuable consideration and is coupled with an interest and, therefore, is irrevocable so long as any duties or obligations to Bank under the Warehouse Agreement or the other Warehouse Documents, or any part thereof, shall remain unpaid or otherwise unsatisfied, and so long as Bank may elect to purchase Participation Interests under the Warehouse Agreement.
This appointment shall be construed in accordance with the Laws of the State of Texas, and venue for any proceeding hereunder shall lie exclusively in Collin County, Texas or Dallas County, Texas.
Dated effective as of the Effective Date.
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AMERIHOME MORTGAGE COMPANY, LLC | |
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A notary public or other officer completing this certificate
verifies only the identity of the individual who signed the
document to which this certificate is attached, and not the
truthfulness, accuracy, or validity of that document.
STATE OF CALIFORNIA |
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appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his her their authorized capacity(ies) and that by his/her their signatures) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
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[Seal] |
EXHIBIT B
(TO MORTGAGE WAREHOUSE AGREEMENT)
PLEDGE AGREEMENT
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PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this Pledge Agreement) is executed made and entered into as of JULY 29, 2020 (but effective as of the Effective Date), by AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY (the foregoing are each individually and collectively referred to herein as Seller), and TEXAS CAPITAL BANK, NATIONAL ASSOCIATION (Bank).
RECITALS
A. Pursuant to that certain Mortgage Warehouse Agreement entered into as of JULY 29, 2020 by Bank and Seller, as may have been amended or modified from time to time (the Warehouse Agreement), Bank has agreed, on a discretionary basis, to purchase Participation Interests in various Mortgage Loans subject to the terms and conditions of the Warehouse Agreement.
B. As partial consideration for Bank entering into the Warehouse Agreement and/or for Bank to now or hereafter elect to purchase Participation Interests subject to the terms and conditions of the Warehouse Agreement, Seller has agreed, pursuant to the terms and conditions of this Pledge Agreement, to assign and pledge to Bank, and grant Bank a security interest in and to, the Collateral described herein.
AGREEMENT
NOW, THEREFORE, for and in consideration of the matters set forth above and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. Capitalized terms used but not otherwise defined herein shall have the meanings given to such terms in the Warehouse Agreement. In addition, as used in this Pledge Agreement, the following terms shall have the meanings set forth below:
Collateral shall mean: (a) all right, title and interest of Seller in and to each depository and other account established by Seller at Bank related to the Warehouse Agreement, and all funds therein contained and all earnings thereon and proceeds thereof, including, without limitation, the Accounts more particularly described on Schedule 1 attached hereto (collectively, the Accounts); and (b) any and all other property included in the definition of Collateral as such term is defined in the Warehouse Agreement, but specifically excluding any servicing or escrow accounts relating to the servicing of the related Mortgage Loans. For the avoidance of doubt, Collateral shall specifically not include any corporate, custodial or other accounts of Seller held at Bank that do not relate to the Warehouse Agreement.
Secured Obligations shall mean the Repurchase/Sale Obligations and any and all other indebtedness, obligations and liabilities of Seller to Bank of any kind or character under the Warehouse Agreement or any other Warehouse Document, now existing or
hereafter arising, whether direct, indirect, related, unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and several.
2. Seller hereby pledges and assigns and grants to Bank a continuing security interest in and to the Collateral to secure the prompt and complete payment and performance of the Secured Obligations.
3. If any Event of Default should occur and be continuing, then Bank may enforce this Pledge Agreement in any manner provided hereunder or at Law or in equity or otherwise. Without limiting the generality of the foregoing, if an Event of Default shall have occurred and be continuing, then Bank may, at its discretion, apply or use any cash held in the Accounts (to the extent of the withdraw value of each Account), and any cash proceeds received by Bank in respect of any sale or other disposition of, collection from, or other realization upon all or any part of the Collateral, towards the satisfaction of the Secured Obligations (provided that Seller shall continue to be liable for any unsatisfied portion of the Secured Obligations). Should an Event of Default occur and be continuing, Bank may proceed against the Collateral without exhausting its remedies against any Person liable under or with respect to the Warehouse Agreement or any other Warehouse Document or against any other security therefor, whether in court, by foreclosure, by private sale or otherwise, at which Bank may be a purchaser, and without making any election.
4. Except for Liens in favor of Bank: (a) as of the Effective Date, no Lien exists on any of the Collateral; and (b) at all times on and after the Effective Date, Seller will not create, incur or suffer to exist any Lien on any of the Collateral.
5. Nothing in this Pledge Agreement shall be construed as requiring Bank to enforce this Pledge Agreement. Banks failure to do so on one or more occasions shall not affect Banks right so to do; nor will enforcement of this Pledge Agreement for less than the full value of any Account impair the effectiveness of this Pledge Agreement as to the remaining value thereof. Bank may elect to enforce its rights under the Warehouse Agreement or any other Warehouse Document without resort to the remedies provided in this Pledge Agreement.
6. Bank expressly agrees that at such time as the duties and obligations of Seller under the Warehouse Agreement have been performed and satisfied without the necessity of Bank exercising its rights hereunder or any other Warehouse Document, and no defense against the duties and obligations under the Warehouse Agreement or any other Warehouse Document or adverse claims of ownership to any security therefor is being asserted, then this Pledge shall be released in writing by Bank.
7. From and after the occurrence and continuation of an Event of Default, Seller authorizes Bank, at Banks option, to collect and receive any and all sums becoming due upon the Collateral, such sums to be held by Bank without liability for interest thereon and applied toward the Secured Obligations. Subject to the terms hereof and the Warehouse Agreement, Bank shall have the full control of each Account until it is released in accordance herewith. All interest, if any, earned on the Accounts prior to an Event of Default shall be paid to Seller.
8. Reserved.
9. Bank, in addition to the rights and remedies provided for in the preceding paragraphs, shall have all other rights and remedies of a secured party under the UCC, and shall have the common law rights of set off and bankers lien, and Bank shall be entitled to avail itself of all such other rights and remedies as may be now or hereafter existing at Law or in equity for the performance of the Secured Obligations, and the foreclosure of the security interest created hereby and the resort to any remedy provided hereunder or provided by the UCC, or by any other Law of the State of Texas, shall not prevent the concurrent exercise or enforcement of any other appropriate remedy or remedies.
10. The requirement of reasonable notice to Seller of the time and place of any public sale of the Collateral, or of the time after which any private sale or any other intended disposition thereof is to be made, shall be met if such notice is mailed, postage prepaid, to Seller at the notice address set forth in the Warehouse Agreement, at least ten (10) days before the date of any public sale or at least ten (10) days before the time after which any private sale or other disposition is to be made.
11. Nothing in the foregoing shall be construed as requiring Bank to enforce this security or to resort to the security hereof in any particular manner excluding other rights or remedies. Banks failure to enforce this security in any fashion on one or more occasions shall not affect its right so to do; nor will enforcement hereof for less than the full extent or value of the Account impair the effectiveness of the security hereof as to any remaining value or interest thereof. Bank may proceed first to enforce the Secured Obligations without resort to the remedies provided in this Pledge Agreement; in such event the terms of the Warehouse Agreement and the other Warehouse Documents alone shall be controlling and no provisions hereof shall be construed as requiring Bank to perform any condition precedent to the enforcement of such duties and obligations and the security therefor against any and all Persons liable therefor nor prevent the continued holding of the Accounts or other Collateral and the collection of sums thereunder for proper application to the duties and obligations of the Warehouse Agreement.
12. Bank may remedy any Event of Default, without waiving the same, or may waive any Event of Default without waiving any prior or subsequent Event of Default.
13. The security interest herein created shall not be affected by or affect any other security taken for the performance of the duties or obligations under the Warehouse Agreement hereby secured, or any part thereof, and any extensions may be made for the performance of such duties and obligations without affecting the priority of this Pledge Agreement or the validity thereof. Bank and its successors shall not be limited by any election of remedies if it chooses to foreclose this security interest by suit. The right to sell under the terms hereof shall also exist cumulative with said suit and one method shall not bar the other, but both may be exercised at the same or different times; provided, however, that one shall not be a defense to the other.
14. Seller represents to and covenants and agrees with Bank that Seller will at any time or from time to time, upon the written request of Bank, execute and deliver such further documents and do such other acts and things as Bank may reasonably specify for the purpose of further assurance and of effecting the purposes of this Pledge Agreement, and otherwise do any and all
things and acts whatsoever which Bank may reasonably request in order to perfect this Pledge Agreement and the security interests created thereby.
15. The law governing this Pledge Agreement shall be the UCC and other applicable laws of the State of Texas, and this Pledge Agreement shall be performable in Collin County, Texas. Except as otherwise provided herein, all terms used herein which, are defined in the Texas Business and Commerce Code shall have the same meaning herein as in said Code.
16. If any clause or provision of this Pledge Agreement is illegal, invalid, or unenforceable, under present or future Laws effective during the term hereof, then it is the intention of the parties hereto that the remainder of this Pledge Agreement shall not be affected thereby. It is also the intention of the parties hereto that in lieu of each clause or provision that is illegal, invalid or unenforceable, there be added as a part of this Pledge Agreement a clause or provision as similar in terms to such illegal, invalid or unenforceable clause or provision as may be possible and be legal, valid and enforceable.
17. The Accounts are delivered herewith or are authorized to be held by Bank.
18. The term of this Pledge Agreement shall begin on the Effective Date and shall expire ten (10) days after the date on which: (a) the Warehouse Agreement has terminated in accordance with its terms; and (b) all of the Secured Obligations, and all other indebtedness, obligations and liabilities (if any) secured hereby, have been fully satisfied, paid and performed. This Pledge Agreement shall be binding upon Seller and inure to the benefit of Bank and its successors and assigns. Seller may not transfer or assign its duties or obligations hereunder without the prior written consent of Bank.
19. The liability of all Persons obligated to Bank in any manner under this Pledge Agreement shall be joint and several. If more than one Person shall execute this Pledge Agreement as Seller, then the term Seller as used herein shall refer both to each such Person individually and to all such Persons collectively.
20. THIS WRITTEN AGREEMENT AND THE OTHER WAREHOUSE DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
[Signature Page Follows]
EXECUTED by Seller to be effective as of the Effective Date.
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AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY | |
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This document was acknowledged before me on the day of , 20 , by of AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY, known to me to be the person who executed this document in the capacity and for the purposes therein stated.
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Notary Public, State of |
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AGREED TO AND ACCEPTED BY BANK AT RICHARDSON, | ||
COLLIN COUNTY. TEXAS. AS OF THE EFFECTIVE DATE: | ||
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TEXAS CAPITAL BANK, | ||
NATIONAL ASSOCIATION | ||
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Bruce Karda |
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Senior Vice President |
ACKNOWLEDGMENT
A notary public or other officer completing this certificate
verifies only the identity of the individual who signed the
document to which this certificate is attached, and not the
truthfulness, accuracy, or validity of that document.
State of California |
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personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
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SCHEDULE 1
(TO PLEDGE AGREEMENT)
LIST OF ACCOUNTS
EXHIBIT C
(TO MORTGAGE WAREHOUSE AGREEMENT)
RESERVED
EXHIBIT D
(TO MORTGAGE WAREHOUSE AGREEMENT)
UCC-1 FINANCING STATEMENT
[Follows This Cover Page]
UCC-1 FINANCING STATEMENT
SCHEDULE OF COLLATERAL
DEBTOR: |
AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY |
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TEXAS CAPITAL BANK, NATIONAL ASSOCIATION |
Capitalized terms used but not otherwise defined in this UCC-1 Financing Statement Schedule of Collateral shall have the meanings given to such terms in the UCC-1 Financing Statement Schedule of Defined Terms attached hereto and made a part hereof for all purposes. Unless otherwise defined in the UCC-1 Financing Statement Schedule of Defined Terms or in this UCC-1 Financing Statement Schedule of Collateral, all capitalized terms used herein shall have the meanings given to such terms in the UCC.
This Financing Statement covers any and all right, title and interest of Debtor in and to any and all Participated Mortgage Loans, wherever the foregoing is located, in which Debtor now has or at any time hereafter has or acquires any right, title or interest, and all Products and Proceeds thereof (collectively, the Collateral). Without limiting the generality of the foregoing, the term Collateral shall include all right, title and interest of Debtor in and to the following, wherever the following is located, in which Debtor now has or at any time hereafter has or acquires any right, title or interest, and all Products and Proceeds thereof:
1. (a) the Mortgage Notes evidencing the Participated Mortgage Loans; (b) the Security Instruments securing the Participated Mortgage Loans and the other Mortgage Loan Documents related to the Participated Mortgage Loans; and (c) any and all other documents relating to the Participated Mortgage Loans (including, without limitation, any and all surveys, appraisals and title insurance commitments and policies);
2. (a) all of the rights of Debtor to the payment of money (including, without limitation, tax refund, insurance proceeds and condemnation proceeds) relating to the Participated Mortgage Loans or the Residential Real Properties securing same; and (b) any other rights ancillary to or securing or relating to the Participated Mortgage Loans;
3. all guaranties, bonds, insurance policies and commitments relating to the Participated Mortgage Loans;
4. all agreements entered into by Debtor relating to the Participated Mortgage Loans (but solely to the extent any such agreement relates to the Participated Mortgage Loans);
5. (a) all Take-Out Purchase Agreements related to the Participated Mortgage Loans; and (b) all rights to sell and deliver Participated Mortgage Loans to purchasers thereof;
6. all proceeds from the sale, financing or other disposition of the Participated Mortgage Loans;
7. all of the rights of Debtor in the portion of any Mortgage Backed Securities secured by, created from or representing any interest in the Participated Mortgage Loans;
8. (a) all rights to service, administer or collect the Participated Mortgage Loans; and (b) solely to the extent any such agreements or rights relate to the Participated Mortgage Loans, (i) all agreements pursuant to which Debtor undertakes to service, administer or collect the Participated Mortgage Loans and (ii) all rights to the payment of money on account of such servicing, administration or collection activities;
9. the Deposit Accounts and any and all funds now or hereafter deposited in or otherwise contained in the Deposit Accounts, including, without limitation, any and all interest and other earnings thereon;
10. all data, files (including, without limitation, credit files), books, records (including, without limitation, servicing records), correspondence and accounting records, whether in electronic or written form, and software, computer files, computer programs, printouts and other electronic materials or records related to the Participated Mortgage Loans (including, without limitation, all of the foregoing items necessary to administer, service and collect the Participated Mortgage Loans), but solely to the extent any such item relates to the Participated Mortgage Loans; and
11. all accounts, chattel paper, commercial tort claims, Deposit Accounts, documents, financial assets, general intangibles, instruments, investment property, securities, securities accounts and other personal property of Debtor of any kind or type, in each case solely to the extent related to the Participated Mortgage Loans.
UCC-1 FINANCING STATEMENT
SCHEDULE OF DEFINED TERMS
Borrower shall mean any Person who is an obligor on or under a Mortgage Loan.
Debtor (whether one or more) shall mean each Person identified as Debtor in the UCC-1 Financing Statement Schedule of Collateral to which this UCC-1 Financing Statement Schedule of Defined Terms is attached. If the term Debtor includes more than one Person, then the term Debtor as used herein shall refer both to each such Person individually and to all such Persons collectively.
Deposit Accounts shall mean those certain deposit accounts established by Debtor and maintained at Secured Party pursuant to the Warehouse Agreement.
Mortgage Backed Security shall mean a mortgage pass-through security, collateralized mortgage obligation, real estate mortgage investment conduit or other security that: (a) is based on and backed by an underlying pool of mortgage loans; and (b) provides for payment by its issuer to its holder of a specified principal installments and/or fixed or floating rate of interest on the unpaid balance and for all prepayments to be passed through to its holder.
Mortgage Loan shall mean a residential mortgage loan evidenced by a Mortgage Note and secured by a Security Instrument.
Mortgage Loan Documents shall mean, with respect to any Mortgage Loan, the Mortgage Note evidencing such Mortgage Loan, the Security Instrument securing such Mortgage Loan and all other agreements, instruments and documents governing, evidencing, guaranteeing or relating to such Mortgage Loan, Mortgage Note or Security Instrument.
Mortgage Note shall mean, with respect to any Mortgage Loan, a promissory note evidencing such Mortgage Loan and secured by a Security Instrument.
Participated Mortgage Loan shall mean any Mortgage Loan in which Secured Party has elected to purchase a Participation Interest from Debtor pursuant to the terms and conditions of the Warehouse Agreement. A Mortgage Loan in which Secured Party has purchased a Participation Interest shall cease to be a Participated Mortgage Loan under the Warehouse Agreement (and shall cease to be a Participated Mortgage Loan for purposes of the UCC-1 Financing Statement Schedule of Collateral to which this UCC-1 Financing Statement Schedule of Defined Terms is attached) at such time as such Mortgage Loan is a Retired Participated Mortgage Loan.
Person shall mean any individual, corporation, limited liability company, partnership, joint venture, association, joint stock company, trust, unincorporated organization, government or any agency or political subdivision thereof, or any other form of entity.
Products and Proceeds shall mean: (a) any and all proceeds, as such term is defined in Chapter 9 of the UCC and, in any event, shall include, but not be limited to (i) any and all proceeds of any insurance, indemnity, warranty, or guaranty payable to Debtor from time to time
with respect to any of the Collateral, (ii) any and all payments (in any form whatsoever) made or due and payable to Debtor from time to time in connection with any requisition, confiscation, condemnation, seizure, or forfeiture of all or any part of the Collateral by any Tribunal (or any person acting under color of Tribunal) and (iii) any and all other amounts from time to time paid or payable under or in connection with any of the Collateral; and (b) any and all additions, substitutions, replacements and products of any of the Collateral.
Residential Real Property shall mean a single platted lot of land improved with a one-to-four family residence, or a condominium or planned unit development.
Retired Participated Mortgage Loan shall mean any Mortgage Loan in which Secured Party has purchased a Participation Interest: (a) which has been subsequently sold in its entirety to a Take-Out Purchaser and the full amount of the purchase price for such sale has been received and applied by Secured Party (as reflected on the Secured Partys books and records), all pursuant to the terms of the Warehouse Agreement; (b) for which the Participation Interest in such Mortgage Loan has been subsequently repurchased in its entirety by Debtor from Secured Party and the full amount of the repurchase price for such repurchase has been received and applied by Secured Party, all pursuant to the terms of the Warehouse Agreement; or (c) for which the entire principal balance and all accrued interest for such Mortgage Loan has been subsequently paid in full by the related Borrower, and Secured Partys pro rata share of such amounts have been received and applied by Secured Party, all pursuant to the terms of the Warehouse Agreement.
Secured Party shall mean Texas Capital Bank, National Association.
Security Instrument shall mean, with respect to any Mortgage Loan, a full recourse mortgage or deed of trust securing such Mortgage Loan and granting a perfected first priority lien on the Residential Real Property related thereto.
Take-Out Purchase Agreement shall mean, with respect to any Participated Mortgage Loan, any and all agreements, commitments or other arrangements for Debtor to sell such Participated Mortgage Loan to any Take-Out Purchaser.
Take-Out Purchaser shall mean any Person approved by Secured Party (pursuant to the Warehouse Agreement) for the purchase of any Participated Mortgage Loan.
Tribunal shall mean any state, commonwealth, federal, foreign, territorial or other court or governmental department, commission, board, bureau, agency or instrumentality.
UCC shall mean the Uniform Commercial Code of the State of Texas, or other applicable jurisdiction, as it may be amended from time to time.
Warehouse Agreement shall mean that certain Mortgage Warehouse Agreement most recently executed by Debtor and Secured Party on or before the date of the filing of this UCC-1 Financing Statement, as the same may from time to time be modified, amended, supplemented, renewed, extended or replaced.
EXHIBIT E
(TO MORTGAGE WAREHOUSE AGREEMENT)
FINANCIAL COVENANTS ADDENDUM
[Follows This Cover Page]
FINANCIAL COVENANTS ADDENDUM
THIS FINANCIAL COVENANTS ADDENDUM (this Addendum) is entered into as of JULY 29, 2020 (but effective as of the Effective Date) by the undersigned executing this Addendum as Seller and TEXAS CAPITAL BANK, NATIONAL ASSOCIATION (Bank) concurrently with, and as a condition to the effectiveness of, that certain Mortgage Warehouse Agreement (as amended and modified from time to time, the Warehouse Agreement) dated of even date herewith, executed by Bank and Seller. Accordingly, Bank and Seller agree as follows:
1. Financial Covenants. Seller covenants and agrees that, until the Agreement Termination Date, Seller will, at all times, observe, perform and comply with each of the following covenant(s):
(a) Minimum Tangible Net Worth. Seller shall maintain Tangible Net Worth of not less than [***]. Tangible Net Worth means, at any particular time, all amounts which, in conformity with GAAP, would be properly included as owners equity on Sellers balance sheet, but excluding (i) all assets which are properly classified as intangible assets, and (ii) loans or advances to, or receivables from, any owner, officer or employee of Seller.
(b) Minimum Liquid Assets. Seller shall maintain Total Eligible Liquidity of not less than [***]. Total Eligible Liquidity means, at any particular time, the sum of Sellers cash, cash equivalents (certificates of deposit and other depository accounts established at FDIC-insured banks), United States government-issued securities and other registered, unrestricted equity or debt securities which are publicly traded on a recognized United States exchange and have been approved by Bank, in its commercially reasonable discretion and which, in all events, are held in Sellers name and are free and clear of all Liens (except Liens in favor of Bank), as calculated and determined as set forth in Exhibit E-1 attached hereto.
(c) Minimum Pre-Tax Net Income. Seller shall maintain, on a rolling four quarter basis, minimum pre-tax net income of not less than $1.00.
If Seller is required or permitted under the Warehouse Agreement to deliver to Bank quarterly consolidated financial statements, then the above-described financial covenants will be tested and calculated by Bank based on the consolidated financial information of Seller and each other entity whose financial information is required or permitted by Bank to be set forth on such consolidated financial statements.
After the Effective Date, Seller and Bank may, in their sole discretion, enter into certain written agreements executed by Seller and Bank evidencing or otherwise governing one or more credit facilities extended by Bank to Seller in addition to the financial accommodations evidenced and governed by the Warehouse Agreement (collectively, Credit Agreements), which Credit Agreements may include (a) certain financial covenants pertaining to Seller in addition to those contained in this Addendum (each a New Financial Covenant) and (b) one or more of the same financial covenants contained in this Addendum, but with certain modified terms pertaining to Seller with respect to each such financial covenant (each a Modified Financial Covenant). In
such event, unless otherwise agreed to by Bank, the financial covenants contained in this Addendum shall automatically be modified and amended from time to time (a) to include each New Financial Covenant and (b) to include the most recent terms of each Modified Financial Covenant to the extent inconsistent with those contained in this Addendum. Except as modified and amended in accordance with the terms of the previous sentence, this Addendum shall continue in full force and effect as originally executed and delivered. The modifications and amendments contemplated hereby shall not be affected by the termination of any Credit Agreement, and shall survive the termination of each Credit Agreement.
2. Intentionally Omitted.
3. Compliance Certificates. Seller acknowledges Bank has requested, and Seller shall timely prepare and furnish to Bank, the financial statements and reports described in the Warehouse Agreement, plus such additional financial reports and information as Bank may from time to time request. In addition, Seller shall prepare and submit to Bank, on a quarterly basis and no later than [***] days after the close of each fiscal quarter, a compliance certificate executed by Seller, demonstrating Sellers compliance with the covenants set forth in Section 1 of this Addendum and the provisions of the Warehouse Agreement, and such substantiation thereof as may be required by Bank, all in such form and content required by Bank from time to time. A copy of Banks current required form of compliance certificate is attached hereto as Exhibit E-1. Although compliance certificates are to be delivered to Bank on a quarterly basis, Seller shall at all times comply with all covenants set forth in Section 1 of this Addendum and the provisions of the Warehouse Agreement and Bank may test Sellers compliance with such covenants and provisions at any time.
4. Miscellaneous. This Addendum is made a part of and is incorporated into the Warehouse Agreement. The provisions of this Addendum superseded, modify and amend any and all inconsistent or conflicting provisions in the Warehouse Agreement. Except as hereby modified and amended, the Warehouse Agreement shall remain in full force and effect. Capitalized terms not otherwise defined in this Addendum shall have the meanings set forth in the Warehouse Agreement. The liability of all Persons obligated to Bank in any manner under this Addendum shall be joint and several. If more than one Person shall execute this Addendum as Seller, then the term Seller as used herein shall refer both to each such Person individually and to all such Persons collectively.
[Signature Page Follows]
EXECUTED by Seller to be effective as of the Effective Date.
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AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY | |
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This document was acknowledged before me on the day of , 20 , by of AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY, known to me to be the person who executed this document in the capacity and for the purposes therein stated.
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Notary Public, State of |
[NOTARY STAMP]
AGREED TO AND ACCEPTED BY BANK AT RICHARDSON,
COLLIN COUNTY, TEXAS. AS OF THE EFFECTIVE DATE:
TEXAS CAPITAL BANK,
NATIONAL ASSOCIATION
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Name: |
Bruce Karda |
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Senior Vice President |
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ACKNOWLEDGMENT
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
State of California
County of )
On before me, |
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(insert name and title of the officer) |
personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
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EXHIBIT E-1
(TO FINANCIAL COVENANTS ADDENDUM
TO MORTGAGE WAREHOUSE AGREEMENT)
COMPLIANCE CERTIFICATE
[Follows This Cover Page]
AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY
COMPLIANCE CERTIFICATE
REPORTING PERIOD: , 20 through , 20
This Compliance Certificate (this Certificate) is being delivered in connection with that certain Mortgage Warehouse Agreement (as amended and modified from time to time, and including all addenda and exhibits thereto, the Agreement) entered into as of JULY 29, 2020 executed by TEXAS CAPITAL BANK, NATIONAL ASSOCIATION (Bank) and the undersigned executing this Certificate as Seller. Capitalized terms used in this Certificate shall, unless otherwise indicated herein, have the meanings set forth in the Agreement. On behalf of Seller, the undersigned certifies to Bank as of the last day of the reporting period indicated above (the Determination Date) that: (a) no Event of Default has occurred and is continuing; (b) all representations and warranties of Seller contained in the Agreement and in the other Warehouse Documents are true and correct in all material respects; and (c) the information set forth below and all documents provided to Bank to substantiate the same are true, correct and complete.
EXHIBIT F
(TO MORTGAGE WAREHOUSE AGREEMENT)
RESERVED
EXHIBIT G
(TO MORTGAGE WAREHOUSE AGREEMENT)
LIST OF CURRENT WAREHOUSE FACILITIES
EXHIBIT H
(TO MORTGAGE WAREHOUSE AGREEMENT)
LIST OF CURRENT AFFILIATE ESCROW AGENTS
Name of Affiliate Escrow Agent |
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NOT APPLICABLE |
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NOT APPLICABLE |
EXHIBIT I
(TO MORTGAGE WAREHOUSE AGREEMENT)
BLANKET ASSIGNMENT
[Follows This Cover Page]
(Space Above For Recorders Use)
ASSIGNMENT OF INTERESTS IN MORTGAGE LOANS
THIS ASSIGNMENT OF INTERESTS IN MORTGAGE LOANS (this Agreement) is made and entered into as of JULY 29, 2020 (but effective as of the Effective Date) between AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY (the foregoing are each individually and collectively referred to herein as Seller) and TEXAS CAPITAL BANK, NATIONAL ASSOCIATION (together with its successors and assigns, Bank).
RECITALS
A. Seller and Bank have executed that certain Mortgage Warehouse Agreement (as amended or modified from time to time, the Warehouse Agreement) entered into as of even date herewith, relating to Banks discretionary purchase from time to time of Participation Interests from Seller in Mortgage Loans. Capitalized terms used and not otherwise defined herein shall have the respective meanings assigned to such terms in the Warehouse Agreement.
B. Pursuant to the terms and conditions of the Warehouse Agreement, Seller shall sell, transfer, assign and convey to Bank a Participation Interest in each Mortgage Loan and Mortgage Loan Document related thereto in which Bank elects to purchase a Participation Interest under the Warehouse Agreement.
AGREEMENT
NOW, THEREFORE, for and in consideration of the premises, recitals and the agreements contained in this Agreement and the Warehouse Agreement, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Seller and Bank agree after the occurrence and continuation of an Event of Default under the Warehouse Agreement as follows:
1. Seller does hereby irrevocably, absolutely and unconditionally sell, transfer, assign and convey to Bank any and all of Sellers right, title and interest in and to any and all Participation Interests in Mortgage Loans now or hereafter purchased by Bank from Seller pursuant to the terms of the Warehouse Agreement. With respect to any Participation Interest purchased by Bank from Seller under the Warehouse Agreement, the sale, transfer, assignment and conveyance by Seller to Bank of all of Sellers right, title and interest in and to such Participation Interest in such Mortgage Loan shall be automatically effective, and shall be deemed conclusively to have occurred as of the Purchase Date for such Participation Interest, without further action by either party hereto, by operation of the applicable terms and provisions of the Warehouse Agreement.
2. Bank may from time to time append and attach hereto as Schedule A (the Participation Interest Schedule) information identifying each Participated Mortgage Loan and Banks Participation Interest therein (Participation Interest Information), which Participation Interest Information may include with respect to each Participated Mortgage Loan: (a) the name
of the related Borrower; (b) the principal amount of the Participated Mortgage Loan; (c) the related Purchase Date; (d) Banks related Participation Percentage; (e) Sellers related Retained Percentage; (f) a description of the related Residential Real Property; and (g) the recording information for the related Security Instrument. In addition, upon any repurchase of a Participation Interest by Seller pursuant to the terms of the Warehouse Agreement, Bank shall assign such Participation Interest back to Seller and take whatever other action is necessary in order to effectuate such transfer back to Seller Bank may, and shall upon any repurchase of a Participation Interest from Seller, from time to time attach hereto an updated Participation Interest Schedule which reflects the then-current Participation Interest Information (and immediately record such updated schedule if this Agreement has been previously recorded pursuant to paragraph 3 below).
3. Bank may at any time elect to record this Agreement (with a corresponding Participation Interest Schedule) in any real property records of any jurisdiction deemed appropriate from time to time by Bank. However, any failure by Bank to so record this Agreement shall not limit, impair or otherwise affect the provisions of the Warehouse Agreement or this Agreement. If Bank at any time requires additional executed originals of this Agreement in order to effect the recording of this Agreement (with any corresponding Participation Interest Schedule) in any jurisdiction deemed appropriate by Bank or for any other reason, Seller shall promptly upon request by Bank execute additional originals of this Agreement as and when required by Bank, and Bank may execute additional copies of this Agreement on Sellers behalf, as Sellers attorney-in-fact, pursuant to any power of attorney granted to Bank by Seller under the Warehouse Agreement or any other Warehouse Document. For the avoidance of doubt, any power of attorney granted to Bank by Seller under any Warehouse Document shall only be effective following the occurrence and during the continuance of an Event of Default under the Warehouse Agreement.
4. The liability of all Persons obligated to Bank in any manner under this Agreement shall be joint and several. If more than one Person shall execute this Addendum as Seller, then the term Seller as used herein shall refer both to each such Person individually and to all such Persons collectively.
5. This Agreement shall be binding upon and inure to the benefit of the successors and assigns of Seller and Bank. Neither party hereto may sell, assign or transfer any right, title or interest hereunder except in accordance with the Warehouse Agreement or with the prior written consent of the other party hereto. Further, Seller shall not sell, assign or transfer any right, title or interest in the Participated Mortgage Loans in violation of any applicable provisions of the Warehouse Agreement.
6. This Agreement may be executed in several identical counterparts, and by the parties hereto on separate counterparts, and each counterpart, when so executed and delivered, shall constitute an original instrument, and all such separate counterparts shall constitute but one and the same instrument.
7. This Agreement shall be governed by, and construed and interpreted in accordance with, the laws of the State of Texas, without regard to the principles of conflicts of laws thereof.
IN WITNESS WHEREOF, each of the parties hereto have duly executed and delivered this Agreement effective as of the Effective Date.
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SELLER: | |
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AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY | |
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By: |
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Name: |
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STATE OF |
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This document was acknowledged, before me on the day of , 20 , by of AMERIHOME MORTGAGE COMPANY, LLC, A DELAWARE LIMITED LIABILITY COMPANY, known to me to be the person who executed this document in the capacity and for the purposes therein stated.
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Notary Public, State of |
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[NOTARY STAMP]
ACKNOWLEDGMENT
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.
State of California
County of )
On before me, |
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(insert name and title of the officer) |
personally appeared who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.
WITNESS my hand and official seal.
Signature |
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(Seal) |
AGREED TO AND ACCEPTED by Bank at Richardson, Collin County, Texas, as of the Effective Date.
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BANK: | |
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TEXAS CAPITAL BANK, NATIONAL ASSOCIATION | |
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By: |
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Name: |
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STATE OF |
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COUNTY OF |
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This document was acknowledged before me on the day of , 20 , by of TEXAS CAPITAL BANK, NATIONAL ASSOCIATION, known to me to be the person who executed this document in the capacity and for the purposes therein stated.
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Notary Public, State of |
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[NOTARY STAMP]
SCHEDULE A
(TO ASSIGNMENT OF INTERESTS IN MORTGAGE LOANS)
PARTICIPATION INTEREST SCHEDULE
[To Be Attached and Updated By Bank From Time to Time]
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
Execution Version
MASTER REPURCHASE AGREEMENT
Between:
UBS BANK USA, as Buyer
and
AMERIHOME MORTGAGE COMPANY, LLC, as Seller
Dated as of July 24, 2015
TABLE OF CONTENTS
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Page |
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SECTION 1. |
APPLICABILITY |
1 |
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SECTION 2. |
DEFINITIONS |
1 |
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SECTION 3. |
INITIATION; TERMINATION |
22 |
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SECTION 4. |
MARGIN AMOUNT MAINTENANCE |
27 |
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SECTION 5. |
PRICE DIFFERENTIAL; COLLECTIONS; INCOME PAYMENTS |
28 |
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SECTION 6. |
REQUIREMENT OF LAW |
29 |
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SECTION 7. |
TAXES |
30 |
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SECTION 8. |
SECURITY INTEREST; BUYERS APPOINTMENT AS ATTORNEY-IN-FACT |
33 |
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SECTION 9. |
PAYMENT, TRANSFER; ACCOUNTS |
34 |
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SECTION 10. |
RESERVED |
37 |
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SECTION 11. |
REPRESENTATIONS |
37 |
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SECTION 12. |
COVENANTS |
42 |
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SECTION 13. |
EVENTS OF DEFAULT |
48 |
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SECTION 14. |
REMEDIES |
50 |
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SECTION 15. |
INDEMNIFICATION AND EXPENSES; RECOURSE |
53 |
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SECTION 16. |
SERVICING |
54 |
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SECTION 17. |
DUE DILIGENCE |
56 |
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SECTION 18. |
ASSIGNABILITY |
56 |
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SECTION 19. |
TRANSFER AND MAINTENANCE OF REGISTER |
57 |
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SECTION 20. |
HYPOTHECATION OR PLEDGE OF PURCHASED ASSETS |
58 |
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SECTION 21. |
TAX TREATMENT |
58 |
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SECTION 22. |
SET-OFF |
58 |
SECTION 23. |
TERMINABILITY |
58 |
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SECTION 24. |
NOTICES AND OTHER COMMUNICATIONS |
59 |
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SECTION 25. |
USE OF THE WAREHOUSE ELECTRONIC SYSTEM AND OTHER ELECTRONIC MEDIA |
60 |
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SECTION 26. |
ENTIRE AGREEMENT; SEVERABILITY; SINGLE AGREEMENT |
62 |
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SECTION 27. |
GOVERNING LAW |
62 |
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SECTION 28. |
SUBMISSION TO JURISDICTION; WAIVERS |
62 |
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SECTION 29. |
NO WAIVERS, ETC |
63 |
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SECTION 30. |
NETTING |
63 |
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SECTION 31. |
CONFIDENTIALITY |
64 |
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SECTION 32. |
INTENT |
66 |
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SECTION 33. |
DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS |
67 |
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SECTION 34. |
CONFLICTS |
67 |
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SECTION 35. |
MISCELLANEOUS |
67 |
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SECTION 36. |
GENERAL INTERPRETIVE PRINCIPLES |
68 |
SCHEDULES AND EXHIBITS
SCHEDULE 1 |
Representations and Warranties |
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SCHEDULE 2 |
Responsible Officers |
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SCHEDULE 3 |
Scheduled Indebtedness |
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EXHIBIT A |
Reserved |
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EXHIBIT B |
Form of Sellers Officers Certificate |
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EXHIBIT C |
Form of Servicer Notice |
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EXHIBIT D |
Form of Trade Assignment |
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EXHIBIT E |
Form of Power of Attorney |
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EXHIBIT F |
Form of Tax Compliance Certificate |
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EXHIBIT G |
Form of Temporary Increase Request |
MASTER REPURCHASE AGREEMENT
This is a MASTER REPURCHASE AGREEMENT (the Agreement), dated as of July 24, 2015, between AmeriHome Mortgage Company, LLC, a Michigan limited liability company (the Seller) and UBS Bank USA, a Utah corporation (the Buyer).
SECTION 1. APPLICABILITY
From time to time the parties hereto may enter into transactions in which Seller agrees to transfer to Buyer Mortgage Loans on a servicing released basis against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Seller such Mortgage Loans on a servicing released basis or Agency Securities backed by such Mortgage Loans on the Repurchase Date, against the transfer of funds by Seller. Each such transaction shall be referred to herein as a Transaction and shall be governed by this Agreement (including any supplemental terms or conditions contained in any annexes identified herein, as applicable hereunder), unless otherwise agreed in writing. This Agreement is not a commitment by Buyer to enter into Transactions with Seller but rather sets forth the procedures to be used in connection with periodic requests for Buyer to enter into Transactions with Seller. Seller hereby acknowledges that Buyer is under no obligation to agree to enter into, or to enter into, any Transaction pursuant to this Agreement. Any commitment to enter into Transactions shall be set forth in the Pricing Letter, and shall be subject to satisfaction of all terms and conditions of this Agreement.
The Pricing Letter is one of the Program Documents as defined below. The Pricing Letter is incorporated by reference into this Agreement and Seller agrees to adhere to all terms, conditions and requirements of the Pricing Letter as incorporated herein. In the event of a conflict or inconsistency between this Agreement and the Pricing Letter, the terms of the Pricing Letter shall govern.
SECTION 2. DEFINITIONS
As used herein, the defined terms set forth below shall have the meanings set forth herein. Additionally, as used herein, the following terms shall have the meanings defined in the Uniform Commercial Code: accounts, chattel paper (including electronic chattel paper), goods (including inventory and equipment and any accessions thereto), instruments (including promissory notes), documents, investment property, general intangibles (including payment intangibles and software), and supporting obligations, products and proceeds.
1934 Act shall have the meaning set forth in Section 33 of the Agreement.
Ability to Repay Rule shall mean 12 CFR 1026.43(c), including all applicable official staff commentary.
Accepted Servicing Practices shall mean, with respect to any Mortgage Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located.
Affiliate shall mean with respect to any Person, any affiliate of such Person, as such term is defined in the Bankruptcy Code; provided, however, for purposes of the Program Documents, Aris Mortgage Holding Company, LLC shall be considered the sole Affiliate of Seller.
Agency shall mean Freddie Mac, Fannie Mae or Ginnie Mae, as applicable.
Agency Approval shall have the meaning set forth in Section 12(w) of the Agreement.
Agency Certified Mortgage Loan shall mean any Purchased Mortgage Loan that is subject to a Transaction hereunder and is part of a pool of Purchased Mortgage Loans certified by an Agencys custodian to such Agency as eligible to be either (a) purchased by such Agency or (b) swapped for an Agency Security backed by such pool, in each case, in accordance with the terms of the guidelines issued by the applicable Agency.
Agency Security shall mean a security issued in exchange for Purchased Mortgage Loans and backed by such Purchased Mortgage Loans that is (a) guaranteed by Ginnie Mae or (b) issued by Fannie Mae or Freddie Mac.
Agency Security Issuance Failure shall mean the failure of an Agency to cause the Delivery of an Agency Security in accordance with a Takeout Commitment.
Aging Limit shall have the meaning specified in the Pricing Letter.
Agreement shall mean this Master Repurchase Agreement between Buyer and Seller, dated as of the date hereof, as the same may be further amended, restated, supplemented or otherwise modified in accordance with the terms of the Agreement.
ALTA shall mean American Land Title Association, or any successor thereto.
Annual Financial Statement Date shall have the meaning set forth in the Pricing Letter.
Anti-Money Laundering Laws shall have the meaning set forth in Section 11(x) of the Agreement.
Application shall mean the application delivered by Seller to Buyer in connection with Buyers approval of Seller for the program evidenced by the Agreement and any renewal thereof.
Appraisal shall mean an appraisal meeting the requirements of the representations and warranties set forth in paragraph (nn) on Schedule 1 hereto
Appraised Value shall mean the value set forth in an Appraisal made in connection with the origination of the related Mortgage Loan as the value of the Mortgaged Property.
Appropriate Federal Banking Agency shall have the meaning ascribed to it by Section 1813(q) of Title 12 of the United States Code, as amended from time to time.
Approved CPA shall mean a certified public accountant that has not been disapproved by Buyer in writing in its reasonable discretion.
Approved Investor shall mean any institution which has made a Takeout Commitment and has been approved by Buyer and not subsequently disapproved by Buyer.
Approved Mortgage Product shall mean each Mortgage Product approved by Buyer as identified in the Pricing Letter. Notwithstanding any reference to a Mortgage Product herein, such Mortgage Product shall not be an Approved Mortgage Product unless expressly identified as such in the Pricing Letter.
Approved Underwriting Guidelines shall mean the underwriting guidelines approved by Buyer in its sole good faith discretion.
Asset Value shall, with respect to each Eligible Mortgage Loan or Agency Security, as of any date of determination, have the meaning specified under the heading Asset Value on Schedule 1 to the Pricing Letter subject to modification pursuant to the terms below. Where a Purchased Asset may qualify for two or more Asset Values hereunder, unless otherwise expressly agreed to by the Buyer in writing, such Purchased Asset shall be assigned the lower Asset Value (other than with respect to an Agency Certified Mortgage Loan or an Agency Security). Without limiting the generality of the foregoing, Seller acknowledges that:
(a) the Asset Value of a Purchased Asset may be reduced to zero by Buyer if:
(i) such Purchased Asset is a Purchased Mortgage Loan that ceases to be an Eligible Mortgage Loan;
(ii) such Mortgage Note related to a Purchased Asset that is a Purchased Mortgage Loan has been released from the possession of Buyer (other than to an Approved Investor pursuant to a Bailee Letter) for a period in excess of 10 calendar days;
(iii) such Purchased Asset is a Purchased Mortgage Loan that has been released from the possession of Buyer to an Approved Investor pursuant to a Bailee Letter for a period in excess of 45 calendar days;
(iv) such Purchased Asset is a Purchased Mortgage Loan that is a Wet Loan for which the related Mortgage File has not been received by Buyer on or prior to the end of the Aging Limit for such Wet Loan; or
(v) such Purchased Asset is rejected by the related Approved Investor or there shall occur a Takeout Failure and Seller has not provided Buyer with written or electronic evidence that such Purchased Asset is eligible for sale with another Takeout Investor within two (2) Business Days;
(vi) such Purchased Asset is not properly registered on the MERS® System in accordance with the Electronic Tracking Agreement within (x) with respect to Purchased Mortgage Loans other than Correspondent Mortgage Loans, five (5) Business Days of the related Purchase Date and (y) with respect to Purchased Mortgage Loans that are Correspondent Mortgage Loans, fifteen (15) Business Days of the related Purchase Date;
(vii) such Purchased Asset is a Purchased Mortgage Loan that is a Delinquent Mortgage Loan;
(viii) such Purchased Asset has been subject to Transactions hereunder for a period of greater than its applicable Aging Limit; or
(ix) such Purchased Asset is a Purchased Mortgage Loan that Buyer has determined in its sole good faith discretion is not eligible for whole loan sale or securitization in a transaction consistent with the prevailing sale and securitization industry with respect to substantially similar Mortgage Loans; and
(b) the aggregate Asset Value of each Approved Mortgage Product shall not exceed the Concentration Limit for such applicable Approved Mortgage Product. If the aggregate Asset Value for any Approved Mortgage Product exceeds the applicable Concentration Limit, Buyer may, in its sole good faith discretion, reduce the value of any related Purchased Assets selected by Buyer to zero until the aggregate Asset Value for such Approved Mortgage Product is less than or equal to the applicable Concentration Limit.
Assignment and Acceptance shall have the meaning set forth in Section 18 of the Agreement.
Assignment of Mortgage shall mean an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the sale of the Mortgage.
Assignment of Proprietary Lease shall mean the specific agreement creating a first lien on and pledge of the Co-op Shares and the appurtenant Proprietary Lease securing a Coop Loan.
Bailee Letter shall have the meaning assigned to such term in the Custodial Agreement.
Bankruptcy Code shall mean the United States Bankruptcy Code of 1978, as amended from time to time.
Beneficial Tax Owners shall have the meaning set forth in Section 7(e)(v) of the Agreement.
Business Day shall mean a day other than (i) a Saturday or Sunday or (ii) any day on which banking institutions are authorized or required by law, executive order or governmental decree to be closed in the States of New York or California.
Buydown Amount shall have the meaning set forth in Section 9(d) of the Agreement.
Buyer shall mean UBS Bank USA, its successors in interest and assigns pursuant to Section 18 and, with respect to Section 7, its participants.
Capitalized Mortgage Servicing Rights shall have the meaning specified in the Pricing Letter.
Cash Equivalents shall mean (a) securities with maturities of [***] days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and Eurodollar time deposits with maturities of [***] days or less from the date of acquisition and overnight bank deposits of Buyer or its Affiliates or of any commercial bank having capital and surplus in excess of [***], (c) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moodys and in either case maturing within [***] days after the day of acquisition, (d) securities with maturities of [***] days or less from the date of acquisition backed by standby letters of credit issued by Buyer or any commercial bank satisfying the requirements of clause (b) of this definition or (e) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (d) of this definition.
Change in Control shall mean:
(a) any transaction or event as a result of which Aris Mortgage Holding Company, LLC ceases to own, directly or indirectly at least 100% of the membership interests of Seller;
(b) the sale, transfer, or other disposition of all or substantially all of Sellers assets (excluding any such action taken in connection with any securitization transaction); or
(c) the consummation of a merger or consolidation of Seller with or into another entity or any other corporate reorganization (in one transaction or in a series of transactions), if more than 50% of the combined voting power of the continuing or surviving entitys stock or other equity interests outstanding immediately after such merger, consolidation or such other reorganization is owned by persons who were not direct or indirect equity stockholders of Seller immediately prior to such merger, consolidation or other reorganization.
Closing Protection Letter shall mean a letter of indemnification from a title insurer addressed to Seller and/or Buyer or for which Buyer is a third party beneficiary, with coverage that is customarily acceptable to Persons engaged in the origination of mortgage loans, identifying the Settlement Agent covered thereby and indemnifying Seller and/or Buyer (directly or as a third party beneficiary) against losses incurred due to malfeasance or fraud by the Settlement Agent or the failure of the Settlement Agent to follow the specific escrow instructions specified by Seller to the Settlement Agent or otherwise by Buyer with respect to the closing of the Mortgage Loan. The Closing Protection Letter shall be either with respect to the individual Mortgage Loan being purchased pursuant hereto or a blanket Closing Protection Letter which
covers closings conducted by the Settlement Agent in the jurisdiction in which the closing of such Mortgage Loan takes place.
CLTA shall mean California Land Title Association, or any successor thereto.
Code shall mean the Internal Revenue Code of 1986, as amended from time to time.
Concentration Limit shall have the meaning specified in the Pricing Letter.
Confidential Information shall have the meaning set forth in Section 12(u) of the Agreement.
Confidential Terms shall have the meaning set forth in Section 31 of the Agreement.
Confirmation shall mean an electronic confirmation of a Transaction delivered by Buyer to Seller in accordance with Section 3(c)(v) hereof.
Conforming Mortgage Loan shall mean a Mortgage Loan, which is secured by a first lien, such Mortgage Loan (a) conforms to the requirements of an Agency for securitization or cash purchase and has (i) a minimum FICO score of [***], (ii) a DTI not more than [***] and (iii) a LTV not greater than [***] or (b) is eligible to be insured by FHA, guaranteed by VA or guaranteed by RD (excluding any Mortgage Loan which exceeds Agency guidelines for maximum general conventional loan amount) and (i) has a minimum FICO score of [***]; (ii) has a DTI not more than [***] and (iii) has a LTV not greater than [***].
Co-op Corporation shall mean, with respect to any Co-op Loan, the cooperative apartment corporation that holds legal title to the related Co-op Project and grants occupancy rights to units therein to stockholders through Proprietary Leases or similar arrangements.
Co-op Loan shall mean a Mortgage Loan secured by the pledge of stock allocated to a Co-op Unit in a Co-op Corporation and collateral assignment of the related Proprietary Lease.
Co-op Project shall mean, with respect to any Co-op Loan, all real property and improvements thereto and rights therein and thereto owned by a Co-op Corporation including without limitation the land, separate dwelling units and all common elements.
Co-op Shares shall mean, with respect to any Co-op Loan, the shares of stock issued by a Co-op Corporation and allocated to a Co-op Unit and represented by a Stock Certificate.
Co-op Unit shall mean, with respect to any Co-op Loan, a specific unit in a Coop Project.
Correspondent Mortgage Loan shall mean a Mortgage Loan originated by a third party originator and acquired by Seller in accordance with Sellers correspondent Mortgage Loan program.
Costs shall have the meaning set forth in Section 15(a) of the Agreement.
Credit File shall mean with respect to each Mortgage Loan, the documents and instruments relating to the origination and administration of such Mortgage Loan.
Custodial Account shall have the meaning set forth in Section 5(b) of the Agreement.
Custodial Agreement shall mean that certain Custodial Agreement dated as of the date hereof, among Seller, Buyer and Custodian as the same may be amended from time to time.
Custodial Loan Transmission shall have the meaning set forth in the Custodial Agreement.
Custodian shall mean Deutsche Bank National Trust Company, or any successor thereto under the Custodial Agreement.
DE Compare Ratio shall mean the Two Year FHA Direct Endorsement Lender Compare Ratio, excluding streamline FHA refinancings, as made publicly available by HUD.
Default shall mean an Event of Default or an event that with notice or lapse of time or both would become an Event of Default.
Defaulting Party shall have the meaning set forth in Section 30 of the Agreement.
Defective Mortgage Loan shall mean a Mortgage Loan (a) which is in foreclosure, has been foreclosed upon or has been converted to real estate owned property, (b) for which the Mortgagor is in bankruptcy, (c) that is not subject to a valid and binding Takeout Commitment or hedging arrangement on (x) the related Purchase Date or (y) any other date and such Mortgage Loan is rejected by the related Approved Investor or there shall occur a Takeout Failure and Seller has not provided Buyer with written or electronic evidence that such Mortgage Loan is eligible for sale with another Takeout Investor within two (2) Business Days, or (d) that is not repurchased by Seller in compliance with the provisions of Section 3(e).
Delinquent Mortgage Loan shall mean any Mortgage Loan as to which any Monthly Payment, or part thereof, remains unpaid for 30 days or more following the original Due Date for such Monthly Payment.
Delivery shall mean (i) with respect to any Agency Security issued by Ginnie Mae, when Buyer is registered as the registered owner of such Agency Security on Ginnie Maes central registry and (ii) with respect to any Agency Security issued by Fannie Mae or Freddie Mac, the later to occur of (a) the issuance of such Agency Security and (b) the transfer of all of the right, title and ownership interest in such Agency Security to Buyer or Securities Intermediary. An Agency Security shall be deemed to be Delivered upon Delivery in accordance herewith.
Depository shall have the meaning set forth in Section 9(d) of the Agreement.
Dollars and $ shall mean lawful money of the United States of America.
DTI shall mean with respect to any Mortgagor, the ratio of the Mortgagors average monthly debt obligations to the Mortgagors average monthly gross income.
Due Date shall mean the day of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.
E-Sign shall mean the federal Electronic Signatures in Global and National Commerce Act, as amended from time to time.
Effective Date shall mean the date upon which the conditions precedent set forth in Section 3(a) shall have been satisfied.
Electronic Record shall mean Record and Electronic Record, both as defined in E-Sign, and shall include but not be limited to, recorded telephone conversations, fax copies or electronic transmissions, including without limitation, those involving the Warehouse Electronic System.
Electronic Signature shall have the meaning set forth in E-Sign.
Electronic Tracking Agreement shall mean an Electronic Tracking Agreement among Buyer, Seller, MERS and MERSCORP Holdings, Inc., as the same may be amended from time to time.
Electronic Transactions shall mean transactions conducted using Electronic Records and/or Electronic Signatures or fax copies of signatures.
Eligible Mortgage Loan shall mean a Purchased Asset that is a Purchased Mortgage Loan which (a) is an Approved Mortgage Product, (b) complies with the representations and warranties set forth on Schedule 1 hereto (assuming that they are made as of each date of determination), (c) is not a Defective Mortgage Loan and (d) is not a Delinquent Mortgage Loan.
ERISA shall, with respect to any Person, mean the Employee Retirement Income Security Act of 1974, as amended from time to time and any successor thereto, and the regulations promulgated and administrative rulings issued thereunder.
ERISA Affiliate shall, with respect to any Person, mean any Person which is treated as a single employer under Section 414(b) or (c) of the Code, or solely for purposes of Section 302 of ERISA and Section 412 of the Code is treated as a single employer described in Section 414 of the Code.
Escrow Payments shall mean, with respect to any Mortgage Loan, the amounts constituting ground rents, taxes, assessments, water rates, sewer rents, municipal charges, mortgage insurance premiums, fire and hazard insurance premiums, condominium charges, and any other payments required to be escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
Event of Default shall have the meaning specified in Section 13 of the Agreement.
Excess Proceeds shall have the meaning set forth in Section 3(e) of the Agreement.
Excluded Taxes shall have the meaning set forth in Section 7(e) of the Agreement.
Expenses shall mean all present and future third party expenses incurred by or on behalf of Buyer in connection with this Agreement or any of the other Program Documents and any amendment, supplement or other modification or waiver related hereto or thereto, whether incurred heretofore or hereafter, which expenses shall include the cost of title, lien, judgment and other record searches; reasonable attorneys fees; and costs of preparing and recording any UCC financing statements or other filings necessary to perfect the security interest created hereby.
Facility Termination Threshold shall have the meaning specified in the Pricing Letter.
Fannie Mae shall mean the Federal National Mortgage Association, or any successor thereto.
FATCA shall have the meaning set forth in Section 7(a) of the Agreement.
FDIA shall have the meaning set forth in Section 32(d) of the Agreement.
FDICIA shall have the meaning set forth in Section 32(e) of the Agreement.
FHA shall mean the Federal Housing Administration, an agency within the United States Department of Housing and Urban Development, or any successor thereto, and including the Federal Housing Commissioner and the Secretary of Housing and Urban Development where appropriate under the FHA Regulations.
FHA Loan shall mean a Mortgage Loan which is the subject of an FHA Mortgage Insurance Certificate.
FHA Mortgage Insurance Certificate shall mean the certificate evidencing the contractual obligation of the FHA respecting the insurance of a Mortgage Loan.
FHA Regulations shall mean the regulations promulgated by the Department of Housing and Urban Development under the National Housing Act, as amended from time to time and codified in 24 Code of Federal Regulations, and other Department of Housing and Urban Development issuances relating to FHA Loans, including the related handbooks, circulars, notices and mortgagee letters.
FICO shall mean Fair Isaac & Co., or any successor thereto.
Fidelity Insurance shall mean insurance coverage with respect to employee errors, omissions, dishonesty, forgery, theft, disappearance and destruction, robbery and safe burglary, property (other than money and securities) and computer fraud in an aggregate amount acceptable to Buyer.
Financial Condition Covenants shall mean the financial covenants of Seller as set forth in Section 3 of the Pricing Letter.
Financial Statements shall have the meaning set forth in Section 12(d) of the Agreement.
Freddie Mac shall mean Federal Home Loan Mortgage Corporation, or any successor thereto.
GAAP shall mean generally accepted accounting principles in the United States of America, applied on a consistent basis and applied to both classification of items and amounts, and shall include, without limitation, the official interpretations thereof by the Financial Accounting Standards Board, its predecessors and successors.
Ginnie Mae shall mean the Government National Mortgage Association, or any successor thereto.
GLB Act shall have the meaning set forth in Section 12(u) of the Agreement.
Governmental Authority shall mean any nation or government, any state, county, municipality or other political subdivision thereof or any governmental body, agency, authority, department or commission (including, without limitation, any taxing authority) or any instrumentality or officer of any of the foregoing (including, without limitation, any court or tribunal) exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any corporation, partnership or other entity directly or indirectly owned by or controlled by the foregoing and with respect to any insured depository institution, including without limitation the Appropriate Federal Banking Agency.
Guarantee shall mean, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided that the term Guarantee shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. The terms Guarantee and Guaranteed used as verbs shall have correlative meanings.
HARP Mortgage Loan shall mean a Mortgage Loan, which (a) is secured by a first lien, (b) conforms to the requirements of an Agency for securitization or cash purchase but does not otherwise meet all of the requirements of a Conforming Mortgage Loan as set forth in the Program Documents and (c) is a refinance Mortgage Loan originated in accordance with and pursuant to HARP 2.0.
HARP 2.0 shall mean the Home Affordable Refinance Program 2.0.
Hedge Agreement shall mean, with respect to any or all of the Purchased Assets, any short sale of a US Treasury Security, or futures contract, or mortgage related security, or Eurodollar futures contract, or options related contract, or interest rate swap, cap or collar agreement or Takeout Commitment, or similar arrangement providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or under specific contingencies, entered into by Seller with a party and with terms, both acceptable to Buyer.
High Balance Mortgage Loan shall mean a Mortgage Loan, which is secured by a first lien, and such Mortgage Loan (a) conforms to the requirements of an Agency for securitization or cash purchase; (b) has an original Mortgage Loan principal balance in excess of general conventional loan amounts for Conforming Mortgage Loans; (c) has an original Mortgage Loan principal balance that is less than or equal to the maximum high balance county limit for the county in which the related Mortgaged Property is located and (d) has a minimum FICO score of [***].
High Cost Mortgage Loan shall mean a Mortgage Loan (a) classified as a high cost loan under the Home Ownership and Equity Protection Act of 1994; (b) classified as a high cost, high risk, high rate, threshold, covered, or predatory loan under any other applicable state, federal or local law (or a similarly classified loan using different terminology under a law, regulation or ordinance imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees) or (c) having a percentage listed under the Indicative Loss Severity Column (the column that appears in the S&P Anti-Predatory Lending Law Update Table, included in the then-current S&Ps LEVELS® Glossary of Terms on Appendix E). For the avoidance of doubt, a higher-priced mortgage loan as defined under Section 226.35 of Regulation Z shall not be considered a High Cost Mortgage Loan.
HUD shall mean the Department of Housing and Urban Development.
Income shall mean, with respect to any Mortgage Loan at any time, any principal thereof then payable and all interest, dividends or other distributions payable thereon.
Indebtedness shall mean (i) all indebtedness for borrowed money or for the deferred purchase price of property or services and all obligations under leases which are or should be under GAAP, recorded as capital leases, in respect of which a person is directly or contingently liable as borrower, guarantor, endorser or otherwise, or in respect of which a person otherwise assures a creditor against loss, (ii) all obligations for borrowed money or for the deferred purchase price of a property or services secured by (or for which the holder has an existing right, contingent or otherwise, to be secured by) any lien upon property (including without limitation accounts receivable and contract rights) owned by a person, whether or not such person has assumed or become liable for the payment thereof, and (iii) all other liabilities and obligations which would be classified in accordance with GAAP as liabilities on a balance sheet or to which reference should be made in footnotes thereto.
Indemnified Party shall have the meaning set forth in Section 15(a) of the Agreement.
Insolvency Event shall mean, for any Person:
(a) that such Person shall discontinue or abandon operation of its business; or
(b) that such Person shall fail generally to, or admit in writing its inability to, pay its debts as they become due; or
(c) a proceeding shall have been instituted in a court having jurisdiction in the premises seeking a decree or order for relief in respect of such Person in an involuntary case under any applicable bankruptcy, insolvency, liquidation, reorganization or other similar Requirement of Law now or hereafter in effect, or for the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person, or for any substantial part of its property, or for the winding-up or liquidation of its affairs; or
(d) the commencement by such Person of a voluntary case under any applicable bankruptcy, insolvency or other similar Requirement of Law now or hereafter in effect, or such Persons consent to the entry of an order for relief in an involuntary case under any such Requirement of Law, or consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator, conservator or other similar official of such Person, or for any substantial part of its property, or any general assignment for the benefit of creditors; or
(e) that such Person shall become insolvent; or
(f) if such Person is a corporation, such Person, or any of their Subsidiaries, shall take any corporate action in furtherance of, or the action of which would result in any of the actions set forth in the preceding clauses (a), (b), (c), (d) or (e).
Insured Depository Institution shall have the meaning ascribed to such term by Section 1813(c)(2) of Title 12 of the United States Code, as amended from time to time.
Intangible Assets shall mean, as of the date of determination thereof, assets that in accordance with GAAP are properly classifiable as intangible assets, including, but not limited to goodwill, franchises, licenses, patents, trademarks, trade names and copyrights.
Intercreditor Agreement shall mean that certain Intercreditor Agreement, dated as of August 29, 2014, among Buyer, Seller and the third party lenders listed therein as the same may be amended from time to time.
Joint Securities Agreement shall mean that certain Joint Securities Account Control Agreement, dated as of June 19, 2014, among Buyer, Seller, the Securities Intermediary and the third party lenders listed therein as the same may be amended from time to time.
Jumbo Mortgage Loan shall mean a Mortgage Loan which is secured by a first lien Mortgage that (a) has an original Mortgage Loan principal balance in excess of general Conforming Mortgage Loan limits but not in excess of [***] or such other higher amount agreed to by Buyer in its sole discretion, (b) has an original Mortgage Loan principal balance in
excess of the maximum high balance county limit for the county that the subject property is located in but not in excess of [***] or such other higher amount agreed to by Buyer in its sole discretion, (c) meets the eligibility requirements of Buyer in Schedule 1 hereto, and (d) has a Takeout Commitment from an Approved Investor.
Legal Proceeding shall have the meaning specified in Section 31 of the Agreement.
Lien shall mean any lien, claim, charge, restriction, pledge, security interest, mortgage, deed of trust or other encumbrance.
Litigation Threshold shall have the meaning specified in the Pricing Letter.
LTV shall mean (a) with respect to any Mortgage Loan other than a HARP Mortgage Loan, the ratio of the original outstanding principal amount of the Mortgage Loan to the Appraised Value of the Mortgaged Property at origination and (b) with respect to any Mortgage Loan that is a HARP Mortgage Loan, the ratio of the original outstanding principal amount of the HARP Mortgage Loan to the Appraised Value of the Mortgaged Property as of the date such Mortgage Loan is funded as a refinanced Mortgage Loan under HARP 2.0.
Maintenance Fee Rate shall have the meaning specified in the Pricing Letter.
Manufactured Home Mortgage Loans shall have the meaning specified on Schedule 1.
Margin Call shall have the meaning specified in Section 4(b) of the Agreement.
Margin Deficit shall have the meaning specified in Section 4(b) of the Agreement.
Market Value shall mean, as of any date with respect to any Purchased Asset, the price at which such Purchased Asset could readily be sold as determined by Buyer in its sole good faith discretion which price may be determined to be zero. Seller acknowledges that Buyers determination of Market Value is for the limited purpose of determining the value of the Purchased Assets for the purposes hereunder without the ability to perform customary Buyers due diligence and is not necessarily equivalent to a determination of the fair market value of the Purchased Assets achieved by obtaining competing bids in an orderly market in which the originator/servicer is not in default hereunder and the bidders have adequate opportunity to perform customary loan and servicing due diligence. Buyers good faith determination of Market Value shall be conclusive upon the parties absent manifest error.
Master Trust Receipt shall have the meaning set forth in the Custodial Agreement.
Material Adverse Effect shall mean a material adverse effect on (a) the Property, business, operations, financial condition or prospects of Seller, (b) the ability of Seller to perform its obligations under any of the Program Documents to which it is a party, (c) the validity or enforceability of any of the Program Documents, (d) the rights and remedies of Buyer or any
Affiliate under any of the Program Documents, (e) the timely payment of any amounts payable under the Program Documents or (f) the Asset Value of the Purchased Assets taken as a whole.
Maximum Aggregate Purchase Price shall have the meaning set forth in the Pricing Letter.
Maximum Available Purchase Price shall have the meaning set forth in the Pricing Letter.
MERS shall mean Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.
MERS System shall mean the system of recording transfers of mortgages electronically maintained by MERS.
Minimum Balance Requirement shall have the meaning set forth in the Pricing
Monthly Financial Statement Date shall have the meaning set forth in the Pricing Letter.
Monthly Payment shall mean the scheduled monthly payment of principal and interest on a Mortgage Loan.
Mortgage shall mean each mortgage, assignment of rents, security agreement and fixture filing, or deed of trust, assignment of rents, security agreement and fixture filing, deed to secure debt, assignment of rents, security agreement and fixture filing, or similar instrument creating and evidencing a first lien on real property and other property and rights incidental thereto, unless such Mortgage is granted in connection with a Co-op Loan, in which case the first lien position is in the Co-op Shares and in the Proprietary Lease relating to such Co-op Shares.
Mortgage File shall mean, with respect to a Mortgage Loan, the documents and instruments relating to such Mortgage Loan and set forth in the Custodial Agreement.
Mortgage Interest Rate shall mean the rate of interest borne on a Mortgage Loan from time to time in accordance with the terms of the related Mortgage Note.
Mortgage Loan shall mean any first lien, one-to-four-family residential mortgage loan evidenced by a Mortgage Note and secured by a Mortgage, which Mortgage Loan is subject to a Transaction hereunder, which in no event shall include any mortgage loan which (a) is subject to Section 226.32 of Regulation Z or any similar state law (relating to high interest rate credit/lending transactions), (b) includes any single premium credit, life or accident and health insurance or disability insurance, or (c) is a High Cost Mortgage Loan.
Mortgage Loan Schedule shall mean with respect to any Transaction as of any date, a mortgage loan schedule in the form of a computer tape or other electronic medium generated by Seller and delivered to Buyer via the Warehouse Electronic System and to Custodian as specified in the Custodial Agreement, which provides information relating to the Purchased Assets in a format required by Buyer.
Mortgage Note shall mean the promissory note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage.
Mortgage Product shall have the meaning set forth in the Pricing Letter.
Mortgaged Property shall mean the real property or other Co-op Loan collateral securing repayment of the debt evidenced by a Mortgage Note.
Mortgagor shall mean the obligor or obligors on a Mortgage Note, including any Person who has assumed or guaranteed the obligations of the obligor thereunder.
Net Income shall mean, for any Person for any period, the net income of such Person for such period as determined in accordance with GAAP.
Netting Agreement shall mean that certain Master Netting and Setoff Agreement dated as of the date hereof, among Buyer, UBS Real Estate Securities Inc. and Seller, as the same may be amended, restated, supplemented or otherwise modified from time to time.
Non-Excluded Taxes shall have the meaning set forth in Section 7(a) of the Agreement.
Non-Exempt Buyer shall have the meaning set forth in Section 7(e) of the Agreement.
Nondefaulting Party shall have the meaning set forth in Section 30 of the Agreement.
Non-Use Fee shall have the meaning set forth in the Pricing Letter.
Obligations shall mean (a) any amounts owed by Seller to Buyer in connection with a Transaction hereunder, together with interest thereon (including interest which would be payable as post-petition interest in connection with any bankruptcy or similar proceeding) and all other fees or expenses which are payable hereunder or under any of the Program Documents; and (b) all other obligations or amounts owed by Seller to Buyer or an Affiliate of Buyer under any other contract or agreement, in each case, whether such amounts or obligations owed are direct or indirect, absolute or contingent, matured or unmatured.
Omnibus Account shall mean the account established pursuant to Section 9(d) of the Agreement.
Operating Account shall mean the account established pursuant to Section 9(d) of the Agreement.
Operating Account Rate shall have the meaning specified in the Pricing Letter.
Other Conforming Mortgage Loan shall mean a Mortgage Loan, which is secured by a first lien, such Mortgage Loan either (a) conforms to the requirements of an Agency for securitization or cash purchase or (b) is eligible to be insured by FHA, guaranteed by VA or
guaranteed by RD (excluding any Mortgage Loan which exceeds Agency guidelines for maximum general conventional loan amount) but does not otherwise meet all of the requirements of a Conforming Mortgage Loan as set forth herein.
Other Taxes shall have the meaning set forth in Section 7(b) of the Agreement.
PBGC shall mean the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA.
Permitted Encumbrances shall have the meaning set forth in Schedule 1(m).
Person shall mean any individual, corporation, company, voluntary association, partnership, joint venture, limited liability company, trust, unincorporated association or government (or any agency, instrumentality or political subdivision thereof).
Plan shall have the meaning set forth in Section 11(s) of the Agreement.
PMI Policy shall mean a policy of primary mortgage guaranty insurance issued by a Qualified Insurer, as required by this Agreement with respect to certain Mortgage Loans.
Post-Default Rate shall have the meaning set forth in the Pricing Letter.
Power of Attorney shall have the meaning set forth in Section 8(d) of the Agreement.
Price Differential shall mean, with respect to any Transaction hereunder as of any date, the aggregate amount obtained by daily application of the Pricing Rate (or, during the continuation of an Event of Default, by daily application of the Post-Default Rate) for such Transaction to the Purchase Price for such Transaction on a 360 day per year basis for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the Repurchase Date (reduced by any amount of such Price Differential previously paid by Seller to Buyer with respect to such Transaction).
Pricing Letter shall mean that certain letter agreement among Buyer and Seller, dated as of the date hereof, as the same may be amended from time to time.
Pricing Rate shall have the meaning set forth in the Pricing Letter.
Program Documents shall mean this Agreement, the Pricing Letter, the Custodial Agreement, the Electronic Tracking Agreement, the Netting Agreement, the Application, the Intercreditor Agreement, the Joint Securities Agreement, a Servicer Notice, if any, and the Power of Attorney.
Property shall mean any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.
Proprietary Lease shall mean the lease on a Co-op Unit evidencing the possessory interest of the owner in the Co-op Shares in such Co-op Unit.
Purchase Advice shall mean a list of Purchased Assets that are requested to be repurchased in connection with a sale to an Approved Investor which shall set forth the loan identification numbers and related Takeout Price on a loan-by-loan and aggregate basis in an electronic format agreed to by Buyer.
Purchase Advice Deficiency shall have the meaning set forth in Section 3(e) of the Agreement.
Purchase Date shall mean the date on which Purchased Assets are transferred by Seller to Buyer or its designee.
Purchase Price shall have the meaning set forth in the Pricing Letter.
Purchased Agency Security shall mean each Agency Security that is subject to a Transaction and which has not been repurchased by Seller hereunder.
Purchased Assets shall mean the Purchased Mortgage Loans and the Purchased Agency Securities.
Purchased Mortgage Loan shall mean each Mortgage Loan sold by Seller to Buyer in a Transaction, as reflected in the Confirmation, and which has not been repurchased by Seller hereunder.
QM Rule shall mean 12 CFR 1026.43(e), including all applicable official staff commentary.
Qualified Insurer shall mean a mortgage guaranty insurance company duly authorized and licensed where required by law to transact mortgage guaranty insurance business and acceptable under the Approved Underwriting Guidelines.
Qualified Mortgage shall mean a Mortgage Loan that satisfies the criteria for a qualified mortgage as set forth in the QM Rule.
RD shall mean the United States Department of Agriculture Rural Development and any successor thereto.
Recognition Agreement shall mean, an agreement among a Co-op Corporation, a lender and a Mortgagor with respect to a Co-op Loan whereby such parties (i) acknowledge that such lender may make, or intends to make, such Co-op Loan, and (ii) make certain agreements with respect to such Co-op Loan.
Records shall mean all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by Seller or any other person or entity with respect to a Purchased Asset. Records shall include the Mortgage Notes, any Mortgages, the Mortgage Files, the credit files related to the Purchased Asset and any other instruments necessary to document or service a Mortgage Loan.
Register shall have the meaning set forth in Section 19(b) of the Agreement.
Regulations T, U and X shall mean Regulations T, U and X of the Board of Governors of the Federal Reserve System (or any successor), as the same may be modified and supplemented and in effect from time to time.
Reportable Event shall mean any of the events set forth in Section 4043(c) of ERISA, other than those events as to which the thirty day notice period is waived under subsections.21,.22,.24,.26,.27 or.28 of PBGC Reg. § 4043.
Reporting Period shall have the meaning provided in Section 11(s) of the Agreement.
Repurchase Assets shall have the meaning provided in Section 8(a) of the Agreement.
Repurchase Date shall mean the date on which Seller is to repurchase the Purchased Assets subject to a Transaction from Buyer which shall be the earliest of (i) the Termination Date or (ii) any date determined by application of the provisions of Sections 3(e) or 14.
Repurchase Price shall mean the price at which Purchased Assets are to be transferred from Buyer or its designee to Seller upon termination of a Transaction, which will be determined in each case (including Transactions terminable upon demand) as the sum of (a) the Purchase Price; (b) any unpaid Price Differential plus (c) any Warehouse Fees or other fees due as of the date of such determination.
Requirement of Law shall mean as to any Person, the certificate of incorporation and bylaws or other organizational or governing documents of such Person, and any law, treaty, rule, regulation, procedure or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its Property is subject.
RESI Facility shall have the meaning set forth in the Pricing Letter.
RESI Operating Account shall mean the Operating Account as defined in the RESI Facility.
Responsible Officer shall mean an officer of Seller listed on Schedule 2 hereto, as such Schedule 2 may be amended from time to time.
Restricted Cash shall mean for any Person, any amount of cash of such Person that is contractually required to be set aside, segregated or otherwise reserved.
S&P shall mean Standard & Poors Ratings Services, or any successor thereto.
Sanctions shall have the meaning set forth in Section 11(y) of the Agreement.
Scheduled Indebtedness shall have the meaning set forth in Section 11(n) of the Agreement.
SEC shall have the meaning set forth in Section 33 of the Agreement.
Section 4402 shall have the meaning set forth in Section 30 of the Agreement.
Securities Intermediary shall mean Deutsche Bank National Trust Company.
Seller shall mean AmeriHome Mortgage Company, LLC, or any successor in interest thereto.
Servicer shall mean LoanCare, a division of FNF Servicing, Inc., n/k/a LoanCare, LLC, Cenlar FSB, or any third party acceptable to Buyer in its sole discretion and any successors in interest and assigns as approved by Buyer.
Servicer Notice shall mean to the extent applicable, the notice acknowledged by the third party Servicer substantially in the form of Exhibit C hereto.
Servicing Agreement shall have the meaning set forth in Section 16(b) of the Agreement.
Servicing Rights shall mean the rights of any Person to administer, service or subservice, the Purchased Assets or to possess related Records.
Servicing Term shall have the meaning set forth in Section 16(a) of the Agreement.
Settlement Agent shall mean (i) a title insurance company or its agent which has not been disapproved by Buyer in its sole good faith discretion for which Buyer is in receipt of a Closing Protection Letter or (ii) a closing agent, other than a title insurance company or its agent, which has not been disapproved by Buyer in its sole good faith discretion.
SIPA shall have the meaning set forth in Section 33 of the Agreement.
Stock Certificate shall mean, with respect to a Co-op Loan, the certificates evidencing ownership of the Co-op Shares issued by the Co-op Corporation.
Stock Power shall mean, with respect to a Co-op Loan, an assignment of the Stock Certificate or an assignment of the Co-op Shares issued by the Co-op Corporation.
Subordinated Debt shall mean, as of the date of determination thereof, all indebtedness which has been subordinated in writing to the obligations owing to Buyer on terms and conditions acceptable to Buyer.
Subservicer shall have the meaning set forth in Section 16(b) of the Agreement.
Successor Servicer shall have the meaning set forth in Section 16(g) of the Agreement.
Subsidiary shall mean, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by
the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.
Takeout Commitment shall mean (a) with respect to Purchased Assets other than Jumbo Mortgage Loans and Purchased Agency Securities, either (i) a commitment of Seller to sell one or more such Purchased Assets to an Approved Investor (including an Agency) and the corresponding Approved Investors (including an Agencys) commitment back to Seller to effectuate the foregoing, which commitment may be in the form of a to be allocated (TBA) commitment for which the related Purchased Assets are allocated or (ii) a commitment of an Agency to swap one or more Purchased Mortgage Loans for an Agency Security, which commitment may be in the form of a to be allocated (TBA) commitment for which the related Purchased Mortgage Loans are allocated; (b) with respect to Purchased Assets that are Jumbo Mortgage Loans, (i) a commitment of Seller to sell one or more such Purchased Assets to an Approved Investor and the corresponding Approved Investors commitment back to Seller to effectuate the foregoing, which commitment (1) shall include evidence of an underwriting approval, with no conditions outstanding to close the Mortgage Loan and a Takeout Price, purchase price commitment number and purchase price commitment expiration date for the Mortgage Loan or (2) is in form and substance acceptable to Buyer in its sole discretion, or (ii) evidence that the Seller is granted delegated authority by the Approved Investor, which in each instance meets the requirements set forth in the definition of Jumbo Mortgage Loan; and (c) with respect to Purchased Agency Securities, a commitment of Seller to sell one or more Purchased Agency Securities to an Approved Investor and the corresponding Approved Investors commitment back to Seller to effectuate the foregoing; and in each case, the expiration date of such commitment has not occurred.
Takeout Failure shall mean, with respect to any Takeout Commitment (i) for the purchase of a Purchased Asset, the failure of the Approved Investor to purchase such Purchased Asset pursuant to such Takeout Commitment and (ii) for the swap of a Purchased Mortgage Loan for an Agency Security backed by such Purchased Mortgage Loan, an Agency Security Issuance Failure.
Takeout Price shall mean the price at which the Approved Investor has agreed to purchase a Purchased Asset from Seller.
Tax Compliance Certificate shall have the meaning set forth in Section 7(e)(ii) hereof.
Taxes shall have the meaning set forth in Section 7(a) of the Agreement.
Temporary Increase shall have the meaning set forth in Section 3(f) of the Agreement.
Temporary Increase Request shall mean a request by Seller for a Temporary Increase in the form of Exhibit G hereto.
Temporary Maximum Aggregate Purchase Price shall have the meaning set forth in Section 3(f) of the Agreement.
Termination Date shall have the meaning set forth in the Pricing Letter.
Third Party Participants shall have the meaning set forth in Section 12(x) of the Agreement.
Third Party Transaction Parties shall have the meaning set forth in Section 17 of the Agreement.
Trade Assignment shall mean an assignment to Buyer of a forward trade between an Approved Investor and Seller with respect to one or more Purchased Agency Securities substantially in the form of Exhibit D hereto.
Transaction shall have the meaning specified in Section 1.
Transaction Request shall mean a request from Seller to Buyer to enter into a Transaction, which shall be submitted electronically through the Warehouse Electronic System.
Uniform Commercial Code or UCC shall mean the Uniform Commercial Code as in effect from time to time in the State of New York; provided that if by reason of mandatory provisions of law, the perfection or the effect of perfection or non-perfection of the security interest in any Repurchase Assets or the continuation, renewal or enforcement thereof is governed by the Uniform Commercial Code as in effect in a jurisdiction other than New York, Uniform Commercial Code shall mean the Uniform Commercial Code as in effect in such other jurisdiction for purposes of the provisions of the Agreement relating to such perfection or effect of perfection or non-perfection.
U.S. Treasury Regulations shall mean regulations promulgated by the U.S. Department of the Treasury under the Code.
VA shall mean the U.S. Department of Veterans Affairs, an agency of the United States of America, or any successor thereto including the Secretary of Veterans Affairs.
Warehouse Accounts shall have the meaning set forth in Section 9(c) of the Agreement.
Warehouse Electronic System shall mean the system utilized by Buyer either directly, or through its vendors, and which may be accessed by Seller in connection with delivering and obtaining information and requests in connection with the Program Documents.
Warehouse Facility shall have the meaning set forth in the Pricing Letter.
Warehouse Fees shall have the meaning set forth in the Pricing Letter.
Wet Delivery Deadline shall have the meaning set forth in the Pricing Letter.
Wet Loan shall mean a Mortgage Loan which Seller is selling to Buyer simultaneously with the origination thereof and for which the Mortgage File has not been delivered to Custodian.
Wiring Instructions shall mean the wiring instructions of Buyer and Seller as provided to the other party in writing, as applicable.
SECTION 3. INITIATION; TERMINATION
(a) Conditions Precedent to Initial Transaction. Buyers agreement to enter into the initial Transaction hereunder is subject to the satisfaction, immediately prior to or concurrently with the making of such Transaction, of the condition precedent that Buyer shall have received from Seller any fees and expenses payable hereunder, and all of the following documents, each of which shall be satisfactory to Buyer and its counsel in form and substance:
(i) The following Program Documents, duly executed and delivered to Buyer:
(A) Agreement. This Agreement, duly executed by the parties thereto.
(B) Pricing Letter. The Pricing Letter, duly executed by the parties thereto in form and substance acceptable to Buyer.
(C) Reserved.
(D) Custodial Agreement. The Custodial Agreement, duly executed by the parties thereto.
(E) Electronic Tracking Agreement. For all Mortgage Loans which are registered on the MERS® System, an Electronic Tracking Agreement entered into, duly executed and delivered by the parties thereto, in full force and effect, free of any modification, breach or waiver.
(F) Reserved.
(G) Application. A duly completed Application, executed and delivered by Seller to Buyer.
(H) Other Program Documents. Any other Program Documents, duly executed by the parties thereto.
(ii) Organizational Documents. Certified copies of the organizational documents of Seller.
(iii) Good Standing Certificate. A certified copy of a good standing certificate from the jurisdiction of organization of Seller, dated as of no earlier than the date ten
(10) Business Days prior to the Purchase Date with respect to the initial Transaction hereunder.
(iv) Officers Certificate. An officers certificate of Seller in form and substance as set forth in Exhibit B attached hereto.
(v) Opinion of Counsel. An opinion of Sellers counsel in form and substance acceptable to Buyer in its good faith discretion.
(vi) Reserved.
(vii) Reserved.
(viii) Security Interest. Evidence that all other actions necessary or, in the opinion of Buyer, desirable to perfect and protect Buyers interest in the Purchased Assets and other Repurchase Assets have been taken, including, without limitation, UCC searches and duly authorized and filed Uniform Commercial Code financing statements on Form UCC-1.
(ix) Insurance. Evidence that Seller has added endorsements for theft of warehouse lender money and collateral, naming Buyer as a loss payee under its Fidelity Insurance and as a direct loss payee/right of action under its errors and omissions insurance policy.
(x) Warehouse Fees. Payment of any Warehouse Fees and other costs and expenses due and payable to Buyer hereunder.
(xi) Other Documents. Such other documents as Buyer may reasonably request, in form and substance reasonably acceptable to Buyer.
(b) Conditions Precedent to all Transactions. Upon satisfaction of the conditions set forth in this Section 3(b), Buyer may enter into a Transaction with Seller. Buyers entering into each Transaction (including the initial Transaction) is subject to the satisfaction of the following further conditions precedent, both immediately prior to entering into such Transaction and also after giving effect thereto to the intended use thereof:
(i) Due Diligence Review. Without limiting the generality of Section 17 of the Agreement, Buyer shall have completed, to its satisfaction, its preliminary due diligence review of the related Mortgage Loans and Seller.
(ii) No Default. No Default or Event of Default shall have occurred and be continuing under the Program Documents.
(iii) Representations and Warranties. Both immediately prior to the Transaction and also after giving effect thereto and to the intended use thereof, the representations and warranties made by Seller in Section 11 of the Agreement, shall be true, correct and complete on and as of such Purchase Date in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
(iv) Maximum Available Purchase Price. After giving effect to the requested Transaction, the aggregate outstanding Purchase Price for all Purchased Assets subject to then outstanding Transactions under this Agreement shall not exceed the Maximum Available Purchase Price.
(v) No Margin Deficit. After giving effect to the requested Transaction, the Asset Value of all Purchased Assets exceeds the aggregate Purchase Price for such Transactions.
(vi) Transaction Request. Seller shall have delivered to Buyer a Mortgage Loan Schedule with respect to all Mortgage Loans subject to the requested Transaction pursuant to the timeframes set forth in Section 3(c) hereof.
(vii) Delivery of Mortgage File. Seller shall have delivered to Custodian the Mortgage File with respect to each Mortgage Loan (other than a Wet Loan) subject to the requested Transaction in accordance with the timeframes set forth in the Custodial Agreement.
(viii) Delivery of Master Trust Receipt. Custodian shall have delivered to Buyer, in accordance with the timeframes set forth in the Custodial Agreement, a Master Trust Receipt (accompanied by a Custodial Loan Transmission) with respect to each Mortgage Loan subject to the requested Transaction.
(ix) Reserved.
(x) Fees and Expenses. Buyer shall have received all fees and expenses as contemplated by Sections 9 and 15(b) which amounts, at Buyers option, may be withheld from the proceeds remitted by Buyer to Seller pursuant to any Transaction hereunder; and
(xi) No Violation of Law. If any Requirement of Law (other than with respect to any amendment made to Buyers certificate of incorporation and bylaws or other organizational or governing documents) or any change in the interpretation or application of any Requirement of Law thereof or compliance by Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof shall result in Buyers entering into any Transaction to be a violation of such Requirement of Law.
(xii) Reserved.
(xiii) No Material Adverse Change. None of the following shall have occurred and/or be continuing:
(A) an event or events shall have occurred in the good faith determination of Buyer resulting in the effective absence of a repo market or comparable lending market for financing debt obligations secured by mortgage loans or securities or an event or events shall have occurred resulting in Buyer not being able to finance Mortgage Loans through the repo market or lending
market with traditional counterparties at rates which would have been reasonable prior to the occurrence of such event or events; or
(B) an event or events shall have occurred resulting in the effective absence of a securities market for securities backed by mortgage loans or an event or events shall have occurred resulting in Buyer not being able to sell securities backed by mortgage loans at prices which would have been reasonable prior to such event or events; or
(C) there shall have occurred a material adverse change in the financial condition of Buyer which affects (or can reasonably be expected to affect) materially and adversely the ability of Buyer to fund its obligations under this Agreement; provided that Buyer shall not invoke this subclause (C) with respect to Seller unless Buyer shall invoke any similar clause contained in other agreements between Buyer and other Persons that are substantially similar to Seller and with respect to substantially the same types of assets as the Mortgage Loans that would be the subject of Transactions hereunder.
(xiv) Maintenance of DE Compare Ratio. At all times when the total amount of Mortgage Loans underwritten and used by the Seller to determine its DE Compare Ratio exceeds [***], Sellers DE Compare Ratio as of the most recent calendar quarter has not exceeded [***].
Each Transaction Request delivered by Seller hereunder shall constitute a certification by Seller that all the conditions set forth in this Section 3(b) (other than clause (xiii) hereof) have been satisfied (both as of the date of such notice or request and as of Purchase Date).
(c) Initiation.
(i) Seller may request a Transaction hereunder on any Business Day by delivering to Buyer a Mortgage Loan Schedule through the Warehouse Electronic System with respect to all Mortgage Loans subject to the requested Transaction on or prior to (A) with respect to Wet Loans, 4:00 p.m. (New York City time) on the requested Purchase Date and (B) with respect to Mortgage Loans other than Wet Loans, 2:00 p.m. (New York City time) on the requested Purchase Date.
(ii) Seller shall deliver to Custodian the Mortgage File with respect to each Mortgage Loan subject to the requested Transaction (A) which is not a Wet Loan, in accordance with the timeframes set forth in the Custodial Agreement, and (B) with respect to each Wet Loan, on or prior to the Wet Delivery Deadline.
(iii) Following receipt of such request, Buyer may, in its sole discretion, agree to enter into such requested Transaction, in which case Buyer shall remit the Purchase Price pursuant to the Sellers Wiring Instructions.
(iv) Buyers remittance of the Purchase Price in connection with the Transaction and Sellers acceptance thereof, will constitute the parties agreement to enter into such Transaction. Upon remittance of the Purchase Price to Seller, Seller hereby grants, assigns,
conveys and transfers all rights in and to the Purchased Assets evidenced on the related Mortgage Loan Schedule submitted through the Warehouse Electronic System.
(v) Buyer shall confirm the terms of each Transaction by posting a Confirmation on the Warehouse Electronic System by the end of the day on each Purchase Date. Each Confirmation together with this Agreement, shall be conclusive evidence of the terms of the Transaction(s) covered thereby unless objected to in writing by Seller no more than two (2) Business Days after the date such Confirmation was posted on the Warehouse Electronic System or unless a corrected Confirmation is posted by Buyer; provided that Buyers failure to post a Confirmation shall not affect the obligations of Seller under any Transaction. An objection sent by Seller must state specifically that such writing which is an objection, must specify the provision(s) being objected to by Seller, must set forth such provision(s) in the manner that Seller believes they should be stated, and must be received by Buyer no more than two (2) Business Days after the Confirmation was posted on the Warehouse Electronic System.
(vi) The Repurchase Date for each Transaction shall not be later than the Termination Date.
(d) Issuance of Agency Securities. In the event the Seller elects to have Purchased Mortgage Loans be pooled for the purpose of backing an Agency Security it shall deliver all documents necessary to enable the applicable Agency to make Delivery of such Agency Security to (x) Securities Intermediary or its nominee as set forth in the Joint Securities Agreement or (y) Buyer subject to the following:
(i) Buyer shall have received a fully executed Trade Assignment; and (ii) at such time as an Agency Security backed by a pool of Purchased Mortgage Loans is delivered to Buyer by the applicable Agency, (A) such Agency Security shall immediately and with no further action on the part of Buyer, Seller or Custodian become subject to a Transaction hereunder and (B) the pool of Purchased Mortgage Loans backing such Agency Security shall immediately and with no further action on the part of Buyer, Seller or Custodian no longer be subject to a Transaction hereunder and Buyer shall have been deemed to release any ownership and/or security interest it has in such pool of Purchased Mortgage Loans.
(e) Repurchase; Purchase by an Approved Investor.
(i) Seller may repurchase Purchased Assets without penalty or premium on any date by remitting to Buyer the applicable Repurchase Price in accordance with the terms of the Joint Securities Agreement or pursuant to the Buyers Wiring Instructions, as applicable.
(ii) Any repurchase of Purchased Assets may occur simultaneously with a sale of the Purchased Asset to an Approved Investor (x) in accordance with the terms of the Joint Securities Agreement or (y) subject to the following procedures:
(A) Seller shall instruct the Approved Investor to remit directly to Buyer pursuant to Buyers Wiring Instructions no later than 4:00 p.m. (New York City
time) on any Business Day the Takeout Price in an amount equal to the Repurchase Price for such Purchased Asset.
(B) Simultaneously, Seller shall deliver to Buyer electronically the related Purchase Advice. The Takeout Price received by Buyer must equal the amount set forth on the Purchase Advice.
(C) The Takeout Price shall be applied to reduce the Repurchase Price in respect of the Purchased Assets listed on the Purchase Advice. In the event the Takeout Price is less than the Repurchase Price, the Buyer shall withdraw funds from the Operating Account and Warehouse Accounts such that no deficiency exists. For the avoidance of doubt, Buyer shall not release its interests in any Purchased Asset until such time as it receives the Repurchase Price in full.
(D) In the event Buyer receives the Takeout Price on or prior to 4:00 p.m. (New York City time) and either (x) no Purchase Advice is received or (y) the Takeout Price does not match the amount on the Purchase Advice (a Purchase Advice Deficiency), then Buyer shall retain the Takeout Price and the related Purchased Assets shall not be released and the Transactions shall continue to accrue Price Differential under the Repurchase Agreement until the Purchase Advice Deficiency is remedied. In the event the Takeout Price matches the amount set forth in the Purchase Advice but are in excess of the Repurchase Price (such amount, the Excess Proceeds) provided that no Default or Event of Default exists, Buyer shall remit such Excess Proceeds to the Operating Account.
(iii) On the Repurchase Date, termination of the Transaction will be effected by reassignment to Seller or its designee of the Purchased Assets against the simultaneous transfer of the Repurchase Price as described in this Section 3(e). Such obligation to repurchase exists without regard to any prior or intervening liquidation or foreclosure with respect to any Purchased Asset.
(f) Request for Temporary Increase. Seller may request a temporary increase of the Maximum Aggregate Purchase Price (a Temporary Increase) by submitting to Buyer an executed Temporary Increase Request, setting forth the requested increased Maximum Aggregate Purchase Price (such increased amount, the Temporary Maximum Aggregate Purchase Price) and the effective date and expiration date of such Temporary Increase. Buyer may from time to time, in its sole and absolute discretion, consent to such Temporary Increase, by returning to Seller a countersigned Temporary Increase Request. At any time that a Temporary Increase is in effect, the Maximum Aggregate Purchase Price shall equal the Temporary Maximum Aggregate Purchase Price for all purposes of this Agreement and all calculations and provisions relating to the Maximum Aggregate Purchase Price shall refer to the Temporary Maximum Aggregate Purchase Price. Upon the termination of a Temporary Increase, Seller shall repurchase Purchased Assets in order to reduce the aggregate outstanding Purchase Price of all Transactions to the Maximum Aggregate Purchase Price (as reduced by the termination of such Temporary Increase).
SECTION 4. MARGIN AMOUNT MAINTENANCE
(a) Buyer shall determine the Market Value of each Purchased Asset at such intervals as determined by Buyer in its sole good faith discretion.
(b) If at any time the aggregate Asset Values of Purchased Assets then subject to Transactions are less than the aggregate Purchase Prices for such Purchased Assets (a Margin Deficit), then Buyer may by notice to Seller (as such notice is more particularly set forth below, a Margin Call), require Seller to transfer to Buyer or its designee cash in the amount of the Margin Deficit.
(c) Notice delivered pursuant to Section 4(b) may be given by any written or electronic means. Any notice given before 10:00 a.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on such Business Day; notice given after 10:00 a.m. (New York City time) on a Business Day shall be met, and the related Margin Call satisfied, no later than 5:00 p.m. (New York City time) on the following Business Day.
(d) The failure of Buyer, on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Buyer to do so at a later date. Seller and Buyer each agree that a failure or delay by Buyer to exercise its rights hereunder shall not limit or waive Buyers rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller.
(e) Any cash transferred to Buyer pursuant to Section 4(b) above shall be held as unsegregated cash margin and collateral for all Obligations under this Agreement.
(f) In the event Buyer makes a Margin Call and upon the request of Seller, Buyer shall deliver (by written or electronic means) to Seller its determination of the Market Value of the related Purchased Asset in form and substance acceptable to Buyer in its sole good faith discretion; provided, however, that such delivery shall in no way effect Sellers obligations to meet the related Margin Call in accordance with the time frames set forth in Section 4(c) herein.
SECTION 5. PRICE DIFFERENTIAL; COLLECTIONS; INCOME PAYMENTS
(a) On each Business Day that a Transaction is outstanding, the Pricing Rate shall be reset and, unless otherwise agreed, the accrued and unpaid Price Differential shall be settled in cash on each related Repurchase Date.
(b) Upon the occurrence of an Event of Default and at the request of Buyer, Seller shall establish and maintain a segregated time or demand deposit account for the benefit of Buyer (the Custodial Account) with Buyer, UBS AG Stamford Branch or an Insured Depository Institution acceptable to Buyer in its sole discretion and shall or shall cause the Servicer to immediately deposit into the Custodial Account all Income received with respect to each Mortgage Loan sold hereunder and under no circumstances shall Seller deposit any of its own funds into the Custodial Account or otherwise commingle its own funds with funds belonging to Buyer as owner of any Mortgage Loans. Seller shall name the Custodial Account AmeriHome Mortgage Company, LLC, in trust for and for the benefit of UBS Bank USA
(c) Upon the occurrence of an Event of Default, Seller authorizes Buyer to withdraw any Income otherwise due Buyer hereunder from any of the Warehouse Accounts and the Operating Account.
(d) All Income received with respect to a Mortgage Loan purchased hereunder, whether or not deposited in the Custodial Account, shall be held in trust for the exclusive benefit of Buyer as the owner of such Mortgage Loan.
SECTION 6. REQUIREMENT OF LAW
(a) If any Requirement of Law (other than with respect to any amendment made to Buyers certificate of incorporation and bylaws or other organizational or governing documents) including those regarding capital adequacy, or any change in the interpretation or application of any Requirement of Law thereof or compliance by Buyer with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority made subsequent to the date hereof:
(i) shall subject Buyer to any Tax or increased Tax of any kind whatsoever or change the basis of taxation of payments to Buyer;
(ii) shall impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, or other extensions of credit by, or any other acquisition of funds by, any office of Buyer;
(iii) shall impose on Buyer any other condition; and the result of any of the foregoing is to increase the cost to Buyer, by an amount which Buyer deems to be material, of entering, continuing or maintaining any Transaction or to reduce any amount due or owing hereunder in respect thereof, or shall have the effect of reducing Buyers rate of return then, in any such case, Seller shall pay Buyer on the applicable Repurchase Date such additional amount or amounts as calculated by Buyer in good faith as will compensate Buyer for such increased cost or reduced amount receivable on an after-tax basis.
(b) If Buyer shall have determined that the adoption of or any change in any Requirement of Law (other than with respect to any amendment made to Buyers certificate of incorporation and by-laws or other organizational or governing documents) regarding capital adequacy or in the interpretation or application thereof or compliance by Buyer or any corporation controlling Buyer with any request or directive regarding capital adequacy (whether or not having the force of law) from any Governmental Authority made subsequent to the date hereof shall have the effect of reducing the rate of return on Buyers or such corporations capital as a consequence of its obligations hereunder to a level below that which Buyer or such corporation could have achieved but for such adoption, change or compliance (taking into consideration Buyers or such corporations policies with respect to capital adequacy) by an amount deemed by Buyer to be material, then from time to time, Seller shall promptly pay to Buyer such additional amount or amounts as will compensate Buyer for such reduction.
(c) If Buyer becomes entitled to claim any additional amounts pursuant to this Section 6, it shall promptly notify Seller of the event by reason of which it has become so entitled.
A certificate as to any additional amounts payable pursuant to this Section submitted by Buyer to Seller shall be conclusive in the absence of manifest error.
(d) If Buyer becomes entitled to claim any additional amounts pursuant to this Section 6, Seller shall pay such additional amounts to Buyer and Buyer and Seller shall negotiate in good faith to mutually agree upon modified terms to this Agreement to account for such future additional amounts. If Seller and Buyer cannot agree upon such modified terms within thirty (30) days of Buyers notice to Seller of such changed circumstances, then Seller (i) may terminate this Agreement; (ii) shall immediately remit the Repurchase Price and any other amounts due hereunder and (iii) shall no longer be liable for any Non-Use Fee from and after the date of such termination.
SECTION 7. TAXES.
(a) Any and all payments by or on behalf of Seller under or in respect of this Agreement or any other Program Documents to which Seller is a party shall be made free and clear of, and without deduction or withholding for or on account of, any and all present or future taxes, levies, imposts, duties, deductions, assessments, fees, charges or withholdings (including backup withholdings), and all liabilities (including penalties, interest and additions to tax) with respect thereto, whether now or hereafter imposed, levied, collected, withheld or assessed by any taxation authority or other Governmental Authority (collectively, Taxes), unless required by law. If any Person shall be required under any applicable Requirement of Law to deduct or withhold any Taxes from or in respect of any sum payable under or in respect of this Agreement or any of the other Program Documents to Buyer (including, for purposes of Section 6 and this Section 7, any agent, assignee, successor or participant), (i) Seller shall make all such deductions and withholdings in respect of Taxes, (ii) Seller shall timely pay the full amount deducted or withheld in respect of Taxes to the relevant taxation authority or other Governmental Authority in accordance with any Requirement of Law, and (iii) the sum payable by Seller shall be increased as may be necessary so that after Seller has made all required deductions and withholdings (including deductions and withholdings applicable to additional amounts payable under this Section 7) such Buyer receives an amount equal to the sum it would have received had no such deductions or withholdings been made in respect of Non-Excluded Taxes. For purposes of this Agreement the term Non-Excluded Taxes are Taxes other than, in the case of a Buyer, (i) Taxes that are imposed on its overall net income (and franchise taxes imposed in lieu thereof) by the jurisdiction under the laws of which such Buyer is organized or of its applicable lending office, or any political subdivision thereof, unless such Taxes are imposed as a result of such Buyer having executed, delivered or performed its obligations or received payments under, or enforced, this Agreement or any of the other Program Documents (in which case such Taxes will be treated as Non-Excluded Taxes), and (ii) Taxes imposed as a result of its failure to comply with the requirements of Sections 1471 through 1474 of the Code (as in effect on the date hereof) and any U.S. Treasury Regulations promulgated thereunder (FATCA).
(b) In addition, Seller hereby agrees to timely pay or, at the Buyers option, timely reimburse it for payment of, any present or future stamp, court, recording, documentary, excise, filing, intangible, property or value-added taxes, or similar taxes, charges or levies that arise from any payment made under or in respect of this Agreement or any other Program Document or from the execution, delivery, enforcement or registration of, any performance,
receipt or perfection of a security interest under, or otherwise with respect to, this Agreement or any other Program Document (collectively, Other Taxes).
(c) Seller hereby agrees to indemnify Buyer (including its Beneficial Tax Owners) for, and to hold it harmless against, the full amount of Non-Excluded Taxes and Other Taxes, and the full amount of Taxes of any kind imposed by any jurisdiction on amounts payable under this Section 7 imposed on, paid, deducted or withheld by such Buyer (or any Beneficial Tax Owners thereof) and any liability (including penalties, additions to tax, interest and expenses) arising therefrom or with respect thereto. A certificate as to the amount of such Taxes or liabilities delivered to Seller by Buyer shall be conclusive absent manifest error. The indemnity by Seller provided for in this Section 7(c) shall apply and be made whether or not the Non-Excluded Taxes, Other Taxes or any other liabilities for which indemnification hereunder is sought have been correctly or legally asserted. Amounts payable by Seller under the indemnity set forth in this Section 7(c) shall be paid within ten (10) days from the date on which Buyer makes written demand therefor.
(d) Within thirty (30) days after the date of any payment of Taxes, Seller (or any Person making such payment on behalf of Seller) shall furnish to Buyer for its own account a certified copy of the original official receipt evidencing payment thereof.
(e) For purposes of this Section 7(e), the terms United States and United States person shall have the meanings specified in Section 7701 of the Code. Each Buyer (including for avoidance of doubt any assignee, successor or participant) that either (i) is not organized under the laws of the United States, any State thereof, or the District of Columbia or (ii) whose name does not include Incorporated, Inc., Corporation, Corp., P.C., insurance company, or assurance company (a Non-Exempt Buyer) shall deliver or cause to be delivered to Seller the following properly completed and duly executed documents:
(i) in the case of a Non-Exempt Buyer that is not a United States person or is a disregarded entity for U.S. federal income tax purposes owned by a person that is not a United States person, a complete and executed (x) U.S. Internal Revenue Service Form W-8BEN with Part II completed in which such Buyer claims the benefits of a tax treaty with the United States providing for a zero or reduced rate of withholding (or any successor forms thereto), including all appropriate attachments or (y) a U.S. Internal Revenue Service Form W-8ECI (or any successor forms thereto); or
(ii) in the case of a Non-Exempt Buyer that is an individual, (x) for non-United States persons, a complete and executed U.S. Internal Revenue Service Form W-8BEN (or any successor forms thereto) and a certificate substantially in the form of Exhibit F (a Tax Compliance Certificate) or (y) for United States persons, a complete and executed U.S. Internal Revenue Service Form W-9 (or any successor forms thereto); or
(iii) in the case of a Non-Exempt Buyer that is organized under the laws of the United States, any State thereof, or the District of Columbia and that is not a disregarded entity for U.S. federal income tax purposes owned by a person that is not a United States person, a complete and executed U.S. Internal Revenue Service Form W-9 (or any successor forms thereto); or
(iv) in the case of a Non-Exempt Buyer that (x) is not organized under the laws of the United States, any State thereof, or the District of Columbia and (y) is treated as a corporation for U.S. federal income tax purposes, a complete and executed U.S. Internal Revenue Service Form W-8BEN (or any successor forms thereto) and a Tax Compliance Certificate; or
(v) in the case of a Non-Exempt Buyer that (A) is treated as a partnership or other non-corporate entity, and (B) is not organized under the laws of the United States, any State thereof, or the District of Columbia, (x)(i) a complete and executed U.S. Internal Revenue Service Form W-8IMY (or any successor forms thereto) (including all required documents and attachments) and (ii) a Tax Compliance Certificate, and (y) in the case of a non-withholding foreign partnership or trust, without duplication, with respect to each of its beneficial owners and the beneficial owners of such beneficial owners looking through chains of owners to individuals or entities that are treated as corporations for U.S. federal income tax purposes (all such owners, Beneficial Tax Owners), the documents that would be provided by each such Beneficial Tax Owner if such Beneficial Tax Owner were Buyer; or
(vi) in the case of a Non-Exempt Buyer that is disregarded for U.S. federal income tax purposes, the document that would be required by clause (i), (ii), (iii), (iv), (v), (vii) and/or this clause (vi) of this Section 7(e) with respect to its Beneficial Tax Owner if such Beneficial Tax Owner were Buyer; or
(vii) in the case of a Non-Exempt Buyer that (A) is not a United States person and (B) is acting in the capacity of an intermediary (as defined in U.S. Treasury Regulations), (x)(i) a U.S. Internal Revenue Service Form W-8IMY (or any successor form thereto) (including all required documents and attachments) and (ii) a Tax Compliance Certificate, and (y) if the intermediary is a non-qualified intermediary (as defined in U.S. Treasury Regulations), from each person upon whose behalf the non-qualified intermediary is acting the documents that would be required by clause (i), (ii), (iii), (iv), (v), (vi), and/or this clause (vii) with respect to each such person if each such person were Buyer; and
(viii) if a payment made to a Buyer under this Agreement or any other Program Documents would be subject to U.S. federal withholding Tax imposed by FATCA if such Buyer were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Buyer shall deliver to Seller at the time or times prescribed by law and at such time or times reasonably requested by Seller such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by Seller as may be necessary for Seller to comply with its obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (viii), FATCA shall include any amendments made to FATCA after the date of this Agreement.
If a Buyer provides a form pursuant to Section 7(e)(i)(x) and the form provided by the Buyer at the time such Buyer first becomes a party to this Agreement or, with respect to a grant
of a participation, the effective date thereof, indicates a United States interest withholding tax rate under the tax treaty in excess of zero, withholding tax at such rate shall be treated as Taxes other than Non-Excluded Taxes (Excluded Taxes) and shall not qualify as Non-Excluded Taxes unless and until such Buyer provides the appropriate form certifying that a lesser rate applies, whereupon withholding tax at such lesser rate shall be considered Excluded Taxes solely for the periods governed by such form. If, however, on the date a Person becomes an assignee, successor or participant to this Agreement, the Buyer transferor was entitled to indemnification or additional amounts under this Section 7, then the Buyer assignee, successor or participant shall be entitled to indemnification or additional amounts to the extent that the Buyer transferor was entitled to such indemnification or additional amounts for Non-Excluded Taxes, and the Buyer assignee, successor or participant shall be entitled to additional indemnification or additional amounts for any other or additional Non-Excluded Taxes.
(f) For any period with respect to which a Buyer has failed to provide Seller with the appropriate form, certificate or other document described in Section 7(e) (other than if such failure is due to a change in any Requirement of Law, or in the interpretation or application thereof, occurring after the date on which a form, certificate or other document originally was required to be provided), such Buyer shall not be entitled to indemnification or additional amounts under subsection (a) or (c) of this Section 7 with respect to Non-Excluded Taxes imposed by the United States by reason of such failure; provided, however, that should a Buyer become subject to Non-Excluded Taxes because of its failure to deliver a form, certificate or other document required hereunder, Seller shall take such steps as such Buyer shall reasonably request, to assist such Buyer in recovering such Non-Excluded Taxes.
(g) Without prejudice to the survival of any other agreement of Seller hereunder, the agreements and obligations of Seller contained in this Section 7 shall survive the termination of this Agreement and the other Program Documents. Nothing contained in Section 6 or this Section 7 shall require Buyer to complete, execute or make available any of its Tax returns or any other information that it deems to be confidential or proprietary, or whose completion, execution or submission would, in Buyers judgment, materially prejudice Buyers legal or commercial position.
SECTION 8. SECURITY INTEREST; BUYERS APPOINTMENT AS ATTORNEY-IN-FACT
(a) Security Interest. On each Purchase Date, Seller hereby sells, assigns and conveys all rights and interests in the Purchased Assets identified on the related Mortgage Loan Schedule and the Repurchase Assets related thereto. Although the parties intend that all Transactions hereunder be sales and purchases and not loans (other than as set forth in Section 21 for U.S. tax purposes), in the event any such Transactions are deemed to be loans, and in any event Seller hereby pledges to Buyer as security for the performance by Seller of its Obligations and hereby grants, assigns and pledges to Buyer a perfected first priority security interest in the Purchased Assets; the Records related to the Purchased Assets; the Program Documents (to the extent such Program Documents and Sellers right thereunder relate to the Purchased Assets); any Property relating to any Purchased Asset or the related Mortgaged Property; any Takeout Commitments relating to any Purchased Assets; any Closing Protection Letter, escrow letter or settlement agreement relating to any Purchased Asset; any Servicing Rights relating to any
Purchased Asset; all insurance policies and insurance proceeds relating to any Purchased Asset or the related Mortgaged Property, including but not limited to any payments or proceeds under any related primary insurance or hazard insurance; any Income relating to any Purchased Asset; the Custodial Account; the Warehouse Accounts; the Operating Account; the benefits allocable from any Hedge Agreements relating to any Purchased Asset; and any other contract rights, accounts (including any interest of Seller in escrow accounts) and any other payments, rights to payment (including payments of interest or finance charges) and general intangibles to the extent that the foregoing relates to any Purchased Asset; any other assets relating to the Purchased Assets (including, without limitation, any other accounts) or any interest in the Purchased Assets; and accounts, chattel paper (including electronic chattel paper), goods (including inventory and equipment and any accessions thereto), instruments (including promissory notes), documents, investment property, general intangibles (including payment intangibles and software) in each case related to the Purchased Assets; together with all accessions and additions thereto, substitutions and replacements therefor, and all products and proceeds of the foregoing, in all instances, whether now owned or hereafter acquired, now existing or hereafter created and wherever located (collectively, the Repurchase Assets).
(b) Servicing Rights. Seller acknowledges that it has sold the Purchased Assets to Buyer on a servicing released basis and it has no rights to service the Purchased Assets except as set forth in this Agreement. Without limiting the generality of the foregoing and in the event that Seller is deemed to retain any residual Servicing Rights, and for the avoidance of doubt, Seller grants, assigns and pledges to Buyer a security interest in the Servicing Rights and proceeds related thereto and in all instances, whether now owned or hereafter acquired, now existing or hereafter created. The foregoing provision is intended to constitute a security agreement or other arrangement or other credit enhancement related to the Agreement and Transactions hereunder as defined under Sections 101(47)(v) and 741(7)(xi) of the Bankruptcy Code.
(c) Financing Statements. Seller hereby authorizes Buyer to file such financing statement or statements relating to the Repurchase Assets and the Servicing Rights as Buyer, at its option, may deem appropriate. Seller shall pay the searching and filing costs for any financing statement or statements prepared or searched pursuant to this Agreement.
(d) Buyers Appointment as Attorney in Fact. Seller agrees to execute a Power of Attorney, the form of Exhibit E hereto (the Power of Attorney), to be delivered on the date hereof.
SECTION 9. PAYMENT, TRANSFER; ACCOUNTS
(a) Payments and Transfers of Funds. Unless otherwise mutually agreed in writing, all transfers of funds to be made by Seller hereunder shall be made in Dollars, in immediately available funds, without deduction, set off or counterclaim, to Buyer pursuant to the Wiring Instructions or pursuant to the Joint Securities Agreement (as applicable), on the date on which such payment shall become due.
(b) Remittance of Purchase Price. On the Purchase Date for each Transaction, ownership of the Purchased Assets shall be transferred to Buyer or its designee against the simultaneous transfer of the Purchase Price pursuant to Sellers Wiring Instructions. With respect
to the Purchased Assets being sold by Seller on a Purchase Date, Seller hereby sells, transfers, conveys and assigns to Buyer or its designee without recourse, but subject to the terms of this Agreement, all the right, title and interest of Seller in and to the Purchased Assets together with all right, title and interest in and to the proceeds of any related Repurchase Assets.
(c) Warehouse Accounts. Buyer or the Buyers designee shall maintain for Seller an inbound account and a margin account (the Warehouse Accounts). The Warehouse Accounts shall be in the form of non-interest bearing book-entry accounts. Buyer shall have exclusive withdrawal rights from the Warehouse Accounts. All amounts on deposit in the Warehouse Accounts shall be held as cash margin and collateral for all Obligations under this Agreement. Without limiting the generality of the foregoing, in the event that a Margin Call or other Default exists, Buyer shall be entitled to use any or all of the amounts on deposit in any Warehouse Account to cure such circumstance or otherwise exercise remedies available to Buyer without prior notice to, or consent from, Seller. Notwithstanding the foregoing, Seller acknowledges that (i) amounts in the Warehouse Accounts are not insured by the Federal Deposit Insurance Corporation, any governmental entity or otherwise and (ii) Buyer is not required to segregate funds in the Warehouse Accounts from its own funds or from funds held for others.
(d) Operating Account. From time to time, Seller may provide funds to Buyer for deposit to an interest bearing account (the Operating Account) in accordance with this Section 9. The Operating Account shall be a subaccount of an interest-bearing savings account (the Omnibus Account) maintained by Buyer as agent for the benefit of Seller and other sellers of mortgage related assets with a bank determined by Buyer its sole discretion (the Depository). The Buyer shall have non-exclusive withdrawal rights from the Operating Account. Seller acknowledges that Buyer acts as Sellers agent for the limited purpose of placing funds with the Depository, and that funds held by Buyer as Sellers agent are not a deposit account or other liability of Buyer. Buyer shall maintain records of Sellers interest in the funds maintained in the Omnibus Account. Withdrawals will be paid by wire transfer. In addition, Seller hereby authorizes Buyer, in its sole discretion, to withdraw funds from the Operating Account and remit such funds to the RESI Operating Account for any purpose permitted under and pursuant to the terms and conditions of the RESI Facility; provided that (i) there are sufficient funds in the Operating Account and a negative balance would not result therefrom; (ii) no Default or Event or Default shall have occurred or result therefrom and (ii) after such withdrawal and unless otherwise approved by Buyer, amounts in the Operating Account are not less than the Minimum Balance Requirement.
(e) Depository. Unless otherwise designated in writing by Buyer, the Depository shall be UBS AG, Stamford Branch. Funds on deposit at the UBS AG, Stamford Branch are not insured by the Federal Deposit Insurance Corporation, Securities Investor Protection Corporation or any governmental agency of the United States, Switzerland or any other jurisdiction. The Omnibus Account and Operating Account are obligations of the UBS AG, Stamford Branch only, and are not obligations of UBS AG generally or of any of its other affiliates. The payment of principal and interest on the Operating Account at the UBS AG, Stamford Branch is subject to the creditworthiness of UBS AG. The Operating Account is not a deposit account or other liability of Buyer. In the unlikely event of the failure of the UBS AG, Stamford Branch, UBS AG shall be responsible for paying the principal and interest on the Operating Account. If
UBS AG is unable to do so, the Seller acknowledges that it will be a general unsecured creditor of UBS AG.
(f) Buydown Amount. The Buydown Amount shall be held as unsegregated cash margin and collateral for all Obligations under this Agreement. Without limiting the generality of the foregoing, in the event that a Margin Call or other Default exists, the Buyer shall be entitled to use any or all of the Buydown Amount and to withdraw such amount from the Operating Account in Buyers sole discretion to cure such circumstance or otherwise exercise remedies available to the Buyer without prior notice to, or consent from, Seller. Regardless of whether a Margin Call or other Default exists, Buyer also may withdraw interest paid to the Operating Account in its discretion from time to time, as a full or partial off-set to Sellers obligation hereunder to pay the Price Differential, Repurchase Price or other amounts due hereunder when due. If the Buyer withdraws any such interest paid to the Operating Account after the occurrence and during the continuance of an Event of Default, Buyer shall promptly give Seller written notice following any such withdrawal. If the Buyer withdraws any such interest paid to the Operating Account at any time when no Event of Default has occurred and is continuing, Buyer shall give Seller advance written notice of any such withdrawal. Within two (2) Business Days receipt of written request from Seller, and provided no Margin Call or other Default exists, Buyer shall withdraw any portion of such Buydown Amount from the Operating Account and remit such amount back to Seller; provided that in the event any request to withdraw funds would result in amounts in the Operating Account to be less than the Minimum Balance Requirement, Seller shall provide Buyer with [***] days prior written notice of such request.
(g) Operating Account Interest. Subject to Section 9(h), the Buydown Amount will accrue interest at the Operating Account Rate; provided that in no event shall interest accrue on (i) the Buydown Amount if (x) on any day the Buydown Amount is less than the Minimum Balance Requirement or (y) the average balance of funds in the Operating Account during any calendar month is less than the Minimum Balance Requirement and (ii) that portion of the Buydown Amount that is in excess of the lesser of (a) the aggregate outstanding Purchase Price of all Transactions during any calendar month or (b) [***]. Unless otherwise set forth in the Pricing Letter:
(i) The Depository calculates interest accrual daily on the basis of funds credited to the Operating Account, but credits interest monthly. As a result, interest will not begin to compound until credited in the month following its accrual. The Depository credits interest to the Operating Account in the month following its accrual on a schedule set by Depository from time to time, which may result in a delay in interest crediting as late as the twentieth (20th) day of the calendar month.
(ii) The Depository accrues interest on funds deposited to the Operating Account beginning on the day on which such funds are received in the Operating Account, and through, but not including, the day on which funds are withdrawn from the Operating Account.
(iii) Interest paid on funds in the Operating Account at the Operating Account Rate shall be credited to the Operating Account unless otherwise withdrawn by Buyer at the direction of Seller as provided herein.
(h) Maintenance of Balances. If Seller shall fail to maintain with Buyer during any calendar month deposits in the Operating Account in the average, after charges to compensate Buyer for services rendered to Seller, equal to at least the Minimum Balance Requirement, Seller shall pay to Buyer a fee equal to the amount of such deficit multiplied by the Maintenance Fee Rate.
(i) Fees. Seller shall pay in immediately available funds to Buyer all fees, including without limitation, the Warehouse Fees, as and when required hereunder. All such payments shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to Buyer at such account designated by Buyer. Without limiting the generality of the foregoing or any other provision of this Agreement, Buyer may withdraw and retain from the Warehouse Accounts and Operating Account any Warehouse Fees due and owing to Buyer.
SECTION 10. RESERVED
SECTION 11. REPRESENTATIONS
Seller represents and warrants to Buyer that as of the Purchase Date for any Purchased Assets, as of the date of this Agreement and any Transaction hereunder and at all times while the Program Documents are in full force and effect and/or any Transaction hereunder is outstanding:
(a) Acting as Principal. Seller will engage in such Transactions as principal (or, if agreed in writing in advance of any Transaction by the other party hereto, as agent for a disclosed principal).
(b) No Broker. Seller has not dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Assets pursuant to this Agreement.
(c) Financial Statements. Seller has heretofore furnished to Buyer a copy, certified by its chief executive officer, controller or other financial officer approved by Buyer, of its (a) Financial Statements for Seller for the fiscal year ended the Annual Financial Statement Date, setting forth in each case in comparative form the figures for the previous year, with an unqualified opinion thereon of an Approved CPA and (b) Financial Statements for Seller for such monthly period(s), of Seller up until Monthly Financial Statement Date, setting forth in each case in comparative form the figures for the previous month and year-to-date. All such Financial Statements are complete and correct and fairly present, in all material respects, the consolidated and consolidating financial condition of Seller and the consolidated and consolidating results of its operations as at such dates and for such monthly periods, all in accordance with GAAP. Since the Annual Financial Statement Date, there has been no material adverse change in the consolidated business, operations or financial condition of Seller taken as a whole from that set forth in said Financial Statements nor is Seller aware of any state of facts which (without notice or the lapse of time) would or could result in any such material adverse change or could have a Material Adverse Effect. Seller does not have, on the Annual Financial Statement Date, any liabilities, direct or indirect, fixed or contingent, matured or unmatured, known or unknown, or
liabilities for taxes, long-term leases or unusual forward or long-term commitments not disclosed by, or reserved against in, said balance sheet and related statements, and at the present time there are no material unrealized or anticipated losses from any loans, advances or other commitments of Seller except as heretofore disclosed to Buyer in writing.
(d) Organization, Etc. Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization. Seller (a) has all requisite corporate or other power, and has all governmental licenses, authorizations, consents and approvals necessary to own its assets and carry on its business as now being or as proposed to be conducted, except where the lack of such licenses, authorizations, consents and approvals would not be reasonably likely to have a Material Adverse Effect; (b) is qualified to do business and is in good standing in all other jurisdictions in which the nature of the business conducted by it makes such qualification necessary, except where failure so to qualify would not be reasonably likely (either individually or in the aggregate) to have a Material Adverse Effect; and (c) has full power and authority to execute, deliver and perform its obligations under the Program Documents.
(e) Authorization, Compliance, Approvals. The execution and delivery of, and the performance by Seller of its obligations under, the Program Documents to which it is a party (a) are within Sellers powers, (b) have been duly authorized by all requisite action by Sellers board of managers, (c) do not violate any provision of applicable law, rule or regulation, or any order, writ, injunction or decree of any court or other Governmental Authority, or its organizational documents, (d) do not violate any indenture, agreement, document or instrument to which Seller or any of its Subsidiaries is a party, or by which any of them or any of their properties, any of the Repurchase Assets is bound or to which any of them is subject and (e) are not in conflict with, do not result in a breach of, or constitute (with due notice or lapse of time or both) a default under, or except as may be provided by any Program Document, result in the creation or imposition of any Lien upon any of the property or assets of Seller or any of its Subsidiaries pursuant to, any such indenture, agreement, document or instrument. Seller is not required to obtain any consent, approval or authorization from, or to file any declaration or statement with, any Governmental Authority in connection with or as a condition to the consummation of the Transactions contemplated herein and the execution, delivery or performance of the Program Documents to which it is a party.
(f) Litigation. There are no actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending or, to the knowledge of Seller, threatened) or other legal or arbitrable proceedings affecting Seller or any of its Subsidiaries or affecting any of the Repurchase Assets or any of the other properties of Seller before any Governmental Authority which (i) questions or challenges the validity or enforceability of the Program Documents or any action to be taken in connection with the transactions contemplated hereby, (ii) except as disclosed to Buyer, makes a claim or claims in an aggregate amount greater than the Litigation Threshold, (iii) individually or in the aggregate, if adversely determined, would be reasonably likely to have a Material Adverse Effect or (iv) relates to any violation of the Home Ownership and Equity Protection Act or any state, city or district high cost home mortgage or predatory lending law.
(g) Purchased Assets.
(i) Seller has not assigned, pledged, or otherwise conveyed or encumbered any Purchased Asset to any other Person, and immediately prior to the sale of such Purchased Asset to Buyer, Seller was the sole owner of such Purchased Asset and had good and marketable title thereto, free and clear of all Liens, in each case except for Liens to be released simultaneously with the sale to Buyer hereunder.
(ii) The provisions of this Agreement are effective to either constitute a sale of Repurchase Assets to Buyer or to create in favor of Buyer a valid first priority security interest in all right, title and interest of Seller in, to and under the Repurchase Assets.
(h) Proper Names; Chief Executive Office/Jurisdiction of Organization. Seller does not operate in any jurisdiction under a trade name, division name or name other than those names previously disclosed in writing by Seller to Buyer. Sellers jurisdiction of organization, type of organization and organizational identification number is as set forth in the Pricing Letter.
(i) Location of Books and Records. The location where Seller keeps its books and records, including all computer tapes, computer systems and storage media and records related to the Repurchase Assets is office located at [***].
(j) Enforceability. This Agreement and all of the other Program Documents executed and delivered by Seller in connection herewith are legal, valid and binding obligations of Seller and are enforceable against Seller in accordance with their terms except as such enforceability may be limited by (i) the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar Requirement of Law affecting creditors rights generally and (ii) general principles of equity.
(k) Ability to Perform. Seller does not believe, nor does it have any reason or cause to believe, that it cannot perform each and every covenant contained in the Program Documents to which it is a party on its part to be performed.
(l) No Default. No Default or Event of Default has occurred and is continuing.
(m) No Adverse Selection. Seller has not selected the Purchased Assets in a manner so as to adversely affect Buyers interests.
(n) Scheduled Indebtedness. All material Indebtedness (other than usual and customary accounts payable for a mortgage company) which is presently in effect and/or outstanding as of the Effective Date is listed on Schedule 3 hereto (the Scheduled Indebtedness) and no defaults or events of default exist thereunder.
(o) Accurate and Complete Disclosure. The information, reports, Financial Statements, exhibits and schedules furnished in writing by or on behalf of Seller to Buyer in connection with the negotiation, preparation or delivery of this Agreement or performance hereof and the other Program Documents or included herein or therein or delivered pursuant hereto or thereto, when taken as a whole, do not contain any untrue statement of material fact or omit to
state any material fact necessary to make the statements herein or therein, in light of the circumstances under which they were made, not misleading. There is no fact known to Seller, after due inquiry, that could reasonably be expected to have a Material Adverse Effect that has not been disclosed herein, in the other Program Documents or in a report, financial statement, exhibit, schedule, disclosure letter or other writing furnished to Buyer for use in connection with the transactions contemplated hereby or thereby.
(p) Margin Regulations. The use of all funds acquired by Seller under this Agreement will not conflict with or contravene any of Regulations T, U or X promulgated by the Board of Governors of the Federal Reserve System as the same may from time to time be amended, supplemented or otherwise modified.
(q) Investment Company. Neither Seller nor any of its Subsidiaries is an investment company or a company controlled by an investment company within the meaning of the Investment Company Act of 1940, as amended.
(r) Solvency. As of the date hereof and immediately after giving effect to each Transaction, the fair value of the assets of Seller is greater than the fair value of the liabilities (including, without limitation, contingent liabilities if and to the extent required to be recorded as a liability on the Financial Statements of Seller in accordance with GAAP) of Seller and Seller is solvent and, after giving effect to the transactions contemplated by this Agreement and the other Program Documents, will not be rendered insolvent or left with an unreasonably small amount of capital with which to conduct its business and perform its obligations. Seller does not intend to incur, nor does it believe that it has incurred, debts beyond its ability to pay such debts as they mature. Seller is not contemplating the commencement of an insolvency, bankruptcy, liquidation, or consolidation proceeding or the appointment of a receiver, liquidator, conservator, trustee, or similar official in respect of itself or any of its property.
(s) ERISA. From the fifth fiscal year preceding the current year through the termination of this Agreement (the Reporting Period), with respect to any plan within the meaning of Section 3(3) of ERISA that is sponsored or maintained by Seller or any ERISA Affiliate, or to which Seller or any ERISA Affiliate contributes or has contributed (each, a Plan), the benefits under which Plan are guaranteed, in whole or in part, by the PBGC (i) Seller and each ERISA Affiliate has funded and will continue to fund each Plan as required by the provisions of Section 412 of the Code; (ii) Seller and each ERISA Affiliate has caused and will continue to cause (directly or indirectly) each Plan to pay all benefits when due; (iii) neither Seller nor any ERISA Affiliate has been or is obligated to contribute to any multiemployer plan as defined in Section 3(37) of ERISA; (iv) Seller (on behalf of ERISA Affiliate, if applicable) will provide to Buyer (A) no later than the date of submission to the PBGC, a copy of any notice of a Plans termination (B) no later than the date of submission to the Department of Labor or to the Internal Revenue Service, as the case may be, a copy of any request for waiver from the funding standards or extension of the amortization periods required by Section 412 of the Code and (C) notice of any Reportable Event as such term is defined in ERISA (and has, prior to the date of this Agreement, provided to Buyer a copy of any document described in clauses (iv)(A), (B) or (C) relating to any date in the Reporting Period prior to the date of this Agreement); and (v) Seller and each ERISA Affiliate will subscribe from the date of this Agreement to the termination of this Agreement to
any contingent liability insurance provided by the PBGC to protect against employer liability upon termination of a guaranteed pension plan, if available to Seller or ERISA Affiliate, as applicable.
(t) Taxes.
(i) Seller and its Subsidiaries have timely filed all income, franchise and other material Tax returns that are required to be filed by them and have timely paid all Taxes due and payable by them or imposed with respect to any of their property and all other material fees and other charges imposed on them or any of their property by any Governmental Authority, except for any such Taxes the amount or validity of which is currently being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in accordance with GAAP.
(ii) There are no Liens for Taxes with respect to any assets of Seller or its Subsidiaries, and to the knowledge of Seller, no claim is being asserted with respect to Taxes of Seller or its Subsidiaries, except for statutory Liens for Taxes not yet due and payable or for Taxes the amount or validity of which is currently being contested in good faith by appropriate proceedings diligently conducted and, in each case, with respect to which adequate reserves have been provided in accordance with GAAP.
(iii) Seller is currently treated as a limited liability company for U.S. federal income tax purposes.
(u) No Reliance. Seller has made its own independent decisions to enter into the Program Documents and each Transaction and as to whether such Transaction is appropriate and proper for it based upon its own judgment and upon advice from such advisors (including without limitation, legal counsel and accountants) as it has deemed necessary. Seller is not relying upon any advice from Buyer as to any aspect of the Transactions, including without limitation, the legal, accounting or tax treatment of such Transactions.
(v) Plan Assets. Seller is not an employee benefit plan as defined in Section 3 of Title I of ERISA, or a plan described in Section 4975(e)(1) of the Code, and the Purchased Assets are not plan assets within the meaning of 29 CFR §2510.3-101, as modified by Section 3(42) of ERISA, in Sellers hands and transactions by or with Seller are not subject to any foreign state or local statute regulating investments of, or fiduciary obligations with respect to, governmental plans within the meaning of Section 3(32) of ERISA or church plans within the meaning of Section 3(33) of ERISA.
(w) Agency Approvals. To the extent previously approved, Seller is approved by Fannie Mae as an approved lender and Freddie Mac as an approved seller/servicer, and, to the extent necessary, approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act. In each such case, Seller is in good standing, with no event having occurred or Seller having any reason whatsoever to believe or suspect will occur, including, without limitation, a change in insurance coverage which would either make Seller unable to comply with the eligibility requirements for maintaining all such applicable approvals or require notification to the relevant Agency. Seller has adequate financial standing, servicing facilities, procedures and experienced personnel necessary for the sound servicing of
mortgage loans of the same types as may from time to time constitute Mortgage Loans and in accordance with Accepted Servicing Practices.
(x) Anti-Money Laundering Laws. Seller has complied with all applicable anti-money laundering laws and regulations, including without limitation the USA Patriot Act of 2001 (collectively, the Anti-Money Laundering Laws); Seller has established an anti-money laundering compliance program as required by the Anti-Money Laundering Laws, has conducted the requisite due diligence in connection with the origination of each Mortgage Loan for purposes of the Anti-Money Laundering Laws, including with respect to the legitimacy of the applicable Mortgagor and the origin of the assets used by the said Mortgagor to purchase the property in question, and maintains, and will maintain, sufficient information to identify the applicable Mortgagor for purposes of the Anti-Money Laundering Laws.
(y) No Sanctions. Neither Seller nor any of its Affiliates, officers, directors, partners or members, (i) is an entity or person (or to the Sellers knowledge, owned or controlled by an entity or person) that (A) is currently subject to any economic sanctions or trade embargoes administered or imposed by the Office of Foreign Assets Control of the U.S. Department of the Treasury, the U.S. Department of State, the United Nations Security Council, the European Union, Her Majestys Treasury or any other relevant authority (collectively, Sanctions) or (B) resides, is organized or chartered, or has a place of business in a country or territory that is currently the subject of Sanctions and (ii) will directly or indirectly use the proceeds of any Transactions contemplated hereunder, or lend, contribute or otherwise make available such proceeds to or for the benefit of any person or entity, for the purpose of financing or supporting, directly or indirectly, the activities of any person or entity that is currently the subject of Sanctions.
SECTION 12. COVENANTS
Seller covenants to Buyer that as of the Purchase Date for any Purchased Asset, as of the date of this Agreement and any Transaction hereunder and at all times while the Program Documents are in full force and effect and/or any thereunder is outstanding, as follows:
(a) Preservation of Existence; Compliance with Law. Seller shall (i) preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises necessary for the operation of its business; (ii) comply with any material applicable Requirement of Law, rules, regulations and orders, whether now in effect or hereafter enacted or promulgated by any applicable Governmental Authority (including, without limitation, all environmental laws); (iii) maintain all material licenses, permits or other approvals necessary for Seller to conduct its business and to perform its obligations under the Program Documents, and shall conduct its business materially in accordance with any applicable Requirement of Law; and (iv) keep adequate records and books of account, in which complete entries will be made in accordance with GAAP consistently applied.
(b) Taxes.
(i) Seller and its Subsidiaries shall timely file all income, franchise and other material Tax returns that are required to be filed by them and shall timely pay all Taxes due and payable by them or imposed with respect to any of their property and all other
material fees and other charges imposed on them or any of their property by any Governmental Authority, except for any such Taxes the amount or validity of which is currently being contested in good faith by appropriate proceedings diligently conducted and with respect to which adequate reserves have been provided in accordance with GAAP.
(ii) Seller will be treated as a limited liability company for U.S. federal income tax purposes.
(c) Notice of Proceedings or Adverse Change. Seller shall give notice to Buyer immediately after a Responsible Officer of Seller has any knowledge of:
(i) the occurrence of any Default or Event of Default;
(ii) any (a) default or event of default under any Indebtedness of Seller in excess of [***] or (b) litigation, investigation, regulatory action or proceeding that is pending or, to the knowledge of Seller, threatened by or against Seller in any federal or state court or before any Governmental Authority which, if not cured or if adversely determined, would reasonably be expected to have a Material Adverse Effect or constitute a Default or Event of Default, and (c) any Material Adverse Effect with respect to Seller;
(iii) any litigation or proceeding that is pending or, to the best of Sellers knowledge, threatened (a) against Seller in which the amount involved exceeds the Litigation Threshold and is not covered by insurance, in which injunctive or similar relief is sought, or which, would reasonably be expected to have a Material Adverse Effect, (b) in connection with any of the Repurchase Assets, which, if adversely determined, would reasonably be expected to have a Material Adverse Effect and (c) that questions or challenges compliance of any Mortgage Loan with the Ability to Repay Rule or QM Rule;
(iv) as soon as reasonably possible, notice of any of the following events: (A) a material and adverse change in the insurance coverage of Seller, with a copy of evidence of same attached; (B) any material change in accounting policies or financial reporting practices of Seller; (C) promptly upon receipt of notice or knowledge of any Lien or security interest (other than security interests created hereby or under any other Program Document) on, or claim asserted against, any of the Repurchase Assets; (D) the termination or nonrenewal of any debt facilities of Seller which have a maximum principal amount (or equivalent) available of more than the Facility Termination Threshold; (E) any Change in Control; and (F) any other event, circumstance or condition that has resulted, or is reasonably likely to result, in a Material Adverse Effect; and
(v) Promptly, but no later than two (2) Business Days after Seller receives notice of the same, (A) any Purchased Mortgage Loan submitted for inclusion into an Agency Security and rejected by that Agency for inclusion in such Agency Security or (B) any Purchased Mortgage Loan submitted to an Approved Investor (whole loan or securitization) and rejected for purchase by such Approved Investor or (C) the termination or suspension of approval of Seller to sell any Mortgage Loans to any Approved Investor.
(d) Financial Reporting. Seller shall maintain a system of accounting established and administered in accordance with GAAP consistently applied, and furnish to Buyer,
with a certification by the chief executive officer, controller or other financial officer (approved by Buyer) of Seller (the following hereinafter referred to as the Financial Statements):
(i) Within ninety (90) days after the close of each fiscal year, audited consolidated and consolidating balance sheets and the related consolidated and consolidating statements of income and retained earnings and of cash flows as at the end of such year for Seller for the fiscal year, setting forth in each case in comparative form the figures for the previous year, with an unqualified opinion thereon of an Approved CPA;
(ii) Within forty-five (45) days after the end of each fiscal quarter, the consolidated and consolidating balance sheets and the related consolidated and consolidating statements of income and retained earnings and of cash flows for Seller for such quarterly period(s), of Seller, setting forth in each case in comparative form the figures for the previous year;
(iii) Within thirty (30) days after the end of each month, the consolidated and consolidating balance sheets and the related consolidated and consolidating statements of income and retained earnings and of cash flows for Seller for such monthly period(s), of Seller;
(iv) Simultaneously with the furnishing of each of the Financial Statements to be delivered pursuant to subsection (i)-(iii) above, a certificate in the form of Exhibit A to the Pricing Letter and certified by the chief executive officer, controller or other financial officer (approved by Buyer) of Seller, which includes detailed reporting to the materials set forth therein including without limitation (x) the valuation of Sellers Capitalized Mortgage Servicing Rights by any third-party evaluator and (y) any request for repurchase of or indemnification for a Mortgage Loan purchased by a third party investor; and
(v) As promptly as practicable, from time to time, such other information regarding the business affairs, operations and financial condition of Seller as Buyer may reasonably request or as set forth in the certificate delivered pursuant to Section 12(d)(iv) above.
(e) Further Assurances. Seller shall execute and deliver to Buyer all further documents, financing statements, agreements and instruments, and take all further actions that may be required under any applicable Requirement of Law, or that Buyer may reasonably request, in order to effectuate the transactions contemplated by this Agreement and the Program Documents or, without limiting any of the foregoing, to grant, preserve, protect and perfect the validity and first-priority of the security interests created or intended to be created hereby.
(f) True and Correct Information. All information, reports, exhibits, schedules, Financial Statements or certificates of Seller or any of its officers furnished to Buyer in connection with the Program Documents, the transactions contemplated thereby and during Buyers diligence of Seller will be true, complete and accurate in every material respect and will not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading or (in the case of projections) shall be based on reasonable estimates, on the date as of which such information is stated or certified. All required Financial
Statements, information and reports delivered by Seller to Buyer pursuant to this Agreement shall be prepared in accordance with GAAP.
(g) ERISA Events. Seller shall not and shall not permit any ERISA Affiliate to be in violation of any provision of Section 11(s) of this Agreement and Seller shall not be in violation of Section 11(v) of this Agreement.
(h) Financial Condition Covenants. Seller shall comply with the Financial Condition Covenants set forth in the Pricing Letter.
(i) Hedging. Seller shall hedge all Purchased Assets in accordance with Sellers hedging policies. Seller shall deliver to Buyer, not later than 1:00 p.m. (New York City time) on each Monday, or if Monday is not a Business Day, on the next succeeding Business Day, a hedging report reflecting hedges as of the prior Friday, in a form reasonably satisfactory to Buyer. Seller shall (i) review the hedging policies periodically to confirm that they are being complied with in all material respects and are adequate to meet Sellers business objectives and (ii) in the event Seller makes any written amendment or written modification to the hedging policies, within 10 days of such amendment or modification deliver to Buyer a complete copy of the amended or modified hedging policies. Additionally, Buyer may in its reasonable discretion request a current copy of Sellers hedging policies at any time.
(j) Servicer Approval. Seller shall not cause the Mortgage Loans to be serviced by any servicer other than a servicer expressly approved in writing by Buyer, which approval shall be deemed granted by Buyer with respect to Seller and LoanCare, a division of FNF Servicing, Inc., with the execution of this Agreement.
(k) Insurance. Seller shall maintain Fidelity Insurance and errors and omissions insurance in respect of its officers, employees and agents in such amounts acceptable to the Agencies. Seller shall notify Buyer of any material change in the terms of any such insurance. Seller shall maintain endorsements for theft of warehouse lender money and collateral, naming Buyer as a loss payee under its Fidelity Insurance and as a direct loss payee/right of action under its errors and omissions insurance policy.
(l) Books and Records. Seller shall, to the extent practicable, maintain and implement administrative and operating procedures (including, without limitation, an ability to recreate records evidencing the Repurchase Assets in the event of the destruction of the originals thereof), and keep and maintain or obtain, as and when required, all documents, books, records and other information reasonably necessary or advisable for the collection of all Repurchase Assets.
(m) Illegal Activities. Seller shall not engage in any conduct or activity that could subject its assets to forfeiture or seizure.
(n) Material Change in Business. Seller shall not engage to any substantial extent in any line or lines of business activity other than the businesses of mortgage banking and financial services related to mortgage products as of the date hereof.
(o) Limitation on Dividends and Distributions. Upon the occurrence of a Default or an Event of Default, Seller shall not make any payment on account of, or set apart assets for, a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of any equity interest of Seller, whether now or hereafter outstanding, or make any other distribution or dividend in respect of any of the foregoing or to any shareholder or equity owner of Seller, either directly or indirectly, whether in cash or property or in obligations of Seller or any of Sellers consolidated Subsidiaries.
(p) Scheduled Indebtedness. Without the prior written consent of Buyer, which shall not be unreasonably withheld, Seller shall not incur any additional material Indebtedness (other than (i) the Scheduled Indebtedness listed under the definition thereof and (ii) usual and customary accounts payable for a mortgage company).
(q) Disposition of Assets; Liens. Seller shall not create, incur, assume or suffer to exist any mortgage, pledge, Lien, charge or other encumbrance of any nature whatsoever on any of the Repurchase Assets, whether real, personal or mixed, now or hereafter owned, other than the Liens created in connection with the transactions contemplated by this Agreement; nor shall Seller cause any of the Purchased Assets to be sold, pledged, assigned or transferred except as permitted hereunder.
(r) Transactions with Affiliates. Seller shall not enter into any transaction, including, without limitation, the purchase, sale, lease or exchange of property or assets or the rendering or accepting of any service with any Affiliate unless such transaction is (i) not otherwise prohibited in this Agreement, (ii) in the ordinary course of Sellers business and (iii) upon reasonable terms no less favorable to Seller than it would obtain in a comparable arms length transaction with a Person which is not an Affiliate.
(s) Organization. Seller shall not (i) cause or permit any change to be made in its name, organizational identification number, identity or corporate structure, each as described in Section 11(h) or (ii) change its jurisdiction of organization, unless it shall have provided Buyer thirty (30) days prior written notice of such change and shall have first taken all action required by Buyer for the purpose of perfecting or protecting the lien and security interest of Buyer established hereunder.
(t) Mortgage Loan Reports. Upon request by Buyer, Seller will furnish to Buyer electronic Mortgage Loan performance data, including, without limitation, a Mortgage Loan Schedule, delinquency reports, pool analytic reports and static pool reports (i.e., delinquency, foreclosure and net charge off reports) and stratification reports summarizing the characteristics of the Mortgage Loans.
(u) Confidentiality. Seller shall comply with all applicable local, state and federal laws, including, without limitation, all privacy and data protection law, rules and regulations (including without limitation the Gramm-Leach-Bliley Act (the GLB Act)) that are applicable to information related to the Purchased Assets and/or any applicable terms of this Agreement, including without limitation nonpublic personal information, as that term is defined in Section 509(4) of the GLB Act (collectively, the Confidential Information). Seller shall implement such physical and other security measures as shall be necessary to (a) ensure the
security and confidentiality of the nonpublic personal information of the customers and consumers (as those terms are defined in the GLB Act) of Buyer or any Affiliate of Buyer which Buyer holds (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Seller shall, at a minimum establish and maintain such data security program as is necessary to meet the objectives of the Interagency Guidelines Establishing Standards for Safeguarding Customer Information as set forth in the Code of Federal Regulations at 12 C.F.R. Parts 30, 208, 211, 225, 263, 308, 364, 568 and 570. Upon written request from Buyer, Seller will provide written confirmation of the continued accuracy of this representation and warranty, it being understood that disclosure of information pertaining to specific policies or processes may require a confidentiality undertaking from Buyer. Seller shall notify Buyer promptly following discovery of any breach or compromise of the security, confidentiality, or integrity of nonpublic personal information of the customers and consumers of Buyer or any Affiliate of Buyer provided directly to Seller by Buyer or such Affiliate. Seller shall provide such notice to Buyer pursuant to Section 24 of this Agreement.
(v) Approved Underwriting Guidelines. Seller shall not submit to Buyer for purchase, and Buyer shall have no obligation to purchase, any Mortgage Loan underwritten in accordance with underwriting guidelines, including amendments to Approved Underwriting Guidelines not expressly approved by Buyer, other than Approved Underwriting Guidelines.
(w) Agency Approvals; Servicing. To the extent previously approved, Seller shall maintain its status with Fannie Mae and Ginnie Mae as an approved lender and Freddie Mac as an approved seller/servicer, in each case in good standing (each such approval, an Agency Approval). Should Seller, for any reason, cease to possess all such applicable Agency Approvals to the extent necessary, should Seller experience any material and adverse change in its delegated underwriting authority from any Agency, or should notification of an adverse occurrence to the relevant Agency or HUD, FHA, VA or RD be required, Seller shall so notify Buyer immediately in writing. Notwithstanding the preceding sentence and to the extent previously approved, Seller shall take all necessary action to maintain all of its applicable Agency Approvals at all times during the term of this Agreement and each outstanding Transaction.
(x) Sharing of Information. Subject to the confidentiality provisions of this Agreement, including Section 31, Seller hereby allows and consents to Buyer, subject to applicable law, exchanging information related to Seller, its credit, its mortgage loan originations and the Transactions hereunder with third party lenders, facility providers and Approved Investors (collectively, Third Party Participants), and Seller shall permit each Third Party Participant to share such similar information with Buyer. In furtherance of the foregoing, Seller shall use commercially reasonable efforts to provide Buyer access to each Third Party Participants electronic system to retrieve the information described herein.
(y) Status. Seller agrees that should Seller enter into a Warehouse Facility with any Person other than Buyer or an Affiliate of Buyer which by its terms provides such Person with the ability to receive the benefit of more favorable terms that are afforded to a different counterparty under a different Warehouse Facility with respect to any guaranties or financial covenants, including without limitation covenants covering the same or similar subject matter referred to in Section 12(h) hereof (such provision a More Favorable Agreement Provision),
Seller shall promptly (i) notify Buyer of such More Favorable Agreement Provision; (ii) notify Buyer of any more favorable terms contained in any Warehouse Facility and (iii) identify such more favorable terms with reasonable specificity, and, in any case, such More Favorable Agreement Provision and any more favorable terms shall without further action of Buyer or Seller, automatically become part of this Agreement and shall be incorporated herein.
(z) Takeout Payments. With respect to each Purchased Asset subject to a Takeout Commitment, the Seller shall arrange that all payments under the related Takeout Commitment shall be paid to Buyer (i) pursuant to the terms of the Joint Securities Agreement or (ii) to Buyers Wiring Instructions, as applicable.
(aa) Issuance of Agency Securities. In the event Purchased Mortgage Loans are pooled for the purpose of backing an Agency Security to be delivered to Buyer, Seller (i) shall comply with Section 3(d) hereof and (ii) shall not revoke such instructions to the applicable Agency.
(bb) QM/ATR Reporting. Seller shall deliver to Buyer, with reasonable promptness upon Buyers request, copies of all documentation in connection with the underwriting and origination of any Purchased Mortgage Loan that evidences compliance with the Ability to Repay Rule and the QM Rule.
(cc) Trade Assignment. In the event Seller elects to cause Delivery of an Agency Security directly to Buyer (as opposed to pursuant to the terms of the Joint Securities Agreement), Seller shall comply with Section 3(d) hereof.
(dd) Use of Proceeds. Unless otherwise agreed to by Buyer and other than in connection with Correspondent Mortgage Loans, Seller shall not use the proceeds of any Transaction hereunder to (i) pay any obligation of or amounts due to any Affiliate of Buyer, (ii) purchase any assets from or any assets financed by any Affiliate of Buyer; or (iii) purchase any securities issued by any Affiliate of Buyer.
SECTION 13. EVENTS OF DEFAULT
If any of the following events (each an Event of Default) occur, Buyer shall have the rights set forth in Section 14, as applicable:
(a) Payment Default. Seller shall default in the payment of (i) any amount payable by it hereunder or under any other Program Document, (ii) Expenses (and such failure to pay Expenses shall continue for more than [***] calendar days following notice or knowledge of such failure by Seller) or (iii) any other Obligations, when the same shall become due and payable, whether at the due date thereof, or by acceleration or otherwise (and such failure to pay such Obligations shall continue for [***] calendar days following notice of knowledge of such failure by Seller); or
(b) Representation and Warranty Breach. Any representation, warranty or certification made or deemed made herein or in any other Program Document by Seller or any certificate furnished to Buyer pursuant to the provisions hereof or thereof or any information with respect to the Mortgage Loans furnished in writing by on behalf of Seller shall prove to have been
untrue or misleading in any material respect as of the time made or furnished (other than the representations and warranties set forth in Schedule 1, which shall be considered solely for the purpose of determining the Market Value of the Purchased Assets; unless (i) Seller shall have made any such representations and warranties with actual knowledge that they were materially false or misleading at the time made; or (ii) any such representations and warranties have been determined by Buyer in its sole good faith discretion to be materially false or misleading on a regular basis) and such failure to observe or perform shall continue unremedied for a period of five (5) Business Days following notice or knowledge of such breach; or
(c) Immediate Covenant Default. The failure of Seller to perform, comply with or observe any term, covenant or agreement applicable to Seller contained in any of Sections 12(a) (Preservation of Existence; Compliance with Law); (f) (True and Correct Information) solely to the extent such information is intentionally or materially false and misleading; (g) (ERISA Events); (h) (Financial Condition Covenants); (m) (Illegal Activities.); (n) (Material Change in Business); (o) (Limitation on Dividends and Distributions); (q) (Disposition of Assets; Liens); (r) (Transactions with Affiliates); (s) (Organization); (w) (Agency Approvals; Servicing); (z) (Takeout Payments) or (cc) (Trade Assignments); or
(d) Additional Covenant Defaults. Seller shall fail to observe or perform any other covenant or agreement contained in this Agreement (and not identified in Section 13(c) including, without limitation, the failure to comply with Section 12(f)) or any other Program Document, and if such default shall be capable of being remedied, and such failure to observe or perform shall continue unremedied for a period of [***] Business Days following notice or knowledge of such failure; or
(e) Judgments. A judgment or judgments for the payment of money in excess of [***] in the aggregate shall be rendered against Seller by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within [***] days from the date of entry thereof, and Seller shall not, within said period of [***] days, or such longer period during which execution of the same shall have been stayed or bonded, appeal therefrom and cause the execution thereof to be stayed during such appeal; or
(f) Buyer Affiliate Cross-Default. Any event of default or any other default which permits a demand for, or requires, the early repayment of obligations due by Seller or its Affiliates under any agreement with Buyer or its Affiliates relating to any Indebtedness of Seller or any Affiliate, as applicable, or any default under any obligation when due with Buyer or its Affiliates; or
(g) Other Cross-Default. Any event of default or any other default (as such terms are defined in the applicable agreements and beyond the expiration of any applicable grace period) which permits a demand for, or requires, the early repayment of obligations due by Seller or its Affiliates under any note, indenture, loan agreement, guaranty, swap agreement, Hedge Agreement or other Indebtedness of Seller or any Affiliate in excess of [***]; or
(h) Insolvency Event. An Insolvency Event shall have occurred with respect to Seller; or
(i) Enforceability. For any reason, this Agreement at any time shall not be in full force and effect in all material respects or shall not be enforceable in all material respects in accordance with its terms, or any Lien granted pursuant thereto shall fail to be perfected and of first priority, or any Person (other than Buyer) shall contest the validity, enforceability, perfection or priority of any Lien granted pursuant thereto, or any party thereto (other than Buyer) shall seek to disaffirm, terminate, limit or reduce its obligations hereunder pursuant to a non-frivolous claim; or
(j) Liens. Seller shall grant, or suffer to exist, any Lien on any Repurchase Asset (except any Permitted Encumbrances and any Lien in favor of Buyer); or at least one of the following fails to be true (A) the Repurchase Assets shall have been sold to Buyer, or (B) the Liens contemplated hereby are first priority perfected Liens on any Repurchase Assets in favor of Buyer; or
(k) Material Adverse Effect. A Material Adverse Effect shall occur as determined by Buyer in its sole good faith discretion; or
(l) Change in Control. A Change in Control shall have occurred; or
(m) Going Concern. Sellers audited Financial Statements or notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of Seller as a going concern or reference of similar import; or
(n) Investigations. There shall occur the initiation of any investigation, audit, examination or review of Seller by an Agency, any Governmental Authority, any trade association or consumer advocacy group relating to the origination, sale or servicing of mortgage loans by Seller or the business operations of Seller, with the exception of normally scheduled audits or examinations by Sellers regulators, which investigation, audit, examination or review is reasonably likely to result in a Material Adverse Effect; or
(o) Inability to Perform. An officer of Seller shall admit its inability to, or its intention not to, perform any of Sellers obligations hereunder; or
(p) Governmental Action. Seller shall become the subject of a cease and desist order of the Appropriate Federal Banking Agency or any other Governmental Authority or enter into a memorandum of understanding or consent agreement with the Appropriate Federal Banking Agency or other Governmental Authority, any of which, would have, or is purportedly the result of any condition which would be reasonably likely to have, a Material Adverse Effect.
SECTION 14. REMEDIES
(a) If an Event of Default occurs, the following rights and remedies are available to Buyer; provided, that an Event of Default shall be deemed to be continuing unless expressly waived by Buyer in writing.
(i) At the option of Buyer, exercised by written or electronic notice to Seller (which option shall be deemed to have been exercised, even if no notice is given, immediately upon the occurrence of an Insolvency Event of Seller), the Repurchase Date for each Transaction hereunder, if it has not already occurred, shall be deemed immediately to occur.
(ii) If Buyer exercises or is deemed to have exercised the option referred to in subsection (a)(i) of this Section,
(A) Sellers obligations in such Transactions to repurchase all Purchased Assets, at the Repurchase Price therefor on the Repurchase Date determined in accordance with subsection (a)(i) of this Section, (1) shall thereupon become immediately due and payable and (2) all Income paid after such exercise or deemed exercise shall be retained by Buyer and applied to the aggregate unpaid Repurchase Price and any other amounts owed by Seller hereunder;
(B) to the extent permitted by any applicable Requirement of Law, the Repurchase Price with respect to each such Transaction shall be increased by the aggregate amount obtained by daily application of, on a 360 day per year basis for the actual number of days during the period from and including the date of the exercise or deemed exercise of such option to but excluding the date of payment of the Repurchase Price as so increased, (x) the Post-Default Rate in effect following an Event of Default to (y) the Repurchase Price for such Transaction as of the Repurchase Date as determined pursuant to subsection (a)(i) of this Section (decreased as of any day by (i) any amounts applied by Buyer pursuant to clause
(C) of this subsection, and (ii) any proceeds from the sale of Purchased Assets applied to the Repurchase Price pursuant to subsection (a)(iv) of this Section; and
(D) all Income actually received by Buyer pursuant to Section 5 shall be applied to the aggregate unpaid Obligations owed by Seller.
(iii) Upon the occurrence of one or more Events of Default, Buyer shall have the right to obtain (A) a physical transfer of the servicing of the Purchased Assets in accordance with Section 16(c) and (B) physical possession of all files of Seller relating to the Purchased Assets and the Repurchase Assets and all documents relating to the Purchased Assets which are then or may thereafter come in to the possession of Seller or any third party acting for Seller (including any Servicer) and Seller shall deliver to Buyer such assignments as Buyer shall request. Buyer shall be entitled to specific performance of all agreements of Seller contained in the Program Documents.
(iv) At any time on the Business Day following notice to Seller (which notice may be the notice given under subsection (a)(i) of this Section), in the event Seller has not repurchased all Purchased Assets, Buyer may (A) immediately sell, without demand or further notice of any kind, at a public or private sale, without any representations or warranties of Buyer and at such price or prices as Buyer may deem satisfactory any or all
Purchased Assets and the Repurchase Assets subject to a such Transactions hereunder and apply the proceeds thereof to the aggregate unpaid Repurchase Prices and any other amounts owing by Seller hereunder or (B) in its sole good faith discretion elect, in lieu of selling all or a portion of such Purchased Assets, to give Seller credit for such Purchased Assets and the Repurchase Assets in an amount equal to the Market Value of the Purchased Assets against the aggregate unpaid Repurchase Price and any other amounts owing by Seller hereunder. The proceeds of any disposition of Purchased Assets and the Repurchase Assets shall be applied as determined by Buyer in its sole good faith discretion.
(v) Seller shall be liable to Buyer for (A) the amount of all reasonable legal or other expenses (including, without limitation, all costs and expenses of Buyer in connection with the enforcement of this Agreement or any other agreement evidencing a Transaction, whether in action, suit or litigation or bankruptcy, insolvency or other similar proceeding affecting creditors rights generally, further including, without limitation, the reasonable fees and expenses of counsel incurred in connection with or as a result of an Event of Default, (B) damages in an amount equal to the cost (including all fees, expenses and commissions) of Buyer entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default, and (C) any other loss, damage, cost or expense directly arising or resulting from the occurrence of an Event of Default in respect of a Transaction.
(vi) Buyer shall have, in addition to its rights hereunder, any rights otherwise available to it under any Program Document or any applicable Requirement of Law.
(b) Buyer may exercise one or more of the remedies available hereunder immediately upon the occurrence of an Event of Default and at any time thereafter without notice to Seller. All rights and remedies arising under this Agreement as amended from time to time hereunder are cumulative and not exclusive of any other rights or remedies which Buyer may have.
(c) Seller recognizes that the market for the Purchased Assets may not be liquid and as a result it may not be possible for Buyer to sell all of the Purchased Assets on a particular Business Day, or in a transaction with the same purchaser, or in the same manner. In view of the nature of the Purchased Assets, Seller agrees that liquidation of any Purchased Asset may be conducted in a private sale. Seller acknowledges and agrees that any such private sale may result in prices and other terms less favorable to Buyer than if such sale were a public sale, and notwithstanding such circumstances, agrees that any such private sale shall be deemed to have been made in a commercially reasonable manner. Seller further agrees that it would not be commercially unreasonable for Buyer to dispose of any Purchased Asset by using internet sites that provide for the auction or sale of assets similar to the Purchased Assets, or that have the reasonable capability of doing so, or that match buyers and sellers of assets.
(d) Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and Seller hereby expressly waives any defenses Seller might otherwise have to require Buyer to enforce its rights by judicial process. Seller also waives any defense (other than a defense of payment or performance) Seller might otherwise have arising from the use of nonjudicial process, enforcement and sale of all or any portion of the Repurchase Assets, or from any other election of remedies. Seller recognizes that nonjudicial remedies are consistent with the
usages of the trade, are responsive to commercial necessity and are the result of a bargain at arms length.
(e) To the extent permitted by any applicable Requirement of Law, Seller shall be liable to Buyer for interest on any amounts owing by Seller hereunder, from the date Seller becomes liable for such amounts hereunder until such amounts are (i) paid in full by Seller or (ii) satisfied in full by the exercise of Buyers rights hereunder. Interest on any sum payable by Seller to Buyer under this Section 14(e) shall be at a rate equal to the Post-Default Rate.
(f) Without limiting the rights of Buyer hereto to pursue all other legal and equitable rights available to Buyer for Sellers failure to perform its obligations under this Agreement, Seller acknowledges and agree that the remedy at law for any failure to perform obligations hereunder would be inadequate and Buyer shall be entitled to specific performance, injunctive relief, or other equitable remedies in the event of any such failure. The availability of these remedies shall not prohibit Buyer from pursuing any other remedies for such breach, including the recovery of monetary damages.
SECTION 15. INDEMNIFICATION AND EXPENSES; RECOURSE
(a) Seller agrees to hold Buyer, and its Affiliates and their officers, directors, employees, agents and advisors (each an Indemnified Party) harmless from and indemnify, on an after-Tax basis, any Indemnified Party against all liabilities, losses, damages, judgments, costs and expenses of any kind which may be imposed on, incurred by or asserted against such Indemnified Party (collectively, Costs), relating to or arising out of this Agreement (including, without limitation, as a result of a breach of any representation or warranty contained on Schedule 1), any other Program Document or any transaction contemplated hereby or thereby, or any amendment, supplement or modification of, or any waiver or consent under or in respect of, this Agreement, any other Program Document or any transaction contemplated hereby or thereby, that, in each case, results from anything other than the Indemnified Partys gross negligence, bad faith or willful misconduct. Without limiting the generality of the foregoing, Seller agrees to hold any Indemnified Party harmless from and indemnify such Indemnified Party, on an after-Tax basis, against all Costs and Taxes incurred or assessed as a result of or otherwise in connection with the holding of the Mortgage Loans or Agency Securities or any failure by Seller or Subsidiary thereof to pay when due any Taxes for which such Person is liable, that result from anything other than the Indemnified Partys gross negligence, bad faith or willful misconduct. In any suit, proceeding or action brought by an Indemnified Party in connection with this Agreement, any Mortgage Loan or Agency Security for any sum owing thereunder, or to enforce any provisions of any Mortgage Loan or Agency Security, Seller will save, indemnify on an after-Tax basis and hold such Indemnified Party harmless from and against all expense, loss or damage suffered by reason of any defense, set off, counterclaim, recoupment or reduction or liability whatsoever of the account debtor or obligor thereunder, arising out of a breach by Seller of any obligation thereunder or arising out of any other agreement, indebtedness or liability at any time owing to or in favor of such account debtor or obligor or its successors from Seller. Seller also agrees to reimburse an Indemnified Party as and when billed by such Indemnified Party for all the Indemnified Partys costs and expenses incurred in connection with the enforcement or the preservation of Buyers rights under this Agreement, any other Program Document or any transaction contemplated hereby or thereby, including without limitation the reasonable fees and disbursements of its counsel.
(b) Seller agrees to pay as and when billed by Buyer all of the out-of-pocket costs and expenses incurred by Buyer in connection with the development, preparation and execution of, and any amendment, supplement or modification to, this Agreement, any other Program Document or any other documents prepared in connection herewith or therewith. Seller agrees to pay as and when billed by Buyer all of the reasonable out-of-pocket costs and expenses incurred in connection with the consummation and administration of the transactions contemplated hereby and thereby including without limitation search and filing fees and all the reasonable fees, disbursements and expenses of counsel to Buyer. Seller agrees to pay Buyer all the reasonable out-of-pocket due diligence, inspection, testing and review costs and expenses incurred by Buyer with respect to Mortgage Loans submitted by Seller for purchase under this Agreement, including, but not limited to, those out-of-pocket costs and expenses incurred by Buyer pursuant to Sections 15(a) and 17 hereof.
(c) The obligations of Seller from time to time to pay the Repurchase Price, the Price Differential, the Obligations and all other amounts due under this Agreement shall be full recourse obligations of Seller.
SECTION 16. SERVICING
(a) Seller shall service each Purchased Mortgage Loan in accordance with the Servicing Agreement which standard shall be no less than Accepted Servicing Practices for the term beginning on the Purchase Date and ending on the earlier to occur of (i) the related Repurchase Date or (ii) the date on or after the occurrence of an Event of Default (the Servicing Term). Seller shall service the Purchased Mortgage Loans in accordance with prudent mortgage loan servicing standards and procedures generally accepted in the mortgage banking industry and in accordance with all applicable requirements of the Agencies, Requirement of Law, the provisions of any applicable servicing agreement, and the requirements of any applicable Takeout Commitment and the Approved Investor, so that the eligibility of the Mortgage Loan for purchase under such Takeout Commitment is not voided or reduced by such servicing and administration.
(b) If any Mortgage Loan that is proposed to be sold on a Purchase Date is serviced by a servicer other than Seller (a Subservicer), or if the servicing of any Mortgage Loan is to be transferred to a Subservicer, Seller shall provide a copy of the related servicing agreement and a Servicer Notice executed by such Subservicer (collectively, the Servicing Agreement) to Buyer prior to such Purchase Date or servicing transfer date, as applicable. Each such Servicing Agreement shall be in form and substance reasonably acceptable to Buyer. In addition, Seller shall have obtained the prior written consent of Buyer for such Subservicer to subservice the Mortgage Loans, which consent may be withheld in Buyers sole good faith discretion, which approval shall be deemed granted by Buyer with respect to Sellers initial subservicer LoanCare, a division of FNF Servicing, Inc. In no event shall Sellers use of a Subservicer relieve Seller of its obligations hereunder, and Seller shall remain liable under this Agreement as if Seller were servicing such Mortgage Loans directly.
(c) Seller shall transfer actual servicing of each Purchased Mortgage Loan, together with all of the related Records in its possession, to Buyers designee and designate Buyers designee as the servicer in the MERS System upon the occurrence of an Event of Default hereunder. Sellers transfer of the Records and servicing under this Section shall be in accordance
with customary standards in the industry and such transfer shall include the transfer of the gross amount of all escrows held for the related mortgagors (without reduction for unreimbursed advances or negative escrows).
(d) During the period Seller is servicing the Purchased Mortgage Loans as agent for Buyer, Seller agrees that Buyer is the owner of the related Credit Files and Records and Seller shall at all times maintain and safeguard and cause the Subservicer to maintain and safeguard the Credit File for the Purchased Mortgage Loans (including photocopies or images of the documents delivered to Buyer), and accurate and complete records of its servicing of the Purchased Mortgage Loan; Sellers possession of the Credit Files and Records being for the sole purpose of servicing such Purchased Mortgage Loan and such retention and possession by Seller being in a custodial capacity only.
(e) At Buyers request, Seller shall promptly deliver to Buyer reports regarding the status of any Purchased Mortgage Loan being serviced by Seller, which reports shall include, but shall not be limited to, a description of any default thereunder for more than thirty (30) days or such other circumstances that could cause a material adverse effect on such Purchased Mortgage Loan, Buyers title to such Purchased Mortgage Loan or the collateral securing such Purchased Mortgage Loan; Seller may be required to deliver such reports until the repurchase of the Purchased Mortgage Loan by Seller. Seller shall immediately notify Buyer if it becomes aware of any payment default that occurs under the Purchased Mortgage Loan or any default under any Servicing Agreement that would materially and adversely affect any Purchased Mortgage Loan subject thereto.
(f) Seller shall release its custody of the contents of any Credit File or Mortgage File only (i) in accordance with the written instructions of Buyer, (ii) upon the consent of Buyer when such release is required as incidental to Sellers servicing of the Purchased Mortgage Loan, is required to complete the Takeout Commitment or comply with the Takeout Commitment requirements, or (iii) as required by any applicable Requirement of Law.
(g) Buyer reserves the right to appoint a successor servicer at any time to service any Purchased Mortgage Loan (each a Successor Servicer) upon the occurrence of an Event of Default. If Buyer elects to make such an appointment upon the occurrence of an Event of Default, Seller shall be assessed all costs and expenses incurred by Buyer associated with transferring the servicing of the Purchased Mortgage Loans to the Successor Servicer. In the event of such an appointment, Seller shall perform all acts and take all action so that any part of the Credit File and related Records held by Seller, together with all funds in the Custodial Account and other receipts relating to such Purchased Mortgage Loan, are promptly delivered to Successor Servicer, and shall otherwise reasonably cooperate with Buyer in effectuating such transfer. Seller shall have no claim for lost servicing income, lost profits or other damages if Buyer appoints a Successor Servicer hereunder and the servicing fee is reduced or eliminated. For the avoidance of doubt any termination of the Servicers rights to service by Buyer as a result of an Event of Default shall be deemed part of an exercise of Buyers rights to cause the liquidation, termination or acceleration of this Agreement.
(h) For the avoidance of doubt, Seller retains no economic rights to the
servicing of the Purchased Mortgage Loans provided that Seller shall continue to service the Purchased Mortgage Loans hereunder as part of its Obligations hereunder. As such, Seller expressly acknowledges that the Purchased Mortgage Loans are sold to Buyer on a servicing released basis.
SECTION 17. DUE DILIGENCE
(a) Seller acknowledges that Buyer has the right to perform continuing due diligence reviews with respect to the Mortgage Loans, Seller, Settlement Agents, Approved Investors and other parties which may be involved in or related to Transactions (collectively, Third Party Transaction Parties), from time to time, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, or otherwise, and Seller agrees that upon reasonable prior notice to Seller, unless an Event of Default shall have occurred, in which case no notice is required, Buyer or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Mortgage Files and any and all documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession or under the control of Seller. Seller will use commercially reasonable efforts to cause Third Party Transaction Parties to reasonably cooperate with any due diligence requests of Buyer. Seller shall also make reasonably available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Mortgage Files and the Mortgage Loans. Without limiting the generality of the foregoing, Seller acknowledges that Buyer may purchase Mortgage Loans from Seller based solely upon the information provided by Seller to Buyer in the Mortgage Loan Schedule and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Mortgage Loans purchased in a Transaction, including, without limitation, ordering brokers price opinions, new credit reports and new appraisals on the related Mortgaged Properties and otherwise re-generating the information used to originate such Mortgage Loan. Buyer may underwrite such Mortgage Loans itself or engage a mutually agreed upon third party underwriter to perform such underwriting. Seller agrees to reasonably cooperate with Buyer and any third party underwriter in connection with such underwriting, including, but not limited to, providing Buyer and any third party underwriter with reasonable access to any and all documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession, or under the control, of Seller. Seller further agrees that it shall pay all reasonable out-of-pocket costs and expenses incurred by Buyer in connection with Buyers activities pursuant to this Section 17.
SECTION 18. ASSIGNABILITY
The rights and obligations of the parties under this Agreement and under any Transaction shall not be assigned by Seller without the prior written consent of Buyer. Buyer may from time to time assign all or a portion of its rights and obligations under this Agreement and the Program Documents with Sellers consent not to be unreasonably withheld; provided, however that such consent shall not be required if Buyer assigns its rights and obligations (i) to an Affiliate of Buyer or (ii) after the occurrence and during the continuance of an Event of Default. Buyer shall maintain as agent of Seller, for review by Seller upon written request, a register of assignees and a copy of an executed assignment and acceptance by Buyer and assignee (Assignment and Acceptance), specifying the percentage or portion of such rights and obligations assigned. Upon
such assignment, (a) such assignee shall be a party hereto and to each Program Document to the extent of the percentage or portion set forth in the Assignment and Acceptance, and shall succeed to the applicable rights and obligations of Buyer hereunder, and (b) Buyer shall, to the extent that such rights and obligations have been so assigned by it be released from its obligations hereunder and under the Program Documents. Subject to the foregoing, this Agreement and any Transactions shall be binding upon and shall inure to the benefit of the parties and their respective successors and assigns. Nothing in this Agreement express or implied, shall give to any Person, other than the parties to this Agreement and their successors hereunder, any benefit of any legal or equitable right, power, remedy or claim under this Agreement. Unless otherwise stated in the Assignment and Acceptance, Seller shall continue to take directions solely from Buyer unless otherwise notified by Buyer in writing. Buyer may distribute to any prospective assignee any document or other information delivered to Buyer by Seller.
Buyer may sell participations to one or more Persons in or to all or a portion of its rights and obligations under this Agreement; provided, however, that (i) Buyers obligations under this Agreement shall remain unchanged, (ii) Buyer shall remain solely responsible to the other parties hereto for the performance of such obligations; and (iii) Seller shall continue to deal solely and directly with Buyer in connection with Buyers rights and obligations under this Agreement and the other Program Documents except as provided in Section 7.
Buyer may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Section 18, disclose to the assignee or participant or proposed assignee or participant, as the case may be, any information relating to Seller or any of its Subsidiaries or to any aspect of the Transactions that has been furnished to Buyer by or on behalf of Seller or any of its Subsidiaries; provided that such assignee or participant agrees to hold such information subject to the confidentiality provisions of this Agreement.
In the event Buyer assigns all or a portion of its rights and obligations under this Agreement, the parties hereto agree to negotiate in good faith an amendment to this Agreement to add agency provisions similar to those included in agreements for similar syndicated repurchase facilities.
SECTION 19. TRANSFER AND MAINTENANCE OF REGISTER.
(a) Subject to acceptance and recording thereof pursuant to Section 19(b), from and after the effective date specified in each Assignment and Acceptance the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment and Acceptance, have the rights and obligations of Buyer under this Agreement. Any assignment or transfer by Buyer of rights or obligations under this Agreement that does not comply with this Section 19 shall be treated for purposes of this Agreement as a sale by such Buyer of a participation in such rights and obligations in accordance with Section 19(b) hereof.
(b) Buyer shall maintain, on Sellers behalf, a register (the Register) on which it will record each Assignment and Acceptance and participation. The Register shall include the names and addresses of Buyer (including all assignees, successors and participants) and the percentage or portion of such rights and obligations assigned. Failure to make any such
recordation, or any error in such recordation shall not affect Sellers obligations in respect of such rights.
SECTION 20. HYPOTHECATION OR PLEDGE OF PURCHASED ASSETS
Title to all Purchased Assets and Repurchase Assets shall pass to Buyer and Buyer shall have free and unrestricted use of all Purchased Assets. Nothing in this Agreement shall preclude Buyer from engaging in repurchase transactions with the Purchased Assets or otherwise pledging, repledging, transferring, hypothecating, or rehypothecating the Purchased Assets to any Person, including without limitation, the Federal Home Loan Bank; provided, however, that to the extent Buyer engages in any Repurchase Transactions, it shall have reacquired title to such particular Purchased Assets on or prior to the related Repurchase Date. Seller shall not be responsible for any additional obligations, costs, fees or expenses in connection with such transactions of Buyer. Nothing contained in this Agreement shall obligate Buyer to segregate any Purchased Assets delivered to Buyer by Seller.
SECTION 21. TAX TREATMENT
Notwithstanding anything to the contrary in this Agreement or any other Program Documents, each party to this Agreement acknowledges that it is its intent for U.S. federal, state and local income and franchise tax purposes to treat each Transaction as indebtedness of Seller that is secured by the Purchased Assets and the Purchased Assets as owned by Seller in the absence of a Default by Seller. All parties to this Agreement agree to such treatment and agree to take no action inconsistent with this treatment, unless required by any Requirement of Law (in which case such party shall promptly notify the other party of such Requirement of Law).
SECTION 22. SET-OFF
In addition to any rights and remedies of Buyer hereunder and by law, Buyer shall have the right, without prior notice to Seller, any such notice being expressly waived by Seller to the extent permitted by applicable law to set-off and appropriate and apply against any Obligation from Seller to Buyer any and all deposits (general or special, time or demand, provisional or final), in any currency, and any other obligation (including to return excess margin), credits, indebtedness or claims or cash, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by or due from Buyer to or for the credit or the account of Seller. Buyer agrees promptly to notify Seller after any such set-off and application made by Buyer; provided that the failure to give such notice shall not affect the validity of such set-off and application.
Buyer shall at any time have the right, in each case until such time as Buyer determines otherwise, to retain, to suspend payment or performance of, or to decline to remit, any amount or property that Buyer would otherwise be obligated to pay, remit or deliver to Seller hereunder if an Event of Default has occurred and is continuing.
SECTION 23. TERMINABILITY
Each representation and warranty made or deemed to be made by entering into a Transaction, herein or pursuant hereto shall survive the making of such representation and
warranty, and Buyer shall not be deemed to have waived any Default that may arise because any such representation or warranty shall have proved to be materially false or misleading, notwithstanding that Buyer may have had notice or knowledge or reason to believe that such representation or warranty was false or misleading at the time the Transaction was made. Notwithstanding any such termination or the occurrence of an Event of Default, all of the representations and warranties and covenants hereunder shall continue and survive. The obligations of Seller under Section 15 hereof shall survive the termination of this Agreement.
SECTION 24. NOTICES AND OTHER COMMUNICATIONS
Except as otherwise expressly permitted by this Agreement, all notices, requests and other communications provided for herein (including without limitation any modifications of, or waivers, requests or consents under, this Agreement) shall be given or made in writing (including without limitation by electronic transmission) delivered to the intended recipient at the addresses set forth below. In all cases, to the extent that the related individual set forth in the respective Attention line is no longer employed by the respective Person, such notice may be given to the attention of a Responsible Officer of the respective Person or to the attention of such individual or individuals as subsequently notified in writing by a Responsible Officer of the respective Person. Except as otherwise provided in this Agreement and except for notices given under Section 3 (which shall be effective only on receipt), all such communications shall be deemed to have been duly given when transmitted electronically or personally delivered or, in the case of a mailed notice, upon receipt, in each case given or addressed as aforesaid.
If to Seller:
AmeriHome Mortgage Company, LLC
21300 Victory Boulevard, Suite 900
Woodland Hills, CA 91367
AmeriHome Mortgage Company, LLC
21300 Victory Boulevard, Suite 900
Woodland Hills, CA 91367
With a copy to:
AmeriHome Mortgage Company, LLC
21300 Victory Boulevard, Suite 900
Woodland Hills, CA 91367
Attention: Legal Department
Email: legal@amerihome.com
If to Buyer:
UBS Bank USA
1285 Avenue of the Americas
New York, NY 10019
With a copy to:
UBS Bank USA
153 West 51st Street
New York, NY 10019
And:
OL-SMFG-Business@ubs.com
SECTION 25. USE OF THE WAREHOUSE ELECTRONIC SYSTEM AND OTHER ELECTRONIC MEDIA
Seller acknowledges and agrees that Buyer may require or permit certain transactions with Buyer be conducted electronically using Electronic Records and/or Electronic Signatures. Seller consents to the use of Electronic Records and/or Electronic Signatures whenever expressly required or permitted by Buyer and acknowledges and agrees that Seller shall be bound by its Electronic Signature and by the terms, conditions, requirements, information and/or instructions contained in any such Electronic Records.
Seller agrees to adopt as its Electronic Signature its user identification codes, passwords, personal identification numbers, access codes, a facsimile image of a written signature and/or other symbols or processes as provided or required by Buyer from time to time (as a group, any subgroup thereof or individually, hereinafter referred to as Sellers Electronic Signature). Seller acknowledges that Buyer will rely on any and all Electronic Records and on Sellers Electronic Signature transmitted or submitted to Buyer.
Buyer shall not be liable for the failure of either its or Sellers internet service provider, or any other telecommunications company, telephone company, satellite company or cable company to timely, properly and accurately transmit any Electronic Record or fax copy.
Before engaging in Electronic Transactions with Seller, Buyer may provide Seller, or require Seller to create, user identification codes, passwords, personal identification numbers and/or access codes, as applicable, to permit access to Buyers computer information processing system. Each Person permitted access to the Warehouse Electronic System must have a separate identification code and password. Seller shall be fully responsible for protecting and safeguarding any and all user identification codes, passwords, personal identification numbers and access codes
provided or required by Buyer. Seller shall adopt and maintain security measures to prevent the loss, theft or unauthorized or improper disclosure or use of any and all user identification codes, passwords, personal identification numbers and/or access codes by Persons other than the individual Person who is authorized to use such information. Seller shall notify Buyer immediately in the event (i) of any loss, theft or unauthorized disclosure or use of any of the user identification codes, passwords, personal identification numbers and/or access codes or (ii) Seller has any reason to believe there has been a breach of security or that its access to Warehouse Electronic System is no longer secure for any reason.
Seller understands and agrees that it shall be fully responsible for protecting and safeguarding its computer hardware and software from any and all (a) computer viruses, time bombs, trojan horses or other harmful computer information, commands, codes or programs that may cause or facilitate the destruction, corruption, malfunction or appropriation of, or damage or change to, any of Sellers or Buyers computer information processing systems, including without limitation, all hardware, software, Electronic Records, information, data and/or codes and (b) computer worms, trap doors or other harmful computer information, commands, codes or programs that enable unauthorized access to Sellers and/or Buyers computer information processing systems, including without limitation, all hardware, software, Electronic Records, information, data and/or codes.
Seller agrees that Buyer may, in its sole good faith discretion and from time to time, without limiting Sellers liability set forth herein, establish minimum security standards that Seller must, at a minimum, comply with in an effort to (x) protect and safeguard any and all user identification codes, passwords, personal identification numbers and/or access codes from loss, theft or unauthorized disclosure or use; and (y) prevent the infiltration and infection of Sellers hardware and/or software by any and all computer viruses, time bombs, trojan horses, worms, trapdoors or other harmful computer codes or programs.
If Buyer, from time to time, establishes minimum security standards, Seller shall comply with such minimum security standards within the time period established by Buyer.
Buyer shall have the right to confirm Sellers compliance with any such minimum security standards. Sellers compliance with such minimum security standards shall not relieve Seller from any of its liability set forth in this Section 25.
Whether or not Buyer establishes minimum security standards, Seller shall continue to be fully responsible for adopting and maintaining security measures that are consistent with the risks associated with conducting electronic transactions with Buyer. Sellers failure to adopt and maintain appropriate security measures or to comply with any minimum security standards established by Buyer may result in, among other things, termination of Sellers access to Buyers computer information processing systems.
Seller understands and agrees that certain elements or components of the Warehouse Electronic System may be provided by third party vendors, and hereby holds Buyer harmless from any liabilities, losses, damages, judgments, costs and expenses of any kind which may be imposed on, incurred by or asserted against Seller relating to or arising out of Sellers use
of the Warehouse Electronic System including without limitation, the use of any elements or components provided by third party vendors.
SECTION 26. ENTIRE AGREEMENT; SEVERABILITY; SINGLE AGREEMENT
This Agreement, together with the Program Documents, constitute the entire understanding between Buyer and Seller with respect to the subject matter they cover and shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions involving Purchased Assets including, without limitation, any confidentiality agreements. By acceptance of this Agreement, Buyer and Seller each acknowledge that they have not made, and are not relying upon, any statements, representations, promises or undertakings not contained in this Agreement. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
Buyer and Seller acknowledge that, and have entered hereinto and will enter into each Transaction hereunder in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and that each has been entered into in consideration of the other Transactions. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that Buyer shall be entitled to set off claims and apply property held by it in respect of any Transaction against obligations owing to it in respect of any other Transaction hereunder; (iii) that payments, deliveries, and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries, and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries, and other transfers may be applied against each other and netted and (iv) to promptly provide notice to the other after any such set off or application.
SECTION 27. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAW PRINCIPLES THEREOF. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE EFFECTIVENESS, VALIDITY AND ENFORCEABILITY OF ELECTRONIC CONTRACTS, OTHER RECORDS, ELECTRONIC RECORDS AND ELECTRONIC SIGNATURES USED IN CONNECTION WITH ANY ELECTRONIC TRANSACTION BETWEEN BUYER AND SELLER SHALL BE GOVERNED BY E-SIGN.
SECTION 28. SUBMISSION TO JURISDICTION; WAIVERS
BUYER AND EACH SELLER HEREBY IRREVOCABLY AND UNCONDITIONALLY:
(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND THE OTHER PROGRAM DOCUMENTS, OR FOR RECOGNITION AND
ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE EXCLUSIVE GENERAL JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, THE FEDERAL COURTS OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS FROM ANY THEREOF;
(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT IN SUCH COURTS AND, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;
(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 24 HEREOF OR AT SUCH OTHER ADDRESS OF WHICH THE OTHER PARTY SHALL HAVE BEEN NOTIFIED;
(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT TO SUE IN ANY OTHER JURISDICTION; AND
(v) HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, ANY OTHER PROGRAM DOCUMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
SECTION 29. NO WAIVERS, ETC.
No failure on the part of Buyer to exercise and no delay in exercising, and no course of dealing with respect to, any right, power or privilege under any Program Document shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under any Program Document preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies provided herein are cumulative and not exclusive of any remedies provided by law. An Event of Default shall be deemed to be continuing unless expressly waived by Buyer in writing.
SECTION 30. NETTING
If Buyer and Seller are financial institutions as now or hereinafter defined in Section 4402 of Title 12 of the United States Code (Section 4402) and any rules or regulations promulgated thereunder (a) all amounts to be paid or advanced by one party to or on behalf of the other under this Agreement or any Transaction hereunder shall be deemed to be payment
obligations and all amounts to be received by or on behalf of one party from the other under this Agreement or any Transaction hereunder shall be deemed to be payment entitlements within the meaning of Section 4402, and this Agreement shall be deemed to be a netting contract as defined in Section 4402; (b) the payment obligations and the payment entitlements of the parties hereto pursuant to this Agreement and any Transaction hereunder shall be netted as follows. In the event that either party (the Defaulting Party) shall fail to honor any payment obligation under this Agreement or any Transaction hereunder, the other party (the Nondefaulting Party) shall be entitled to reduce the amount of any payment to be made by the Nondefaulting Party to the Defaulting Party by the amount of the payment obligation that the Defaulting Party failed to honor.
SECTION 31. CONFIDENTIALITY
(a) Confidential Terms. Buyer and Seller hereby acknowledge and agree that all information provided before or after the date hereof by one party to any other in connection with any Program Document or the Transactions contemplated hereby, whether furnished by or on behalf of Buyer or Seller or any of their representatives including without limitation: (i) all knowledge or information concerning the business, operations and assets of the Buyer or Seller or their respective affiliates, which for the avoidance of doubt, shall include, without limitation, internal operating procedures; methodologies; investment strategies; hedging strategies; structuring strategies and concepts; trade secrets; sales data; vendor data and customer lists (existing and potential); financial plans, projections and reports; product strategies; and investment strategies; (ii) all property owned, licensed and/or developed by or for the Buyer or Seller or their respective affiliates, such as computer systems, programs, software and devices, plus information about the design, methodology and documentation therefor; (iii) information about or personal to the Buyer or Seller or their respective affiliates, insureds, employees, agents and applicants (for jobs or products) of any of the foregoing and (iv) information, materials, products or any other tangible or intangible assets in the possession or the control of the Buyer or Seller or their respective affiliates, which is proprietary to, or confidential to or about, any other person or entity (the Confidential Terms) shall be kept confidential and shall not be divulged to any party without the prior written consent of such other party except to the extent set forth in clause (b) below. Confidential Terms shall not include information that (A) is or becomes part of the public domain through no fault of the Buyer or Seller, as applicable, or its Permitted Recipients (as defined below) in violation of this Agreement; (B) is already known to the Buyer or Seller, as applicable, or any of its Permitted Recipients on a non-confidential basis prior to disclosure of such information by either party; (C) is subsequently received by the Buyer or Seller, as applicable, or its Permitted Recipients from a third party who the Buyer or Seller, as applicable, or its Permitted Recipients believe is not prohibited from disclosing such information by a contractual, legal, fiduciary or other obligation owed to the Buyer or Seller, as applicable.
(b) Permitted Disclosures. Notwithstanding clause (a) above, Buyer and Seller, as applicable, shall be permitted to disclose, on a confidential basis, Confidential Terms to the extent that (i) it is necessary in connection with any Program Document, Purchased Assets and/or Transaction to do so in working with its affiliates, legal counsel, actuaries, auditors, directors, officers, employees (Permitted Recipients); (ii) taxing authorities or other governmental agencies or regulatory bodies or in order to comply with any applicable federal or state laws; or (iii) in the event of an Event of Default, Buyer determines such information to be necessary or
desirable to disclose in connection with the marketing and sales of the Purchased Assets or otherwise to enforce or exercise Buyers rights hereunder.
(c) Involuntary Disclosures. If the Buyer or Seller shall at any time be involved in any litigation, arbitration, administrative, legal, regulatory or other proceeding or if Buyer or Seller and/or its respective Permitted Recipients is otherwise required by law, regulation or other legal process, in each case, in which such party and/or its Permitted Recipient, on the advice of its own legal counsel, may be or becomes required to disclose any Confidential Terms in violation of Section 31 of this Agreement (a Legal Proceeding), whether in discovery or otherwise, including by any oral question, subpoena, interrogatory, deposition, request for documents or information, order, writ, rule, regulatory, or other legal process, such party and/or its Permitted Recipients shall, if such party and/or its Permitted Recipients may lawfully do so, promptly notify the other party of the receipt of such Legal Proceeding whereupon such other party may seek an appropriate protective order or other relief at such other partys own expense. Buyer or Seller and its respective Permitted Recipients, as applicable, shall cooperate with the other party, at such other partys expense, to obtain a protective order or other remedy or reasonable assurance that confidential treatment will be afforded the Confidential Terms in the Legal Proceeding. Buyer or Seller and/or its respective Permitted Recipients may disclose any Confidential Terms in accordance with such Legal Proceeding in the event that the other party fails to obtain any protective order or other relief but shall use its reasonable efforts to disclose only that portion of the Confidential Terms which is necessary to comply with such Legal Proceeding after taking commercially reasonable steps to ensure that the portion of the Confidential Terms so disclosed will be treated confidentially by the party to which it has been so disclosed. Notwithstanding the foregoing, no notice or other action by Buyer or Seller, as applicable, or any of their respective Permitted Recipients shall be required where disclosure of Confidential Terms is made in connection with a routine request, audit or examination by a bank examiner, auditor, regulatory authority or supervisory authority not targeting or in regards to the Program Documents, Transactions or the Buyer or Seller, as applicable.
(d) Treatment of Confidential Information. Buyer understands that the Confidential Information may contain information that is subject to, and accordingly Buyer represents and warrants to Seller that Buyer and its Affiliates are subject to internal policies and processes that require Buyer and its Permitted Recipients to receive, maintain, store and dispose of such Confidential Information in compliance with, any and all applicable federal, state and local laws, rules, regulations and ordinances governing or relating to privacy rights in connection with its performance under this Agreement including, without limitation, the GLB Act. Such policies and procedures include the implementation of such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of any nonpublic personal information that is disclosed to Buyer in any manner or for any purpose and that pertains to any customers or consumers (as all such terms are defined in the GLB Act) of Seller, (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Buyer further understands that Seller is relying on Buyers representation and warranty in disclosing the Confidential Information. Upon written request from Seller, Buyer will provide written confirmation of the continued accuracy of this representation and warranty, it being understood that disclosure of information pertaining to specific policies or processes may require a confidentiality undertaking from Seller.
(e) Notwithstanding the foregoing or anything to the contrary contained herein or in any other Program Document, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the Transactions, any fact relevant to understanding the federal, state and local tax treatment of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that Seller may not disclose the name of or identifying information with respect to Buyer, its Affiliates or any other Indemnified Party, or any pricing terms (including, without limitation, the Pricing Rate, Warehouse Fees and, Purchase Price) or other nonpublic business or financial information (including any sublimits and financial covenants) that is unrelated to the federal, state and local tax treatment of the Transactions and is not relevant to understanding the federal, state and local tax treatment of the Transactions, without the prior written consent of Buyer. The provisions set forth in this Section 31 shall survive the termination of this Agreement.
SECTION 32. INTENT
(a) The parties recognize that each Transaction is a repurchase agreement as that term is defined in Section 101 of Title 11 of the Bankruptcy Code, as amended and a securities contract as that term is defined in Section 741 of Title 11 of the Bankruptcy Code, as amended and that all payments hereunder are deemed margin payments or settlement payments as defined in Title 11 of the Bankruptcy Code and that the pledge of the Repurchase Assets constitutes a security agreement or other arrangement or other credit enhancement that is related to the Agreement and Transactions hereunder within the meaning of Sections 101(38A)(A), 101(47)(A)(v) and 741(7)(A)(xi) of the Bankruptcy Code. The parties further recognize and intend that this Agreement is an agreement to provide financial accommodations and is not subject to assumption pursuant to Bankruptcy Code Section 365(a).
(b) This Agreement is intended to be a repurchase agreement and a securities contract, within the meaning of Section 555 and Section 559 under the Bankruptcy Code. It is understood that either partys right to liquidate Purchased Assets delivered to it in connection with Transactions hereunder or to exercise any other remedies pursuant to Section 13 hereof is a contractual right to liquidate such Transaction as described in Sections 555 and 559 of Title 11 of the Bankruptcy Code, as amended; any payments or transfers of property made with respect to this Agreement or any Transaction to satisfy a Margin Deficit shall be considered a margin payment as such term is defined in Bankruptcy Code Section 741(5).
(c) The parties hereby agree that any provisions hereof or in any other document, agreement or instrument that is related in any way to the servicing of the Purchased Mortgage Loans shall be deemed related to this Agreement within the meaning of Sections 101(38A)(A) and 101(47)(A)(v) of the Bankruptcy Code and part of the contract as such term is used in Section 741 of the Bankruptcy Code.
(d) The parties agree and acknowledge that if a party hereto is an insured depository institution, as such term is defined in the Federal Deposit Insurance Act, as amended (FDIA), then each Transaction hereunder is a qualified financial contract, a repurchase agreement and a securities contract as such terms are defined in FDIA and any rules, orders or policy statements thereunder.
(e) It is understood that this Agreement constitutes a netting contract as defined in and subject to Title IV of the Federal Deposit Insurance Corporation Improvement Act of 1991 (FDICIA) and each payment entitlement and payment obligation under any Transaction hereunder shall constitute a covered contractual payment entitlement or covered contractual payment obligation, respectively, as defined in and subject to FDICIA (except insofar as one or both of the parties is not a financial institution as that term is defined in FDICIA).
(f) Each party intends that this Agreement constitutes and shall be construed and interpreted as a master netting agreement within the meaning of and as such terms are used in Section 561 of the Bankruptcy Code and each party agrees that this Agreement is intended to create mutuality of obligations among the parties, and as such, this Agreement constitutes a contract which (i) is between all of the parties and (ii) places each party in the same right and capacity.
SECTION 33. DISCLOSURE RELATING TO CERTAIN FEDERAL PROTECTIONS
The parties acknowledge that they have been advised that (a) in the case of Transactions in which one of the parties is a broker or dealer registered with the Securities and Exchange Commission (SEC) under Section 15 of the Securities Exchange Act of 1934 (1934 Act), the Securities Investor Protection Corporation has taken the position that the provisions of the Securities Investor Protection Act of 1970 (SIPA) do not protect the other party with respect to any Transaction hereunder and (b) in the case of Transactions in which one of the parties is a financial institution, funds held by the financial institution pursuant to a Transaction hereunder are not a deposit and therefore are not insured by the Federal Deposit Insurance Corporation or the National Credit Union Share Insurance Fund, as applicable.
SECTION 34. CONFLICTS
In the event of any conflict between the terms of this Agreement, any other Program Document and any Confirmation, the documents shall control in the following order of priority: first, the terms of the Confirmation shall prevail, then the terms of this Agreement shall prevail, and then the terms of the other Program Document shall prevail.
SECTION 35. MISCELLANEOUS
(a) Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Agreement by signing any such counterpart. Delivery of an executed counterpart of a signature page of this Agreement in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Agreement.
(b) Captions. The captions and headings appearing herein are for included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement.
(c) Acknowledgment. Seller hereby acknowledges that (i) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Program
Documents; (ii) Buyer has no fiduciary relationship to Seller; and (iii) no joint venture exists between Buyer and Seller.
(d) Documents Mutually Drafted. Seller and Buyer agree that this Agreement each other Program Document prepared in connection with the Transactions set forth herein have been mutually drafted and negotiated by each party, and consequently such documents shall not be construed against either party as the drafter thereof.
(e) Amendments. This Agreement and each other Program Document may be amended from time to time, in writing and duly executed by the parties hereto.
(f) Acknowledgement of Anti Predatory Lending Policies. Buyer has in place internal policies and procedures that expressly prohibit its purchase of any High Cost Mortgage Loan.
(g) Authorizations. Any of the persons whose signatures and titles appear on Schedule 2 are authorized, acting singly, to act for Seller, under this Agreement.
SECTION 36. GENERAL INTERPRETIVE PRINCIPLES
For purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires: (a) the terms defined in this Agreement have the meanings assigned to them in this Agreement and include the plural as well as the singular, and the use of any gender herein shall be deemed to include the other gender; (b) accounting terms not otherwise defined herein have the meanings assigned to them in accordance with GAAP; (c) references herein to Articles, Sections, Subsections, Paragraphs, and other subdivisions without reference to a document are to designated Articles, Sections, Subsections, Paragraphs and other subdivisions of this Agreement; (d) a reference to a Subsection without further reference to a Section is a reference to such Subsection as contained in the same Section in which the reference appears, and this rule shall also apply to Paragraphs and other subdivisions; (e) the words herein, hereof, hereunder and other words of similar import refer to this Agreement as a whole and not to any particular provision; (f) the term include or including shall mean without limitation by reason of enumeration; (g) all times specified herein or in any other Program Document (unless expressly specified otherwise) are local times in New York, New York unless otherwise stated; and (h) all references herein or in any Program Document to good faith means good faith as defined in Section 1-201(19) of the UCC as in effect in the State of New York.
[THIS SPACE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, the parties have entered into this Agreement as of the date set forth above.
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UBS BANK USA | |
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Signature Page to Master Repurchase Agreement
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AMERIHOME MORTGAGE COMPANY, LLC | |
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Signature Page to Master Repurchase Agreement
SCHEDULE 1
REPRESENTATIONS AND WARRANTIES
Seller represents and warrants to Buyer, with respect to each Mortgage Loan, that as of the Purchase Date for the purchase of any Purchased Mortgage Loans by Buyer from Seller and as of the date of this Agreement and any Transaction hereunder and at all times while the Program Documents and any Transaction hereunder is in full force and effect, that the following are true and correct. For purposes of this Schedule 1 and the representations and warranties set forth herein, a breach of a representation or warranty shall be deemed to have been cured with respect to a Mortgage Loan if and when Seller has taken or caused to be taken action such that the event, circumstance or condition that gave rise to such breach no longer adversely affects such Mortgage Loan. With respect to those representations and warranties which are made to the best of Sellers knowledge, if it is discovered by Seller or Buyer that the substance of such representation and warranty is inaccurate, notwithstanding Sellers lack of knowledge with respect to the substance of such representation and warranty, such inaccuracy shall be deemed a breach of the applicable representation and warranty.
(a) Mortgage Loans as Described. The information set forth in the Mortgage Loan Schedule is complete, true and correct.
(b) Payments Current. No payment required under the Mortgage Loan is [***] days or more delinquent nor has any payment under the Mortgage Loan been [***] days or more delinquent at any time since the origination of the Mortgage Loan; and, if the Mortgage Loan is a Co-op Loan, no foreclosure action or private or public sale under the Uniform Commercial Code has begun or, to the knowledge of Seller, is currently being threatened or commenced with respect to the Co-op Loan.
(c) Origination Date. The initial Purchase Date is no more than (i) with respect to Mortgage Loans other than Correspondent Mortgage Loans in non-escrow states, [***] days following the origination date of the Mortgage Note; (ii) with respect to Mortgage Loans other than Correspondent Mortgage Loans in escrow states, [***] days following the origination date of the Mortgage Note and (iii) with respect to Correspondent Mortgage Loans, [***] days following the origination date of the Mortgage Note or such other date approved by Buyer in its sole discretion.
(d) Approved Underwriting Guidelines. The Mortgage Loan satisfies the Approved Underwriting Guidelines.
(e) No Outstanding Charges. There are no defaults in complying with the terms of the Mortgage, and all taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable. Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required under the Mortgage Loan, except for interest accruing from the date of the Mortgage Note or date
of disbursement of the Mortgage Loan proceeds, whichever is earlier, to the day which precedes by one month the Due Date of the first installment of principal and interest.
(f) Original Terms Unmodified. The terms of the Mortgage Note (and the Proprietary Lease, the Assignment of Proprietary Lease and Stock Power with respect to each Co-op Loan) and Mortgage have not been impaired, waived, altered or modified in any respect, from the date of origination except by a written instrument which has been recorded, if necessary to protect the interests of Buyer, and which has been delivered to the Custodian or to such other Person as Buyer shall designate in writing, and the terms of which are reflected in the Mortgage Loan Schedule. The substance of any such waiver, alteration or modification has been approved by the issuer of any related PMI Policy and the title insurer, if any, to the extent required by the policy, and its terms are reflected on the Mortgage Loan Schedule, if applicable. No Mortgagor has been released, in whole or in part, except in connection with an assumption agreement, approved by the issuer of any related PMI Policy and the issuer of the title insurer, to the extent required by the policy, and which assumption agreement is part of the Mortgage File delivered to the Custodian or to such other Person as Buyer shall designate in writing and the terms of which are reflected in the Mortgage Loan Schedule.
(g) No Defenses. The Mortgage Loan (and the Assignment of Proprietary Lease related to each Co-op Loan) is not subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto, and no Mortgagor was a debtor in any state or federal bankruptcy or insolvency proceeding at, or subsequent to, the time the Mortgage Loan was originated.
(h) Hazard Insurance. Pursuant to the terms of the Mortgage, the Fannie Mae guide, the Freddie Mac guide and any additional requirements set forth in the Approved Underwriting Guidelines, all buildings or other improvements upon the Mortgaged Property are insured by a generally acceptable insurer against loss by fire, hazards of extended coverage and such other hazards. If required by the National Flood Insurance Act of 1968, as amended, each Mortgage Loan is covered by a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration as in effect which policy conforms to Fannie Mae and Freddie Mac, as well as all additional requirements set forth in the Servicing Agreement. All individual insurance policies contain a standard mortgagee clause naming Seller and its successors and assigns as mortgagee, and all premiums thereon have been paid. The Mortgage obligates the Mortgagor thereunder to maintain the hazard insurance policy at the Mortgagors cost and expense, and on the Mortgagors failure to do so, authorizes the holder of the Mortgage to obtain and maintain such insurance at such Mortgagors cost and expense, and to seek reimbursement therefor from the Mortgagor. Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance, provided the policy is not a master or blanket hazard insurance policy covering a condominium, or any hazard insurance policy covering the common facilities of a planned unit development. The hazard insurance policy is the valid and binding obligation of the insurer, is in full force and effect, and will be in full force and effect and inure to the benefit of Buyer upon the
consummation of the transactions contemplated by this Agreement. Seller has not engaged in, and has no knowledge of the Mortgagors or any servicers having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of such policy, including, without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other person or entity, and no such unlawful items have been received, retained or realized by Seller.
(i) Compliance with Applicable Laws. Any and all requirements of any federal, state or local law including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, anti-predatory lending laws, laws covering fair housing, fair credit reporting, community reinvestment, homeowners equity protection, equal credit opportunity, mortgage reform and disclosure laws or unfair and deceptive practices laws applicable to the Mortgage Loan have been complied with, the consummation of the transactions contemplated hereby will not involve the violation of any such laws or regulations. Seller shall maintain in its possession, available for Buyers inspection, and shall deliver to Buyer upon demand, evidence of compliance with all requirements set forth herein.
(j) No Satisfaction of Mortgage. The Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part, nor has any instrument been executed that would affect any such release, cancellation, subordination or rescission. Seller has not waived the performance by the Mortgagor of any action, if the Mortgagors failure to perform such action would cause the Mortgage Loan to be in default, nor has Seller waived any default resulting from any action or inaction by the Mortgagor.
(k) Location and Type of Mortgaged Property. The Mortgaged Property is a fee simple property located in the state identified in the Mortgage Loan Schedule except that with respect to real property located in jurisdictions in which the use of leasehold estates for residential properties is a widely-accepted practice, the Mortgaged Property may be a leasehold estate and consists of a single parcel of real property with a detached single family residence erected thereon, or a two- to four-family dwelling, or an individual residential condominium or Co-op Unit in a low-rise or high-rise condominium or Co-op Project, or an individual unit in a planned unit development and that no residence or dwelling is (i) a mobile home or (ii) a manufactured home, provided, however, that any condominium or Co-op Unit or planned unit development shall not fall within any of the Ineligible Projects of part VIII, Section 102 of the Fannie Mae Selling Guide and shall conform with the Approved Underwriting Guidelines. The Mortgaged Property is not raw land. In the case of any Mortgaged Properties that are manufactured homes (a Manufactured Home Mortgage Loans), (i) such Manufactured Home Mortgage Loan conforms with the applicable Fannie Mae or Freddie Mac requirements regarding mortgage loans related to manufactured dwellings, (ii) the related manufactured dwelling is permanently affixed to the land, (iii) the related manufactured dwelling and the related land are subject to a Mortgage properly filed in the appropriate public recording office and naming Seller as mortgagee, (iv) the applicable laws of the jurisdiction in which the related Mortgaged Property is located will deem the manufactured dwelling located on such Mortgaged Property to be a part of the real property on which such dwelling is located, and (v) such
Manufactured Home Mortgage Loan is (x) a qualified mortgage under Section 860G(a)(3) of the Internal Revenue Code of 1986, as amended and (y) secured by manufactured housing treated as a single family residence under Section 25(e)(10) of the Code. As of the date of origination, no portion of the Mortgaged Property was used for commercial purposes, and since the date of origination, no portion of the Mortgaged Property has been used for commercial purposes; provided, that Mortgaged Properties which contain a home office shall not be considered as being used for commercial purposes as long as the Mortgaged Property has not been altered for commercial purposes and is not storing any chemicals or raw materials other than those commonly used for homeowner repair, maintenance and/or household purposes.
(l) Located in U.S. No collateral (including, without limitation, the related real property and the dwellings thereon and otherwise) relating to such Mortgage Loan is located in any jurisdiction other than the United States of America or the District of Columbia.
(m) Valid First Lien. Each Mortgage is a valid and subsisting first lien of record on a single parcel of real estate constituting the Mortgaged Property, including all buildings and improvements on the Mortgaged Property and all installations and mechanical, electrical, plumbing, heating and air conditioning systems located in or annexed to such buildings, and all additions, alterations and replacements made at any time, subject in all cases to the exceptions to title set forth in the title insurance policy with respect to the related Mortgage Loan, which exceptions are generally acceptable to prudent mortgage lending companies, and such other exceptions to which similar properties are commonly subject and which do not individually, or in the aggregate, materially and adversely affect the benefits of the security intended to be provided by such Mortgage. The lien of the Mortgage is subject only to (collectively, Permitted Encumbrances):
(i) the lien of current real property taxes and assessments not yet due and payable.
(ii) covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to prudent mortgage lending institutions generally and specifically referred to in the lenders title insurance policy delivered to the originator of the Mortgage Loan and (a) specifically referred to or otherwise considered in the appraisal made for the originator of the Mortgage Loan or (b) which do not adversely affect the Appraised Value of the Mortgaged Property set forth in such appraisal; and
(iii) other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, subsisting, enforceable and perfected first lien and first priority security interest on the property described therein and Seller has full right to sell and assign the same to Buyer.
(n) Validity of Mortgage Documents. The Mortgage Note and the Mortgage and any other agreement executed and delivered by a Mortgagor in connection with a Mortgage Loan are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms, except as enforceability may be limited by bankruptcy, insolvency, reorganization, receivership or other similar laws affecting creditors rights generally from time to time in effect and general principles of equity. All parties to the Mortgage Note and the related Mortgage had legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note and the related Mortgage, and the Mortgage Note and the related Mortgage have been duly and properly executed by other such related parties. The documents, instruments and agreements submitted for loan underwriting were not falsified and contain no untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the information and statements therein not misleading. No fraud, error, omission, misrepresentation, negligence or similar occurrence with respect to the Mortgage Loan has taken place on the part of any Person, including without limitation, the Mortgagor, any appraiser, any builder or developer, or any other party involved in the origination or servicing of the Mortgage Loan or in the application or any insurance in relation to such Mortgage Loan. Seller has reviewed all of the documents constituting the Mortgage File and has made such inquiries as it deems necessary to make and confirm the accuracy of the representations set forth herein.
(o) Full Disbursement of Proceeds. The Mortgage Loan has been closed and the proceeds of the Mortgage Loan have been fully disbursed and there is no requirement for future advances thereunder, and any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor have been complied with. All costs, fees and expenses incurred in making or closing the Mortgage Loan and the recording of the Mortgage were paid, and the Mortgagor is not entitled to any refund of any amounts paid or due under the Mortgage Note or Mortgage. All points and fees related to each Mortgage Loan were disclosed in writing to the Mortgagor in accordance with applicable state and federal law and regulation. No Mortgagor was charged points and fees (whether or not financed) in an amount that exceeds the greater of (i) [***] and (ii) [***] (or such other applicable limits for lower balance Mortgages) as specified under 12 CFR 1026.43(e)(3), and the points and fees were calculated using the calculation required for qualified mortgages under 12 CFR 1026.32(b) to determine compliance with applicable requirements.
(p) Ownership. Seller is the sole owner of record and holder of the Mortgage Loan and the indebtedness evidenced by each Mortgage Note and upon the sale of the Mortgage Loans to Buyer, Seller will retain the Mortgage Files or any part thereof with respect thereto not delivered to the Custodian, Buyer or Buyers designee, in trust only for the purpose of servicing and supervising the servicing of each Mortgage Loan. The Mortgage Loan is not assigned or pledged, and Seller has good, indefeasible and marketable title thereto, and has full right to transfer and sell the Mortgage Loan to Buyer free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest (other than Permitted Encumbrances), and has full right and authority subject to no interest or participation of, or agreement with, any other party, to sell and assign each Mortgage Loan (and with respect to any Co-op Loan, the sole owner of the related Assignment of Proprietary Lease) pursuant to this Agreement and following the sale of each Mortgage Loan, Buyer will own such Mortgage Loan free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest (other than Permitted
Encumbrances). Seller intends to relinquish all rights to possess, control and monitor the Mortgage Loan.
(q) Doing Business. All parties which have had any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (1) in compliance with any and all applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and (2) either (i) organized under the laws of such state, or (ii) qualified to do business in such state, or (iii) a federal savings and loan association, a savings bank or a national bank having a principal office in such state, or (3) not doing business in such state.
(r) LTV, PMI Policy. No Conforming Mortgage Loan has an LTV greater than [***]. The LTV of the Conforming Mortgage Loan either is not more than [***] or the excess over [***] of the Appraised Value is and will be insured as to payment defaults by a PMI Policy until the LTV of such Conforming Mortgage Loan is reduced to [***]. All provisions of such PMI Policy have been and are being complied with, such policy is in full force and effect, and all premiums due thereunder have been paid. No action, inaction, or event has occurred and no state of facts exists that has, or will result in the exclusion from, denial of, or defense to coverage. Any Conforming Mortgage Loan subject to a PMI Policy obligates the Mortgagor thereunder to maintain the PMI Policy and to pay all premiums and charges in connection therewith. The Mortgage Interest Rate for the Conforming Mortgage Loan as set forth on the Mortgage Loan Schedule is net of any such insurance premium. The LTV of any HARP Mortgage Loan is no greater than [***] if such Mortgage Loan is (i) a fixed-rate Mortgage Loan with a term in excess of 30 years, or (ii) an adjustable-rate Mortgage Loan with an initial fixed period greater than or equal to five years, unless otherwise approved by Buyer in its sole discretion.
(s) Title Insurance. The Mortgage Loan is covered by an ALTA lenders title insurance policy, or with respect to any Mortgage Loan for which the related Mortgaged Property is located in California a CLTA lenders title insurance policy, or other generally acceptable form of policy or insurance acceptable to Fannie Mae or Freddie Mac and each such title insurance policy is issued by a title insurer acceptable to Fannie Mae or Freddie Mac and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring Seller, its successors and assigns, as to the first priority lien of the Mortgage in the original principal amount of the Mortgage Loan, subject only to the Permitted Encumbrances, and in the case of adjustable rate Mortgage Loans, against any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of the Mortgage providing for adjustment to the Mortgage Interest Rate and Monthly Payment. Where required by state law or regulation, the Mortgagor has been given the opportunity to choose the carrier of the required mortgage title insurance. Additionally, such lenders title insurance policy affirmatively insures ingress and egress, and against encroachments by or upon the Mortgaged Property or any interest therein. The title policy does not contain any special exceptions (other than the standard exclusions) for zoning and uses and has been marked to delete the standard survey exception or to replace the standard survey exception with a specific survey reading. Seller, its successors and assigns, are the sole insureds of such lenders title insurance policy, and such lenders title insurance policy is valid and remains in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement. No claims have been made under such lenders title insurance policy, and no prior holder of the related Mortgage, including Seller, has done, by act or omission,
anything which would impair the coverage of such lenders title insurance policy, including without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other Person or entity, and no such unlawful items have been received, retained or realized by Seller.
(t) No Defaults. Other than payments due but not yet [***] days or more delinquent, there is no default, breach, violation or event which would permit acceleration existing under the Mortgage or the Mortgage Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event which would permit acceleration, and neither Seller nor any of its affiliates nor any of their respective predecessors, have waived any default, breach, violation or event which would permit acceleration; and with respect to each Co-op Loan, there is no default in complying with the terms of the Mortgage Note, the Assignment of Proprietary Lease and the Proprietary Lease and all maintenance charges and assessments (including assessments payable in the future installments, which previously became due and owing) have been paid, and Seller has the right under the terms of the Mortgage Note, Assignment of Proprietary Lease and Recognition Agreement to pay any maintenance charges or assessments owed by the Mortgagor.
(u) No Mechanics Liens. There are no mechanics or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under law could give rise to such liens) affecting the related Mortgaged Property which are or may be liens prior to, or equal or coordinate with, the lien of the related Mortgage.
(v) Location of Improvements; No Encroachments. All improvements which were considered in determining the Appraised Value of the Mortgaged Property at origination lay wholly within the boundaries and building restriction lines of the Mortgaged Property, and no improvements on adjoining properties encroach upon the Mortgaged Property (except those encroachments which the title insurer has affirmatively insured over). No improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning law or regulation.
(w) Origination; Payment Terms. The Mortgage Loan was originated by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or other similar institution which is supervised and examined by a federal or state authority. The documents, instruments and agreements submitted for loan underwriting were not falsified and contain no untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the information and statements therein not misleading. No Mortgage Loan contains terms or provisions which would result in negative amortization. Principal payments on the Mortgage Loan commenced no more than [***] days after funds were disbursed in connection with the Mortgage Loan. The mortgage interest rate as well as the lifetime rate cap and the periodic cap are as set forth on the Mortgage Loan Schedule. The Mortgage Note is payable in equal monthly installments of principal and interest, which installments of interest, with respect to adjustable rate Mortgage Loans, are subject to change due to the adjustments to the mortgage interest rate on each interest rate adjustment date, with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty
years from commencement of amortization. Unless otherwise specified, the Mortgage Loan is payable on the first day of each month. There are no Mortgage Loans which contain a provision allowing the Mortgagor to convert the Mortgage Note from an adjustable interest rate Mortgage Note to a fixed interest rate Mortgage Note.
(x) Customary Provisions. The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (i) in the case of a Mortgage designated as a deed of trust, by trustees sale, and (ii) otherwise by judicial or non-judicial foreclosure. Upon default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustees sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage Loan will be able to deliver good and merchantable title to the Mortgaged Property. There is no homestead or other exemption or other right available to the Mortgagor or any other person, or restriction on Seller or any other person, including without limitation, any federal, state or local, law, ordinance, decree, regulation, guidance, attorney general action, or other pronouncement, whether temporary or permanent in nature, that would interfere with, restrict or delay, either (y) the ability of Seller, Buyer or any servicer or any successor servicer to sell the related Mortgaged Property at a trustees sale or otherwise, or (z) the ability of Seller, Buyer or any servicer or any successor servicer to foreclose on the related Mortgage.
(y) Conformance with Agency and Approved Underwriting Guidelines. The Mortgage Loan was underwritten in accordance with the Approved Underwriting Guidelines (a copy of which has been delivered to Buyer). The Mortgage Note and Mortgage are on forms acceptable to Freddie Mac, Fannie Mae or FHA, as applicable, and Seller has not made any representations to a Mortgagor that are inconsistent with the mortgage instruments used. The methodology used in underwriting the extension of credit for each Mortgage Loan employs objective quantitative principles which relate the Mortgagors credit characteristics, income, assets and liabilities (as applicable to a particular underwriting program) to the proposed payment, and such underwriting methodology does not rely on the extent of the Mortgagors equity in the collateral as the principal determining factor in approving such credit extension. Such underwriting methodology confirmed that at the time of origination (application/approval) the Mortgagor had a reasonable ability to make timely payments on the Mortgage Loan.
(z) Occupancy of the Mortgaged Property. The Mortgaged Property is lawfully occupied under applicable law. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities.
(aa) No Additional Collateral. The Mortgage Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage and the security interest of any applicable security agreement or chattel mortgage referred to in clause (j) above.
(bb) Deeds of Trust. In the event the Mortgage constitutes a deed of trust, a trustee, authorized and duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or
will become payable by Buyer to the trustee under the deed of trust, except in connection with a trustees sale after default by the Mortgagor or reconveyance of the deed of trust.
(cc) Acceptable Investment. There are no circumstances or conditions with respect to the Mortgage, the Mortgaged Property, the Mortgagor, the Mortgage File or the Mortgagors credit standing that can reasonably be expected to cause private institutional investors to regard the Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to become delinquent, or adversely affect the value or marketability of the Mortgage Loan, or cause the Mortgage Loans to prepay during any period materially faster or slower than the mortgage loans originated by Seller generally.
(dd) Delivery of Mortgage Documents. The Mortgage Note, the Mortgage, the Assignment of Mortgage and any other documents required to be delivered under the Custodial Agreement for each Mortgage Loan have been delivered to the Custodian. Seller is in possession of a complete, true and accurate Mortgage File, except for such documents the originals of which have been delivered to the Custodian or Buyer or which have been submitted for recording and not yet returned.
(ee) Condominiums/Planned Unit Developments. If the Mortgaged Property is a condominium unit or a planned unit development (other than a de minimis planned unit development) such condominium or planned unit development project is (i) acceptable to Fannie Mae or Freddie Mac or (ii) located in a condominium or planned unit development project which has received project approval from Fannie Mae or Freddie Mac. The representations and warranties required by Fannie Mae with respect to such condominium or planned unit development have been satisfied and remain true and correct.
(ff) Transfer of Mortgage Loans. The Assignment of Mortgage with respect to each Mortgage Loan is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located. The transfer, assignment and conveyance of the Mortgage Notes and the Mortgages by Seller are not subject to the bulk transfer or similar statutory provisions in effect in any applicable jurisdiction.
(gg) Due-On-Sale. The Mortgage contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the mortgagee thereunder, and to the best of Sellers knowledge, such provision is enforceable.
(hh) Assumability. No Mortgage Loan is assumable.
(ii) No Buydown Provisions; No Graduated Payments or Contingent Interests. The Mortgage Loan does not contain provisions pursuant to which Monthly Payments are paid or partially paid with funds deposited in any separate account established by Seller, the Mortgagor, or anyone on behalf of the Mortgagor, or paid by any source other than the Mortgagor nor does it contain any other similar provisions which may constitute a buydown provision. The Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan does not have a shared appreciation or other contingent interest feature.
(jj) Consolidation of Future Advances. Any future advances made to the Mortgagor prior to the Purchase Date have been consolidated with the outstanding principal amount secured by the Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term. The lien of the Mortgage securing the consolidated principal amount is expressly insured as having first lien priority by a title insurance policy, an endorsement to the policy insuring the mortgagees consolidated interest or by other title evidence acceptable to Fannie Mae and Freddie Mac and/or FHA, as applicable. The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan.
(kk) Mortgaged Property Undamaged; No Condemnation Proceedings. There is no proceeding pending or threatened for the total or partial condemnation of the Mortgaged Property. The Mortgaged Property is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty so as to affect adversely the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended and each Mortgaged Property is in good repair.
(ll) Collection Practices; Escrow Deposits; Interest Rate Adjustments. The origination, servicing and collection practices used by Seller with respect to the Mortgage Loan have been in all respects in compliance with Accepted Servicing Practices, applicable laws and regulations, and have been in all respects legal and proper and prudent in the mortgage origination and servicing business. With respect to escrow deposits and Escrow Payments, all such payments are in the possession of, or under the control of, Seller and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. All Escrow Payments have been collected in full compliance with state and federal law and the provisions of the related Mortgage Note and Mortgage. An escrow of funds is not prohibited by applicable law and has been established in an amount sufficient to pay for every item that remains unpaid and has been assessed but is not yet due and payable. No escrow deposits or Escrow Payments or other charges or payments due Seller have been capitalized under the Mortgage or the Mortgage Note. All mortgage interest rate adjustments have been made in strict compliance with state and federal law and the terms of the related Mortgage and Mortgage Note on the related interest rate adjustment date. If, pursuant to the terms of the Mortgage Note, another index was selected for determining the mortgage interest rate, the same index was used with respect to each Mortgage Note which required a new index to be selected, and such selection did not conflict with the terms of the related Mortgage Note. Seller executed and delivered any and all notices required under applicable law and the terms of the related Mortgage Note and Mortgage regarding the mortgage interest rate and the Monthly Payment adjustments. Any interest required to be paid pursuant to state, federal and local law has been properly paid and credited.
(mm) No Violation of Environmental Laws. The Mortgaged Property is free from any and all toxic or hazardous substances and there exists no violation of any local, state or federal environmental law, rule or regulation. There is no pending action or proceeding directly involving the Mortgaged Property in which compliance with any environmental law, rule or regulation is an issue; there is no violation of any environmental law, rule or regulation with respect to the Mortgaged Property; and nothing further remains to be done to satisfy in full all requirements of each such law, rule or regulation constituting a prerequisite to use and enjoyment of said property.
(nn) Servicemembers Civil Relief Act of 2003. The Mortgagor has not notified Seller, and Seller has no knowledge of any relief requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act of 2003.
(oo) Appraisal. The Mortgage File contains an appraisal of the related Mortgaged Property signed prior to the approval of the Mortgage Loan application by a qualified appraiser, duly appointed by Seller, who had no interest, direct or indirect in the Mortgaged Property or in any loan made on the security thereof, and whose compensation is not affected by the approval or disapproval of the Mortgage Loan, and the appraisal and appraiser both satisfy the requirements of Fannie Mae, Freddie Mac or FHA and Title XI of the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 and the regulations promulgated thereunder, all as in effect on the date the Mortgage Loan was originated, or with respect to a HARP Mortgage Loan, a duly executed property inspection waiver, fieldwork waiver, or other such similar document as required by the applicable Agency.
(pp) Disclosure Materials. The Mortgagor has executed a statement to the effect that the Mortgagor has received all disclosure materials required by, and Seller has complied with, all applicable law with respect to the making of the Mortgage Loans. Seller shall maintain such statement in the Mortgage File.
(qq) Construction or Rehabilitation of Mortgaged Property. No Mortgage Loan was made in connection with the construction or rehabilitation of a Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged Property.
(rr) Value of Mortgaged Property. Seller has no knowledge of any circumstances existing that could reasonably be expected to adversely affect the value or the marketability of any Mortgaged Property or Mortgage Loan or to cause the Mortgage Loans to prepay during any period materially faster or slower than similar mortgage loans held by Seller generally secured by properties in the same geographic area as the related Mortgaged Property.
(ss) No Defense to Insurance Coverage. Seller has caused or will cause to be performed any and all acts required to preserve the rights and remedies of Buyer in any insurance policies applicable to the Mortgage Loans including, without limitation, any necessary notifications of insurers, assignments of policies or interests therein, and establishments of coinsured, joint loss payee and mortgagee rights in favor of Buyer. No action has been taken or failed to be taken, no event has occurred and no state of facts exists or has existed on or prior to the Purchase Date (whether or not known to Seller on or prior to such date) which has resulted or will result in an exclusion from, denial of, or defense to coverage under any applicable, special hazard insurance policy, or applicable PMI Policy or bankruptcy bond (including, without limitation, any exclusions, denials or defenses which would limit or reduce the availability of the timely payment of the full amount of the loss otherwise due thereunder to the insured) whether arising out of actions, representations, errors, omissions, negligence, or fraud of Seller, the related Mortgagor or any party involved in the application for such coverage, including the appraisal, plans and specifications and other exhibits or documents submitted therewith to the insurer under such insurance policy, or for any other reason under such coverage, but not including the failure of such insurer to pay by reason of such insurers breach of such insurance policy or such insurers financial inability to pay.
(tt) Reserved.
(uu) Prior Servicing. Each Mortgage Loan has been serviced in all material respects in strict compliance with Accepted Servicing Practices.
(vv) Credit Information. As to each consumer report (as defined in the Fair Credit Reporting Act, Public Law 91-508) or other credit information furnished by Seller to Buyer, that Seller has full right and authority and is not precluded by law or contract from furnishing such information to Buyer and Buyer is not precluded from furnishing the same to any subsequent or prospective purchaser of such Mortgage. Seller shall hold Buyer harmless from any and all damages, losses, costs and expenses (including attorneys fees) arising from disclosure of credit information in connection with Buyers secondary marketing operations and the purchase and sale of mortgages or Servicing Rights thereto.
(ww) Leaseholds. If the Mortgage Loan is secured by a long-term residential lease, (1) the lessor under the lease holds a fee simple interest in the land; (2) the terms of such lease expressly permit the mortgaging of the leasehold estate, the assignment of the lease without the lessors consent and the acquisition by the holder of the Mortgage of the rights of the lessee upon foreclosure or assignment in lieu of foreclosure or provide the holder of the Mortgage with substantially similar protections; (3) the terms of such lease do not (a) allow the termination thereof upon the lessees default without the holder of the Mortgage being entitled to receive written notice of, and opportunity to cure, such default, (b) allow the termination of the lease in the event of damage or destruction as long as the Mortgage is in existence, (c) prohibit the holder of the Mortgage from being insured (or receiving proceeds of insurance) under the hazard insurance policy or policies relating to the Mortgaged Property or (d) permit any increase in rent other than pre-established increases set forth in the lease; (4) the original term of such lease is not less than 15 years; (5) the term of such lease does not terminate earlier than five years after the maturity date of the Mortgage Note; and (6) the Mortgaged Property is located in a jurisdiction in which the use of leasehold estates in transferring ownership in residential properties is a widely accepted practice.
(xx) Prepayment Penalty. No Mortgage Loan is subject to a prepayment penalty such that an amount in excess of the unpaid principal balance is due by the Mortgagor if Mortgagor prepays the Mortgage Loan prior to the maturity date of such Mortgage Loan.
(yy) Predatory Lending Regulations; High Cost Loans. No Mortgage Loan (i) is classified as High Cost Mortgage Loans; (ii) is subject to Section 226.32 of Regulation Z or any similar state law (relating to high interest rate credit/lending transactions) or (iii) is subject to any law, regulation or rule that (A) imposes liability on a mortgagee or a lender to a mortgagee for upkeep to a Mortgaged Property prior to completion of foreclosure thereon, or (B) imposes liability on a lender to a mortgagee for acts or omissions of the mortgagee or otherwise defines a mortgagee in a manner that would include a lender to a mortgagee. For the avoidance of doubt, a higher-priced mortgage loan as defined under Section 226.35 of Regulation Z shall not be considered a High Cost Mortgage Loan. No Mortgagor was encouraged or required to select a Mortgage Loan product offered by Seller or the originator which is a higher cost product designed for less creditworthy borrowers, unless at the time of the Mortgage Loans origination, such Mortgagor did not qualify taking into account credit history and debt to income ratios for a lower cost credit
product then offered by Seller or originator. If, at the time of loan application, the Mortgagor qualified for a lower cost credit product then offered by Seller or the originators standard mortgage channel (if applicable), Seller or the originator directed the Mortgagor towards such standard mortgage channel, or offered such lower-cost credit product to the Mortgagor.
(zz) Ohio Stated Income Exclusion. Each Mortgage Loan with an origination date on or after January 1, 2007 which is secured by Mortgaged Property located in Ohio was originated pursuant to a program which requires verification of the borrowers income in accordance with Full and Alternative Documentation programs as described within the Approved Underwriting Guidelines.
(aaa) Origination. No predatory or deceptive lending practices, including, without limitation, the extension of credit without regard to the ability of the Mortgagor to repay and the extension of credit which has no apparent benefit to the Mortgagor, were employed in the origination of the Mortgage Loan.
(bbb) Single-premium Credit or Life Insurance Policy. In connection with the origination of any Mortgage Loan, no proceeds from any Mortgage Loan were used to purchase any single premium credit insurance policy (e.g., life, mortgage, disability, accident, unemployment, or health insurance product) or debt cancellation agreement as a condition of obtaining the extension of credit. No Mortgagor obtained a prepaid single-premium credit insurance policy (e.g., life, mortgage, disability, accident, unemployment, or health insurance product) or debt cancellation agreement in connection with the origination of the Mortgage Loan; No proceeds from any Mortgage Loan were used to purchase single premium credit insurance policies (e.g., life, mortgage, disability, accident, unemployment, or health insurance product) or debt cancellation agreements as part of the origination of, or as a condition to closing, such Mortgage Loan.
(ccc) Tax Service Contract; Flood Certification Contract. Each Mortgage Loan is covered by a paid in full, life of loan, tax service contract and a paid in full, life of loan, flood certification contract and each of these contracts is assignable to Buyer.
(ddd) Qualified Mortgage. Each Mortgage Loan satisfies the following criteria: (i) such Mortgage Loan is a Qualified Mortgage; (ii) prior to the origination of such Mortgage Loan, the related originator made a reasonable and good faith determination that the related Mortgagor would have a reasonable ability to repay such Mortgage Loan according to its terms, in accordance with, at a minimum, the eight underwriting factors set forth in 12 CFR 1026.43(c)(2); and (iii) such Mortgage Loan is supported by documentation that evidences compliance with the Ability to Repay Rule and the QM Rule.
(eee) Ability to Repay Determination. There is no action, suit or proceeding instituted by or against or, to the knowledge of Seller, threatened against Seller in any federal or state court or before any commission or other regulatory body (federal, state or local, foreign or domestic) that questions or challenges the compliance of any Mortgage Loan (or the related underwriting) with the Ability to Repay Rule or the QM Rule.
(fff) Regarding the Mortgagor. The Mortgagor is one or more natural persons and/or trustees for an Illinois land trust or a trustee under a living trust and such living trust is in compliance with Fannie Mae guidelines for such trusts.
(ggg) Recordation. Each original Mortgage was recorded and, except for those Mortgage Loans subject to the MERS identification system, all subsequent assignments of the original Mortgage (other than the assignment to Buyer) have been recorded in the appropriate jurisdictions wherein such recordation is necessary to perfect the lien thereof as against creditors of Seller, or is in the process of being recorded.
(hhh) FICO Scores. Other than with respect to (i) FHA, VA and RD streamlined Mortgage Loans and (ii) Mortgage Loans where the related Mortgagor is a foreign national, each Mortgage Loan has a non-zero FICO score.
(iii) Reserved.
(jjj) Illinois Mortgage Loans. All Mortgage Loans originated on or after September 1, 2006 secured by property located in Cook County, Illinois are recordable at the time of origination.
(kkk) Subprime Mortgage Loans. No Mortgage Loan originated in the state of New York is a Subprime Home Loan as defined in New York Banking Law 6-m, effective September 1, 2008.
(lll) Balloon Mortgage Loans. No Mortgage Loan is a balloon mortgage loan that has an original stated maturity of less than seven (7) years.
(mmm) Adjustable Rate Mortgage Loans. Each Mortgage Loan that is an adjustable rate Mortgage Loan and that has a residential loan application date on or after September 13, 2007, complies in all material respects with the Interagency Statement on Subprime Mortgage Lending, 72 FR 37569 (July 10, 2007), regardless of whether the Mortgage Loans originator or Seller is subject to such statement as a matter of law.
(nnn) Agency Mortgage Loans. Each Mortgage Loan that is subject to a Takeout Commitment with an Agency as the Approved Investor had a principal balance at its origination that did not exceed such Agencys conforming loan limits as of the Purchase Date.
(ooo) Nontraditional Mortgage Loan. Each Mortgage Loan that is a nontraditional mortgage loan within the meaning of the Interagency Guidance on Nontraditional Mortgage Product Risks, 71 FR 58609 (October 4, 2006), and that has a residential loan application date on or after September 13, 2007, complies in all material respects with such guidance, regardless of whether the Mortgage Loans originator or Seller is subject to such guidance as a matter of law.
(ppp) Mandatory Arbitration. No Mortgage Loan is subject to mandatory arbitration.
(qqq) Reserved.
(rrr) Wet Loans. With respect to each Mortgage Loan that is a Wet Loan, (i) such Mortgage Loan (other than a Mortgage Loan originated in the State of New York) is covered by a duly authorized, executed, delivered and enforceable Closing Protection Letter, and (ii) the Settlement Agent has been instructed in writing by the applicable Seller to hold the related Mortgage Loan documents as agent and bailee for Buyer or Buyer agent and to promptly forward such Mortgage Loan documents to Custodian.
(sss) Takeout Commitment. Unless otherwise approved by Buyer, each Purchased Asset is (a) eligible for sale to at least two (2) Approved Investors or (b) covered by a Takeout Commitment (i) that does not exceed the availability under such Takeout Commitment (taking into consideration mortgage loans which have been purchased by the respective Approved Investor under the Takeout Commitment and mortgage loan which Seller has identified to Buyer as covered by such Takeout Commitment); (ii) conforms to the requirements and the specifications set forth in such Takeout Commitment and the related regulations, rules, requirements and/or handbooks of the applicable Approved Investor and (iii) is eligible for sale to and insurance or guaranty by, respectively the applicable Approved Investor and applicable insurer. Each Takeout Commitment is a legal, valid and binding obligation of Seller enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency and similar laws affecting creditors rights generally and subject, as to enforceability, to general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law).
(ttt) Prior Financing. Other than with respect to a Correspondent Mortgage Loan or as otherwise approved by Buyer, no Mortgage Loan has been subject to any other repurchase agreement or credit facility prior to the initial Purchase Date of such Mortgage Loan.
(uuu) Borrower Benefit. Each HARP Mortgage Loan, as of the date of origination, meets the borrower benefit requirements as defined by the Agency.
(vvv) Co-op Loan: Valid First Lien. With respect to each Co-op Loan, the related Mortgage is a valid, enforceable and subsisting first security interest on the related Co-op Shares securing the related Proprietary Lease, subject only to (a) liens of the Co-op Corporation for unpaid assessments representing the Mortgagors pro rata share of the Co-op Corporations payments for its blanket mortgage, current and future real property taxes, insurance premiums, maintenance fees and other assessments to which like collateral is commonly subject and (b) other matters to which like collateral is commonly subject which do not materially interfere with the benefits of the security intended to be provided by the security interest. There are no liens against or security interests in the Co-op Shares relating to each Co-op Loan (except for unpaid maintenance, assessments and other amounts owed to the related cooperative which individually or in the aggregate will not have a material adverse effect on such Co-op Loan), which have priority equal to or over Sellers security interest in such Co-op Shares.
(www) Co-op Loan: Compliance with Law. With respect to each Co-op Loan, the related Co-op Corporation that owns title to the related Co-op Project is a cooperative housing corporation within the meaning of Section 216 of the Internal Revenue Code, and is in material compliance with applicable federal, state and local laws which, if not complied with, could have a material adverse effect on the Mortgaged Property.
(xxx) Co-op Loan: No Pledge. With respect to each Co-op Loan, there is no prohibition against pledging the Co-op Shares or assigning the Proprietary Lease. With respect to each Co-op Loan, (i) the term of the related Proprietary Lease is longer than the term of the Co-op Loan, (ii) there is no provision in any Proprietary Lease which requires the Mortgagor to offer for sale the Co-op Shares owned by such Mortgagor first to the Co-op Corporation, (iii) there is no prohibition in any Proprietary Lease against pledging the Co-op Shares or assigning the Proprietary Lease and (iv) the Recognition Agreement is on a form of agreement published by Aztech Document Systems, Inc. as of the date hereof or includes provisions which are no less favorable to the lender than those contained in such agreement.
(yyy) Co-op Loan: Acceleration of Payment. With respect to each Co-op Loan, each Assignment of Proprietary Lease contains enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization of the material benefits of the security provided thereby. The Assignment of Proprietary Lease contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Note in the event the Co-op Unit is transferred or sold without the consent of the holder thereof.
RESPONSIBLE OFFICERS
SELLER AUTHORIZATIONS
Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for Seller under this Agreement:
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Signature Page to Master Repurchase Agreement
BUYER AUTHORIZATIONS
Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for Buyer under this Agreement:
AUTHORIZED REPRESENTATIVES OF UBS BANK USA
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Signature Page to Master Repurchase Agreement
EXHIBIT B
FORM OF SELLERS OFFICERS CERTIFICATE
The undersigned, of AmeriHome Mortgage Company, LLC, a [STATE] limited liability company (the Seller), hereby certifies as follows:
1. Attached hereto as Exhibit 1 is a copy of the formation documents of Seller, as certified by the Secretary of State of the State of [STATE].
2. Neither any amendment to the formation documents of Seller nor any other charter document with respect to Seller has been filed, recorded or executed since , , and no authorization for the filing, recording or execution of any such amendment or other charter document is outstanding.
3. Attached hereto as Exhibit 2 is a true, correct and complete copy of the Bylaws of Seller as in effect as of the date hereof and at all times since , .
4. Attached hereto as Exhibit 3 is a true, correct and complete copy of resolutions adopted by the Board of Managers of Seller by unanimous written consent on , 20 (the Resolutions). The Resolutions have not been further amended, modified or rescinded and are in full force and effect in the form adopted, and they are the only resolutions adopted by the Board of Managers of Seller or by any committee of or designated by such Board of Managers relating to the execution and delivery of, and performance of the transactions contemplated by the Master Repurchase Agreement dated as of July 24, 2015 (the Repurchase Agreement), between Seller and UBS Bank USA (the Buyer).
5. The Repurchase Agreement is substantially in the form approved by the Resolutions or pursuant to authority duly granted by the Resolutions.
6. The undersigned, as a officers of Seller or as attorney-in-fact, are authorized to and have signed manually the Repurchase Agreement or any other document delivered in connection with the transactions contemplated thereby, were duly elected or appointed, were qualified and acting as such officer or attorney-in-fact at the respective times of the signing and delivery thereof, and were duly authorized to sign such document on behalf of Seller, and the signature of each such person appearing on any such document is the genuine signature of each such person.
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IN WITNESS WHEREOF, the undersigned has hereunto executed this Certificate as of the day of , 20 .
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Exhibit 3 to Officers Certificate of Seller
RESOLUTIONS OF SELLER
Action of the [Board of Managers][Managing Members]
Without a Meeting Pursuant to
Section of
The undersigned, being the directors of AmeriHome Mortgage Company, LLC, a limited liability company (the Company), do hereby consent to the taking of the following action without a meeting and do hereby adopt the following resolutions by written consent pursuant to Section of of the State of :
WHEREAS, it is in the best interests of the Company to transfer from time to time to Buyer Mortgage Loans against the transfer of funds by Buyer, with a simultaneous agreement by Buyer to transfer to Company such Mortgage Loans at a date certain or on demand, against the transfer of funds by Company pursuant to the terms of the Repurchase Agreement (as defined below).
NOW, THEREFORE, be it RESOLVED, that the execution, delivery and performance by the Company of the Master Repurchase Agreement (the Repurchase Agreement) to be entered into by the Company and UBS Bank USA, as Buyer, substantially in the form of the draft dated July 24, 2015, attached hereto as Exhibit A, are hereby authorized and approved and that the [President] or any [Vice President] (collectively, the Authorized Officers) of the Company be and each of them hereby is authorized and directed to execute and deliver the Repurchase Agreement to the Buyer with such changes as the officer executing the same shall approve, his execution and delivery thereof to be conclusive evidence of such approval;
RESOLVED, that the Authorized Officers hereby are, and each hereby is, authorized to execute and deliver all such aforementioned agreements on behalf of the Company and to do or cause to be done, in the name and on behalf of the Company, any and all such acts and things, and to execute, deliver and file in the name and on behalf of the Company, any and all such agreements, applications, certificates, instructions, receipts and other documents and instruments, as such Authorized Officer may deem necessary, advisable or appropriate in order to carry out the purposes of the foregoing resolutions.
RESOLVED, that the proper officers, agents and counsel of the Company are, and each of such officers, agents and counsel is, hereby authorized for and in the name and on behalf of the Company to take all such further actions and to execute and deliver all such other agreements, instruments and documents, and to make all governmental filings, in the name and on behalf of the Company and such officers are authorized to pay such fees, taxes and expenses, as advisable in order to fully carry out the intent and accomplish the purposes of the resolutions heretofore adopted hereby.
EXHIBIT C
FORM OF SERVICER NOTICE
[Date]
[ ], as Servicer
[ADDRESS]
Attention:
Re: Master Repurchase Agreement, dated as of July 24, 2015 (the Agreement), between AmeriHome Mortgage Company, LLC (the Seller) and UBS Bank USA (the Buyer).
Ladies and Gentlemen:
[ ] (the Servicer) is servicing certain mortgage loans for Seller pursuant to that certain [ ] (the Servicing Agreement) between the Servicer and Seller. Pursuant to the Agreement, the Servicer is hereby notified that Seller has pledged to Buyer certain mortgage loans which are serviced by Servicer which are subject to a security interest in favor of Buyer.
Upon receipt of a notice that an Event of Default has occurred under the Repurchase Agreement (a Notice of Event of Default) from Buyer in which Buyer shall identify the mortgage loans which are then pledged to Buyer under the Agreement (the Subject Mortgage Loans), the Servicer shall segregate all amounts collected on account of such Subject Mortgage Loans, hold them in trust for the sole and exclusive benefit of Buyer, and remit such collections in accordance with Buyers written instructions. Following such Notice of Event of Default, Servicer shall follow the instructions of Buyer with respect to the Subject Mortgage Loans, and shall deliver to Buyer any information with respect to the Subject Mortgage Loans reasonably requested by Buyer.
Notwithstanding any contrary information which may be delivered to the Servicer by Seller, the Servicer may conclusively rely on any information or Notice of Event of Default delivered by Buyer, and Seller shall indemnify and hold the Servicer harmless for any and all claims asserted against it for any actions taken in good faith by the Servicer in connection with the delivery of such information or Notice of Event of Default.
Please acknowledge receipt of this instruction letter by signing in the signature block below and forwarding an executed copy to Buyer promptly upon receipt. Any notices to Buyer should be delivered to the following addresses: UBS Bank USA, 1285 Avenue of the Americas, New York, NY 10019; Attention:
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ACKNOWLEDGED:
[ ],
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EXHIBIT D
FORM OF TRADE ASSIGNMENT
(Takeout Investor)
[Insert Address and notice info]
Dear Ladies and Gentlemen:
Attached to this Trade Assignment is a correct and complete copy of your confirmation of commitment (the Commitment), [insert trade date], to purchase [insert description of Agency MBS] mortgage-backed pass-through securities (Agency Securities) at a purchase price of $ from on [insert Settlement Date].
Pursuant to this Trade Assignment, we assign $ of this Commitments full amount to UBS Securities LLC (UBS), which assignment shall be effective and shall be fully enforceable by UBS on the Settlement Date.
This is to confirm that (i) the form of this assignment conforms to the SIFMA guidelines, (ii) the Commitment is in full force and effect, (iii) the Commitment has been assigned to UBS as security for the obligations of AmeriHome Mortgage Company, LLC, the Seller under that certain Master Repurchase Agreement, dated as of July 24, 2015, between Seller and UBS, whose acceptance of such assignment is indicated below, [and] (iv) upon delivery of this trade assignment to you by UBS you will accept Sellers direction set forth herein to pay UBS for such Agency Securities, [(v) you will accept delivery of such Securities directly from UBS, (vi) UBS is obligated to make delivery of such Agency Securities to you in accordance with the attached Commitment and (vii) you have released Seller from its obligation to deliver the Agency Securities to you under the Commitment.] Payment will be made delivery versus payment (DVP) to UBS in immediately available funds.
If you have any questions, please call [SELLER CONTACT] at ( ) - immediately or contact him by fax at ( ) - .
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Accepted and Agreed to:
UBS SECURITIES LLC
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EXHIBIT E
FORM OF POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that AmeriHome Mortgage Company, LLC (Seller) hereby irrevocably constitutes and appoints UBS Bank USA (Buyer) and any officer or agent thereof, with full power of substitution, as its true and lawful attorney-in-fact with full irrevocable power and authority in the place and stead of Seller and in the name of Seller or in its own name, from time to time in Buyers discretion:
(a) in the name of Seller, or in its own name, or otherwise, to take possession of and endorse and collect any checks, drafts, notes, acceptances or other instruments for the payment of moneys due with respect to any assets purchased by Buyer under the Master Repurchase Agreement (as amended, restated or modified) dated July 24, 2015 (the Assets) and to file any claim or to take any other action or proceeding in any court of law or equity or otherwise deemed appropriate by Buyer for the purpose of collecting any and all such moneys due with respect to any other assets whenever payable;
(b) to pay or discharge taxes and liens levied or placed on or threatened against the Assets;
(c) (i) to direct any party liable for any payment under any Assets to make payment of any and all moneys due or to become due thereunder directly to Buyer or as Buyer shall direct; (ii) to ask or demand for, collect, receive payment of and receipt for, any and all moneys, claims and other amounts due or to become due at any time in respect of or arising out of any Assets; (iii) to sign and endorse any invoices, assignments, verifications, notices and other documents in connection with any Assets; (iv) to commence and prosecute any suits, actions or proceedings at law or in equity in any court of competent jurisdiction to collect the Assets or any proceeds thereof and to enforce any other right in respect of any Assets; (v) to defend any suit, action or proceeding brought against Seller with respect to any Assets; (vi) to settle, compromise or adjust any suit, action or proceeding described in clause (v) above and, in connection therewith, to give such discharges or releases as Buyer may deem appropriate; and (vii) generally, to sell, transfer, pledge and make any agreement with respect to or otherwise deal with any Assets as fully and completely as though Buyer were the absolute owner thereof for all purposes, and to do, at Buyers option and Sellers expense, at any time, and from time to time, all acts and things which Buyer deems necessary to protect, preserve or realize upon the Assets and Buyers Liens thereon and to effect the intent of this Agreement, all as fully and effectively as Seller might do;
(d) for the purpose of carrying out the transfer of servicing with respect to the Assets from Seller to a successor servicer appointed by Buyer in its sole discretion and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such transfer of servicing, and, without limiting the generality of the foregoing, Seller hereby gives Buyer the power and right, on behalf of Seller, without assent by Seller, to, in the name of Seller or its own name, or otherwise, prepare and send or cause to be sent good-bye letters to all mortgagors under the Assets, transferring the servicing of the Assets to a successor servicer appointed by Buyer in its sole discretion;
(e) for the purpose of delivering any notices of sale to mortgagors or other third parties, including without limitation, those required by law.
Seller hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.
Seller also authorizes Buyer, from time to time, to execute, in connection with any sale, any endorsements, assignments or other instruments of conveyance or transfer with respect to the Assets.
The powers conferred on Buyer hereunder are solely to protect Buyers interests in the Assets and shall not impose any duty upon it to exercise any such powers. Buyer shall be accountable only for amounts that it actually receives as a result of the exercise of such powers, and neither it nor any of its officers, directors, employees or agents shall be responsible to Seller for any act or failure to act hereunder, except for its or their own gross negligence or willful misconduct.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND BUYER ON ITS OWN BEHALF AND ON BEHALF OF BUYERS ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
[REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURES FOLLOW.]
IN WITNESS WHEREOF Seller has caused this power of attorney to be executed and Sellers seal to be affixed this day of , 20 .
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Signature Page to the Power of Attorney
Acknowledgment of Execution by Seller (Principal):
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On the day of , 20 before me, the undersigned, a Notary Public in and for said State, personally appeared , personally known to me or proved to me on the basis of satisfactory evidence to be the individual whose name is subscribed to the within instrument and acknowledged to me that he executed the same in his capacity as for AmeriHome Mortgage Company, LLC and that by his signature on the instrument, the person upon behalf of which the individual acted, executed the instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.
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Signature Page to the Power of Attorney
EXHIBIT F
FORM OF TAX COMPLIANCE CERTIFICATE
Reference is hereby made to the Master Repurchase Agreement dated as of July 24, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Agreement), between AmeriHome Mortgage Company, LLC (the Seller) and UBS Bank USA (the Buyer). Pursuant to the provisions of Section 7 of the Agreement, the undersigned hereby certifies that:
1. It is a natural individual person, treated as a corporation for U.S. federal income tax purposes, disregarded for U.S. federal income tax purposes (in which case a copy of this Tax Compliance Certificate is attached in respect of its sole beneficial owner), or treated as a partnership for U.S. federal income tax purposes (one must be checked).
2. It is the beneficial owner of amounts received pursuant to the Agreement.
3. It is not a bank, as such term is used in section 881(c)(3)(A) of the Internal Revenue Code of 1986, as amended (the Code), or the Agreement is not, with respect to the undersigned, a loan agreement entered into in the ordinary course of its trade or business, within the meaning of such section.
4. It is not a 10-percent shareholder of Seller within the meaning of section 871(h)(3) or 881(c)(3)(B) of the Code.
5. It is not a controlled foreign corporation that is related to Seller within the meaning of section 881(c)(3)(C) of the Code.
6. Amounts paid to it under the Agreement and the other Program Documents (as defined in the Agreement) are not effectively connected with its conduct of a trade or business in the United States.
Dated:
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EXHIBIT G
FORM OF TEMPORARY INCREASE REQUEST
UBS Bank USA
1285 Avenue of the Americas
New York, NY 10019
Attention: Gary Timmerman
Telephone: (212) 649-8156
Facsimile: (212) 713-9640
Email: Gary.Timmerman@ubs.com
Re: Master Repurchase Agreement, dated as of July 24, 2015 (the Agreement), between AmeriHome Mortgage Company, LLC (the Seller) and UBS Bank USA (the Buyer).
Ladies and Gentlemen:
In accordance with Section 3(f) of the Repurchase Agreement, Buyer hereby consents to a Temporary Increase of the Maximum Aggregate Purchase Price as further set forth below:
Amount of Temporary Increase: $ .
Temporary Maximum Aggregate Purchase Price: $ .
Effective date: [ ]
Expiration date: [ ]
On and after the effective date indicated above and until the expiration date indicated above, the Maximum Aggregate Purchase Price shall equal the Temporary Maximum Aggregate Purchase Price indicated above for all purposes of the Repurchase Agreement and all calculations and provisions relating to the Maximum Aggregate Purchase Price shall refer to the Temporary Maximum Aggregate Purchase Price including without limitation, Concentration Limits.
Unless otherwise terminated pursuant to the Repurchase Agreement, this Temporary Increase shall terminate on the expiration date indicated above. Upon the termination of this Temporary Increase, Seller shall repurchase Purchased Assets such that (i) the aggregate outstanding Purchase Price of all Transactions does not exceed the Maximum Aggregate Purchase Price and (ii) the applicable portion of the aggregate outstanding Purchase Price of all Transactions does not exceed any Concentration Limit.
All terms used herein and not otherwise defined herein shall have the respective meanings ascribed to such terms in the Repurchase Agreement.
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CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
EXECUTION
AMENDMENT NO. 1 TO
MASTER REPURCHASE AGREEMENT
Amendment No. 1 to Master Repurchase Agreement (the Amendment), dated as of October 15, 2015, between UBS Bank USA (the Buyer) and AmeriHome Mortgage Company, LLC (the Seller).
RECITALS
The Buyer and the Seller are parties to that certain (a) Master Repurchase Agreement, dated as of July 24, 2015 (the Existing Repurchase Agreement; and as amended by this Amendment, the Repurchase Agreement) and (b) Pricing Letter, dated as of July 24, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Pricing Letter). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement.
The Buyer and the Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.
Accordingly, the Buyer and the Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement are hereby amended as follows:
SECTION 1 Covenants. Section 12 of the Existing Repurchase Agreement is hereby amended by deleting subsection (o) in its entirety and replacing it with the following:
(o) Limitation on Dividends and Distributions. Upon the occurrence of a Default or an Event of Default, Seller shall not make any payment on account of, or set apart assets for, a sinking or other analogous fund for the purchase, redemption, defeasance, retirement or other acquisition of any equity interest of Seller, whether now or hereafter outstanding, or make any other distribution or dividend in respect of any of the foregoing or to any shareholder or equity owner of Seller, either directly or indirectly, whether in cash or property or in obligations of Seller or any of Sellers consolidated Subsidiaries. In addition, Seller shall provide notice to Buyer to the extent Seller makes any dividends or distributions in any rolling four calendar quarters in the amount of [***] or more of the Tangible Net Worth of Seller determined as of the prior calendar year end.
SECTION 2 Conditions Precedent. This Amendment shall become effective as of the date hereof (the Amendment Effective Date), subject to the satisfaction of the following conditions precedent:
2.1 Delivered Documents. On the Amendment Effective Date, the Buyer shall have received the following documents, each of which shall be satisfactory to the Buyer in form and substance:
(a) this Amendment, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller;
(b) Amendment No. 1 to Pricing Letter, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller; and
(c) such other documents as the Buyer or counsel to the Buyer may reasonably request.
SECTION 3 Ratification of Agreement. As amended by this Amendment, the Existing Repurchase Agreement is in all respects ratified and confirmed and the Existing Repurchase Agreement as so modified by this Amendment shall be read, taken, and construed as one and the same instrument.
SECTION 4 Representations and Warranties. The Seller hereby represents and warrants to the Buyer that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that no Default or Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 11 of the Repurchase Agreement. The Seller hereby represents and warrants that this Amendment has been duly and validly executed and delivered by it, and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.
SECTION 5 Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 6 Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 7 Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment by signing any such counterpart. The parties agree that this Amendment, any documents to be delivered pursuant to this Amendment and any notices hereunder may be transmitted between them by email and/or by facsimile. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment. The original documents shall be promptly delivered, if requested.
SECTION 8 Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
SECTION 9 GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES TO THIS AMENDMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES TO THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. THE PARTIES HERETO INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AMENDMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE EFFECTIVENESS, VALIDITY AND ENFORCEABILITY OF ELECTRONIC CONTRACTS, OTHER RECORDS, ELECTRONIC RECORDS AND ELECTRONIC SIGNATURES USED IN CONNECTION WITH ANY ELECTRONIC TRANSACTION BETWEEN BUYER AND SELLER SHALL BE GOVERNED BY E-SIGN.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the Buyer and the Seller have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date first above written.
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UBS BANK USA, as Buyer | |
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |
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Signature Page to Amendment No. 1 to Master Repurchase Agreement
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
EXECUTION VERSION
AMENDMENT NO. 2 TO
MASTER REPURCHASE AGREEMENT
Amendment No. 2 to Master Repurchase Agreement (the Amendment), dated as of May 31, 2016, between UBS Bank USA (the Buyer) and AmeriHome Mortgage Company, LLC (the Seller).
RECITALS
The Buyer and the Seller are parties to that certain (a) Master Repurchase Agreement, dated as of July 24, 2015 (as amended by Amendment No. 1, dated as of October 15, 2015, the Existing Repurchase Agreement; and as amended by this Amendment, the Repurchase Agreement) and (b) Pricing Letter, dated as of July 24, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Pricing Letter). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement.
The Buyer and the Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.
Accordingly, the Buyer and the Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement are hereby amended as follows:
SECTION 1. Definitions. Section 2 of the Existing Repurchase Agreement is hereby amended by:
1.1 deleting the definitions of Agency Approval, Buydown Amount and Change in Control in their entirety and replacing them with the following:
Buydown Amount shall mean amounts held in the Operating Account to the extent not applied to Obligations under this Agreement.
Agency Approval shall mean the approvals of Seller from the relevant Agencies as set forth on Schedule 4 hereof.
Change in Control shall mean:
(a) any transaction or event as a result of which Aris Mortgage Holding Company, LLC ceases to own, directly or indirectly at least 100% of the membership interests of Seller;
(b) the sale, transfer, or other disposition of all or substantially all of Sellers assets (excluding any such action taken in connection with any securitization transaction); or
(c) the consummation of a merger or consolidation of Seller with or into another entity or any other corporate reorganization (in one transaction or in a series of transactions), if 50% or more of the combined voting power of the continuing or surviving entitys stock or other equity interests outstanding immediately after such merger, consolidation or such other reorganization is owned by persons who were not direct or indirect equity stockholders of Seller immediately prior to such merger, consolidation or other reorganization.
1.2 deleting the definition of Maximum Available Purchase Price in its entirety and all references to Maximum Available Purchase Price shall be deemed references to Maximum Aggregate Purchase Price;
1.3 deleting the definitions of Netting Agreement, RESI Facility and RESI Operating Account in their entirety and all references thereto.
SECTION 2. Payment, Transfers; Accounts. Section 9 of the Existing Repurchase Agreement is hereby amended by:
2.1 deleting subsection (d) in its entirety and replacing it with the following:
(d) Operating Account. From time to time, Seller may provide funds to Buyer for deposit to an interest bearing account (the Operating Account) in accordance with this Section 9. The Operating Account shall be a subaccount of an interest-bearing savings account (the Omnibus Account) maintained by Buyer as agent for the benefit of Seller and other sellers of mortgage related assets with a bank determined by Buyer its sole discretion (the Depository). The Buyer shall have non-exclusive withdrawal rights from the Operating Account. Seller acknowledges that Buyer acts as Sellers agent for the limited purpose of placing funds with the Depository, and that funds held by Buyer as Sellers agent are not a deposit account or other liability of Buyer. Buyer shall maintain records of Sellers interest in the funds maintained in the Omnibus Account. Withdrawals will be paid by wire transfer.
2.2 deleting subsection (g) in its entirety and replacing it with the following:
(g) Operating Account Interest. Subject to Section 9(h), the Buydown Amount will accrue interest at the Operating Account Rate; provided that in no event shall interest accrue on (i) the Buydown Amount if (x) on any day the Buydown Amount is less than the Minimum Balance Requirement or (y) the average balance of funds in the Operating Account during any calendar month is less than the Minimum Balance Requirement and (ii) that portion of the Buydown Amount that is in excess of the lesser of (a) the aggregate outstanding Purchase Price of all Transactions during any calendar month or (b) the Minimum Balance Requirement. Unless otherwise set forth in the Pricing Letter:
(i) The Depository calculates interest accrual daily on the basis of funds credited to the Operating Account, but credits interest monthly. As a result, interest will not begin to compound until credited in the month following its accrual. The Depository credits interest to the Operating Account in the month following its accrual on a schedule set by Depository from time to time, which may result in a delay in interest crediting as late as the twentieth (20th) day of the calendar month.
(ii) The Depository accrues interest on funds deposited to the Operating Account beginning on the day on which such funds are received in the Operating Account, and through, but not including, the day on which funds are withdrawn from the Operating Account.
(iii) Interest paid on funds in the Operating Account at the Operating Account Rate shall be credited to the Operating Account unless otherwise withdrawn by Buyer at the direction of Seller as provided herein.
SECTION 3. Representations. Section 11 of the Existing Repurchase Agreement is hereby amended by deleting subsection (w) in its entirety and replacing it with the following:
(w) Agency Approvals. With respect to each Agency Approval, Seller is in good standing, with no event having occurred or Seller having any reason whatsoever to believe or suspect will occur, including, without limitation, a change in insurance coverage which would either make Seller unable to comply with the eligibility requirements for maintaining all such Agency Approvals or require notification to the relevant Agency.
SECTION 4. Covenants. Section 12 of the Existing Repurchase Agreement is hereby amended by:
4.1 deleting subsection (c) in its entirety and replacing it with the following:
(c) Notice of Proceedings or Adverse Change. Seller shall give notice to Buyer immediately after a Responsible Officer, president, vice president, chief executive officer, chief financial officer, chief operating officer, secretary, treasurer or controller of Seller Party has any knowledge of:
(i) the occurrence of any Default or Event of Default;
(ii) any (a) default or event of default under any Indebtedness of Seller in excess of [***] or (b) litigation, investigation, regulatory action or proceeding that is pending or, to the knowledge of Seller, threatened by or against Seller in any federal or state court or before any Governmental Authority which, if not cured or if adversely determined, would reasonably be expected to have a Material Adverse Effect or constitute a Default or Event of Default, and (c) any Material Adverse Effect with respect to Seller;
(iii) any litigation or proceeding that is pending or, to the best of Sellers knowledge, threatened (a) against Seller in which the amount involved exceeds the Litigation Threshold and is not covered by insurance, in which injunctive or similar relief is sought, or which, would reasonably be expected to have a Material Adverse Effect, (b) in connection with any of the Repurchase Assets, which, if adversely determined, would reasonably be expected to have a Material Adverse Effect and (c) that questions or challenges compliance of any Mortgage Loan with the Ability to Repay Rule or QM Rule;
(iv) as soon as reasonably possible, notice of any of the following events: (A) a material and adverse change in the insurance coverage of Seller, with a copy of evidence of same attached; (B) any material change in accounting policies or financial reporting
practices of Seller; (C) promptly upon receipt of notice or knowledge of any Lien or security interest (other than security interests created hereby or under any other Program Document) on, or claim asserted against, any of the Repurchase Assets; (D) the termination or nonrenewal of any debt facilities of Seller which have a maximum principal amount (or equivalent) available of more than the Facility Termination Threshold; (E) any Change in Control; and (F) any other event, circumstance or condition that has resulted, or is reasonably likely to result, in a Material Adverse Effect; and
(v) Promptly, but no later than two (2) Business Days after Seller receives notice of the same, (A) any Purchased Mortgage Loan submitted for inclusion into an Agency Security and rejected by that Agency for inclusion in such Agency Security or (B) any Purchased Mortgage Loan submitted to an Approved Investor (whole loan or securitization) and rejected for purchase by such Approved Investor or (C) the termination or suspension of approval of Seller to sell any Mortgage Loans to any Approved Investor.
4.2 deleting subsection (d) in its entirety and replacing it with the following:
(d) Financial Reporting. Seller shall maintain a system of accounting established and administered in accordance with GAAP consistently applied, and furnish to Buyer, with a certification by the president, chief financial officer, chief executive officer, controller or other financial officer (or designee as approved by Buyer) of Seller (the following hereinafter referred to as the Financial Statements):
(i) Within ninety (90) days after the close of each fiscal year, audited consolidated and consolidating balance sheets and the related consolidated and consolidating statements of income and retained earnings and of cash flows as at the end of such year for Seller for the fiscal year, setting forth in each case in comparative form the figures for the previous year, with an unqualified opinion thereon of an Approved CPA;
(ii) Within forty-five (45) days after the end of each fiscal quarter, the consolidated and consolidating balance sheets and the related consolidated and consolidating statements of income, and as may be reasonably requested by Buyer, the statement of retained earnings and the statement of cash flows for Seller for such quarterly period(s), of Seller
(iii) Within thirty (30) days after the end of each month, the consolidated and consolidating balance sheets and the related consolidated and consolidating statements of income, a calculation schedule of Financial Condition Covenants, and as may be reasonably requested by Buyer, the statement of retained earnings and the statement of cash flows for Seller for such monthly period(s), of Seller;
(iv) Unless otherwise waived by Buyer in writing, simultaneously with the furnishing of each of the Financial Statements to be delivered pursuant to subsection (i) and (iii) above, submission of a certificate in the form of Exhibit A to the Pricing Letter and certified by the president, chief financial officer, chief executive officer, controller or other financial officer (or designee as approved by Buyer) of Seller, which includes detailed reporting to the materials set forth therein including without limitation (x) the
valuation of Sellers Capitalized Mortgage Servicing Rights by any third-party evaluator, (y) any request for repurchase of or indemnification for a Mortgage Loan purchased by a third party investor and (z) a quarterly legal and compliance questionnaire certified by the general counsel or chief/head of compliance;
(v) As promptly as practicable, from time to time, such other information regarding the business affairs, operations and financial condition of Seller as Buyer may reasonably request or as set forth in the certificate delivered pursuant to Section 12(d)(iv) above.
4.3 deleting subsection (p) in its entirety and replacing it with the following:
(p) Scheduled Indebtedness. Without the prior written (i) consent of Buyer, which shall not be unreasonably withheld, Seller shall not incur any additional material Indebtedness (other than (x) the Scheduled Indebtedness listed under the definition thereof and (y) usual and customary accounts payable for a mortgage company) and (ii) notice to Buyer, Seller shall not incur Indebtedness under a Warehouse Facility.
4.4 deleting subsection (w) in its entirety and replacing it with the following:
(w) Agency Approvals; Servicing. To the extent previously approved, Seller shall maintain all Agency Approvals and in each case shall remain in good standing with respect to such Agency Approvals. Should Seller, for any reason, cease to possess all such applicable Agency Approvals to the extent necessary, should Seller experience any material and adverse change in its delegated underwriting authority from any Agency, or should notification of an adverse occurrence to the relevant Agency or to HUD, FHA, VA or RD be required, Seller shall so notify Buyer immediately in writing. Notwithstanding the preceding sentence and to the extent previously approved, Seller shall take all necessary action to maintain all of its applicable Agency Approvals at all times during the term of this Agreement and each outstanding Transaction. Seller shall maintain adequate financial standing, servicing facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same types as may from time to time constitute Mortgage Loans and in accordance with Accepted Servicing Practices.
SECTION 5. Schedules. The Existing Repurchase Agreement is hereby amended by adding Schedule 4 attached hereto as Annex A in its proper numerical order.
SECTION 6. Conditions Precedent. This Amendment shall become effective as of the date hereof (the Amendment Effective Date), subject to the satisfaction of the following conditions precedent:
6.1 Delivered Documents. On the Amendment Effective Date, the Buyer shall have received the following documents, each of which shall be satisfactory to the Buyer in form and substance:
(a) this Amendment, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller;
(b) Amendment No. 2 to Pricing Letter, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller; and
(c) such other documents as the Buyer or counsel to the Buyer may reasonably request.
SECTION 7. Ratification of Agreement. As amended by this Amendment, the Existing Repurchase Agreement is in all respects ratified and confirmed and the Existing Repurchase Agreement as so modified by this Amendment shall be read, taken, and construed as one and the same instrument.
SECTION 8. Representations and Warranties. The Seller hereby represents and warrants to the Buyer that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that no Default or Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 11 of the Repurchase Agreement. The Seller hereby represents and warrants that this Amendment has been duly and validly executed and delivered by it, and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.
SECTION 9. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 10. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 11. Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment by signing any such counterpart. The parties agree that this Amendment, any documents to be delivered pursuant to this Amendment and any notices hereunder may be transmitted between them by email and/or by facsimile. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment. The original documents shall be promptly delivered, if requested.
SECTION 12. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
SECTION 13. GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES TO THIS AMENDMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES TO THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. THE PARTIES HERETO INTEND THAT THE PROVISIONS OF SECTION
5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AMENDMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE EFFECTIVENESS, VALIDITY AND ENFORCEABILITY OF ELECTRONIC CONTRACTS, OTHER RECORDS, ELECTRONIC RECORDS AND ELECTRONIC SIGNATURES USED IN CONNECTION WITH ANY ELECTRONIC TRANSACTION BETWEEN BUYER AND SELLER SHALL BE GOVERNED BY E-SIGN.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the Buyer and the Seller have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date first above written.
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UBS BANK, as Buyer | |
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Gary Timmerman |
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/S/ Ari Lash |
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |
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/S/ Josh Adler |
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Signature Page to Amendment No. 2 to Master Repurchase Agreement
EXECUTION VERSION
ASSIGNMENT AND AMENDMENT NO. 3
TO MASTER REPURCHASE AGREEMENT AND
ASSIGNMENT AND AMENDMENT NO. 3 TO PRICING LETTER
Assignment and Amendment No. 3 to Master Repurchase Agreement and Assignment and Amendment No. 3 to Pricing Letter, dated August 11, 2016 (this Amendment) among AmeriHome Mortgage Company, Inc. (the Seller), UBS BANK USA (Assignor) and UBS AG, by and through its branch office at 1285 Avenue of the Americas, New York, New York (Assignee and UBS 1285).
WITNESSETH
Assignor and Seller are parties to that certain (a) Master Repurchase Agreement, dated as of July 24, 2015 (as amended by Amendment No. 1, dated as of October 15, 2015 and Amendment No. 2, dated as of May 31, 2016, the Existing Repurchase Agreement, and as further amended by this Amendment, the Repurchase Agreement) and (b) Pricing Letter, dated as of July 24, 2015 (as amended by Amendment No. 1, dated as of October 15, 2015 and Amendment No. 2, dated as of May 31, 2016, the Existing Pricing Letter, and as further amended by this Amendment, the Pricing Letter). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement and Existing Pricing Letter, as applicable.
Assignor wishes to assign to UBS 1285 and UBS 1285 wishes to assume all of the Assignors interest in the Repurchase Agreement, the Pricing Letter, the other Program Documents and all future and outstanding Transactions thereunder.
Assignor, UBS 1285 and Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement and Existing Pricing Letter be amended to reflect certain agreed upon revisions to the terms thereof.
Accordingly, Assignor, UBS 1285 and Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein contained (the receipt and sufficiency of which are hereby acknowledged by each of the parties), that the Existing Repurchase Agreement and Existing Pricing Letter are hereby amended as follows:
SECTION 1. Assignment. In consideration of the Repurchase Price outstanding as of the date hereof, Assignor hereby assigns and UBS 1285 hereby assumes all of Assignors rights and obligations, as Buyer, with respect to the Existing Repurchase Agreement, the Existing Pricing Letter and all future and outstanding Transactions thereunder. For the avoidance of doubt, each outstanding Transaction is a continuing transaction and has not been, and shall not be, considered terminated in any respect. From and after the date hereof, (a) UBS 1285 shall be a party to the Repurchase Agreement and Pricing Letter and shall have the rights and obligations of Assignor as Buyer thereunder and shall be bound by the provisions thereof and (b) Assignor shall relinquish its rights and be released from its obligations under the Repurchase Agreement and Pricing Letter and all future and outstanding Transactions thereunder except for those Obligations of Seller to Assignor (including, without limitation, any indemnification obligations) that survive which shall continue for the benefit of the Assignor.
SECTION 2. Repurchase Agreement Amendments.
2.1 Definitions. Section 2 of the Existing Repurchase Agreement is hereby amended by deleting the definition of Buyer in its entirety and replacing it with the following:
Buyer shall mean UBS AG, by and through its branch office at 1285 Avenue of the Americas, New York, New York, its successors in interest and assigns pursuant to Section 17 and, with respect to Section 7, its participants.
2.2 References. The Existing Repurchase Agreement is hereby amended by replacing all references to UBS BANK USA with UBS AG, by and through its branch office at 1285 Avenue of the Americas, New York, New York.
2.3 Buyer Authorizations. The Existing Repurchase Agreement is hereby amended by deleting Buyers Authorizations on Schedule 2 in its entirety and replacing it Annex A attached hereto.
SECTION 3. Pricing Letter Amendments.
3.1 References. The Existing Pricing Letter is hereby amended by replacing all references to UBS BANK USA with UBS AG, by and through its branch office at 1285 Avenue of the Americas, New York, New York.
SECTION 4. Seller Authorized Persons. In addition to the Responsible Officers of Seller set forth in the Repurchase Agreement, UBS 1285 requires that Seller provide a list of additional employees that are designated as authorized representatives for the purpose of wire verification and additional documentation (documentation includes but is not limited to: (i) insured closing protection letters; (ii) wire instructions on closing agents letterhead; and (iii) any other documentation as needed by UBS 1285 on a one time basis for new closing agents). Seller hereby confirms that the persons listed on Annex B hereto are so authorized to act on behalf of Seller.
SECTION 5. Conditions Precedent. This Amendment shall become effective as of the date hereof (the Assignment Effective Date), subject to the satisfaction of the following conditions precedent:
5.1 Delivered Documents. The parties hereto shall have received the following documents, each of which shall be satisfactory to the Assignor and UBS 1285, as applicable, in form and substance:
(a) this Amendment, executed and delivered by the parties hereto;
(b) amendments to the other Program Documents as required by UBS 1285 in its sole discretion, executed and delivered by the parties thereto;
(c) on or prior to the date hereof, Seller shall permit UBS 1285 and Assignor to take all steps as it may deem necessary in connection with UCC searches and filing duly authorized and filed Uniform Commercial Code financing statements on Form UCC-1 and
UCC-3 as applicable, as is necessary or, in the opinion of UBS 1285, desirable to perfect UBS 1285s interests in the Purchased Assets and other Repurchase Assets;
(d) a Servicer Notice, executed and delivered by UBS 1285, Seller and Cenlar FSB, as Servicer;
(e) Servicer Notice, executed and delivered by UBS 1285, Seller and LoanCare, LLC, as Servicer; and
(f) such other documents as UBS 1285 or counsel to UBS 1285 may reasonably request.
SECTION 6. Ratification of Agreement. As amended by this Amendment, the Existing Repurchase Agreement and Existing Pricing Letter are in all respects ratified and confirmed and the Existing Repurchase Agreement as so modified by this Amendment shall be read, taken, and construed as one and the same instrument.
SECTION 7. Representations and Warranties. The Seller hereby represents and warrants to the Buyer and Assignee that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that other than as waived pursuant to that certain Limited Waiver dated as of August 5, 2016, no Default or Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 11 of the Repurchase Agreement. The Seller hereby represents and warrants that this Amendment has been duly and validly executed and delivered by it, and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.
SECTION 8. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 9. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 10. Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment by signing any such counterpart. The parties agree that this Amendment, any documents to be delivered pursuant to this Amendment and any notices hereunder may be transmitted between them by email and/or by facsimile Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment. The original documents shall be promptly delivered, if requested.
SECTION 11. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
SECTION 12. GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES TO THIS AMENDMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES TO THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. THE PARTIES HERETO INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AMENDMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE EFFECTIVENESS, VALIDITY AND ENFORCEABILITY OF ELECTRONIC CONTRACTS, OTHER RECORDS, ELECTRONIC RECORDS AND ELECTRONIC SIGNATURES USED IN CONNECTION WITH ANY ELECTRONIC TRANSACTION AMONG ASSIGNOR, SELLER AND UBS 1285 SHALL BE GOVERNED BY E-SIGN.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their representative officers there under duly authorized, as of the date first above written.
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UBS BANK USA | ||
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/S/ Gary Timmerman | |
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Gary Timmerman |
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MANAGING DIRECTOR |
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/S/ Ari Lash | |
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Ari Lash |
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Executive Director |
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UBS AG, by and through its branch office at | ||
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/S/ Hye Eun Cheong | |
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Hye-Eun Cheong |
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Authorized Signatory |
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/S/ Chi Ma | |
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Chi Ma |
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Authorized Signatory |
Signature Page to
Assignment and Amendment No. 3 to Master Repurchase Agreement and
Assignment and Amendment No. 3 to Pricing Letter
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AMERIHOME MORTGAGE COMPANY, INC., as Seller | ||
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/S/ Josh Adler | |
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Josh Adler |
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Managing Director, Secondary Marketing |
Signature Page to
Assignment and Amendment No. 3 to Master Repurchase Agreement and
Assignment and Amendment No. 3 to Pricing Letter
Annex A to Amendment
BUYER AUTHORIZATIONS
Any of the persons whose signatures and titles appear below are authorized, acting singly, to act for Buyer under this Agreement:
UBS Bank USA
Tel. +1-801-741-0310 | |
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Fax +1-801-741-0311 |
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www.ubs,com |
Schedule A
· Include a minimum of three authorized representatives
· Include at least one officer
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Authorized Signature: |
/S/ Kathleen Conte |
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UBS 1285 Ave of the Americas Branch
Schedule A
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· Include at least one officer
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/S/ Kathleen Conte |
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EXECUTION VERSION
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
AMENDMENT NO. 4 TO
MASTER REPURCHASE AGREEMENT
Amendment No. 4 to Master Repurchase Agreement (the Amendment), dated as of May 30, 2017, between UBS AG, by and through its branch office at 1285 Avenue of the Americas, New York, New York (the Buyer) and AmeriHome Mortgage Company, LLC (the Seller).
RECITALS
The Buyer and the Seller are parties to that certain (a) Master Repurchase Agreement, dated as of July 24, 2015 (as amended by Amendment No. 1, dated as of October 15, 2015, Amendment No. 2, dated as of May 31, 2016, and Amendment No. 3, dated as of August 11, 2016, the Existing Repurchase Agreement; and as amended by this Amendment, the Repurchase Agreement) and (b) Pricing Letter, dated as of July 24, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Pricing Letter). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement.
The Buyer and the Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.
Accordingly, the Buyer and the Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement are hereby amended as follows:
SECTION 1. Definitions. Section 2 of the Existing Repurchase Agreement is hereby amended by:
1.1 deleting the definition of Servicing Term in its entirety and all references thereto;
1.2 adding the following definitions of HomePath Mortgage Loan, HomePath Renovation Mortgage Loan and HomeStyle Renovation Mortgage Loan in their proper alphabetical order:
HomePath Mortgage Loan shall mean a Mortgage Loan that is originated in compliance with Fannie Maes HomePath mortgage loan program (as such program is amended, supplemented or otherwise modified, from time to time).
HomePath Renovation Mortgage Loan shall mean a Mortgage Loan that is originated in compliance with Fannie Maes HomePath mortgage loan program (as such program is amended, supplemented or otherwise modified, from time to time).
HomeStyle Renovation Mortgage Loan shall mean a Mortgage Loan that is originated in compliance with Fannie Maes HomeStyle Renovation mortgage loan program (as such program is amended, supplemented or otherwise modified, from time to time).
SECTION 2. Covenants. Section 12 of the Existing Repurchase Agreement is hereby amended by:
2.1 deleting the first paragraph of such section in its entirety and replacing it with the following:
Seller covenants to Buyer that as of the Purchase Date for any Purchased Asset, as of the date of this Agreement and any Transaction hereunder and at all times while the Program Documents are in full force and effect and/or any Transaction thereunder is outstanding, as follows:
2.2 deleting subsection 12(d)(ii) in its entirety and replacing it with the following:
(ii) Reserved;
SECTION 3. Notice. Section 24 of the Existing Repurchase Agreement is hereby amended by deleting the notices to the Buyer and Seller in their entirety and replacing them with the following:
If to Seller:
AmeriHome Mortgage Company, LLC
21215 Burbank Boulevard, 4th Floor
Woodland Hills, CA 91367
AmeriHome Mortgage Company, LLC
21215 Burbank Boulevard, 4th Floor
Woodland Hills, CA 91367
With a copy to:
AmeriHome Mortgage Company, LLC
21215 Burbank Boulevard, 4th Floor
Woodland Hills, CA 91367
Attention: Legal Department
Email: legal@amerihome.com
If to Buyer:
UBS AG
1285 Avenue of the Americas
New York, NY 10019
Attention: Gary Timmerman
Telephone: (212) 649-8156
Facsimile: (212) 713-9640
Email: Gary.Timmerman@ubs.com
With a copy to:
UBS AG
153 West 51St Street
New York, NY 10019
Attention: Chad Eisenberger
Telephone: (212) 821-4885
Email: Chad.Eisenberger@ubs.com
And:
OL-SGMF-Business@ubs.com
SECTION 4. General Interpretive Principles. Section 36 of the Existing Repurchase Agreement is hereby amended by deleting the reference to Section 1-201(19) and replacing it with a reference to Section 5-102(7).
SECTION 5. Representations and Warranties. Schedule 1 to the Existing Repurchase Agreement is hereby amended by deleting subparagraphs (o) and (fff) in their entirety and replacing them with the following:
(o) Full Disbursement of Proceeds. The Mortgage Loan has been closed and, except with respect to, Homestyle Renovation Mortgage Loans or HomePath Renovation Mortgage Loans, the proceeds of the Mortgage Loan have been fully disbursed and there is no requirement for future advances thereunder, and any and all requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor have been complied with. With respect to Homestyle Renovation Mortgage Loans and HomePath Renovation Mortgage Loans, Seller has made all advances and disbursements in accordance with the terms of the Mortgage and/or the terms and conditions of the related mortgage loan program, and such additional amounts have been advanced or disbursed from Sellers own funds and not from the funds representing any Purchase Price paid by Buyer to Seller hereunder. All costs, fees and expenses incurred in making or closing the Mortgage Loan and the recording of the Mortgage were paid, and the Mortgagor is not entitled to any refund of any amounts paid or due under the Mortgage Note or Mortgage. All points and fees related to each Mortgage Loan were disclosed in writing to the Mortgagor in accordance with applicable state and federal law and regulation. No Mortgagor was charged points and fees (whether or not financed) in an amount that exceeds the greater of (i) 5,000 and (ii) 5% (or such other applicable limits for lower balance Mortgages) as specified under 12 CFR 1026.43(e)(3), and the points and fees were calculated using the calculation required for qualified mortgages under 12 CFR 1026.32(b) to determine compliance with applicable requirements.
(fff) Regarding the Mortgagor. The Mortgagor is one or more natural persons and/or trustees for an Illinois land trust or a trustee under a living trust or revocable trust and
such living trust or revocable trust is in compliance with Fannie Mae or Freddie Mac guidelines, as applicable, for such trusts.
SECTION 6. Conditions Precedent. This Amendment shall become effective as of the date hereof (the Amendment Effective Date), subject to the satisfaction of the following conditions precedent:
6.1 Delivered Documents. On the Amendment Effective Date, the Buyer shall have received the following documents, each of which shall be satisfactory to the Buyer in form and substance:
(a) this Amendment, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller;
(b) Amendment No. 7 to Pricing Letter, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller; and
(c) such other documents as the Buyer or counsel to the Buyer may reasonably request.
SECTION 7. Ratification of Agreement. As amended by this Amendment, the Existing Repurchase Agreement is in all respects ratified and confirmed and the Existing Repurchase Agreement as so modified by this Amendment shall be read, taken, and construed as one and the same instrument.
SECTION 8. Representations and Warranties. The Seller hereby represents and warrants to the Buyer that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that no Default or Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 11 of the Repurchase Agreement. The Seller hereby represents and warrants that this Amendment has been duly and validly executed and delivered by it, and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.
SECTION 9. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 10. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 11. Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment by signing any such counterpart. The parties agree that this Amendment, any documents to be delivered pursuant to this Amendment and any notices hereunder may be transmitted between them by email and/or by facsimile Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by
facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment. The original documents shall be promptly delivered, if requested.
SECTION 12. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
SECTION 13. GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES TO THIS AMENDMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES TO THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. THE PARTIES HERETO INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AMENDMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE EFFECTIVENESS, VALIDITY AND ENFORCEABILITY OF ELECTRONIC CONTRACTS, OTHER RECORDS, ELECTRONIC RECORDS AND ELECTRONIC SIGNATURES USED IN CONNECTION WITH ANY ELECTRONIC TRANSACTION BETWEEN BUYER AND SELLER SHALL BE GOVERNED BY E-SIGN.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the Buyer and the Seller have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date first above written.
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UBS AG, BY AND THROUGH ITS BRANCH OFFICE AT 1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK, as Buyer | ||
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By: |
/S/ Ari Lash | |
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Ari Lash |
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Executive Director |
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/S/ Chi Ma | |
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Chi Ma |
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Director |
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AMEIRIHOME MORTGAGE COMPANY, LLC, as Seller | ||
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Signature Page to Amendment No. 4 to Master Repurchase Agreement
IN WITNESS WHEREOF, the Buyer and the Seller have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date first above written.
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UBS AG, BY AND THROUGH ITS BRANCH OFFICE AT 1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK, as Buyer | |||
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AMEIRIHOME MORTGAGE COMPANY, LLC, as Seller | |||
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/S/ Kathleen Conte | ||
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Kathleen Conte | |
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SVP Capital Markets | |
Signature Page to Amendment No. 4 to Master Repurchase Agreement
EXECUTION VERSION
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
AMENDMENT NO. 5 TO
MASTER REPURCHASE AGREEMENT
Amendment No. 5 to Master Repurchase Agreement (the Amendment), dated as of June 5, 2018, between UBS AG, by and through its branch office at 1285 Avenue of the Americas, New York, New York (the Buyer) and AmeriHome Mortgage Company, LLC (the Seller).
RECITALS
The Buyer and the Seller are parties to that certain (a) Master Repurchase Agreement, dated as of July 24, 2015 (as amended by Amendment No. 1, dated as of October 15, 2015, Amendment No. 2, dated as of May 31, 2016, Amendment No. 3, dated as of August 11, 2016, and Amendment No. 4, dated as of May 30, 2017, the Existing Repurchase Agreement; and as further amended by this Amendment, the Repurchase Agreement) and (b) Pricing Letter, dated as of July 24, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Pricing Letter). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement and Pricing Letter, as applicable.
The Buyer and the Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.
Accordingly, the Buyer and the Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement is hereby amended as follows:
SECTION 1. Definitions. Section 2 of the Existing Repurchase Agreement is hereby amended by adding the following definitions of Ginnie Mae Modified Loan, Modification Agreement, RD Loan, RD Loan Guaranty Agreement, VA Loan and VA Loan Guaranty Agreement in their proper alphabetical order:
Ginnie Mae Modified Loan shall mean a FHA Loan, VA Loan or RD Loan that (i) is modified in accordance with the Ginnie Mae guide, (ii) conforms to the requirements of Ginnie Mae for securitization; (iii) is not a Wet Loan and (iv) is otherwise acceptable to Buyer in its sole discretion.
Modification Agreement shall mean, with respect to a Ginnie Mae Modified Loan, the agreement that modifies the terms of the Mortgage Loan in accordance with the Ginnie Mae guide.
RD Loan shall mean a Mortgage Loan which is the subject of a RD Loan Guaranty Agreement as evidenced by a loan guaranty.
RD Loan Guaranty Agreement shall mean the agreement evidencing the contractual obligation of the RD respecting the guaranty of an RD Loan.
VA Loan shall mean a Mortgage Loan which is the subject of a VA Loan Guaranty Agreement as evidenced by a loan guaranty certificate.
VA Loan Guaranty Agreement shall mean the agreement evidencing the contractual obligation of the VA respecting the guaranty of a VA Loan.
SECTION 2. Representations and Warranties. Schedule 1 to the Existing Repurchase Agreement is hereby amended by:
2.1 deleting paragraphs (b), (c), (e), (f), (g), (h), (j), (t), (w), (dd), (kk) and (ggg) in their entirety and replacing them with the following:
(b) Payments Current. No payment required under the Mortgage Loan is [***] days or more delinquent nor has any payment under the Mortgage Loan (other than a Ginnie Mae Modified Loan) been [***] days or more delinquent at any time since the origination of the Mortgage Loan; and, if the Mortgage Loan is a Co-op Loan, no foreclosure action or private or public sale under the Uniform Commercial Code has begun or, to the knowledge of Seller, is currently being threatened or commenced with respect to the Co-op Loan.
(c) Origination Date. Other than with respect to a Ginnie Mae Modified Loan, the initial Purchase Date is no more than (i) with respect to Mortgage Loans other than Correspondent Mortgage Loans in non-escrow states, [***] days following the origination date of the Mortgage Note; (ii) with respect to Mortgage Loans other than Correspondent Mortgage Loans in escrow states, [***] days following the origination date of the Mortgage Note and (iii) with respect to Correspondent Mortgage Loans, [***] days following the origination date of the Mortgage Note or such other date approved by Buyer in its sole discretion.
(e) No Outstanding Charges. Other than with respect to a Ginnie Mae Modified Loan, there are no defaults in complying with the terms of the Mortgage, and all taxes, governmental assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable. Other than with respect to a Ginnie Mae Modified Loan, Seller has not advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required under the Mortgage Loan, except for interest accruing from the date of the Mortgage Note or date of disbursement of the Mortgage Loan proceeds, whichever is earlier, to the day which precedes by one month the Due Date of the first installment of principal and interest.
(f) Original Terms Unmodified. Other than with respect to a Ginnie Mae Modified Loan, the terms of the Mortgage Note (and the Proprietary Lease, the Assignment of Proprietary Lease and Stock Power with respect to each Co-op Loan) and Mortgage have not been impaired, waived, altered or modified in any respect, from the date of origination except by a written instrument which has been recorded, if necessary to protect
the interests of Buyer, and which has been delivered to the Custodian or to such other Person as Buyer shall designate in writing, and the terms of which are reflected in the Mortgage Loan Schedule. The substance of any such waiver, alteration or modification has been approved by the issuer of any related PMI Policy and the title insurer, if any, to the extent required by the policy, and its terms are reflected on the Mortgage Loan Schedule, if applicable. No Mortgagor has been released, in whole or in part, except in connection with an assumption agreement, approved by the issuer of any related PMI Policy and the issuer of the title insurer, to the extent required by the policy, and which assumption agreement is part of the Mortgage File delivered to the Custodian or to such other Person as Buyer shall designate in writing and the terms of which are reflected in the Mortgage Loan Schedule.
(g) No Defenses. The Mortgage Loan (and the Assignment of Proprietary Lease related to each Co-op Loan) is not subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage or with respect to a Ginnie Mae Modified Loan, the terms of the Modification Agreement, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage or with respect to a Ginnie Mae Modified Loan, the Modification Agreement unenforceable, in whole or in part, or subject to any right of rescission, set-off, counterclaim or defense, including without limitation the defense of usury, and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto, and no Mortgagor was a debtor in any state or federal bankruptcy or insolvency proceeding at, or subsequent to, the time the Mortgage Loan was originated or with respect to a Ginnie Mae Modified Loan, at the time the Modification Agreement was entered into.
(h) Hazard Insurance. Pursuant to the terms of the Mortgage, the Fannie Mae guide, the Freddie Mac guide and any additional requirements set forth in the Approved Underwriting Guidelines, all buildings or other improvements upon the Mortgaged Property are insured by a generally acceptable insurer against loss by fire, hazards of extended coverage and such other hazards. If required by the National Flood Insurance Act of 1968, as amended, and the Flood Disaster Protection Act of 1973, as amended, each Mortgage Loan is covered by a flood insurance policy meeting the requirements of the current guidelines of the Federal Insurance Administration as in effect which policy conforms to Fannie Mae and Freddie Mac, as well as all additional requirements set forth in the Servicing Agreement. All individual insurance policies contain a standard mortgagee clause naming Seller and its successors and assigns as mortgagee, and all premiums thereon have been paid. The Mortgage obligates the Mortgagor thereunder to maintain the hazard insurance policy at the Mortgagors cost and expense, and on the Mortgagors failure to do so, authorizes the holder of the Mortgage to obtain and maintain such insurance at such Mortgagors cost and expense, and to seek reimbursement therefor from the Mortgagor. Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance, provided the policy is not a master or blanket hazard insurance policy covering a condominium, or any hazard insurance policy covering the common facilities of a planned unit development. The hazard insurance policy is the valid and binding obligation of the insurer, is in full force and effect, and will be in full force and effect and inure to the benefit of Buyer upon
the consummation of the transactions contemplated by this Agreement. Seller has not engaged in, and has no knowledge of the Mortgagors or any servicers having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of such policy, including, without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other person or entity, and no such unlawful items have been received, retained or realized by Seller.
(j) No Satisfaction of Mortgage. The Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or, other than with respect to a Ginnie Mae Modified Loan, in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or, other than with respect to a Ginnie Mae Modified Loan, in part, nor has any instrument been executed that would affect any such release, cancellation, subordination or rescission. Other than with respect to a Ginnie Mae Modified Loan, Seller has not waived the performance by the Mortgagor of any action, if the Mortgagors failure to perform such action would cause the Mortgage Loan to be in default, nor has Seller waived any default resulting from any action or inaction by the Mortgagor.
(t) No Defaults. Other than payments due but not yet [***] days or more delinquent, there is no default, breach, violation or event which would permit acceleration existing under the Mortgage or the Mortgage Note and no event which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event which would permit acceleration, and neither Seller nor any of its affiliates nor any of their respective predecessors, have waived any default, breach, violation or event which would permit acceleration other than with respect to a Ginnie Mae Modified Loan in accordance with the Ginnie Mae guide and the Modification Agreement; and with respect to each Co-op Loan, there is no default in complying with the terms of the Mortgage Note, the Assignment of Proprietary Lease and the Proprietary Lease and all maintenance charges and assessments (including assessments payable in the future installments, which previously became due and owing) have been paid, and Seller has the right under the terms of the Mortgage Note, Assignment of Proprietary Lease and Recognition Agreement to pay any maintenance charges or assessments owed by the Mortgagor.
(w) Origination; Payment Terms. The Mortgage Loan was originated by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or other similar institution which is supervised and examined by a federal or state authority. The documents, instruments and agreements submitted for loan underwriting were not falsified and contain no untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the information and statements therein not misleading. No Mortgage Loan contains terms or provisions which would result in negative amortization. Principal payments on a Mortgage Loan that is not a Ginnie Mae Modified Loan commenced no more than [***] days after funds were disbursed in connection with the Mortgage Loan. The mortgage interest rate as well as the lifetime rate
cap and the periodic cap are as set forth on the Mortgage Loan Schedule. The Mortgage Note is payable in equal monthly installments of principal and interest, which installments of interest, with respect to adjustable rate Mortgage Loans, are subject to change due to the adjustments to the mortgage interest rate on each interest rate adjustment date, with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty (30) years from commencement of amortization. Unless otherwise specified, the Mortgage Loan is payable on the first day of each month. There are no Mortgage Loans which contain a provision allowing the Mortgagor to convert the Mortgage Note from an adjustable interest rate Mortgage Note to a fixed interest rate Mortgage Note.
(dd) Delivery of Mortgage Documents. The Mortgage Note, the Mortgage, the Assignment of Mortgage and any other documents required to be delivered under the Custodial Agreement for each Mortgage Loan have been delivered to the Custodian including, the Modification Agreement with respect to a Ginnie Mae Modified Loan. Seller is in possession of a complete, true and accurate Mortgage File, except for such documents the originals of which have been delivered to the Custodian or Buyer or which have been submitted for recording and not yet returned.
(kk) Mortgaged Property Undamaged; No Condemnation Proceedings. There is no proceeding pending or threatened for the total or partial condemnation of the Mortgaged Property. Other than with respect to a Ginnie Mae Modified Loan, the Mortgaged Property is undamaged by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty so as to affect adversely the value of the Mortgaged Property as security for the Mortgage Loan or the use for which the premises were intended and each Mortgaged Property is in good repair.
(ggg) Recordation. Each original Mortgage has been recorded or has been sent for recordation and, except for those Mortgage Loans subject to the MERS identification system, all subsequent assignments of the original Mortgage (other than the assignment to Buyer) have been recorded in the appropriate jurisdictions wherein such recordation is necessary to perfect the lien thereof as against creditors of Seller, or is in the process of being recorded. With respect to each Ginnie Mae Modified Loan, the related Modification Agreement has been recorded or has been sent for recordation.
2.2 adding the following new paragraphs at the end thereof:
(zzz) Ginnie Mae Modified Loan. Each Ginnie Mae Modified Loan (i) was modified in accordance with the Ginnie Mae guide; (ii) with respect to (x) a FHA Loan, is fully insured by the FHA pursuant to a FHA Mortgage Insurance Certificate; (y) a VA Loan, is guaranteed by the VA pursuant to a VA Loan Guaranty Agreement and (z) a RD Loan, is guaranteed by the RD pursuant to a RD Loan Guaranty Agreement and (iii) conforms to the requirements of Ginnie Mae for securitization.
(aaaa) FHA Loans, VA Loans and RD Loans. With respect to each FHA Loan, VA Loan and RD Loan, as applicable, (i) the FHA Mortgage Insurance Certificate is in full force and effect, there exists no impairment to full recovery, the VA Loan Guaranty
Agreement is in full force and effect to the maximum extent stated therein and there exists no impairment to full recovery thereunder and the RD Loan Guaranty Agreement is in full force and effect to the maximum extent stated therein and there exists no impairment to full recovery thereunder, (ii) all necessary steps have been taken to keep such guaranty or insurance valid, binding and enforceable and each of such is the binding, valid and enforceable obligation of the FHA, the VA and RD, as applicable, to the full extent thereof, without surcharge, set-off or defense, (iii) such FHA Loan is insured, or eligible to be insured, pursuant to the National Housing Act and such VA Loan is guaranteed, or eligible to be guaranteed, under the provisions of Chapter 37 of Title 38 of the United States Code, as applicable, (iv) with respect to each FHA Mortgage Insurance Certificate, VA Loan Guaranty Agreement and RD Loan Guaranty Agreement, as applicable, Seller has complied with applicable provisions of the insurance for guaranty contract and federal statutes and regulations, all premiums or other charges due in connection with such insurance or guarantee have been paid, and (v) Seller has no knowledge of any circumstance which would cause such FHA Loan to be ineligible for FHA mortgage insurance, such VA Loan to be ineligible for a VA loan guaranty, such RD Loan to be ineligible for a RD loan guaranty or cause the FHA, the VA or RD to deny or reject the related Mortgagors application for FHA mortgage insurance, a VA loan guaranty or RD loan guaranty, as applicable.
SECTION 3. Conditions Precedent. This Amendment shall become effective as of the date hereof (the Amendment Effective Date), subject to the satisfaction of the following conditions precedent:
3.1 Delivered Documents. On the Amendment Effective Date, the Buyer shall have received the following documents, each of which shall be satisfactory to the Buyer in form and substance:
(a) this Amendment, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller;
(b) Amendment No. 10 to Pricing Letter, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller;
(c) Amendment No. 2 to Custodial Agreement, executed and delivered by duly authorized officers, as applicable, of the Buyer, the Seller and Custodian; and
(d) such other documents as the Buyer or counsel to the Buyer may reasonably request.
SECTION 4. Ratification of Agreement. As amended by this Amendment, the Existing Repurchase Agreement is in all respects ratified and confirmed and the Existing Repurchase Agreement as so modified by this Amendment shall be read, taken, and construed as one and the same instrument.
SECTION 5. Representations and Warranties. The Seller hereby represents and warrants to the Buyer that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that no Default or Event of
Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 11 of the Repurchase Agreement. The Seller hereby represents and warrants that this Amendment has been duly and validly executed and delivered by it, and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.
SECTION 6. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 7. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 8. Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment by signing any such counterpart. The parties agree that this Amendment, any documents to be delivered pursuant to this Amendment and any notices hereunder may be transmitted between them by email and/or by facsimile Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment. The original documents shall be promptly delivered, if requested.
SECTION 9. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
SECTION 10. GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES TO THIS AMENDMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES TO THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. THE PARTIES HERETO INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AMENDMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE EFFECTIVENESS, VALIDITY AND ENFORCEABILITY OF ELECTRONIC CONTRACTS, OTHER RECORDS, ELECTRONIC RECORDS AND ELECTRONIC SIGNATURES USED IN CONNECTION WITH ANY ELECTRONIC TRANSACTION BETWEEN BUYER AND SELLER SHALL BE GOVERNED BY E-SIGN.
[SIGNATURE PAGES FOLLOW]
IN WITNESS WHEREOF, the Buyer and the Seller have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date first above written.
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UBS AG, BY AND THROUGH ITS BRANCH OFFICE AT 1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK, as Buyer | ||
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | ||
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Signature Page to Amendment No. 5 to Master Repurchase Agreement
IN WITNESS WHEREOF, the Buyer and the Seller have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date first above written.
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |||
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Signature Page to Amendment No. 5 to Master Repurchase Agreement
EXECUTION
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
AMENDMENT NO. 6 TO
MASTER REPURCHASE AGREEMENT
Amendment No. 6 to Master Repurchase Agreement (the Amendment), dated as of May 28, 2019, between UBS AG, by and through its branch office at 1285 Avenue of the Americas, New York, New York (the Buyer) and AmeriHome Mortgage Company, LLC (the Seller).
RECITALS
The Buyer and the Seller are parties to that certain (a) Master Repurchase Agreement, dated as of July 24, 2015 (as amended by Amendment No. 1, dated as of October 15, 2015, Amendment No. 2, dated as of May 31, 2016, Amendment No. 3, dated as of August 11, 2016, Amendment No. 4, dated as of May 30, 2017 and Amendment No. 5, dated as of June 5, 2018, the Existing Repurchase Agreement; and as further amended by this Amendment, the Repurchase Agreement) and (b) Pricing Letter, dated as of July 24, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Pricing Letter). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement and Pricing Letter, as applicable.
The Buyer and the Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.
Accordingly, the Buyer and the Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement is hereby amended as follows:
SECTION 1. Definitions. Section 2 of the Existing Repurchase Agreement is hereby amended by:
1.1 deleting the definition of LTV in its entirety and replacing it with the following:
LTV shall mean (a) with respect to any Mortgage Loan other than a HARP Mortgage Loan or Agency High LTV Mortgage Loan, the ratio of the original outstanding principal amount of the Mortgage Loan to the Appraised Value of the Mortgaged Property at origination, (b) with respect to any Mortgage Loan that is a HARP Mortgage Loan, the ratio of the original outstanding principal amount of the HARP Mortgage Loan to the Appraised Value of the Mortgaged Property as of the date such Mortgage Loan is funded as a refinanced Mortgage Loan under HARP 2.0 and (c) with respect to any Mortgage Loan that is an Agency High LTV Mortgage Loan, the ratio of the original outstanding principal amount of the Mortgage Loan to the Appraised Value of the Mortgaged Property as of the date such Mortgage Loan is funded as a refinanced Mortgage Loan under the High LTV Refinance Option program implemented by Fannie Mae or the Enhanced Relief Refinance program implemented by Freddie Mac, as applicable.
1.2 adding the following definition in its proper alphabetical order:
Agency High LTV Mortgage Loan shall mean a Mortgage Loan, which is secured by a first lien, and such Mortgage Loan (a) conforms to the requirements of an Agency for securitization or cash purchase and (b) has a LTV in excess of the amounts for Conforming Mortgage Loans but otherwise meets the requirements of the High LTV Refinance Option program implemented by Fannie Mae or the Enhanced Relief Refinance program implemented by Freddie Mac, as applicable.
SECTION 2. Notices and Other Communications. Section 24 of the Existing Repurchase Agreement is hereby amended by:
2.1 deleting Sellers notice information in its entirety and replacing it with the following:
If to Seller:
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, California 91362-3888
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, California 91362-3888
With a copy to:
AmeriHome Mortgage Company, LLC
1 Baxter Way, Suite 300
Thousand Oaks, California 91362-3888
Attention: Legal Department
Email: legal@amerihome.com
2.2 deleting Buyers notice information in its entirety and replacing it with the following:
If to Buyer:
UBS AG
1285 Avenue of the Americas
New York, NY 10019
Attention: Gary Timmerman
Telephone: 212-649-8156
Facsimile: 212-713-9640
Email: Gary.Timmerman@ubs.com
With a copy to:
Chad Eisenberger
Executive Director & Counsel
UBS Business Solutions LLC
1285 Avenue of the Americas
New York, NY 10019
Phone: 212-821-4885
Email: Chad.Eisenberger@ubs.com
And:
OL-SGMF-Business@ubs.com
SECTION 3. Representations and Warranties. Schedule 1 to the Existing Repurchase Agreement is hereby amended by deleting paragraphs (r), (w) and (ii) in their entirety and replacing them with the following:
(r) LTV, PMI Policy. No Conforming Mortgage Loan has an LTV greater than [***]. The LTV of the Conforming Mortgage Loan either is not more than 80% or the excess over 75% of the Appraised Value is and will be insured as to payment defaults by a PMI Policy until the LTV of such Conforming Mortgage Loan is reduced to 80%. All provisions of such PMI Policy have been and are being complied with, such policy is in full force and effect, and all premiums due thereunder have been paid. No action, inaction, or event has occurred and no state of facts exists that has, or will result in the exclusion from, denial of, or defense to coverage. Any Conforming Mortgage Loan subject to a PMI Policy obligates the Mortgagor thereunder to maintain the PMI Policy and to pay all premiums and charges in connection therewith. The Mortgage Interest Rate for the Conforming Mortgage Loan as set forth on the Mortgage Loan Schedule is net of any such insurance premium. The LTV of any HARP Mortgage Loan is no greater than [***] if such Mortgage Loan is (i) a fixed-rate Mortgage Loan with a term in excess of [***] years, or (ii) an adjustable-rate Mortgage Loan with an initial fixed period greater than or equal to five (5) years, unless otherwise approved by Buyer in its sole discretion. The LTV of any Agency High LTV Mortgage Loan meets the requirements of the High LTV Refinance
Option program implemented by Fannie Mae or the Enhanced Relief Refinance program implemented by Freddie Mac, as applicable.
(w) Origination; Payment Terms. The Mortgage Loan was originated by a mortgagee approved by the Secretary of Housing and Urban Development pursuant to Sections 203 and 211 of the National Housing Act, a savings and loan association, a savings bank, a commercial bank, credit union, insurance company or other similar institution which is supervised and examined by a federal or state authority. The documents, instruments and agreements submitted for loan underwriting were not falsified and contain no untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the information and statements therein not misleading. No Mortgage Loan contains terms or provisions which would result in negative amortization. Principal payments on a Mortgage Loan that is not a Ginnie Mae Modified Loan commenced no more than sixty-two (62) days after funds were disbursed in connection with the Mortgage Loan. The mortgage interest rate as well as the lifetime rate cap and the periodic cap are as set forth on the Mortgage Loan Schedule. The Mortgage Note is payable in equal monthly installments of principal and interest, which installments of interest, with respect to adjustable rate Mortgage Loans, are subject to change due to the adjustments to the mortgage interest rate on each interest rate adjustment date, with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty (30) years from commencement of amortization. Unless otherwise specified, the Mortgage Loan is payable on the first day of each month. There are no Mortgage Loans which contain a provision allowing the Mortgagor to convert the Mortgage Note from an adjustable interest rate Mortgage Note to a fixed interest rate Mortgage Note.
(ii) No Buydown Provisions; No Graduated Payments or Contingent Interests. Unless otherwise permitted by the applicable Agency, the Mortgage Loan does not contain provisions pursuant to which Monthly Payments are paid or partially paid with funds deposited in any separate account established by Seller, the Mortgagor, or anyone on behalf of the Mortgagor, or paid by any source other than the Mortgagor nor does it contain any other similar provisions which may constitute a buydown provision. The Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan does not have a shared appreciation or other contingent interest feature.
SECTION 4. Conditions Precedent. This Amendment shall become effective as of the date hereof (the Amendment Effective Date), subject to the satisfaction of the following conditions precedent:
4.1 Delivered Documents. On the Amendment Effective Date, the Buyer shall have received the following documents, each of which shall be satisfactory to the Buyer in form and substance:
(a) this Amendment, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller;
(b) Amendment No. 13 to Pricing Letter, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller; and
(c) such other documents as the Buyer or counsel to the Buyer may reasonably request.
SECTION 5. Ratification of Agreement. As amended by this Amendment, the Existing Repurchase Agreement is in all respects ratified and confirmed and the Existing Repurchase Agreement as so modified by this Amendment shall be read, taken, and construed as one and the same instrument.
SECTION 6. Representations and Warranties. The Seller hereby represents and warrants to the Buyer that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that no Default or Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 11 of the Repurchase Agreement. The Seller hereby represents and warrants that this Amendment has been duly and validly executed and delivered by it, and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.
SECTION 7. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 8. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 9. Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment by signing any such counterpart. The parties agree that this Amendment, any documents to be delivered pursuant to this Amendment and any notices hereunder may be transmitted between them by email and/or by facsimile. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment. The original documents shall be promptly delivered, if requested.
SECTION 10. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
SECTION 11. GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES TO THIS AMENDMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES TO THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. THE PARTIES HERETO INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AMENDMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE
EFFECTIVENESS, VALIDITY AND ENFORCEABILITY OF ELECTRONIC CONTRACTS, OTHER RECORDS, ELECTRONIC RECORDS AND ELECTRONIC SIGNATURES USED IN CONNECTION WITH ANY ELECTRONIC TRANSACTION BETWEEN BUYER AND SELLER SHALL BE GOVERNED BY E-SIGN.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Buyer and the Seller have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date first above written.
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UBS AG, BY AND THROUGH ITS BRANCH OFFICE AT 1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK, as Buyer | |
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/s/ Ari Lash |
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Name: Ari Lash |
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Title: Executive Director |
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/s/ Chi Ma |
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Name: Chi Ma |
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Title: Director |
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |
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/s/ Kathleen Conte |
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Name: Kathleen Conte |
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Title: SCP Capital Markets |
Signature Page to Amendment No. 6 to Master Repurchase Agreement
EXECUTION
AMENDMENT NO. 7 TO
MASTER REPURCHASE AGREEMENT
Amendment No. 7 to Master Repurchase Agreement (the Amendment), dated as of May 26, 2020, between UBS AG, by and through its branch office at 1285 Avenue of the Americas, New York, New York (the Buyer) and AmeriHome Mortgage Company, LLC (the Seller).
RECITALS
The Buyer and the Seller are parties to that certain (a) Master Repurchase Agreement, dated as of July 24, 2015 (as amended by Amendment No. 1, dated as of October 15, 2015, Amendment No. 2, dated as of May 31, 2016, Amendment No. 3, dated as of August 11, 2016, Amendment No. 4, dated as of May 30, 2017, Amendment No. 5, dated as of June 5, 2018 and Amendment No. 6, dated as of May 28, 2019, the Existing Repurchase Agreement; and as further amended by this Amendment, the Repurchase Agreement) and (b) Pricing Letter, dated as of July 24, 2015 (as amended, restated, supplemented or otherwise modified from time to time, the Pricing Letter). Capitalized terms used but not otherwise defined herein shall have the meanings given to them in the Existing Repurchase Agreement and Pricing Letter, as applicable.
The Buyer and the Seller have agreed, subject to the terms and conditions of this Amendment, that the Existing Repurchase Agreement be amended to reflect certain agreed upon revisions to the terms of the Existing Repurchase Agreement.
Accordingly, the Buyer and the Seller hereby agree, in consideration of the mutual promises and mutual obligations set forth herein, that the Existing Repurchase Agreement is hereby amended as follows:
SECTION 1. Definitions. Section 2 of the Existing Repurchase Agreement is hereby amended by adding the following definitions in their proper alphabetical order:
FHA, VA and RD Streamlined Mortgage Loan shall mean a refinance Mortgage Loan available to Mortgagors with existing FHA Loans, VA Loans and RD Loans and such Mortgage Loan is the subject of an FHA Mortgage Insurance Certificate, VA Loan Guaranty Agreement or RD Loan Guaranty Agreement, as applicable.
Index Rate shall have the meaning specified in the Pricing Letter.
One-Month LIBOR shall have the meaning specified in the Pricing Letter.
Overnight LIBOR shall have the meaning specified in the Pricing Letter.
Successor Rate shall mean a rate determined by Buyer in accordance with Section 5(e) hereof.
SECTION 2. Price Differential; Collections; Income Payments. Section 5 of the Existing Repurchase Agreement is hereby amended by adding the following new subsection at the end thereof:
(e) If Buyer determines that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining One-Month LIBOR or Overnight LIBOR, Buyer shall give prompt notice thereof to Seller, whereupon the Index Rate and Operating Account Rate, until such notice has been withdrawn by Buyer, shall be an alternative per annum rate based on an index approximating the behavior of One-Month LIBOR or Overnight LIBOR, as applicable, as determined by Buyer in its sole discretion (such rate, a Successor Rate).
SECTION 3. General Interpretive Principles. Section 36 of the Existing Repurchase Agreement is hereby amended by deleting the reference to Section 5-102(7) and replacing it with a reference to Section 1-201(b)(20).
SECTION 4. Conditions Precedent. This Amendment shall become effective as of the date hereof (the Amendment Effective Date), subject to the satisfaction of the following conditions precedent:
4.1. Delivered Documents. On the Amendment Effective Date, the Buyer shall have received the following documents, each of which shall be satisfactory to the Buyer in form and substance:
(a) this Amendment, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller;
(b) Amendment No. 15 to Pricing Letter, executed and delivered by duly authorized officers, as applicable, of the Buyer and the Seller; and
(c) such other documents as the Buyer or counsel to the Buyer may reasonably request.
SECTION 5. Ratification of Agreement. As amended by this Amendment, the Existing Repurchase Agreement is in all respects ratified and confirmed and the Existing Repurchase Agreement as so modified by this Amendment shall be read, taken, and construed as one and the same instrument.
SECTION 6. Representations and Warranties. The Seller hereby represents and warrants to the Buyer that it is in compliance with all the terms and provisions set forth in the Repurchase Agreement on its part to be observed or performed, and that no Default or Event of Default has occurred or is continuing, and hereby confirms and reaffirms the representations and warranties contained in Section 11 of the Repurchase Agreement. The Seller hereby represents and warrants that this Amendment has been duly and validly executed and delivered by it, and constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.
SECTION 7. Limited Effect. Except as expressly amended and modified by this Amendment, the Existing Repurchase Agreement shall continue to be, and shall remain, in full force and effect in accordance with its terms.
SECTION 8. Severability. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
SECTION 9. Counterparts. This Amendment may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any of the parties hereto may execute this Amendment by signing any such counterpart. The parties agree that this Amendment, any documents to be delivered pursuant to this Amendment and any notices hereunder may be transmitted between them by email and/or by facsimile. Delivery of an executed counterpart of a signature page of this Amendment in Portable Document Format (PDF) or by facsimile shall be effective as delivery of a manually executed original counterpart of this Amendment. The original documents shall be promptly delivered, if requested.
SECTION 10. Binding Effect. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns.
SECTION 11. GOVERNING LAW. THIS AMENDMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO THIS AMENDMENT, THE RELATIONSHIP OF THE PARTIES TO THIS AMENDMENT, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES TO THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS AND DECISIONS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE CHOICE OF LAW RULES THEREOF. THE PARTIES HERETO INTEND THAT THE PROVISIONS OF SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW SHALL APPLY TO THIS AMENDMENT. NOTWITHSTANDING ANYTHING TO THE CONTRARY, THE EFFECTIVENESS, VALIDITY AND ENFORCEABILITY OF ELECTRONIC CONTRACTS, OTHER RECORDS, ELECTRONIC RECORDS AND ELECTRONIC SIGNATURES USED IN CONNECTION WITH ANY ELECTRONIC TRANSACTION BETWEEN BUYER AND SELLER SHALL BE GOVERNED BY E-SIGN.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the Buyer and the Seller have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date first above written.
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UBS AG, BY AND THROUGH ITS BRANCH OFFICE AT 1285 AVENUE OF THE AMERICAS, NEW YORK, NEW YORK, as Buyer | |
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By: |
/s/ Gary Timmerman |
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Name: Gary Timmerman |
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Title: Managing Director |
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By: |
/s/ Ari Lash |
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Name: Ari Lash |
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Title: Executive Director |
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AMERIHOME MORTGAGE COMPANY, LLC, as Seller | |
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By: |
/s/ Kathleen Conte |
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Name: Kathleen Conte |
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Title: SCP Capital Markets |
Signature Page to Amendment No. 7 to Master Repurchase Agreement
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
Version: 5.01
EXECUTION COPY
MASTER REPURCHASE AGREEMENT AND SECURITIES CONTRACT
BETWEEN
Wells Fargo Bank, N.A., as buyer (Buyer)
The Sellers identified on the Addendum, as seller (Seller)
The Guarantor, if identified on the Addendum, as guarantor (Guarantor)
Dated as of the Effective Date set forth in the Addendum
TABLE OF CONTENTS
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Page |
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1. |
Applicability |
1 |
2. |
Definitions |
1 |
3. |
Program; Initiation of Transactions |
25 |
4. |
Repurchase |
27 |
5. |
[Reserved.] |
27 |
6. |
Margin Maintenance |
27 |
7. |
Income Payments |
29 |
8. |
Payment and Transfer |
30 |
9. |
Conditions Precedent |
30 |
10. |
Program; Costs |
34 |
11. |
Servicing |
35 |
12. |
Representations and Warranties |
37 |
13. |
Covenants |
42 |
14. |
Events of Default |
47 |
15. |
Remedies Upon Default |
50 |
16. |
Reports |
53 |
17. |
[Reserved] |
55 |
18. |
Repurchase Transactions |
55 |
19. |
Custodial Responsibilities |
56 |
20. |
Single Agreement |
57 |
21. |
Notices and Other Communications |
57 |
22. |
Entire Agreement; Severability |
57 |
23. |
Non-assignability |
58 |
24. |
Set-off |
58 |
25. |
Binding Effect; Governing Law; Jurisdiction |
59 |
26. |
No Waivers, Etc. |
60 |
27. |
Intent |
60 |
28. |
Power of Attorney |
60 |
29. |
Buyer May Act Through Affiliates |
61 |
30. |
Indemnification; Obligations |
61 |
31. |
Counterparts |
61 |
32. |
Confidentiality |
62 |
33. |
Recording of Communications |
62 |
34. |
Periodic Due Diligence Review |
62 |
35. |
Authorizations |
63 |
36. |
Documents Mutually Drafted |
63 |
37. |
Joint and Several |
63 |
38. |
Security Interest |
63 |
39. |
Agency Security Takeout |
64 |
40. |
Physical Possession of Records and Files relating to the Purchased Assets |
66 |
41. |
Conflicts |
66 |
ANNEXES |
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Annex A |
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Financial Covenants |
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SCHEDULES |
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Schedule 1 |
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Representations and Warranties with Respect to Purchased Mortgage Loans |
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EXHIBITS |
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Exhibit A |
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Officers Compliance Certificate |
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Exhibit B |
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Certificate of an Officer of the Seller, including a Form of Resolutions |
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Exhibit C |
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Form of Power of Attorney |
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Exhibit D |
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Form of Guaranty |
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Exhibit E |
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Form of Incumbency Certificate |
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Exhibit F |
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Form of Service Side Letter |
This Master Repurchase Agreement and Securities Contract is dated as of the Effective Date by and among the Buyer, the Seller and the Guarantor.
1. Applicability
From time to time the parties hereto may enter into transactions in which Seller agrees to sell all right, title and interest (including, without limitation, the Servicing Rights (as hereinafter defined)) in and to the Mortgage Loans and, if applicable, Agency Securities (each as hereinafter defined) to Buyer in exchange for the transfer of funds by Buyer to Seller, with a simultaneous agreement by Buyer to transfer to Seller such Mortgage Loans and Agency Securities (if applicable) at a date certain or on demand, in exchange for the transfer of funds by Seller to Buyer. Each such loan level transaction shall be referred to herein as a Transaction and, unless otherwise agreed in writing, shall be governed by this Agreement. All sales of Mortgage Loans from Seller to Buyer will be on a servicing-released basis. In addition, the Guarantor agrees to provide the Guaranty (as hereinafter defined) guarantying certain obligations of the Seller.
2. Definitions
a. Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:
1934 Act means the Securities Exchange Act of 1934, as amended from time to time.
Acceptable State means any state, commonwealth, or federal district acceptable to Buyer in which the Seller is licensed to originate, purchase or service, as applicable, Mortgage Loans.
Accepted Servicing Practices means, with respect to any Mortgage Loan, those mortgage servicing practices of prudent mortgage lending institutions which service mortgage loans of the same type as such Mortgage Loan in the jurisdiction where the related Mortgaged Property is located, and, with respect to any Mortgage Loan other than a Government Mortgage Loan, serviced in accordance with Fannie Mae or Freddie Mac, as applicable, servicing practices and procedures, as defined in the Fannie Mae or Freddie Mac, as applicable servicing guidelines (as may be amended or updated from time to time) and, with respect to Government Mortgage Loans, in accordance with HUD servicing guidelines, and in each case, as set forth in this Agreement and the Manual.
Accounts Receivable Rate means the interest rate set forth on the Addendum for such term.
Act of Insolvency means, with respect to any Person or its Affiliates, (i) the filing of a petition, commencing, or authorizing the commencement of any case or proceeding, or the voluntary joining of any case or proceeding under any bankruptcy, insolvency, reorganization, liquidation, dissolution or similar law relating to the protection of creditors, or suffering any such petition or proceeding to be commenced by another which is consented to, not timely contested or results in entry of an order for relief; (ii) the seeking of the appointment of a receiver, trustee, custodian or similar official for such party or an Affiliate or any substantial part of the property of
either; (iii) the appointment of a receiver, conservator, or manager for such party or an Affiliate by any governmental agency or authority having the jurisdiction to do so; (iv) the making or offering by such party or an Affiliate of a composition with its creditors or a general assignment for the benefit of creditors; (v) the admission by such party or an Affiliate of such party of its inability to pay its debts or discharge its obligations as they become due or mature; or (vi) that any governmental authority or agency or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the property of such party or of any of its Affiliates, or shall have taken any action to displace the management of such party or of any of its Affiliates or to curtail its authority in the conduct of the business of such party or of any of its Affiliates.
Addendum means that certain Addendum hereto entered into contemporaneously with this Agreement, dated as of the Effective Date, among the Buyer, the Seller and the Guarantor, as may be amended or restated from time to time.
Additional Covenants and Conditions means the Other Covenants and Conditions and the Financial Covenants (to the extent that such covenants are not already specifically set forth in this Agreement), as set forth in the Addendum.
Affiliate means, with respect to any Person, any affiliate of such Person, as such term is defined in the Bankruptcy Code.
Agency means Ginnie Mae, Freddie Mac or Fannie Mae, as applicable.
Agency Custodian means the custodian designated in (i) the Master Ginnie Mae Custodial Agreement, (ii) the Master Fannie Mae Custodial Agreement or (iii) the Master Freddie Mac Custodial Agreement, as applicable.
Agency Document Custodian Manual means, collectively, (i) the Ginnie Mae Mortgage-Backed Securities Program Document Custodian Manual as found in Appendix V-1 of the Ginnie Mae Guide, (ii) the Fannie Mae Requirements for Document Custodians or (iii) the Freddie Mac Document Custody Procedures Handbook, as applicable.
Agency Security means a Ginnie Mae Security, a Fannie Mae Security or a Freddie Mac Security, as applicable, and, in each case, is backed by one-to-four-family residential mortgage loans.
Agency Security Margin means the margin set forth in the Sublimit, Rate and Term Schedule of the Addendum for such term; provided, however, that upon the occurrence of an Event of Default, the Agency Security Margin shall automatically be increased by the Post Default Rate Margin, even if the Buyer forebears exercising any of its rights and remedies as a result of such Event of Default.
Agency Security Purchase Commitment means a written commitment, in form and substance satisfactory to Buyer, issued in favor of Seller by a Takeout Broker Dealer pursuant to which that Takeout Broker Dealer commits to purchase one or more Agency Securities.
Agency Security Purchase Price means, in the case of any Purchased Agency Security (a) as of the Purchase Date for such Purchased Agency Security, an amount equal to the lesser of the amount requested by the Seller or the product of the Purchase Price Percentage for such Purchased Agency Security times the lesser of (i) the Market Value of such Purchased Agency Security, (ii) the unpaid principal balance of the underlying Purchased Mortgage Loans pooled in the Purchased Agency Security or (iii) the amount set forth on the Agency Security Purchase Commitment with respect to such Purchased Agency Security, and (b) as of any other date, the amount calculated on the Purchase Date in the preceding clause (a), (i) reduced by any amount of Margin Deficit transferred by Seller to Buyer pursuant to Section 6 and applied to the Agency Security Purchase Price of such Purchased Agency Security, (ii) reduced by any Principal Payments remitted to the Collection Account and which were applied to the Agency Security Purchase Price of such Purchased Agency Security by Buyer pursuant to clause first of Section 7(b) and (iii) reduced by any payments made by Seller in reduction of the outstanding Agency Security Purchase Price, in each case before or as of such determination date with respect to such Purchased Agency Security.
Agency Security Sublimit means the amount set forth on the Addendum for such term.
Aggregate Claim Threshold means the amount set forth on the Addendum for such term.
Aggregate Purchase Price means the sum of (i) the Purchase Price of all Purchased Mortgage Loans subject to outstanding Transactions and (ii) the Purchase Price of all Purchased Agency Securities subject to outstanding Transactions.
Agreement means, collectively, this Master Repurchase Agreement and Securities Contract, the Addendum, and each Schedule and Exhibit hereto and thereto, as such agreement may be amended, supplemented or otherwise modified from time to time.
Anti-Terrorism Laws means, any Requirements of Law relating to money laundering or terrorism, including Executive Order 13224 signed into law on September 23, 2001, the regulations promulgated by OFAC, and the Patriot Act.
Appraised Value means the value set forth in an appraisal made in connection with the origination of the related Mortgage Loan as the value of the Mortgaged Property.
Asset Tape means a remittance report containing servicing information, including, without limitation, those fields reasonably requested by Buyer from time to time, on a loan-by-loan basis and in the aggregate, with respect to the Purchased Mortgage Loans serviced by Seller or any Servicer for the immediately prior month or months, as applicable (or any portion thereof).
Assignment of Mortgage means an assignment of the Mortgage, notice of transfer or equivalent instrument in recordable form, sufficient under the laws of the jurisdiction wherein the related Mortgaged Property is located to reflect the sale of the Mortgage to Buyer.
Authorized Funds Recipient means the entity approved by Buyer, in its sole good faith discretion, which may be a title company, escrow company or attorney in accordance with local law and practice in the jurisdiction where the related Mortgage Loan is being originated, or in the case of a Correspondent Mortgage Loan, any warehouse bank or correspondent which has been approved by Buyer, which may receive funds on behalf of Seller. Any transfer by Buyer to an Authorized Funds Recipient shall be considered a transfer of funds by Buyer to Seller.
Bankruptcy Code means the United States Bankruptcy Code of 1978, as amended from time to time.
Business Day means any day other than (A) a Saturday or Sunday and (B) a public or bank holiday in New York City or Los Angeles, California during which financial institutions are authorized or required to close.
Buyer has the meaning set forth on the first page of this Agreement.
Buyers Federal Book Account means the securities clearing account owned by the Buyer and identified on the Addendum.
Capital Lease Obligations means, for any Person, all obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) Property to the extent such obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP, and, for purposes of this Agreement, the amount of such obligations shall be the capitalized amount thereof, determined in accordance with GAAP.
Change in Control means:
(A) the sale, transfer, or other disposition of all or an amount equivalent to twenty-five percent (25%) or more of any Sellers or any Guarantors assets (excluding any such action taken in connection with any securitization, whole loan transaction or servicing rights transaction); or, if applicable, the sale, transfer, or other disposition of all or an amount equivalent to 25% or more of the Managers, General Partners or Limited Partners assets (excluding any such action taken in connection with any securitization or whole loan transaction); or
(B) the consummation of a merger or consolidation of Seller or Guarantor (or, if applicable, the Manager, General Partner or Limited Partner) with or into another entity or any other corporate reorganization, if more than 25% of the combined voting power of the continuing or surviving entitys stock outstanding immediately after such merger, consolidation or such other reorganization is owned by Persons who were not stockholders of Seller or Guarantor (or, if applicable, the Manager, General Partner or Limited Partner) immediately prior to such merger, consolidation or other reorganization.
Closing Instruction Letter means the Closing Instruction Letter from Seller to the Authorized Funds Recipient, in a form substantially similar to the form provided in the Manual, as the same may be modified, supplemented and in effect from time to time.
Code means the Internal Revenue Code of 1986, as amended.
Collateral Documents means the documents in the Mortgage File delivered to the Custodian. For the avoidance of doubt, the Collateral Documents for any Purchased Mortgage Loan may only be held by one Custodian at all times.
Collection Account means one or more accounts identified on the Addendum and established by or on behalf of the Servicer or Seller for the benefit of Buyer or assigned to the Buyer, into which all collections and proceeds on or in respect of the Purchased Assets shall be deposited by Servicer or Seller and subject to a Collection Account Control Agreement.
Collection Account Control Agreement means a blocked account agreement providing the Buyer with control at all times over the Collection Account.
Combined Loan-to-Value Ratio or CLTV means with respect to any Mortgage Loan, the ratio of (i)(a) the original outstanding principal amount of the Mortgage Loan, plus (b) the unpaid principal balance of any related subordinate mortgage loan or loans secured by the Mortgaged Property, to (ii) the lesser of (a) the Appraised Value of the related Mortgaged Property at origination or (b) if the Mortgaged Property was purchased within twelve (12) months of the origination of such Mortgage Loan, the purchase price of the related Mortgaged Property.
Conforming Mortgage Loan means a first lien mortgage loan originated in accordance with the most recently published underwriting and eligibility criteria of Fannie Mae or Freddie Mac for purchase of mortgage loans, as determined by Buyer in its sole discretion.
Cooperative Corporation means with respect to any Cooperative Mortgage Loan, the cooperative apartment corporation that holds legal title to the related Cooperative Project and grants occupancy rights to units therein to stockholders through Proprietary Leases or similar arrangements.
Cooperative Mortgage Loan means a mortgage loan that is secured by a first lien on and perfected security interest in Cooperative Shares and the related Proprietary Lease granting exclusive rights to occupy the related Cooperative Unit in the building owned by the related Cooperative Corporation.
Cooperative Project means, with respect to any Cooperative Mortgage Loan, all real property and improvements thereto and rights therein and thereto owned by a Cooperative Corporation including, without limitation, the land, separate dwelling units and all common elements.
Cooperative Shares means, with respect to any Cooperative Mortgage Loan, the shares of stock issued by a Cooperative Corporation and allocated to a Cooperative Unit and represented by a stock certificate.
Cooperative Unit means, with respect to a Cooperative Mortgage Loan, a specific unit or apartment in a Cooperative Project.
Correspondent Mortgage Loan means a mortgage loan purchased from a licensed mortgage lender who is approved by the Seller and for which Seller does not appear as the lender on the Mortgage Note.
Cross Default Threshold means the amount set forth on the Addendum for such term.
Custodial Agreement means either or both, as the context in the Agreement requires: (a) the custodial agreement between Buyer and Wells Fargo Bank, National Association as Custodian, as the same may be amended from time to time or (b) such other custodial agreement, among Seller, Buyer and a Custodian, as the same may be amended from time to time. For the avoidance of doubt, each Purchased Mortgage Loan shall be subject to only one Custodial Agreement at any time.
Custodian means any of, as the context requires, (a) Wells Fargo Bank, National Association or (b) such other party identified on the Addendum and agreed to by Buyer and, prior to an Event of Default, Seller.
Default means an Event of Default or an event that with notice or lapse of time or both would become an Event of Default.
Delivery Date means any day on which the Buyer, Seller or an agent of the Seller delivers a Mortgage File to the Custodian.
Deutsche Bank means the Deutsche Bank National Trust Company.
Dollars and $ means dollars in lawful currency of the United States of America.
Due Date means the day of the month on which the Monthly Payment is due on a Mortgage Loan, exclusive of any days of grace.
Effective Date means the date set forth on the Addendum.
Electronic Tracking Agreement means an Electronic Tracking Agreement among Buyer, Seller, Servicer (if applicable), MERS and MERSCORP Holdings, Inc., to the extent applicable as the same may be amended from time to time.
ERISA means the Employee Retirement Income Security Act of 1974 and any successor thereto.
ERISA Affiliate means each person (as defined in Section 3(9) of ERISA) which, together with Seller, would be deemed to be a single employer within the meaning of Section 414(b), (c), (m) or (o) of the Code.
ERISA Event means (i) a reportable event within the meaning of Section 4043 of ERISA and regulations thereunder with respect to any Plan (excluding those for which the thirty (30) day notice to the PBGC has been waived by regulation); (ii) the failure to meet the minimum funding standard of Section 303 of ERISA with respect to any Plan or the failure to timely make a required installment under Section 430(j) of the Code with respect to any Plan or the failure to make any required contribution to a Multiemployer Plan; (iii) the provision by the administrator of any Plan pursuant to Section 4041 of ERISA of a notice of intent to terminate such plan in a distress termination described under Section 4041(c ) of ERISA; (iv) the imposition
on Seller or any Affiliate of any liability (including any contingent liability) to or on account of any Plan pursuant to Section 4062, 4063, 4064, 4201 or 4104 of ERISA; (v) the institution by the PBGC of proceedings for the termination of, or the appointment of a trustee to administer, any Plan; (vi) the imposition of liability on Seller or any Affiliate pursuant to Section 4062 or 4069 of ERISA pursuant to Section 4212 of ERISA; (vii) the receipt by Seller or its ERISA Affiliates of notice from any Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 of ERISA or that it intends to terminate or has terminated under Section 4041A or 4042 of ERISA and (ix) the imposition of a lien pursuant to Section 430(k) of the Code with respect to a Plan.
Errors and Omissions Insurance Policy means, if applicable, an errors and omissions insurance policy to be maintained by the Seller pursuant to Section 13(e) hereof.
Escrow Payments means, with respect to any Mortgage Loan, the amounts constituting ground rents, taxes, assessments, water rates, sewer rents, municipal charges, mortgage insurance premiums, fire and hazard insurance premiums, condominium charges, and any other payments required to be escrowed by the Mortgagor with the mortgagee pursuant to the Mortgage or any other document.
Event of Default has the meaning specified in Section 14 hereof.
Fannie Mae means Fannie Mae, the government sponsored enterprise formerly known as the Federal National Mortgage Association or any successor thereto.
Fannie Mae Guide means, together, the Fannie Mae MBS Selling Guide and the Fannie Mae Servicing Guide, as such guides may hereafter from time to time be amended.
Fannie Mae Security means a mortgage-backed security received in exchange for mortgage loans sold by the Seller to Fannie Mae and issued by Fannie Mae.
Fannie Mae Seller means a business organization that is approved to sell mortgages to, and service on behalf of, Fannie Mae.
FHA means the Federal Housing Administration, an agency within the United States Department of Housing and Urban Development, or any successor thereto, and including the Federal Housing Commissioner and the Secretary of Housing and Urban Development where appropriate under the FHA Regulations.
FHA Approved Mortgagee means a corporation or institution approved as a mortgagee by the FHA under the National Housing Act, as amended from time to time, and applicable FHA Regulations, and eligible to own and service mortgage loans such as the FHA Loans.
FHA Loan means a Mortgage Loan which is the subject of an FHA Mortgage Insurance Contract, or eligible for such FHA Mortgage Insurance Contract and will be submitted for such contract immediately after its origination.
FHA Mortgage Insurance means, mortgage insurance authorized under the National Housing Act, as amended from time to time, and provided by the FHA.
FHA Mortgage Insurance Certificate means the contractual obligation of the FHA with respect to the insurance of a Mortgage Loan.
FHA Regulations means the regulations promulgated by the Department of Housing and Urban Development under the National Housing Act, as amended from time to time, and codified in 24 Code of Federal Regulations, and other Department of Housing and Urban Development issuances relating to FHA Loans, including the related handbooks, circulars, notices and mortgagee letters.
FICO means Fair Isaac & Co., or any successor thereto.
Fidelity Insurance Policy means, if applicable, a fidelity insurance policy to be maintained by the Seller pursuant to Section 13(e) hereof.
Financial Covenants means the covenants set forth on Annex A to this Agreement and the Financial Covenants (to the extent that such covenants are not already specifically set forth in this Agreement) set forth in the Addendum.
Freddie Mac means Freddie Mac, the government sponsored enterprise formerly known as the Federal Home Loan Mortgage Corporation or any successor thereto.
Freddie Mac Guide means the Freddie Mac Sellers and Servicers Guide, as such Guide may hereafter from time to time be amended.
Freddie Mac Security means a mortgage-backed security received in exchange for mortgage loans sold by the Seller to Freddie Mac and issued by Freddie Mac.
Freddie Mac Seller means a business organization that is approved to sell mortgages to, and service on behalf of, Freddie Mac.
GAAP means generally accepted accounting principles in effect from time to time in the United States of America and applied on a consistent basis.
General Partner means, if applicable, the Person identified on the Addendum for such term.
Ginnie Mae means the Government National Mortgage Association and any successor thereto.
Ginnie Mae Guide means the Ginnie Mae Mortgage-Backed Securities Guide, including the Ginnie Mae Document Custodian Manual, as such Ginnie Mae Guide may hereafter from time to time be amended.
Ginnie Mae Issuer or the Issuer means a business organization that, having met certain criteria, has been approved to issue securities guaranteed by Ginnie Mae and service the mortgage loans related to such securities.
Ginnie Mae Security means a mortgage-backed security issued by the Seller for which the timely payment of principal and interest is guaranteed by Ginnie Mae.
GLB Act has the meaning set forth in Section 32 hereof.
Governing Documents means, with respect to any Person, its articles or certificate of incorporation or formation, by-laws, memorandum and articles of association, partnership, limited liability company, operating or trust agreement and/or other organizational, charter or governing documents, together with any amendments, restatement or supplements thereto.
Government Mortgage Loan means a first lien mortgage loan originated in accordance with the criteria of USDA, FHA, VA or other Governmental Authority for purchase of mortgage loans, including, without limitation, USDA Mortgage Loans, FHA Loans and VA Loans, as determined by Buyer in its sole discretion.
Governmental Authority means any (a) nation or government, any state or other political subdivision thereof, (b) Person, agency, authority, instrumentality, court, regulatory body, central bank or other body or entity exercising executive, legislative, judicial, taxing, quasi-judicial, quasi-legislative, regulatory or administrative functions or powers of or pertaining to government, (c) court or arbitrator having jurisdiction over such Person, its Affiliates or its assets or properties, (d) stock exchange on which shares of stock of such Person are listed or admitted for trading or (e) accounting board or authority that is responsible for the establishment or interpretation of national or international accounting principles.
Gross Margin means, with respect to each adjustable rate Mortgage Loan, the fixed percentage amount set forth in the related Mortgage Note.
Guarantee means, as to any Person, any obligation of such Person directly or indirectly guaranteeing any Indebtedness of any other Person or in any manner providing for the payment of any Indebtedness of any other Person or otherwise protecting the holder of such Indebtedness against loss (whether by virtue of partnership arrangements, by agreement to keep-well, to purchase assets, goods, securities or services, or to take-or-pay or otherwise); provided, that the term Guarantee shall not include (i) endorsements for collection or deposit in the ordinary course of business, or (ii) obligations to make servicing advances for delinquent taxes and insurance or other obligations in respect of a Mortgaged Property, to the extent required by Buyer. The amount of any Guarantee of a Person shall be deemed to be an amount equal to the stated or determinable amount of the primary obligation in respect of which such Guarantee is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith. The terms Guarantee and Guaranteed used as verbs shall have correlative meanings.
Guarantor, if applicable, has the meaning set forth in the Guaranty Addendum.
Guaranty means, if applicable, the guaranty in the form of Exhibit D hereto, as supplemented by the Guaranty Addendum, of each Guarantor dated as of the date set forth on the Guaranty Addendum as the same may be amended from time to time, pursuant to which each Guarantor fully and unconditionally guarantees the obligations of the Seller hereunder.
Guaranty Addendum means that certain addendum to the Guaranty, if applicable, dated as of the date set forth thereon, between the Buyer and the Seller.
Guide means, collectively, (i) the Ginnie Mae Guide, (ii) the Fannie Mae Guide or (iii) the Freddie Mac Guide, as applicable and including the applicable Agency Document Custodian Manual, as such Guide may hereafter from time to time be amended.
High Cost Mortgage Loan means a mortgage loan classified as (a) a high cost loan under the Home Ownership and Equity Protection Act of 1994, as amended, or (b) a high cost, threshold, covered, abusive, high risk or predatory loan under any other applicable state, federal or local law (or a similarly classified loan using different terminology under a law, regulation or ordinance imposing heightened regulatory scrutiny or additional legal liability for residential mortgage loans having high interest rates, points and/or fees).
HUD means the U.S. Department of Housing and Urban Development.
Income means with respect to any Purchased Asset, all of the following (in each case with respect to the entire par amount of the Purchased Asset represented by such Purchased Asset and not just with respect to the portion of the par amount represented by the Purchase Price advanced against such Purchased Asset): (a) all Principal Payments, (b) all Interest Payments, (c) all other income, distributions, receipts, payments, collections, prepayments, recoveries, proceeds (including insurance and condemnation proceeds) and other payments or amounts of any kind paid, received, collected, recovered or distributed on, in connection with or in respect of such Purchased Asset, including prepayment fees, extension fees, exit fees, any rental payments, if any, transfer fees, make whole fees, late charges, late fees and all other fees or charges of any kind or nature, premiums, yield maintenance charges, penalties, default interest, dividends, gains, receipts, allocations, rents, interests, profits, payments in kind, returns or repayment of contributions, net sale, foreclosure, liquidation, securitization or other disposition proceeds, insurance payments, settlements and proceeds, (d) all payments received from hedge counterparties pursuant to interest rate protection agreements related to such Purchased Mortgage Loans; and (e) all other proceeds as defined in Section 9-102(64) of the UCC, including all collections or distributions thereon or other income or receipts therefrom or in respect thereof; provided, that any amounts that under the applicable Mortgage Loan Documents are required to be deposited into and held in escrow or reserve to be used for a specific purpose, such as taxes and insurance, shall not be included in the term Income unless and until (i) an event of default exists under such Mortgage Loan Documents, (ii) the holder of the related Purchased Mortgage Loan has exercised or is entitled to exercise rights and remedies with respect to such amounts, (iii) such amounts are no longer required to be held for such purpose under such Mortgage Loan Documents, or (iv) such amounts may be applied to all or a portion of the outstanding indebtedness under such Mortgage Loan Documents.
Indebtedness means, for any Person: (a) obligations created, issued or incurred by such Person for borrowed money (whether by loan, the issuance and sale of debt securities or the sale of Property to another Person subject to an understanding or agreement, contingent or otherwise, to repurchase such Property from such Person); (b) obligations of such Person to pay the deferred purchase or acquisition price of Property or services, other than trade accounts payable (other than for borrowed money) arising, and accrued expenses incurred, in the ordinary course of business, so long as such trade accounts payable are payable within ninety (90) days after the date the respective goods are delivered or the respective services are rendered; (c) indebtedness to others secured by a Lien on the Property of such Person, whether or not the respective indebtedness so secured has been assumed by such Person; (d) obligations (contingent or otherwise) of such Person in respect of letters of credit or similar instruments issued or accepted by banks and other financial institutions for the account of such Person; (e) Capital Lease Obligations of such Person; (f) obligations of such Person under repurchase agreements, sale/buy-back agreements, early purchase agreements, or like arrangements; (g) indebtedness of others Guaranteed by such Person; (h) all obligations of such Person incurred in connection with the acquisition or carrying of fixed assets by such Person; (i) indebtedness of general partnerships of which such Person is a general partner; and (j) to the extent not already included in clauses (a) through (i) above, any amounts either existing or reported on the financial statements of Seller, that Buyer determines, in its sole discretion, are obligations of such Person that should be included as Indebtedness hereunder.
Index means, with respect to any adjustable rate Mortgage Loan, the index identified on the Mortgage Loan Schedule and set forth in the related Mortgage Note for the purpose of calculating the applicable Mortgage Interest Rate.
Index Floor means the rate set forth on the Addendum for such term.
Individual Claim Threshold means the amount set forth on the Addendum for such term.
Interest Only Adjustment Date means, with respect to each Interest Only Loan, the date, specified in the related Mortgage Note on which the Monthly Payment will be adjusted to include principal as well as interest.
Interest Only Loan means a Mortgage Loan which only requires payments of interest for a period of time specified in the related Mortgage Note.
Interest Payments means with respect to any Purchased Asset, all payments of interest, income, receipts, dividends, and any other collections and distributions received from time to time in connection with any such Purchased Asset.
Interest Rate Adjustment Date means the date on which an adjustment to the Mortgage Interest Rate with respect to each Mortgage Loan becomes effective.
Interest Rate Protection Agreement means, with respect to any or all of the Purchased Mortgage Loans, any short sale of a US Treasury Security, or futures contract, or mortgage related security, or Eurodollar futures contract, or options related contract, or interest rate swap, interest rate lock agreement or similar arrangement providing for protection against fluctuations in interest rates or the exchange of nominal interest obligations, either generally or
under specific contingencies, entered into by Seller and an Affiliate of Buyer or such other party acceptable to Buyer in its sole discretion, which agreement is acceptable to Buyer in its sole discretion.
Judgment Threshold means the amount set forth on the Addendum for such term.
Jumbo Mortgage Loan means a mortgage loan with an original unpaid principal amount in excess of the lesser of the applicable conventional conforming loan limits set by Fannie Mae and Freddie Mac.
Key Personnel means the people or positions set forth on the Addendum for such term.
LIBOR means the rate determined on the first (1st) Business Day of each week by Buyer on the basis of the offered rate for one-month or three-month (as set forth on the Addendum) U.S. dollar deposits, as such rate appears on Bloomberg Screen US0001M Page, as of 11:00 a.m. (London time) on such date (rounded up to the nearest whole multiple of 1/8%); provided, that if such rate does not appear on Bloomberg Screen US0001M Page, the rate for such date will be the rate determined by reference to such other comparable publicly available service publishing such rates as may be selected by Buyer in its sole discretion and communicated to Seller; provided, further, that if Buyer determines that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining LIBOR, then Buyer shall provide Seller with prompt notice thereof and Buyer shall use such other comparable rate that is being used in the relevant market until otherwise communicated to Seller. Notwithstanding anything to the contrary herein, Buyer shall have the option in its sole discretion, to re-set LIBOR on a daily basis.
Lien means any mortgage, lien, pledge, charge, security interest or similar encumbrance.
Limited Partner means, if applicable, the Person identified on the Addendum for such term.
Loan Margin means the loan margin for the applicable Mortgage Loan set forth in the Sublimit, Rate and Term Schedule of the Addendum; provided, however, that upon the occurrence of a Default or Event of Default, the Loan Margin shall automatically be increased by the Post Default Rate Margin, even if the Buyer forebears exercising any of its rights and remedies as a result of such Default or Event of Default.
Loan Program Authority means, with respect to Conforming Mortgage Loans and Government Mortgage Loans, Fannie Mae, Freddie Mac, FHA, VA, or the USDA, as applicable, and with respect to Jumbo Mortgage Loans and Specialized Mortgage Loans, the applicable Takeout Investor.
Loan to Value Ratio or LTV means with respect to any Mortgage Loan, the ratio of the original outstanding principal amount of the Mortgage Loan, to the lesser of (a) the Appraised Value of the related Mortgaged Property at origination or (b) if the Mortgaged Property
was purchased within twelve (12) months of the origination of such Mortgage Loan, the purchase price of the related Mortgaged Property.
Manager means the managing member or non-member manager of Seller, if any.
Manual has the meaning set forth in Section 13(c) hereof.
Manufactured Home means any dwelling unit built on a permanent chassis and attached to a permanent foundation system.
Margin Call has the meaning specified in Section 6(a) hereof.
Margin Deadlines has the meaning specified in Section 6(c) hereof.
Margin Deficit has the meaning specified in Section 6(a) hereof.
Margin Stock has the meaning assigned to that term in Regulation U of the Board of Governors of the Federal Reserve System as in effect from time to time.
Market Value means, with respect to any Purchased Mortgage Loan as of any date of determination, the whole loan servicing released fair market value of such Purchased Mortgage Loan on such date as determined by Buyer (or an Affiliate thereof) in its sole discretion, and with respect to any Purchased Agency Security as of any date of determination the fair market value of such Purchased Agency Security on such date as determined by Buyer (or an Affiliate thereof) in its sole discretion; provided, however, that the methodology for such determination is consistent with Wells Fargo Securities, LLCs determination with respect to its own portfolio of mortgage loans or agency securities, to which such a determination would be applicable. Without limiting the generality of the foregoing, Seller acknowledges that the Market Value of a Purchased Mortgage Loan or Purchased Agency Security may be reduced to zero by Buyer if:
(i) a breach of a representation, warranty or covenant made by Seller in this Agreement (including, without limitation, any representation, warranty or covenant made on a Schedule or Exhibit including, without limitation, Schedule 1) with respect to such Purchased Mortgage Loan or Purchased Agency Security has occurred and is continuing;
(ii) such Purchased Mortgage Loan is or becomes a Sub-Performing Mortgage Loan;
(iii) such Purchased Mortgage Loan has been released from the possession of the Custodian under the Custodial Agreement for a period in excess of ten (10) days for a servicing-related issue or twenty (20) days if provided under a bailee letter in either case without an extension of the applicable time period granted by Buyer in writing;
(iv) such Purchased Mortgage Loan has been subject to a Transaction hereunder for a period of greater than the Maximum Transaction Duration identified on the Addendum for the relevant loan type or such Purchased Agency Security has been subject to a Transaction hereunder for a period greater than the Maximum Transaction Duration identified on the Addendum for Purchased Agency Securities; provided, however, that in no event shall a Purchased
Mortgage Loan or Purchased Agency Security be subject to a Transaction for greater than 364 days;
(v) such Purchased Mortgage Loan is a Wet-Ink Mortgage Loan for which the Mortgage File has not been delivered to the Custodian on or prior to the Wet-Ink Mortgage Loan Document Receipt Date after the related Purchase Date;
(vi) such Purchased Mortgage Loan is no longer acceptable for purchase by a Takeout Investor under any of the flow purchase or conduit programs for which Seller has been approved, or a Takeout Investor conditions the purchase of such Purchased Mortgage Loan and, in each case, in Buyers sole determination, such ineligibility or conditions demonstrate an impairment of the marketability of such Purchased Mortgage Loan, or, if such Purchased Mortgage Loan has not been offered to a Takeout Investor, Buyer determines that there is a flaw in such Purchased Mortgage Loan which materially impacts the marketability of such Purchased Mortgage Loan; provided, that, if Buyer or the Takeout Investor determines that there is a flaw that materially impacts the marketability of such Purchased Mortgage Loan, Buyer shall notify Seller of such flaw and allow the Seller three (3) Business Days to cure such flaw if, in Buyers sole determination, allowing Seller time to cure such flaw does not materially impact Buyers interests in, or marketability of, such Purchase Mortgage Loan;
(vii) when the Purchase Price for a Purchased Mortgage Loan is added to other Purchased Mortgage Loans that are of the same type of Mortgage Loan, the aggregate Purchase Price of all such type of Purchased Mortgage Loans exceeds the applicable Sublimit for such type of Mortgage Loans;
(viii) when the Purchase Price for such Purchased Mortgage Loan is added to other Purchased Mortgage Loans, the aggregate Purchase Price of all Purchased Mortgage Loans exceeds the Maximum Aggregate Purchase Price;
(ix) when the Purchase Price for such Purchased Agency Security is added to other Purchased Agency Securities, the aggregate Purchase Price for all Purchased Agency Securities exceeds the Agency Security Sublimit;
(x) when the Purchase Price for such Purchased Mortgage Loan or such Purchased Agency Security, as applicable, is added to other Purchased Assets, the Aggregate Purchase Price of all Purchased Assets exceeds the Maximum Aggregate Purchase Price; or
(xi) such Purchased Agency Security is no longer acceptable for purchase by a Takeout Broker Dealer under any of the flow purchase or conduit programs for which Seller has been approved, or a Takeout Broker Dealer conditions the purchase of such Agency Security and, in each case, in Buyers sole determination, such ineligibility or conditions demonstrate an and, in each case, in Buyers sole determination, such ineligibility or conditions demonstrate an impairment of the marketability of such Purchased Agency Security, or, if such Purchased Agency Security has not been offered to a Takeout Broker Dealer, Buyer determines that there is a flaw in such Purchased Agency Security which materially impacts the marketability of such Purchased Agency Security; provided, that, if Buyer or the Takeout Broker Dealer determines that there is a flaw that materially impacts the marketability of such Purchased Agency Security, Buyer shall
notify Seller of such flaw and allow the Seller three (3) Business Days to cure such flaw if, in Buyers sole determination, allowing Seller time to cure such flaw does not materially impact Buyers interests in, or marketability of, such Purchase Agency Security.
Master Agency Custodial Agreement means (i) the Master Fannie Mae Custodial Agreement, (ii) the Master Freddie Mac Custodial Agreement or (iii) the Master Ginnie Mae Custodial Agreement, as applicable.
Master Fannie Mae Custodial Agreement means Fannie Mae Form 2003.
Master Freddie Mac Custodial Agreement means Freddie Mac Form 1035.
Master Ginnie Mae Custodial Agreement means form HUD-11715.
Material Adverse Effect means (a) a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of any Seller, any Guarantor, any Manager, any General Partner, any Limited Partner or any Affiliate that is a party to any Program Agreement taken as a whole; (b) a material impairment of the ability of any Seller, any Guarantor or any Affiliate that is a party to any Program Agreement to perform under any Program Agreement and to avoid any Event of Default; or (c) a material adverse effect upon the legality, validity, binding effect or enforceability of any Program Agreement against Seller, any Guarantor, any Manager, any General Partner, any Limited Partner or any Affiliate that is a party to any Program Agreement.
Maximum Aggregate Purchase Price means the amount set forth on the Addendum for such term.
Maximum Transaction Duration means the number of days that a Purchased Mortgage Loan or Purchased Agency Security can be subject to a Transaction as set forth on the Sublimit, Rate and Term Schedule of the Addendum.
MBS Sweep Mortgage Loan means a Conforming Mortgage Loan or a Government Mortgage Loan originated or purchased by Seller, which prior to being subject to a Transaction was purchased or financed by a third-partys facility, and such mortgage loan received a pre-certification from the Custodian certifying that such loan is eligible, pursuant to Buyers published guidelines for such loans, as a MBS Sweep Mortgage Loan for sale to an Agency in exchange for an Agency Security.
MERS means Mortgage Electronic Registration Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, or any successor thereto.
MERS Designated Mortgage Loan means a mortgage loan for which (a) the Seller has designated or will designate MERS as, and has taken or will take such action as is necessary to cause MERS to be, the mortgagee of record, as nominee for the Seller, in accordance with MERS Procedures Manual and (b) the Seller has designated or shall promptly designate the Seller as the servicer or subservicer in the MERS System.
MERS System means the system of recording transfers of mortgages electronically maintained by MERS.
MOM Mortgage Loan means any mortgage loan as to which MERS is acting as mortgagee, solely as nominee for the originator of such mortgage loan and its successors and assigns.
Monthly Payment means the scheduled monthly payment of principal and/or interest on a Mortgage Loan.
Mortgage means each mortgage, assignment of rents, security agreement and fixture filing, or deed of trust, assignment of rents, security agreement and fixture filing, deed to secure debt, assignment of rents, security agreement and fixture filing, or similar instrument creating and evidencing a lien on real property and other property and rights incidental thereto.
Mortgage File means, with respect to a Mortgage Loan, the documents and instruments relating to such Mortgage Loan and in the form set forth in the Manual.
Mortgage Interest Rate means the rate of interest borne on a Mortgage Loan from time to time in accordance with the terms of the related Mortgage Note.
Mortgage Interest Rate Cap means, with respect to an adjustable rate Mortgage Loan, the limit on each Mortgage Interest Rate adjustment as set forth in the related Mortgage Note.
Mortgage Loan means any fixed or floating rate, one-to-four-family residential mortgage loan that is evidenced by a Mortgage Note and secured by a Mortgage; provided, however, that such mortgage loan will only be considered a Mortgage Loan for the purposes of this Agreement if such mortgage loan is of the type listed on the Sublimit, Rate and Term Schedule of the Addendum under the heading Mortgage Loans which may include the following types of mortgage loans: Conforming Mortgage Loan, Correspondent Mortgage Loan, Government Mortgage Loan, Jumbo Mortgage Loan, MBS Sweep Mortgage Loan, Retail Mortgage Loan, Specialized Mortgage Loan or Wholesale Mortgage Loan. If a type of mortgage loan is not listed in the Sublimit, Rate and Term Schedule of the Addendum, such types of mortgage loans shall not be purchased by the Buyer hereunder and the sublimit, pricing and purchase price categories shall be inapplicable.
Mortgage Loan Documents means the documents in the related Mortgage File to be delivered to the Custodian.
Mortgage Loan Schedule means with respect to any Transaction as of any date, a mortgage loan schedule in the form of either (a) the schedule attached to the Manual or (b) a computer tape or other electronic medium generated by Seller and delivered to Buyer and Custodian, which provides information (including, without limitation, the information in the schedule attached to the Manual) relating to the Purchased Mortgage Loans in a format acceptable to Buyer.
Mortgage Note means the promissory note or other evidence of the indebtedness of a Mortgagor secured by a Mortgage.
Mortgaged Property means the real property (and with respect to any Cooperative Mortgage Loan, the Cooperative Unit) securing repayment of the debt evidenced by a Mortgage Note.
Mortgagor means the obligor or obligors on a Mortgage Note, including any person who has assumed or guaranteed the obligations of the obligor thereunder.
Multiemployer Plan means any employee benefit plan (within the meaning of Section 3(3) of ERISA) that is a multiemployer plan as defined in Section 3(37) of ERISA to which the Seller or any of its ERISA Affiliates makes or is obligated to make contributions or to which the Seller or any of its ERISA Affiliates within the last six (6) preceding plan years has made or been obligated to make contributions.
Negative Amortization means the portion of interest accrued at the Mortgage Interest Rate in any month which exceeds the Monthly Payment on the related Mortgage Loan for such month and which, pursuant to the terms of the Mortgage Note, is added to the principal balance of the Mortgage Loan.
Non-QM Mortgage Loan means a Mortgage Loan originated on or after January 10, 2014, which does not (i) meet the requirements of Section 1026.43(e)(1)(i) of Regulation Z and (ii) is not a qualified mortgage as each such term is defined under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended, and any regulations, rulings, interpretations or orders promulgated by any Governmental Authority having jurisdiction thereunder including, without limitation, the Consumer Financial Protection Bureau.
NRSRO means a nationally recognized statistical rating organization.
Obligations means (a) all of Sellers indebtedness, obligations to pay the Repurchase Price on the Repurchase Date, the Price Differential on each Repurchase Date, and other obligations and liabilities, to Buyer, its Affiliates or Custodian arising under, or in connection with, the Program Agreements, whether now existing or hereafter arising; (b) any sums paid by Buyer or on behalf of Buyer in order to preserve any Purchased Assets or Buyers interest therein; (c) in the event of any proceeding for the collection or enforcement of any of Sellers indebtedness, obligations or liabilities referred to in clause (a), the reasonable third party or out-of-pocket expenses of retaking, holding, collecting, preparing for sale, selling or otherwise disposing of or realizing on any Purchased Assets, or of any exercise by Buyer of its rights under the Program Agreements, including, without limitation, reasonable outside counsel attorneys fees and disbursements and court costs; and (d) all of Sellers indemnity obligations to Buyer or Custodian or both pursuant to the Program Agreements.
OFAC means The Office of Foreign Assets Control of the U.S. Department of the Treasury.
Officers Compliance Certificate means a certificate of a Responsible Officer of Seller in the form of Exhibit A hereto.
Patriot Act means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001.
Paying Agent has the meaning set forth in Section 14(a) hereof.
PBGC means the Pension Benefit Guaranty Corporation or any successor thereto.
Person means an individual, partnership (general, limited or otherwise), corporation (including a business trust), limited liability company, joint stock company, trust, unincorporated association, joint venture or other entity, or a government or any political subdivision or agency thereof.
Plan means any employee benefit plan within the meaning of Section 3(3) of ERISA that is subject to Title IV of ERISA other than a Multiemployer Plan to which the Seller or any of its ERISA Affiliates makes or is obligated to make contributions or to which the Seller or any of its ERISA Affiliates within the last six (6) preceding plan years has made or been obligated to make contributions.
Post Default Rate Margin means the percentage set forth on the Addendum for such term.
Price Differential means with respect to any Transaction as of any date of determination, an amount equal to the product of (A) the Pricing Rate for such Transaction and (B) the Purchase Price for such Transaction, calculated daily on the basis of a three hundred sixty (360) day year for the actual number of days during the period commencing on (and including) the Purchase Date for such Transaction and ending on (but excluding) the Repurchase Date.
Pricing Rate means a rate per annum equal to the greater of (A) Index Floor or (B) LIBOR, plus (1) the applicable Loan Margin for such Purchased Mortgage Loan or (2) the Agency Security Margin with respect to Transactions the subject of which are Purchased Agency Securities. The Pricing Rate shall change in accordance with LIBOR, and shall be reset on the first (1st) Business Day of each week that a Purchased Mortgage Loan or Purchased Agency Security is subject to a Transaction.
Principal Payments means for any Purchased Asset, all payments and prepayments of principal received and applied as principal toward the Purchase Price for such Purchased Asset, including insurance and condemnation proceeds and recoveries from liquidation or foreclosure.
Professional Liability Insurance Policy means, if applicable, a professional liability insurance policy to be maintained by the Seller pursuant to Section 13(e) hereof.
Profitability Threshold has the meaning specified on the Addendum for such term.
Program Agreements means, collectively, the Servicing Agreement, if any, the Servicer Side Letter, if any, the Custodial Agreement, this Agreement, the Collection Account
Control Agreement, the Sellers Clearing Account Control Agreement, the Reserve Account Control Agreement, the Electronic Tracking Agreement, if any, and the Guaranty, if any, and any other agreements entered into in connection herewith between the Buyer and the Seller.
Property means any right or interest in or to property of any kind whatsoever, whether real, personal or mixed and whether tangible or intangible.
Proprietary Lease means the lease on a Cooperative Unit evidencing the possessory interest of the owner of the Cooperative Shares in such Cooperative Unit.
Purchase Confirmation means a confirmation of a Transaction, in the form attached to the Manual.
Purchase Date means, with respect to each Transaction, the date on which Purchased Mortgage Loans or Purchased Agency Securities, as applicable, are sold by Seller to the Buyer hereunder.
Purchase Price means, (x) in the case of any Purchased Mortgage Loan, (a) as of the Purchase Date for such Purchased Mortgage Loan, an amount equal to the lesser of the amount requested by the Seller or the product of the Purchase Price Percentage for such Purchased Mortgage Loan times the least of (i) the Market Value of such Purchased Mortgage Loan, (ii) the unpaid principal balance of such Purchased Mortgage Loan, (iii) the amount set forth on the Takeout Commitment with respect to such Purchased Mortgage Loan, or (iv) the Sellers Acquisition Price, and (b) as of any other date, the amount calculated on the Purchase Date in the preceding clause (a), (i) reduced by any amount of Margin Deficit transferred by Seller to Buyer pursuant to Section 6 and applied to the Purchase Price of such Purchased Mortgage Loan, (ii) reduced by any Principal Payments remitted to the Collection Account and which were applied to the Purchase Price of such Purchased Mortgage Loan by Buyer pursuant to clause first of Section 7(b) and (iii) reduced by any payments made by Seller in reduction of the outstanding Purchase Price, in each case before or as of such determination date with respect to such Purchased Mortgage Loan, and (y) in the case of any Purchased Agency Security, the Agency Security Purchase Price.
Purchase Price Percentage means, the maximum allowable percentage determined by Buyer for a Purchased Mortgage Loan or Purchased Agency Security, as applicable, in accordance with the Sublimit, Rate and Term Schedule of the Addendum, and in accordance with the Manual with respect to aged loan curtailments. The Purchase Price Percentage may be reduced to zero for any Mortgage Loan that becomes an ineligible Mortgage Loan.
Purchased Agency Securities means the collective reference to Agency Securities sold by Seller to Buyer in a Transaction hereunder.
Purchased Assets means the Purchased Mortgage Loans, the Records, and all related Servicing Rights, the Purchased Agency Securities, the Program Agreements (to the extent such Program Agreements and Sellers right thereunder relate to the Purchased Mortgage Loans or the Purchased Agency Securities), the lien with respect to any Mortgaged Property relating to the Purchased Mortgage Loans or the Purchased Agency Securities, all insurance policies and insurance proceeds relating to any Purchased Mortgage Loan or the related Mortgaged Property, including, but not limited to, any payments or proceeds under any related primary insurance,
hazard insurance and FHA Mortgage Insurance Contracts (if any) and VA Loan Guaranty Agreements (if any), Income, all amounts in the Collection Account, all amounts in the Sellers Clearing Account and the Reserve Account, and any account to which such amount is deposited, the pro rata amount received pursuant to Interest Rate Protection Agreements allocable to the Purchased Mortgage Loans or Purchased Agency Securities, accounts (including any interest of Seller in escrow accounts) and any other contract rights, instruments, accounts, payments, rights to payment (including payments of interest or finance charges) general intangibles and other assets relating to the Purchased Assets (including, without limitation, any other accounts) or any interest in the Purchased Assets, and any proceeds (including the related securitization proceeds) and distributions with respect to any of the foregoing and any other property, rights, title or interests as are specified on a Transaction Request and/or Trust Receipt, in all instances, whether now owned or hereafter acquired, now existing or hereafter created.
Purchased Mortgage Loans means the collective reference to Mortgage Loans sold by Seller to Buyer in a Transaction hereunder, listed on the related Mortgage Loan Schedule attached to the related Transaction Request, which such Mortgage Loans the Custodian has been instructed to hold pursuant to the Custodial Agreement.
Qualified Insurer means a mortgage guaranty insurance company duly authorized and licensed where required by law to transact mortgage guaranty insurance business and approved as an insurer by Fannie Mae or Freddie Mac.
Qualified Originator means an originator of Mortgage Loans which is acceptable under the Underwriting Guidelines.
Records means all instruments, agreements and other books, records, and reports and data generated by other media for the storage of information maintained by Seller, Servicer or any other person or entity with respect to a Purchased Mortgage Loan and/or Purchased Agency Security. Records shall include the Mortgage Notes, any Mortgages, the Mortgage Files, the credit files related to the Purchased Mortgage Loan, the Purchased Agency Security and any other instruments necessary to document or service a Mortgage Loan.
Release of Security Interest means form HUD-11711A, Fannie Mae Form 2004A, Freddie Mac Form 996 or Freddie Mac Form 996E, as applicable.
Reporting Date means the fifth (5th) Business Day of each month or such other time period set forth in the Addendum for such term.
Reporting Period means the time period set forth in the Addendum for such term.
Repurchase Date means the date occurring on the earliest of (i) the Termination Date, (ii) the date determined by application of Section 15 hereof, (iii) any date determined by application of the respective Maximum Transaction Duration, (iv) any other date communicated by Buyer to Seller in connection with the funding of a Transaction, (v) the date determined pursuant to Section 4 hereof, or (vi) any other date communicated by Buyer to Seller in connection with a Margin Deficit as set forth in Section 6(b) hereof.
Repurchase Price means the price at which Purchased Assets are to be transferred from Buyer to Seller upon termination of a Transaction, on the Repurchase Date or at any other time specified in this Agreement, which will be determined in each case (including Transactions terminable upon demand) as the sum of the Purchase Price for such Purchased Assets and the accrued but unpaid Price Differential as of the date of such determination and any fees and expenses charged by the Buyer and payable by the Seller as set forth on the Addendum and any custodial fees as set forth on the Addendum with respect to such Purchased Assets and all other fees and expenses incurred by the Buyer.
Required Insurance Amount means the amount set forth on the Addendum for such term.
Required Insurance Policy means any Fidelity Insurance Policy, Errors and Omissions Insurance Policy, Professional Liability Insurance Policy or any other insurance policy that may be required by Buyer, in each case, as set forth in the Addendum.
Requirements of Law means, with respect to any Person, any law, treaty, rule or regulation or determination of an arbitrator, a court or other Governmental Authority, applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject.
Reserve Account means an account established at Wells Fargo Bank, N.A. or one of its Affiliates, in the name of the Person set forth on the Addendum and subject to a Reserve Account Control Agreement with Buyer which shall at all times contain a balance at least equal to the Reserve Account Threshold, as such amount may be adjusted from time to time by Buyer in its sole discretion, and subject to set off by Buyer with respect to any Obligations.
Reserve Account Control Agreement means a blocked account agreement providing the Buyer with control at all times over the Reserve Account.
Reserve Account Threshold means the amount set forth on the Addendum for such term.
Responsible Officer means as to any Person, the chief executive officer, president, corporate secretary, general partner, managing member, non-member manager, or, with respect to financial matters, the chief financial officer, treasurer or controller of such Person, or if such positions do not exist, any such similar positions.
Retail Mortgage Loan means a mortgage loan originated by the Seller for which the Seller took the borrowers loan application, and for which Seller appears as the lender on the Mortgage Note.
Sanctioned Entity or Sanctioned Entities means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, or (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.
SEC means the Securities and Exchange Commission, or any successor thereto.
Securities Custodian means the party identified on the Addendum.
Seller has the meaning set forth on the Addendum.
Sellers Account for Remittance means an account identified on the Addendum and established in the name of Seller into which Buyer will remit funds in accordance with Section 8 hereof.
Sellers Acquisition Price means the price that the Seller paid a third party for a Mortgage Loan in the event that the Seller did not originate such Mortgage Loan.
Sellers Clearing Account means an account identified on the Addendum and established at Wells Fargo Bank, N.A. or one of its Affiliates, in the name of Seller and subject to a Sellers Clearing Account Control Agreement with Buyer or another insured financial institution, into which certain amounts shall be deposited or withdrawn, which shall at all times contain a balance at least equal to the Sellers Clearing Account Threshold, as such amount may be adjusted from time to time by Buyer in its sole discretion, and subject to set off by Buyer with respect to any Obligations.
Sellers Clearing Account Control Agreement means a blocked account agreement providing the Buyer with control at all times over the Sellers Clearing Account.
Sellers Clearing Account Threshold means the amount set forth on the Addendum for such term; if no such amount is specified on the Addendum then such amount is zero.
Servicer means any servicer appointed by Seller and approved by Buyer in its sole discretion to service Purchased Mortgage Loans on behalf of Buyer, which may be Seller or such other third party as set forth on the Addendum that has executed a Servicing Agreement.
Servicer Side Letter has the meaning set forth in Section 11(d) hereof.
Servicing Agreement means a separate written agreement with a third party servicer to service the Purchased Mortgage Loans.
Servicing Rights means contractual, possessory or other rights of the Seller or any third party servicer to administer or service the Purchased Mortgage Loans, including, without limitation, the right to collect Monthly Payments.
Settlement Account means one or more accounts established at Wells Fargo Bank, N.A. or one of its Affiliates, by and in the name of the Buyer, into which (i) all Income shall be deposited or transferred from the Collection Account; (ii) the Takeout Investor remits funds pursuant to the Takeout Commitment; and (iii) the Takeout Broker Dealer remits funds pursuant to the Agency Security Purchase Commitment.
Shipment Order means an electronically transmitted request for shipment of Collateral Documents, substantially in the form attached to the Custodial Agreement.
Specialized Mortgage Loan means the definition as set forth in the Addendum.
Sublimit means the limit for the applicable Mortgage Loan type set forth in the Sublimit, Rate and Term Schedule of the Addendum. For a Purchased Mortgage Loan that is a Wet-Ink Mortgage Loan, such Mortgage Loan shall be subject to both the Sublimit for a Wet-Ink Mortgage Loan and the Sublimit applicable to such Mortgage Loan type. For a Purchased Mortgage Loan that is a Cooperative Mortgage Loan, such Mortgage Loan shall be subject to the Sublimit for a Wet-Ink Mortgage Loan, Conforming Mortgage Loan or Jumbo Mortgage Loan, as applicable.
Sublimit, Rate and Term Schedule means Schedule 3 of the Addendum.
Sub-Performing Mortgage Loan means a mortgage loan that is or has been more than thirty (30) days contractually past due.
Subsidiary or Subsidiaries means, with respect to any Person, any corporation, partnership or other entity of which at least a majority of the securities or other ownership interests having by the terms thereof ordinary voting power to elect a majority of the board of directors or other persons performing similar functions of such corporation, partnership or other entity (irrespective of whether or not at the time securities or other ownership interests of any other class or classes of such corporation, partnership or other entity shall have or might have voting power by reason of the happening of any contingency) is at the time directly or indirectly owned or controlled by such Person or one or more Subsidiaries of such Person or by such Person and one or more Subsidiaries of such Person.
Takeout Broker Dealer means any broker dealer pre-approved in writing by Buyer, in its sole discretion, to purchase mortgage backed securities from Seller and who issues an Agency Security Purchase Commitment relating to an Agency Security. Takeout Broker Dealers approved by Buyer may be listed in the Manual or specifically approved in an electronic communication sent by Buyer to Seller.
Takeout Commitment means a written commitment, in form and substance satisfactory to Buyer, issued in favor of Seller by a Takeout Investor pursuant to which such Takeout Investor commits to purchase one or more Mortgage Loans.
Takeout Investor means any investor pre-approved in writing by Buyer, in its sole discretion, to purchase Mortgage Loans from Seller and who issues a Takeout Commitment relating to a Mortgage Loan. Takeout Investors approved by Buyer are listed in an electronic form by the Buyer or electronically submitted by the Seller to the Buyer.
Termination Date has the meaning set forth on the Addendum; provided, however, that in the case of an Event of Default hereunder, the date immediately upon which such Event of Default has occurred.
Transaction has the meaning set forth in Section 1 hereof.
Transaction Request means a request from Seller to Buyer to enter into a Transaction, submitted through Buyers on-line warehouse loan system.
Transmittal Letter means a letter describing a Purchased Mortgage Loan delivered or to be delivered to the Custodian hereunder, in the form attached to the Custodial Agreement.
Trust Receipt means, with respect to any Transaction as of any date, a receipt and certification in the form attached as an exhibit to the Custodial Agreement.
UCC means the Uniform Commercial Code as in effect on the Effective Date in the State of New York or the Uniform Commercial Code as in effect in the applicable jurisdiction.
Underwriting Approval means, with respect to any Mortgage Loan, a written approval, in form and substance satisfactory to Buyer representing the credit underwriting of such Mortgage Loan, issued by the applicable Loan Program Authority. The Underwriting Approval may take the form of (1) a clear to close approval from the Takeout Investor confirming that such specific Mortgage Loans are approved for purchase by the Takeout Investor, (2) an automated underwriting system AUS with a Seller internal clear to close per delegated authorities of the Takeout Investor, (3) a mortgage insurer clear to close per delegated authorities of the Takeout Investor, (4) with respect to a Correspondent Mortgage Loan, an automated underwriting system AUS; (5) an approval issued by Seller as delegated by the applicable Loan Program Authority or (6) another form approved by Buyer in writing as set forth on the Addendum.
Underwriting Guidelines means the standards, procedures and guidelines of the Seller for underwriting and acquiring Mortgage Loans, which are set forth in the written policies and procedures of the Seller.
USDA means the United States Department of Agriculture.
USDA Mortgage Loan means a mortgage loan which is guaranteed by the USDA evidenced by a loan guaranty certificate.
US Treasury Security means a negotiable debt obligation issued by the U.S. government for a specific amount and maturity, with any related income being exempt from state and local tax income tax.
VA means the U.S. Department of Veterans Affairs, an agency of the United States of America, or any successor thereto including the Secretary of Veterans Affairs.
VA Loan means a Mortgage Loan which is subject of a VA Loan Guaranty Agreement as evidenced by a loan guaranty certificate, or which is eligible for such VA Loan Guaranty Agreement and will be submitted for such loan guaranty certificate immediately after its origination, or a Mortgage Loan which is a vender loan sold by the VA.
VA Loan Guaranty Agreement means the obligation of the United States to pay a specific percentage of a Mortgage Loan (subject to a maximum amount) upon default of the Mortgagor pursuant to the Servicemens Readjustment Act, as amended.
Wet-Ink Documents means, with respect to any Wet-Ink Mortgage Loan, the (a) Transaction Request, (b) the Mortgage Loan Schedule and (c) any other documents required by the Manual.
Wet-Ink Mortgage Loan means a mortgage loan for which the Trust Receipt has not been issued as of the Purchase Date.
Wet-Ink Mortgage Loan Document Receipt Date means the date that the Custodian receives the Mortgage Loan Documents for a Wet-Ink Mortgage Loan which shall in no event be later than the date set forth on the Addendum.
Wholesale Mortgage Loan means a mortgage loan which was submitted to Seller by a mortgage broker who is not an employee of Seller, but for which Sellers funds were used as the Mortgage Loan proceeds at the closing, and for which Seller appears as the lender on the Mortgage Note.
b. Headings are for convenience only and do not affect interpretation. The singular includes the plural and conversely. Where a word or phrase is defined, its other grammatical forms have a corresponding meaning. A reference to a Section, Subsection, Paragraph, Subparagraph, Clause, Addendum, Annex, Schedule or Exhibit is, unless otherwise specified, a reference to a Section, Subsection, Paragraph, Subparagraph or Clause of, or Addendum, Annex, Schedule or Exhibit to, this Agreement, all of which are hereby incorporated herein by this reference and made a part hereof. The word any is not limiting and means any and all unless the context clearly requires or the language provides otherwise. In the computation of periods of time from a specified date to a later specified date, the word from means from and including, the words to and until each mean to but excluding, and the word through means to and including. The words will and shall have the same meaning and effect. A reference to day or days without further qualification means calendar days. Unless the context otherwise clearly requires, all accounting terms not expressly defined herein shall be construed in accordance with GAAP, and all accounting determinations, financial computations and financial statements required hereunder shall be made in accordance with GAAP, without duplication of amounts, and on a consolidated basis with all Subsidiaries.
3. Program; Initiation of Transactions
a. From time to time, in the sole discretion of Buyer, (i) Buyer may purchase from Seller all right, title and interest in and to certain Mortgage Loans (including, without limitation, the Servicing Rights) that have been either originated by Seller or, if approved by Buyer, purchased by Seller from other originators, and (ii) Buyer may purchase from Seller all right, title and interest in and to certain Agency Securities. The Mortgage Loans shall be sold on a servicing-released basis. This Agreement is not a commitment by Buyer to enter into Transactions with Seller but rather sets forth the procedures to be used in connection with periodic requests for Buyer to enter into Transactions with Seller. Seller hereby acknowledges that Buyer is under no obligation to agree to enter into, or to enter into, any Transaction pursuant to this Agreement. All Purchased Mortgage Loans shall exceed or meet the Underwriting Guidelines, and shall be serviced by Servicer on the behalf of Buyer. The Aggregate Purchase Price shall not exceed the Maximum Aggregate Purchase Price.
b. With respect to each Transaction, Seller shall provide notice of a proposed sale and comply with the procedures set forth in the Manual. Following receipt of such request, Buyer may enter into such requested Transaction or may notify Seller of its intention not to enter into such Transaction for any reason. In the event the Mortgage Loan Schedule provided by Seller contains erroneous computer data, is not formatted properly or the computer fields are otherwise improperly aligned, Buyer shall provide written or electronic notice to Seller describing such error and Seller may either (a) give Buyer written or electronic authority to correct the computer data, reformat the Mortgage Loans or properly align the computer fields or (b) correct the computer data, reformat or properly align the computer fields itself and resubmit the Mortgage Loan Schedule as required herein.
In the event that the Seller gives Buyer authority to correct the computer data, reformat the Mortgage Loan Schedule or properly align the computer fields, the Seller shall pay an amount set forth in the fee schedule attached to the Manual and any other direct expenses incurred by Buyer; provided, that upon thirty (30) days notice to the Seller, Buyer may change such computer correction fee. The Seller shall hold Buyer harmless for such correction, reformatting or realigning, as applicable, except as otherwise expressly provided herein.
In the event that Seller requires the return of any Collateral Documents, upon its execution of a release pursuant to the terms of the Custodial Agreement, the Buyer may authorize the Custodian to deliver any Collateral Documents to the Seller for correction. The Seller shall be fully liable for any failure or delay in the return or handling of any documents delivered to the Seller in accordance with the terms of such release.
c. Upon the satisfaction of the applicable conditions precedent set forth in Section 9 hereof, all of Sellers right, title and interest in the Purchased Assets shall pass to Buyer on the Purchase Date, against the transfer of the Purchase Price to Seller or through the transfer of the Purchase Price to an Authorized Funds Recipient. The Purchased Assets shall be sold by the Seller to the Buyer on a servicing-released basis. In the event that Seller requests that the Buyer remit by wire transfer an amount in excess of the Purchase Price in connection with the purchase of any Purchased Assets, such excess amount shall be remitted from the Sellers Clearing Account to the Buyer, provided that such remittance does not leave the Sellers Clearing Account with less than the Sellers Clearing Account Threshold. Upon transfer of the Purchased Assets to Buyer as set forth in this Section 3 and until termination of any related Transactions as set forth in Sections 4 or 15 of this Agreement, ownership of each Purchased Asset, including each document in the related Mortgage File and Records, is vested in Buyer; provided that, prior to the recordation of any Assignment of Mortgage to Buyer or the applicable Takeout Investor, record title in the name of Seller to each Purchased Mortgage Loan shall be retained by Seller in trust, for the benefit of Buyer, for the sole purpose of facilitating the servicing and the supervision of the servicing of the Purchased Mortgage Loans.
d. With respect to each Wet-Ink Mortgage Loan, by no later than 12:00 noon (New York City time) on the Wet-Ink Mortgage Loan Document Receipt Date following the applicable Purchase Date, Seller shall deliver or cause the related Authorized Funds Recipient to deliver to the Custodian the remaining documents in the Mortgage File.
4. Repurchase
a. Seller shall repurchase the related Purchased Assets from Buyer on each related Repurchase Date at the Repurchase Price. Such obligation to repurchase exists without regard to any prior or intervening liquidation or foreclosure with respect to any Purchased Asset (but liquidation or foreclosure proceeds received by Buyer shall be applied to reduce the Repurchase Price for such Purchased Asset on each Repurchase Date except as otherwise provided herein). Seller is obligated to repurchase and take physical possession of the Purchased Assets from Buyer or its designee (including the Custodian) at Sellers expense on the related Repurchase Date. Prior to a Default or Event of Default, Seller may elect to repurchase any Purchased Asset by providing written notice to Buyer in the form of electronic communication. In addition to the foregoing, Buyer, with at least 30 days notice, may terminate any Transaction then outstanding and require that Seller repurchase any Purchased Assets related to such Transaction.
b. Provided that no Default has occurred and is continuing, and Buyer has received the related Repurchase Price upon repurchase of the Purchased Assets, Buyer agrees to release its ownership interest hereunder in the Purchased Assets. With respect to payments in full by the related Mortgagor of a Purchased Mortgage Loan, Seller agrees to remit to Buyer, within two (2) Business Days, the Repurchase Price with respect to such Purchased Mortgage Loan. Buyer agrees to release its ownership interest in Purchased Mortgage Loans which have been prepaid in full after receipt of the Repurchase Price.
5. [Reserved.]
6. Margin Maintenance
a. If on any date, and at Buyers discretion, the product of either (A) the lesser of (i) the current Market Value of a Purchased Asset, or (ii) the unpaid principal balance underlying any individual Purchased Asset, times the current Purchase Price Percentage for such Purchased Asset, or (B) the current Market Value of all Purchased Assets times the current Purchase Price Percentage for all Purchased Assets, is less than the then current Purchase Price with respect to such Purchased Asset(s) as of such date (such deficit, a Margin Deficit), Buyer may provide notice to Seller (as such notice is more particularly set forth below and in Sections 6(b) and 6(c) below, a Margin Call) of such Margin Deficit.
b. Upon the issuance of a Margin Call in Buyers sole and absolute discretion, Seller shall (i) transfer cash to Buyer to satisfy the Margin Deficit, or (ii) repurchase the affected Purchased Assets at the Repurchase Price thereof. If Seller has not satisfied the Margin Deficit within the applicable Margin Deadline (as more particularly set forth in Section 6(c)), then Buyer may, in its sole and absolute discretion, either (i) notify Seller that Buyer is exercising its rights to sell the affected Purchased Assets as more particularly set forth in Section 6(e) below or (ii) exercise its remedies under Section 15 hereof. In connection with exercising remedies pursuant to this Section 6(b), Buyer shall apply funds received in connection with a Margin Call in such manner as Buyer determines to eliminate the Margin Deficit. If Buyer exercises its rights to sell the related Purchased Assets as set forth in Section 6(e) and the proceeds of such sale are insufficient to satisfy the Margin Deficit, Buyer may in its discretion require Seller to transfer cash
to Buyer to eliminate such Margin Deficit. Once a Margin Deficit has been eliminated, the related Margin Call shall have been satisfied.
c. A Margin Call may be given by any written or electronic means. Notice given before 10:00 a.m. (New York City time) on a Business Day shall be met, and the related Margin Deficit satisfied, no later than 5:00 p.m. (New York City time) on such Business Day or such later time as may be communicated by Buyer to Seller in its sole discretion; notice given after 10:00 a.m. (New York City time) on a Business Day shall be met, and the related Margin Deficit satisfied, no later than 5:00 p.m. (New York City time) on the following Business Day or such later time as may be communicated by Buyer to Seller in its sole discretion (the foregoing time requirements for satisfying a Margin Deficit, the Margin Deadlines). The failure of Buyer, on any one or more occasions, to exercise its rights hereunder, shall not change or alter the terms and conditions to which this Agreement is subject or limit the right of Buyer to do so at a later date. Seller and Buyer each agree that a failure or delay by Buyer to exercise its rights hereunder shall not limit or waive Buyers rights under this Agreement or otherwise existing by law or in any way create additional rights for Seller.
d. In the event that a Margin Deficit exists or any other funds are due and payable to Buyer, Buyer may retain any funds received by it to which the Seller would otherwise be entitled hereunder or exercise control over any funds in the Sellers Clearing Account and remit such funds to the Settlement Account, which funds shall be held and applied by Buyer against such Margin Deficit, may be applied by Buyer against amounts due and owing, or any shortfall, with respect to any Purchased Asset. Notwithstanding the foregoing, the Buyer retains the right, in its discretion, to make a Margin Call in accordance with the provisions of this Section 6.
e. If Buyer elects to exercise its rights set forth in Section 6(b) above to sell the affected Purchased Assets, Buyer shall have the right to sell the affected Purchased Mortgage Loans (including, without limitation, the Servicing Rights) or Purchased Agency Securities. Such disposition of a Purchased Mortgage Loan may be, at Buyers option, on either a servicing-released or a servicing-retained basis. Buyer shall not be required to give any warranties as to the Purchased Mortgage Loans or the Purchased Agency Securities with respect to any such disposition thereof. Buyer may specifically disclaim or modify any warranties of title or the like relating to the Purchased Mortgage Loans or the Purchased Agency Securities. The foregoing procedure for disposition of the Purchased Mortgage Loan or the Purchased Agency Security shall not be considered to adversely affect the commercial reasonableness of any sale thereof. Seller agrees that it would not be commercially unreasonable for Buyer to dispose of the Purchased Mortgage Loan or Purchased Agency Security or any portion thereof by using Internet sites that provide for the auction of assets similar to the Purchased Mortgage Loan or the Purchased Agency Security, or that have the reasonable capability of doing so, or that match buyers and sellers of assets. Buyer shall be entitled to place the Purchased Mortgage Loans in a pool for issuance of mortgage-backed securities at the then-prevailing price for such securities and to sell such securities for such prevailing price in the open market. Buyer shall also be entitled to sell any or all of such Purchased Mortgage Loans individually for the prevailing price.
7. Income Payments
a. If Income is paid in respect of any Purchased Asset during the term of a Transaction, such Income shall be the property of Buyer. Upon notice from Buyer, or immediately upon the occurrence of an Event of Default, such Income (other than any Income relating to prepayments of principal in full which shall be paid in accordance with Section 7(d) below) shall be deposited in the Collection Account by either the Seller or the applicable Servicer. All deposits contained in the Collection Account (other than any Income relating to prepayments of principal in full which will be paid in accordance with Section 7(d) below) will be transferred to the Settlement Account on a monthly basis in accordance with Section 11(c) or by the Buyer at any other time.
b. Prior to an Event of Default, upon the termination of any Transaction, Buyer shall apply payments received from a Takeout Investor or Takeout Broker Dealer or otherwise, including those payments contemplated in Sections 6, 7(a) and 7(d), as follows (provided that Buyer shall have no obligation to apply payments in the event that it is unable to identify the Purchased Mortgage Loans or Purchased Agency Securities to which such payments correspond or there are insufficient funds in the Settlement Account or the Sellers Clearing Account, and the related Repurchase Price will continue to accrue interest as if no payment had been made) and shall provide Seller with a reconciliation detailing such application of payments:
First, to the payment of the Repurchase Price for each outstanding Purchased Asset owed by the Seller under this Agreement;
Second, to the payment of all other amounts owed by the Seller under the Program Agreements;
Third, to the payment of related costs and expenses owed under the Program Agreements, including reasonable compensation to Buyers agents and counsel, and all expenses, liabilities and advances made or incurred by or on behalf of Buyer in connection therewith that are due and owing;
Fourth, to the payment of any other amounts owed by the Seller or any Affiliate to the Buyer under any other instrument or agreement, in accordance with Section 24 that are due and owing;
Fifth, to the Servicer, if and only if such party is a third party, costs and fees it is entitled to under the related Servicing Agreement; and
Sixth, to the Seller, any remainder, by remittance to the Sellers Clearing Account.
c. If an Event of Default has occurred, notwithstanding any provision set forth herein, Buyer may apply Income contained in the Collection Account for the payment of all outstanding Obligations under this Agreement including, any related costs and expenses owed under the Program Agreements, including reasonable compensation to Buyers agents and outside counsel, and all expenses, liabilities and advances made or incurred by or on behalf of Buyer in connection therewith. After all Obligations under this Agreement have been paid in full, Buyer shall distribute to Seller any remaining Income; provided, however, that if Seller has failed to repurchase the
Purchased Assets and Buyer has exercised its rights in a deemed sale of the Purchased Assets as set forth in Section 15 herein, then Seller shall not be entitled to any remaining Income.
d. Seller shall, or cause Servicer to, deposit within [***] after the receipt of any prepayment of principal in full into the Collection Account, with respect to a Purchased Mortgage Loan. Buyer shall apply upon receipt any such amount to reduce the amount of the Repurchase Price due upon termination of the related Transaction.
e. Notwithstanding anything to the contrary set forth herein, to the extent that any Income (excluding principal prepayments in full) is not deposited in the Collection Account, upon notice by Buyer to Seller, Seller shall immediately remit to the Settlement Account all such Income received by Servicer or Seller in respect of the Purchased Assets.
8. Payment and Transfer
Unless otherwise mutually agreed in writing, all transfers of funds to be made by the Seller, the Takeout Investor or Takeout Broker Dealer hereunder shall be made in Dollars, in immediately available funds, without deduction, set-off or counterclaim, to Buyer at the Settlement Account or such other account as Buyer shall specify to Seller, Takeout Investor or Takeout Broker Dealer in writing. Seller acknowledges that it has no rights of withdrawal from the Settlement Account; however, Buyer, in its discretion, may, by written notice, allow Seller to withdraw money from the Settlement Account in accordance with the terms of the Manual. All Purchased Assets shall be evidenced by a Purchase Confirmation. With respect to any Repurchase Price received by Buyer in the Settlement Account after 2:00 p.m. (New York City time) on any Business Day, Buyer shall use reasonable efforts to credit such amount to Seller on such Business Day, and if not credited on such Business Day, then such amount shall be deemed received on the next succeeding Business Day; provided, however, for transfers of funds to Buyer from the Securities Custodians account, so long as sufficient information is provided by the Securities Custodian or Takeout Investor to identify the wire and loan reconciliation associated with the relevant settlement and Seller delivers to Buyer the related purchase advice by no later than 3:00 p.m. (New York City time) on the date of such settlement, Buyer shall process any such funds on the same Business Day as such funds are received by Buyer if such funds are received (i) by 3:00 p.m. (New York City time) on the last three (3) Business Days of any calendar month or (ii) by 4:00 p.m. (New York City time) on any other Business Day. For transfers of funds to Buyer from the Securities Custodians account received by Buyer later than the applicable time set forth in the preceding sentence, Buyer shall use reasonable efforts to credit such amounts to Seller on the same Business Day, and if not credited on such Business Day then such amounts shall be deemed received on the next succeeding Business Day. From time to time, the Seller may request in writing that a wire transfer be made from the Sellers Clearing Account and Buyer may approve such request (provided that the Sellers Clearing Account Threshold is maintained and there are sufficient funds remaining to satisfy any other amounts that are currently due and payable under this Agreement). Upon approval of such a request, the Buyer will remit funds to Sellers Account for Remittance.
9. Conditions Precedent
a. Initial Transaction. As conditions precedent to the initial Transaction, Buyer shall have received on or before the day of such initial Transaction the following, in form and substance
satisfactory to Buyer and duly executed by each Seller where applicable, each Guarantor and each other party thereto:
(1) Program Agreements. The Program Agreements duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver, except with respect to the Electronic Tracking Agreement, which shall be duly executed and delivered by the parties thereto and shall be in full force and effect, free of any modification, breach or waiver within thirty (30) days of the Effective Date.
(2) Security Interest. Evidence that all other actions necessary or, in the opinion of Buyer, desirable to perfect and protect Buyers interest in the Purchased Mortgage Loans, Purchased Agency Securities and other Purchased Assets have been taken, including, without limitation, duly authorized and filed UCC financing statements on Form UCC 1.
(3) Governing Documents. A certificate of a Responsible Officer of Seller substantially in the form of Exhibit B hereto, attaching certified copies of Sellers Governing Documents and corporate or other resolutions approving the Program Agreements and transactions thereunder (either specifically or by general resolution) and all documents evidencing other necessary corporate action or governmental approvals as may be required in connection with the Program Agreements.
(4) Good Standing Certificate. A certified copy of a good standing certificate from the jurisdiction of organization of Seller, dated as of no earlier than the date which is thirty (30) days prior to the Effective Date with respect to the initial Transaction hereunder.
(5) Incumbency Certificate. An incumbency certificate of the corporate secretary, general partner or other similar person of each Seller, substantially in the form of Exhibit E hereto, certifying the names, true signatures and titles of the representatives duly authorized to request transactions hereunder and to execute the Program Agreements.
(6) Underwriting Guidelines. A true and correct copy of the Underwriting Guidelines of the Seller.
(7) Legal Opinion. If requested by Buyer, Seller shall provide a legal opinion in form and substance acceptable to Buyer.
(8) Fees. Payment of any fees due to Buyer hereunder.
(9) Manual. Seller shall have received, reviewed and agreed to comply with the Manual.
(10) Collection Account. Evidence that the Collection Account has been established by the Seller or the Servicer, and the fully executed Collection Account Control Agreement.
(11) Settlement Account. The Settlement Account has been established by Buyer.
(12) Sellers Clearing Account. Evidence that the Sellers Clearing Account has been established by the Seller and contains at least the Sellers Clearing Account Threshold, and the fully executed Sellers Clearing Account Control Agreement.
(13) Reserve Account. Evidence that the Reserve Account has been established, per the terms of the Addendum, and contains at least the Reserve Account Threshold, and the fully executed Reserve Account Control Agreement.
(14) Due Diligence Review. Buyer shall have completed, to its satisfaction, its due diligence review of each Seller, each Guarantor and the Servicer.
b. All Transactions. Buyer will not enter into a Transaction unless all of the following conditions precedent have been satisfied:
(1) Due Diligence Review. Without limiting the generality of Section 34 hereof, Buyer shall have completed, to its satisfaction, its due diligence review of the related Purchased Mortgage Loans and Purchased Agency Securities.
(2) Required Documents.
(a) (X) With respect to Purchased Mortgage Loans the Custodian of which is Wells Fargo Bank, National Association, for each Purchased Mortgage Loan which is not a Wet-Ink Mortgage Loan, the Mortgage File has been delivered to the Custodian (i) with respect to any purchase of twenty-five (25) or fewer Mortgage Loans on a single Purchase Date, on or prior to 10:30 a.m. (New York City time) on the Purchase Date, and (ii) with respect to any purchase of twenty-six (26) or more Mortgage Loans on a single Purchase Date, at least twenty-four (24) hours prior to the Purchase Date or (Y) with respect to Purchased Mortgage Loans the Custodian of which is not Wells Fargo Bank, National Association for each Purchased Mortgage Loan which is not a Wet-Ink Mortgage Loan, the Mortgage File has been delivered to the Custodian in accordance with the requirements of the related Custodial Agreement;
(b) With respect to each Wet-Ink Mortgage Loan, the Wet-Ink Documents have been delivered to Buyer by 2:00 p.m. (New York City time) on the Purchase Date; and
(c) With respect to each Purchased Agency Security, necessary deliveries as specified in the Manual.
(3) Transaction Documents. Buyer or its designee shall have received, within the timeframe specified in the Manual, the following, in form and substance satisfactory to Buyer and (if applicable) duly executed:
(a) A Transaction Request, an Underwriting Approval and, as applicable, either (i) a Takeout Commitment or an Interest Rate Protection Agreement , or (ii) an Agency Security Purchase Commitment.
(b) The related Mortgage Loan Schedule, and the Trust Receipt.
(c) Any other documents required to be delivered by the Manual.
(d) Such certificates, opinions of counsel or other documents as Buyer may reasonably request.
(4) No Default. No Default shall have occurred and be continuing;
(5) Requirements of Law. Buyer shall not have determined that the introduction of or a change in any Requirements of Law or in the interpretation or administration of any Requirements of Law applicable to Buyer has made it unlawful, and no Governmental Authority shall have asserted that it is unlawful, for Buyer to enter into the Transactions contemplated by this Agreement.
(6) Representations and Warranties. Both immediately prior to the related Transaction and also after giving effect thereto and to the intended use thereof, the representations and warranties (excluding, the representations and warranties set forth on Schedule 1, which shall result in a Margin Call or repurchase in the event of a breach) made by Seller in each Program Agreement shall be true, correct and complete on and as of such Purchase Date in all material respects with the same force and effect as if made on and as of such date (or, if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date).
(7) Electronic Tracking Agreement. To the extent Seller is selling Mortgage Loans which are registered on the MERS® System, an Electronic Tracking Agreement entered into, duly executed and delivered by the parties thereto and being in full force and effect, free of any modification, breach or waiver within thirty (30) days of the Effective Date.
(8) Material Adverse Change. None of the following shall have occurred and/or be continuing:
(a) there shall have occurred a material adverse change in the financial condition of Buyer which causes, or would be likely to cause, a material adverse effect on the ability of the Buyer to fund its obligations under this Agreement, including, but not limited to, Buyers corporate bond rating, if applicable, as calculated by a NRSRO has been lowered or downgraded to a rating below investment grade by such NRSRO.
(b) an event or events shall have occurred in the good faith determination of Buyer resulting in: (i) the effective absence of a repo market or comparable lending market for financing debt obligations secured by mortgage loans or securities or an event or events shall have occurred resulting in Buyer not being able to finance Purchased Mortgage Loans through the repo market or lending market with traditional counterparties at rates which would have been reasonable prior to the occurrence of such event or event; or (ii) the effective absence of a whole loan market, securities market for securities backed by
mortgage loans or an event or events shall have occurred, resulting in Buyer not being able to sell whole loans or securities backed by mortgage loans at prices which would have been reasonable prior to such event or event.
(9) Reserved.
(10) Sellers Clearing Account. Evidence that the Sellers Clearing Account contains at least the Sellers Clearing Account Threshold.
(11) Reserve Account. Evidence that the Reserve Account, established pursuant to the terms of the Addendum, contains at least the Reserve Account Threshold.
c. The failure of Seller to satisfy any of the conditions precedent in this Section 9 with respect to any Transaction or Purchased Asset shall, unless such failure was waived in writing by Buyer on or before the related Purchase Date, give rise to the right of Buyer at any time to rescind the related Transaction. Except with respect to Sellers failure to satisfy the conditions precedent set forth in Section 9(b)(4), Section 9(b)(6), and Sections 9(b)(8)-(11), Buyer shall give Seller two (2) Business Days notice of its intent to rescind any such Transaction or Purchased Asset, as applicable. If Seller has not cured such failed condition precedent within such two (2) Business Day period, at such time Seller shall immediately pay to Buyer the Repurchase Price of such Purchased Asset and Buyer shall transfer ownership of such Purchased Asset back to Seller pursuant to the terms of this Agreement.
10. Program; Costs
a. Seller shall reimburse Buyer for any of Buyers reasonable out-of-pocket costs, including due diligence review costs and reasonable attorneys fees, incurred by Buyer in determining the acceptability to Buyer of any Mortgage Loans or Agency Securities or incurred in connection with entering into, amending or modifying the Program Agreements. Seller shall also pay, or reimburse Buyer if Buyer shall pay, any termination fee, which may be due any Servicer. Seller shall pay the fees and expenses of Buyers outside counsel in connection with the Program Agreements. Further, Seller shall pay, or reimburse Custodian for, any fees and expenses of Custodian relating to the Purchased Mortgage Loans and any Program Agreement, including, without limitation, any shipping costs. Legal fees for any subsequent amendments to this Agreement or related documents shall be borne by Seller. Seller shall pay ongoing custodial and bank fees and any other fees and expenses as set forth on the Addendum, and any other ongoing fees and expenses under any other Program Agreements. If Wells Fargo Bank, National Association is the Custodian with respect to any Purchased Mortgage Loans, Seller shall indemnify, hold harmless and defend Wells Fargo Bank, National Association with respect to any damages or costs and expenses incurred by Wells Fargo Bank, National Association in its capacity as Custodian, except any damages or costs and expenses that result from the gross negligence, bad faith or willful misconduct of Wells Fargo Bank, National Association as Custodian. Wells Fargo Bank, National Association shall be considered a third party beneficiary of the rights set forth in the prior sentence. Any of the foregoing fees shall be invoiced and delivered to the Seller and must be paid by the due date. If there is no due date specified on the invoice, the invoice amount is due within thirty (30) days. Any late payment will accrue interest at the Accounts Receivable Rate.
b. If Buyer determines that, due to the introduction of, any change in, or the compliance by Buyer with the interpretation of any law, regulation or any guideline or request from any central bank or other Governmental Authority (whether or not having the force of law), there shall be an increase in the cost to Buyer in engaging in the present or any future Transactions, then Seller agrees to pay to Buyer, from time to time, upon demand by Buyer the actual cost of additional amounts as specified by Buyer to compensate Buyer for such increased costs. In determining any additional amounts due under this Section 10(b), Buyer shall treat Seller in the same manner it treats other similarly situated sellers in repurchase facilities with generally similar terms as determined by Buyer in its reasonable discretion.
c. With respect to any Transaction, Buyer may conclusively rely upon, and shall incur no liability to Seller in acting upon, any request or other communication that Buyer reasonably believes to have been given or made by a person authorized to enter into a Transaction on Sellers behalf, whether or not such person is listed on the certificate delivered pursuant to Section 9(a)(5) hereof. In each such case, Seller hereby waives the right to dispute Buyers record of the terms of the Purchase Confirmation, request or other communication.
d. Notwithstanding the assignment of the Mortgage Loan Documents and any other agreements that relate to Mortgage Loans with respect to each Purchased Asset to Buyer, Seller agrees and covenants with Buyer to enforce diligently Sellers rights and remedies set forth in the Program Agreements.
e. Any payments made by Seller or Guarantor to Buyer shall be free and clear of, and without deduction or withholding for, any taxes; provided, however, that if such payer shall be required by law to deduct or withhold any taxes from any sums payable to Buyer, then such payer shall (A) make such deductions or withholdings and pay such amounts to the relevant authority in accordance with applicable law, (B) pay to Buyer the sum that would have been payable had such deduction or withholding not been made, and (C) at the time Price Differential is paid, pay to Buyer all additional amounts as specified by Buyer to preserve the after-tax yield Buyer would have received if such tax had not been imposed, and otherwise indemnify Buyer for any such taxes imposed (and, costs and expenses, if any, related thereto).
11. Servicing
a. Seller, on Buyers behalf, shall contract with Servicer to, or if Seller is the Servicer, Seller shall, interim service the Mortgage Loans consistent with the degree of skill and care that Seller customarily requires with respect to similar Mortgage Loans owned or managed by it and in accordance with Accepted Servicing Practices. The Servicer shall (i) comply with all applicable Federal, State and local laws and regulations, (ii) maintain all state and federal licenses necessary for it to perform its servicing responsibilities hereunder and (iii) not impair the rights of Buyer in any Mortgage Loans or any payment thereunder.
b. Seller shall, or shall cause the Servicer to, hold or cause to be held all escrow funds collected by Servicer with respect to any Purchased Mortgage Loans in segregated trust accounts, separate and apart from any of Sellers corporate funds, and shall apply the same for the purposes for which such funds were collected.
c. Seller shall, or shall cause the Servicer to, upon notice from Buyer to Seller, or immediately upon the occurrence of an Event of Default, deposit all Income, excluding any prepayments in full as set forth in Section 7(d), received by Servicer on the Purchased Assets in the Collection Account no later than the [***] following receipt; provided, however, that any amounts required to be remitted to Buyer shall be deposited in the Collection Account on or prior to the day on which such remittance is to occur. Any such amounts deposited in the Collection Account shall then be remitted by Buyer to the Settlement Account on a monthly basis, on the [***], and on any other day Buyer directs such a transfer in its discretion.
d. If any Mortgage Loan that is proposed to be sold on a Purchase Date is serviced by a servicer other than Seller, or if the servicing of any Purchased Mortgage Loan is to be transferred from Seller to a Servicer other than Seller, Seller shall, prior to such Purchase Date or servicing transfer date, as applicable, provide to Buyer the related Servicing Agreement and a servicer notice or letter agreement, executed by Buyer, Seller and such Servicer (each, a Servicer Side Letter), in form and substance substantially similar to Exhibit F hereto.
e. The Buyer shall have the right to immediately terminate the Servicers right to service the Purchased Mortgage Loans under the Servicing Agreement without payment of any penalty or termination fee. Seller and the Servicer shall cooperate in transferring the servicing and all Records of the Purchased Mortgage Loans to a successor servicer appointed by Buyer in its discretion.
f. If Seller should discover that, for any reason whatsoever, Seller or any entity responsible to Seller for managing or servicing any such Purchased Mortgage Loan has failed to perform fully Sellers obligations under the Program Agreements or any of the obligations of such entities with respect to the Purchased Mortgage Loans, Seller shall promptly notify Buyer and promptly remedy any non-compliance.
g. The Servicers rights and obligations to interim service the Purchased Mortgage Loans shall terminate on the [***] of each calendar month (and if such day is not a Business Day, the next succeeding Business Day), unless otherwise directed in writing by the Buyer prior to such date. For purposes of this provision, notice provided by electronic mail shall constitute written notice. Upon termination, the Servicer shall transfer servicing, including, without limitation, delivery of all servicing files to the designee of the Buyer. The Servicers delivery of servicing files shall be in accordance with Accepted Servicing Practices. The Seller and Servicer shall have no right to select a subservicer or successor servicer. After the servicing terminates and until the servicing transfer date, the Servicer shall service the Purchased Mortgage Loans in accordance with the terms of this Agreement and for the benefit of the Buyer.
h. If Seller at any time uses or intends to use, as applicable, an independent third party subservicer to fulfill its obligations as Servicer hereunder, Seller shall, prior to the related Purchase Date or servicing transfer date, as applicable, (i) provide Buyer with the related Servicing Agreement pursuant to which such subservicer shall service such Mortgage Loans, which Servicing Agreement shall be acceptable to Buyer in all respects, (ii) obtain Buyers prior written consent to the use of such subservicer in the performance of such servicing duties and obligations, which consent may be withheld in Buyers sole discretion and (iii) provide Buyer with a fully
executed Servicer Side Letter with respect to such subservicer. In no event shall Sellers use of a subservicer relieve Seller of its obligations hereunder, and Seller shall remain liable under this Agreement as if Seller were servicing such Mortgage Loans directly.
i. Seller hereby agrees and acknowledges, and shall cause any third-party subservicer to agree and acknowledge, that Buyer or its designees shall have the right to conduct examinations and audits of the Servicer with respect to the servicing of the Purchased Mortgage Loans. Buyer shall also have the right to obtain copies of all Records and files of the Servicer relating to the Purchased Assets, including all documents relating to the Purchased Mortgage Loans and the servicing thereof. Notwithstanding an Event of Default of Seller or Servicer, Buyer shall provide Seller with reasonable prior notice of any requirements for examinations, audits or copies of Records and files.
12. Representations and Warranties
a. Each Seller represents and warrants to Buyer as of the Effective Date and at all times thereafter:
(1) Due Organization and Qualification. Seller is duly organized, validly existing and in good standing under the laws of the jurisdiction under whose laws it is organized. Seller is duly qualified to do business, is in good standing and has obtained all necessary licenses, permits, charters, registrations and approvals necessary for the conduct of its business as currently conducted and the performance of its obligations under the Program Agreements except where any failure to obtain such a license, permit, charter, registration or approval would not cause or be likely to cause a Material Adverse Effect or impair the enforceability of any Purchased Asset.
(2) Power and Authority. Seller has all necessary power and authority to conduct its business as currently conducted, to execute, deliver and perform its obligations under the Program Agreements, any electronic transmissions contemplated hereunder, and to consummate the Transactions.
(3) Due Authorization. The execution, delivery and performance of the Program Agreements, any electronic transmissions contemplated hereunder, by Seller have been duly authorized by all necessary action and do not require any additional approvals or consents or other action by or any notice to or filing with any Person other than any that have heretofore been obtained, given or made.
(4) Non-contravention. None of the execution and delivery of the Program Agreements, any electronic transmissions contemplated hereunder, by Seller or the consummation of the Transactions and transactions thereunder:
(a) conflicts with, breaches or violates any provision of the Governing Documents or material agreements of Seller or any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award currently in effect having applicability to Seller or its properties;
(b) constitutes a material default by Seller under any loan or repurchase agreement, mortgage, indenture or other agreement or instrument to which Seller is a party or by which it or any of its properties is or may be bound or affected; or
(c) results in or requires the creation of any lien upon or in respect of any of the assets of Seller except the lien relating to the Program Agreements.
(5) Legal Proceeding. There is no action, proceeding or investigation by or before any court, governmental or administrative agency or arbitrator affecting any of the Purchased Assets, Seller or any of its Affiliates, pending or to Sellers knowledge, threatened, which, if decided adversely, would have a Material Adverse Effect.
(6) Valid and Binding Obligations. Each of the Program Agreements, and any electronic transmissions contemplated hereunder, to which Seller is a party, when executed and delivered by Seller, will constitute the legal, valid and binding obligations of Seller, enforceable against Seller, in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors rights generally and general equitable principles (regardless of whether enforcement is sought in a proceeding in equity or at law).
(7) Financial Statements. The financial statements of Seller, copies of which have been furnished to Buyer, (i) are, as of the dates and for the periods referred to therein, complete and correct in all material respects, (ii) present fairly the financial condition and results of operations of Seller as of the dates and for the periods indicated and (iii) have been prepared in accordance with GAAP consistently applied, except as noted therein (subject as to interim statements to normal year-end adjustments). Since the date of the most recent financial statements, there has been no event or circumstance that would be likely to cause a Material Adverse Effect with respect to Seller. Except as disclosed in such financial statements, Seller is not subject to any contingent liabilities or commitments (including, but not limited to, any potential or current repurchase demands, any potential or current indemnification claims or notice of any actual or potential fines or penalty fees) that, individually or in the aggregate, have a possibility of causing a Material Adverse Effect with respect to Seller.
(8) Accuracy of Information. Neither this Agreement nor any of the documents or information prepared by or on behalf of Seller and provided by Seller to Buyer contains any statement of a material fact with respect to Seller or the Transactions that was untrue or misleading in any material respect when made. Since Sellers initial discussions with Buyer regarding the terms of this Agreement and the furnishing of such documents or information, there has been no change, nor any development or event involving a prospective change known to Seller that has not been disclosed to Buyer, that would (i) render any of the Program Agreements, such documents or information untrue or misleading in any material respect or (ii) adversely affect the property, business, operations or conditions (financial or otherwise) of Seller.
(9) No Consents. No consent, license, approval or authorization from, or registration, filing or declaration with, any Governmental Authority, nor any consent,
approval, waiver or notification of any creditor, lessor or other non-governmental person, is required in connection with the execution, delivery and performance or consummation by Seller of this Agreement or any other Program Agreements, other than any that have heretofore been obtained, given or made.
(10) Compliance With Law, Etc. Seller has complied in all respects with all Requirements of Law. None of Seller, Guarantor or any Affiliate of Seller or Guarantor (a) is an enemy or an ally of the enemy as defined in the Trading with the Enemy Act of 1917, (b) is in violation of any Anti-Terrorism Laws, (c) is a blocked person described in Section 1 of Executive Order 13224 or to its knowledge engages in any dealings or transactions or is otherwise associated with any such blocked person, (d) is in violation of any country or list based economic and trade sanction administered and enforced by OFAC, (e) is a Sanctioned Entity, (f) has more than 10% of its assets located in Sanctioned Entities, or (g) derives more than 10% of its operating income from investments in or transactions with Sanctioned Entities. The proceeds of any Transaction have not been and will not be used to fund any operations in, finance any investments or activities in or make any payments to a Sanctioned Entity. None of Seller, Guarantor or any Affiliate of Seller or Guarantor (a) is a broker or dealer as defined in, or could be subject to a liquidation proceeding under, the Securities Investor Protection Act of 1970, or (b) is subject to regulation by any Governmental Authority limiting its ability to incur the Obligations. Each of Seller, Guarantor and all of their respective Affiliates are in compliance with the Foreign Corrupt Practices Act of 1977 and any foreign counterpart thereto. None of Seller, Guarantor or any Affiliate of Seller or Guarantor has made, offered, promised or authorized a payment of money or anything else of value (a) in order to assist in obtaining or retaining business for or with, or directing business to, any foreign official, foreign political party, party official or candidate for foreign political office, (b) to any foreign official, foreign political party, party official or candidate for foreign political office, or (c) with the intent to induce the recipient to misuse his or her official position to direct business wrongfully to Seller, Guarantor, any Affiliate of Seller or Guarantor or any other Person, in violation of the Foreign Corrupt Practices Act of 1977.
(11) Solvency; Fraudulent Conveyance. Seller is solvent and will not be rendered insolvent by any Transaction and, after giving effect to each such Transaction, each Seller will not be left with an unreasonably small amount of capital with which to engage in its business. Seller does not intend to incur, or believe that it has incurred, debts beyond its ability to pay such debts as they mature. Seller and, if applicable, the Manager, the General Partner and the Limited Partner, is not contemplating the commencement of insolvency, bankruptcy, liquidation or consolidation proceedings or the appointment of a receiver, liquidator, conservator, trustee or similar official in respect of Seller or any of its assets. The amount of consideration being received by Seller upon the sale of the Purchased Assets to Buyer constitutes reasonably equivalent value and fair consideration for such Purchased Assets. Seller is not transferring any Purchased Assets with any intent to hinder, delay or defraud any of its creditors.
(12) Investment Company Act Compliance. Seller is not required to be registered as an investment company as defined under the Investment Company Act or
as an entity under the control of an investment company as defined under the Investment Company Act.
(13) Taxes. Seller has filed all federal and state tax returns which are required to be filed and paid all taxes (including, without limitation, any applicable franchise taxes), including any assessments received by it, to the extent that such taxes have become due (other than for taxes that are being contested in good faith or for which it has established adequate reserves). Any taxes, fees and other governmental charges payable by Seller, or which otherwise have become due, in connection with a Transaction and the execution and delivery of the Program Agreements have been paid.
(14) Additional Representations. With respect to each Purchased Mortgage Loan, Seller hereby makes all of the applicable representations and warranties set forth in Schedule 1 hereto as of the related Purchase Date and continuously while such Purchased Mortgage Loan is subject to a Transaction. Further, as of each Purchase Date, Seller shall be deemed to have represented and warranted in like manner that Seller has no knowledge that any such representation or warranty has ceased to be true in a material respect as of such date, except as otherwise stated in a transaction notice (as referenced in the Manual), any such exception to identify the applicable representation or warranty and specify in reasonable detail the related knowledge of Seller.
(15) No Broker. Seller has not dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Assets pursuant to this Agreement; provided, that if Seller has dealt with any broker, investment banker, agent, or other person, except for Buyer, who may be entitled to any commission or compensation in connection with the sale of Purchased Assets pursuant to this Agreement, such commission or compensation shall have been paid in full by Seller.
(16) Hedging. Seller has entered into hedge or swap agreements pursuant to its customary hedging procedures and in accordance with Sellers policies and procedures.
(17) Takeout Commitment, Agency Security Purchase Commitment, and Interest Rate Protection Agreements. If Seller has entered into a Takeout Commitment, such Takeout Commitment shall be in full force and effect, and fully enforceable against the related Takeout Investor. If Seller has entered into an Agency Security Purchase Commitment, such Agency Security Purchase Commitment shall be in full force and effect, and fully enforceable against the related Takeout Broker Dealer. If Seller has entered into an Interest Rate Protection Agreement, such Interest Rate Protection Agreement shall be in full force and effect, and fully enforceable against the related counterparty thereto.
(18) Regulation U. Seller is not engaged principally, or as one of its major activities, in the business of extending credit for the purpose of purchasing or carrying Margin Stock, and no part of the proceeds of any Transactions hereunder will be used to purchase or carry any Margin Stock or to extend credit to others for the purpose of purchasing or carrying any Margin Stock.
(19) ERISA. Each employee benefit plan as defined in Section 3(3) of ERISA sponsored or maintained by Seller or any ERISA Affiliate or with respect to which Seller or any ERISA Affiliate has any liability, contingent or otherwise, is in material compliance with all applicable provisions of ERISA and the Code except as would not reasonably be expected to cause a Material Adverse Effect. Neither Seller nor any ERISA Affiliate has engaged in a non-exempt prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code. No ERISA Event has occurred and no condition exists which presents a material risk to Seller or any Affiliate of incurring a liability, fine or penalty with respect to or on account of any Plan or Multiemployer Plan pursuant to Title IV of ERISA except to the extent any such condition would not reasonably be expected to result in a Material Adverse Effect.
(20) Other Approvals. Seller is licensed as required in the state in which the related Mortgaged Property is located (to the extent such state has licensing requirements), with the facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same type as the Purchased Mortgage Loans, and no event has occurred, including but not limited to a change in insurance coverage, any notice of any fines, penalty charges or other regulatory action, which would make Seller unable to comply with applicable Agency and HUD eligibility requirements or relevant state licensing requirements which would require notification to any Agency and HUD or the related state regulatory authority. Seller is licensed as a mortgage lender, mortgage purchaser or servicer, as applicable, in all states where Seller is originating, purchasing or servicing mortgage loans (to the extent such states have licensing requirements for mortgage lenders, mortgage purchasers and/or servicers, as applicable).
(21) Subsidiaries and Trade Names. Seller, and, if applicable, the Manager, the General Partner and Limited Partner, have no Subsidiaries, Affiliates or trade names other than those listed on the Addendum, or if a Subsidiary, Affiliate or trade name is established after the date of this Agreement, as provided to Buyer in the immediately following Officers Compliance Certificate.
(22) Other Credit Facilities and Debts. Seller is not an obligor under any master repurchase facilities or similar warehouse facilities that are not listed on the Addendum or on the schedule to the most recent Officers Compliance Certificate. Seller has notified its other lenders with respect to this Agreement, to the extent that such notification is necessary.
(23) Title to Properties. Seller has good, valid insurable (in the case of real property) and marketable title to all of its properties and assets.
(24) Additional Covenants and Conditions. All of the Additional Covenants and Conditions are true and correct at all times, and continue to be maintained as set forth in the Addendum.
b. The representations and warranties set forth in this Agreement shall survive transfer of the Purchased Assets to Buyer and shall continue for so long as the Purchased Assets are subject to this Agreement.
13. Covenants
Each Seller covenants with Buyer that, at all times during the term of this facility:
a. Litigation. Seller will promptly, and in any event within ten (10) Business Days after service of process on any of the following, give to Buyer notice of all litigation, actions, suits, arbitrations, investigations (including, without limitation, any of the foregoing which are pending, or to Sellers knowledge, threatened) or other legal or arbitrable proceedings affecting Seller or any of its Subsidiaries or affecting any of the Property of any of them before any Governmental Authority that (i) questions or challenges the validity or enforceability of any of the Program Agreements or any action to be taken in connection with the transactions contemplated hereby, (ii) makes a claim individually in an amount greater than the Individual Claim Threshold or in an aggregate amount greater than the Aggregate Claim Threshold, or (iii) which, individually or in the aggregate, if adversely determined, could be reasonably likely to have a Material Adverse Effect. Seller will promptly provide notice of any judgment, which with the passage of time, could cause an Event of Default hereunder.
b. [Reserved.]
c. Manual. Seller shall comply with Buyers manual of procedures and policies, including, without limitation, any Mortgage Banker Finance Group guidelines (and any updates related thereto) (collectively, the Manual), as such Manual may be updated from time to time by Buyer in its sole discretion. Any changes to the Manual shall only apply to Transaction occurring on or after the date Seller receives written notice of such change (which may be via email).
d. Servicer; Asset Tape. Upon the occurrence of any of the following (a) the occurrence and continuation of an Event of Default, or (b) upon the request of Buyer, including, without limitation, upon any Purchased Mortgage Loan exceeding its Maximum Transaction Duration, Seller shall cause Servicer to provide to Buyer, electronically, in a format mutually acceptable to Buyer and Seller, an Asset Tape by no later than the Reporting Date. Seller shall not cause the Purchased Mortgage Loans to be serviced by any servicer other than a servicer expressly approved in writing by Buyer.
e. Maintenance of Insurance. The Seller shall continue to maintain, for Seller and its Subsidiaries, with responsible companies, at its own expense, the Required Insurance Policy, in each case, in a form acceptable to Buyer, with broad coverage on all officers, employees or other persons (if applicable, including, without limitation, employees or other person of the Manager or the General Partner who act on behalf of Seller in handling funds, money, documents or papers relating to the Purchased Assets) (Seller Employees) acting in any capacity requiring such persons to handle funds, money, documents or papers relating to the Purchased Assets, with respect to any claims made in connection with all or any portion of the Purchased Assets. Any such Required Insurance Policy shall protect and insure the Seller against losses, including forgery, theft, embezzlement, fraud, errors and omissions and negligent acts of such Seller Employees, and such policies also shall protect and insure the Seller against losses in connection with the release or satisfaction of a Purchased Mortgage Loan without having obtained payment in full of the indebtedness secured thereby. No provision of this Section 13(e) requiring such Required Insurance Policy shall diminish or relieve the Seller from its duties and obligations as set forth in
this Agreement. The minimum coverage under any such Required Insurance Policy shall be at least equal to the Required Insurance Amount as set forth on the Addendum. Seller shall not cause the Required Insurance Policy to be terminated or materially modified without providing thirty (30) days prior written notice to the Buyer. Seller shall name Buyer as a loss payee under any applicable Fidelity Insurance Policy and as a direct loss payee with right of action under any applicable Errors and Omissions Insurance Policy or Professional Liability Insurance Policy.
f. No Adverse Claims. Seller warrants and will defend, and shall cause any Servicer to defend, the right, title and interest of Buyer in and to all Purchased Assets against all Liens and any other adverse claims and demands.
g. Assignment. Except as permitted herein, neither Seller nor any Servicer shall sell, assign, transfer or otherwise dispose of, or grant any option with respect to, or pledge, hypothecate or grant a security interest in or lien on or otherwise encumber (except pursuant to the Program Agreements), any of the Purchased Assets or any interest therein, provided, that this Section 13(g) shall not prevent any transfer of Purchased Assets in accordance with the Program Agreements.
h. Security Interest. Seller shall do all things necessary to preserve the Purchased Assets so that they remain subject to a first priority perfected security interest hereunder.
i. Records.
(1) Seller shall collect and maintain or cause to be collected and maintained all Records relating to the Purchased Mortgage Loans in accordance with industry custom and practice for assets similar to the Purchased Mortgage Loans, including those maintained pursuant to the preceding subparagraph, and all Collateral Documents shall be in Custodians possession in accordance with the applicable Custodial Agreement. Seller will not consent to or request any such papers, records or files that are an original or an only copy to leave Custodians possession, except for individual items removed in connection with servicing a specific Mortgage Loan, in which event Seller will obtain or cause to be obtained a receipt from a duly authorized individual of Custodian for any such paper, record or file. Seller or the Servicer of the Purchased Mortgage Loans will maintain all such Records not in the possession of Custodian in good and complete condition in accordance with industry practices for assets similar to the Purchased Mortgage Loans and preserve them against loss.
(2) For so long as Buyer has an interest in or lien on any Purchased Mortgage Loan, Seller will hold or cause to be held all related Records in trust for Buyer. Seller shall notify, or cause to be notified, every other party holding any such Records of the interests and liens in favor of Buyer granted hereby.
(3) Upon reasonable advance notice from Custodian or Buyer, Seller or Servicer, if such files are in the Servicers possession, shall (x) provide Buyer or Custodian with an electronic copy of all Records, (y) make any such Records available to Custodian or Buyer to examine any such Records, either by its own officers or employees, or by agents or contractors, or both, and make copies of all or any portion thereof, and (z) permit
Buyer or its authorized agents to discuss the affairs, finances and accounts of Seller with its chief operating officer and chief financial officer and to discuss the affairs, finances and accounts of Seller with its independent certified public accountants.
j. Books. Seller shall keep or cause to be kept in reasonable detail books and records of account of its assets and business and shall clearly reflect therein the transfer of Purchased Assets to Buyer.
k. Approvals. Seller shall maintain all licenses, permits or other approvals necessary for Seller to conduct its business and to perform its obligations under the Program Agreements, and Seller shall conduct its business in accordance with Requirements of Law.
l. Material Change in Business. Seller shall not liquidate, wind up or dissolve itself (or suffer any liquidation, winding up or dissolution) or sell all or substantially all of its assets or make any material change in the nature of its business as carried on at the Effective Date. Seller shall not enter into any transaction of merger or consolidation or amalgamation without giving Buyer notice of such transaction within two (2) Business Days of entering into such agreement.
m. Underwriting Guidelines. In the event that Seller makes any amendment or modification to the Underwriting Guidelines, Seller shall deliver to Buyer a complete copy of the amended or modified Underwriting Guidelines. Mortgage Loans originated under such revised Underwriting Guidelines shall not eligible for Transactions under this Agreement unless such Underwriting Guidelines are approved in writing by Buyer; provided, that, notwithstanding the foregoing, amendments or modifications to the Underwriting Guidelines that were made by Seller to align with or be more conservative than published Agency guidelines shall not require the approval of Buyer.
n. Distributions. If an Event of Default has occurred and is continuing or the payment of a distribution would cause, or would be likely to cause, a violation of a Financial Covenant herein, Seller shall not pay any dividends with respect to any capital stock or other equity interests in such entity, whether now or hereafter outstanding, or make any other distribution in respect thereof, either directly or indirectly, whether in cash or property or in obligations of Seller.
o. Applicable Law. Seller shall comply with the requirements of all Requirements of Law and orders of any Governmental Authority.
p. Existence. Seller shall preserve and maintain its legal existence and all of its material rights, privileges, licenses and franchises.
q. Chief Executive Office; Jurisdiction of Organization. Seller shall not (i) move its chief executive office from the address referred to on the Addendum, (ii) change its jurisdiction of organization or (iii) cause or permit any change to be made in its name, tax identification number, Governing Documents or structure, unless it shall have provided Buyer thirty (30) days prior written notice of such change and Seller shall have first taken all action required by Buyer for the purpose of perfecting or protecting the lien and security interest of Buyer established hereunder.
r. Taxes. Seller shall timely file all tax returns that are required to be filed by it and shall timely pay and discharge all taxes, assessments and governmental charges or levies imposed
on it or on its income or profits or on any of its property prior to the date on which such taxes are due without penalties or interest, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained.
s. Transactions with Affiliates. Seller will not enter into any transaction, including, without limitation, any purchase, sale, lease or exchange of property or the rendering of any service, with any Affiliate unless such transaction is (a) otherwise permitted under the Program Agreements, (b) in the ordinary course of Sellers business, and (c) upon fair and reasonable terms no less favorable to Seller than it would obtain in a comparable arms length transaction with a Person which is not an Affiliate, or make a payment that is not otherwise permitted by this Section 13(s) to any Affiliate.
t. True and Correct Information. All information, reports, exhibits, schedules, financial statements (including, without limitation, any schedules) or certificates of Seller, any Affiliate or any of its officers furnished to Buyer hereunder and during Buyers diligence of Seller is and will be true and complete and do not omit to disclose any material facts necessary to make the statements herein or therein, in light of the circumstances in which they are made, not misleading. All required financial statements, information and reports delivered by Seller to Buyer pursuant to this Agreement shall be prepared in accordance with U.S. GAAP, or, if applicable, to SEC filings, the appropriate SEC accounting regulations.
u. Takeout Investors, Takeout Broker Dealers and Agency Approvals; Servicing. Unless otherwise approved by Buyer in advance, Seller shall maintain its status with at least three (3) Buyer-approved Takeout Investors for each type of non-Agency eligible Mortgage Loan and at least (1) Buyer-approved Takeout Investor for Agency-eligible Mortgage Loans, with such one Takeout Investor being an Agency listed on the Sublimit, Rate and Term Schedule of the Addendum, and, if applicable, Takeout Broker Dealers or its status with Fannie Mae as an approved lender and/or Freddie Mac as an approved seller/servicer, in all cases in good standing. Should Seller, for any reason, cease to be in good standing with any of the foregoing, or, if in order to remain in good standing, should Seller be required by any Takeout Investor, Takeout Broker Dealer or Fannie Mae or Freddie Mac to provide any notification to the relevant Takeout Investor, Takeout Broker Dealer, Fannie Mae or Freddie Mac or to the Department of Housing and Urban Development, FHA or VA, such Seller shall also notify Buyer immediately in writing of such notification. Notwithstanding the preceding sentence, Seller shall take all necessary action to maintain all of their applicable Agency approvals at all times during the term of this Agreement and each outstanding Transaction. Seller or Servicer, as applicable, has adequate financial standing, servicing facilities, procedures and experienced personnel necessary for the sound servicing of mortgage loans of the same types as may from time to time constitute Purchased Mortgage Loans and in accordance with Accepted Servicing Practices.
v. No Pledge. Seller shall not pledge, transfer or convey any security interest in the Collection Account or the Sellers Clearing Account to any Person without the express written consent of Buyer.
w. [Reserved.]
x. [Reserved.]
y. [Reserved.]
z. Sellers Clearing Account and Reserve Account. The Sellers Clearing Account Threshold and the Reserve Account Threshold, if a Reserve Account is required per the terms of the Addendum, shall be maintained at all times.
aa. [Reserved.]
bb. Documentation. Seller has performed the documentation procedures required by its operational guidelines with respect to endorsements and assignments, including the recordation of assignments, or has verified that such documentation procedures have been performed by a prior holder of such Purchased Mortgage Loan.
cc. Compliance. Seller has observed or performed and shall continue to observe and perform in all material respects all of its covenants and representations and warranties in this Agreement and the other Program Agreements, and Seller has satisfied every condition, contained in this Agreement and the other Program Agreements to be observed, performed and satisfied by it.
dd. Regulatory Action. Seller is not currently under investigation and, to Sellers knowledge, no investigation by any federal, state or local government agency is threatened. Seller has not been the subject of any government investigation which has resulted in the voluntary or involuntary suspension of a license, a cease and desist order, or such other action as could adversely impact Sellers business.
ee. No Default. No Default or Event of Default has occurred or is continuing.
ff. Most Favored Status. The Seller agrees that should the Seller or any Affiliate of the Seller enter into a repurchase agreement or credit facility with any Person other than Buyer or an Affiliate of Buyer which by its terms provides more favorable terms to counterparty with respect to any guaranties or Financial Covenants, including without limitation covenants covering the same or similar subject matter referred to on Annex A hereof (a More Favorable Agreement), Seller shall immediately notify Buyer, in writing, of such more favorable terms contained in such More Favorable Agreement, identifying such more favorable terms with reasonable specificity and the terms of this Agreement shall be deemed to be immediately and automatically revised to provide that Seller shall make such more favorable guaranties or financial covenants with Buyer hereunder.
gg. Hedging. An accurate and true summary of all Interest Rate Protection Agreements entered into or maintained by Seller during the most recent calendar month end and all preceding months shall be provided to Buyer (unless Buyer gives notice to Seller that such summary is not required); and any documentation related to such Interest Rate Protection Agreements as required by the Manual and such other documents requested by Buyer shall be provided to Buyer.
hh. Notification. Seller shall notify Buyer (1) at least monthly for each Reporting Period of any repurchase requests or demands, and indemnification requests it received from its
secondary market investors, including any Takeout Investors or any Governmental Authority or Agency where initial rebuttal has been rejected, and (2) immediately of any suspension notices or termination notices it received from its secondary market investors, including any Takeout Investors, Takeout Broker Dealers or any Governmental Authority or Agency.
ii. Mortgage Loan Schedule. Each Mortgage Loan Schedule is true and correct in all respects.
jj. [Reserved.]
kk. Interim Funder. Seller shall ensure that Buyer will be named as the interim funder with MERS.
ll. Additional Covenants and Conditions. Seller shall ensure compliance with the Additional Covenants and Conditions.
mm. Partnership Change in Financial Relationship. If applicable, Seller shall promptly notify Buyer if either the General Partner or the Seller obtain separate tax identification numbers and/or begin filing separate tax returns from the other.
nn. Financial Covenants. Seller shall comply with all the Financial Covenants.
oo. Key Personnel. There shall be no material change in the Key Personnel of Seller unless Buyer receives adequate assurances from Seller within five (5) Business Days of such material change that such Key Personnel position will be filled or covered to the reasonable satisfaction of Buyer and in a timeframe to the reasonable satisfaction of Buyer, and Seller shall so fill or cover the position in such manner and timeframe.
14. Events of Default
Each of the following shall constitute an Event of Default hereunder:
a. Payment Failure. Failure of any Seller to (i) make any payment of Price Differential or Repurchase Price or any other sum which has become due, on a Repurchase Date or otherwise, whether by acceleration or otherwise, under the terms of this Agreement, any other warehouse and security agreement or any other document evidencing or securing Indebtedness of Seller to Buyer or to any Affiliate of Buyer, or (ii) cure any Margin Deficit when due pursuant to Section 6 hereof, provided, that it shall not be an Event of Default hereunder if such failure arises solely by reason of an error, omission or failure of an administrative or operational nature made on Sellers behalf by any bank, broker-dealer, clearing operation or other similar financial intermediary holding funds, securities or other property directly for such partys account (each, a Paying Agent), subject to satisfaction of the following conditions: (1) such failure is cured no later than the close of business on the Business Day following the day on which the failure occurs; (2) Seller demonstrates to the reasonable satisfaction of Buyer that funds, securities or property were available to such Paying Agent(s) to enable it (or them) to make the relevant payment or delivery when due; and (3) Seller has provided Buyer with such additional information as Buyer shall have reasonably requested in order to satisfy itself that such failure occurred solely as a result of an error or omission as described above, including, but not limited to, a prime broker or custodian bank
statement or other evidence demonstrating that Seller has cash and immediately available funds or other collateral necessary to satisfy Sellers obligations, federal reference numbers demonstrating attempted delivery of securities or cash and documents or communications from the financial intermediary demonstrating the administrative or operational nature of the failure.
b. Cross Default.
(1) Seller or any of Sellers Affiliates shall be in default under (A) any Indebtedness of any Seller or of such Affiliate which default shall have occurred and be continuing and (1) involves the failure to pay a matured obligation, or (2) results in the acceleration of the maturity thereof, or (B) any other contract or obligation to which any Seller or such Affiliate is a party which default shall have occurred and be continuing; provided, that it shall not be an Event of Default under this subsections (B) if such disputed amount or obligation is less than the Cross Default Threshold or for Interest Rate Protection Agreements or Agency Security Purchase Commitments that do not cause a Takeout Broker Dealer or a Takeout Investor to terminate their relationship with the Seller.
(2) Seller or any Sellers Affiliates shall be in default under any Indebtedness or any other contract or obligation due to Buyer or any of Buyers Affiliates which default shall have occurred and be continuing, except for Interest Rate Protection Agreements or Agency Security Purchase Commitments that do not cause any of Buyers Affiliates to terminate their relationship with the Seller.
(3) A breach by any Guarantor of the terms of its Guaranty or its related addendum, including but not limited to, a guarantor event of default or term of similar import or a breach of a financial covenant or the failure to timely provide any financial or other reporting.
c. Assignment. Assignment or attempted assignment by any Seller of this Agreement or any rights hereunder without first obtaining the specific written consent of Buyer, or the granting by any Seller of any security interest, lien or other encumbrances on any Purchased Assets to any person other than Buyer.
d. Insolvency. An Act of Insolvency shall have occurred with respect to any Seller or any Affiliate, or, if applicable, the Manager, the General Partner or Limited Partner.
e. Material Adverse Effect. Any Material Adverse Effect as determined by Buyer in its sole good faith discretion, or any other condition shall exist which, in Buyers sole good faith discretion, constitutes a material impairment of any Sellers ability to perform its obligations under this Agreement or any other Program Agreement.
f. Breach of Representation, Covenant or Obligation.
(1) A breach by Seller of any of the representations, warranties, covenants or obligations set forth in Sections 12(a)(1), 12(a)(3), 12(a)(6), 12(a)(12), 12(a)(19), 12(a)(24), 13(c), 13(g), 13(h), 13(l), 13(n), 13(s), 13(v), 13(z), 13(ll), 13(nn) or 13(oo) of this Agreement.
(2) A breach by any Seller of any other representation, warranty, covenant or any other obligation set forth in this Agreement (and not otherwise specified in Sections 14(f)(1) or 14(f)(3)) or any other failure to perform under this Agreement, if such breach is not cured within [***] Business Days of the earlier of (i) knowledge of Seller of such breach or (ii) delivery by Buyer of notice of such breach (other than a breach of the representations and warranties set forth in Schedule 1, which shall be considered solely for the purpose of determining the Market Value, the existence of a Margin Deficit, the obligation to repurchase such Mortgage Loan and the right of Buyer to sell such Mortgage Loan as set forth in Section 6(e) hereof, unless (1) such party shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made, or (2) any such representations and warranties have been determined by Buyer in its discretion to be materially false or misleading on a regular basis, then such breach shall constitute an Event of Default for purposes of this Section 14(f)(2)), unless (i) such party shall have made any such representations and warranties with knowledge that they were materially false or misleading at the time made, (ii) any such representations and warranties have been determined by Buyer in its discretion to be materially false or misleading on a regular basis, or (iii) Buyer, in its discretion, determines that such breach of a material representation, warranty or covenant materially and adversely affects (A) the condition (financial or otherwise) of such party, its Subsidiaries, or Affiliates, or (B) Buyers determination to enter into this Agreement or Transactions with such party, then such breach shall constitute an immediate Event of Default and Seller shall have no cure right hereunder.
(3) A breach by any Seller of any of the representations, warranties, covenants or obligations set forth in Sections 12(a)(9), 13(k), 13(q), 13(u), 13(cc), or 13(kk) of this Agreement if such breach is not cured within [***] days.
g. ERISA. (i) Seller or any ERISA Affiliate shall engage in a non-exempt prohibited transaction within the meaning of Section 406 of ERISA or Section 4975 of the Code involving any Plan or (ii) one or more ERISA Events shall occur or reasonably could be expected to occur; and, in the case of clauses (i) and (ii), such condition or event, together with all other conditions or events, if any, is reasonably expected to result in a Material Adverse Effect.
h. Change in Control. The occurrence of a Change in Control or any individuals determined to be Key Personnel, or, if applicable, the Manager, the General Partner or Limited Partner cease to be the employees of the Seller, the Manager, the General Partner or the Limited Partner, as applicable.
i. Failure to Transfer. Any Seller fails to transfer the Purchased Assets to Buyer on the applicable Purchase Date (provided Buyer has tendered the related Purchase Price); provided, however, that it shall not be an Event of Default under this clause (i) if (A) Seller has failed to transfer less than five (5) Purchased Assets and (B) Buyer has received the Repurchase Price for such Purchased Assets within one (1) Business Day of such failure to transfer.
j. Judgment. A judgment or judgments for the payment of money in excess of the Judgment Threshold shall be rendered against any Seller or any of its Affiliates by one or more courts, administrative tribunals or other bodies having jurisdiction and the same shall not be
satisfied, discharged (or provision shall not be made for such discharge) or bonded, or a stay of execution thereof shall not be procured, within [***] days from the date of entry thereof.
k. Government Action. Any Governmental Authority or any person, agency or entity acting or purporting to act under governmental authority shall have taken any action to condemn, seize or appropriate, or to assume custody or control of, all or any substantial part of the Property of any Seller, Guarantor or Affiliate thereof, or shall have taken any action to displace the management of any Seller, Guarantor or Affiliate thereof or to curtail its authority in the conduct of the business of any Seller, Guarantor or Affiliate thereof, or takes any action in the nature of enforcement to remove, limit or restrict the approval of any Seller, Guarantor or Affiliate thereof as an issuer, buyer or a seller/servicer of Mortgage Loans or Agency Securities, and such action provided for in this subparagraph (l) shall not have been discontinued or stayed within [***] days.
l. Inability to Perform. An officer of any Seller or Guarantor shall admit its inability to, or its intention not to, perform any of any Sellers Obligations or Guarantors obligations hereunder or the Guaranty.
m. Security Interest. In the event that this Agreement is recharacterized by a court of competent jurisdiction as a secured loan or similar financing, the Agreement shall for any reason cease to create a valid, first priority security interest in any material portion of the Purchased Mortgage Loans or other Purchased Assets purported to be covered hereby.
n. Financial Statements. Any Sellers or Guarantors audited annual financial statements or the notes thereto or other opinions or conclusions stated therein shall be qualified or limited by reference to the status of Seller or Guarantor as a going concern or a reference of similar import.
o. Reserved.
p. Material Adverse Effect Upon the Servicer. If Seller fails to transfer the servicing of Purchased Mortgage Loans serviced by any Servicer with respect to which a material adverse change in, or a material adverse effect upon, the operations, business, properties, condition (financial or otherwise) or prospects of such Servicer has occurred, to a successor Servicer approved in writing by Buyer as soon as practicable and in any event within [***] following the occurrence of such material adverse change or effect.
An Event of Default shall be deemed to be continuing unless Buyer expressly waives such Event of Default or acknowledges that such Event of Default has been subsequently cured by Seller, in each case, in writing.
15. Remedies Upon Default
In the event that an Event of Default shall have occurred:
a. Buyer may, at its option, declare an Event of Default to have occurred hereunder (which option shall be deemed to have been exercised immediately and without any notice upon the occurrence of an Event of Default pursuant to Section 14(d)) and, upon the exercise or deemed
exercise of such option, the Repurchase Date for each Transaction hereunder shall, if it has not already occurred, be deemed immediately to occur (except that, in the event that the Purchase Date for any Transaction has not yet occurred as of the date of such exercise or deemed exercise, such Transaction shall be deemed immediately canceled). Buyer shall give written notice to each Seller and Guarantor of the exercise of such option as promptly as practicable; provided, however, that Buyer shall not be required to provide written notice upon the occurrence of an Event of Default pursuant to Section 14(d), which shall constitute an immediate Event of Default without any further action or notice by Buyer. (For purposes of this provision, notice provided by electronic mail shall constitute written notice.)
b. If Buyer exercises or is deemed to have exercised the option referred to in paragraph (a) of this Section 15, (i) Sellers obligations in such Transactions to repurchase all Purchased Assets, at the Repurchase Price therefor on the Repurchase Date determined in accordance with paragraph (a) of this Section 15, shall thereupon become immediately due and payable, (ii) all Income paid after such exercise or deemed exercise shall be retained by Buyer, or, to the extent not yet transferred to the Collection Account, the Sellers Clearing Account or the Reserve Account, remitted to Buyer, and in any case applied, in Buyers discretion, to the aggregate unpaid Repurchase Prices for all outstanding Transactions and any other amounts owing by any Seller hereunder, (iii) Seller shall immediately comply with the further instructions of Buyer with respect to holding or delivering any of the Mortgage Files relating to any Purchased Assets subject to such Transactions then in Sellers possession or control; and (iv) the Agency Security Margin and the Loan Margin shall automatically be increased by the Post Default Rate Margin. In addition, Buyer shall have the right to satisfy any Obligations with funds remaining in the Sellers Clearing Account or the Reserve Account.
c. Buyer shall have the right to direct all Servicers then servicing any Purchased Mortgage Loans to remit all collections thereon to Buyer to the extent that any such Servicer is not currently remitting to the Buyer, and if any such payments are received by Seller, Seller shall not commingle the amounts received with other funds of Seller and shall promptly pay them over to Buyer. Buyer shall also have the right to terminate any one or all of the Servicers then servicing any Purchased Mortgage Loans with or without cause.
d. If Buyer exercises or is deemed to have exercised the option referred to in paragraph (a) of this Section 15, Buyer shall have the right to immediately sell and liquidate the Purchased Mortgage Loans (including, without limitation, the Servicing Rights), Purchased Agency Securities and all other Purchased Assets. Such disposition of Purchased Mortgage Loans may be, at Buyers option, on either a servicing-released or a servicing-retained basis. Buyer shall not be required to give any warranties as to the Purchased Mortgage Loans or Purchased Agency Securities with respect to any such disposition thereof. Buyer may specifically disclaim or modify any warranties of title or the like relating to the Purchased Assets. The foregoing procedure for disposition and liquidation of the Purchased Assets shall not be considered to adversely affect the commercial reasonableness of any sale thereof. Seller agrees that it would not be commercially unreasonable for Buyer to dispose of the Purchased Assets or any portion thereof by using Internet sites that provide for the auction of assets similar to such Purchased Assets, or that have the reasonable capability of doing so, or that match buyers and sellers of assets. Buyer shall be entitled to place the Purchased Mortgage Loans in a pool for issuance of mortgage-backed securities at the then-prevailing price for such securities and to sell such securities for such prevailing price in the
open market. Buyer shall also be entitled to sell any or all of such Purchased Mortgage Loans individually for the prevailing price. Buyer shall also be entitled, in its discretion to elect, in lieu of selling all or a portion of such Purchased Assets, to give the Seller credit for such Purchased Assets in an amount equal to the current market value of such Purchased Assets (as determined by Buyer (or an Affiliate thereof) in its discretion using methodology consistent with Buyers determination with respect to similar portfolios) against the aggregate unpaid Repurchase Price and any other amounts owing by the Seller hereunder.
e. Upon the happening of one or more Events of Default, Buyer may apply any proceeds from the liquidation of the Purchased Assets to the Repurchase Price hereunder and all other Obligations in the manner Buyer deems appropriate in its sole discretion.
f. Seller shall be liable to Buyer for (i) the amount of all reasonable outside legal or other expenses (including, without limitation, all out-of-pocket costs and expenses of Buyer in connection with the enforcement of this Agreement or any other agreement evidencing a Transaction, whether in action, suit or litigation or bankruptcy, insolvency or other similar proceeding affecting creditors rights generally, further including, without limitation, the reasonable fees and expenses of outside counsel incurred in connection with or as a result of an Event of Default, (ii) damages in an amount equal to the actual out-of-pocket cost (including all fees, expenses and commissions) of entering into replacement transactions and entering into or terminating hedge transactions in connection with or as a result of an Event of Default, and (iii) any other loss, damage, or out-of-pocket cost or expense directly arising or resulting from the occurrence of an Event of Default in respect of a Transaction.
g. Seller shall be liable to Buyer for the Repurchase Price related to a Transaction, and, to the extent permitted by applicable law, Seller shall be liable to Buyer for interest on any other amounts owing by Seller hereunder, from the date Seller becomes liable for such amounts hereunder until such amounts are (i) paid in full by Seller, or (ii) satisfied in full by the exercise of Buyers rights hereunder. Interest on any sum payable by Seller under this paragraph (g) shall be at a rate equal to the Post Default Rate Margin or the Accounts Receivable Rate, as applicable.
h. Buyer shall have, in addition to its rights hereunder, any rights otherwise available to it under any other agreement or applicable law, including, without limitation, any equitable remedies.
i. Buyer may exercise one or more of the remedies available to Buyer immediately upon the occurrence of an Event of Default and, except to the extent provided in paragraph (a) of this Section 15, at any time thereafter without notice to Seller. All rights and remedies arising under this Agreement amended from time to time hereunder are cumulative and not exclusive of any other rights or remedies which Buyer may have.
j. Buyer may enforce its rights and remedies hereunder without prior judicial process or hearing, and as permitted by law Seller hereby expressly waives any defenses Seller might otherwise have to require Buyer to enforce its rights by judicial process. Seller also waives any defense (other than a defense of payment or performance) Seller might otherwise have arising from the use of nonjudicial process, enforcement and sale of all or any portion of the Purchased Assets, or from any other election of remedies. Seller recognizes that nonjudicial remedies are consistent
with the usages of the trade, are responsive to commercial necessity and are the result of a bargain at arms length.
k. If Buyer exercises or is deemed to have exercised the option referred to in paragraph (a) of this Section 15, Buyer shall have the right to terminate this Agreement; provided, however, that no such termination shall affect Sellers outstanding obligations to Buyer at the time of such termination, nor shall it affect the survivability of any provisions in this Agreement that, by their express terms, are intended to survive the termination of this Agreement or any of the other Program Agreements and the repayment in full of all outstanding Obligations.
l. Following the exercise of remedies pursuant to this Section 15, Buyer shall (to the extent permitted by any Requirements of Law) provide Seller with an accounting of any proceeds received and any remaining deficiency.
16. Reports
a. Notices. Each Seller and Guarantor shall furnish to Buyer (w) promptly, written summaries satisfactory to Buyer of any material and adverse notices (including, without limitation, notices of defaults, breaches, potential defaults or potential breaches) and any material financial information that is not otherwise required to be provided by Seller hereunder which is given to Sellers lenders; provided, that upon the request of Buyer, Seller shall promptly furnish to Buyer copies of such notices or financial information to the extent permitted under Requirements of Law and if precluded by Requirements of Law, Seller shall promptly furnish to Buyer summaries, satisfactory to Buyer, of such notices or financial information, (x) immediately, notice of the occurrence of any Event of Default hereunder or default or breach by any Seller, Servicer or Guarantor of any obligation under any Program Agreement or any material contract or agreement of any Seller or Guarantor or the occurrence of any event or circumstance that such party reasonably expects has resulted in, or will, with the passage of time, result in, a Material Adverse Effect or an Event of Default, (y) immediately, notice of a Takeout Investors cancellation of a Takeout Commitment or notice of a Takeout Broker Dealers cancellation of Agency Security Purchase Commitment and (z) the following:
(1) as soon as available and in any event within the Reporting Period, the unaudited balance sheets of Seller and Guarantor (if elected in the Guaranty Addendum with respect to the Guarantor) as at the end of such period, the unaudited balance sheets, related unaudited consolidated statements of income and retained earnings and of cash flows for the Seller and Guarantor, if applicable, for such period and the portion of the fiscal year through the end of such period, accompanied by the Officers Compliance Certificate, executed by a Responsible Officer of Seller and Guarantor, if applicable, which certificate shall state that said financial statements and schedules fairly present in all material respects the financial condition and results of operations of Seller and Guarantor, if applicable, in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end adjustments);
(2) as soon as available and in any event within one hundred twenty (120) days after the end of the Sellers fiscal year, the audited balance sheets and the related statements of income for the Seller and Guarantor (if elected in the Guaranty Addendum with respect
to the Guarantor) as at the end of such fiscal year, with such balance sheets and statements of income being audited if required by Buyer but in any event prepared by a certified public accountant in accordance with GAAP, setting forth in each case in comparative form the figures for the previous year, accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall have no going concern qualification and shall state that said financial statements fairly present the financial condition and results of operations of Seller and Guarantor, if applicable, as at the end of, and for, such fiscal year in accordance with GAAP;
(3) to the extent permitted by each Agency and Governmental Authority and as soon as available, or otherwise stipulated in this Agreement, copies of relevant portions of all final written Fannie Mae, Freddie Mac, FHA, VA, Governmental Authority and investor audits, examinations, evaluations, monitoring reviews and reports of its operations (including those prepared on a contract basis) which provide for or relate to (i) material corrective action required, (ii) material sanctions proposed, imposed or required, including, without limitation, notices of defaults, notices of termination of approved status, notices of imposition of supervisory agreements or interim servicing agreements, and notices of probation, suspension, or non-renewal, or (iii) adverse findings by such Agency or Governmental Authority;
(4) from time to time such other information regarding the financial condition, operations, or business of the Seller or the Guarantor as Buyer may reasonably request;
(5) as soon as reasonably possible or as otherwise set forth in this Agreement, notice of any of the following events:
(a) change in the insurance coverage required of Seller, Servicer or any other Person pursuant to any Program Agreement, with a copy of evidence of same attached;
(b) any material claim, dispute, litigation, investigation, proceeding or suspension between Seller, Guarantor or Servicer, on the one hand, and any Governmental Authority, Takeout Investor, third party loan purchaser or any other Person on the other;
(c) any material change in accounting policies or financial reporting practices of Seller, Guarantor or Servicer;
(d) with respect to any Purchased Mortgage Loan, immediately upon Sellers receipt of notice or knowledge thereof, that the value of the underlying Mortgaged Property or such Mortgage Loan has been adversely affected for any reason, including, without limitation, damage by waste, fire, earthquake or earth movement, windstorm, flood, tornado or other casualty;
(e) any material issues raised upon examination of Seller, Guarantor or Sellers facilities by any Governmental Authority which issues remain unresolved at the conclusion of such examination;
(f) any material change in the Indebtedness of the Seller or Guarantor, including, without limitation, any default, renewal, non-renewal, termination, increase in available amount or decrease in available amount related thereto;
(g) any breach of a representation or warranty set forth in Schedule 1 hereto;
(h) any other event, circumstance or condition that has resulted, or has a possibility of resulting, in a Material Adverse Effect with respect to Seller or Servicer, and
(i) Any repurchase requests or demands where initial rebuttal has been rejected, indemnification requests, suspension notices or termination notices Seller received, or is reasonably likely to receive, from its secondary market investors, including any Takeout Investors.
b. Officers Compliance Certificate. Seller will furnish to Buyer, at the time the Seller furnishes each set of financial statements pursuant to Sections 16(a)(1) or (2) above, a certificate of a Responsible Officer of Seller in the form of Exhibit A hereto, along with all schedules required by Buyer. If elected in the Guaranty Addendum with respect to the Guarantor, Guarantor will furnish to Buyer, at the time the Guarantor furnishes each set of financial statements pursuant to Sections 16(a)(1) or (2) above, a certificate of a Responsible Officer of Guarantor in the form attached to the Guaranty.
c. Mortgage Loan Reports. At the request of Buyer, Seller will furnish to Buyer monthly electronic Mortgage Loan performance data, including, without limitation, delinquency reports (i.e., delinquency, foreclosure and net charge-off reports). Such reports will contain at least the loan number, original loan amount, current loan amount, interest paid to date, next due date and current interest rate, the Buyer, in its sole discretion, may require and Seller shall provide additional information.
d. Asset Tape. Within two (2) Business Days following a request from Buyer, Seller shall provide to Buyer, electronically, in a format mutually acceptable to Buyer and Seller, an Asset Tape.
e. Other. Sellers and Guarantor shall deliver to Buyer any other reports or information reasonably requested by Buyer or as otherwise required pursuant to this Agreement.
17. [Reserved]
18. Repurchase Transactions
Buyer may, in its sole election, engage in repurchase transactions with the Purchased Assets or otherwise pledge, hypothecate, assign, transfer or otherwise convey the Purchased Assets with a counterparty of Buyers choice. Upon receipt of the Repurchase Price and all fees and expenses related to any Purchased Asset, Buyer is obliged to transfer such Purchased Assets to Seller pursuant to Section 4 hereof and credit or pay Income to, or apply Income to the obligations of, Seller pursuant to Section 7 hereof; provided, that in each instance
an Event of Default shall not have occurred. In the event Buyer engages in a repurchase transaction with any of the Purchased Assets or otherwise pledges or hypothecates any of the Purchased Assets, Buyer shall have the right to assign to Buyers counterparty any of the applicable representations or warranties herein and the remedies for breach thereof, as they relate to the Purchased Assets that are subject to such repurchase transaction. Unless otherwise agreed to in writing by Buyer, Seller shall not be responsible for any additional obligations, costs, fees or expenses in connection with Buyers pledging or hypothecating of the Purchased Assets, including but not limited to, any additional expenses that may be incurred in reassigning such Purchased Assets to Seller.
19. Custodial Responsibilities
a. With respect to any Purchased Mortgage Loans held by, or to be delivered to, Wells Fargo Bank, National Association as Custodian:
i. On the Purchase Date, or Delivery Date if different from the Purchase Date, the Seller shall deliver to the Custodian the Collateral Documents, together with a Transmittal Letter upon which the Custodian shall be entitled to rely conclusively until expressly notified to the contrary in writing by the Buyer. The Mortgage Loan Schedule, relating to all of the Purchased Mortgage Loans delivered to the Custodian on the related Purchase Date (or the related Delivery Date), shall be delivered electronically to the Custodian by Buyer on such Purchase Date or Delivery Date, as applicable, in accordance with the terms of the Manual.
ii. From time to time Seller may request Shipment Orders from the Buyer. Once Buyer has indicated that the Custodian has received all the Collateral Documents from the Seller, Buyer shall electronically transmit any Shipment Orders to the Custodian and the Custodian shall deliver the specified Collateral Documents or reports in its possession to the Takeout Investor (or its custodian) in the manner directed in the Custodial Agreement and such Shipment Order. The Seller is responsible for determining whether all Collateral Documents are on the current forms required by the Takeout Investor, in compliance with any related Takeout Commitment, or otherwise sufficient for the Takeout Investor. Neither the Buyer nor the Custodian shall have any obligation to prepare, assemble, correct or sign any documents included in the Shipment Order.
iii. In the event that the Custodian delivers any Collateral Documents to the Seller upon the written authorization of the Buyer and pursuant to the Sellers delivery to the Custodian of an executed request for the release of such Collateral Documents pursuant to the terms of the Custodial Agreement, the Seller shall be solely responsible for the safe, prompt return of such Collateral Documents in the timeframe specified in the release request (or other similar document) upon making any correction deemed necessary by Buyer or the Seller.
iv. In the event that the Custodian pays for the shipment of the package of Collateral Documents, Seller will reimburse Custodian for all actual shipment costs related to such Seller upon receipt of an invoice; provided, that in any event Buyer shall not be held responsible or liable for recovery of shipment costs incurred pursuant to this Section 19.
b. Buyer and Seller shall each comply in all respects with their respective duties and obligations as set forth in and be entitled to their respective rights and benefits under any Custodial Agreement with a Custodian other than Wells Fargo Bank, National Association.
20. Single Agreement
Buyer and Seller acknowledge that, and have entered hereunto, and will enter into each Transaction hereunder, in consideration of and in reliance upon the fact that, all Transactions hereunder constitute a single business and contractual relationship and have been made in consideration of each other. Accordingly, each of Buyer and Seller agrees (i) to perform all of its obligations in respect of each Transaction hereunder, and that a default in the performance of any such obligations shall constitute a default by it in respect of all Transactions hereunder, (ii) that each of them shall be entitled to set-off claims and apply property held by them in respect of any Transaction against obligations owing to them in respect of any other Transactions hereunder and (iii) that payments, deliveries and other transfers made by either of them in respect of any Transaction shall be deemed to have been made in consideration of payments, deliveries and other transfers in respect of any other Transactions hereunder, and the obligations to make any such payments, deliveries and other transfers may be applied against each other and netted.
21. Notices and Other Communications
Any notices (with the exception of Transaction Requests or Purchase Confirmations, which shall be delivered in the manner set forth in the Manual), statements, demands or other communications hereunder may be given by a party to the other by electronic mail, facsimile, messenger or otherwise to the Seller and Buyers addresses specified on the Addendum, or so sent to such party at any other place specified in a notice of change of address hereafter received by the other. Notice provided by electronic mail or facsimile shall be deemed to be given upon transmission provided that an electronic notice of non-transmission is not received. All notices, demands and requests hereunder may be made orally, to be confirmed promptly in writing, or by other communication as specified in the preceding sentence.
22. Entire Agreement; Severability
This Agreement shall supersede any existing agreements between the parties containing general terms and conditions for repurchase transactions. Each provision and agreement herein shall be treated as separate and independent from any other provision or agreement herein and shall be enforceable notwithstanding the unenforceability of any such other provision or agreement.
23. Non-assignability
The Program Agreements are not assignable by any Seller or Guarantor, as applicable. Buyer may from time to time assign all or a portion of its rights and obligations under this Agreement and the Program Agreements; provided, however, that Buyer shall maintain as agent of Seller, for review by Seller upon written request, a register of assignees and a copy of an executed assignment and acceptance by Buyer and assignee (Assignment and Acceptance), specifying the percentage or portion of such rights and obligations assigned. Upon such assignment, (a) such assignee shall be a party hereto and to each Program Agreement to the extent of the percentage or portion set forth in the Assignment and Acceptance, and shall succeed to the applicable rights and obligations of Buyer hereunder, and (b) Buyer shall be released from its obligations hereunder and under the Program Agreements to the extent of the percentage or portion set forth in the Assignment and Acceptance. Unless otherwise stated in the Assignment and Acceptance, Seller shall continue to take directions solely from Buyer unless otherwise notified by Buyer in writing. Buyer may distribute to any prospective assignee any document or other information delivered to Buyer by Seller, provided that such prospective assignee has agreed to hold such information subject to and in accordance with the confidentiality provisions of this Agreement.
24. Set-off
In addition to any rights and remedies of Buyer provided by law, Buyer shall have the right, without prior notice to Seller or Guarantor, any such notice being expressly waived by Seller or Guarantor to the extent permitted by applicable law, upon any amount becoming due and payable by any Seller or Guarantor hereunder (whether at the stated maturity, by acceleration or otherwise) to set-off and appropriate and apply against such amount any deposits (general or special, time or demand, provisional or final), in any currency, and any other credits, indebtedness or claims, in any currency, in each case whether direct or indirect, absolute or contingent, matured or unmatured, at any time held or owing by Buyer, Buyers Affiliates (including, without limitation Wells Fargo & Company and its Affiliates) or any branch or agency thereof to or for the credit or the account of Seller or Guarantor under any other agreement; provided, that the foregoing right of set-off shall not apply to (i) any account of Seller or Guarantor that is an escrow or servicing account containing funds for the benefit of a Person other than Seller or Guarantor, or (ii) the operating accounts of Seller and Guarantor bearing the following account numbers or such other accounts approved by Buyer in writing: [***], [***], [***], [***], [***], [***], [***]. Buyer agrees promptly to notify each Seller and Guarantor after any such set-off and application made by Buyer; provided, that the failure to give such notice shall not affect the validity of such set-off and application. For avoidance of doubt and not as a limitation, Buyer may set-off any amounts in the Sellers Clearing Account and the Reserve Account.
Buyer shall at any time, unless and until all Obligations under this Agreement have been paid in full, have the right to retain, to suspend payment or performance of, or to decline to remit, any amount or property that Buyer would otherwise be obligated to pay, remit or deliver to Seller or Guarantor hereunder if an Event of Default or Default has occurred.
25. Binding Effect; Governing Law; Jurisdiction
a. This Agreement shall be binding and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Seller acknowledges that the obligations of Buyer hereunder or otherwise are not the subject of any guaranty by, or recourse to, any direct or indirect parent or other Affiliate of Buyer. THIS AGREEMENT AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION WITH THIS AGREEMENT, THE RELATIONSHIP OF THE PARTIES, AND/OR THE INTERPRETATION AND ENFORCEMENT OF THE RIGHTS AND DUTIES OF THE PARTIES WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW.
b. EACH SELLER AND GUARANTOR HEREBY WAIVE TRIAL BY JURY. SELLER AND GUARANTOR HEREBY IRREVOCABLY CONSENT TO THE EXCLUSIVE JURISDICTION OF ANY COURT OF THE STATE OF NEW YORK, OR IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS IN ANY ACTION OR PROCEEDING. EACH SELLER AND GUARANTOR HEREBY SUBMITS TO, AND WAIVES ANY OBJECTION THEY MAY HAVE TO, EXCLUSIVE PERSONAL JURISDICTION AND VENUE IN THE COURTS OF THE STATE OF NEW YORK AND THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, WITH RESPECT TO ANY DISPUTES ARISING OUT OF OR RELATING TO THE PROGRAM AGREEMENTS.
c. TO THE EXTENT PERMITTED BY REQUIREMENTS OF LAW, SELLER HEREBY WAIVES ANY RIGHT TO CLAIM OR RECOVER IN ANY LITIGATION WHATSOEVER INVOLVING ANY INDEMNIFIED PARTY, ANY SPECIAL, EXEMPLARY, PUNITIVE, INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES OF ANY KIND OR NATURE WHATSOEVER OR ANY DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES, WHETHER SUCH WAIVED DAMAGES ARE BASED ON STATUTE, CONTRACT, TORT, COMMON LAW OR ANY OTHER LEGAL THEORY, WHETHER THE LIKELIHOOD OF SUCH DAMAGES WAS KNOWN AND REGARDLESS OF THE FORM OF THE CLAIM OF ACTION. NO INDEMNIFIED PARTY SHALL BE LIABLE FOR ANY DAMAGES ARISING FROM THE USE BY UNINTENDED RECIPIENTS OF ANY INFORMATION OR OTHER MATERIALS DISTRIBUTED BY IT THROUGH TELECOMMUNICATIONS.
d. SELLER ACKNOWLEDGES THAT THE WAIVERS IN THIS SECTION 25 ARE A MATERIAL INDUCEMENT TO ENTER INTO A BUSINESS RELATIONSHIP, THAT SUCH PARTY HAS ALREADY RELIED ON SUCH WAIVERS IN ENTERING INTO THE PROGRAM AGREEMENTS, AND THAT SUCH PARTY WILL CONTINUE TO RELY ON SUCH WAIVERS IN THEIR RELATED FUTURE DEALINGS UNDER THE PROGRAM AGREEMENTS.
e. THE PROVISIONS OF THIS SECTION 25 SHALL SURVIVE TERMINATION OF THE PROGRAM AGREEMENTS AND THE PAYMENT IN FULL OF THE OBLIGATIONS.
26. No Waivers, Etc.
No express or implied waiver of any Event of Default by Buyer shall constitute a waiver of any other Event of Default and no exercise of any remedy hereunder by any party shall constitute a waiver of its right to exercise any other remedy hereunder. No modification or waiver of any provision of this Agreement and no consent by any party to a departure herefrom shall be effective unless and until such shall be in writing and duly executed by both of the parties hereto. Without limitation on any of the foregoing, the failure to give a notice pursuant to Section 6(a), Section 15(a) or otherwise, will not constitute a waiver of any right to do so at a later date.
27. Intent
a. THE PARTIES RECOGNIZE THAT EACH TRANSACTION IS A REPURCHASE AGREEMENT AS THAT TERM IS DEFINED IN SECTION 101 OF TITLE 11 OF THE UNITED STATES CODE, AS AMENDED, AND A SECURITIES CONTRACT AS THAT TERM IS DEFINED IN SECTION 741 OF TITLE 11 OF THE UNITED STATES CODE, AS AMENDED, AND A MASTER NETTING AGREEMENT AS THAT TERM IS DEFINED IN SECTION 101 OF TITLE 11 OF THE UNITED STATES CODE, AS AMENDED.
b. IT IS UNDERSTOOD THAT ANY PARTYS RIGHT TO LIQUIDATE PURCHASED ASSETS DELIVERED TO IT IN CONNECTION WITH TRANSACTIONS HEREUNDER OR TO EXERCISE ANY OTHER REMEDIES PURSUANT TO SECTION 15 HEREOF IS A CONTRACTUAL RIGHT TO LIQUIDATE SUCH TRANSACTION AS DESCRIBED IN SECTIONS 555, 559 AND 561 OF TITLE 11 OF THE UNITED STATES CODE.
28. Power of Attorney
Seller hereby authorizes Buyer to file such financing statement or statements relating to the Purchased Assets without Sellers signature thereon as Buyer, at its option, may deem appropriate. Seller hereby appoints Buyer as Sellers attorney-in-fact to execute any such financing statement or statements in Sellers name and to perform all other acts which Buyer deems appropriate to perfect and continue its ownership interest in and/or the security interest granted hereby, if applicable, and to protect, preserve and realize upon the Purchased Assets, including, but not limited to, the right to endorse notes, complete blanks in documents, transfer servicing, providing good-bye letters to the Mortgagor in the form set forth in the Manual, sign assignments on behalf of Seller as its attorney-in-fact, and sell a Purchased Asset as is where is in the name and on behalf of Seller. This power of attorney is coupled with an interest and given as security and is irrevocable without Buyers consent. At Buyers request, Seller shall immediately execute all powers of attorney in favor of Buyer in the form attached hereto as Exhibit C. In addition, Seller shall direct by board resolution attached as part of Exhibit B hereto that, pursuant to its execution and delivery of such a power of attorney, certain personnel of Buyer may take certain
actions on behalf of Seller as its attorney-in-fact, with such resolution to survive until all obligations of Seller hereunder are satisfied. Seller shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 28.
29. Buyer May Act Through Affiliates
Buyer may, from time to time, designate one or more Affiliates for the purpose of performing any action hereunder.
30. Indemnification; Obligations
a. Each Seller agrees to hold Buyer and each of its respective Affiliates and their officers, directors, employees, agents and advisors (each, an Indemnified Party) harmless from and indemnify each Indemnified Party (and will reimburse each Indemnified Party as the same is incurred) against all liabilities, losses, damages, judgments, costs and expenses (including, without limitation, reasonable fees and expenses of outside counsel) of any kind which may be imposed on, incurred by, or asserted against any Indemnified Party relating to or arising out of this Agreement, any Transaction Request, Interest Rate Protection Agreement, any Program Agreement or any transaction contemplated hereby or thereby resulting from anything other than the Indemnified Partys gross negligence or willful misconduct. Seller also agrees to reimburse each Indemnified Party for all reasonable out-of-pocket expenses in connection with the enforcement of this Agreement and the exercise of any right or remedy provided for herein, any Transaction Request, Purchase Confirmation and any Program Agreement, including, without limitation, the reasonable fees and disbursements of outside counsel. Sellers agreements in this Section 30 shall survive the payment in full of the Repurchase Price and the expiration or termination of this Agreement. Each Seller hereby acknowledges that its obligations hereunder are recourse obligations of Seller and are not limited to recoveries each Indemnified Party may have with respect to the Purchased Mortgage Loans. Each Seller also agrees not to assert any claim against Buyer or any of its Affiliates, or any of their respective officers, directors, employees, attorneys and agents, on any theory of liability, for special, indirect, consequential or punitive damages arising out of or otherwise relating to the facility established hereunder, the actual or proposed use of the proceeds of the Transactions, this Agreement or any of the transactions contemplated thereby. THE INDEMNITY IN THE IMMEDIATELY PRECEDING SENTENCE EXPRESSLY APPLIES, WITHOUT LIMITATION, TO THE NEGLIGENCE (BUT NOT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT) OF THE INDEMNIFIED PARTIES.
b. Without limiting the provisions of paragraph (a) of this Section 30, if any Seller fails to pay when due any costs, expenses or other amounts payable by it under this Agreement, including, without limitation, fees and expenses of outside counsel and indemnities, such amount may be paid on behalf of Seller by Buyer, in its discretion. If Buyer elects to make any such payment hereunder, Buyer shall promptly notify Seller thereof, and Seller shall reimburse Buyer for any such costs, including, without limitation, per diem interest at the Post Default Rate Margin.
31. Counterparts
This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original, and all such counterparts shall together constitute one and the same
instrument. Each counterpart delivered by email or facsimile transmission shall be effective as an original.
32. Confidentiality
This Agreement and its terms, provisions, supplements and amendments, and notices hereunder, are proprietary to Buyer and its Affiliates and shall be held by each Seller and Guarantor in strict confidence and shall not be disclosed to any third party without the written consent of Buyer except for (i) disclosure to Sellers or Guarantors direct and indirect Affiliates and Subsidiaries, attorneys or accountants, but only to the extent such disclosure is necessary and such parties agree to hold all information in strict confidence, (ii) disclosure required by law, rule, regulation or order of a court or other regulatory body or (iii) disclosure to any potential Takeout Investor but only with respect to the following: (1) the current Repurchase Price, (2) whether or not there are any defaults or terminations of the facility known to Seller, or (3) the Repurchase Date. Notwithstanding the foregoing or anything to the contrary contained herein or in any other Program Agreement, the parties hereto may disclose to any Persons, without limitation of any kind, the federal, state and local tax treatment of the Transactions, any fact relevant to understanding the federal, state and local tax treatment of the Transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided, that Seller may not disclose the name of or identifying information with respect to Buyer or an Affiliate or any pricing terms (including, without limitation, the Pricing Rate, and Purchase Price) or other nonpublic business or financial information (including any sublimits and Financial Covenants) that is unrelated to the federal, state and local tax treatment of the Transactions and is not relevant to understanding the federal, state and local tax treatment of the Transactions, without the prior written consent of the Buyer. Buyer agrees to maintain nonpublic personal information of the customers and consumers (as those terms are defined in the Gramm-Leach-Bliley Act (the GLB Act)) of Seller that it receives hereunder in accordance with the GLB Act and other applicable federal and state privacy laws. Buyer shall implement such physical and other security measures as shall be necessary to comply with the GLB Act with respect to such nonpublic personal information. Notwithstanding the foregoing, in no event shall Buyers failure to comply herewith affect Buyers rights under the Program Agreements or Buyers ability to enforce remedies in accordance therewith, including any remedies under Section 15 hereof.
33. Recording of Communications
Buyer, Seller and Guarantor consent to the tape recordings of communications between its employees and those of the other party with respect to Transactions and such tape recordings of communications may be used in any court, arbitration, or other proceedings to the extent permitted by law.
34. Periodic Due Diligence Review
Each Seller acknowledges that Buyer has the right to perform continuing due diligence reviews with respect to the Seller and the Mortgage Loans and Agency Securities, for purposes of verifying compliance with the representations, warranties and specifications made hereunder, to review the servicing of the Mortgage Loans, or otherwise, and Seller agrees that
upon reasonable (but no less than five (5) Business Days) prior notice unless an Event of Default shall have occurred, in which case no notice is required, to Seller, Buyer or its authorized representatives will be permitted during normal business hours to examine, inspect, and make copies and extracts of, the Mortgage Files and any documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession or under the control of Seller and/or the Custodian. Seller also shall make available to Buyer a knowledgeable financial or accounting officer for the purpose of answering questions respecting the Mortgage Files and the Mortgage Loans. Without limiting the generality of the foregoing, Seller acknowledges that Buyer may purchase Mortgage Loans from Seller based solely upon the information provided by Seller to Buyer in the Mortgage Loan Schedule and the representations, warranties and covenants contained herein, and that Buyer, at its option, has the right at any time to conduct a partial or complete due diligence review on some or all of the Mortgage Loans purchased in a Transaction, including, without limitation, ordering Brokers price opinions, new credit reports and new appraisals on the related Mortgaged Properties and otherwise re-generating the information used to originate such Mortgage Loan, which such information may be used by Buyer to calculate Market Value. Buyer may underwrite such Mortgage Loans itself or engage a mutually agreed upon third party underwriter to perform such underwriting. Seller agrees to cooperate with Buyer and any third party underwriter in connection with such underwriting, including, but not limited to, providing Buyer and any third party underwriter with access to any documents, records, agreements, instruments or information relating to such Mortgage Loans in the possession, or under the control, of Seller. Seller further agrees that Seller shall pay all reasonable out-of-pocket costs and expenses incurred by Buyer in connection with Buyers activities pursuant to this Section 34 (Due Diligence Costs).
35. Authorizations
Any of the persons whose signatures and titles appear on Schedule 5 of the Addendum are authorized, acting singly, to act for Guarantor, Seller or Buyer, as the case may be, under this Agreement.
36. Documents Mutually Drafted
The Seller and the Buyer agree that this Agreement and each other Program Agreement prepared in connection with the Transactions set forth herein have been mutually negotiated by each party, and consequently such documents shall not be construed against either party as the drafter thereof.
37. Joint and Several
If there are multiple Guarantors or Sellers, such Guarantors, such Sellers and Buyer hereby acknowledge and agree that Sellers and Guarantors, as applicable, are each jointly and severally liable to Buyer for all of their respective obligations hereunder.
38. Security Interest
Although the parties intend that all Transactions hereunder be sales and purchases and not loans, Seller hereby pledges to Buyer as security for performance by Seller of its obligations and hereby grants, assigns and pledges to Buyer a fully perfected first priority security
interest in the Purchased Assets. Seller agrees to execute, deliver and/or file such documents and perform such acts as may be reasonably necessary to fully perfect Buyers security interest created hereby. Furthermore, the Seller hereby authorizes the Buyer to file financing statements relating to the Purchased Assets, as the Buyer may deem appropriate. The Seller shall pay the filing costs for any financing statement or statements prepared pursuant to this Section 38.
39. Agency Security Takeout
a. Prior to an Event of Default, from time to time, the Seller, as an approved Issuer of Ginnie Mae Securities, may agree to issue Ginnie Mae Securities backed, in whole or in part, by certain of the Purchased Mortgage Loans or, as an approved Fannie Mae Seller or Freddie Mac Seller, may agree to sell Purchased Mortgage Loans to Fannie Mae or Freddie Mac, as applicable, in exchange for Fannie Mae Securities or Freddie Mac Securities, as applicable. Buyer will agree to sell the related Purchased Mortgage Loans back to the Seller in satisfaction of the related Repurchase Price and will simultaneously purchase the related Agency Securities (the proceeds from such sale will be used to satisfy the Repurchase Price with respect to the Purchased Mortgage Loans) from the Seller in a new Transaction. The Agency Securities will be delivered to the Buyers Federal Book Account or the Securities Custodians account, at which time they will be considered Purchased Agency Securities hereunder. The Seller shall arrange for the sale of the Purchased Agency Securities to a Takeout Broker Dealer, the proceeds of such sale to be credited to Buyers or Securities Custodians account as further provided herein to satisfy the Repurchase Price with respect to the Purchased Agency Securities.
b. As a condition precedent to Buyer agreeing to accept such Agency Securities (or any proportional interest therein) as Purchased Agency Securities hereunder, the Seller must comply with all of the following conditions: (i) the Seller shall at all times be (A) a Ginnie Mae Issuer in good standing with the authority to issue securities, (B) a Fannie Mae Seller in good standing with the authority to sell mortgages or (C) a Freddie Mac Seller in good standing with the authority to sell mortgages, as applicable; (ii) the Agency Custodian and the Seller shall have entered into the Master Agency Custodial Agreement, which shall be in full force and effect at all times; (iii) Seller and the Agency Custodian shall comply with all applicable requirements set forth in the Guide and the Master Agency Custodial Agreement as hereafter amended, modified or superseded, and (iv) the Agency Securities shall be delivered to the Securities Custodians account until such time as the Securities Custodian delivers the Agency Securities to the Takeout Broker Dealer.
c. The Seller agrees to comply with the following additional protocol with respect to the Buyers purchase of Purchased Agency Securities:
(1) The Agency Security Purchase Commitment will not describe specific Purchased Mortgage Loans that will underlie the Purchased Agency Security, but instead shall solely provide for delivery of a Purchased Agency Security.
(2) Seller shall inform Buyer of the Purchased Mortgage Loans that Seller intends to pool in a related Purchased Agency Security. Buyer shall cause the Custodian to make available to the Agency Custodian the Collateral Documents related to such Purchased Mortgage Loans to enable the Agency Custodian to complete the initial
certification(s) pursuant to the Guide. Such Collateral Documents shall at all times remain in the custody of the Custodian or the Agency Custodian.
(3) Seller shall designate on (i) the Schedule of Subscribers and Ginnie Mae Guaranty Agreement (HUD-11705) (A) the Buyer or Securities Custodian exclusively as the Subscriber/Participant, (B) the Buyer or Securities Custodian exclusively as the Name of the Individual or Organization Authorized to Take Delivery, and (C) the Buyers or Securities Custodians Fed Member Bank Information and no other; (ii) the Fannie Mae Delivery Schedule (Fannie Mae Form 2014) the Buyers or Securities Custodians Depository Institution and Telegraphic Abbreviation, ABA Number and Account Name and Account Number and no other and (iii) the Freddie Mac Delivery Authorization (Freddie Mac Form 939) (A) the Buyer or Securities Custodian exclusively as the Warehouse Lender and (B) the Buyers or Securities Custodians Security Wire Instructions and no other. Seller shall ensure that the Purchased Agency Securities are delivered to the Buyers Federal Book Account or Securities Custodians account free from obligation or repayment. Seller shall cause a copy of the final completed Schedule of Subscribers and Ginnie Mae Guaranty Agreement, Freddie Mac Delivery Authorization and Fannie Mae Delivery Schedule to be delivered to the Buyer upon its request.
(4) The Buyer shall provide an executed copy of the Release of Security Interest to the Ginnie Mae Agency Custodian, in the case of Ginnie Mae, and to Fannie Mae or Freddie Mac, as applicable, in the case of Fannie Mae or Freddie Mac, to be held in escrow with respect to any pool of Purchased Mortgage Loans prior to the issuance of the related Purchased Agency Securities. Any Purchased Mortgage Loans that are not included in the related Purchased Agency Security shall continue to be Purchased Mortgage Loans under the Agreement and the Release of Security Interest shall not apply to such Purchased Mortgage Loans.
(5) All pool and loan packages relating to Purchased Assets are required to be submitted in electronic form using (i) the GinnieNET system, (ii) MIDANET or the Selling System (Freddie) or (iii) MORNET or Loan Delivery (Fannie), as applicable (such terms as defined in the Guide).
(6) Simultaneously upon the transfer of the Purchased Agency Security to the Buyer or Securities Custodian, (i) the Seller shall be construed to have transferred the Repurchase Price to the Buyer for the related pooled Purchased Mortgage Loans backing such Purchased Agency Security (or portion thereof related to such Purchased Mortgage Loans); (ii) the Seller and Buyer shall have entered into a new Transaction with respect such Purchased Agency Security (or portion thereof related to such Purchased Mortgage Loans); (iii) the Buyer shall be construed to have transferred the Purchase Price for the related Purchased Agency Securities to the Seller; and (v) the Buyer shall be deemed to automatically release the Release of Security Interest from escrow.
(7) The Agency Security agent shall deliver the related Purchased Agency Security to Buyer or Securities Custodian. Upon such delivery, the Buyer or Securities Custodian shall deliver the related Purchased Agency Security to the Takeout Broker Dealer, in accordance with the delivery vs. payment procedures of Depositary Trust
Company (DTC), simultaneously upon payment for such Purchased Agency Security to the Buyers Federal Book Account or Securities Custodians account.
40. Physical Possession of Records and Files relating to the Purchased Assets
Buyer shall have the right to obtain physical possession, and to commence an action to obtain physical possession, of all Records and files of Seller relating to the Purchased Assets and all documents relating to the Purchased Assets (including, without limitation, any legal, credit or servicing files with respect to the Purchased Mortgage Loans) which are then or may thereafter come in to the possession of Seller or any third party acting for Seller. Except where a default or an Event of Default has occurred and is continuing, Buyer shall provide Seller with reasonable prior notice of such requirements for physical possession of the Records, files and documents pertaining to the Purchased Assets. Buyer shall be entitled to specific performance of all agreements of Seller contained in this Agreement.
41. Conflicts
In the event of any conflict between the terms of this Agreement and any other Program Agreement, the Addendum or the Manual, the documents shall control in the following order of priority: first, the terms of the Addendum shall prevail, then the terms of this Agreement shall prevail, then the terms of the Manual shall prevail, and then the terms of the other Program Agreements shall prevail. For the avoidance of doubt, in the event of any conflict between the terms of this Agreement and the terms of that certain Joint Securities Account Control Agreement, dated as of June 18, 2014, among Deutsche Bank National Trust Company, as securities intermediary, the Seller, and the lenders party thereto from time to time, as amended through the Effective Date, and as may be amended, supplemented or otherwise modified from time to time, the terms of this Agreement shall prevail, including, but not limited to, with respect to the time periods set forth in Section B of Exhibit C thereof.
[Signature page to follow]
IN WITNESS WHEREOF, the Seller and the Buyer have caused their names to be signed hereto by their respective officers thereunto duly authorized as of the date first above written.
WELLS FARGO BANK, N.A., as Buyer |
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AMERIHOME MORTGAGE |
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COMPANY, LLC, as Seller |
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[AmeriHome - Master Repurchase Agreement]
ANNEX A
FINANCIAL COVENANTS
Definitions:
Capitalized terms not otherwise defined herein shall have the meanings assigned to such terms in the Agreement. Whenever used in this Annex A or the Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings:
Adjusted Tangible Net Worth means, for any Person, Net Worth of such Person plus Subordinated Debt (if approved for purposes of this calculation by Buyer in its sole discretion), minus all intangible assets, goodwill, patents, trade names, trademarks, copyrights, franchises, any organizational expenses, deferred expenses, prepaid expenses, prepaid assets, receivables from shareholders, Affiliates or employees, any other asset as shown as an intangible asset on the balance sheet of such Person on a consolidated basis as determined at a particular date in accordance with GAAP, and any other assets that Buyer deems, at any time, in its reasonable discretion, as intangible assets or overstated assets. For the avoidance of doubt, Buyer may deem, in its reasonable discretion, any asset as intangible or overstated at any time after the delivery of the most recent Officers Compliance Certificate. Buyer agrees to use reasonable efforts to notify Seller of assets deemed by Buyer to be intangible or materially overstated.
Cash Equivalents means (a) securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed or insured by the United States Government or any agency thereof, (b) certificates of deposit and eurodollar time deposits with maturities of ninety (90) days or less from the date of acquisition and overnight bank deposits with Buyer or any commercial bank having capital and surplus in excess of [***], plus such deposits in an amount up to the current FDIC-insured limit with any commercial bank having capital and surplus less than or equal to [***] (c) repurchase obligations of Buyer or of any commercial bank satisfying the requirements of clause (b) of this definition, having a term of not more than seven (7) days with respect to securities issued or fully guaranteed or insured by the United States Government, (d) commercial paper of a domestic issuer rated at least A-1 or the equivalent thereof by S&P or P-1 or the equivalent thereof by Moodys and in either case maturing within ninety (90) days after the day of acquisition, (e) securities with maturities of ninety (90) days or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth or territory or by any foreign government, the securities of which state, commonwealth, territory, political subdivision, taxing authority or foreign government (as the case may be) are rated at least A by S&P or A by Moodys, (f) securities with maturities of ninety (90) days or less from the date of acquisition backed by standby letters of credit issued by Buyer or any commercial bank satisfying the requirements of clause (b) of this definition or (g) shares of money market mutual or similar funds which invest exclusively in assets satisfying the requirements of clauses (a) through (f) of this definition.
Indebtedness Limit means $[***] or such other amount as specified in the Addendum.
Liquidity means the sum of (i) Unrestricted Cash, (ii) Cash Equivalents, (iii) any other assets that Buyer deems, in its reasonable discretion, as liquid, less (iv) net borrower escrow liability on any mortgage loans owned or serviced by the Seller and (v) any other such extraordinary liabilities or extraordinary obligations of Seller that Buyer determines, in its reasonable discretion, will result in claims against Sellers cash within the next sixty (60) days.
[***]
Maximum Financial Exposure means the difference between the market value of all hedges and the sum of the market value of all closed loans plus the pipeline of unclosed loans, adjusted for pull through.
Moodys means Moodys Investors Service, Inc., or any successor thereto.
Net Operating Income means, with respect to Seller or Guarantor, as applicable, pre-tax net income from continuing operations for the applicable period then being measured, determined in accordance with GAAP, but excluding depreciation, amortization, changes in fair value of mortgage servicing rights, gains and losses associated with hedging transactions in respect of mortgage servicing rights, extraordinary items, cumulative effects of changes in accounting principles and impairment of intangible assets.
Net Worth means, with respect to any Person, an amount equal to, on a consolidated basis, such Persons stockholder equity, or, if applicable, value of membership or partnership interests, or similar calculations (all determined in accordance with GAAP).
[***]
S&P means Standard and Poors Ratings Services, a Standard & Poors Financial Services LLC business, which is a part of McGraw Hill Financial, Inc., or any successor thereto.
Subordinated Debt means, Indebtedness of Seller which (i) is unsecured, (ii) no part of the principal of such Indebtedness is required to be paid (whether by way of mandatory sinking fund, mandatory redemption, mandatory prepayment or otherwise) prior to the date which is one year following the Termination Date, (iii) the payment of the principal of and interest on such Indebtedness and other obligations of Seller in respect of such Indebtedness are subordinated to the prior payment in full of the principal of and interest (including post-petition obligations) on the Transactions and all other obligations and liabilities of Seller to Buyer hereunder, (iv) is not encumbered in any manner, (v) does not impose any duties on the Buyer and (vi) all other terms or conditions are acceptable to Buyer. Buyer must specifically approve any Subordinated Debt for purposes of inclusion in any impacted Financial Covenants.
Test Period means any calendar quarter, or as otherwise set forth in the Addendum, following the Effective Date.
Total Expenses means a Sellers total expenses (excluding depreciation, amortization, warehouse line interest, loan officer commissions, broker commissions, tax payments made, extraordinary, non-recurring items, and non-cash adjustments, which include, but are not limited to, changes to capitalized mortgage servicing rights and changes to loan loss reserve) as set forth on the financial statements submitted for the related Reporting Period.
Unrestricted Cash means cash that is not controlled by or subject to any lien or other preferential arrangement in favor of any creditor.
Covenants:
Each Seller covenants with Buyer that, at all times during the term of this facility:
a. Indebtedness. No Indebtedness of Seller exists in an aggregate amount in excess of the Indebtedness Limit other than (i) any Indebtedness listed on Schedule 2 of the Addendum, (ii) any Indebtedness set forth on the schedule to the most recent Officers Compliance Certificate, (iii) any Indebtedness otherwise disclosed to Buyer in writing within five (5) Business Days following the existence of such Indebtedness and (iv) usual and customary accounts payable for a mortgage and servicing company or any forward or other delayed delivery transaction arrangements involving mortgage backed securities with a Takeout Investor.
b. Maintenance of Profitability. Seller shall not permit, for any Test Period, Net Operating Income for such Test Period, before income taxes for such Test Period and distributions made during such Test Period, to be less than the Profitability Threshold.
c. Adjusted Tangible Net Worth Threshold. Seller shall maintain at all times an Adjusted Tangible Net Worth amount equal to or greater than the amount set forth on the Addendum for such term.
d. Indebtedness to Adjusted Tangible Net Worth Ratio. Seller shall maintain at all times a ratio of Indebtedness to Adjusted Tangible Net Worth equal to or less than the amount set forth on the Addendum.
e. Liquidity Threshold. Seller shall maintain at all times a Liquidity amount equal to or greater than the amount set forth on the Addendum for such term.
f. Liquidity Overhead Coverage Ratio. Seller shall maintain at all times a Liquidity Overhead Coverage ratio equal to or greater than the amount set forth on the Addendum.
g. Maximum Financial Exposure. Seller shall maintain at all times a Maximum Financial Exposure amount equal to or less than the amount set forth on the Addendum for such term.
h. Quick Ratio. Seller shall maintain at all times a Quick Ratio in an amount equal to or greater than the amount set forth on the Addendum for such term.
i. Unrestricted Cash Threshold. Seller shall maintain at all times Unrestricted Cash in an amount equal to or greater than the amount set forth on the Addendum for such term.
SCHEDULE 1
REPRESENTATIONS AND WARRANTIES WITH RESPECT TO
PURCHASED MORTGAGE LOANS
(a) Payments Current. All payments required to be made up to the Purchase Date for the Mortgage Loan under the terms of the Mortgage Note have been made and credited. No payment required under the Mortgage Loan is delinquent nor has any payment under the Mortgage Loan been delinquent at any time since the origination of the Mortgage Loan. The first Monthly Payment shall be made, or shall have been made, with respect to the Mortgage Loan on its Due Date or within thirty (30) days thereof, all in accordance with the terms of the related Mortgage Note.
(b) No Outstanding Charges. All taxes and governmental assessments or other similar charges, levies or assessments, insurance premiums, water, sewer and municipal charges, leasehold payments or ground rents which previously became due and owing have been paid, or an escrow of funds has been established in an amount sufficient to pay for every such item which remains unpaid and which has been assessed but is not yet due and payable. Neither Seller nor the Qualified Originator from which Seller acquired the Mortgage Loan has advanced funds, or induced, solicited or knowingly received any advance of funds by a party other than the Mortgagor, directly or indirectly, for the payment of any amount required under the Mortgage Loan, except for interest accruing from the date of the Mortgage Note or date of disbursement of the proceeds of the Mortgage Loan, whichever is earlier, to the day which precedes by one (1) month the Due Date of the first installment of principal and/or interest thereunder.
(c) Original Terms Unmodified. The terms of the Mortgage Note and Mortgage have not been impaired, waived, altered or modified in any respect, from the date of origination; except by a written instrument which has been recorded, if necessary to protect the interests of Buyer, and which has been delivered to the Custodian and the terms of which are reflected in the Mortgage Loan Schedule. The substance of any such waiver, alteration or modification has been approved by the title insurer, to the extent required, and its terms are reflected on the Mortgage Loan Schedule. No Mortgagor in respect of the Mortgage Loan has been released, in whole or in part, except in connection with an assumption agreement approved by the title insurer, to the extent required by such policy, and which assumption agreement is part of the Mortgage File delivered to the Custodian and the terms of which are reflected in the Mortgage Loan Schedule. The related Mortgage and Mortgage Note contain the entire agreement of the parties and all of the obligations of the Seller under the Purchased Mortgage Loan.
(d) No Defenses. The Mortgage Loan is not subject to any right of rescission, set-off, counterclaim or defense, including, without limitation, the defense of usury, nor will the operation of any of the terms of the Mortgage Note or the Mortgage, or the exercise of any right thereunder, render either the Mortgage Note or the Mortgage unenforceable, in whole or in part and no such right of rescission, set-off, counterclaim or defense has been asserted with respect thereto, and no Mortgagor in respect of the Mortgage Loan was a debtor in any state or Federal bankruptcy or insolvency proceeding at the time the Mortgage Loan was originated. Seller has no knowledge nor has it received any notice that any Mortgagor in respect of the Mortgage Loan is a debtor in any state or federal bankruptcy or insolvency proceeding.
(e) Hazard Insurance. The Mortgaged Property is insured by a fire and extended perils insurance policy, issued by a qualified insurer, and such other hazards as are customary in the area where the Mortgaged Property is located, and to the extent required by Seller as of the date of origination consistent with the applicable Loan Program Authority against earthquake and other risks insured against by Persons operating like properties in the locality of the Mortgaged Property, in an amount not less than the lesser of (i) one hundred percent (100)% of the replacement cost of all improvements to the Mortgaged Property or (ii) such amount that would have been required as of the date of origination in accordance with the applicable Loan Program Authority. If any portion of the Mortgaged Property is in an area identified by any federal Governmental Authority as having special flood hazards, and flood insurance is available, a flood insurance policy meeting the current guidelines of the Federal Emergency Management Agency is in effect with a generally acceptable insurance carrier, in an amount representing coverage not less than the least of (1) the outstanding principal balance of the Mortgage Loan, (2) the full insurable value of the Mortgaged Property, and (3) the maximum amount of insurance available under the National Flood Insurance Act of 1968, as amended by the Flood Disaster Protection Act of 1974. All such insurance policies (collectively, the hazard insurance policy) contain a standard mortgagee clause naming Seller, its successors and assigns (including, without limitation, subsequent owners of the Mortgage Loan), as mortgagee, and may not be reduced, terminated or canceled without thirty (30) days prior written notice to the mortgagee. No such notice has been received by Seller. All premiums on such insurance policy have been paid. The related Mortgage obligates the Mortgagor to maintain all such insurance and, at such Mortgagors failure to do so, authorizes the mortgagee to maintain such insurance at the Mortgagors cost and expense and to seek reimbursement therefor from such Mortgagor. Where required by state law or regulation, the Mortgagor has been given an opportunity to choose the carrier of the required hazard insurance, provided the policy is not a master or blanket hazard insurance policy covering a condominium, or any hazard insurance policy covering the common facilities of a planned unit development. The hazard insurance policy is the valid and binding obligation of the insurer and is in full force and effect. Seller has not engaged in, and has no knowledge of the Mortgagors having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the endorsement provided for herein, or the validity and binding effect of either including, without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other Person, and no such unlawful items have been received, retained or realized by Seller.
(f) Compliance with Applicable Laws. Any requirements of any federal, state or local law including, without limitation, usury, truth-in-lending, real estate settlement procedures, consumer credit protection, equal credit opportunity or disclosure laws applicable to the Mortgage Loan have been complied with, the consummation of the transactions contemplated hereby will not involve the violation of any such laws or regulations, and Seller shall maintain or shall cause its agent to maintain in its possession, available for the inspection of Buyer, and shall deliver to Buyer, upon demand, evidence of compliance with all such requirements.
(g) No Satisfaction of Mortgage. The Mortgage has not been satisfied, canceled, subordinated or rescinded, in whole or in part, and the Mortgaged Property has not been released from the lien of the Mortgage, in whole or in part, nor has any instrument been executed that would affect any such release, cancellation, subordination or rescission. Seller has not waived
the performance by the Mortgagor of any action, if the Mortgagors failure to perform such action would cause the Mortgage Loan to be in default, nor has Seller waived any default resulting from any action or inaction by the Mortgagor.
(h) Location and Type of Mortgaged Property. The Mortgaged Property is located in an Acceptable State and consists of a single parcel of real property with a detached single family residence erected thereon, or a two- to four-family dwelling, or an individual condominium unit in a low-rise condominium project, or an individual unit in a planned unit development or a de minimis planned unit development; provided, however, that any condominium unit or planned unit development shall conform with the applicable Fannie Mae and Freddie Mac requirements regarding such dwellings or shall conform to Underwriting Guidelines acceptable to Buyer in its discretion, that a de minimus percentage of the Mortgage Loans may be Cooperative Mortgage Loans and that no residence or dwelling is a (i) a mobile home or manufactured housing unit (other than a Manufactured Home) not secured by real property, (ii) a log home, (iii) an earthen home, (iv) an underground home, (v) any dwelling situated on more acreage than is permitted by the applicable Loan Program Authority and (vi) any dwelling situated on a leasehold estate, in each case, except as otherwise permitted under the Manual. No portion of the Mortgaged Property is used for commercial purposes; provided, that, the Mortgaged Property may be a mixed use property if such Mortgaged Property conforms to Underwriting Guidelines acceptable to Buyer in its discretion. With respect to each Loan that is a Manufactured Home, such unit is a single family residence within the meaning of Section 25(e)(1) of the Code, and has a minimum of four hundred (400) square feet of living space, a minimum width of one hundred two (102) inches and is of a kind customarily used at a fixed location. The fair market value of the Manufactured Home securing each contract was at least equal to [***] percent ([***]%) of the total price of the contract (including land) at either (i) the time the contract was originated (determined pursuant to the REMIC Provisions) or (ii) the time the contract is transferred to the purchaser.
(i) Valid First Lien. The Mortgage is a valid, subsisting, enforceable and perfected first priority lien and first priority security interest on the real property included in the Mortgaged Property, including all buildings on the Mortgaged Property and all installations and mechanical, electrical, plumbing, heating and air conditioning systems located in or annexed to such buildings, and all additions, alterations and replacements made at any time with respect to the foregoing and with respect to Cooperative Mortgage Loans, including the Proprietary Lease and the Cooperative Shares. The lien of the Mortgage is subject only to:
a. the lien of current real property taxes and assessments not yet due and payable;
b. covenants, conditions and restrictions, rights of way, easements and other matters of the public record as of the date of recording acceptable to prudent mortgage lending institutions generally and specifically referred to in lenders title insurance policy delivered to the originator of the Mortgage Loan and (a) referred to or otherwise considered in the appraisal made for the originator of the Mortgage Loan or (b) which do not adversely affect the Appraised Value of the Mortgaged Property set forth in such appraisal; and
c. other matters to which like properties are commonly subject which do not materially interfere with the benefits of the security intended to be provided by the Mortgage or the use, enjoyment, value or marketability of the related Mortgaged Property.
Any security agreement, chattel mortgage or equivalent document related to and delivered in connection with the Mortgage Loan establishes and creates a valid, subsisting and enforceable first lien and first priority security interest on the property described therein and Seller has full right to pledge and assign the same to Buyer.
(j) Validity of Mortgage Documents. The Mortgage Note and the Mortgage and any other agreement executed and delivered by a Mortgagor or guarantor, if applicable, in connection with a Mortgage Loan are genuine, and each is the legal, valid and binding obligation of the maker thereof enforceable in accordance with its terms, subject to bankruptcy, reorganization, insolvency, moratorium, other similar laws affecting the enforcement of creditors rights generally, and other principles of equity affecting the rights of creditors generally, whether considered in a proceeding at law or in equity. All parties to the Mortgage Note, the Mortgage and any other such related agreement had legal capacity to enter into the Mortgage Loan and to execute and deliver the Mortgage Note, the Mortgage and any such agreement, and the Mortgage Note, the Mortgage and any other such related agreement have been duly and properly executed by such related parties. No fraud, error, omission, misrepresentation, negligence or similar occurrence with respect to a Mortgage Loan has taken place on the part of any Person, including, without limitation, the Mortgagor, any appraiser, any builder or developer, or any other party involved in the origination of the Mortgage Loan. Seller has reviewed all of the documents constituting the Mortgage File and has made such inquiries as it deems necessary to make and confirm the accuracy of the representations set forth herein. To the best of Sellers knowledge, except as disclosed to Buyer in writing, all tax identifications and property descriptions are legally sufficient; and tax segregation, where required, has been completed.
(k) Full Disbursement of Proceeds. There is no further requirement for future advances under the Mortgage Loan, and any requirements as to completion of any on-site or off-site improvement and as to disbursements of any escrow funds therefor have been complied with. All costs, fees and expenses incurred in making or closing the Mortgage Loan and the recording of the Mortgage were paid, and the Mortgagor is not entitled to any refund of any amounts paid or due under the Mortgage Note or Mortgage.
(l) Ownership. Seller has full right to sell the Mortgage Loan to Buyer free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest, and has full right and authority subject to no interest or participation of, or agreement with, any other party, to sell each Mortgage Loan pursuant to this Agreement and following the sale of each Mortgage Loan, Buyer will own such Mortgage Loan free and clear of any encumbrance, equity, participation interest, lien, pledge, charge, claim or security interest except any such security interest created pursuant to the terms of this Agreement.
(m) Doing Business. All parties which have had any interest in the Mortgage Loan, whether as mortgagee, assignee, pledgee or otherwise, are (or, during the period in which they held and disposed of such interest, were) (i) in compliance with any applicable licensing requirements of the laws of the state wherein the Mortgaged Property is located, and (ii) either
(A) organized under the laws of such state, (B) qualified to do business in such state, (C) a federal savings and loan association, a savings bank or a national bank having a principal office in such state, or (D) not doing business in such state.
(n) Title Insurance. The Mortgage Loan is covered by either (i) an irrevocable title commitment, or an attorneys opinion of title and abstract of title, each of which must be in form and substance acceptable to prudent mortgage lending institutions making mortgage loans in the area wherein the Mortgaged Property is located or (ii) an ALTA lenders title insurance policy or other generally acceptable form of policy or insurance acceptable to Fannie Mae or Freddie Mac and each such title insurance policy is issued by a title insurer acceptable to Fannie Mae or Freddie Mac and qualified to do business in the jurisdiction where the Mortgaged Property is located, insuring Seller, its successors and assigns, as to the first priority lien of the Mortgage, as applicable, in the original principal amount of the Mortgage Loan, subject only to the exceptions contained in clauses (a), (b) and (c) of paragraph (i) of this Schedule 1, and in the case of adjustable rate Mortgage Loans, against any loss by reason of the invalidity or unenforceability of the lien resulting from the provisions of the Mortgage providing for adjustment to the Mortgage Interest Rate and Monthly Payment. Where required by state law or regulation, the Mortgagor has been given the opportunity to choose the carrier of the required mortgage title insurance. Additionally, such lenders title insurance policy affirmatively insures ingress and egress and against encroachments by or upon the Mortgaged Property or any interest therein. The title policy does not contain any special exceptions (other than the standard exclusions) for zoning and uses and has been marked to delete the standard survey exception or to replace the standard survey exception with a specific survey reading. Seller, its successors and assigns, are the sole insureds of such lenders title insurance policy, and such lenders title insurance policy is valid and remains in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement. No claims have been made under such lenders title insurance policy, and no prior holder or servicer of the related Mortgage, including Seller, has done, by act or omission, anything which would impair the coverage of such lenders title insurance policy, including, without limitation, no unlawful fee, commission, kickback or other unlawful compensation or value of any kind has been or will be received, retained or realized by any attorney, firm or other Person, and no such unlawful items have been received, retained or realized by Seller.
(o) No Defaults. There is no default, breach, violation or event of acceleration existing under the Mortgage or the Mortgage Note and no event has occurred which, with the passage of time or with notice and the expiration of any grace or cure period, would constitute a default, breach, violation or event of acceleration, and neither Seller nor its predecessors have waived any default, breach, violation or event of acceleration.
(p) No Mechanics Liens. There are no mechanics or similar liens or claims which have been filed for work, labor or material (and no rights are outstanding that under the law could give rise to such liens) affecting the Mortgaged Property which are or may be liens prior to, or equal or coordinate with, the lien of the Mortgage.
(q) Location of Improvements; No Encroachments. All improvements which were considered in determining the Appraised Value of the Mortgaged Property lie wholly within the boundaries and building restriction lines of the Mortgaged Property, and no improvements on
adjoining properties encroach upon the Mortgaged Property. No improvement located on or being part of the Mortgaged Property is in violation of any applicable zoning and building law, ordinance or regulation.
(r) Payment Terms. Principal and/or interest payments on the Mortgage Loan commenced no more than sixty (60) days after funds were disbursed in connection with the Mortgage Loan. With respect to adjustable rate Mortgage Loans, the Mortgage Interest Rate is adjusted on each Interest Rate Adjustment Date to equal the Index plus the Gross Margin (rounded up or down to the nearest .125%), subject to the Mortgage Interest Rate Cap. The Mortgage Note is payable on the first (1st) day of each month in equal monthly installments of principal and/or interest (subject to an interest only period in the case of Interest Only Loans), which installments of interest (a) with respect to adjustable rate Mortgage Loans are subject to change on the Interest Rate Adjustment Date due to adjustments to the Mortgage Interest Rate on each Interest Rate Adjustment Date and (b) with respect to Interest Only Loans are subject to change on the Interest Only Adjustment Date due to adjustments to the Mortgage Interest Rate on each Interest Only Adjustment Date, in both cases with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty (30) years from commencement of amortization. The Mortgage Note does not permit Negative Amortization.
(s) Customary Provisions. The Mortgage Note has a stated maturity. The Mortgage contains customary and enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization against the Mortgaged Property of the benefits of the security provided thereby, including, (i) in the case of a Mortgage designated as a deed of trust, by trustees sale, and (ii) otherwise by judicial foreclosure. Upon default by a Mortgagor on a Mortgage Loan and foreclosure on, or trustees sale of, the Mortgaged Property pursuant to the proper procedures, the holder of the Mortgage Loan will be able to deliver good and merchantable title to the Mortgaged Property. There is no homestead or other exemption available to a Mortgagor which would interfere with the right to sell the Mortgaged Property at a trustees sale or the right to foreclose the Mortgage. The Mortgage Note and Mortgage are on forms acceptable to Buyer with respect to Jumbo Mortgage Loans and Non-QM Mortgage Loans and Fannie Mae or Freddie Mac with respect to Mortgage Loans other than Jumbo Mortgage Loans and Non-QM Mortgage Loans.
(t) Occupancy of the Mortgaged Property. As of the Purchase Date the Mortgaged Property is lawfully permitted to be occupied under applicable law. All inspections, licenses and certificates required to be made or issued with respect to all occupied portions of the Mortgaged Property and, with respect to the use and occupancy of the same, including but not limited to certificates of occupancy and fire underwriting certificates, have been made or obtained from the appropriate authorities. Seller has not received notification from any Governmental Authority that the Mortgaged Property is in material non-compliance with such laws or regulations, is being used, operated or occupied unlawfully or has failed to have or obtain such inspection, licenses or certificates, as the case may be. Seller has not received notice of any violation or failure to conform with any such law, ordinance, regulation, standard, license or certificate. With respect to any Mortgage Loan originated with an owner-occupied Mortgaged Property, the Mortgagor represented at the time of origination of the Mortgage Loan that the Mortgagor would occupy the Mortgaged Property as the Mortgagors primary residence.
(u) No Additional Collateral. The Mortgage Note is not and has not been secured by any collateral except the lien of the corresponding Mortgage and the security interest of any applicable security agreement or chattel mortgage referred to in clause (i) above.
(v) Deeds of Trust. In the event the Mortgage constitutes a deed of trust, a trustee, authorized and duly qualified under applicable law to serve as such, has been properly designated and currently so serves and is named in the Mortgage, and no fees or expenses are or will become payable by the Custodian or Buyer to the trustee under the deed of trust, except in connection with a trustees sale after default by the Mortgagor.
(w) Transfer of Mortgage Loans. Except with respect to Mortgage Loans registered with MERS, the Assignment of Mortgage is in recordable form and is acceptable for recording under the laws of the jurisdiction in which the Mortgaged Property is located. With respect to each MOM Mortgage Loan, the related Assignment of Mortgage to MERS, if applicable, has been duly and properly recorded, or has been delivered for recording to the applicable recording office.
(x) Due-On-Sale. Except as otherwise permitted by the Agencies, the Mortgage contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Mortgage Loan in the event that the Mortgaged Property is sold or transferred without the prior written consent of the mortgagee thereunder.
(y) No Buydown Provisions; No Graduated Payments or Contingent Interests. The Mortgage Loan does not contain provisions pursuant to which Monthly Payments are paid or partially paid with funds deposited in any separate account established by Seller, the Mortgagor, or anyone on behalf of the Mortgagor, or paid by any source other than the Mortgagor nor does it contain any other similar provisions which may constitute a buydown provision. The Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan does not have a shared appreciation or other contingent interest feature.
(z) Consolidation of Future Advances. Any future advances made to the Mortgagor prior to the Purchase Date have been consolidated with the outstanding principal amount secured by the Mortgage, and the secured principal amount, as consolidated, bears a single interest rate and single repayment term. Except with respect to Jumbo Mortgage Loans and Non-QM Mortgage Loans, the lien of the Mortgage securing the consolidated principal amount is expressly insured as having first lien priority by a title insurance policy, an endorsement to the policy insuring the mortgagees consolidated interest or by other title evidence acceptable to Fannie Mae and Freddie Mac. The consolidated principal amount does not exceed the original principal amount of the Mortgage Loan. With respect to Jumbo Mortgage Loans and Non-QM Mortgage Loans, the lien of the Mortgage securing the consolidated principal amount is expressly insured as having first lien priority by a title insurance policy, an endorsement to the policy insuring the mortgagees consolidated interest or by other title evidence acceptable to Buyer in its discretion.
(aa) Mortgaged Property Undamaged. The related Mortgaged Property is free of damage and waste; and there is no proceeding pending for the total or partial condemnation of such Mortgaged Property.
(bb) Collection Practices; Escrow Deposits; Interest Rate Adjustments. The origination and collection practices used by the originator, each servicer of the Mortgage Loan and Seller with respect to the Mortgage Loan have been in all respects in compliance with Accepted Servicing Practices, applicable laws and regulations, and have been in all respects legal and proper. With respect to escrow deposits and Escrow Payments, all such payments are in the possession of, or under the control of, Seller and there exist no deficiencies in connection therewith for which customary arrangements for repayment thereof have not been made. All Escrow Payments have been collected in full compliance with state and federal law. An escrow of funds is not prohibited by applicable law and has been established in an amount sufficient to pay for every item that remains unpaid and has been assessed but is not yet due and payable. No escrow deposits or Escrow Payments or other charges or payments due Seller have been capitalized under the Mortgage or the Mortgage Note. All Mortgage Interest Rate adjustments have been made in strict compliance with state and federal law and the terms of the related Mortgage Note. Any interest required to be paid pursuant to state, federal and local law has been properly paid and credited.
(cc) Conversion to Fixed Interest Rate. Except as allowed by Fannie Mae or Freddie Mac or otherwise as expressly approved in writing by Buyer, with respect to adjustable rate Mortgage Loans, the Mortgage Loan is not convertible to a fixed interest rate Mortgage Loan.
(dd) Other Insurance Policies. No action, inaction or event has occurred and no state of facts exists or has existed that has resulted or will result in the exclusion from, denial of, or defense to coverage under any applicable special hazard insurance policy, PMI Policy or bankruptcy bond, irrespective of the cause of such failure of coverage. In connection with the placement of any such insurance, no commission, fee, or other compensation has been or will be received by Seller or by any officer, director, or employee of Seller or any designee of Seller or any corporation in which Seller or any officer, director, or employee had a financial interest at the time of placement of such insurance.
(ee) Servicemembers Civil Relief Act. The Mortgagor has not notified Seller, and Seller has no knowledge, of any relief requested or allowed to the Mortgagor under the Servicemembers Civil Relief Act of 2003.
(ff) Appraisal. The Mortgage File with respect to such Mortgage Loan contains an appraisal of the related Mortgaged Property made and signed, prior to the approval of the application for such Mortgage Loan, by a qualified appraiser (a) who, at the time of such appraisal, met the minimum qualifications of Fannie Mae or Freddie Mac and the requirements of the Sellers appraisal policy and (b) who satisfied (and which appraisal was conducted in accordance with) all of the applicable requirements of the Uniform Standards of Professional Appraisal Practice and all applicable federal and state laws and regulations in effect at the time of such appraisal and procedures. Such appraiser was licensed in the state where the Mortgaged Property is located, had no interest, direct or indirect, in such Mortgaged Property or in any loan made on the security thereof, and such appraisers compensation was not affected by the approval or disapproval of such Mortgage Loan. The appraisal shall have been made within one hundred eighty (180) days of the origination of the Mortgage Loan. If the appraisal was made more than one hundred twenty (120) days before the origination of the Mortgage Loan, Seller shall have received and included in the Mortgage File a recertification of the appraisal.
(gg) Disclosure Materials. The Mortgagor received all disclosure materials required by Requirements of Law with respect to the making of adjustable rate mortgage loans, and Seller maintains copies of such materials and any acknowledgements from the Mortgagor in the Mortgage File as required by Requirements of Law.
(hh) Construction or Rehabilitation of Mortgaged Property. No Mortgage Loan was made in connection with the construction or rehabilitation of a Mortgaged Property or facilitating the trade-in or exchange of a Mortgaged Property.
(ii) No Defense to Insurance Coverage. No action has been taken or failed to be taken, no event has occurred and no state of facts exists or has existed on or prior to the Purchase Date (whether or not known to Seller on or prior to such date) which has resulted or will result in an exclusion from, denial of, or defense to coverage under any private mortgage insurance (including, without limitation, any exclusions, denials or defenses which would limit or reduce the availability of the timely payment of the full amount of the loss otherwise due thereunder to the insured) whether arising out of actions, representations, errors, omissions, negligence, or fraud of Seller, the related Mortgagor or any party involved in the application for such coverage, including the appraisal, plans and specifications and other exhibits or documents submitted therewith to the insurer under such insurance policy, or for any other reason under such coverage, but not including the failure of such insurer to pay by reason of such insurers breach of such insurance policy or such insurers financial inability to pay.
(jj) Capitalization of Interest. The Mortgage Note does not by its terms provide for the capitalization or forbearance of interest.
(kk) No Equity Participation. No document relating to the Mortgage Loan provides for any contingent or additional interest in the form of participation in the cash flow of the Mortgaged Property or a sharing in the appreciation of the value of the Mortgaged Property. The indebtedness evidenced by the Mortgage Note is not convertible to an ownership interest in the Mortgaged Property or the Mortgagor and Seller has not financed nor does Seller own directly or indirectly, any equity of any form in the Mortgaged Property or the Mortgagor.
(ll) Proceeds of Mortgage Loan. The proceeds of the Mortgage Loan have not been and shall not be used to satisfy, in whole or in part, any debt owed or owing by the Mortgagor to Seller or any Affiliate or correspondent of Seller, except in connection with a refinanced Mortgage Loan.
(mm) Origination Date. Unless approved by Buyer, the origination date of a Mortgage Loan that is a Retail Mortgage Loan or a Wholesale Mortgage Loan is no earlier than thirty (30) days prior to the related Purchase Date and the origination date of any Mortgage Loan that is a Correspondent Mortgage Loan is no earlier than one-hundred twenty (120) days prior to the related Purchase Date.
(nn) No Exception. The Custodian has not noted any material exceptions on a Mortgage Loan Schedule with respect to the Mortgage Loan which would materially adversely affect the Mortgage Loan or Buyers interest in the Mortgage Loan.
(oo) Mortgage Submitted for Recordation. The Mortgage either has been or will promptly be submitted for recordation in the appropriate governmental recording office of the jurisdiction where the Mortgaged Property is located.
(pp) Documents Genuine. Such Purchased Mortgage Loan and all accompanying Collateral Documents are complete and authentic and all signatures thereon are genuine.
(qq) Bona Fide Loan. Such Purchased Mortgage Loan arose from a bona fide loan, complying with all applicable State and Federal laws and regulations, to persons having legal capacity to contract and is not subject to any defense, set off or counterclaim.
(rr) Other Encumbrances. Any property subject to any security interest given in connection with such Purchased Mortgage Loan is not subject to any other encumbrances other than a stated first mortgage, if applicable, and encumbrances which may be allowed under the Guide.
(ss) Description. Each Purchased Mortgage Loan conforms to the description thereof as set forth on the related Mortgage Loan Schedule delivered to the Custodian and Buyer.
(tt) Underwriting Guidelines. Each Purchased Mortgage Loan has been originated in accordance with the Underwriting Guidelines (including all supplements or amendments thereto) in effect as of the date the Transaction is entered into and as previously provided to Buyer.
(uu) Primary Mortgage Guaranty Insurance. After the funding of the Purchased Mortgage Loan and payment of any premium thereafter, each Mortgage Loan is insured as to payment defaults by a policy of primary mortgage guaranty insurance in the amount required where applicable, and by an insurer approved by the applicable Takeout Investor, if applicable, and all provisions of such primary mortgage guaranty insurance have been and are being complied with, such policy is in full force and effect, and all premiums due thereunder have been paid. Each Mortgage Loan which is represented to Buyer to have, or to be eligible for, FHA insurance is insured, or eligible to be insured, pursuant to the National Housing Act. Each Mortgage Loan which is represented by Seller to be guaranteed, or to be eligible for guaranty, by the VA is guaranteed, or eligible to be guaranteed, under the provisions of Chapter 37 of Title 38 of the United States Code. As to each FHA insurance certificate or each VA guaranty certificate, Seller has complied with applicable provisions of the insurance for guaranty contract and federal statutes and regulations, all premiums or other charges due in connection with such insurance or guarantee have been paid, there has been no act or omission which would or may invalidate any such insurance or guaranty, and the insurance or guaranty is, or when issued, will be, in full force and effect with respect to each Mortgage Loan. There are no defenses, counterclaims, or rights of setoff affecting the Mortgage Loans or affecting the validity or enforceability of any private mortgage insurance or FHA insurance applicable to the Mortgage Loans or any VA guaranty with respect to the Mortgage Loans.
(vv) Predatory Lending Regulations; High Cost Loans. None of the Mortgage Loans are classified as High Cost Mortgage Loans.
(ww) Wet-Ink Mortgage Loans. With respect to each Mortgage Loan that is a Wet-Ink Mortgage Loan, the Authorized Funds Recipient has been instructed in writing by Seller to (a) hold the related Mortgage Loan Documents as agent and bailee for Buyer and to promptly forward such Mortgage Loan Documents in accordance with the provisions of the Custodial Agreement and the Closing Instruction Letter and (b) return Buyers payment in the event that the Mortgage Loan does not close within twenty-four (24) hours of receipt of Buyers funds.
(xx) FHA Mortgage Insurance; VA Loan Guaranty; USDA Mortgage Loan Guaranty. With respect to each Mortgage Loan to be insured or guaranteed by the FHA, the VA or the USDA, (i) all insurance or guaranty premiums or payments payable to the applicable Loan Program Authority in connection with such Mortgage Loan were paid within the timeframe required by such agency to avoid the imposition of any late fees or penalty fees, (ii) Seller has taken all necessary steps, or will take necessary steps within the time frames required by the applicable insurance contract, to keep such guaranty or insurance valid, binding and enforceable and each of such is the binding, valid and enforceable obligation of the FHA, the VA or the USDA, respectively, to the full extent thereof, without surcharge, set-off or defense, (iii) such Mortgage Loan is insured, or eligible to be insured, pursuant to the National Housing Act or is guaranteed, or eligible to be guaranteed, under the provisions of Chapter 37 of Title 38 of the United States Code, as applicable, (iv) there has been no notice, indication of ineligibility or rejection of the Mortgage Loan and there exists no impairment to full recovery without indemnity from the related Loan Program Authority, (v) the related insurance contract, guaranty agreement and each similar agreement, as applicable, is in full force and effect, and (vi) Seller has provided Buyer any evidence or information requested by Buyer necessary for Buyer to verify that the related insurance or guaranty premiums or payments have been made.
(yy) Cooperative Mortgage Loans. With respect to each Cooperative Mortgage Loan, (i) the term of the related Proprietary Lease is longer than the term of the Cooperative Mortgage Loan, (ii) there is no provision in any Proprietary Lease which requires the Mortgagor to offer for sale the Cooperative Shares owned by such Mortgagor first to the Cooperative Corporation, (iii) there is no prohibition in any Proprietary Lease against pledging the Cooperative Shares or assigning the Proprietary Lease and (iv) the recognition agreement is on a form of agreement published by the Aztech Document Systems, Inc. or includes provisions which are no less favorable to the lender than those contained in such agreement.
(zz) Cooperative Filings. With respect to each Cooperative Mortgage Loan, each original UCC financing statement, continuation statement or other governmental filing or recordation necessary to create or preserve the perfection and priority of the first priority lien and security interest in the Cooperative Shares and Proprietary Lease has been timely and properly made. Any security agreement, chattel mortgage or equivalent document related to the Cooperative Mortgage Loan and delivered to Seller or its designee establishes in Seller a valid and subsisting perfected first lien on and security interest in the Mortgaged Property described therein, and Seller has full right to sell and assign the same.
(aaa) Cooperative Assignment. With respect to each Cooperative Mortgage Loan, each acceptance of assignment and assumption of lease agreement contains enforceable provisions such as to render the rights and remedies of the holder thereof adequate for the realization of the benefits of the security provided thereby. The acceptance of assignment and
assumption of lease agreement contains an enforceable provision for the acceleration of the payment of the unpaid principal balance of the Note in the event the Cooperative Unit is transferred or sold without the consent of the holder thereof.
(bbb) LTV; CLTV. The LTV and CLTV, as applicable, of any Purchased Mortgage Loan at origination was in accordance with the applicable Guide, unless otherwise specified in the Manual, or if such percentage is not set forth in the Manual, then the percentage set forth in the Addendum.
(ccc) No Adverse Selection. Such Mortgage Loan was not intentionally selected by the Seller in a manner intended to adversely affect the interest of the Buyer. The Seller used no selection procedures that identified such Mortgage Loan as being less desirable or valuable than other comparable Mortgage Loans originated by the Seller. Such Mortgage Loans, collectively with the other Mortgage Loans included on such Mortgage Loan Schedule, is representative of the Sellers portfolio of Mortgage Loans.
(ddd) Single Original Mortgage Note. There is only one originally executed Mortgage Note; provided, however, that if there is more than one signed note, then each page of such additional note will have Duplicate, Copy or similar language clearly stamped on it.
(eee) Acceptable Investment. The Mortgagor is not in bankruptcy or insolvent and Seller has no knowledge of any circumstances or conditions with respect to the Mortgage, the Mortgaged Property, the Mortgagor or the Mortgagors credit standing that can reasonably be expected to cause private institutional investors to regard the Mortgage Loan as an unacceptable investment, cause the Mortgage Loan to become a Sub-Performing Mortgage Loan, or adversely affect the value or marketability of the Mortgage Loan.
(fff) Environmental Matters. The Mortgaged Property is free from any toxic or hazardous substances and there exists no violation of any local, state or federal environmental law, rule or regulation. There is no pending action or proceeding directly involving any Mortgaged Property in which compliance with any environmental law, rule or regulation is an issue; and nothing further remains to be done to satisfy in full all requirements of each such law, rule or regulation existing as a prerequisite to use and enjoyment of said property.
(ggg) Regarding the Mortgagor. The Mortgagor is one or more natural persons or a trustee under a living trust and such living trust is in compliance with the applicable Takeout Investor guidelines for such trusts.
(hhh) Insurance. Seller has caused or will cause to be performed any acts required to preserve the rights and remedies of Buyer in any insurance policies applicable to the Mortgage Loans including, without limitation, any necessary notifications of insurers, assignments of policies or interests therein, and establishments of coinsured, joint loss payee and mortgagee rights in favor of Buyer.
(iii) Simple Interest Mortgage Loans. None of the Mortgage Loans are simple interest Mortgage Loans.
(jjj) Prepayment Fee. With respect to each Mortgage Loan that has a prepayment fee feature, each such prepayment fee is enforceable and was originated in compliance with all applicable federal, state and local laws and will be enforced by Seller for the benefit of Buyer, and is only payable during the first three (3) years of the term of the Mortgage Loan. The Mortgagor received a benefit in exchange for accepting such prepayment fee.
(kkk) Flood Certification Contract. Seller shall have obtained a life of loan, transferable flood certification contract for each Mortgage Loan and shall assign all such contracts to Buyer.
(lll) Endorsements. Each Mortgage Note has been endorsed by a duly authorized officer of Seller for its own account and not as a fiduciary, trustee, trustor or beneficiary under a trust agreement.
(mmm)Accuracy of Information. All information provided to Buyer by Seller with respect to the Mortgage Loans is accurate in all material respects.
(nnn) Single Premium Credit Insurance. No Mortgagor was offered or required to purchase single premium credit insurance in connection with the origination of the related Mortgage Loan.
(ooo) Patriot Act. The Seller has complied with all applicable anti money laundering laws and regulations, including, without limitation, the Patriot Act. No Mortgage Loan is subject to nullification pursuant to Executive Order 13224 (the Executive Order) or the regulations promulgated by OFAC (the OFAC Regulations) or in violation of the Executive Order or the OFAC Regulations, and no Mortgagor is subject to the provisions of such Executive Order or the OFAC Regulations nor listed as a blocked person for purposes of the OFAC Regulations.
(ppp) MERS Designated Mortgage Loans. With respect to each MERS Designated Mortgage Loans, a mortgage identification number has been assigned by MERS and such mortgage identification number is accurately provided on the Mortgage Loan Schedule. The related Assignment of Mortgage to MERS has been duly and properly recorded. With respect to each MERS Mortgage Loan, no Mortgagor has received any notice of liens or legal actions with respect to such Mortgage Loan and no such notices have been electronically posted by MERS.
(qqq) MOM Mortgage Loans. With respect to each MOM Loan, the Seller has not received any notice of liens or legal actions with respect to such Mortgage Loan and no such notices have been electronically posted by MERS.
(rrr) Fully Funded. Such Purchased Mortgage Loan is a closed loan. Each Purchased Mortgage Loan is fully funded.
(sss) Authorized Funds Recipient. Any related settlement or closing agent has fully disbursed all proceeds received from the Buyer in accordance with the related HUD-1 form.
(ttt) Qualified Mortgage. Notwithstanding anything to the contrary set forth in the Agreement, on and after January 10, 2014 (or such later date as the relevant regulations may
go into effect) (i) prior to the origination of each Mortgage Loan, the originator made a reasonable and good faith determination that the borrower has a reasonable ability to repay the loan according to its terms, and that at a minimum, the originator underwrote the loan in accordance with 12 CFR 1026.43(c) as may be amended from time to time; and (ii) except as allowed for in the Addendum, such mortgage loan is a Qualified Mortgage as defined in 12 CFR 1026.43(e) as may be amended from time to time.
(uuu) [Reserved].
EXHIBIT B
CERTIFICATE OF AN OFFICER OF THE SELLER
The undersigned, [Secretary] of AmeriHome Mortgage Company, LLC, a Delaware limited liability company (the Seller), hereby certifies as follows:
1. Attached here as Exhibit A is a copy of the Certificate of Formation of the Seller, as certified by the Secretary of State of the State of Delaware.
2. Neither any amendment to the Certificate of Formation of the Seller nor any other charter document with respect to the Seller has been filed, recorded or executed since [ , , 201 ], and no authorization for the filing, recording or execution of any such amendment or other charter document is outstanding.
3. Attached hereto as Exhibit B is a true, correct and complete copy of the Operating Agreement of the Seller as in effect as of the date hereof and at all times since [ , , 201 ].
4. Attached hereto as Exhibit C is a true, correct and complete copy of resolutions adopted by the [Board of Directors]/[Board of Managers]/[General Partner] of the Seller by unanimous written consent on [ , , 201 ] (the Resolutions). The Resolutions have not been further amended, modified or rescinded and are in full force and effect in the form adopted, and they are the only resolutions adopted by the [Board of Directors]/[Board of Managers]/[General Partner] of the Seller relating to the execution and delivery of, and performance of the transactions contemplated by the Master Repurchase Agreement and Securities Contract and Addendum (the Repurchase Agreement), each dated as of [ , , 201 ] and between the Seller, [Guarantor] and Wells Fargo Bank, N.A. (the Buyer).
5. Attached here as Exhibit D is a copy of a Certificate of Good Standing of Seller, as certified by the Secretary of State of the State of Delaware.
6. The Repurchase Agreement is substantially in the form approved by the Resolutions or pursuant to authority duly granted by the Resolutions.
7. The undersigned, as officers of the Seller or as attorney-in-fact, are authorized to and have signed manually the Repurchase Agreement or any other document delivered in connection with the transactions contemplated thereby, were duly elected or appointed, were qualified and acting as such officer or attorney-in-fact at the respective times of the signing and delivery thereof, and were duly authorized to sign such document on behalf of the Seller and the signature of each such person appearing on any such documents is the genuine signature of each such person.
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IN WITNESS WHEREOF, the undersigned has hereunto executed this Certificate as of the day of , 201 .
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EXHIBIT B
CERTIFICATE OF AN OFFICER OF THE SELLER (CONTINUED)
Exhibit C to Officers Certificate of the Seller
WRITTEN CONSENT IN LIEU OF A MEETING
OF THE BOARD OF [DIRECTORS][MANAGERS] OF AMERIHOME MORTGAGE
COMPANY, LLC
The undersigned, being all of the members of the [Board of Directors]/[Board of Managers]/[General Partner] of AmeriHome Mortgage Company, LLC, a Delaware limited liability company (the Seller), do hereby consent to the adoption of the following resolutions taking or authorizing the actions specified therein:
WHEREAS, it is in the best interests of the Seller to transfer from time to time to Wells Fargo Bank, N.A. (the Buyer) certain mortgage loans in exchange for the transfer of funds by Buyer to Seller, with a simultaneous agreement by Buyer to transfer to Seller such mortgage loans at a date certain or on demand, in exchange for the transfer of funds by Seller pursuant to the terms of the Repurchase Agreement (as defined below).
NOW, THEREFORE, be it
RESOLVED, that the execution, delivery and performance by the Seller of the Master Repurchase Agreement and Securities Contract and Addendum (the Repurchase Agreement) to be entered into by the Seller [Guarantor] and Buyer, substantially in the form of the drafts each dated [ , 201 ], and attached hereto as Exhibit A, are hereby authorized and approved and that the [Chairman, Chief Executive Officer, the Secretary or the Treasurer] (collectively, the Authorized Officers) of the Seller be and each of them hereby is authorized and directed to execute and deliver the Repurchase Agreement to the Buyer with such changes as the officer executing the same shall approve, his execution and delivery thereof to be conclusive evidence of such approval;
RESOLVED, that the execution, delivery and performance by the Seller of the Electronic Tracking Agreement (the Tracking Agreement) to be entered into by the Seller, the Buyer, [[Servicer] (the Servicer)], Mortgage Electronic Registration Systems, Inc. and MERSCORP Holdings, Inc. substantially in the form of the draft dated [ , 201 ], attached hereto as Exhibit B, are hereby authorized and approved and that the Authorized Officers of the Seller be and each of them hereby is authorized and directed to execute and deliver the Tracking Agreement to the Buyer, [the Servicer,] Mortgage Electronic Registration Systems, Inc. and MERSCORP Holdings, Inc. with such changes as the officer executing the same shall approve, his execution and delivery thereof to be conclusive evidence of such approval;
RESOLVED, that the execution and delivery by the Seller of one or more copies of a Power of Attorney (Power of Attorney) authorizing certain personnel of Buyer and its affiliates to take certain actions, as set forth substantially in the form attached to the Repurchase Agreement and irrevocable except with the consent of Buyer, are hereby authorized and approved
and that the Authorized Officers of the Seller be and each of them hereby is authorized and directed to execute and deliver the Power of Attorney to the Buyer immediately upon any request of Buyer for so long as any obligations of the Seller under the Repurchase Agreement remain unsatisfied, with such changes as the officer executing the same shall approve, his execution and delivery thereof to be conclusive evidence of such approval, and the termination of this resolution requiring the consent of the Buyer;
RESOLVED, that the Authorized Officers hereby are, and each hereby is, authorized to execute and deliver all such aforementioned agreements on behalf of the Seller and to do or cause to be done, in the name and on behalf of the Seller, any and all such acts and things, and to execute, deliver and file in the name and on behalf of the Seller, any and all such agreements, applications, certificates, instructions, receipts and other documents and instruments, as such Authorized Officer may deem necessary, advisable or appropriate in order to carry out the purposes of the foregoing resolutions;
RESOLVED, that all actions taken by any of the Authorized Officers before the date of this consent for the purpose of effecting any of the actions authorized by this consent be, and they hereby are, approved and ratified in all respects;
RESOLVED, that the proper officers, agents and counsel of the Seller are, and each of such officers, agents and counsel is, hereby authorized for and in the name and on behalf of the Seller to take all such further actions and to execute and deliver all such other agreements, instruments and documents, and to make all governmental filings, in the name and on behalf of the Seller and such officers are authorized to pay such fees, taxes and expenses, as advisable in order to fully carry out the intent and accomplish the purposes of the resolutions heretofore adopted hereby.
Dated as of: , 20
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EXHIBIT C
FORM OF POWER OF ATTORNEY
Wells Fargo Bank, N.A.
c/o Wells Fargo Securities
Mortgage Banker Finance Group
2500 Northwinds Parkway, Suite 200
Alpharetta, Georgia 30009
Attention: Ken Logan
Telephone: (678) 867-1080
Re: Master Repurchase Agreement and Securities Contract and Addendum, each dated as of July 1, 2016 (as amended from time to time, the Agreement) and among AmeriHome Mortgage Company, LLC (the Seller) and Wells Fargo Bank, N.A. (the Buyer)
Ladies and Gentlemen:
KNOW ALL MEN BY THESE PRESENTS, that Seller hereby irrevocably constitutes and appoints the Buyer and any officer or director of the Buyer or Wells Fargo Securities, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority, in the place and stead of Seller and in the name of Seller or in its own name, from time to time in the Buyers discretion, to: (1) execute, witness, attest and deliver, on behalf of the Seller, (a) all mortgage documents reasonably necessary or appropriate to properly effect the transfer of the Mortgage Loans from the Seller to Buyer, (b) all release or satisfaction documents reasonably necessary or appropriate to properly effect the release or satisfaction of mortgages, deeds of trust or other similar security instruments with respect to the Mortgage Loans, and (c) all documents reasonably necessary to correct or otherwise remedy any errors or deficiencies contained in any documents contemplated by part (a) above; (2) take any action to carry out the transfer of servicing with respect to the Mortgage Loans from Seller to a successor servicer appointed by the Buyer in its discretion, in the name of Seller or its own name, or otherwise, and prepare and send or cause to be sent good-bye letters to all mortgagors under the Mortgage Loans, transferring the servicing of the Mortgage Loans to a successor servicer appointed by the Buyer in its discretion, and (3) preserve any rights of the Buyer under the Program Agreements, and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such preservation of rights.
Seller hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.
Any capitalized term used but not defined herein shall have the meaning assigned to such term in the Agreement.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION
OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS OWN BEHALF AND ON BEHALF OF SELLERS ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed and Sellers seal to be affixed this 1st day of July, 2016.
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On the day of July 2016 before me, a Notary Public in and for said State, personally appeared , known to me to be [ ] of [ ], the institution that executed the within instrument and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.
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EXHIBIT E
CERTIFICATE OF INCUMBENCY OF OFFICERS AND OF
AUTHORIZED PERSONS OF SELLER
I, , Secretary of AmeriHome Mortgage Company, LLC, a Delaware limited liability company (hereinafter called the Company), do hereby certify that the below-named individuals have been duly elected and qualified as, and are this day, officers of the Company holding the respective offices set forth opposite their names and the signatures below set opposite their names are their genuine signatures:
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I DO FURTHER CERTIFY that as [ ] of the Company, I am hereby authorized and from time to time directed to execute a certificate of incumbency and obtain specimen signatures of persons holding the offices referred to in the Corporate Resolutions, and of the officers or persons named in the Corporate Resolutions, and to file such certified copy, and such certificate or certificates, and specimen signatures.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal of the Company this day of , 20[ ].
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SCHEDULE I
FORM OF POWER OF ATTORNEY
Wells Fargo Bank, N.A.
c/o Wells Fargo Securities
Mortgage Banker Finance Group
2500 Northwinds Parkway
Suite 200
Alpharetta, Georgia 30009
Attention: Ken Logan
Telephone: (678) 867-1080
Re: Master Repurchase Agreement and Securities Contract and Addendum, each dated as of July 1, 2016 (as amended from time to time, the Agreement) and [between] [among] AmeriHome Mortgage Company, LLC (the Seller)[,] [and] Wells Fargo Bank, N.A. (the Buyer) [and [Guarantor], as guarantor]
Ladies and Gentlemen:
KNOW ALL MEN BY THESE PRESENTS, that Seller hereby irrevocably constitutes and appoints the Buyer and any officer or director of the Buyer or Wells Fargo Securities Mortgage Banker Finance Group, with full power of substitution, as its true and lawful attorney-in-fact with full power and authority, in the place and stead of Seller and in the name of Seller or in its own name, from time to time in the Buyers discretion, solely in connection with the Agreement, to: (1) execute, witness, attest and deliver, on behalf of the Seller, (a) all mortgage documents reasonably necessary or appropriate to properly effect the transfer of the Mortgage Loans from the Seller to Buyer, (b) all release or satisfaction documents reasonably necessary or appropriate to properly effect the release or satisfaction of mortgages, deeds of trust or other similar security instruments with respect to the Mortgage Loans, and (c) all documents reasonably necessary to correct or otherwise remedy any errors or deficiencies contained in any documents contemplated by part (a) above; (2) take any action to carry out the transfer of servicing with respect to the Mortgage Loans from Seller to a successor servicer appointed by the Buyer in its sole discretion, in the name of Seller or its own name, or otherwise, and prepare and send or cause to be sent good-bye letters to all mortgagors under the Mortgage Loans, transferring the servicing of the Mortgage Loans to a successor servicer appointed by the Buyer in its sole discretion, and (3) preserve any rights of the Buyer under the Program Agreements, and to take any and all appropriate action and to execute any and all documents and instruments which may be necessary or desirable to accomplish such preservation of rights.
Seller hereby ratifies all that said attorneys shall lawfully do or cause to be done by virtue hereof. This power of attorney is a power coupled with an interest and shall be irrevocable.
Any capitalized term used but not defined herein shall have the meaning assigned to such term in the Agreement.
TO INDUCE ANY THIRD PARTY TO ACT HEREUNDER, SELLER HEREBY AGREES THAT ANY THIRD PARTY RECEIVING A DULY EXECUTED COPY OR FACSIMILE OF THIS INSTRUMENT MAY ACT HEREUNDER, AND THAT REVOCATION OR TERMINATION HEREOF SHALL BE INEFFECTIVE AS TO SUCH THIRD PARTY UNLESS AND UNTIL ACTUAL NOTICE OR KNOWLEDGE OF SUCH REVOCATION OR TERMINATION SHALL HAVE BEEN RECEIVED BY SUCH THIRD PARTY, AND SELLER ON ITS OWN BEHALF AND ON BEHALF OF SELLERS ASSIGNS, HEREBY AGREES TO INDEMNIFY AND HOLD HARMLESS ANY SUCH THIRD PARTY FROM AND AGAINST ANY AND ALL CLAIMS THAT MAY ARISE AGAINST SUCH THIRD PARTY BY REASON OF SUCH THIRD PARTY HAVING RELIED ON THE PROVISIONS OF THIS INSTRUMENT.
IN WITNESS WHEREOF Seller has caused this Power of Attorney to be executed and Sellers seal to be affixed this day of , .
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On the day of , 20 before me, a Notary Public in and for said State, personally appeared , known to me to be the of AmeriHome Mortgage Company, LLC, the institution that executed the within instrument and also known to me to be the person who executed it on behalf of said corporation, and acknowledged to me that such corporation executed the within instrument.
IN WITNESS WHEREOF, I have hereunto set my hand affixed my office seal the day and year in this certificate first above written.
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CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
AMENDMENT NO. 1 TO MASTER REPURCHASE AGREEMENT
This Amendment No. 1 (the Amendment) to the Master Repurchase Agreement (defined below), is entered into on May 10, 2019 by and between Wells Fargo Bank, N.A. (the Buyer) and AmeriHome Mortgage Company, LLC (the Seller). The Buyer and the Seller may also be referred to individually as a Party or collectively as the Parties.
WITNESSETH:
WHEREAS, the Parties have entered into Master Repurchase Agreement and Securities Contract, dated as of July 1, 2016, Version 5.01, (as amended, the Master Repurchase Agreement), along with the related Amended and Restated Addendum, dated as of May 10, 2018, as such Addendum may be amended and restated from time to time (the Addendum and together with the Master Repurchase Agreement and this Amendment, the Agreement) pursuant to which the Seller agrees to sell certain mortgage loans and/or securities to the Buyer in exchange for the transfer of funds by the Buyer to the Seller, with a simultaneous agreement by the Buyer to transfer to the Seller such mortgage loans and/or securities at a date certain or on demand, in exchange for the transfer of funds by the Seller to the Buyer.
NOW, THEREFORE, in consideration of the premises and mutual agreements set forth herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Seller and the Buyer agree as follows:
1. Section 2 (Definitions) of the Master Repurchase Agreement is hereby amended by adding the following definition thereto:
Buydown Mortgage Loan shall have the meaning set forth in the Addendum.
Buydown Mortgage Loan Limit means the amount set forth on the Addendum for such term.
Buydown Mortgage Loan Margin means the margin set forth on the Addendum for such term.
Buydown Mortgage Loan Purchase Price Percentage means the percentage set forth on the Addendum for such term.
Minimum Credit Enhancement means the required minimum percentage for each individual loan type, as applicable, indicated in a footnote to the Sublimit, Rate and Term Schedule of the Addendum.
2. Section 2 (Definitions) of the Master Repurchase Agreement is hereby amended by deleting the following definitions in their entirety and replacing them with the following, in correct alphabetical order:
LIBOR means the rate determined on the first (1st) Business Day of each week by Buyer on the basis of the offered rate for one-month or three-month (as set forth on the Addendum) U.S. dollar deposits, as such rate appears on Bloomberg Screen US0001M Page, as of 11:00 a.m. (London time) on such date; provided, that if such rate does not appear on Bloomberg Screen US0001M Page, the rate for such date will be the rate determined by reference to such other comparable publicly available service publishing such rates as may be selected by Buyer in its sole discretion and communicated to Seller; provided, further, that if Buyer determines that, by reason of circumstances affecting the relevant market, adequate and reasonable means do not exist for ascertaining LIBOR, then Buyer shall provide Seller with prompt notice thereof and Buyer shall use such other comparable rate that is being used in the relevant market until otherwise communicated to Seller. Notwithstanding anything to the contrary herein, Buyer shall have the option in its sole discretion, to re-set LIBOR on a daily basis.
3. Section 6 (a) (Margin Maintenance) of the Master Repurchase Agreement is hereby deleted in its entirety and replaced as follows:
a. If on any date, and at Buyers discretion
For Mortgage Loans or Purchased Assets with a Purchase Price Percentage on the Purchase Date less than or equal to 98.0%:
(A) the lesser of (i) the current Market Value of a Purchased Asset, or (ii) the unpaid principal balance underlying any individual Purchased Asset, times the current Purchase Price Percentage for such Purchased Asset, or
(B) the current Market Value of all Purchased Assets times the current Purchase Price Percentage for all Purchased Assets,
in either case, is less than the then current Purchase Price with respect to such Purchased Asset(s) as of such date (such deficit, a Margin Deficit), Buyer may provide notice to Seller (as such notice is more particularly set forth below and in Sections 6(b) and 6(c) below, a Margin Call) of such Margin Deficit.
For Mortgage Loans or Purchased Assets subject to the Minimum Credit Enhancement requirement as set forth in the Addendum:
(A) the lesser of (i) the current Market Value of a Purchased Asset, minus the product of (x) the lesser of (1) the current Market Value of a Purchased Asset or (2) [***] or (ii) the unpaid principal balance underlying any individual Purchased Asset, times the current Purchase Price Percentage for such Purchased Asset, or
(B) the current Market Value of all Purchased Assets less the product of the unpaid principal balance for all Purchased Assets and the Minimum Credit Enhancement,
Amendment no. 1 to MRA AmeriHome Mortgage Company
in either case, is less than the then current Purchase Price with respect to such Purchased Asset(s) as of such date (such deficit, a Margin Deficit), Buyer may provide notice to Seller (as such notice is more particularly set forth below and in Sections 6(b) and 6(c) below, a Margin Call) of such Margin Deficit.
4. The definition of Adjusted Tangible Net Worth found in Annex A of the Master Repurchase Agreement is hereby deleted in its entirety and replaced as follows:
Adjusted Tangible Net Worth means, for any Person, Net Worth of such Person plus Subordinated Debt (if approved for purposes of this calculation by Buyer in its sole discretion), minus all intangible assets, goodwill, patents, trade names, trademarks, copyrights, franchises, any organizational expenses, deferred expenses, prepaid expenses, prepaid assets, receivables from shareholders, Affiliates or employees, any mortgage servicing rights capitalization exceeding the book value [***], any other asset as shown as an intangible asset on the balance sheet of such Person on a consolidated basis as determined at a particular date in accordance with GAAP, and any other assets that Buyer deems, at any time, in its reasonable discretion, as intangible assets or overstated assets. For the avoidance of doubt, Buyer may deem, in its reasonable discretion, any asset as intangible or overstated at any time after the delivery of the most recent Officers Compliance Certificate. Buyer agrees to use reasonable efforts to notify Seller of assets deemed by Buyer to be intangible or materially overstated.
5. The definition of Liquidity found in Annex A of the Master Repurchase Agreement is hereby deleted in its entirety and replaced as follows:
Liquidity means the sum of (i) Unrestricted Cash, (ii) Cash Equivalents, (iii) any other assets that Buyer deems, in its reasonable discretion, as liquid, (iv) any undrawn capacity of one of Sellers facilities financing its portfolio of Servicing Rights as long as the maturity date of such facility is more than ninety (90) days from each date of determination, less (v) net borrower escrow liability on any mortgage loans owned or serviced by the Seller and (vi) any other such extraordinary liabilities or extraordinary obligations of Seller that Buyer determines, in its reasonable discretion, will result in claims against Sellers cash within the next sixty (60) days.
6. Schedule 1 of the Master Repurchase Agreement is hereby amended by deleting paragraph (r) in its entirety and replacing it as follows:
(r) Payment Terms. Principal and/or interest payments on the Mortgage Loan commenced no more than sixty (60) days after funds were disbursed in connection with the Mortgage Loan except in the case of a Conforming Mortgage Loan or a Government Mortgage Loan where the principal and/or interest payment commenced no more than
Amendment no. 1 to MRA AmeriHome Mortgage Company
sixty-two (62) days after funds were disbursed in connection with such Mortgage Loan. With respect to adjustable rate Mortgage Loans, the Mortgage Interest Rate is adjusted on each Interest Rate Adjustment Date to equal the Index plus the Gross Margin (rounded up or down to the nearest.125%), subject to the Mortgage Interest Rate Cap. The Mortgage Note is payable on the first (1st) day of each month in equal monthly installments of principal and/or interest (subject to an interest only period in the case of Interest Only Loans), which installments of interest (a) with respect to adjustable rate Mortgage Loans are subject to change on the Interest Rate Adjustment Date due to adjustments to the Mortgage Interest Rate on each Interest Rate Adjustment Date and (b) with respect to Interest Only Loans are subject to change on the Interest Only Adjustment Date due to adjustments to the Mortgage Interest Rate on each Interest Only Adjustment Date, in both cases with interest calculated and payable in arrears, sufficient to amortize the Mortgage Loan fully by the stated maturity date, over an original term of not more than thirty (30) years from commencement of amortization. The Mortgage Note does not permit Negative Amortization.
7. Schedule 1 of the Master Repurchase Agreement is hereby amended by deleting paragraph (y) in its entirety and replacing it as follows:
(y) No Buydown Provisions; No Graduated Payments or Contingent Interests. The Mortgage Loan does not contain provisions pursuant to which Monthly Payments are paid or partially paid with funds deposited in any separate account established by Seller, the Mortgagor, or anyone on behalf of the Mortgagor, or paid by any source other than the Mortgagor nor does it contain any other similar provisions which may constitute a buydown provision, unless the Mortgage Loan is a Conforming Mortgage Loan or a Government Mortgage Loan and qualifies under the applicable Takeout Investors underwriting guidelines and program requirements. Notwithstanding the foregoing, the Mortgage Loan is not a graduated payment mortgage loan and the Mortgage Loan does not have a shared appreciation or other contingent interest feature.
8. Schedule 1 of the Master Repurchase Agreement is hereby amended by deleting paragraph (ww) in its entirety and replacing it as follows:
(ww) Wet-Ink Mortgage Loans: With respect to each Mortgage Loan that is a Wet-Ink Mortgage Loan, the Authorized Funds Recipient has been instructed in writing by Seller to (a) hold the related Mortgage Loan Documents as agent and bailee for Buyer and to promptly forward such Mortgage Loan Documents in accordance with the provisions of the Custodial Agreement and the Closing Instruction Letter and (b) return Buyers payment in the event that the Mortgage Loan does not close within forty-eight (48) hours of receipt of Buyers funds.
9. Any capitalized term used but not defined herein shall have the meaning assigned to such term in the Master Repurchase Agreement.
10. This Amendment only relates to the Master Repurchase Agreement between the Buyer and the Seller. Except as expressly amended above, all of the terms and conditions of the Master Repurchase Agreement remain in full force and effect and are hereby reaffirmed.
Amendment no. 1 to MRA AmeriHome Mortgage Company
11. This Amendment may be executed simultaneously in any number of counterparts. Each counterpart shall be deemed to be an original, and all such counterparts shall constitute one and the same instrument.
Amendment no. 1 to MRA AmeriHome Mortgage Company
IN WITNESS WHEREOF, the Seller and the Buyer have caused their names to be signed to this Amendment to the Master Repurchase Agreement by their respective officers thereunto duly authorized as of the date first above written.
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WELLS FARGO BANK, N.A. | |
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Name: Kelly J. Kucsma |
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Title: Director |
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AMERIHOME MORTGAGE COMPANY, LLC | |
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Name: Kathleen Conte |
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Title: SVP-Capital Markets |
Amendment no. 1 to MRA AmeriHome Mortgage Company
CERTAIN IDENTIFIED INFORMATION HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. [***] INDICATES THAT INFORMATION HAS BEEN REDACTED.
WESTERN ALLIANCE BANK
LOAN AGREEMENT
This LOAN AGREEMENT (Agreement) is made and entered into effective March 6, 2020 (the Effective Date), by and between WESTERN ALLIANCE BANK, an Arizona corporation (Bank), and AMERIHOME MORTGAGE COMPANY, LLC, a Delaware limited liability company (Borrower).
RECITALS
A. Borrower has requested that Bank extend credit to Borrower as described in this Agreement.
B. Subject to and upon the provisions, terms and conditions of this Agreement, Bank is willing to make such credit available to Borrower and has agreed to lend to Borrower the amounts herein described for the purposes set forth below.
AGREEMENT
NOW, THEREFORE, in consideration of the premises, the covenants, representations, warranties and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby covenant and agree as follows:
ARTICLE 1
CERTAIN DEFINITIONS
1.1 Definitions. As used in this Agreement, all addendums, exhibits and schedules hereto and in any note, certificate, report or other Loan Documents made or delivered pursuant to this Agreement, the following terms will have the meanings given such terms in this Article One unless otherwise provided in any such other document.
Advance means any disbursement of an amount or amounts to be loaned by Bank to Borrower hereunder or the re-borrowing of amounts previously loaned hereunder.
Advance Request means, as of the date of preparation, a certificate requesting an Advance (in a form acceptable to Bank) prepared by an Authorized Officer.
Affiliate means, as to any Person, any other Person (a) that directly or indirectly, through one or more intermediaries, controls or is controlled by, or is under common control with, such Person, (b) that directly or indirectly beneficially owns or holds fifty percent (50%) or more of any class of voting stock of such Person, or (c) that controls fifty percent (50%) or more of the voting stock of which is directly or indirectly beneficially owned or held by the Person in question. As used herein, the term control means the possession, directly or indirectly, of the power to direct or cause direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise; provided, however, in no event shall Bank be deemed an Affiliate of Borrower. For purposes of this Agreement, Aris Mortgage Holding Company, LLC shall be deemed to be the only Affiliate of Borrower.
Agency means Fannie Mae, Freddie Mac or Ginnie Mae, as applicable.
Agreement means this Loan Agreement, as the same may, from time to time, be amended, supplemented, or replaced.
Approved Purposes has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Adjusted Tangible Net Worth has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Article and Articles have the meanings set forth in Section 1.6.
Authorized Officer means the President, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Controller, Treasurer and any other officers legally authorized by Borrower and approved hereafter in writing by Bank.
Bank means Western Alliance Bank, an Arizona corporation and its participants, successors and assigns.
Borrower means the Person identified as such in the introductory paragraph hereof, and its successors and assigns.
Business Day means a day other than a Saturday, Sunday or a day on which commercial banks in Phoenix, Arizona or the State of California are authorized to be closed. Unless otherwise provided, the term days means calendar days.
Code means the Uniform Commercial Code of the State of Arizona.
Commitment means the obligation of Bank to make the Revolving Loans in an aggregate principal amount at any time outstanding up to but not to exceed in the aggregate the Committed Sum in effect from time to time.
Committed Sum has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Compliance Certificate means a certificate, substantially in the form of Exhibit C attached hereto, prepared by and executed by an Authorized Officer of Borrower.
Current Financial Statements means the financial statements of Borrower most recently submitted to Bank and dated within thirty (30) days of the Effective date.
Debt means with respect to any Person at any time (without duplication), (a) all obligations of such Person for borrowed money; (b) all obligations of such Person evidenced by bonds, notes, debentures, or other similar instruments; (c) all obligations of such Person to pay the deferred purchase price of property or services, except trade accounts payable of such Person arising in the ordinary course of business that are not past due by more than ninety (90) days; (d) all capital lease obligations of such Person; (e) all Debt or other obligations of others
guaranteed by such Person; (f) all obligations secured by a Lien existing on property owned by such Person, whether or not the obligations secured thereby have been assumed by such Person or are non-recourse to the credit of such Person; (g) any other obligation for borrowed money or other financial accommodations which in accordance with GAAP, or other method of accounting acceptable to Bank, would be shown as a liability on the balance sheet of such Person; (h) any repurchase obligation or liability of a Person with respect to accounts, chattel paper or notes receivable sold by such Person; (i) any liability under a sale and leaseback transaction that is not a capital lease obligation; (j) any obligation arising with respect to any other transaction that is the functional equivalent of borrowing but which does not constitute a liability on the balance sheets of a Person; (k) all payment and reimbursement obligations of such Person (whether contingent or otherwise) in respect of letters of credit, bankers acceptances, surety or other bonds and similar instruments; and (l) all obligations of such Person to purchase, redeem, retire, defease or otherwise make any payment in respect of any equity interests in such Person or any other Person, valued, in the case of redeemable preferred stock interests, at the greater of its voluntary or involuntary liquidation preference plus all accrued and unpaid dividends.
Debtor Relief Laws means Bankruptcy Code of the United States and all other applicable liquidation, receivership, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar debtor relief Laws affecting the rights of creditors generally from time to time in effect.
Effective Date has the meaning provided in the introductory paragraph hereof.
Environmental Laws means any and all federal, state, and local laws, regulations, judicial decisions, orders, decrees, plans, rules, permits, licenses, and other governmental restrictions and requirements pertaining to health, safety, or the environment, including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. § 9601, et seq., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. § 6901, et seq., the Occupational Safety and Health Act, 29 U.S.C. § 651, et seq., the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33 U.S.C. § 1251, et seq., and the Toxic Substances Control Act, 15 U.S.C. § 2601, et seq., as the same may be amended or supplemented from time to time.
Environmental Liabilities means, as to any Person, all liabilities, obligations, responsibilities, Remedial Actions, losses, damages, punitive damages, consequential damages, treble damages, reasonable and documented out-of-pocket costs, and expenses (including, without limitation, all reasonable and documented out-of-pocket fees, disbursements and expenses of counsel, expert and consulting fees and costs of investigation and feasibility studies), fines, penalties, sanctions, and interest incurred as a result of any claim or demand, by any Person, whether based in contract, tort, implied or express warranty, strict liability, criminal or civil statute, including any Environmental Law, permit, order or agreement with any Governmental Authority or other Person, arising from environmental, health or safety conditions or the Release or threatened Release of a Hazardous Material into the environment, resulting from the past, present, or future operations of such Person.
Event of Default has the meaning set forth in Article Nine of this Agreement.
Existing Litigation has the meaning set forth in Section 5.5.
Facility Fee has the meaning set forth in Section 6 of the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
GAAP means generally accepted accounting principles, applied on a consistent basis, set forth in Opinions of the Accounting Principles Board of the American Institute of Certified Public Accountants and/or in statements of the Financial Accounting Standards Board which are applicable under the circumstances and in effect as of the date in question.
Guarantor means any Person who from time to time guarantees all or any part of the Indebtedness. The parties agree there shall be no Guarantor under this Agreement.
Guaranty Agreement means a written guaranty of each Guarantor, if any, in favor of Bank, in form and substance satisfactory to Bank, as the same may be amended, modified, restated, renewed, replaced, extended, supplemented or otherwise changed from time to time. The parties agree there shall be no Guaranty Agreement.
Hazardous Material means any substance, product, waste, pollutant, material, chemical, contaminant, constituent, or other material which is or becomes listed, regulated, or addressed under any Environmental Law, including, without limitation, asbestos, petroleum, and polychlorinated biphenyls.
Indebtedness means all present and future indebtedness, obligations, and liabilities of Borrower to Bank, including all direct and contingent obligations arising under letters of credit, bankers acceptances, bank guaranties and similar instruments, overdrafts, Automated Clearing House obligations, and all other financial accommodations which could be considered a liability under GAAP, or other method of accounting acceptable to Bank, and all renewals, extensions, and modifications thereof, or any part thereof, now or hereafter owed to Bank by Borrower, and all interest accruing thereon and reasonable and documented out-of-pocket costs, expenses, and reasonable and documented out-of-pocket attorneys fees incurred in the enforcement or collection thereof, regardless of whether such indebtedness, obligation, and liabilities are direct, indirect, fixed, contingent, liquidated, unliquidated, joint, several, or joint and several, including, but not limited to, the indebtedness, obligations, and liabilities evidenced, secured, or arising pursuant to (i) any of the Loan Documents and all renewals and extensions thereof, or any part thereof, and all present and future amendments thereto and (ii) any other documents or agreements between Borrower and Bank, together with all renewals and extensions thereof or any part thereof, and all present and future amendments thereto.
Laws means all applicable statutes, laws, ordinances, regulations, orders, writs, injunctions, or decrees of the United States, any city or municipality, state, commonwealth, nation, country, territory, possession, or any Tribunal.
Leases means those certain lease agreements between the owners of the real property on which any part of Borrowers business is operated, as landlord, and Borrower, as tenant, pertaining to the lease of such real property.
Lien means any mortgage, pledge, hypothecation, assignment, encumbrance, lien (whether statutory or otherwise), or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, any conditional sale or other title retention agreement, any financing lease having substantially the same economic effect as any of the foregoing, and the filing of any financing statement under the UCC or comparable law of any jurisdiction in respect of any of the foregoing).
Liquid Assets means, at any particular time, the sum of Borrowers cash, cash equivalents (certificates of deposit and other depository accounts established at FDIC-insured banks and all unrestricted cash on deposit with Borrowers warehouse lenders), United States government-issued securities and other registered, unrestricted equity or debt securities which are publicly traded on a recognized United States exchange and have been approved by Bank, in its reasonable discretion and which, in all events, are held in Borrowers name and are free and clear of all Liens (except Liens in favor of Bank).
Litigation means any proceeding, claim, lawsuit, and/or investigation conducted or threatened by or before any Tribunal, including, but not limited to, proceedings, claims, lawsuits, and/or investigations under or pursuant to any environmental, occupational safety and health, antitrust, unfair competition, securities, Tax, or other Law, or under or pursuant to any agreement, document, or instrument.
Loan means the Revolving Loans, collectively.
Loan Documents mean this Agreement, the Promissory Note, any guaranty, and any and all other agreements, documents, and instruments executed and delivered in connection with the Loan, and any future amendments thereto, or restatements thereof, together with any and all renewals, extensions, and restatements of, and amendments and modifications to, any such agreements, documents, and instruments.
Loan Period means the period beginning on the Effective Date and ending on the Maturity Date.
Maturity Date means March 6, 2021.
Material Adverse Effect means any set of circumstances or event which with respect to any Person (a) could reasonably be expected to have a material adverse effect upon the validity, performance, or enforceability of any Loan Document against such Person, (b) is or could reasonably be expected to have a material adverse effect upon the condition (financial or otherwise), properties, liabilities (actual or contingent), or business operations of such Person, (c) could reasonably be expected to materially impair the ability of such Person to pay the Indebtedness or to fulfill its Obligations under the Loan Documents, or (d) could reasonably be expected to cause an Event of Default.
Maximum Rate means the maximum non-usurious rate of interest (or, if the context so requires, an amount calculated at such rate) which Bank is allowed to contract for, charge, take, reserve, or receive in this transaction under applicable federal or state Law from time to time in effect after taking into account, to the extent required by applicable federal or state Law from time to time in effect, any and all relevant payments or charges under the Loan Documents.
Mortgage Loan Assets has the meaning set forth in Section 7.3.
Net Income shall mean, for any particular period, Borrowers net income (after provision for taxes), as determined in accordance with GAAP.
Obligated Party means Borrower, each Guarantor or any other Person who is or becomes party to any agreement that guarantees or secures payment and performance of the Indebtedness and/or the Obligations or any part thereof.
Obligations means any and all of the covenants, conditions, warranties, representations and other obligations (other than to repay the Indebtedness) made or undertaken by Borrower or any Obligated Party to Bank as set forth in the Loan Documents.
Organizational Documents means (a) in the case of a corporation, its articles or certificate of incorporation and bylaws, (b) in the case of a general partnership, its partnership agreement, (c) in the case of a limited partnership, its certificate of limited partnership and partnership agreement, (d) in the case of a limited liability company, its articles of organization and operating agreement or regulations, and (e) in the case of any other entity, its organizational and governance documents and agreements.
Overadvance shall have the meaning set forth in Section 2.4, below.
Permitted Businesses mean, those businesses in which Borrower was engaged as of the Effective Date, including without limitation making mortgage loans and consumer mortgage Loans (and servicing rights related thereto), and related business lines relating or incidental to the origination, buying, selling or servicing of residential mortgage loans.
Person means any individual, firm, corporation, limited liability company, association, partnership, joint venture, trust, other entity, or a Tribunal.
Principal Balance means the aggregate unpaid principal balance of the Promissory Note on any date of determination.
Promissory Note has the meaning set forth in the Additional Loan Terms and Covenants Addendum attached hereto as Exhibit A.
Release means, as to any Person, any release, spill, emissions, leaking, pumping, injection, deposit, disposal, disbursement, leaching, or migration of Hazardous Materials into the indoor or outdoor environment or into or out of property owned by such Person, including, without limitation, the movement of Hazardous Materials through or in the air, soil, surface water, ground water, or property.
Remedial Action means all actions required to (a) clean up, remove, treat, or otherwise address Hazardous Materials in the indoor or outdoor environment, (b) prevent the Release or threat of Release or minimize the further Release of Hazardous Materials so that they do not migrate or endanger or threaten to endanger public health or welfare or the indoor or outdoor environment, or (c) perform pre-remedial studies and investigations and post-remedial monitoring and care.
Revolving Loan and Revolving Loans have the meanings set forth in Section 2.1.
Rights mean any remedies, powers, and privileges exercisable by Bank under the Loan Documents, at Law, equity, or otherwise.
Section and Sections have the meanings set forth in Section 1.6.
Subordinated Debt means all Debt of Borrower whether now existing or hereafter incurred which is subordinate in right of payment to the Indebtedness, pursuant to a written agreement in form and content satisfactory to Bank.
Subsection and Subsections have the meanings set forth in Section 1.6.
Subsidiary(ies) means any entity more than fifty percent (50%) of whose ownership, equity or voting interest now or hereafter is owned directly or indirectly by Borrower or any Subsidiary or may be voted by Borrower or any Subsidiary.
Tangible Net Worth means, for any Person at any particular time, all amounts which, in conformity with GAAP, or other method of accounting acceptable to Bank, would be included as owners equity on a balance sheet of a Person.
Taxes means all taxes (including withholding), assessments, fees, levies, imposts, duties, deductions, withholdings, or other charges of any nature whatsoever from time to time or at any time imposed by any Laws or by any Tribunal, excluding state and local sales and use taxes.
Tribunal means any state, commonwealth, federal, foreign, territorial, or other court or governmental department, commission, board, bureau, agency, or instrumentality.
Tribunal Proceedings has the meaning set forth in Section 5.4.
Unpaid Judgments has the meaning set forth in Section 5.5.
1.2 Terms Defined in the Code. Terms (whether or not capitalized) defined in the Code which are not otherwise defined in this Agreement are used herein as defined in the Code as in effect on the date hereof.
1.3 Accounting Matters. Any accounting term used in this Agreement or the other Loan Documents shall have, unless otherwise specifically provided therein, the meaning customarily given such term in accordance with GAAP, or other method of accounting acceptable to Bank, and all financial computations thereunder shall be computed, unless otherwise specifically provided therein, in accordance with GAAP, or other method of accounting acceptable to Bank, consistently applied. That certain items or computations are explicitly modified by the phrase in accordance with GAAP, or other method of accounting acceptable to Bank shall in no way be construed to limit the foregoing.
1.4 Headings. The headings, captions, and arrangements used in any of the Loan Documents are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify, or modify the terms of the Loan Documents nor to affect the meaning thereof.
1.5 Number and Gender of Words. Whenever herein the singular number is used, the same shall include the plural where appropriate, and words of any gender shall include each other gender where appropriate. Reference herein to Borrower shall mean, jointly and severally, each Person comprising same.
1.6 Articles, Addendums, Sections and Exhibits. All references herein to Article, Articles, Section, Sections, Subsection, and Subsections contained herein are, unless specified indicated otherwise, references to articles, sections, and subsections of this Agreement. All references herein to an Addendum, Exhibit or Schedule are references to exhibits or schedules attached hereto, all of which are made a part hereof for all purposes, the same as if set forth herein verbatim, it being understood that if any addendum, exhibit or schedule attached hereto which is to be executed and delivered, contains blanks, the same shall be completed correctly and in accordance with the terms and provisions contained and as contemplated herein prior to or at the time of the execution and delivery thereof. The words herein, hereof, hereunder and other similar compounds of the word here when used in this Agreement shall refer to the entire Agreement and not to any particular provision or section.
ARTICLE 2
COMMITMENT TO LEND, TERMS OF PAYMENT
2.1 Revolving Loans. Subject to and upon the terms and conditions of this Agreement, during the Loan Period, Bank agrees to make one or more Advances (hereinafter called, individually, a Revolving Loan and, collectively, the Revolving Loans) to Borrower for Approved Purposes in an aggregate principal amount at any one time outstanding up to but not exceeding the Committed Sum. Subject to Section 11 of the Promissory Note, within the limit of the Committed Sum in effect from time to time, during the Loan Period, Borrower may borrow, repay without penalty, and re-borrow at any time and from time to time from the Effective Date to the earlier of (a) the expiration of the Loan Period, or (b) the earlier termination of Banks Commitment hereunder in accordance with Section 10.1 (the Commitment Termination Date). If, by virtue of payments made on the Promissory Note during the Loan Period, the principal amount owed on the Promissory Note during its term reaches zero at any point, Borrower agrees that all of the Loan Documents shall remain in full force and effect to secure any Advances made thereafter, and Bank shall be fully entitled to rely on all of the Loan Documents unless an appropriate release of all or any part of the Loan Documents has been executed by Bank. The Principal Balance may not exceed the Committed Sum at any time. On the Maturity Date, the entire unpaid principal balance, and all unpaid accrued interest thereon, shall be due and payable without demand or notice. The Loan shall be unsecured. Borrower may, without cause and for any reason whatsoever, terminate this Agreement by providing thirty (30) days prior written notice to Bank; provided that Borrower has paid in full all amounts then owing hereunder on or prior to such date of termination, including the Indebtedness and all other Obligations.
2.2 Promissory Note. The Loan shall be evidenced by, be repayable, and accrue interest in accordance with, the Promissory Note. Subject to the terms and conditions in this Agreement, the Promissory Note, and the other Loan Documents, Borrower may borrow, repay, and re-borrow under the Promissory Note during the Loan Period. The unpaid principal balance of the Promissory Note shall be repaid as provided therein.
2.3 Borrowing Procedure. Borrower shall give Bank notice of each Revolving Loan by means of a written request containing the information required by Bank and delivered (by hand or email) to Bank no later than noon (Pacific time) on the day on which Borrower desires that Bank fund the Revolving Loan. Bank, at its option, may accept telephonic requests for such Advances, provided, however, that such acceptance shall not constitute a waiver of Banks right to require delivery of a written request in connection with subsequent Revolving Loans. Any telephonic request for a Revolving Loan by Borrower shall be promptly confirmed by Borrowers submission of a properly completed written request to Bank, but failure to deliver a written request shall not be a defense to the obligation to repay a Revolving Loan if made by Bank. Bank shall have no liability to Borrower for any loss or damage suffered by Borrower as a result of Banks honoring of any requests, execution of any instructions, authorizations or agreements or reliance on any reports communicated to it telephonically or electronically, and purporting to have been sent to Bank by Borrower and Bank shall have no duty to verify the origin of any such communication or the identity or authority of the Person sending it. Subject to the terms and conditions of this Agreement, each Revolving Loan shall be made available to Borrower by depositing the same, in immediately available funds, in an account or accounts of Borrower designated by Borrower maintained with Bank.
2.4 Overadvances. If, at any time and for any reason, the aggregate principal amount of the outstanding Revolving Loans exceeds the Committed Sum (an Overadvance), Borrower shall immediately pay Bank, in cash, the amount of such Overadvance. Bank may apply such payments to the outstanding Revolving Loans or Indebtedness in such order and manner as Bank, in its sole and absolute discretion, may determine.
2.5 Payments. If a scheduled payment under the Promissory Note is not made in a timely manner, Bank is authorized by Borrower to debit the amount of any such payments from the general deposit account of Borrower with Bank (which for the avoidance of doubt shall not be any escrow or custodial accounts).
2.6 Purpose of Loan. Borrower represents that the proceeds of the Loan will be used only for Approved Purposes.
2.7 Sale of Participations; Disclosure of Information. Bank may, with Borrowers consent, not to be unreasonably withheld, from time to time sell or offer to sell the Indebtedness, or interests therein, to one or more assignees or participants that are not in the same industry as Borrower and its Affiliates. Borrowers consent shall not be required, however, with respect to any sale of Bank or any division of Bank. Borrower further agrees that Bank is hereby authorized to disseminate and disclose any information (whether or not confidential or proprietary in nature) Bank now has or may hereafter obtain pertaining to Borrower, the Indebtedness or the Loan Documents (including, without limitation, any credit or other information regarding Borrower, any of its principals, or any other person or entity liable, directly or indirectly, for any part of the Loan), to Persons who need to know such information and are any of: (a) any assignee or participant or any prospective assignee or prospective participant, (b) any regulatory body having jurisdiction over Bank or the Indebtedness, and (c) any other persons or entities as may be necessary or appropriate in Banks reasonable judgment (Permitted Recipients); provided, that Bank shall only disclose such information as is reasonably necessary and shall require any such Person (other than regulators having jurisdiction over Bank) to agree to adhere to the provisions relating to
confidentiality contained in this Agreement with respect to any such confidential or proprietary information of Borrower.
2.8 Order of Application. Except as otherwise provided in the Loan Documents or otherwise agreed by Bank, all payments and prepayments of the Indebtedness, including proceeds from the exercise of any Rights under the Loan Documents, shall be applied to the Indebtedness in the following order, any instructions from Borrower to the contrary notwithstanding: (a) upon the occurrence and during the continuance of an Event of Default, to the reasonable and documented out-of-pocket expenses for which Bank shall be entitled to reimbursement under the Loan Documents, and not previously reimbursed, and then to all indemnified amounts due under the Loan Documents; (b) to fees then owed to Bank hereunder; (c) to accrued interest on the portion of the Indebtedness being paid or prepaid; (d) to the portion of the principal being paid or prepaid; (e) to the remaining accrued interest on the Indebtedness; (f) to the remaining principal; and (g) to the remaining Indebtedness. All amounts remaining after the foregoing application of funds shall be paid to Borrower.
ARTICLE 3
[RESERVED].
ARTICLE 4
CONDITIONS PRECEDENT TO LENDING
4.1 Initial Extension of Credit. The obligation of Bank to make the initial Advance under the Promissory Note is subject to the condition precedent that Bank shall have received on or before the day of such Advance all of the following, each dated (as applicable and unless otherwise indicated) on or as of the Effective Date, in form and substance reasonably satisfactory to Bank:
(a) Resolutions. Certified resolutions of the directors or shareholders, as required, of Borrower and each other Obligated Party which authorize the execution, delivery, and performance by Borrower or any such Obligated Party of this Agreement and the other Loan Documents to which Borrower or any such Obligated Party is or is to be a party;
(b) Incumbency Certificate. A certificate of incumbency certified by an authorized officer or representative certifying the names of the individuals or other Persons authorized to sign this Agreement and the other Loan Documents to which Borrower or any other Obligated Party is or is to be a party on behalf of Borrower or any such Obligated Party together with specimen signatures of such Persons;
(c) Organizational Documents. Certified Organizational Documents for Borrower and each other Obligated Party as of a date acceptable to Bank;
(d) Governmental Certificates. Certificates of the appropriate government officials of the state of incorporation or organization of Borrower and each other Obligated Party as to the existence and good standing of Borrower or any such Obligated Party, each dated within thirty (30) days prior to the date of the initial Advance;
(e) Promissory Note. The Promissory Note, executed by Borrower;
(f) Loan Agreement. This Agreement, executed by Borrower;
(g) Insurance Matters. Copies of insurance certificates describing all insurance policies required by the Agreement and the other Loan Documents;
(h) [Reserved];
(i) UCC Searches. Results of UCC and other search reports from one or more commercial search firms acceptable to Bank, listing all of the effective financing statements and other Liens filed against Borrower in the jurisdiction in which Borrower is incorporated and any other jurisdiction Bank deems relevant;
(j) Facility Fee. Borrower shall have paid Bank that portion of the Facility Fee due on the Effective Date; and
(k) Additional Items. All other additional items as may be reasonably required by Bank.
4.2 Conditions for All Advances. In addition to the conditions precedent stated elsewhere herein, Bank shall not be obligated to make any Advance unless:
(a) Representations and Warranties. The representations and warranties made in Article Five of this Agreement are true and correct in all material respects at and as of the time the Advance is to be made, and the request for an Advance shall constitute the representation and warranty by Borrower that such representations and warranties are true and correct in all material respects at such time;
(b) No Event of Default. On the date of, and upon receipt of, the Advance, no Event of Default, and no event which, with the lapse of time or notice or both, could reasonably be expected to become an Event of Default, shall have occurred and be continuing;
(c) Advance Request. Bank has received an Advance Request, as well as such other documents, opinions, certificates, agreements, instruments and evidences as Bank may reasonably request; and
(d) Additional Documentation. Bank shall have received such additional approvals, opinions, or documents as Bank may reasonably request.
Each Advance hereunder shall be deemed to be a representation and warranty by Borrower to Bank that the conditions specified in Section 4.1 and this Section 4.2 have been satisfied on and as of the date of the applicable Advance.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Bank as follows as of the date hereof and as of the date of each Loan:
5.1 Existence. Borrower is a duly organized, validly existing, and in good standing under the laws of the State of its formation, and is duly qualified to transact business and is in good standing in all jurisdictions where the nature and extent of its business and property requires the same and where the failure to so qualify would result in a Material Adverse Effect.
5.2 Authorization. Borrower possesses all requisite authority, power, licenses, permits, and franchises to conduct its business and execute, deliver, and comply with the terms of the Loan Documents. The execution and delivery of this Agreement, the consummation of the transactions herein contemplated and compliance with the terms and provisions hereof, the making of the Loan, and the execution, issuance, and delivery of the Loan Documents have been duly authorized and approved by all necessary entity action on the part of Borrower. No consent or approval of any Tribunal or any other Person is required in order for Borrower to legally execute, deliver, and comply with the terms of the Loan Documents.
5.3 Properties. Borrower has good and marketable title to, and is the legal and equitable holder of, its assets.
5.4 Compliance with Laws and Documents. Borrower is not, nor will the execution, delivery, and performance of and compliance with the terms of the Loan Documents cause Borrower to be, in violation of any Laws or in default (nor has any event occurred which, with the giving of notice or lapse of time or both, could reasonably be expected to constitute such a default) under any material contract in any respect, which in either case could reasonably be expected to have a Material Adverse Effect. During the past two (2) years, there have been no proceedings, claims, or (to Borrowers knowledge) investigations against or involving Borrower by any Tribunal under or pursuant to any environmental, occupational safety and health, antitrust, unfair competition, securities, or other Laws which could reasonably be expected to have a Material Adverse Effect, except as previously disclosed to Bank in writing in connection with Borrowers application for the Loan (the Tribunal Proceedings).
5.5 Litigation. Except for Litigation in which Borrower is exclusively a plaintiff without a counterclaim, cross claim, or similar action asserted against Borrower and except as previously disclosed to Bank in writing in connection with Borrowers application for the Loan (the Existing Litigation), Borrower is not involved in, nor is Borrower aware of the threat of, any Litigation which could reasonably be expected to have a Material Adverse Effect, and there are no material outstanding or unpaid judgments against Borrower that could reasonably be expected to have a Material Adverse Effect, and which are not stayed or pending appeal, except as previously disclosed to Bank in writing in connection with Borrowers application for the Loan (the Unpaid Judgments).
5.6 Taxes. All material federal, state, foreign, and other Tax returns of Borrower required to be filed have been filed, all material federal, state, foreign, and other Taxes imposed
upon Borrower which are due and payable have been paid, and to Borrowers knowledge, no material amounts of Taxes not reflected on such returns are payable by Borrower, other than Taxes being contested in good faith by appropriate legal proceedings and before commencing such contest disclosed in writing by Borrower to Bank.
5.7 Enforceability of Loan Documents. All Loan Documents when duly executed and delivered by Borrower (and assuming due execution and delivery by the other parties thereto) will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their terms subject to Debtor Relief Laws and except that the availability of equitable remedies may be limited.
5.8 Financial Statements. All financial statements of Borrower heretofore and hereafter to be delivered to Bank have been and shall continue to be prepared in accordance with GAAP, and do and shall fairly represent the financial condition of Borrower as of the date of each such financial statement (subject to reasonable yearend adjustments for interim financial statements). There are and shall be no material liabilities, direct or indirect, fixed or contingent, as of the date of each such financial statement which are not reflected therein or in the notes thereto. Except for transactions directly related to, or specifically contemplated by, this Agreement and transactions heretofore disclosed in writing to Bank, there has been no material adverse change in the financial condition of Borrower as shown by the Current Financial Statements for Borrower between the date of such Current Financial Statements and the date hereof, nor has Borrower incurred any material liability, direct or indirect, fixed, or contingent, except as otherwise disclosed to Bank. Neither Borrower nor any of its Subsidiaries has any material Debt, other contingent liabilities, liabilities for taxes, any long-term lease obligations or unusual forward or long-term commitments, or any Hedge Agreement or other transaction or obligation in respect of derivatives, that are not reflected in the most recent financial statements referred to in this paragraph except as disclosed to Bank in writing.
5.9 Regulation U. The proceeds of the Advances are not and will not be used directly or indirectly for the purpose of purchasing or carrying, or for the purpose of extending credit to others for the purpose of purchasing or carrying, any margin stock as that term is defined in Regulation U of the Board of Governors of the Federal Reserve System.
5.10 Subsidiaries. Borrower has no Subsidiaries as of the date of this Agreement except those disclosed to Bank in writing, in connection with Borrowers application for the Loan. There are no outstanding subscriptions, options, warrants, calls, rights or other agreements or commitments relating to any equity interests of Borrower the exercise or performance of which would effect a change in Control of Borrower. For purposes of this Section 5.10, Control means possession of either (a) the power to vote, or the beneficial ownership of, a majority of any class of voting ownership interests of Borrower; or (b) the power to direct or cause the direction of the management and policies of Borrower whether by contract or otherwise.
5.11 Other Debt. Except as previously disclosed to the Bank in writing, Borrower is not directly, indirectly, or contingently obligated with respect to any Debt as of the Effective Date. Borrower is not in default in the payment of the principal of or interest on any Debt after consideration for applicable cure periods.
5.12 Regulatory Acts. Borrower is not an investment company or controlled by an investment company within the meaning of the Investment Company Act of 1940, as amended, nor is Borrower subject to regulation under the Federal Power Act, the Interstate Commerce Act, or any other Law (other than Regulation X of the Board of Governors of the Federal Reserve System) which regulates the incurring by Borrower or Guarantor of debt, including, without limitation, Laws regulating common or contract carriers or the sale of electricity, gas, steam, water, or other public utility serves.
5.13 [Reserved].
5.14 [Reserved].
5.15 General. There is no significant material fact or condition relating to the financial condition and business of Borrower which has not been disclosed in writing to Bank, and all writings heretofore or hereafter exhibited, made, or delivered to Bank by or on behalf of Borrower are and will be genuine and in all material respects what they purport and appear to be.
5.16 Licensing. Borrower and any sub-servicers of Borrower are duly registered as mortgage lenders and/or servicers in each state in which mortgage loans have been or are from time to time originated or serviced, as applicable, to the extent such registration is required by any applicable Laws, except where the failure to register could not reasonably be expected to result in a Material Adverse Effect.
5.17 Solvency. Borrower and each Subsidiary are solvent and generally able to pay their debts as they come due.
5.18 [Reserved].
5.19 [Reserved].
5.20 [Reserved].
5.21 Financial Information. All representations and warranties set forth in the Loan Documents with respect to any financial information concerning Borrower or any Guarantor shall apply to all financial information delivered to Bank by Borrower, such Guarantor, or any Person purporting to be an Authorized Officer or other representative of Borrower or such Guarantor at the time of such transmission regardless of the method of transmission to Bank or whether or not signed by Borrower, such Guarantor or such Authorized Officer or other representative, as applicable.
ARTICLE 6
AFFIRMATIVE COVENANTS
So long as Bank is committed to make Advances hereunder, and thereafter until payment and performance in full of all of the Indebtedness and Obligations (other than indemnity and reimbursement obligations for which no claim has been made), Borrower covenants and agrees that:
6.1 Reporting Requirements. Borrower shall provide to Bank and/or cause the Guarantor to provide to Bank the financial statements and reports more particularly described in Exhibit A attached hereto.
6.2 Insurance. Borrower will maintain insurance with financially sound and reputable insurance companies in such amounts and covering such risks as is usually carried by corporations engaged in similar businesses and owning similar properties in the same general areas in which Borrower and the Subsidiaries operate, provided that in any event Borrower will maintain workmens compensation insurance, property insurance, and comprehensive general liability insurance required by any Agency.
6.3 Payment of Debts. Borrower will pay or cause to be paid, prior to the date on which penalties attach thereto all of its Debt (except to the extent and so long as the payment thereof is being properly contested in good faith by appropriate proceedings and adequate reserves have been established therefor, or where such failure to so pay could not reasonably be expected to result in a Material Adverse Effect.
6.4 Taxes. Borrower will promptly pay or cause to be paid when due any and all material Taxes due by Borrower, including, without limitation, all material taxes, duties, fees, levies and other charges of whatsoever nature which have been or may be imposed by any government or by any department, agency, state, other political subdivision or taxing authority thereof or therein; provided that Borrower shall not be required to pay and discharge any such Taxes or charges so long as the validity thereof shall be contested in good faith by appropriate proceedings and Borrower shall set aside on its books adequate reserves with respect thereto and shall pay any such Taxes or charge before the property subject thereto shall be sold to satisfy any lien which has attached as security therefor.
6.5 Expenses of Bank. Borrower will reimburse Bank, for all reasonable and documented out-of-pocket costs, fees, and expenses incident to the Loan Documents or any transactions contemplated thereby through the Effective Date, including, without limitation, all recording fees, all recording taxes, and the reasonable and documented out-of-pocket fees and disbursements of outside counsel for Bank for negotiation and preparation of the Loan Documents, preparation and review of other documents, and providing of other legal service. Borrower shall additionally reimburse Bank for all reasonable and documented out-of-pocket costs, fees and expenses arising after the Effective Date incident to the Loan Documents or the transactions contemplated thereby including without limitation for services (a) in connection with any subsequent Advance, (b) in connection with or in anticipation of an Event of Default or otherwise in the enforcement of the Loan Documents, (c) in connection with any amendment or waiver to any of the Loan Documents, (d) in connection with any request or action initiated by Borrower, or
(e) in connection with the exercise of any of Banks rights and remedies under this Agreement, the Promissory Note, or any of the other Loan Documents, or at law, including, without limitation, all reasonable and documented out-of-pocket consulting fees, filing fees, brokerage fees and commissions, fees incident to security interests, liens, and other title and other searches and reports, escrow fees, and outside attorneys fees, legal expenses, court costs, auctioneer fees and expenses, all of which shall be and become a part of the Indebtedness.
6.6 Maintenance of Entity Existence, Assets and Business; Continuance of Present Business. Borrower will preserve and maintain its existence and all of its leases, licenses, permits, franchises, qualifications, and rights that are necessary or desirable in the ordinary conduct of its business except where failure to so could not reasonably expected to have a Material Adverse Effect. Borrower will conduct its business in an orderly and efficient manner in accordance with good business practices. Borrower will keep or cause to be kept all of Borrowers assets which are useful and necessary in their respective businesses in good repair, working order and condition, and will make or cause to be made all necessary repairs, renewals and replacements as may be reasonably required.
6.7 Books and Records. Borrower will maintain proper books of record and account in which full, true, and correct entries in conformity with GAAP shall be made of all dealings and transactions in relation to its business and activities.
6.8 Compliance with Applicable Laws and with Contracts. Borrower will comply with the requirements of all applicable material Laws, rules, regulations and orders of any governmental authority, except where contested in good faith and by proper proceedings. Borrower will not default or fail to comply with any agreement, contract or instrument binding on it or affecting its properties or business which default or failure to comply could reasonably be expected to result in a Material Adverse Effect.
6.9 [Reserved].
6.10 [Reserved].
6.11 Information and Inspection. Borrower shall permit an authorized representative of Bank to visit with reasonable written advance notice to Borrower, which shall be at least five (5) Business Days notice provided no Event of Default then exists (and which notice shall specify what documents and information Bank would like to review, if any), and examine and make copies or records of, and inspect at reasonable times any of the properties of, Borrower and to discuss the affairs, finances, and accounts of Borrower with the officers and employees of Borrower; provided that unless an Event of Default has occurred and is continuing at such time, during the term of this Agreement Borrower shall not be required to reimburse Bank for any costs, expenses or other reimbursable amounts related to any such review, inspection and other actions described in this Section 6.11 taken by or on behalf of the Bank.
6.12 Additional Information. Borrower will promptly furnish or cause to be furnished to Bank such other information not otherwise required herein respecting the business affairs, assets and liabilities of Borrower, Guarantor, and the Subsidiaries as Bank shall from time to time
reasonably request to the extent Borrower is not prohibited from sharing due to obligations of confidentiality relating to any such information.
6.13 [Reserved].
6.14 Covenants Relating to Borrowers Property and Assets:
6.14.1. General:
(a) Records and Reports; Notification of Event of Default. Borrower will maintain complete and accurate books and records with respect to its property and other assets, and furnish to Bank such reports relating to its property and other assets as Bank shall from time to time reasonably request.
(b) [Reserved].
(c) [Reserved].
(d) Defense of Title. Borrower will take any and all actions necessary to defend title to its property and other assets against all persons.
(e) [Reserved].
(f) Change in Location, Jurisdiction of Organization or Name. Borrower shall give Bank written notice prior to (i) changing its principal place of business to a location other than a location previously disclosed to Bank in writing, (ii) changing its name or taxpayer identification number, (iii) changing its mailing address, or (iv) changing its jurisdiction of organization.
(g) [Reserved].
(h) [Reserved].
ARTICLE 7
NEGATIVE COVENANTS
So long as Bank is committed to make Advances hereunder, and thereafter until payment and performance in full of all of the Indebtedness and all of the Obligations (other than indemnity and reimbursement obligations for which no claim has been made), Borrower covenants and agrees that, without the prior written consent or notice as applicable, of Bank:
7.1 [Reserved].
7.2 [Reserved].
7.3 Pledging or Assignment of Assets. Except (a) in the ordinary course of Borrowers business, including without limitation the pledging, sale or assignment of mortgage loans, mortgage loan servicing rights, mortgage and other asset backed securities, and other related assets
(collectively, Mortgage Loan Assets), or (b) with Lenders written consent, which shall not be unreasonably withheld, Borrower shall not pledge, grant a security interest in or assign any existing or future rights to its assets.
7.4 [Reserved].
7.5 Mergers, Etc. Borrower will not, directly or indirectly (a) become a party to a merger or consolidation, or (b) without notice to Bank, other than in the ordinary course of business, purchase or otherwise acquire all or substantially all of the assets or shares or other evidence of beneficial ownership of any Person, (c) transfer assets other than Mortgage Loan Assets to any Subsidiary, unless prior to any such transfer of assets other than Mortgage Loan Assets to a Subsidiary, such Subsidiary executes and delivers to Bank such guaranty and/or pledge agreements as may be required by Bank, or (d) wind-up, dissolve, or liquidate without the prior written consent of Bank; provided, however, that Borrower may, without the prior written consent of Bank, and provided that an Event of Default is not then existing and will not occur as a result thereof: (i) merge or consolidate with any Person if Borrower is the surviving and controlling entity, (ii) in the ordinary course of business, sell equipment that is uneconomic or obsolete in accordance with Section 7.9, and (iii) acquire for resale and sell Mortgage Loan Assets.
7.6 [Reserved].
7.7 [Reserved].
7.8 Transactions with Affiliates. Borrower will not, directly or indirectly, enter into any transaction, including, without limitation, the purchase, sale, or exchange of property or the rendering of any service or the payment of any management, advisory or similar fees, with any Affiliate of Borrower, except in the ordinary course of and pursuant to the reasonable requirements of Borrowers business, and upon fair and reasonable terms no less favorable to Borrower than would be obtained in a comparable arms-length transaction with a Person not an Affiliate of Borrower.
7.9 Disposition of Assets. Other than in the ordinary course of business, including without limitation (i) the disposition of Mortgage Loan Assets, and (ii) dispositions, for fair value, of worn-out and obsolete equipment not necessary or useful to the conduct of business, Borrower will not, directly or indirectly, sell, lease, assign, transfer, or otherwise dispose of all or any material portion of its assets.
7.10 Nature of Business. Borrower will not engage in any business other than the Permitted Businesses without providing Bank prior written notice.
7.11 Environmental Protection. Borrower will not, directly or indirectly, (a) use (or permit any tenant to use) any of its properties or assets for the handling, processing, storage, transportation, or disposal of any Hazardous Material, (b) generate any Hazardous Material, (c) conduct any activity that is likely to cause a Release or threatened Release of any Hazardous Material, or (d) otherwise conduct any activity or use any of its respective properties or assets in any manner that is likely to violate any Environmental Law or create any Environmental Liabilities for which Borrower would be responsible.
7.12 [Reserved].
7.13 Judgments. Borrower will not allow any judgment rendered against it that could reasonably be determined to cause a Material Adverse Effect to Borrower to remain undischarged or unsuperseded for a period of thirty (30) days during which execution shall not be effectively stayed.
7.14 [Reserved].
7.15 [Reserved].
ARTICLE 8
FINANCIAL COVENANTS
Borrower covenants and agrees that, as long as any Indebtedness or Obligations or any part thereof is outstanding or Bank is under any obligation to make additional Advances under this Agreement, Borrower will, at all times, observe and perform the financial covenants set forth on Exhibit A attached hereto.
ARTICLE 9
EVENTS OF DEFAULT
The term Event of Default as used herein shall mean the occurrence of any one or more of the following events:
9.1 Payment of Indebtedness. The failure of Borrower to punctually pay the Indebtedness under the Loan Documents, or any part thereof, as the same become due in accordance with the terms of the Loan Documents, including, without limitation, the failure or refusal of Borrower to punctually pay the principal of or the interest on any Loan or the failure of Borrower to cure an Overadvance in accordance with the terms of Section 2.4, and such failure continues for more than [***] Business Days following written notice of such default by Bank to Borrower.
9.2 Misrepresentation. Any statement, representation, or warranty heretofore or hereafter made or deemed made by Borrower or any Obligated Party in this Agreement or any other Loan Document or in any writing, or any statement or representation made in any certificate, report, or opinion delivered to Bank pursuant to the Loan Documents, is incorrect, false, calculated to mislead, misleading, or erroneous in any material respect at the time made, and such failure continues for more than [***] days following written notice of such default by Bank to Borrower.
9.3 Covenants. The failure or refusal of Borrower or any Obligated Party to materially perform, observe, and comply with any covenant or agreement contained in any of the Loan Documents, and (i) with respect to any financial covenant, such failure to perform, observe or comply continues for a period of [***] days; and (ii) with respect to any other term, covenant or agreement, such failure to perform, observe or comply continues for a period of [***] days following Borrowers receipt of written notice of such default.
9.4 Voluntary Debtor Relief. Borrower or any Obligated Party shall (a) execute an assignment for the benefit of creditors, (b) become or be adjudicated as bankrupt or insolvent, or (c) admit in writing its inability to, pay its debts generally as they become due, (d) apply for or consent to the appointment of a conservator, receiver, trustee, liquidator, custodian or other similar official of it or all or a substantial part of its assets, (e) file a voluntary petition, or commence any other proceeding, or other action, seeking liquidation, reorganization or dissolution, conservatorship, or seek any other arrangement with creditors or to take advantage or seek any other relief under any Debtor Relief Law now or hereafter existing, (f) file an answer admitting the material allegations of or consenting to, or default in, a petition filed against it in any liquidation, conservatorship, bankruptcy, reorganization, rearrangement, debtors relief, or other insolvency proceedings, or (g) institute or voluntarily be or become a party to any other judicial proceedings intended to effect a discharge of its debts, in whole or in part, or a postponement of the maturity or the collection thereof, or a suspension of any of the Rights or powers of Bank granted in any of the Loan Documents.
9.5 Involuntary Proceedings. Borrower or any Obligated Party shall involuntarily (a) have an order, judgment, or decree entered against it by any Tribunal pursuant to any Debtor Relief Law that could suspend or otherwise affect any of the Rights granted to Bank in any of the Loan Documents, and such order, judgment, or decree is not permanently stayed, vacated, or reversed within [***] days after the entry thereof, or (b) have a petition filed against it or any of its property seeking the benefit or benefits provided for by any Debtor Relief Law that would suspend or otherwise affect any of the Rights granted to Bank in any of the Loan Documents, and such petition is not discharged within [***] days after the filing thereof.
9.6 Attachment. The failure to have discharged within a period of [***] days after the commencement thereof any attachment, sequestration, or similar proceedings against any of the material assets of Borrower which could reasonably be expected to result in a Material Adverse Effect.
9.7 Other Debt. Borrower or any other Obligated Party shall default in the due and punctual payment of the principal of or the interest, on any Debt with a principal balance of $[***] or greater (other than the Loans made hereunder) with Bank, secured or unsecured, or in the due performance or observance of any covenant or condition of any agreement executed in connection therewith which might reasonably be determined to cause a Material Adverse Effect, and such default shall have continued beyond any period of grace or cure provided with respect thereto.
9.8 [Reserved].
9.9 Dissolution. The dissolution of Borrower for any reason whatsoever.
9.10 [Reserved].
9.11 [Reserved].
9.12 Defaults on Other Debt or Agreements. Borrower or any other Obligated Party shall default in the due and punctual payment of the principal of or the interest on any Debt owing
to the Bank or any Person, or shall fail to materially perform, observe or comply with any covenant, agreement or other obligation to be performed, observed or complied with by Borrower or such Obligated Party in any agreement ancillary to such Debt, subject to any grace and/or cure periods provided therein, which default or failure could reasonably be expected to result in a Material Adverse Effect.
9.13 [Reserved].
9.14 Material Adverse Effect. A Material Adverse Effect has occurred.
9.15 [Reserved.]
ARTICLE 10
CERTAIN RIGHTS AND REMEDIES OF BANK
10.1 Rights upon Event of Default. If any Event of Default shall occur and be continuing, Bank may upon written notice to Borrower terminate the Commitment and declare the Indebtedness or any part thereof to be immediately due and payable, and the same shall thereupon become immediately due and payable without notice, demand, present, notice of dishonor, notice of acceleration, notice of intent to accelerate, protest or other formalities of any kind, all of which are hereby expressly waived by Borrower; provided, however, that upon the occurrence of an Event of Default under Section 9.4 or Section 9.5, the Commitment shall automatically terminate, and the Indebtedness shall become immediately due and payable without notice, demand, presentment, notice of dishonor, notice of acceleration, notice of intent to accelerate, notice of intent to demand, protest, or other formalities of any kind, all of which are hereby expressly waived by Borrower. Notwithstanding the foregoing, Borrower reserves the right to contest the existence of an Event of Default. If any Event of Default shall occur and be continuing, Bank may exercise all rights and remedies available to it in law or in equity, under the Loan Documents, or otherwise.
10.2 [Reserved].
10.3 Attorney-in-Fact. Upon the occurrence and during the continuance of an Event of Default, Bank is hereby appointed the attorney-in-fact of Borrower, with full power of substitution, for the purpose of carrying out the provisions of this Agreement and taking any action and executing any agreements, documents or instruments that Bank may deem necessary or advisable to accomplish this Agreements purposes, which appointment as attorney-in-fact is coupled with an interest and irrevocable for so long as any of the Indebtedness, the Obligations (other than indemnity and reimbursement obligations for which no claim has been made) or the Commitments are outstanding. Bank agrees not to exercise its rights under this power of attorney unless, in its opinion or the opinion of its legal counsel, an Event of Default has occurred that Bank has not declared in writing to have been cured or waived.
10.4 Setoff. At any time during the continuance of an Event of Default, to the extent permitted by law, Bank shall be entitled to exercise rights of setoff or bankers lien against the interest of Borrower in and to each and every account and other property of Borrower which are in the possession of Bank (except trust or custodial accounts) to the extent of the full amount of the Indebtedness; provided that such Indebtedness is then due. The rights and remedies of Bank
hereunder are in addition to other rights and remedies (including, without limitation, other rights of setoff) which Bank may have.
10.5 Performance by Bank. Upon the occurrence and during the continuance of an Event of Default hereunder, should any covenant, duty, or agreement of Borrower fail to be materially performed in accordance with the terms of the Loan Documents, Bank may, at its option and upon notice to Borrower, perform or attempt to perform such covenant, duty, or agreement on behalf of Borrower. In such event, or if Bank reasonably expends any sum pursuant to the exercise of any Right provided herein, Borrower shall, at the request of Bank, promptly pay to Bank any such reasonable and documented out-of-pocket amount reasonably expended by Bank in such performance or attempted performance, together with interest thereon at the Maximum Rate from the date of such expenditure by Bank until paid. Notwithstanding the foregoing, it is expressly understood that Bank does not assume any liability or responsibility for the performance of any duties of Borrower or Guarantor hereunder.
10.6 Appointment of Receiver. At any time an Event of Default exists, Bank shall be entitled to exercise the right to appoint or seek appointment of a receiver, custodian, or trustee of Borrower pursuant to an order by any Tribunal, and Borrower consents to such appointment and will not oppose Banks efforts to obtain such receiver, custodian, or trustee.
10.7 [Reserved].
10.8 Waivers. The acceptance of Bank at any time and from time to time of part payment on the Indebtedness shall not be deemed to be a waiver of any Event of Default then existing. No waiver by Bank of any Event of Default shall be deemed to be a waiver of any other then-existing or subsequent Event of Default. No waiver by Bank of any of its Rights hereunder, in the other Loan Documents, or otherwise shall be considered a waiver of any other or subsequent Right of Bank. No delay or omission by Bank in exercising any Right under the Loan Documents shall impair such Right or be construed as a waiver thereof or any acquiescence therein, nor shall any single or partial exercise of any such Right preclude other or further exercise thereof, or the exercise of any other Right under the Loan Documents or otherwise.
10.9 Cumulative Rights. All Rights available to Bank under the Loan Documents shall be cumulative of and in addition to all other Rights granted to Bank at Law or in equity, whether or not the Indebtedness or the Obligations be due and payable or performance required and whether or not Bank shall have instituted any suit for collection, foreclosure, or other action under or in connection with the Loan Documents.
10.10 INDEMNIFICATION OF BANK. BORROWER SHALL INDEMNIFY BANK, EACH AFFILIATE OF BANK AND EACH OF ITS AND THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FOR, FROM, AND AGAINST AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, AND REASONABLE AND DOCUMENTED OUT-OF-POCKET COSTS AND EXPENSES (INCLUDING REASONABLE AND DOCUMENTED OUT-OF-POCKET OUTSIDE ATTORNEYS FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH ARISE FROM OR RELATE TO (A) THE NEGOTIATION,
EXECUTION, DELIVERY, PERFORMANCE, ADMINISTRATION, OR ENFORCEMENT OF ANY OF THE LOAN DOCUMENTS, (B) ANY OF THE TRANSACTIONS CONTEMPLATED BY THE LOAN DOCUMENTS, (C) ANY BREACH BY BORROWER OR ANY OTHER OBLIGATED PARTY OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, (D) THE PRESENCE, RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY HAZARDOUS MATERIAL LOCATED ON, ABOUT, WITHIN OR AFFECTING ANY OF THE PROPERTIES OR ASSETS OF BORROWER OR ANY SUBSIDIARY, (E) ANY INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED INVESTIGATION, LITIGATION, OR OTHER PROCEEDING, RELATING TO ANY OF THE FOREGOING, OR (F) ANY HEDGE AGREEMENT; PROVIDED, HOWEVER, THE INDEMNITIES PROVIDED IN THIS SECTION 10.10 DO NOT EXTEND TO LOSSES, LIABILITIES, CLAIMS, OR DAMAGES CAUSED BY ANY INDEMNITEES BAD FAITH, SOLE NEGLIGENCE OR WILLFUL MISCONDUCT.
10.11 Limitation of Liability. Neither party hereto nor any Affiliate, officer, director, employee, attorney, or agent of such party shall have any liability with respect to, and hereby waives, releases, and agrees not to sue any of them upon, any claim for any special, indirect, incidental, or consequential damages suffered or incurred by such party in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents. Each party hereby waives, releases, and agrees not to sue the other party or any of such partys Affiliates, officers, directors, employees, attorneys, or agents for punitive damages in respect of any claim in connection with, arising out of, or in any way related to, this Agreement or any of the other Loan Documents, or any of the transactions contemplated by this Agreement or any of the other Loan Documents.
ARTICLE 11
MISCELLANEOUS
11.1 Headings. The headings, captions, and arrangements used in any of the Loan Documents are, unless specified otherwise, for convenience only and shall not be deemed to limit, amplify, or modify the terms of the Loan Documents, nor affect the meaning thereof.
11.2 Number and Gender of Words. Whenever herein the singular number is used, the same shall include the plural where appropriate, and vice versa; and words of any gender shall include each other gender where appropriate.
11.3 Notices. All notices, requests, consents and other communications hereunder shall be in writing and shall be delivered personally or mailed by first-class registered or certified mail, postage prepaid, overnight delivery service, or email to any party at its address shown on the signature pages of this Agreement or at such other address as may be designated by it by notice to the other party. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt.
11.4 [Reserved].
11.5 Survival. All covenants, agreements, undertakings, representations, and warranties made in any of the Loan Documents shall survive all closings under the Loan Documents and shall continue in full force and effect so long as any part of the Indebtedness remains outstanding and, except as otherwise indicated, shall not be affected by any investigation made by any party. Notwithstanding anything contained herein to the contrary, the covenants, agreements, undertakings, representations, and warranties made in Section 6.5 and Section 10.10 shall survive the expiration or termination of this Agreement, regardless of the means of such expiration or termination.
11.6 GOVERNING LAW; PLACE OF PERFORMANCE. THE LOAN DOCUMENTS ARE BEING EXECUTED AND DELIVERED, AND ARE INTENDED TO BE PERFORMED, IN THE STATE OF ARIZONA, AND THE LAWS OF SUCH STATE (WITHOUT REGARD TO ITS PROVISIONS OF CHOICE OF LAWS) AND OF THE UNITED STATES SHALL GOVERN THE RIGHTS AND DUTIES OF THE PARTIES HERETO AND THE VALIDITY, CONSTRUCTION, ENFORCEMENT, AND INTERPRETATION OF THE LOAN DOCUMENTS, EXCEPT TO THE EXTENT OTHERWISE SPECIFIED IN ANY OF THE LOAN DOCUMENTS. THIS AGREEMENT, ALL OF THE OTHER LOAN DOCUMENTS, AND ALL OF THE OBLIGATIONS OF BORROWER UNDER ANY OF THE LOAN DOCUMENTS ARE PERFORMABLE, AND THE INDEBTEDNESS IS PAYABLE, IN MARICOPA COUNTY, ARIZONA. VENUE OF ANY LITIGATION INVOLVING THIS AGREEMENT OR ANY LOAN DOCUMENT SHALL BE MAINTAINED, AND EACH PARTY CONSENTS TO JURISDICTION, IN AN APPROPRIATE STATE OR FEDERAL COURT LOCATED IN MARICOPA COUNTY, ARIZONA, TO THE EXCLUSION OF ALL OTHER VENUES.
11.7 Additional Sums. All fees, charges, goods, things in action or any other sums or things of value, other than the interest resulting from the Stated Interest Rate and the Default Interest Rate (as those terms are defined in the Promissory Note, as applicable, paid or payable by Borrower under the Loan Documents (collectively, the Additional Sums), whether pursuant to the Promissory Note, this Agreement, any of the other Loan Documents or otherwise with respect to this lending transaction, that, under the laws of the State of Arizona, may be deemed to be interest with respect to this lending transaction, for the purpose of any laws of the State of Arizona that may limit the maximum amount of interest to be charged with respect to this lending transaction, shall be payable by Borrower as, and shall be deemed to be, additional interest, and for such purposes only, the agreed upon and contracted for rate of interest of this lending transaction shall be deemed to be increased by the rate of interest resulting from the Additional Sums. Borrower understands and believes that this lending transaction complies with the usury laws of the State of Arizona; however, if any interest or other charges in connection with this lending transaction are ever determined to exceed the maximum amount permitted by law, then Borrower agrees that: (a) the amount of interest or charges payable pursuant to this lending transaction shall be reduced to the maximum amount permitted by law; and (b) any excess amount previously collected from Borrower in connection with this lending transaction that exceeded the maximum amount permitted by law, will be credited against the principal balance then outstanding hereunder. If the outstanding principal balance hereunder has been paid in full, the excess amount paid will be refunded to Borrower.
11.8 Invalid Provisions. If any provision of any of the Loan Documents is held to be illegal, invalid, or unenforceable under present or future Laws effective during the term thereof, such provision shall be fully severable, the appropriate Loan Document shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part thereof, and the remaining provisions thereof shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance therefrom. Furthermore, in lieu of such illegal, invalid, or unenforceable provision, there shall be added automatically as a part of such Loan Document a provision as similar in terms to such illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable.
11.9 Entirety and Amendments. This Agreement, together with the other Loan Documents, embodies the entire agreement between the parties relating to the subject matter hereof, supersedes all prior agreements and understandings, if any, relating to the subject matter hereof, and may be amended only by an instrument in writing executed jointly by Borrower and Bank and supplemented only by documents delivered or to be delivered in accordance with the express terms hereof.
11.10 Multiple Counterparts. This Agreement has been executed in a number of identical counterparts, each of which constitutes an original and all of which constitute, collectively, one agreement; but in making proof of this Agreement, it shall not be necessary to produce or account for more than one such counterpart. Facsimile or email copies of signatures may be accepted as originals.
11.11 Parties Bound. This Agreement shall be binding upon and inure to the benefit of Borrower, Bank and their respective successors and assigns; provided, however that Borrower may not, without the prior written consent of Bank, assign any of its Rights, duties, or obligations hereunder. No term or provision of this Agreement shall inure to the benefit of any Person other than Borrower and Bank and their respective successors and assigns.
11.12 [Reserved].
11.13 Conflicts. In the event of any conflict between the terms of this Agreement and any terms of any other Loan Documents, the terms of this Agreement shall govern. All of the Loan Documents are by this reference incorporated into this Agreement.
11.14 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER HEREBY IRREVOCABLY AND EXPRESSLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING, OR COUNTERCLAIM (WHETHER BASED UPON CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE ACTIONS OF BANK IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT THEREOF.
11.15 Independence of Covenants. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or be otherwise within the limitations of, another
covenant shall not avoid the occurrence of an Event of Default if such action is taken or such condition exists.
11.16 USA Patriot Act. Bank is subject to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the Act) and hereby notifies Borrower that pursuant to the requirements of the Act, it is required to obtain, verify, and record information that identifies Borrower, which information includes the name and address of Borrower and other information that will allow such Bank to identify Borrower in accordance with the Act.
11.17 [Reserved].
11.18 Confidentiality.
(a) Confidential Terms. Bank and Borrower hereby acknowledge and agree that certain non-public, confidential or proprietary information may be provided before or after the date hereof by one party to any other in connection with this Agreement or the transactions contemplated hereby, whether furnished by or on behalf of Bank or Borrower or any of their representatives including without limitation: (i) knowledge or information concerning the business, operations and assets of the Bank or Borrower or their respective Affiliates, internal operating procedures; methodologies; investment strategies; hedging strategies; structuring strategies and concepts; trade secrets; sales data; vendor data and customer lists (existing and potential); financial plans, projections and reports; product strategies; and investment strategies; (ii) property owned, licensed and/or developed by or for the Bank or Borrower or their respective Affiliates, such as computer systems, programs, software and devices, plus information about the design, methodology and documentation therefor; (iii) information about or personal to the Bank or Borrower or their respective Affiliates, insureds, employees, agents and applicants (for jobs or products) of any of the foregoing, and (iv) information, materials, products or any other tangible or intangible assets in the possession or the control of the Bank or Borrower or their respective Affiliates, which is proprietary to, or confidential to or about, any other person or entity (the Confidential Terms). Bank and Borrower agree that Confidential Terms shall be kept confidential and shall not be divulged to any party without the prior written consent of such other party except to the extent set forth in clause (b) below. Confidential Terms shall not include information that (A) is or becomes part of the public domain other than as a result of an unauthorized disclosure by Bank or Borrower, as applicable, or its Permitted Recipients (as defined below) in violation of this Agreement; (B) is already known to the Bank or Borrower, as applicable, or any of its Permitted Recipients on a non-confidential basis prior to disclosure of such information by either party; (C) is subsequently received by the Bank or Borrower, as applicable, or its Permitted Recipients from a third party who is not known by Bank or Borrower, as applicable, or its Permitted Recipients to be under an obligation of confidentiality; or (D) is independently developed by Bank or Borrower, as applicable without use of Confidential Terms of the other.
(b) Permitted Disclosures. Notwithstanding clause (a) above, Bank and Borrower, as applicable, shall be permitted to disclose, on a confidential basis, Confidential Terms (i) in working with its Affiliates, legal counsel, actuaries, auditors, professional advisors, directors, officers, employees, rating agencies, participants, successors or assigns (Permitted Recipients); (ii) to any taxing authorities or other governmental agencies or regulatory bodies or in order to comply with
any applicable federal or state laws; (iii) subject to an agreement containing provisions substantially the same as this section, to any actual or prospective successor (or its advisors); or (iv) in the event of an Event of Default, Bank determines such information to be necessary or desirable to disclose in connection with the exercise Banks rights hereunder.
(c) Involuntary Disclosures. If the Bank or Borrower shall at any time be involved in any litigation, arbitration, administrative, legal, regulatory or other proceeding or if Bank or Borrower and/or its respective Permitted Recipients is otherwise required by law, regulation or other legal process, in each case, in which such party and/or its Permitted Recipient, on the advice of its own legal counsel, may be or becomes required to disclose any Confidential Terms in violation of this Section of this Agreement (a Legal Proceeding), whether in discovery or otherwise, including by any oral question, subpoena, interrogatory, deposition, request for documents or information, order, writ, rule, regulatory, or other legal process, such party and/or its Permitted Recipients shall, if such party and/or its Permitted Recipients may lawfully do so, promptly notify the other party of the receipt of such Legal Proceeding whereupon such other party may seek an appropriate protective order or other relief at such other partys own expense. Bank or Borrower and its respective Permitted Recipients, as applicable, shall reasonably cooperate with the other party, at such other partys reasonable expense, if it seeks to obtain a protective order or other remedy or reasonable assurance that confidential treatment will be afforded the Confidential Terms in the Legal Proceeding. Notwithstanding the foregoing, no notice or other action by Bank or Borrower, as applicable, or any of their respective Permitted Recipients shall be required where disclosure of Confidential Terms is made in connection with a routine request, audit or examination by a bank examiner, auditor, regulatory authority or supervisory authority.
(d) Treatment of Confidential Terms. Bank understands that the Confidential Terms may contain information that is subject to, and accordingly Bank represents and warrants to Borrower that Bank and its Affiliates are subject to internal policies and processes that require Bank and its Permitted Recipients to receive, maintain, store and dispose of such Confidential Terms in compliance with, any and all applicable federal, state and local laws, rules, regulations and ordinances governing or relating to privacy rights in connection with its performance under this Agreement including, without limitation, the Gramm Leach Bliley Act, as amended (the GLB Act). Such policies and procedures include the implementation of such physical and other security measures as shall be necessary to (a) ensure the security and confidentiality of any nonpublic personal information that is disclosed to Bank in any manner or for any purpose and that pertains to any customers or consumers (as all such terms are defined in the GLB Act) of Borrower, (b) protect against any threats or hazards to the security and integrity of such nonpublic personal information, and (c) protect against any unauthorized access to or use of such nonpublic personal information. Bank further understands that Borrower is relying on Banks representation and warranty in disclosing the Confidential Terms. Upon written request from Borrower, Bank will provide written confirmation of the continued accuracy of this representation and warranty, it being understood that disclosure of information pertaining to specific policies or processes may require a confidentiality undertaking from Borrower.
(e) Required Tax Disclosures. Notwithstanding the foregoing or anything to the contrary contained herein or in any other Loan Document, the parties hereto may disclose to any and all Persons, without limitation of any kind, the federal, state and local tax treatment of the transactions, any fact relevant to understanding the federal, state and local tax treatment of the
transactions, and all materials of any kind (including opinions or other tax analyses) relating to such federal, state and local tax treatment and that may be relevant to understanding such tax treatment; provided that Borrower may not disclose the name of or identifying information with respect to Bank, its Affiliates or any other indemnified party, or any pricing terms or other nonpublic business or financial information (including any sublimits and financial covenants) that is unrelated to the federal, state and local tax treatment of the transactions and is not relevant to understanding the federal, state and local tax treatment of the transactions, without the prior written consent of Bank. The provisions set forth in this Section shall survive the termination of this Agreement.
[Signature Page Follows]
EXECUTED to be effective as of the date first written above.
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BANK: | ||
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WESTERN ALLIANCE BANK, | ||
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an Arizona corporation | ||
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By: |
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Name: |
Josh Ormiston | |
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Title: |
Vice President | |
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Address for Notices: | ||
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Western Alliance Bank | ||
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2701 East Camelback Rd., Ste. 110 | ||
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Phoenix, Arizona 85016 | ||
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Attention: |
Josh Ormiston | |
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E-mail: |
jormiston@WesternAllianceBank.com | |
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With copies to: | ||
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Western Alliance Bank | ||
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2701 East Camelback Rd. Ste. 110 | ||
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Phoenix, Arizona, 85016 | ||
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Attention: Elizabeth Mix | ||
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E-mail: emix@WesternAllianceBank.com | ||
[Signature Page to Loan Agreement]
EXECUTED to be effective as of the date first written above.
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BORROWER: | |
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AMERIHOME MORTGAGE COMPANY, LLC, | |
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a Delaware limited liability company | |
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By: |
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Name: |
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Title: |
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Address of Borrower: | |
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AmeriHome Mortgage Company, LLC | |
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1 Baxter Way, Suite 300 | |
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Thousand Oaks, CA 91362 | |
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With a copy to: | |
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AmeriHome Mortgage Company, LLC | |
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1 Baxter Way, Suite 300 | |
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Thousand Oaks, CA 91362 | |
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And to: | |
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AmeriHome Mortgage Company, LLC | |
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1 Baxter Way, Suite 300 | |
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Thousand Oaks, CA 91362 | |
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Attention: Legal Department | |
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email: legal@amerihome.com |
[Signature Page to Loan Agreement]
EXHIBIT A
(TO LOAN AGREEMENT)
ADDITIONAL LOAN TERMS AND COVENANTS ADDENDUM
This ADDITIONAL LOAN TERMS AND COVENANTS ADDENDUM (this Addendum) is effective March 6, 2020 (the Effective Date), and is entered into by AmeriHome Mortgage Company, LLC, a Delaware limited liability company (Borrower) and Western Alliance Bank, an Arizona corporation (Bank) concurrently with, and as a condition to the effectiveness of, that certain Loan Agreement (as amended and modified from time to time, the Loan Agreement) dated the Effective Date, executed by Bank and Borrower. Accordingly, Bank and Borrower agree as follows:
1. Additional Definitions. Capitalized terms used herein but not defined shall have the meanings ascribed to them in the Agreement. In addition, the following terms shall have the following definitions, and if a term is defined in the Agreement and in this Addendum, the definition set forth in this Addendum shall govern and control for purposes of this Addendum:
Adjusted Tangible Net Worth means the Tangible Net Worth of such Person plus (a) the MSR Value at such date; minus: (b) (i) the aggregate book value of all intangible assets of such Person (as determined in accordance with GAAP), including, without limitation: goodwill; trademarks, trade names, service marks, copyrights, patents, licenses and franchises; capitalized servicing rights; organizational expenses; deferred expenses; (ii) receivables from equity owners, Affiliates or employees; (iii) any other assets deemed intangible by Bank; in all cases, calculated on a consolidated basis and determined in accordance with GAAP consistent with those applied in the preparation of the Financial Statements referred to herein.
Approved Purposes means working capital in ordinary course of Borrowers business operations.
Committed Sum means Ten Million and No/100 Dollars ($10,000,000.00).
Debt Service Coverage Ratio means, [***].
MSR Value means, as of any date of determination, the lesser of (a) Borrowers capitalized servicing rights at such time, and (b) as applicable, and with respect to the same servicing rights (i) the value set forth in a servicing appraisal, at such time, with respect to those mortgage loans then included in Borrowers capitalized servicing rights, or (ii) if the applicable servicing appraisal has not been timely delivered to Bank, such amount as Bank shall determine in its reasonable discretion, using such means of valuation as it reasonably deems appropriate under the circumstances.
Pre-Tax Profitability means Borrowers pre-tax Net Income.
Promissory Note means the promissory note, dated as of the Effective Date, in the maximum principal amount of Ten Million and No/100 Dollars ($10,000,000.00), executed by Borrower and payable to the order of Bank, in form and substance satisfactory to Bank, and all amendments, extensions, renewals, replacements, increases, and modifications thereof.
Restricted Cash means any amount of cash of such Person that is contractually required to be set aside, segregated or otherwise reserved.
3. Financial Covenants. Borrower covenants and agrees that, as long as the Agreement remains in effect, Borrower will, on a quarterly basis, observe, perform and comply with each of the following covenant(s):
(a) Maintenance of Adjusted Tangible Net Worth. Borrower shall maintain an Adjusted Tangible Net Worth as of the end of each fiscal quarter of not less than[***], commencing on March 31, 2020.
(b) Maintenance of Ratio of Debt to Adjusted Tangible Net Worth. Borrower shall maintain the ratio of total Debt minus Subordinated Debt to Adjusted Tangible Net Worth plus Subordinated Debt as of the end of each fiscal quarter of no greater than[***], commencing on March 31, 2020.
(c) Maintenance of Liquidity. Borrower shall ensure that as of the end of each fiscal quarter it has cash and Liquid Assets (excluding Restricted Cash or cash pledged to Persons other than Bank) in an amount not less than[***], commencing on March 31, 2020.
(d) Minimum Pre-Tax Profitability. Borrower shall not permit Borrowers Pre-Tax Profitability to be less than $1.00 for any fiscal calendar quarter, commencing on March 31, 2020.
(e) Debt Service Coverage Ratio. Borrower shall maintain a Debt Service Coverage Ratio as of the end of each fiscal quarter of at least [***], commencing on [***].
(f) Out of Debt Period. Borrower covenants and agrees that the Loan is intended by Borrower and provided by Bank with the understanding that it is to be utilized to finance the short-term business needs of Borrower and is not intended as a long-term loan. Borrower therefore agrees that during the Loan Period and any renewals or extensions thereof, Borrower will maintain an outstanding balance of not greater than [***] for at least [***] consecutive days during the Loan Period.
4. Non-Financial Covenants. Borrower covenants and agrees that, as long as the Agreement remains in effect, Borrower will, at all times, observe, perform and comply with each of the following covenant(s):
(a) [Reserved];
(b) Financial Statements and Compliance Certificate; Financial Reporting. Borrower shall maintain a system of accounting established and administered in accordance with GAAP, and furnish, or cause to be furnished, to Bank:
(i) Within one hundred twenty (120) days after the close of each fiscal year, audited financial statements, including a statement of income and changes in shareholders equity of Borrower for such year, and the related balance sheet as at the end of such year, all in reasonable detail and accompanied by an opinion of a certified public accountant acceptable to Bank as to said financial statements, and certified by such Borrower that said financial statement fairly presents the financial condition of such Borrower as of such date;
(ii) Within forty five (45) days after the end of each calendar quarter, including the last quarter of Borrowers fiscal year, the unaudited balance sheets of Borrower as at the end of such period and the related unaudited consolidated statements of income and retained earnings and of cash flows for Borrower for such period and the portion of the fiscal year through the end of such period, subject, however, to year-end adjustments;
(iii) Concurrently with the delivery of the financial statements required above, submit to Bank: (1) a Compliance Certificate as of the end of such period; and (2) a certificate of an Authorized Officer of Borrower (i) stating that to the best of such Persons knowledge, no Event of Default has occurred and is continuing, or if an Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto, and (ii) showing in reasonable detail the calculations demonstrating compliance with Article Eight and this Addendum. Such Compliance Certificate shall be in the form of Exhibit B to the Agreement or in such other form as Bank may reasonably require; and
(iv) [Reserved];
(v) [Reserved];
(c) [Reserved].
(d) [Reserved].
(e) Restricted Payments. Provided no Event of Default has occurred and is continuing, and such payment or distribution will not result in an Event of Default, Borrower may , directly or indirectly, declare or pay any dividends or make any other payment or distribution (in cash, property, or obligations) on account of its equity interests, or redeem, purchase, retire, or otherwise acquire any of its equity interests, or set apart any money for a sinking or other analogous fund for any dividend or other distribution on its equity interests or for any redemption, purchase, retirement, or other acquisition of any of its equity interests, or undertake any new obligation (contingent or otherwise) to do any of the foregoing.
(f) Change in Management or Subservicer. Borrower shall not permit any change in the senior executive management of Borrower or subservicer of Borrower without promptly providing Bank notice of such a change.
(g) Change in Ownership or Control. Borrower shall not permit any change in the ownership or control of Borrower, or permit the sale, transfer or conveyance of more than fifty percent (50%) of the shares or other equity interests in Borrower without promptly providing Bank notice of such a change.
5. [Reserved].
6. Facility Fee. Borrower shall pay Bank a facility fee (the Facility Fee) in an amount equal to [***] of the Committed Sum, which Facility Fee is fully-earned and payable on the Effective Date.
7. Miscellaneous. This Addendum is made a part of and is incorporated into the Agreement. Except as hereby modified or supplemented, the Agreement shall remain in full force and effect. The liability of all Persons obligated in any manner under this Addendum shall be joint and several. If more than one Person shall execute this Addendum as Borrower, then the term Borrower as used herein shall refer both to each such Person individually and to all such Persons collectively.
[Signature Page Follows]
EXECUTED by Borrower to be effective as of the Effective Date.
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BANK: | |
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WESTERN ALLIANCE BANK, | |
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an Arizona corporation | |
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By: |
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Name: |
Josh Ormiston |
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Title: |
Vice President |
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BORROWER: | |
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AMERIHOME MORTGAGE COMPANY, LLC, | |
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a Delaware limited liability company | |
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By: |
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Name: |
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Title: |
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Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption Experts and to the use of our reports dated October 1, 2020 and March 16, 2020, included in Amendment No. 3 to the Registration Statement (Form S-1, No. 333-249235) and related Prospectus of AmeriHome, Inc.
/s/ Ernst & Young LLP
Los Angeles, CA
October 16, 2020
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